Income Tax Update

Income Tax

Income tax is the tax payable, at the rate enacted by the Union Budget (Finance Act) for every assessment year, on the total income earned in the previous year by every individual. The government of India imposes Income Tax on every taxable income of individual. The Levy of tax is different on each of the person. The Levy is governed by the Indian Income Tax Act, 1961, which came into force on 1st day of April, 1962. The Act has been recently amended by the Finance Act of 2011.

The Indian Income Tax department is governed by the Central Board of Direct Tax and is part of the Department of Revenue under the Ministry of Finance, Government of India. The chargeability of Income Tax is based on the nature of income, i.e., whether it is Revenue or Capital.

The recent rates of Income Tax with effect from 1st April, 2011, are:

Income Tax Rates/Slab Rates (%)

For Men

· Up to 1,80,000 = Nil
· 1,80,001 – 5,00,000 = 10%
· 5,00,000 – 8,00,000 = 20%
· 8,00,000 upwards = 30%

For Women

· Up to 1, 90,000 = 0%
· 1,90,001 - 5,00000 = 10%
· 5,00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

For Senior Citizen (for resident individual of 60 years or above)

· Up to 2, 50,000 = 0%
· 2, 50,001 - 5,00,000 = 10%
· 5, 00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

For Very Senior Citizen of 80 years or above

· Up to 5, 00,000 = 0%
· 5,00,001 - 8,00,000 = 20%
· Above 8,00,000 = 30%

Educational cess is applicable @ 3% on income tax. No Surcharge will be levied.

Income Tax (Corporate)

The Corporate Tax Rate in India entirely depends on the origin of the company. Indian Companies are taxable in India on their worldwide income. The slab for the corporate income tax is different from the general Income Tax slabs. There are special rates prescribed for corporate, firms, cooperatives and local authorities. Features of Corporate Income Tax are:

· Income is taxed at a flat rate of 30% for Indian Companies.
· A surcharge of 7.5% of the Income Tax is levied, if the taxable income exceeds Rs. 1 million.
· Foreign companies pay 40%
· An educational cess of 3% (on both the tax and the surcharge) is payable, yielding effective tax rates of 32.5% for domestic companies and 41.2% for foreign companies.
· All companies incorporated in India are deemed as domestic Indian Companies for tax purposes, even if owned by foreign companies.
· Electronic filing of Income Tax Returns is a legal obligation of every company whose total Income Tax for the previous year has exceeded the maximum amount that is not chargeable for Income Tax under the provisions of the Income Tax Act, 1961.


Income Tax (Individual)


In India, Individual Income Tax is a progressive tax. It is important for every income individual to pay tax on time. For resident individual, Income Tax rate is levied by the Indian Government on the taxable income which may be lower than total income depending on Deduction/Exemptions. The slab for tax payment is different for women, senior citizen, and very senior citizen which has been recently included in the category and is also different as per individual income level. The slab for individuals has been mentioned above.

The Individual Income tax is divided into 5 heads:

· Income from salary: All income received as salary under Employer/Employee relationship is taxed under this head. Income from salary is the least from all deductions.
· Income from House property: Income from House property is computed by taking into account Annual value of the property.
· Income from Business or Profession
· Income from capital gain: Transfer of capital assets results in capital gain.
· Income from other heads.

For Personal Income Tax, surcharge has been abolished in the financial year of 2009-10.

With effect from assessment year 2009-10, Secondary and Higher Secondary Education Cess of 1% is applicable on the subtotal of Income Tax. The education cess is mainly applicable on excise duty and service tax.