Scope of Total Income:
- Total income is categorized under five heads:
- Income from Salary
- Income from House Property
- Profits and Gains of Business or Profession
- Capital Gains
- Income from Other Sources
Residential Status and Tax Incidence:
- Tax liability depends on the residential status of the taxpayer, classified as:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR)
- Residents are taxed on global income, while non-residents are taxed only on income earned or received in India.
Income Tax Slabs and Rates:
- Individual taxpayers, HUFs, and associations are taxed based on income slabs which vary with the taxpayer’s age and income level.
- Corporations and firms have specific tax rates, often subject to surcharges and cess.
Filing of Income Tax Returns:
- Various ITR forms are prescribed based on the type of taxpayer and income sources.
- Mandatory e-filing for most taxpayers, with due dates varying for different categories (individuals, firms, companies).
Advance Tax and TDS (Tax Deducted at Source):
- Advance Tax: Taxpayers are required to pay tax in installments during the year if their tax liability exceeds INR 10,000.
- TDS: Employers and other deductors must withhold tax at source on specified payments like salaries, interest, rent, etc.
Tax Audits:
- Certain taxpayers (e.g., businesses with turnover above specified limits) must get their accounts audited and file the audit report.
Assessment and Reassessment:
- The Income Tax Department assesses the returns filed by taxpayers to verify accuracy and compliance.
- Reassessment can be initiated if income has escaped assessment within specified time limits.
Penalties and Prosecutions:
- Penalties for non-compliance include late filing fees, underreporting/ misreporting penalties, and failure to maintain proper records.
- Serious violations may lead to prosecution.
Appeals and Dispute Resolution:
- Taxpayers can appeal against assessments and orders to higher authorities like the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal (ITAT), High Courts, and the Supreme Court.
Deductions and Exemptions:
- Chapter VI-A provides various deductions like:
- Section 80C: Investments in specified instruments (e.g., PPF, EPF, LIC premiums) up to INR 1.5 lakh.
- Section 80D: Health insurance premiums.
- Section 80G: Donations to specified funds and charitable institutions.
- Exemptions under sections like:
- Section 10: Certain incomes like agricultural income, scholarships, and allowances.
