A BETTER WAY TO IDENTIFY YOUR INCOME TAX RETURN
A taxpayer is an individual or entity like partnership or company, paying income tax under the provisions of the Income Tax Act. Taxpayers calculate their income for the previous financial year, get their books audited if required, pay their income tax as per the applicable ITR form, pay taxes at source, as advance tax or after self-assessment, and even claim a tax refund if eligible.
HEADS OF INCOME
Taxable income in India is categorised under five income heads.
Salary Persons
House Property owners
Share Market Investors
Gold Bond Investors
Stock Brokers
Professionals
Chartered Accountant
Lawyers
Doctors
Engineers
Free Lancers
Tutors or Education
Insurance Agents
Myriad incomers
Lottery Income
Rent From Property
Gift Receivers
Interest Receivers
Buisness Holders
Presumptive Buisness Persons
Building Promotors
Contractors
Agency’s
Corporate
Marketing Professionals
Bank Pofessionals
Income from salaries
It includes income earned by an employee from an employer as remuneration under the terms of engagement. Salary income is often further divided into basic salary, various allowances, and reimbursements. Even pension income received after retirement is included as income from salaries. Form 16, issued by an employer to employees, indicates the taxability of the income from salaries and tax deducted and deposited thereon.
Income from house properties
Property owned by a person and let out on rent for residential or commercial purposes generates rental income. This income is taxed under this head. However, the entire rent receipt is not chargeable to tax. A standard deduction of 30% of the property’s net annual value as well as municipal taxes can be deducted from the rental income earned during the year.
Income from capital gains
Capital gains are the profits earned by the owner of an asset on the sale of such asset. Capital assets include house property, jewellery, land, stocks, bonds etc.
Income from business or profession
Business income is calculated under the provisions of sections 30-43D of the Income Tax Act and classified under this income head. Besides, professionals like chartered accountants, lawyers, doctors, freelancers, life insurance agents, and tutors also report their income for the financial year under this header.
Income from other sources
This is an umbrella category that includes myriad incomes like gambling and lottery income, gifts received, interest, rent from property other than a house, etc.
A taxpayer pays income tax as per the tax slabs defined under the Income Tax Act. There are different slabs under the new regime and the old regime. Slabs are different for regular, senior, and super senior citizens.
ITR I
ITR-1 – It is meant for resident individuals with income less than or equal to ₹50 lakh from salary/pension, one house property, or income from other sources.
ITR II
ITR-2 – Income of over ₹50 lakh, from sources other than business/ enterprise or professions, which may include capital gains (including crypto income), more than one house property, foreign income or asset and by a person holding directorship in a company and/or holding unlisted equity shares or agricultural income up to ₹5,000.
ITR III
ITR-3 – To be filed by people with incomes mentioned in ITR-2 and income from business or profession, including crypto income as business income, and by a partner of a firm. It is to be filed by people who cannot file ITR 1, 2 and 4.
ITR IV
ITR-4 – ITR 4 applies to that which is filed by individuals and HUFs with a total income of less than or equal to ₹50 lakh. It can be filed by taxpayers with incomes mentioned in ITR-1 and/or presumptive income subject to Section 44AD, 44AE and 44ADA taxation.
ITR V
ITR-5 – is filed by firms, limited liability partnerships, associations of persons, and a body of individuals. The list also includes – artificial juridical person (AJP), co-operative society, estate of deceased, estate of insolvent, business trust and investment fund, subject to conditions.
ITR VI
ITR-6 – is filed by companies registered under the Companies Act. However, companies claiming exemptions under section 11, i.e., earning income from property held for religious or charitable purposes, do not file ITR 6.
ITR VII
ITR-7 – is filed by a person or company under section 139 (4A)/ (4B)/ (4C)/ (4D)/(4E) and (4F).
ENTITIES WHO ARE NOT A TAXPAYER
To understand who a taxpayer is not, you have to check the list of exempt incomes specified under section 10. This is an exhaustive list spread across 50 subsections.
Your responsibilities as a taxpayer include,
- To remain cooperative, fair, and honest during tax assessment and payment
- Assist and facilitate audit officers to perform their duties
- Respond aptly to tax queries
- Not declare incorrect income or seek undeserved relief in tax returns
- Keep their tax records safe for the specified period required
WHEN IS INCOME TAX APPLICABLE?
As stated, not everyone in India is a taxpayer. So, when it comes down to who is a taxpayer in India, it is well-defined in the Income Tax Act 1961.
People who are taxpayers become so based on two broad factors:
- The income earned by the person must be taxable, i.e., is should not be exempt income.
- The income earned during the financial year must be more than the maximum amount not chargeable to tax.
RIGHTS AND RESPONSIBILITIES OF TAXPAYERS
The rights of a taxpayer include,
- Information about the tax laws and transactions with the income tax department
- Question tax authorities in case of breach of duties and claim answers
- Submission of tax returns
- Appoint an authorised representative for tax-related duties
- Redressed for defaults by tax authorities
