Home | Login | About Us | Contact Us | Downloads | Sitemap
Karvy Distribution Logo
Mutual Funds Fixed Deposits Bonds IPOs Financial Planning Tax Planning
Nuts & Bolts of IT
Tax Calendar
Forms & Enclosures
NRI Corner
Articles and Reports
FAQs
Glossary


  Tax Planning

 
home > Tax Planning > Nuts & Bolts of IT > Basics of Income Tax
logo   BASICS OF INCOME TAX
   
  The Indian income tax act is like a maze - full of sections, provisions, exceptions, deductions etc. Before proceeding on any study of the law, it is critical to understand the fundamentals of the subject.
   
bullet What is income tax ?
  Income tax is a tax that is levied on income earned by the individual. It is governed by the 'Income Tax Act, 1961'
   
bullet Who should pay income tax ?
  All persons covered under the income tax act will have to pay income tax on the income earned by them. These persons are technically refered to as "assessees". The following are assessees under the Income Tax law:
 
  • An individual
  • A Hindu undivided family
  • A company
  • A firm
  • An association of persons or body of individuals
  • A local authority
  • Other artificial juridical persons
bullet Is there any other term that I should know with reference to income tax ?
  Lots of terms, but for the time being, there are 2 important terms - "previous year" and "assessment year."
  'Assessment year' (A.Y) refers to the financial year starting from 1st of April to 31st of March
  'Previous year' (P.Y) refers to the financial year preceding the 'assessment year'. The total income of every person earned during the previous year (mentioned above) shall be taxable in the assessment year. In other words, previous year is the same as the current financial year.
  Example: Raju has income of Rs.1,00,000 on 1st September 2005. The P.Y is 1st April 2005 - 31st March 2006, the corresponding A.Y in which he would be liable to pay tax is 1st April 2006 - 31st March 2007
   
bullet What is my tax rate ?
  The Income tax Act provides different rates for different classes of persons. The income would be taxable at rates specified for different individuals for that particular assessment year.
   
 
  (Click here For tax rates)  
   
 
I - Slab rates applicable for AY 2007-08

Rates for male individuals (less than 65 years), HUFs, AOP and BOI.

Income upto Rs. 1,00,000 (Basic exemption limit)
NIL
Income above Rs. 1,00,000 upto Rs. 1,50,000
10%
Income above Rs. 1,50,000 upto Rs. 2,50,000
20%
Income above Rs. 2,50,000
30%


The rates for women assessees (less than 65 years)

Income upto Rs. 1,35,000 (Basic exemption limit)
NIL
Income above Rs. 1,35,000 upto Rs. 1,50,000
10%
Income above Rs. 1,50,000 upto Rs. 2,50,000
20%
Income above Rs. 2,50,000
30%


Rates for senior citizens (more than 65 years)

Income upto Rs. 1,85,000 (Basic exemption limit)
NIL
Income above Rs. 1,85,000 upto Rs. 2,50,000
20%
Income above Rs. 2,50,000
30%
  • Note 1 - Surcharge @10% (on tax) will be applicable when your total income exceeds Rs.10,00,000.
  • Note 2 - Education cess @ 2% (on tax + surcharge) will be applicable on all levels of income.
Some of the other rates are:

Long term capital gains on shares and securities listed on a recognized stock exchange Nil%
Short term capital gains on the above 10%
Long term capital gains on other assets 10%+indexation OR 20% without indexation
Short term capital gains on other assets Normal rates


Securities transaction rates

Details of the transaction Person Rate
Delivery based purchase of an equity Share in a company or the units of an equity fund entered into a recognised stock exchange
Buyer
0.125%
Delivery based purchase of an equity share in a company or the units of an equity fund entered into a recognised stock exchange
Seller
0.125%
Non delivery based sale of equity share in a company
Buyer
0.025%
Value of transaction in derivatives
Buyer
0.017%
Sale of units of an equity mutual fund to the fund
Seller
0.25%


Special rates for other income

S.No.
INCOME DETAILS
RATES OF TAX
1
Income arising from speculative activities
30%
2
Income earned from Betting, Horse races, Winnings from Lotteries or Crossword puzzles etc.
30%


Rates of cost inflation index

 
F.Y
C.I.I
1 1981 - 1982 100
2 1982 - 1983 109
3 1983 - 1984 116
4 1984 - 1985 125
5 1985 - 1986 133
6 1986 - 1987 140
7 1987 - 1988 150
8 1988 - 1989 161
9 1989 - 1990 172
10 1990 - 1991 182
11 1991 - 1992 199
12 1992 - 1993 223
13 1993 - 1994 244
14 1994 - 1995 259
15 1995 - 1996 281
16 1996 -1997 305
17 1997 - 1998 331
18 1998 - 1999 351
19 1999 - 2000 389
20 2000 - 2001 406
21 2001 - 2002 426
22 2002 - 2003 447
23 2003 - 2004 463
24 2004 - 2005 480

Hide
bullet When do I have to file my returns ?
  As an individual under income tax law, you will have to file your return by 31st July. In case you are covered under the new economic criteria, you will have to file your return by 31st October
   
 
  (Click here For new economic criteria)  
 
NEW ECONOMIC CRITERIA This was introduced by the Finance Act 06-07. A person is said to be covered under this scheme under the following conditions:-
  • If he is not required to file his ROI (i.e. does not have taxable income),
  • Resides in notified area,
  • Has incurred Rs. 50,000 or more as electricity expenses at any time during the previous year
  • Fulfils any of the 5 criteria below:
    • Occupation of an Immovable property exceeding a specified floor area by way of ownership, tenancy or otherwise.
    • Possession of a motor vehicle as a owner or a lessee (other than 2 wheeled motor vehicle.)
    • Incurring expenditure for self or any other person on travel to a foreign country.
    • Holding of a Credit card, not being an Add-on card.
    • Membership of a club where entrance fees charged is Rs. 25,000 or more.
Hide
bullet PAN
  It is an acronym of Permanent Account Number. It is a 10 digit alphanumeric number that helps to identifies and tracks an individual in the taxman's database. Each individual can get one PAN in his name. He will be assigned a unique number, which he has to quote while filing his return of income.
  Care to be taken while filing your return.
 
  • You have to file your returns diligently by the due date applicable to you.
  • Make sure you give correct details of your income.
  • Do not forget to quote your correct PAN no.
  The I.T Law imposes penalties in certain cases:
 
  • Non filing returns
  • Concealing income which amounts to tax evasion
  • Not quoting PAN or misquoting PAN
Karvy.com | About Us | Sitemap | Contact Us | Locate Us | Terms and Conditions | Disclaimer | * Best viewed in 1024 by 768 resolution *| © 2007 www.karvydistribution.com