Introduction to Income Tax Basic Concepts

The concept of income tax in india is governed by the income tax act of 1961. This act lays
down the rules and regulations about the income tax. The act provides for the scope and
machinery for levy of income tax in india. The act is supported by income tax rules, 1961 and
several other subordinate and regulations. Besides, circulars and notifications are issued by
the central board of direct taxes (cbdt) and sometimes by the ministry of finance, government
of india dealing with various aspects of the levy of income tax. Unless otherwise stated,
references to the sections will be the reference to the sections of the income tax act, 1961.
Income tax is a tax on the total income of a person called the assessee of the previous year
relevant to the assessment year at the rates prescribed in the relevant finance act.
The government of India levies taxes on the income earned by individuals, businesses,
organizations, and other entities within a financial year. The financial year in India starts on
April 1st and ends on March 31st of the following year.
Some of the important definitions under Income Tax Act, 1961 are as follows:
ASSESSMENT YEAR – S. 2(9)

Section 2(9) defines an “Assessment year” as “the period of twelve months starting from the
first day of April every year.” An assessment year begins on 1st April every year and ends on
31st March of the next year. For example, Assessment year 2012-13 means the period of one
year beginning on 1 st April, 2011 and ending on 31st March, 2012. In an assessment year,
income of the assessee during the previous year is taxed at the rates prescribed by the relevant
Finance Act. It is therefore, also called as the “Tax Year”
PREVIOUS YEAR- S. 2(34) & S. 3

Section 3 defines “Previous year” as “the financial year immediately preceding the
assessment year”. Income earned in one financial year is taxed in the next financial year. The
year in which income is earned is called the “previous year” and the year in which it is taxed
is called the “assessment year” Common previous year for all source of income
PERSON –Section 2(31)
The term “person” includes: a. an individual; b. a Hindu undivided family (HUF); c. a
company; d. a firm; e. an Association of Persons(AoP) or a Body of Individuals,(BoI)
whether incorporated or not; f. a local authority; and every artificial juridical person not
falling within any of the preceding categories
ASSESSEE–S. 2(7)

U/s 2(7) “Assessee” means a person by whom income tax or any other sum of money is
payable under the Act and it includes:
a. every person in respect of whom any proceeding under the Act has been taken for the
assessment of his income or loss or the amount of refund due to him
b. a person who is assessable in respect of income or loss of another person or who is
deemed to be an assessee, or
c. an assessee in default under any provision of the Act
ASSESSMENT - S 2(8)
 An assessment is the procedure to determine the taxable income of an assessee and the tax
payable by him. S. 2(8) of the Income Tax Act, 1961 gives an inclusive 4 definition of
assessment “an assessment includes reassessment “ U/s 139 of the Act, every assessee is
required to file a self declaration of his income and tax payable by him called “return of
income”.
INCOME- S 2(24)

Broadly the term “Income includes the following:

i. profits and gains ;
ii. dividend;
iii. voluntary contributions received by certain institutions
iv. Receipts by employees the value of any benefit or perquisite, whether convertible into
money or not.
vi. Incomes from business – s-28
vii. any capital gains chargeable under section 45;

Income Tax Concepts: Heads of Income

Income from Salary – It includes wages, pensions, allowances, and other benefits received
from employment
Income from House or Personal Property – Any rental or other income generated from a
pre-owned property falls under this income category

Income from Business or Profession – Profits and losses a business or organization

incurs are a part of this income category.

Income from Capital Gains – Income from the sale of capital assets like shares, real
estate, etc., is taxed under this head. The tax rate depends on the duration you hold the
asset – short-term or long-term capital gains.

Income from Other Resources – Any other source of income, like interest earnings, gifts,
dividends, etc., is added to this income category

Income Tax Deductions List - Deductions on Section 80C, 80CCC,

80CCD & 80D - FY 2023-24 (AY 2024-25)

Section Permissible limit (maximum) Eligible Claimant

80 C Rs 1.5 lakh (aggregate of 80C, Individuals/Hindu Undivided Families

80CCC and 80CCD)
80 Rs 1.5 lakh (aggregate of 80C, Individuals
CCC 80CCC and 80CCD)
80 Rs 1.5 lakh (aggregate of 80C, Individuals
CCD 80CCC and 80CCD)
80 CCF Rs 20,000 Individuals/Hindu Undivided Families
80 • RS 50,000 for senior citizens Individuals/Hindu Undivided Families
CCG
• Rs 25,000 for other
individuals
80 D RS 20,000 Individuals/Hindu Undivided Families
80 DD  Rs 75,000 for general Resident Individuals/Hindu Undivided Families
disability
 Rs 1.25 lakh for severe
disability

80 • Rs 1 lakh for senior Resident Individuals/Hindu Undivided Families

DDB citizens

• Rs 40,000 for others

80 E No limit mentioned Individuals
80 EE Rs 3 lakh Individuals
80 G Different limits based on All assessees
donation
80 GG Rs 2,000 per month Individuals who do not get HRA
80 Depends on quantum of All assessees who do not have income from
GGA donation profit or gains from a business/profession
80 Depends on quantum of Indian companies
GGB donation
80 Depends on quantum of All assesses apart from local/Artificial judicial
GGC donation authorities who are funded by the government
80 IA No maximum limit defined All assessees
80 No maximum limit defined All assessees who are SEZ developers
IAB
80 IB No maximum limit defined All assessees
80 IC No maximum limit defined All assessees
80 ID No maximum limit defined All assessees
80 IE No maximum limit defined All assessees
80 All profits earned for first 5 All assessees
JJA years
80 30% of increased wages Indian companies which have income from
JJAA profit/gains
80 LA Portion of their income Scheduled banks, IFSCs, banks established
outside India
80 P Portion of their income Cooperative societies
80 Rs 3 lakh Authors – resident individuals
QQB
80 Rs 3 lakh Resident individuals
RRB
80 Rs 10,000 per year Individuals/Hindu Undivided Families
TTA
80 U  Rs 75,000 for people Resident individuals
with disabilities
 Rs 1.25 lakh for people
with severe disabilities

Tax Slabs for AY 2024-25

Your income is categorized into different slabs based on your salary, and each slab
has a specific tax rate. These slabs and rates are subject to revision every financial
year based on the Union Budget presented by the Finance Minister of India.

India follows a progressive concept of taxation on income. It means the higher your
salary, the higher your taxable rate will be.

Below are the income tax slabs and rates for the financial year 2024-25 basis the
Interim Budget announced on February 1st, 2024:

Income Tax Slabs and Rates for 2024-25 – Old

Regime
Income Slab (₹) Tax R

Below 60 years

Up to 2,50,000 Nil

2,50,001 – 5,00,000 5%

5,00,001 – 10,00,000 20%

Above 10,00,000 30%

Senior Citizens (60 Years and Above, But Less than 80 Years)
Up to 3,00,000 Nil

3,00,001 – 5,00,000 5%

5,00,001 – 10,00,000 20%

Above 10,00,000 30%

Super Senior Citizen (80 Years and Above)

Up to 5,00,000 Nil

5,00,001 – 10,00,000 20%

Above 10,00,000 30%

Tax Slabs and Rates for 2024-25 – New Regime

The new tax regime offers lower tax rates but requires forgoing certain exemptions
and deductions. It applies to all individuals regardless of their age.

Income Slab (₹) Tax

Up to 2,50,000 Nil

2,50,001 – 5,00,000 5%

5,00,001 – 7,50,000 10%

7,50,001 – 10,00,000 15%

10,00,001 – 12,50,000 20%

12,50,001 – 15,00,000 25%

Above 15,00,000 30%

Rebate u/s 87A for FY 2024-25 (AY 2025-26)

Rebate u/s 87A: Resident Individuals are also eligible for a Rebate of up to 100%
of income tax subject to a maximum limit depending on tax regimes as under:
Total Old Tax Regime New Tax Regime
Income Rebate under Section 87A Applicable
Tax rebate up to Rs.12,500 is
applicable for resident individuals
Up to Rs. 5 Tax rebate up to Rs.25,000 is
if the total income does not exceed
Lakh applicable for resident individuals
Rs 5,00,000 (not applicable for
if the total income does not exceed
NRIs
Rs 7,00,000 (not applicable for
From 5
NRIs
Lakhs to 7 NIL
Lakhs

Health & Education cess @ 4% shall also be paid on the amount of income tax plus
Surcharge

How to calculate income tax? (See example)

Income tax calculation for the Salaried
Income from salary is the sum of Basic salary + HRA + Special Allowance + Transport
Allowance + any other allowance. Some components of your salary are exempt from tax,
such as telephone bills reimbursement, leave travel allowance. If you receive HRA and live
on rent, you can claim exemption on HRA. Calculate exempt portion of HRA, by using
this HRA Calculator.
On top of these exemptions, a standard deduction of Rs 40,000 was introduced in the
budget 2018. This has been increased to Rs 50,000 in budget 2021 and further in Budget
2024, Standard deduction of 50,000 is available in case of new regime as well.
In case you opt for the new tax regime, these exemptions will not be available to you.
Let's understand income tax calculation under the current tax slabs and new tax slabs
(optional) by way of an example. Neha receives a Basic Salary of Rs 1,00,000 per month.
HRA of Rs 50,000. Special Allowance of Rs 21,000 per month. LTA of Rs 20,000 annually.
Neha pays a rent of Rs 40,000 and lives in Delhi.

Nature Amount Exemption/Deduction Taxable(Old regim

Basic Salary 12,00,000 - 12,00,000

HRA 6,00,000 3,60,000 2,40,000

 Nature Amount Exemption/Deduction Taxable(Old regim

Special Allowance 2,52,000 - 2,52,000

LTA 20,000 12,000 (bills submitted) 8,000

Standard Deduction - 50,000 50,000

Gross Total Income from Salary 16,50,000

To calculate Income tax, include income from all sources. Include:

Neha has income from interest from savings account of Rs 8,000 and a fixed deposit interest
income of Rs 12,000 during the year. Neha has made some investments to save income tax.
PPF investment of Rs 50,000. ELSS purchase of Rs 20,000 during the year. LIC premium of
Rs 8,000. Medical insurance paid of Rs 12,000. Here are the deductions Neha can claim
under the old tax regime.

Nature Maximum Deduction Eligible investments/expenses

Section Rs.1,50,000 PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC premium Rs
80C deducted by employer(Neha’s contribution) = Rs 1,00,000 *12% *1

Section Rs 25,000 for self Rs Medical insurance premium Rs 12,000

80D 50,000 for parents
 Nature Maximum Deduction Eligible investments/expenses

Section 10,000 Savings account interest 8,000

80TTA

Calculation of gross taxable income in India (Old regime)

Nature Amount

Income from Salary 16,50,000

Income from Other Sources 20,000

Gross Total Income

Deductions

80C 1,50,000

80D 12,000

80TTA 8,000
Nature Amount

Gross Taxable Income

Total tax on above (including cess)

Calculation of gross taxable income in India (New regime)

Nature Amount

Income from Salary 20,22,000

Income from Other Sources 20,000

Gross Total Income

Total tax on above (including cess)

This is how income tax has been calculated for Neha under the new tax regime

Up to Rs 3,00,000 Exempt from tax

Rs 3,00,000 to Rs 6,00,000 5% (5% of Rs 6,00,000 less Rs 3,00,000)

Rs 6,00,000 to Rs 9,00,000 10% (10% of Rs 9,00,000 less Rs 6,00,000)

Rs 9,00,000 to Rs 12,00,000 15% (15% of Rs 12,00,000 less Rs 9,00,000)

Rs 12,00,000 to Rs 15,00,000 20% (20% of Rs 15,00,000 less Rs 12,00,000)

More than Rs Rs 15,00,000 30% (30% of Rs 20,42,000 less Rs 15,00,000)

Cess 4% of total tax (4% of Rs 15,000 + Rs 30,000+ Rs 45,000 + Rs 60,000 + Rs

Total Income Tax Rs 15,000 + Rs 30,000+ Rs 45,000 + Rs 60,000 + Rs 1,62,600 + Rs 12,504

INCOME TAX RETURN

The Income Tax Department has notified 7 types of Income Tax Return
(ITR) forms for filing taxes in India. Choosing the correct ITR form in
India depends on your income source and category:

 ITR-1 (Sahaj): For resident individuals with income up to ₹50 lakhs from
salaries, one house property, and other sources like interest.
 ITR-2: For individuals and HUFs without income from business or profession,
covering salary, multiple house properties, capital gains, and foreign income.
 ITR-3: For individuals and HUFs with income from a business or profession,
including partners in firms but not conducting business through the firm.
 ITR-4 (Sugam): For resident individuals, HUFs, and firms with total income up
to ₹50 lakhs and presumptive income under Sections 44AD, 44ADA, or 44AE.
 ITR-5: For firms, BOIs (Bodies of Individuals), AOPs (Association of Persons),
LLPs (Limited Liability Partnerships), and AJP (Artificial Juridical Persons),
excluding individuals, HUFs, and companies.
 ITR-6: Exclusively for companies that do not declare exemption as per
Section 11, which includes income from property held for religious or
charitable purposes.
  ITR-7: For companies or persons who need to file taxes as per sections
139(4A) mandatorily, 139(4B), 139(4C), and 139(4D), such as political parties,
trusts, and educational institutions

ADVANCE TAX
Advance tax is the income-tax amount a taxpayer pays in advance for a particular
financial year. Generally, taxpayers pay the outstanding tax at the end of the financial
year. Because of this one-time payment, they must pay substantial amounts in a single
go. But in the case of advance tax, taxpayers can pay the estimated tax in four
instalments in the current year only, which helps reduce their financial burden.

Advance tax is applicable to individuals, self-employed professionals, and businesses

whose estimated tax liability for the financial year exceeds a certain threshold.

Advance Tax Payment Due Date FY 2024-25

The advance tax must be paid on the 15th of the last month of every quarter. Check the below
table:

Due date FY 2024-25 Advance tax payable

15th June 2024 15% of advance tax

15th September 2024 45% of advance tax minus advance tax already paid

15th December 2024 75% of advance tax minus advance tax already paid

15th March 2025 100% of advance tax minus advance tax already paid

Advance Tax Calculation with Example

Advance tax is calculated on the basis of your taxable income in the financial year. You can
calculate your taxable income by deducting all the exemptions and deductions from your
gross income. After this, you must calculate your tax liability based on your income-tax slab.
If you do not want to do this tedious calculation manually, you can use the Income Tax
calculator to calculate your tax liability.
This calculated tax liability is paid in four instalments on or before the due dates. Let’s take
an example to understand this:

Vikas has a net annual salary income of Rs. 12 lakh; apart from this, he has an additional
interest income of Rs. 20,000. He has invested Rs. 50,000 in the PPF, Rs. 50,000 in an ELSS,
and Rs. 50,000 in tax-saving FDs. Further, he has also purchased medical insurance for his
family for Rs. 25,000 and his parents for Rs. 40,000.

Income Tax Calculation

Income from Salary Rs. 12,00

Income from Other Sources Rs. 50,

Gross Taxable Income Rs. 12,50

Less: Deductions

PPF Rs. 50,000

ELSS Rs. 50,000

Fixed Deposits Rs. 50,000

Deduction Under Section 80C Rs. 1,50

Deduction under Section 80D Rs. 65,

Net Taxable Income Rs. 10,35

Tax Liability (As per the Slab Rates) Rs. 1,23

Add: Education cess @ 4% Rs. 4,9

Net Tax Payable Rs.1,27

Now, let’s check the advance tax payable at the end of each due date:

ADVANCE TAX PAYMENTS

Due date Advance Tax Calculation Advance Tax Pay

15th June 15% of Rs. 1,27,920 Rs. 19,188

15th September 45% of Rs. 1,27,920 – Rs.19,188 Rs. 57,564

15th December 75% of Rs. 1,27,920 – Rs. 57,564 Rs. 95,940

15th March 100% of Rs. 1,27,920 – Rs. 95,940 Rs. 127,920

TAX DEDUCTED AT SOURCE

Tax Deducted at Source (TDS) is a procedure implemented by the Indian
government to collect taxes at the source of income. A certain percentage of tax
is deducted by the payer at the time of making payments to the receiver, and this
amount is then remitted to the government. TDS is applicable to a wide range of
income categories such as salaries, interest on fixed deposits, rent, commissions,
etc. TDS helps prevent tax evasion and understanding it is crucial for both
payers and receivers of income in India.

TDS RETURN FORMS

Filing Tax Deducted at Source returns is mandatory for all the persons who
have deducted TDS. TDS return is to be submitted quarterly and various details
need to be furnished like TAN, amount of TDS deducted, type of payment, PAN
of deductee, etc. Also, different forms are prescribed for filing returns
depending upon the purpose of the deduction of TDS. Various types of return
forms are as follows:

Form No Transactions reported in the return Due date

 Q1 – 31st July
Form Q2 – 31st October
TDS on all payments except salaries
26Q Q3 – 31st January
Q4 – 31st May

Form Q1 – 31st July

24Q Q2 – 31st October
TDS on Salary
Q3 – 31st January
Q4 – 31st May

Form TDS on all payments made to non-residents Q1 – 31st July

27Q except salaries Q2 – 31st October
Q3 – 31st January
Q4 – 31st May

Form 30 days from the end of the month

TDS on sale of property
26QB TDS is deducted

Form 30 days from the end of the month

TDS on rent
26QC TDS is deducted

TAX COLLECTING AT SOURCE

Tax collected at source (TCS) is the tax collected by the seller from
the buyer on sale so that it can be deposited with the tax authorities.
Section 206C of the Income-tax act governs the goods on which the
seller has to collect tax from the buyers. Such persons must have
the Tax Collection Account Number to be able to collect TCS.

GST
The goods and services tax (GST) is a value-added tax (VAT) levied
on most goods and services sold for domestic consumption. The GST
is paid by consumers, but it is remitted to the government by the
businesses selling the goods and services.
 The goods and services tax (GST) is a tax on goods and services sold
domestically for consumption.
 The tax is included in the final price and paid by consumers at point of
sale and passed to the government by the seller.
 The GST is usually taxed as a single rate across a nation.
 Governments prefer GST as it simplifies the taxation system and reduces
tax avoidance.
 Critics of GST say it burdens lower income earners more than higher
income earners.
India has, since launching the GST on July 1, 2017, implemented the following
tax rates:12
A 0% tax rate applied to certain foods, books, newspapers, homespun cotton
cloth, and hotel services.
A rate of 0.25% applied to cut and semi-polished stones.
A 5% tax on household necessities such as sugar, spices, tea, and coffee.
A 12% tax on computers and processed food.
An 18% tax on hair oil, toothpaste, soap, and industrial intermediaries.
The final bracket, taxing goods at 28%, applies to luxury products, including
refrigerators, ceramic tiles, cigarettes, cars, and motorcycles.
 components of GST
There are three taxes applicable under this system: CGST, SGST & IGST.

 CGST: It is the tax collected by the Central Government on an

intra-state sale (e.g., a transaction happening within
Maharashtra)
 SGST: It is the tax collected by the state government on an
intra-state sale (e.g., a transaction happening within
Maharashtra)
 IGST: It is a tax collected by the Central Government for an
inter-state sale (e.g., Maharashtra to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:

Transaction New Old Regime Revenue Distribution

Regime

Sale within CGST + VAT + Central Revenue will be shared equally between the
the State SGST Excise/Service tax and the State

Sale to IGST Central Sales Tax + There will only be one type of tax (central) i
another State Excise/Service Tax inter-state sales. The Centre will then share
revenue based on the destination of goods.

GST RETURNS
A GST return is a document containing details of all income/sales and/or
expenses/purchases that a GST-registered taxpayer (every GSTIN) is required to
file with the tax administrative authorities. This is used by tax authorities to
calculate net tax liability.
There are 13 returns under GST. They are the GSTR-1, GSTR-3B, GSTR-4,
GSTR-5, GSTR-5A, GSTR-6, GSTR-7, GSTR-8, GSTR-9, GSTR-10, GSTR-
11, CMP-08, and ITC-04. However, all returns do not apply to all taxpayers.
Taxpayers file returns based on the type of taxpayer/type of registration
obtained.

TYPES OF GST RETURNS AND THE DUE DATES TO

FILE

Return Form Description Frequency Due Da

GSTR-1 Details of outward supplies Monthly 11th of the ne

 Return Form Description Frequency Due Da

month.

of taxable goods and/or

Quarterly (If opted 13th of the mo
services affected.
under the QRMP succeeding th
scheme) quarter.

IFF (Optional
by taxpayers Details of B2B supplies of Monthly (for the
13th of the nex
under the taxable goods and/or first two months of
month.
QRMP services affected. the quarter)
scheme)

20th of the nex

Monthly
month.
Summary return of outward
supplies and input tax credit
GSTR-3B Quarterly (For
claimed, along with payment 22nd or 24th o
taxpayers under
of tax by the taxpayer. month succee
the QRMP
quarter***
scheme)

CMP-08 Statement-cum-challan to Quarterly 18th of the mo

make a tax payment by a succeeding th
taxpayer registered under the quarter.
composition scheme under
Return Form Description Frequency Due Da

Section 10 of the CGST Act.

Return for a taxpayer

30th of the mo
registered under the
GSTR-4 Annually succeeding a
composition scheme under
year.
Section 10 of the CGST Act.

20th of the nex

month.
Return to be filed by a non-
GSTR-5 Monthly (Amended to 1
resident taxable person.
Budget 2022;
notified by CB

Return to be filed by non-

20th of the nex
GSTR-5A resident OIDAR service Monthly
month.
providers.

Return for an input service

distributor to distribute the 13th of the nex
GSTR-6 Monthly
eligible input tax credit to its month.
branches.

GSTR-7 Return to be filed by Monthly 10th of the nex

registered persons deducting month.
Return Form Description Frequency Due Da

tax at source (TDS).

Return to be filed by e-
commerce operators
containing details of supplies 10th of the nex
GSTR-8 Monthly
effected and the amount of month.
tax collected at source by
them.

Annual return by a regular 31st Decembe

GSTR-9 Annually
taxpayer. next financial y

Self-certified reconciliation 31st Decembe

GSTR-9C Annually
statement. next financial y

Within three m
Once, when the
Final return to be filed by a the date of
GST registration is
GSTR-10 taxpayer whose GST cancellation or
cancelled or
registration is cancelled. cancellation or
surrendered.
whichever is la

GSTR-11 Details of inward supplies to Monthly 28th of the mo

be furnished by a person following the m
having UIN and claiming a which stateme
 Return Form Description Frequency Due Da

refund filed.

25th April whe

AATO is up to
Annually crore.
(for AATO up to
Statement to be filed by a Rs.5 crore)
principal/job-worker about
ITC-04
details of goods sent 25th October a
to/received from a job-worker Half-yearly April where AA
(for AATO > Rs.5 exceeds Rs.5
crore)
(AATO = Annu
aggregate turn

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