The economic growth of a nation depends on the Taxes received from its responsible citizens. Different development services of the country are looked after by the taxpayers’ money.
As per the Indian constitution, the Government is allowed to collect tax money from its citizen. All the taxes are supported by the laws authorized by the parliament or the State Legislature.
The Chartered Accountants in India help the citizens to calculate and files the taxes. As per the government rule, everyone who has an income is subject to income tax. Whether you are getting a salary or earning interest on FD or winning prize money, you have to pay tax for every source of income.
Here are the sources of income for which any individual has to pay tax in India
• Income from salary: When an individual is earning from the salary and pension.
• Income from other sources: If the source is the interest of bank account, fixed deposit, or lottery
• Income from real estate: The rental income from tenants comes under it.
• Income from capital gains: The income that comes from the selling of capital assets like property, shares, and mutual funds.
• Income from Business: In case, you run a business, or self-employed or a freelancer, then the income will come under the tax. People like doctors, life insurance agents, designers, artists, lawyers, and Chartered Accountants in India have to pay the tax.
Income Tax Slabs:
There are main three categories of the taxpayers depending on their purpose of paying the tax. It has:
• Individual person, Association of Persons (AOP), Hindu Undivided Family (HUF), and Body of Individual (BOI)
• Companies
• Firms
Under the Income Tax laws of India, each category of the taxpayer is taxed differently. In case, the firms and companies have to pay 30% of their profit as tax annually, there are tax slabs for the individual, HUF, AOP, and BOI based on their income.
This grouping is called tax slabs and tax brackets. Each of the slabs has a different tax rate. Currently, India has four slabs with different tax rates.
• The tax slab for annual income up to 2.5 lakhs has no tax
• Tax slab in between Rs. 2.5 lakh to Rs. 5 lakhs has to pay 5% of the taxable income
• The tax slab in between Rs 5 lakh to 10 lakhs has to pay Rs. 12,500 and 20% income above Rs. 5 lakhs
• Tax slab above Rs. 10 lakhs has to pay Rs 1,12,500 and 30% of the income above Rs. 10 lakhs
However, you have to keep in mind that not all types of income will be taxed as per the slab. For example, capital gain income is exceptional. It depends on the type of asset and the period you have it.
The holding period is the most important factor to determine whether it is long term or short term. The nature of the asset is also another vital factor for it.
