Income Tax: Some Facts and Truths

It is that time of the year again, when we all are stressed so much and the accounts department is after our lives to provide documentation for Income tax.

So before, you loose your mind and get stressed, here is some information for all of you to get rid of the income tax woes.

Income exempted from income tax India for Assessment Year 2010-11

The income of following individuals/sources is exempted to file income tax return.

1. Men who earn Up to Rs. 1, 60,000.
2. Women who earn up to Rs. 1, 90,000.
3. Senior citizens who are 65 years old or above having income Up to Rs.2,40,000
4. income gained from agriculture is also exempted from income-tax
5. The investments made in Central Government Health Scheme (CGHS) are considered as tax free.
6. The tax discount of Rs. 20,000 is granted for investments in certain investment bonds.

Tax Rates for income tax India

1. Tax rate is 10% if taxable income is between Rs.1, 60,001 to Rs. 5, 00,000.
2. Tax rate is 20 % if income is between Rs.5, 00,001 to Rs. 8, 00,000.
3. Tax rate is 30% if income exceeds from Rs. 8, 00,001.
4. Surcharge of 10 per cent of the total tax liability is applicable if total income is more than Rs 1,000,000.
5. The basic tax rate is 35% with 2.5% surcharge for domestic corporations
6. Foreign corporations pay tax at a basic tax rate of 40% with 2.5% surcharge.
7. In addition, education cess is applicable at the rate of 3% on the income tax.
8. Wealth tax at the rate of 1% is applicable for Corporates if their net wealth exceeds Rs.1.5 mn.

Filing an income tax return is an activity that rolls around once a year or so keeping up with requirements and these guidelines will work as a savior for all your worries around this time. Take a look at these few basics of Income tax that you should be aware of:

1. Filing Basics. It is important to know what to report on the tax return. Include the correct name, social security number and mailing address on your return. If filing electronically include the routing and account number for each account that you will use for direct deposit and payments.
2. Types of Forms. There are different types of forms for individuals and which one to file depends on the taxable income, filing status, qualifying dependents and any eligible credits. Business income tax forms vary as well. The correct one will depend upon the type of business structure that applies.
3. Filing Requirements. Reporting income is not a requirement for everyone but varies with the amount and type of earnings. Check before filing to see if you qualify for filing exemptions.
4. Reporting income. Knowing what income is taxable and non-taxable makes a difference in what to report on a tax return. It can also determine whether there is a need to file at all.
5. Minimize income taxes. When it comes to taxable income it is not how much you make but how much you get to keep that matters. Monitor the latest changes in tax law so that you pay the least amount possible.
6. Tax compliance. While avoiding tax payments is illegal, lowering taxable income is not. Stay in compliance by reporting taxable income and deductions that you are legally entitled to claim. Also, be sure to file on time and send payments by the due date.
7. Monitor changes in tax law. Monitor changes in tax law throughout the year to proactively reduce your tax bill. Keep an eye on new credits and deductions as well as those that you may have been eligible for in the past that are set to phase out.
8. Take eligible deductions. Know what deductions you can and cannot claim to save time, money and frustration at tax time.
9. Know your filing options. The Internal Revenue Service allows two ways to file income taxes. Electronic filing enables you to transmit returns easily and quickly over the internet. Those who are uncomfortable with e-filing can mail hard copies.
10. Get good advice. For most people, income tax is not a topic in which they have extensive experience. The complexity in tax law can be confusing so get good advice for preparing the return.

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