Income Tax Department of India Last Updated : 01 Jun 2020

All AboutIncome Tax Department Of India
Income Tax Department Of India

The Income Tax Department of India breaks income into 5 different sub-categories. There are also different income tax slabs, tax rebates, and tax refunds that are important to understand to be compliant with the law.

The Income Tax or IT department is essentially responsible for monitoring the inflow of taxes and their subsequent collection by the Indian Government. The IT department falls under the jurisdiction of the Department of Revenue under the Finance Ministry.

The Income Tax Department of India is supposed to administer the following direct tax acts pronounced by the Parliament of India:

  • The Income Tax Act of 1961
  • The Expenditure Act of 1987
  • Multiple Finance Acts passed in every year’s Budget session

The Predominant Nature of Your Income

Any individual, whether a resident or an NRI, whose place of origin is India and who gets a salaried income in India falls into the slab of IT and is therefore eligible for tax payment. This income could materialise in any form - pension, salary, or a savings account with a good interest rate. Additionally, individuals such as reality TV show winners are also required to pay tax on the sum of money they receive from the program.

For a better understanding, let’s break the nature of your income falling under the Income Tax Department into 5 sub-categories:

  • If you have a salaried income, your pension and salary will fall into this category.
  • If you are earning from other sources, remunerations from fixed deposits, interest on your savings account, etc. will fall into this category.
  • If you have a real estate or a property, it falls into the category of rental income.
  • If you are gaining from capital investments, your earnings from selling these assets in the form of market shares, house property and mutual funds shall fall into this category.
  • If you are an entrepreneur or a businessman, you fall into the category of “self-employed individuals”. Lawyers, doctors, CAs, and teachers encompass this category.

Income Tax Department e-Filing

  • Registration: For e-filing your IT return, the first step would be registering yourself on the website of the Income Tax Department. Enter your PAN card details along with your birth date. Your PAN number acts as your username in this case.
  • Mode of e-filing: Primarily, there are 2 ways of e-filing that you can use. First is the offline method, wherein you download the form from the website, fill it up and upload it back on the site. Or, promptly choose the e-file option on the website if you want to fill the form online.
  • Choose the required form: This depends entirely on the nature of your income. Refer to the aforementioned points determining the nature of your income to get a better understanding of your remunerations. Choose a form accordingly.
  • Documents must be within immediate reach: PAN card, certificates of your TDS, statement of interests, Form 16, Home loans and investment details are considered as mandatory documents while filing an income tax return. Thereafter, make sure you validate your tax return to check your liability by downloading Form 26AS.
  • Upload the form once you’re done filling: This is again depends on your choice of the mode of filing. If you choose to fill the form online, there will be no hassle of downloading and saving a copy separately. Alternatively, if you are filling out the form offline, download a copy first, fill up all the sections (do not leave anything blank), then click on the option ‘Generate XML’. Once you are done filling it up, cross-check for any discrepancies. After that, go to the ‘Upload XML’ option and submit your file.
  • ITR-V Verification: Once you submit your ITR form, you will get an acknowledgment number. If you have used digital signature while filing the return, make sure to preserve this number. If not, an ITR-V will be procured and sent to your ID.

The nature and structure of the Income Tax Department of India undergo minimal changes every year. Make sure you are thoroughly aware of all the information before you begin to file your returns.

Income Tax Slabs

If you are an Indian citizen and are working in the Indian marketplace, by now you must be aware that each person’s income falls under a certain tax bracket. These brackets are termed as “tax slabs”. Each tax slab offers a different rate of tax. This pursuit is of utmost importance when you are filing IT returns during a financial year.

India is gradually increasing its tax rates and for better comprehension, let us look at these brackets by breaking them into classifications:

  • If you are earning up to Rs.2.5 lakh, you owe zero tax to the Government.
  • If your remuneration is between Rs.2.5 and Rs.5 lakh, your tax rate will be 5%.
  • If your earning falls between Rs.5 lakh to Rs.10 lakh, an amount of Rs.12,500 along with a 20% deduction (for earners above Rs.5 lakh) will be made.
  • If you are earning more than Rs.10 lakh, you will be eligible to a 30% tax rate.

The Financial year 2017-18 saw the above-mentioned tax brackets. The existing tax groupings may undergo alterations during the next financial year.

Tax Rebate Under Section 87A

If you are a resident of India, you will undoubtedly be eligible to a tax rebate offered under Section 87A of the Income Tax Act. However, this comes along with its own set of terms and conditions. If your taxable income does not exceed the amount of Rs.3 lakh, then you will be eligible to a Rs.2,500 benefit or the tax amount, whichever is lesser!

If you are required to pay taxes up until the allowed rebate limit, then you will not have to pay any additional charges for towards the amount, provided you have taken the benefit already! In order to avail the complete rebate amount, your total taxable income of the returns filed will have to be till Rs.3.5 lakh, pertaining to fiscal year 2020-21 and assessment year 2021-22.

Who all can claim a refund under Section 87A for assessment year 2020-21?

The following set of individuals will be eligible to claim a tax rebate under Section 87A:

  1. If you are a resident individual
  2. If your total taxable income does not exceed Rs.3.5 lakh

What is the total amount of Rebate that is allowed under this section?

The computation of how much rebate you are eligible to under Section 87A is pretty simple. You are eligible to a tax exemption upto the basic exemption limit. However, in case your total payable taxes are less than the basic exemption limit, the amount of your exemption will only be restricted to the lower amount of payable tax! In a nutshell, it can be stated that

Tax Rebate under Section 87A will only allowed for:

  1. 100% of the total payable tax and
  2. Rs.2,500

How to calculate Rebate under Section 87A?

Mentioned below are a few steps that might assist you in calculating your total tax rebate under this section.

  1. First and foremost, compute how much your Net Gross Total Income stands at.
  2. Subtract the exemptions that falls under Section 80C all the way to Section 80U.
  3. After this, subtract the basic limit of exemption from your total taxable income. This exemption limit stands at Rs.2.5 lakh for the financial year 2017-18.
  4. Refer to the income tax slabs in order to compute your total payable taxes.
  5. Minus the rebate amount from this figure that you computed in the step above.
  6. The end figure is how much rebate you are eligible for.

Let us understand the computation better with an example:

Mr. Diniz has a total taxable income of Rs.3.45 lakh, and he wants to compute the amount of rebate that he is eligible for.

TTI (total taxable income) Rs.3.45 lakh
Basic Limit of Exemption Rs.2.5 lakh
Taxable Income Rs.95,000
Tax that is payable at 5% Rs.4,750
Less: Relief offered under Section 87A Rs.2,500
Total balance that is payable Rs.2,250
Add: Educational and Secondary Education Cess Charge 67.5
Final Amount of tax that is payable Rs.2,317.50
Round the figure Rs.2,320

Rebate Amounts under Section 87A for the Preceding Financial Years:

Rebate Under Section 87A Financial Year 2016-17 Financial Year 2017-18 Financial Year 2018-19
TTI or Total Taxable Income Will be Up to Rs.5 lakh Rs.3.5 lakh Rs.3.5 lakh
Rebate (maximum rebate) under Section 87A Rs.5,000 Rs.2,500 Rs.2,500

News About Income Tax Department

  • IT (Income Tax) department notifies all safe harbour rates for 2019-2020

    The income tax department has now notified everyone about the 'safe harbour' rates for the fiscal year, 2019-20 for calculation of the transfer pricing by foreign companies in the country.

    The Central Board of Direct Taxes (CBDT) has also notified the changes to Rules 10TD and 10TE of Income Tax Rules these relate to Safe Harbour Rules. It has said that the rates applicable from Assessment Year (AY) 2017-18 to 2019-20 will apply for the AY 2020-21.

    The transfer pricing now implies that the prices at which many overseas divisions of a company can transact with each other. The safe harbour has been defined as circumstances where the tax authority can accept the transfer price which has been declared by the taxpayer.

    22 May 2020

  • Income Tax Department Deposits Refunds of Rs.4,240 crore

    According to reports, the income tax department has disbursed refunds amounting to Rs.4250 crore pending to various assessors till April 14. As per sources, assessors whose claim is less than Rs.5 lakh have received their refunds in their respective bank accounts.

    These refunds are above the Rs.2.5 crore refunds issued till 31 March 2020 for the financial year 2019-2020, amounting to a total of Rs.1.84 lakh crore as per Central Board of Direct taxes (CBDT). According to CBDT, refunds of Rs.1.75 lakh crore are still in the process of issuance and will be credited directly to the taxpayers’ bank account within 5-7 business days.

    20 April 2020

  • Income tax collection to fall by 10% amidst Coronavirus

    The Income tax department has said that they are expecting a shortfall of income tax collection by 1%. The IT department might collect Rs.10 to Rs.10.5 lakh crores, which is very short when the figure is compared to the revised target amount of Rs.11.7 lakh crores.

    By the end of March, the department had collected around Rs.9.84 lakh crores (84.26) of the total collection. One source from the department had said that they might even reach about 90-92% of the collection as compared to the revised target.

    Mumbai, the city which contributes to the highest tax collection (33%) of the income tax collection, is now showing a shortfall of 20%. In March, Mumbai had collected Rs.3.04 lakh crore and the revised target estimate is Rs.3.78 lakh crores.

    02 April 2020

  • Officers working from home asked to chase dues from large taxpayers by the Tax Department

    Even though a three-month extension has been provided to file returns, the Income Tax Department has asked officers to get in touch with large taxpayers via email and phone to check on the pending collections.

    Daily reports in regards to the follow-ups on any pending tax collections have been requested by the Commissioner of Income Tax (Coordinations & Systems), Central Board of Direct Tax (CBDT), Rakesh Gupta. According to officials, even though many tax officers are working from home because of the lockdown due to the coronavirus outbreak, getting the work completed is possible with the technology available. According to Rakesh Gupta, even though the Income Tax Business Application (ITBA) platform is currently unavailable to the officers, it is still possible to contact large taxpayers. Recently the Finance Minister Nirmala Sitharaman announced a three-month extension for the filing of income tax returns as well as the payment of securities transaction tax, tax collected at source, tax deducted at source, regular tax, self-assessment tax, and advanced tax. A three-month extension has also been provided for individuals who opt for Vivad se Vishwas scheme as well. However, the principal amount must be paid.

    01 April 2020

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