Income tax is direct tax by Government of India on one’s income in given financial year.
The 5 heads of Income on which we have to give tax by Income Tax Law are as follows:
2. House Property
3. Profit & Gains
4. Capital Gains
5. Income from Other Sources
All above are ways in which earn income.
Aggregated Income – It is the sum of earnings from all 5 income heads.
Clubbing Provisions – Income from minor dependents are added to your total income these are called as clubbing provisions
Set Off / Carry Forward – These are simply the losses like interest on home loan.
Gross Total Income – It is total income
Deductions – The deductions are the amount you can reduce from your total income like PF, PPF, Life Insurance Premium Payment etc. these are explained as follows:
- Sections 80 C –> LIC, PF, PPF, Tution Fees, ELSS, Home Loan Principal payment (upto 1.5 L)
- 80 D –> Medical, Health Checkup
- 80 CCD(B) –> NPS (upt 50k)
- 80 TTA –> Saving bank interest
- 80U –> Disability related deductions
Tax is calculated on total income of an assessee after all calculations like aggregations, clubbing, setting off losses and then deducting the deductions from it.
- What is an Assessment Year ?
Answer: It is the year in which you have earned the income and tax will be calculated on this amount.
e.g. 1st April, 2022 to 31st March, 2023.
- What is a Financial Year ?
Answer: This is the year in which we are calculating the income tax. However, as we said earlier in above question, financial year is from 1st April, 2022 to 31st March, 2023. So, the minimum date on which we will be able to calculate tax is 01/04/2023 and it can continue till 31/03/2024.
In simple words,
Assessment year (e.g. 2023 – 24) = Financial year (2022 – 23) + 1
We will keep adding the details in this document. Meanwhile, you may like to take a look at Preferred Sequence to Learn Aptitude in an EasyWay.