Income Tax

What is Income Tax?

Income tax meaning is decoded under the Income Tax Act. It is a type of direct tax imposed by the government on the income earned by individuals and corporations during a financial year.

It is a way by which the government generates revenue and uses this amount in various development activities for the people of the nation, such as infrastructure, healthcare, education, farming, welfare programs, subsidies, etc. Taxes are also classified into two types: direct taxes and indirect taxes.

Who are the taxpayers in India?

Under the Income Tax Act, any individual aged less than 60 and earning more than 2.5 lakhs per year is required to pay Income tax. And, if a person is more than 60 years old and earns more than 2.5 lakhs per year, then he should pay the taxes to the Government of India.

The entities mentioned below are required to pay the taxes:

• Body of Individuals
• Hindu Undivided Family
• Companies
• Corporate firms
• Local Authorities
• Association of persons
• All Artificial Juridical Persons

Types of Income - Taxable Heads of Income

According to the Income Tax Act, 1961, there are various heads of income in which the income earned is categorised:

1. Income from Salary: This category includes income earned from salaries and pensions, which are taxable.
2. Income from House Property: It includes the income earned by renting out a property.
3. Income from capital gains: his category encompasses the income generated from selling assets, such as stocks, mutual funds, and bonds.
4. Income from Profits and gains from business or profession: It includes the profit that you earn by running a business or following a profession like a doctor, lawyer, etc.
5. Income from other sources: This category includes income earned from all other sources, such as bank account interest, fixed deposits, and lottery winnings.