The Income Tax Act contains a total of 23 chapters and 298 sections according to the official website of the Income Tax Department of India[1]. These different sections deal with various aspects of taxation in India. The various heads for which you have to pay income tax include:
- Salary
- Income from house property
- Capital gains
- Profit and gains from business or profession
- Income from other sources
Type of Taxes
Income Tax holds its importance for it is the money which tends to support the running of our government. It is one of the major sources of revenue for the government and thus is inevitable to not to impose it on the income earned or utilized in the country. It helps meet the funds required to develop the country and other defense-related needs of a nation.
There are basically two kinds of taxes
Direct Tax is tax that is paid by an individual or any other person on the basis of his Income. It is a form of tax that is directly paid by the person to the government, i.e., the liability to pay the tax and the burden of tax falls on the same person.
Indirect Taxes
Indirect taxes are the types of taxes where the person depositing the tax with government and the person actually having been burdened by the tax are different. Generally these taxes are included in the prices of the goods or services which are provided to the people and then such taxes are deposited by the person collecting the same from their customers. GST is one of the most popular type of indirect tax.
Every year, the Indian government presents a finance budget during the month of February. The budget brings in various amendments to the Income Tax Act. This includes changes in tax slabs wherever applicable. For example, the Finance Minister announced that the tax rate for individuals in the lowest tax bracket of Rs. 2.5 lakh to 5 lakh would be cut from 10% to 5% in FY2017. Similarly, tax on Long Term Capital Gains (LTCG) was re-introduced during the FY2018 budget. As a result, all gains greater than Rs. 1 lakh from shares and equity mutual funds held longer than one year is now eligible for LTCG tax at 10%.
The most recent budget presented by the current Finance Minister Nirmala Sitharaman included the introduction of a new optional system of taxation that comes with reduced income tax rates. These new rates shall be available as an option from the financial year 2020-21.
Income Tax Rules, 1962
Income tax rules act as a supplement to the Income Tax Act, 1961. Income tax rules are effective from 1 April 1962. The Central Board of Direct Taxes (CBDT) has the power to amend the income tax rules. For example, Section 10 (13A) (1) of the Income Tax Act states that the house rent allowance can be exempted up to a certain limit. Rule 2A under income tax rules states how the limit can be calculated.
What are the tax rates applicable to me for AY 2021-22 ?
In respect of AY 21-22, you can opt for either old or new tax regime as under:
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