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Income Tax – Get to Know it Better : PART 2

Income Tax 
Meaning – Income Tax is a levy on income earned in India by anybody during a financial year. Rates of Income Tax vary according to the taxpayer’s status, income level and heads of income.                                                                                         
Whom is it applicable to – Resident Indians, non-resident Indians (NRIs) and foreign citizens are all liable to Income Tax if they have income arising / earned in India. 
In case of resident individuals, their global income is taxable in India. However, non-residents have to pay tax only on the income earned in India or from a source/activity in India.                                                                                                                     
How is it to be paid – Voluntary payment of Income Tax is in the form of Advance Tax, Self-Assessment Tax and TDS (Tax Deducted at Source). If your voluntary tax payment falls short of the tax assessed by the Income Tax Department, you will need to pay the differential amount along with penal interest.                                               
Your tax credits are reflected in your Form 26AS (Tax Credit Statement). Ensure that you claim all tax credits in your income tax return by logging into your account at https://incometaxindiaefiling.gov.in/                                                                             
What is an Income Tax Return – Income Tax Return (ITR) is a prescribed form in which individuals declare the particulars of income earned by them in a financial year as also the taxes paid on such income and submit the same to the Income Tax Department after the end of the financial year. Submission of ITR is called filing. Different types of ITR forms (e.g. ITR-1, ITR-2) are prescribed for filing of returns depending upon the status of the taxpayer and nature of income being declared.
 
What must file an Income Tax Return – Every individual (other than a senior citizen) with income exceeding Rs.2 lakhs is required by law to file her/his tax returns. Senior citizens (persons aged over 60 years) with income over Rs.2.5 lakhs have to statutorily file their tax returns. Electronic filing (efiling) is mandatory for all individuals whose taxable income for FY 2013-14 is above Rs.5 lakhs. Presently, returns for FY 2013-14 can be filed with the due date for this activity being July 31, 2014.          
In order to obtain your income tax refund, it is necessary for you to file your income tax returns. You can carry forward a loss of a financial year for adjustment against positive income in the next financial year only if you have filed your return before the due date. If you have pending tax liabilities, then make sure that your tax returns are filed in time. Else, penal interest will get levied if you file your returns after the due date. For FY 2013-14, if you fail to file your tax returns before March 31, 2015, you may be liable to pay a penalty of Rs. 5,000.
 
Why Should You Pay Income Tax 
Income Tax is a key source of revenue for the central government and helps to fund activities of national interest in areas as diverse as infrastructure development, social welfare, education, public works & sanitation, healthcare, law & order and defence. Hence, instead of groaning and grumbling, pay your taxes with your head held high and a smile. It is how you can contribute to the holy cause of nation building.                                                                                                                                                
What Will Happen If Income Tax is Not Paid
At a social level, by not paying our taxes – correctly and in time – we fail in our duty towards our nation. More pertinently, at a personal level, non-payment of tax is an invitation to serious trouble. The Income Tax Department has various data gathering mechanisms whereby it attempts to continuously keep a track of all financial transactions. Enhanced automation levels have significantly empowered the Department and it has become almost impossible for offenders to evade their gaze and escape from their net. Thus, tax delinquencies could cause you high financial stress because of the imposition of interest as well as steep monetary fines and leave you socially embarrassed because of the possibilities of raids, seizures and imprisonment.
 
So, if not for the nation’s sake, then, at least for your own sake, Be a Good Tax Citizen.
 
If you need any assistance in this regard, we shall be most happy to serve you.            
NOTE: The above is an attempt to familiarize the lay reader with some key terms and concepts related to Income Tax. Readers are advised NOT to carry out financial actions merely based on their understanding/interpretation of the above article. It is recommended that you employ discretion/seek professional guidance before indulging in fiscal actions of any kind. 
 

Income Tax – Get to Know it Better : PART 1

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