Income tax is a direct tax levied on the income of individuals or entities. The Income Tax Department calculates income tax based on pre-determined income slabs applied to net taxable income.

What is Income Tax?

Income tax is a tax paid to the government based on earnings. It is calculated according to the income brackets set by the government, and the revenue collected is used for government expenditures and development projects. Online platforms facilitate easy payment of income tax, TDS/TCS, and non-TDS/TCS payments, simplifying the process for taxpayers.

Who Should Pay Income Tax?

In India, taxpayers are required to pay income tax based on their age and income under the old tax regime:

Individuals below 60 years: Taxable income exceeding ₹2.5 lakh per year.
Senior citizens (60-80 years): Taxable income exceeding ₹3 lakh per year.
Super senior citizens (80 years and above): Taxable income exceeding ₹5 lakh per year.

The following entities must also file income tax returns:

Artificial Juridical Persons
Corporate Firms
Association of Persons (AOP)
Hindu Undivided Families (HUF)
Companies
Local Authorities
Body of Individuals (BOI)

Income Tax Rules in India

The Income Tax Act, 1961, governs income tax collection and administration, supplemented by the Income Tax Rules, 1962.

Types of Income

The Income Tax Department categorizes income under five heads:

Income from House Property – Earnings from renting out residential properties.
Salary Income – Includes salary, pension, and employment-related earnings.
Business or Professional Income – For self-employed individuals, freelancers, business owners, contractors, and professionals like doctors and lawyers.
Capital Gains Income – Profits from the sale of capital assets such as stocks, mutual funds, and real estate.
Income from Other Sources – Includes interest from savings accounts, fixed deposits, and lottery winnings.

Income Tax Return (ITR)

An income tax return (ITR) is a form submitted to the Income Tax Department, declaring an individual's income. To file an ITR, individuals need Form 16 (issued by their employer) and investment proofs. Taxpayers can calculate their tax liability and claim refunds accordingly.

For MSMEs and professionals, the new common IT form allows businesses with cash receipts below 5% to file under higher estimated tax limits (₹3 crore turnover and ₹75 lakh income).

E-Filing of Income Tax

E-filing eliminates paperwork and saves time. Taxpayers can file:

Income Tax Returns
TDS Returns
AIR Returns
Wealth Tax Returns

E-filing can be done through the official government portal: https://incometaxindiaefiling.gov.in.

Taxpayers & Income Tax Slabs

The Union Budget 2024 introduced changes in tax slabs under the new tax regime. However, taxpayers can choose between the old and new tax regimes.

New Tax Regime (FY 2024-25)
Income Tax Slab    Tax Rate
Up to ₹3 lakh    Nil
₹3-7 lakh    5%
₹7-10 lakh    10%
₹10-12 lakh    15%
₹12-15 lakh    20%
More than ₹15 lakh    30%

Old Tax Regime – Below 60 Years

Income Tax Slab    Tax Rate
Up to ₹2.50 lakh    Nil
₹2,50,001 - ₹5 lakh    5%
₹5,00,001 - ₹10 lakh    20% of amount exceeding ₹5 lakh
More than ₹10 lakh    30% of amount exceeding ₹10 lakh

(Note: An additional 4% cess is applicable on the total tax amount.)

Senior & Super Senior Citizen Tax Slabs (Old System)

Income Tax Slab    Age 60-80 Years    Age 80+ Years
Up to ₹3 lakh    Nil    Nil
₹3-5 lakh    10%    Nil
₹5-10 lakh    20%    10%
More than ₹10 lakh    30%    20%

Income Tax Calculation

Income tax can be calculated manually or using an online income tax calculator. The taxable salary includes:

Basic salary
House Rent Allowance (HRA)
Transport allowance
Special allowance

However, some components are tax-free, like Leave Travel Allowance (LTA) and telephone bill reimbursements. If you pay rent and receive HRA, you can claim exemptions. Additionally, a standard deduction of ₹75,000 is available.

Advance Tax Payment

Advance tax must be paid as per the following schedule:

Due Date    Advance Tax Payment %
June 15       15% of total tax
September 15    45% of total tax
December 15    75% of total tax
March 15    100% of total tax

How to Pay Income Tax

Taxpayers can deposit tax online using e-payment facilities. A net banking account with an authorized bank and PAN/TAN details are required.

Income Tax Collection Methods

The government collects tax through:

Voluntary Payments – Advance tax & self-assessment tax.
Tax Deduction at Source (TDS) – Deducted from salaries before payment.
Tax Collection at Source (TCS)
The Income Tax Department (ITD), under the Ministry of Finance, oversees tax administration. The Central Board of Direct Taxes (CBDT) handles policy, planning, and enforcement.

Income Tax Forms

To claim a refund, individuals must file an ITR. The applicable form depends on income type:

ITR Form    Description
ITR-1    Salaried individuals with one house property & other income
ITR-2    Individuals & HUFs (not earning from business/profession)
ITR-3    Partners in firms (not running a business)
ITR-4    Business owners & professionals
ITR-5    Entities other than individuals, HUFs & companies
ITR-6    Companies (not claiming exemptions under Section 11)
ITR-7    Entities filing returns under specific tax provisions
ITR-V    Acknowledgment form for filing tax returns
To file ITR, individuals need bank statements, Form 16, and the previous year's return. Visit https://incometaxindiaefiling.gov.in for e-filing.

Income Tax Refund

If excess tax has been deducted, taxpayers can claim a refund.

Example: If your TDS liability for FY 2023-24 was ₹35,000, but your employer deducted ₹40,000, you can claim a ₹5,000 refund.

Refund status can be checked on the Income Tax Department’s official website.

Tax-Saving Investments

Investment Options (Section 80C):

ELSS (Equity Linked Savings Scheme) – Short lock-in period, higher returns than FDs.
ULIPs (Unit Linked Insurance Plans) – Market-linked insurance schemes.
Life & Health Insurance (80C & 80D) – Premiums are tax-deductible.
Education Loan (80E) – No upper limit on deductions for interest paid.
Home Loan Interest (80EEA) – Deduction up to ₹1.5 lakh per financial year.
Fixed Deposits (FD) – 5-year FDs qualify for tax deductions.
National Savings Certificate (NSC) – Safe investment option with tax benefits.
Provident Fund (PF) – Extra PF contributions reduce taxable income.