In order to file your Income Tax Return, you first need to collect all the information required to file it. The next important step is to compute your total taxable income. After this, final tax payable or refundable is calculated by applying the applicable tax rates in force and then deducting taxes already paid by way of TDS/TCS or Advance tax from the tax due amount arrived at.
As per the income tax laws, a person can have a total of 5 sources of income which are:
- Income from salary
- Income from House Property
- Income from Business or Profession
- Income from Capital Gains
- Income from Other sources
Income from Salary
You can compute income from your salary using the TDS certificate in Form 16 issued by your employer. This is to be done as follows:
* Collect your salary slips and Form 16 for the financial year. – Now add all your emoluments like (Basic salary, DA, TA, DA on TA, HRA, all other allowances, and reimbursements) which will be mentioned in your salary slips and Form 16 (Part B).
The total will be termed as your Gross salary.
From Gross Salary, you can claim various exemptions and deductions. Standard Deduction for Salaried Person is Rs.50000. * The result will be your net income from salary.
Income from House Property (HP)
Income from house property mainly consists of rental income received by the assessee from the house that he has let out. In case, assessee has only one house and that too is self-occupied by him, then also he will be required to compute his income from house property.
Income from Capital Gains
Computing income from capital gains involves some effort depending on the number and complexity of transactions. You might need an expert to calculate the same depending upon the nature and number of transactions. Broadly, income from capital gains is computed as follows:
* Compute your Long term capital gains (LTCG) from sale of all capital assets. – Compute your Short term capital gains (STCG) from sale of all capital Assets. – Claim the deductions u/s 54, 54G, 54EC etc. if any.
Income from Business/Profession
Calculating the taxable income arising from gains from Business/ Profession might be a challenging task. In case, the business or professional set up is not on a big scale and does not involve complex transactions, then income from Business/Profession can be computed by the assessee himself/herself but in most cases, it is beneficial to take the advice of an expert
There several provisions under the Income Tax Act which deal with the allowance/disallowances of various expenditures and incomes. Other concepts like AMT, Book Profits, and Presumptive incomes are also applicable while computing gains from a Business/Profession.
- NOW JOIN TALLY ERP 9 FULL COURSE [FREE] CLICK HERE
- NOW JOIN TALLY PRIME FULL COURSE [FREE] CLICK HERE
- NOW JOIN BUSY FULL COURSE [FREE] CLICK HERE
- NOW JOIN ADVANCE EXCEL COURSE [FREE] CLICK HERE
- NOW JOIN ACCOUNTING COURSE [FREE] CLICK HERE
Income from other source
All the incomes that cannot be classified in the heads of income mentioned above will be considered as income from other sources. It generally consists of Interest Income, Dividend income, Gifts (where taxable) etc.
Gross Total Income
It is the sum of income from all 5 heads after setting off the losses under the relevant heads of income. It is worth noting that Gross total income is to be categorized in 2 parts i.e. one which is to be taxed at normal slab rates (NORMAL INCOME) and other which is subject to tax at specific rates.
For this purpose, following are not considered as normal income:
* Short Term capital Gains on which Securities Transaction Tax has been paid (taxed at 15 percent)
* Long term capital gains except for those exempted under section 10(38) (Taxed at 20 percent)
* Casual income like lottery income, income from horse racing (taxed at 30 percent)
Deductions under chapter VI-A
We all are aware of the popular deductions like deductions under 80C (upto Rs 150000), but there are many more deductions that can be claimed by the assessee. Make sure you claim all the relevant deductions from your Gross total income which are given under sections 80C to 80U.
Net Taxable Income
Subtract the Deductions under Chapter VI-A from your Gross Total Income. The result will be your total taxable income. After calculating your total taxable income, apply the tax rates relevant for the financial year for which the income has been calculated to compute your tax liability.