April is an important month for taxpayers in India. Only buzz words we get to hear are tax paying, ITR filing, etc. during this time. People who have thorough knowledge or have experience are pro in tax filing. But what about beginners who just joined the workforce? They are the most confused lot.
If you are a beginner and need some guidance on this, read through the conversation between a father and son below.
Son: Father, my office has asked me to make an investment declaration. I am a bit confused about income tax and ITR filing. Can you shed some light on this?
Father: Why not! Tax means a compulsory contribution every individual has to make to the country’s revenue. It is levied on workers’ income or added to the cost of some services, goods, and transactions. There are n number of taxes like property tax, flat tax, fuel tax, sales tax, income tax, etc. in India. Income tax, as the name suggests, is levied by the central and most state governments on individual and business income.
Son: Is it necessary for me to pay tax? I mean have I become eligible?
Father: Yes, it is necessary. If your income is taxable, you should pay tax. I know you are not aware of what taxable income is. Let me explain in short.
Taxable income is any compensation that triggers a tax liability. The total amount of tax you owe to the taxman is a tax liability. Taxable income is further divided into two types; earned tax (salary, tips, commissions, bonuses, etc.) and unearned income (dividends, rents, interest, royalties, alimony, winnings, etc.).
Got it, son?
Son: So far, yes. Now tell me about ITR filing and why is it required?
Father: ITR Filing states your income across different sources, tax liabilities, the tax that has been paid, and the refunds (if any) that the government has to make. ITR filing is of utmost importance as it is proof that your income is legal. It helps you in getting refunds, applying for loans and tenders, startup funding, etc.
Son: How to file an income tax return? Is online income tax return filing feasible?
Father: Online income tax return filing is super easy and hassles free. Keep handy your PAN card; aadhaar card; bank account details; form 16 (issued by the employer); income tax e-filing profile (profile on ITR e-filing portal); investment details if any; and loan details if any.
Log in on the portal and fill the relevant details in the income tax return form. Keep a check on the ITR due date else you have to bear the hefty penalty.
Son: Yes. How do I know how much tax I have to pay?
Father: There are different tax slabs mentioned by the government. The details mentioned in the following table will give you a fair idea as to in which tax slab you fall.
|Income Slab||Tax Rate|
|Up to Rs. 2,50,000||No tax|
|Rs. 2,50,000 – Rs.5,00,000||5%|
|Rs. 5,00,000 – Rs.10,00,000||20%|
|Rs. 10,00,000 and beyond||30%|
Son: Final question. Why do we have to pay tax?
Father: Government needs funds to run the country. Development of necessary facilities such as public toilets, parks, library, bridges, roads, etc. is done via the tax collected.
Son: Oh, then I think everyone should be a responsible citizen and pay their taxes diligently.
Father: Of course, son. Progress of a country is not just the governments’ domain. It is the responsibility of everyone. So are you going to be a responsible citizen or a naïve millennial?
Son: Like father like son. A responsible citizen.