Highlight the important provisions of income tax (IT) ?

 Highlight the important provisions of income tax (IT) ?

As per the IT Act, 1961, income is taxable under five heads: salary, house property, business or profession, capital gain and other sources. A salaried person must obtain Form 16 from his employer every year. As much as 30% standard deduction is available on income from house property. Income is to be considered as deemed let-out on second house property. Deduction of interest on loan for self-occupied house-property is allowed up to Rs two lakh. For other house property, actual expenditure of interest on housing loan is allowed as deduction. Repayment of the principal amount of the housing loan is deductible up to Rs 1.50 lakh under Section 80C of the IT Act.

Tax audit is compulsory if business sales turnover exceeds Rs 1 crore. Tax audit is also compulsory if the gross receipts of professionals exceed Rs 25 lakh.

If sales turnover is below Rs. 1 crore, then net profit of 8% or higher is to be taken as business income. Otherwise, tax audit is required. The due date for tax audit and income tax return is 30 September. A tax payer other than company and those eligible for tax audit are required to file income tax return before 31 July.

Tax payers subject to tax audit should deduct tax at source (TDS) on particular transactions. TDS should be on the date of credit or payment, whichever is earlier. TDS payment should be made on or before the 7th day of the next month. TDS returns are to be filed quarterly. If TDS is not deducted, then deduction of 30% of expenditure is not allowed.

Long-term capital gains (LTCG) will arise if transfer of specified capital assets is made after three years. Capital gains on shares are said to be long term if held for more than one year. Generally, long-term capital gains are taxable at 20%. LTCG on shares on which securities transaction tax (STT) has been paid is exempt from tax. Short-term capital gains are taxable at 15% if STT is paid and as per applicable slab rates in other cases. Dividend received from domestic company and mutual funds is exempt from tax.

Agricultural income is exempt from tax. Gifts received from non-relatives exceeding Rs 50000 are taxable. IT is not chargeable on gifts received at the time of marriage, as per of will, in case of succession and from specified relatives.

The maximum deduction limit under Sections 80C, 80CCC and 80 CCD is Rs 1.50 lakh. Deduction of medical insurance premium is available subject to the prescribed limits. Deduction limit of interest earned on savings account is up to Rs 10000. Income earned by a minor child is clubbed in the hands of parents.

Form 26AS provides information about TDS, advance tax paid and details of refund. Notice may be sent to the taxpayer if the income mentioned in Form 26AS and the IT return filed has differences. IT return should be filed if income exceeds the basic exemption limit. The basic exemption limit for individuals for assessment year 2015-16 (financial year 2014-15) is Rs 2.50 lakh. The basic exemption limit for senior citizens, i.e., above 60 years, is Rs three lakh. The basic exemption limit for super senior citizens, i.e., above 80 years, is Rs five lakh.

Advance tax is to be paid if tax liability during the year exceeds Rs 10000. As much as 12% of surcharge is applicable if income exceeds Rs one crore.

Tax of 30% is applicable on income of a partnership firm, company and limited liability partnership. Details of bank accounts, passport number and Aadhar card number have to be given in the IT return.

Details of fixed assets held in foreign country ares required to be given in the IT return. If the taxable income of the individual is less than Rs five lakh, then relief of Rs 2000 is available in tax. E-filling of return is compulsory if income exceeds Rs 5 lakh.

From the fiscal year ended March 2015, depreciation is to be calculated as per the New Companies Act, 2013.

The replies are only in the nature of guidelines. The tax counsellors and the publication are not responsible for any decision taken by readers on the basis of the same.

source: capital market