Tax Facts

We thought the following information on various tax issues would be useful to you. Personal circumstances always vary, so please ensure you contact us for specific advice.

Tax Facts - Income tax

Income tax is the direct tax paid by individuals to the Central Government of India. It is imposed on income to generate government revenue and plays a vital role in economic growth and stability.
Income Tax in modern India began in 1860 when the first Income Tax Act was implemented. After five years the second Income Tax Act came into existence with major changes to the first act including the new concept of Agriculture Income.
After 1865 additional acts were implemented, the most significant being the Income Tax Act of 1961. According to this act, any person whose salary from any source of income exceeds the maximum limit of unchargeable amount is liable for Income Tax. There is also a provision of deduction and exemptions in Income Tax which depends on the:
  • Type of assessee
  • Source of income
  • Residential status
  • Investment in saving schemes

Refunds

Tax authorities have now made it easier for Indian taxpayers to determine their refund status. You can simply visit the NSDL-TIN website www.tin-nsdl.com and click Status of Tax Refunds to see whether a refund is due to you.

NOTE: To track your refund status you will have to enter PAN (Permanent Account Number) and Assessment Year information.

Income Tax Rates - 2018-19

For Individuals, Hindu Undivided Family, Association of Persons, Body of Individuals and Artificial juridical persons

Income Tax Tax Rate
Up to 250000 (a)(b) Nil
Rs. 250,001 to Rs. 500,000(d)(e) 5%
Rs. 500,001 to Rs. 1,000,000(d) 20%
Rs. 1,000,001 and above(c)(d) 30%

  1. In the case of a resident individual of the age of 60 years or above but below 80 years, the basic exemption limit is Rs 300,000.
  2. In case of a resident individual of an age of 80 years or above, the basic exemption limit is Rs 500,000.
  3. Surcharge @ 12% is applicable on income exceeding Rs 1 crore; Marginal relief for such person is available Education cess is applicable @ 3% on an aggregate of tax plus surcharge
  4. Finance Bill, 2017 provides a rebate of lower of actual tax liability or Rs. 2,500 (against earlier rebate of Rs. 5,000) in the case of individuals having a total income of less than Rs. 350,000.

Partnership Firm

For the Assessment Year 2018-19, a partnership firm (including LLP) is taxable at 30%.

Add:
  • Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where the total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
  • Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  • Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

Local Authority

For the Assessment Year 2018-19, a local authority is taxable at 30%.

Add:
  • Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where the total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
  • Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  • Secondary and Higher Education Cess:The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

Domestic Company

For the Assessment Year 2018-19, a domestic company is taxable at 30%. However, for Assessment year 2018-19, the tax rate would be 25% where a turnover or gross receipt of the company does not exceed Rs. 50 crore in the previous year 2015-16.

Add:
  • Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
    • Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
    • Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
  • Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  • Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

Foreign Company

Assessment Year Assessment Year 2018-19

Nature of Income Tax Rate
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government 50%
Any other income 40%

Add:
  • Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
    • Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
    • Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
  • Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  • Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

Co-operative Society

Assessment Year Assessment Year 2018-19

Taxable income Tax Rate
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

Add:
  • Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
  • Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  • Secondary and Higher Education Cess:The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

Capital gains

According to the 1961 Income Tax Act, capital gains are derived according to the transfer of capital assets. Capital gain is the profit or gain of an assessee that comes from the transfer of a capital asset effected during the previous or assessment year.

Capital assets

Under section 2(14) of the 1961 Income Tax Act, a Capital Asset is defined as a property of any kind held by an assessee, including property held for their business or profession. A capital asset includes all property types as well as all rights in the property. It is also defined as gains on a transfer of assets where there is no cost of acquisition such as:
  • Goodwill of business generated by the assessee
  • Tenancy rights
  • Stage carriage permits
  • Loom hours
  • The right to manufacture
  • Processing and production of any article

Assets that don't fall under heads of capital assets

According to the 1961 Income Tax Act, some assets are not included as Capital Assets, including:
  • Stock and raw materials used by an assessee for their business or profession.
  • Movable properties such as wearing apparel, furniture, automobiles, phones, and household goods that are held by the assessee.
NOTE: Jewelry that is also a movable asset falls under heads of capital assets.
  • Agricultural property in India.
NOTE: Agricultural land that falls under municipal limits (in an area where the population exceeds 10,000) falls under Capital Assets. Agricultural land within 8 km of municipal limit also falls under Capital Assets if notified by the central government of India.
  • A few Gold Bonds issued by the government.
  • A few special bonds issued by the central government (eg Special Bearer Bonds, 1991).

Transferring capital assets

Under Section 2(47) of the 1961 Income Tax Act, transfer of capital assets is defined as:
  • Sale, exchange and relinquishment of assets.
  • Extinguishment of any rights in capital assets.
  • Acquisition of capital assets or rights.
  • Conversion of a capital asset by the owner as stock in trade of their business.
NOTE: This may also be a term of transfer.
  • Transfer of immovable property under Section 53A of the 1882 Transfer of Property Act.
  • Any transaction by which an assessee is able to act as a member of a cooperative society.
  • Any transaction by which an assessee acquires shares in a cooperative society.

Tax Deductions (Section 80C)

If it's a long-term investment (typically with a lock-in of 5 years), chances are high that it would qualify for the Section 80C deduction. Tax deductions are used by the government as tools to encourage you to:
  • Save for your retirement
  • Buy insurance and thus protect your loved ones.
  • Invest in Indian economy for longer periods
  • Buy a home
Why you should care?
  • Because it is the closest thing to free money you will ever get. Depending on your income tax slab, you might be saving up to about Rs. 80,340
A few investment avenues for 80C are:

Deductions under 80C (Max Rs 1.5 lakh)
1 Life insurance premium
2 PF
3 PPF
4 ULIP
5 NSC
6 ELSS (u/s 10(23D)) – Mutual Fund
7 Pension Fund (MF) (u/s 10(23D))
8 Annuity Plan by insurer (u/s 80CCC)
9 Repayment towards Principal amount of Housing Loan
10 Bank Term Deposit
11 Senior Citizen Saving Scheme 2004 (Postal Scheme)
12 Sukanya Samriddhi Scheme
13 Tuition Fees (Excluding Development fee and Donation, Etc)

Other than 80C

  • Deductions u/s 80 CCG - Investments in RGESS (50% of First time Invest) – Max Rs.50000
  • Deductions u/s 80 CCD - Investments in NPS (50000 Maximum)
  • Deductions u/s 80 D - Medical Insurance Premium (Self, Parents) – Rs.25000 for self and for senior citizens Rs.30000.
  • Tax Benefit u/s 24 - Interest Paid On Home Loan (Max 2 Lakh)

Deductions From Gross Total Income

Gross total Income is the total of income under all heads for a particular previous year. Out of the said Gross total Income, deductions are allowed under various sections comprised in chapter VI-A. To claim the said deductions, certain conditions have to be fulfilled.

80CCC -Contribution to Pension Fund of LIC
80D - Medical Insurance premia
80DD - Maintenance including medical treatment of handicapped dependent
80DDB - Medical treatment, etc.
80-E - Repayment of loan taken for higher education
80G - Certain Donations to Charitable trusts of institutions for charitable purpose.
80GG - Rent Paid by an Assessee.
80GGA - Donations for scientific research or rural or urban development
80-HH - Deduction in respect of profits and gains from newly established industrial undertakings or hotel in backward areas.
80-HHA - Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas.
80-HHB - Deduction in respect of profits and gains from projects outside India.
80-HHBA- Deduction in respect of profits and gains from housing projects in certain areas.
80-HHC Deduction in respect of profits and gains from export of goods outside India.
80-HHD Deduction in respect of earning in foreign exchange
80-HHE Deduction in respect of profit from export of computer software, etc.
80-HHF Deduction in respect of profit from export or transfer of film software, etc.
80-IA Deduction in respect of profit and gains of certain industrial undertakings or enterprises, etc. .
80-IB Deduction in respect of profit and gains of certain industrial undertakings other than infrastructure development undertakings, etc.
80-JJA Profits and gains from business of collecting and processing biodegradable waste.
80-JJAA Deduction in respect of employment of new workmen.
80-L Interest on securities, dividends, etc.
80 O Royalties, commissions, fees for professional services etc, earned in convertible foreign exchange
80-P Certain income of Co-operative Societies
80-R, 80-RR and 80-RRAIncome from foreign sources.
80-UIncome of handicapped Assessee.

Disclaimer: The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme or investment. Any action taken by you on the basis of the information contained herein is your responsibility alone.

Tax Facts - Permanent Account Number - PAN

The Permanent Account Number (PAN) is a number used by the Income Tax Department to identify assessees.
PAN is a 10-digit alphanumeric number that is printed on a laminated card known as a PAN card, along with other details such as the:
  • PAN number
  • Name of applicant
  • Father's name
  • Date of birth
  • Passport-size photo
The PAN number replaces the General Index Registrar (GIR) Number which is given to the assessee by an assessing officer and includes the officer's details.
Under section 139A of the 1961 Income Tax Act, the PAN number is required for individuals:

  • Whose total annual income exceeds the amount that is not chargeable under the income tax act
  • Whose income through business or another profession exceeds Rs. 5 lakhs
  • Who is filing an income tax return
PAN is required in the following situations:

  • Filing an income tax return
  • Any correspondence with the income tax department
  • Submitting challans for payment of any tax to the department
  • Verifying the identity of an assessee in the income tax department
MORE: Click here to learn more about PAN.

Income Tax Act

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