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Income Tax

Income tax is a tax paid to the central government on personal income. It is the direct tax paid on income by an individual or a company/firm within a given financial year. The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT) (External website that opens in a new window) and is part of the Department of Revenue (External website that opens in a new window) under the Ministry of Finance (External website that opens in a new window), Government of India.

Detailed information on all types of taxation in India can be found here.

The Income Tax Act, 1961 (External website that opens in a new window) as amended by Finance Act 2010 (External website that opens in a new window), under Section 139 (External website that opens in a new window) makes it obligatory upon any person to file return if the person's total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax.

Provided that a person referred to, who is not required to furnish a return under this sub-section and residing in such area as may be specified by notification in the Official Gazette, and who during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or at any time during the previous year fulfils any one of the following conditions, namely:

  • is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified; or
  • is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
  • has incurred expenditure for himself or any other person on travel to any foreign country; or
  • is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or
  • is a member of a club where entrance fee charged is twenty-five thousand rupees or more.

The tax liability to be computed for AY 2013 -2014 is as per the under:-

(i) In case of individuals (other than women and individuals who are of the age of 60 years or more at any time during the financial year 2012-13) -

Income (In Rs.): Tax Liability (In Rs.)

  • Upto Rs.2,00,000 : Nil
  • Between Rs.2,00,001 - Rs.5,00,000 : 10%
  • Between Rs.5,00,001 - Rs.10,00,000 : 20%
  • Above Rs.10,00,000 : 30%

(ii) In case of women (other than women who are of the age of 60 years or more at any time during the financial year 2012-13)-

Income (In Rs.) : Tax Liability (In Rs.)

  • Upto Rs.2,00,000 : Nil
  • Between Rs.2,00,001 - Rs.5,00,000 : 10%
  • Between Rs.5,00,001 - Rs.10,00,000 : 20%
  • Above Rs.10,00,000 : 30%

(iii) In case of individuals who are of the age between 60 and 80 years at any time during the financial year 2012-13-

Income (In Rs.) : Tax Liability (In Rs.)

  • Upto Rs.2,50,000 : Nil
  • Between Rs.2,50,001 - Rs.5,00,000 : 10%
  • Between Rs.5,00,001 - Rs.10,00,000 : 20%
  • Above Rs.10,00,000 : 30%

(iv) In case of individuals who are of the age of 80 years or more at any time during the financial year 2012-13-

Income (In Rs.) : Tax Liability (In Rs.)

  • Upto Rs.5,00,000 : Nil
  • Between Rs.5,00,001 - Rs.10,00,000 : 20%
  • Above Rs.10,00,000 : 30%

In all the above cases 3% of the Income-tax will be Education Cess.

More details on tax liability computation can be found here (External website that opens in a new window)

Filing of Income Tax Returns (ITR) is a legal obligation of every person whose total income for the previous year has exceeded the maximum amount that is not chargeable for income tax under the provisions of the I.T. Act, 1961. To file Income Tax Returns, one needs to submit the ITRs belonging to the particular assessment year. The ITR forms to file income returns for AY 2012-13 are:

Further instructions and forms for previous years can be found here (External website that opens in a new window).

It is mandatory to file a return, irrespective of the fact that tax has been deducted at source by your employer or not, and whether you are eligible for a refund or not. ITR filing can be either done manually, or through e-filing.

To file returns manually, the duly filled out ITR form applicable, needs to be filed with the concerned ward in the Income Tax Department of the appropriate jurisdiction. You can find your jurisdiction here (External website that opens in a new window)

Income Tax Returns through the Internet is known as e-filing of returns (External website that opens in a new window). This facility was introduced for the first time during assessment year 2006-07. At present, it is mandatory for companies and firms requiring statutory audit under Section 44AB (External website that opens in a new window) to e-file their Income Tax Returns. Also, the e-filing benefit has been extended to all assesses except for trusts.

More details on e-filling of tax returns can be found here (External website that opens in a new window).

Permanent Account Number (PAN)

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department. PAN is an all India, unique number permanent for an individual's life, and will not change with change of address or station, or change of Assessing Officer, etc.

A PAN number is essential for filing returns. It is mandatory to quote PAN on return of income, all correspondence with any income tax authority.

In order to improve PAN related services, the Income Tax department has authorized UTI Investor Services Ltd (UTIISL) (External website that opens in a new window) to set up and manage IT PAN Service Centers in all cities or towns where there is an Income Tax office and National Securities Depository Limited (NSDL) (External website that opens in a new window) to dispense PAN services from TIN Facilitation Centers.

PAN application should be made only on Form 49A (File referring to external site opens in a new window) . A PAN application can be downloaded from the website of Income Tax department (External website that opens in a new window) or UTIISL (External website that opens in a new window) or NSDL (External website that opens in a new window). The form is also available at IT PAN Service centers (External website that opens in a new window) and TIN Facilitation centers (External website that opens in a new window).

More information about PAN can be found here (External website that opens in a new window).

The National Securities Depository Limited (NSDL) on behalf of Income Tax Department also provides online services like:

UTI Technology Services also provides online services like:

Tax Rebate

After the income is computed as per the provisions of the Income Tax Act, a further deduction is allowed of certain amount from the tax computed on the income earned by the assessee under section 80C (External website that opens in a new window) of the act. This deduction is termed as Tax Rebate.

Rebate is a reduction from income tax liability and not a deduction from income. One can invest in various ways at the beginning of any financial year, so that the amount of net tax to be paid is comparatively reduced at the time of filing your returns.

Some of the common tax-saving instruments include General Provident Fund (GPF), NSC/NSS, Public Provident Fund (PPF), Life Insurance Premium, Employee's Provident Fund Scheme, etc.

More information on the computation of tax rebate can be found here (External website that opens in a new window).

Source: National Portal Content Management Team, Reviewed on: 27-07-2012