What Is The Simple Way Of Understanding Indian Income Tax System?
Income taxes are most the most prized sources of the government to collect money from the salaried persons of the country. They are either deducted at the source or they are assessed at the end of the financial year. In simple words anyone who earns is liable to file for income tax returns. This even makes the financial lives easier.
What Is Financial Year And Assessment Year In The Indian Income Tax System?
These two terms make up the entire format of Indian income tax system. First is the financial which is defined as the year in which the income is earned. It is a 12 month period which starts from 1st of april of one year and ends in 31st of march of the next year. It does not matter when do you start working and closed your job, but your tax year ends on 31st of march. So it is mandatory for you to pay your taxes before 31st of March.
The second term most frequently used is the assessment year. This year is the defined as the year in which the income is assessed. It is always the very next year of the financial year. For Example, if your financial year is 2018-2019 so this means that you’ve made your earning in this year. Your assessment year would then be 2019-2020 the next year to the financial year in which your income will be assessed and tax will be calculated on it.
Deductions In The Indian Income Tax System
The gross income is the sum of all heads in the income. After deductions are made in the gross income, it becomes a taxable income. These deductions are made according to the section 80 of the Income tax Act. The amount of tax which has to be paid by you depends on your annual income and the tax slab it falls into.