Tag Archives: What is Income Tax

Income tax adviser in India

Income Tax: Skepticism eliminated

What is Income Tax?
A tax imposed on taxable income or profits of persons (whether individual, firm, company, Artificial Juridical Person, Association of Persons, Body of Individuals or Local Authority). Taxation rates may vary by type or characteristics of tax payers.

Tax trend followed in India:
In India, two types of tax trends are followed:

  • Progressive Rates: When the tax rate increases as the taxable income increases.
  • Proportional Rates: When the tax rates are uniform, irrespective of the person or their incomes.

Income tax in itself is a vast concept and cannot be understood in entirety by a layman, so here are few answers to drive away all ifs’ and buts’ that usually arise:

  • Are gifts from relatives always tax free?
    The provisions of Section 56 of Income Tax Act, 1956, state that the section provides for a cap of INR 50,000 on gifts received from non-relatives and if gifts exceeded the amount, the same would be taxable under the head “income from other sources.” But there was no such cap on gifts received from a relative.
  • What is the meaning of Presumptive taxable scheme?
    As per section 44AA of the Income-tax Act, 1961, a person engaged in business is required to maintain regular books of account under certain circumstances. In order to provide relief to small taxpayers, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, 44ADA and 44AE. A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the job of maintenance of books of account. ​
  • Is occasion a necessary condition for receiving any sum from a relative as a gift?
    The need to provide an explanation on the occasion for which gift was received is not mandatory, as per the provisions of Section 56 of Income Tax Act, 1956.
  • How is long-term capital gain from NABARD bonds taxed?
    Long-term capital gains (LTCG), after indexation, from zero-coupon bonds of NABARD are taxable at 20.8% and without indexation they are taxable at 10.40%, after taking into account basic exemption limit.
  • Is deduction allowed on money invested in Senior Citizens’ Saving Scheme (SCSS)?
    Amount deposited in SCSS is eligible for deduction under section 80C of the Income Tax Act, subject to the maximum limit of Rs 1.5 lakh.
  • What are Equity Oriented Mutual funds?
    Mutual Funds that apply 65% or more of their corpus to equity or equity related securities at all times.
  • How Equity Oriented Mutual Funds are taxed?
    1. Gains on equity oriented mutual funds held for less than a year are treated as short-term capital gains and taxed at 15%.
    2. Gains on equity oriented mutual funds held for a year or more are treated as long-term capital gains and taxed at 10% for gains exceeding Rs 1 lakh in a year.
    3. For equity oriented mutual funds invested on or before 31 January 2018, gains till that date will be considered as grandfathered and will be exempt from tax.
  • Is maintaining proof or records of earnings necessary? ​​
    For every source of income one should maintain proof of earning and the records specified under the Income-tax Act. In case no such records are prescribed, reasonable records with which one can support the claim of execution of income should be maintained.
  • Is relief available from double taxation, if income is earned in both India as well as abroad?
    A person can claim relief in respect of income which is charged to tax both in India as well as abroad. Relief is granted either, as per the provisions of double taxation avoidance agreement entered into with that country (foreign country) by the Government of India or by allowing relief as per section 91 of Income Tax Act in respect of tax paid in the foreign country.
  • When are incomes deemed to be received in India?
    Following incomes are treated as incomes deemed to be received in India: ​

    1. Interest credited to recognised provident fund account of an employee in excess of 9.5% per annum.
    2. Employer’s contribution to recognised provident fund in excess of 12% of the salary of the employee.
    3. Transferred balance in case of re-org​anization of unrecognised provident fund.
    4. Contribution by the Central Government or other employer to the account of the employee in case of notified pension scheme referred to in section 80CCD​.​
  • What is the eligibility for being taxable under Presumptive taxable Scheme under section 44AD?
    The scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm). Further, a person who has made any claim towards deductions under section 10A / 10AA / 10B / 10BA or under  sections 80HH to ​80RRB in the relevant year, cannot come under the purview of this scheme.We believe that income tax cannot be illustrated and explained with few questions because of its vast dominion. Still confused and have questions regarding your income tax filing, you can reach our team of experts.

If you require any assistance in filing income tax returns, corporate returns, tax assessments, tax planning, structuring, transaction advisory, please click here.