What is Income-tax?
It is a tax levied by the Government of India on the income of every person. The provisions governing the Income-Tax Law are given in the Income-tax Act, of 1961.
Define salary income.
Section 17 of the Income-tax Act defines the term ‘salary’. Generally, whatever is received by an employee from an employer in cash, kind, or as a facility [perquisite] is considered as salary.
What is the period for which a person’s income is considered for the purpose of Income-tax?
Income tax is levied on the annual income of a person earned during the Financial Year i.e., Income Earned from 1st April to 31st March of the next year.
What is the Previous Year as per Income Tax Act?
The year in which income is earned is known as the previous year. In layman's language, the financial year is known as the previous year. The previous year for the current Financial year is 2022-23.
What is the Assessment year as per Income Tax Act?
The year in which a person's income is assessed is known as Assessment Year. The period for Assessment Year starts on 1st April and ends on 31st March of the next year. For the Financial year 2022-23, the Assessment year will be 2023-24
What are allowances?
An allowance is a fixed amount of money received by a salaried employee from his employer to meet a particular type of expenditure that may or may not be part of the Salary.
Are all allowances taxable?
Based on the respective tax treatment, allowances can be categorized into three types - Taxable, non-taxable, and partially taxable.
Is Gratuity taxable as Salary?
Gratuity paid to an employee is exempt under section 10 (10) of the Income Tax up to INR 20 Lacs for the whole employment tenure irrespective of the changes in Employer.
Is leave encashment taxable as Salary?
Leave Encashment received while in service is fully Taxable. Leave Encashment paid at the time of retirement, death or separation will be exempt subject to the limit prescribed under Section 10 (10AA) which is up to INR 3,00,000/- for the whole employment tenure irrespective of the changes in Employer.
How is House Rent Allowance (HRA) Exemption calculated?
Employees who live in Rented Houses can claim HRA Exemption to reduce their Income Tax under Section 10(13A). HRA is either fully or partially exempt. HRA Exemption is a minimum of below:
- The actual HRA received,
- Rent paid reduced by 10% of Salary,
- 50% of your salary (if you live in a metro city), or 40% of your salary (if you live in a non-metro city).
Note: Salary for the purpose of HRA Exemption is Basic Salary and Dearness Allowance (DA)
If the result is a negative value, Exemption will be considered as NIL value and therefore the HRA is fully taxable.
What is Standard Deduction?
Standard deduction means a flat deduction allowed to individuals earning Salary or Pension Income. It was introduced back in Budget 2018 in lieu of the exemption of Transport Allowance and reimbursement of medical expenses. The current limit is Rs INR 50,000/-
Can an employee get a tax benefit for repayment of Interest on a Home Loan?
A residential property owned by an employee and either employee or their family is residing in that property (not rented), the employee can claim a tax benefit of up to INR 2,00,000/- per year.
How is Income / (Loss) from Let out Property calculated?
Income / (Loss) from Let Out Property is calculated as below:
What are the available investments/deduction under Chapter VIA?
The Income Tax department with a view to encouraging savings and investments amongst the taxpayers has provided various deductions from the taxable income under chapter VI A deductions. Check the attached file-"Deductions under Chapter 6 A" to see the qualifying investments/deduction with limits applicable.
What are the current Income Tax Slabs applicable for the Financial year 2022-23?
Below are the current Income Tax Slabs for the financial year 2022-23
What is New Tax Regime?
During the financial year 2020-21, new section 115BAC was introduced as a type of tax calculation with a reduced Rate of Tax. This is applicable only to Individuals & HUF. Under this, employees will have to forego various exemptions/deductions & Investment benefits.
What are some of the differences between the Old Regime and the New Regime?
The main difference between Old Regime & New Regime is that the Tax Slabs have been changed to give more tax benefits. Other than there are certain Allowance / Exemptions & Deductions that are not allowed in New Regime. See the below table for what is allowed / not allowed in New Regime.
Allowances / Exemptions / Deductions
Exemptions / Deduction for Perquisites
Leave Travel Allowance (LTA)
House Rent Allowance (HRA)
Allowances under Section 10(14)
Children Education Allowance
Professional Tax (PT)
Interest on Home Loan - Self-Occupied (Sec 24)
Chapter VIA Deductions - 80C, 80D, 80E Etc
NPS Employee Contribution Section 80CCD(1B)
NPS Employer Contribution Section 80CCD (2)
Rebate - Section 87A
What is Section 87A Rebate?
A rebate under section 87A is one of the income Tax provisions that help taxpayers to reduce their income tax liability. The employee will get this rebate if the total income does not exceed Rs 5 lakh in a financial year. Thus, income tax liability becomes NIL after claiming the rebate under section 87A.
Who can claim the Section 87A Rebate?
Section 87A rebate is available for Taxpayers whose Net Taxable Income is between 2.50 Lacs to 5.00 Lacs.
What is the Maximum rebate allowed under Section 87A Rebate?
INR 12,500/- is the Maximum rebate allowed under Section 87A for the Financial Year 2022-23.
What is Surcharge on Income Tax?
A surcharge on income tax is an extra tax to be paid by taxpayers earning a higher income beyond a certain limit. The Government ensures that with the surcharge provision, the rich contribute to the income tax more than the poor.
What are the current Slabs of Surcharge on Income Tax?
Below are the current Surcharge Slabs for the financial year 2022-23
What is Cess on Income Tax?
A cess is a form of tax levied by the government on tax with specific purposes till the time the Government gets enough money for that purpose. Currently, Cess is charged for the purpose of Health and Education.
What is the applicable Cess for the Financial year 2022-23?
4% is the Cess applicable on Income Tax and Surcharge for the Financial year 2022-23.
What is the Due date for Payment of Income Tax Deducted from employees’ Salaries?
7th of the following month is the Due date for Payment of Income Tax for the months of April to February every year. 30th April will be the due date for payment of Income Tax for the month of March every year.
Is there any interest in delayed payment of Income Tax?
There will be an interest calculated at the rate of 1.50% per month from the date on which TDS was deducted and the actual date of Payment as per Section 201(1A).
What is the Due date for filing Quarterly Returns?
Below is the due date for filing quarterly returns:
April to June
July to September
October to December
January to March
Is there any late fee for not / delayed filing of quarterly returns?
There will be a late fee of INR 200/- for every day of delay in filing the returns as per Section 234E. However, the total penalty will be capped to the total TDS deducted during that quarter.
Is there any Penalty imposed by the Assessing Officer for non-filing of returns?
The Assessing Officer may impose a penalty of a minimum of INR 10,000/- and a maximum of INR 1,00,000/- for non-filing of returns in addition to late filing fees under Section 234E.
Is there an exemption for Penalty?
If the below conditions are met, the penalty will not be applicable:
- The tax deducted is paid to the Government.
- Late filing fees and interest (if any) are paid to the Government.
- The return is filed before the expiry of a year from the due date.
What is the basis for issuing Form16?
Irrespective of Salary earned and Tax deducted, every employee who has a PAN must be issued Form16.
Who issues Form16?
Form 16 is generated by the Income Tax Department based on the returns filed by the employer. The employer must download the same from the Income Tax Department website and issue it to their employees by affixing the digital signature.
What does Form16 contain?
Form16 is divided into Part A & Part B. Employees for whom salary is paid and tax is deducted will be issued both Part A & Part B, and employees, where tax is not deducted, will be issued only Part B.
What is Part A of Form16?
Part A is a certification duly signed by the employer stating that they have deducted the TDS from the employee’s salary and deposited it with the Income Tax department. Part A of form 16 provides details of the quarterly TDS deducted and deposited, details of PAN, and TAN of the employer along with other information. An employer can generate and download this part of Form 16 through TRACES.
What is Part B of Form16?
Part B represents the information in a comprehensive and orderly manner stating the income earned by the employee along with the exemptions and deductions applicable thereon and the amount of tax to be recovered if any. An employer can generate and download this part of Form 16 through TRACES.
Can I file a return of income even if my income is below taxable limits?
Yes, you can file a return of income voluntarily even if your income is less than the basic exemption limit.
What documents are to be enclosed along with the return of income?
There is no need to enclose any documents with the return of income. However, one should retain the documents (Tax computation sheets, Form 16, Proof of Investments) to produce before any competent authority as and when required in the future.
Can marginal relief be claimed by an Individual?
Yes, marginal relief can be claimed by all persons for whom a surcharge is applicable up to a certain limit.