• Saturday, August 13, 2022

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Save your Money by mastering the tax game

Saving money financial concept. Cartoon people inserting cash into piggy bank, getting and investing income. Vector illustration for fund, investment, deposit topics

By: Eastern Eye Staff

Income tax calculation may seem complicated, but it does not have to be. You need to know the basic terminology and how to calculate the proper income tax amount you are supposed to pay.

The majority of people avoid paying taxes due to a lack of knowledge. This is a big problem. This article provides you with information on income tax, income tax calculator, and all the different kinds of income to consider while calculating income tax.

What is the definition of income tax?

Individuals and corporations pay income tax, a direct tax levied by the federal government on income received within a fiscal year. It is determined using the income tax slab established by the Internal Revenue Service.

How is taxable income defined?

The taxable income is the money that is imposed by a tax. It subtracts costs and other deductions from all or some sources of revenue. Depending on the country and its tax system, different amounts are deductible as income, expenses, and other deductions. Generally, all income is considered taxable, although certain Money is exempt from taxation due to tax exemptions and deductions and hence is not included in taxable income.

Who should be responsible for paying income tax? – Different Types of Taxpayers

The Income Tax Act categorises taxpayers so that different tax rates can be applied to different groups of people. The various sorts of taxpayers are as follows: Individuals

  • Hindu Undivided Family (HUF)
  • Association of Persons (AOP)
  • Body of Individuals (BOI)
  • Firms
  • Companies

In addition, there are two types of individuals: residents and non-residents. Taxes are due on worldwide income, including income earned in India and abroad, for individuals living in India. The income of non-residents in India, on the other hand, is subject to taxation regardless of where it is earned or accrued. Based on the length of stay in India, the residence status must be determined separately for each financial year. Resident individuals are further classified according to their tax status as follows:

  • Individuals under the age of 60
  • Individuals who are above 60 but not yet 80 years old.
  • Over-the-hill people (those over the age of 80)

What are the five different types of income?

Everyone who earns or gets money in India is subject to income tax. (This is true for both residents and non-residents of India.) For the convenience of classification, the Revenue Tax Department splits income into five categories:

Head of RevenueCovered Income Sources
Other Sources of IncomeInterest on savings accounts, fixed deposits, and winnings in lotteries are all taxable under this heading.
House Property IncomeRenting a house property generates revenue that is taxable under this heading.
Gains on Capital AssetsProfits earned through the sale of a capital asset, such as mutual funds, stocks, or real estate, are subject to taxation.
Earnings from a Business or a ProfessionProfits earned by self-employed people, businesses, freelancers, or contractors and income earned by life insurance agents, chartered accountants, doctors, lawyers who have their practice, and tuition teachers are taxable under this heading.
Salary-based incomeThe income obtained through a salary or a pension is taxable under this category.

Income tax slab  

The income tax system in India is based on a slab structure, which the taxpayers must pay. The income tax slab system fundamentally means that each person’s tax rate is determined by their income.

In other words, a person with a larger income will be subjected to a higher tax burden. The government has also added some tax breaks for persons compelled to pay long-term funds. The Money put into various tax-avoidance methods is finally deducted from gross income. This also aids in lowering the amount of income tax due, which benefits the taxpayers.

The income tax brackets tend to alter over time, constantly considering inflation. Aside from that, the government guarantees that low-income people will receive a tax refund. The fundamental goal of the income tax slab is to ensure that the country’s tax arrangements are both progressive and equitable.

Income tax calculator

Calculating income tax can be a daunting task, especially if you’re unsure what deductions you can claim.

Luckily, an easy way to ensure you’re not overpaying is an income tax calculator. It walks you through calculating your taxable income and helps you find any possible deductions so that you don’t end up with a surprise at tax time.

Following the publication of the Union Budget, an income tax calculator is an online application that assists you in calculating taxes due based on your income. An income tax calculator is an online application that assists you in calculating taxes due based on your income. A portion of your net annual income must be paid as income tax, depending on whatever taxable income bucket you fall into. The income tax calculator considers factors such as your age, income, expenses, applicable tax deductions and existing investments to estimate tax liability under the old or new income tax regime.

The Advantages of Using a Tax Calculator

An income tax calculator can help you simplify your tax estimate by accounting for all possible tax savings opportunities. The best thing is that you may use this online ITR calculator to change your tax-saving investments and liabilities at any time during the fiscal year.

The following are all of the advantages of using an income tax calculator:

  • It’s simple to use
  • It’s always available
  • It simplifies tax calculations and helps you find deductions
  • Estimation of potential tax liability in advance

 Conclusion – 

When you are planning to invest your money for the long term, it is essential to declare all the investments at the beginning of the assessment year so that the tax to be paid can be calculated properly. Wrong tax payments, presenting incorrect information, and lying are all illegal. Calculating income tax can become a daunting process, but with the help of income tax calculator it becomes very simple. Knowing about proper calculations and deductions helps in proper money investment and tax saving which helps in achieving the luxurious life everyone dreams of.

 

Eastern Eye

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