What is Income Tax?

Income tax is a direct tax that a government levies on the income of its citizens. The Income Tax Act, 1961, mandates that the central government collect this tax. The government can change the income slabs and tax rates every year in its Union Budget.

Income does not only mean money earned in the form of salary. It also includes income from house property, profits from business, gains from profession (such as bonus), capital gains income, and 'income from other sources'. The government also often provides certain levy such that various deductions are made from an individual's income before the tax to be levied is calculated.

Income Tax Returns

 Income Tax Returns (ITR) form are the basis of calculating a person's income tax. It is a statement showing the status of a person, all their sources of revenue, deductions and, lastly, the tax payable or tax refund, if any.

Income Tax slabs

 What income tax rate a person pays depends on the slab they fall in. The government has categorized incomes into slabs like — up to Rs 250,000, Rs 250,000-Rs 5,00,000, Rs 5,00,000-Rs 1 million, and more than Rs 1 million. The rates on different slabs might be different based on age groups.

Standard deduction

 Tax on some components of income can be waived by the government. These tax reliefs are known as standard deductions.

What is the difference between Financial Year and Assessment Year?

Financial Year is the year in which you have earned income On the other hand, Assessment Year is always the succeeding year in which you file your Previous Year Income Tax Return, and offer the particulars of your income earned during the Previous Year to be assessed by the Income Tax Department.