February 24, 2020

How to calculate income tax?

Will you be filing ITR for the first time in 2020? You first need to know your total taxable income, followed by the computation of income tax as per the applicable tax slab. While calculating income tax manually might appear daunting, it isn’t as complicated if you thoroughly understand the computation process.

Every individual under 60 years with an annual income of more than Rs 2.5 lakh is required to file Income Tax Return (ITR) as per the Income Tax Act. For seniors between 60 and 80 years, this limit is above Rs 3 lakh, and for super seniors above 80 years, it is above Rs 5 lakh. In fact, even people falling under the nil tax bracket are advised to file ITR.

To successfully and accurately file ITR, one should first know his/her total taxable income for the year. The annual income will decide the tax slab an individual falls under and the rate at which the tax will be calculated. So, how to calculate income tax? Here are the things you should know.

Different sources of income

According to the IT Act, an individual can have five different sources of income. They are:

  • Salary – Income earned through salary
  • House property – Generally consists of rental income earned from house property
  • Business or profession – Income earned from business or profession
  • Capital gains – Long-term and short-term capital gains from the sale of capital assets
  • Other sources – All the other incomes, like interest, dividends, taxable gifts, etc. that cannot be categorised under the four sources listed above

Any income an individual earns can only be categorised under these five sources.

Computing gross total income and claiming deductions

The Gross Total Income (GTI) is calculated by setting off any losses under any of the income heads and then adding the income from all the five sources. Once you have the GTI, the next step is to claim relevant deductions from the income.

Chapter VI-A of the IT Act offers a wide range of deductions from Section 80C to Section 80U. You can claim deductions under relevant sections, and this will help you reduce your GTI and the income tax you are required to pay.

Understanding income tax slabs

The GTI left after claiming deductions will be your total taxable income for the year. Income tax slabs in India are divided based on income in the financial year. The income range also differs for different age groups. There are three different age groups:

  • Under 60 years
  • Between 60 and 80 years
  • Above 80 years

For instance, for an individual under 60 years, the tax slabs are as follows:

Tax slabsTax rates
Annual income of up to Rs 2.5 lakhNil
Annual income between Rs 2.5 lakh and Rs 5 lakh5% tax on the income above Rs 2.5 lakh + 4% cess
Annual income between Rs 5 lakh and Rs 10 lakhRs 12,500 + 20% tax on the income above Rs 5 lakh + 4% cess
Annual income above Rs 10 lakhRs 1,12,500 + 30% tax on the income above Rs 10 lakh + 4% cess

Based on your total taxable income and income tax slab, you can calculate your tax liability. For instance, if your taxable income is Rs 800,000, income tax computation will be as follows:

Taxable incomeRs 8,00,000
Income tax on income of up to Rs 2.5 lakhRs 0 (nil income tax for income of up to Rs 2.5 lakh)
Income tax on income from Rs 2.5 lakh to Rs 5 lakhRs 12,500 (5% of Rs 2.5 lakh as income is above Rs 5 lakh)
Income tax on income between Rs 5 lakh and Rs 10 lakhRs 60,000 (20% of income above Rs 5 lakh, which is Rs 3 lakh in this case)
Total income tax liabilityRs 72,500

There is also a 4% cess applicable to the tax amount. So, the total tax liability of an individual with a taxable income of Rs 8 lakh is Rs 75,400 [Rs 72,500 + Rs 2,900 (4% of Rs 72,500)].

Filing ITR

Now that you know how income tax is calculated, the next step is to file ITR. By filing ITR, you will know whether you are eligible for a tax refund or need to pay additional taxes. You can compare your income tax liability with the income tax already paid in the form of Tax Deducted at Source (TDS)/Tax Collected at Source (TCS), advance tax or self-assessment tax.

If the total tax paid is higher than your tax liability, you will be eligible for a tax refund. If the tax liability is higher than what is already paid, you can pay the difference while filing ITR.

Calculating your income tax liability

While the manual calculation of income tax is manageable if you have a single source of income and not claiming deductions, things can get challenging for multiple income sources and deductions. In such cases, you can consider using an online income tax calculator.

The calculator will allow you to add income from all the different sources and claim all the relevant deductions, making it easier for you to know your income tax liability. Moreover, the calculation will also be quick and free from errors that manual calculations are generally prone to.

DISCLAIMER

The contents of this document are meant merely for information purposes. The information contained herein is subject to updation, completion, revision, verification and amendment and the same may change materially. The information provided herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person‘s nationality, residence or otherwise) be contrary to law or regulation or would subject lClCl Bank or its affiliates to any licensing or registration requirements. This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. Please obtain professional legal, tax and other investment advice before making any investment. Any investment decisions that may be made by you shall be at your sole discretion, independent analysis and at your own evaluation of the risks involved. The use of any information set out in this document is entirely at the recipient’s own risk. The information set out in this document has been prepared by ICICI Bank based upon projections which have been determined in good faith by lClCl Bank and from sources deemed reliable. There can be no assurance that such projections will prove to be accurate. lClCl Bank does not accept any responsibility for any errors whether caused by negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this document. The information set out in this document has been prepared by ICICI Bank based upon projections which have been determined in good faith and sources considered reliable by lClCl Bank. In preparing this document we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. Past performance cannot be a guide to future performance. ‘lClCl ‘ and the ‘I-man’ logo are the trademarks and property of lCICl Bank. Misuse of any intellectual property, or any other content displayed herein is strictly prohibited

https://www.icicibank.com/blogs/taxation/how-to-calculate-income-tax.page?

Perform the following steps to view or download the Form-26AS from e-Filing portal:

  1. Logon to ‘e-Filing’ Portal www.incometaxindiaefiling.gov.in
  2. Go to the ‘My Account’ menu, click ‘View Form 26AS (Tax Credit)’ link.
  3. Read the disclaimer, click ‘Confirm’ and the user will be redirected to TDS-CPC Portal.
  4. In the TDS-CPC Portal, Agree the acceptance of usage. Click ‘Proceed’.
  5. Click ‘View Tax Credit (Form 26AS)’
  6. Select the ‘Assessment Year’ and ‘View type’ (HTML, Text or PDF)
  7. Click ‘View / Download’
    Note
    To export the Tax Credit Statement as PDF, view it as HTML > click on ‘Export as PDF’. ​

Go to https://incometaxindiaefiling.gov.in​ ​​​​​

e-Filing of ITR

The user can file the Income Tax Return (ITR) in two ways:

1. Offline: Download the applicable ITR, fill the form offline, save the generated XML file and then upload it.

To e-File the ITR using the upload XML method, the user must download either of the following ITR utility:

  • Excel Utility
  • Java Utility

Perform the following steps to download the Java Utility or Excel Utility, then to generate and Upload the XML:

  1. Go to the Income Tax e-Filing portal www.incometaxindiaefiling.gov.in
  2. Download the Appropriate ITR utility under ‘Downloads > IT Return Preparation Software’.
  3. Extract the downloaded utility ZIP file and Open the Utility from the extracted folder. (For more information and prerequisites, refer the ‘Read me’ document).
    Note : System Requirements
    Excel Utilities: Macro enabled MS-Office Excel version 2007/2010/2013 on Microsoft Windows 7 / 8 /10 with .Net Framework (3.5 & above)
    Java Utilities: Microsoft Windows 7/8/10, Linux and Mac OS 10.x with JRE (Java Runtime Environment) Version 8 with latest updates.
    To Enable Macros in Excel Go to > File > Options > Trust Centre > Trust Centre Settings > Macro Settings > Enable All Macro > Click ‘OK’ button twice to save these settings.
  4. Fill the applicable and mandatory fields of the ITR form.
    Note :
    Pre-filled XML can be downloaded post login to the e-Filing portal from ‘My Account > Download Pre-Filled XML’ and can be imported to the utility for prefilling the personal and other available details.
  5. Validate all the tabs of the ITR form and Calculate the Tax.
  6. Generate and Save the XML.
  7. Login to e-Filing portal by entering user ID (PAN), Password, Captcha code and click ‘Login’.
  8. Click on the ‘e-File’ menu and click ‘Income Tax Return’ link.
  9. On Income Tax Return Page:
    • PAN will be auto-populated
    • Select ‘Assessment Year’
    • Select ‘ITR form Number’
    • Select ‘Filing Type’ as ‘Original/Revised Return’
    • Select ‘Submission Mode’ as ‘Upload XML’
  10. Choose any one of the following option to verify the Income Tax Return:
    • Digital Signature Certificate (DSC).
    • Aadhaar OTP.
    • EVC using Prevalidated Bank Account Details.
    • EVC using Prevalidated Demat Account Details.
    • Already generated EVC through My Account  Generate EVC Option or Bank ATM. Validity of such EVC is 72 hours from the time of generation.
    • I would like to e-Verify later. Please remind me.
    • I don’t want to e-verify this Income Tax Return and would like to send signed ITR-V through normal or speed post to “Centralized Processing Center, Income Tax Department, Bengaluru – 560500”
  11. Click ‘Continue’
  12. Attach the ITR XML file.
    On choosing,
    • DSC as verification option, Attach the signature file generated from DSC management utility.
    • Aadhaar OTP as verification option, Enter the Aadhaar OTP received in the mobile number registered with UIDAI.
    • EVC through Bank account, Demat account or Bank ATM as verification option, Enter the EVC received in the mobile number registered with Bank or Demat Account respectively.
    • Other two verification options, the ITR will be submitted but the process of filing the ITRs is not complete until it is verified. The submitted ITR should be e-Verified later by using ‘My Account > e-Verify Return’ option or the signed ITR-V should be sent to CPC, Bengaluru.
  13. Submit the ITR.
  14. To view the uploaded ITRs

2. Online: Enter the relevant data directly online at e-filing portal and submit it. Taxpayer can file ITR 1 and ITR 4 online.

  1. Go to the Income Tax e-Filing portal, www.incometaxindiaefiling.gov.in
  2. Login to e-Filing portal by entering user ID (PAN), Password, Captcha code and click ‘Login’.
  3. Click on the ‘e-File’ menu and click ‘Income Tax Return’ link.
  4. On Income Tax Return Page:
    • PAN will be auto-populated
    • Select ‘Assessment Year’
    • Select ‘ITR Form Number’
    • Select ‘Filing Type’ as ‘Original/Revised Return’
    • Select ‘Submission Mode’ as ‘Prepare and Submit Online’
  5. Click on ‘Continue’
  6. Read the Instructions carefully and Fill all the applicable and mandatory fields of the Online ITR Form.Note :
    To avoid loss of data/rework due session time out, Click on ‘Save Draft’ button periodically to save the entered ITR details as a draft. The saved draft will be available for 30 days from the date of saving or till the date of filing the return or till there is no change in the XML schema of the notified ITR (Whichever is earlier).
  7. Choose the appropriate Verification option in the ‘Taxes Paid and Verification’ tab.
    Choose any one of the following option to verify the Income Tax Return:
    • I would like to e-Verify
    • I would like to e-Verify later within 120 days from date of filing.
    • I don’t want to e-Verify and would like to send signed ITR-V through normal or speed post to “Centralized Processing Center, Income Tax Department, Bengaluru – 560 500” within 120 days from date of filing.
    • Click on ‘Preview and Submit’ button, Verify all the data entered in the ITR.
    • ‘Submit’ the ITR.
    • On Choosing ‘I would like to e-Verify’ option, e-Verification can be done through any of the following methods by entering the EVC/OTP when asked for.
      • EVC generated through bank ATM or Generate EVC option under My Account
      • Aadhaar OTP
      • Prevalidated Bank Account
      • Prevalidated Demat Account
      Note
      On Choosing the other two verification options, the ITR will be submitted but the process of filing the ITRs is not complete until it is verified. The submitted ITR should be e-Verified later by using ‘My Account > e-Verify Return’ option or the signed ITR-V should be sent to CPC, Bengaluru.
    • The EVC/OTP should be entered within 60 seconds else, the Income Tax Return (ITR) will be auto-submitted. The submitted ITR should be verified later by using ‘My Account > e-Verify Return’ option or by sending signed ITR-V to CPC.
    • To view the uploaded ITRs ​​

Go to https://incometaxindiaefiling.gov.in

Prerequisite for Individual Users

Before taxpayers start registration, ensure the following details should be hand-in-hand.

  1. Valid PAN
  2. Valid Mobile Number
  3. Valid Current Address
  4. Valid Email Address, preferably your own

Registration Process

Perform the following steps to register as an ‘Individual User’:

  1. Visit the ‘e-Filing’ Portal www.incometaxindiaefiling.gov.in
  2. Click ‘Register Yourself’ button located at right side of the Home Page.
  3. Select the user type as ‘Individual’. Click Continue
  4. Provide the following basic details:
    • PAN
    • Surname, First Name and Middle Name
    • Date of birth
    • Residential Status
  5. Click ‘Continue’
  6. Fill in the following mandatory details:
    • Password Details
    • Contact Details
    • Current Address
    • Click ‘Submit’
  7. After registration,
    For Residents, a six digit OTP1 and OTP2 will be shared on your mobile number and email ID, specified at the time of registration.
    For Non-residents, OTP will be shared on your primary email ID, specified at the time of registration.
  8. Enter the correct OTP to complete the registration process

2) Prerequisite for HUF

The user must have the following mandatory details:

  1. Valid PAN Card
  2. Valid Mobile Number
  3. Valid Email Address, preferable belonging to KARTA*

*Karta means senior most male member in the family. He is the person who takes care of day to day expenses of the family looks after the family and protects the joint family properties. No outsider or stranger can become a Karta.

Registration Process

Perform the following steps to register as a ‘HUF User’:

  1. Visit the ‘e-Filing’ Portal www.incometaxindiaefiling.gov.in
  2. Click ‘Register Yourself’ button located at right side of the Home Page.
  3. Select the user type as ‘Hindu Undivided Family (HUF)’. Click Continue
  4. Provide PAN of the HUF*’, ‘Name of HUF*’, and ‘Date of Incorporation*
  5. Click ‘Continue’
  6. Fill in the following details:
    • Password Details
    • PAN Details of Karta
    • Contact Details of Karta
    • Address of HUF
    • Click ‘Submit’
  7. After registration,
    For Residents, a six digit OTP1 and OTP2 will be shared on your mobile number and email ID, specified at the time of registration.
    For Non-residents, OTP will be shared on your primary email ID, specified at the time of registration.
  8. Enter the correct OTP to complete the registration process

3) Other than Individual and HUF

The user must have the following mandatory details:

  1. Valid PAN Card
  2. Valid Mobile Number
  3. Valid Email Address, preferably belonging to Principal contact person

Registration Process

Perform the following steps to register as an ‘Other than Individual and HUF User’:

  1. Visit the ‘e-Filing’ Portal www.incometaxindiaefiling.gov.in
  2. Click ‘Register Yourself’ button located at right side of the Home Page.
  3. Select the ‘User Type’ as ‘Other than individual/HUF’ and select the ‘Sub-User type’ as per the PAN.
    • Company
    • Body of Individuals (BOI)
    • Local Authority
    • Firm
    • Trust
    • Association of Persons (AOP)
    • Artificial Juridical Person
    • Government
    • Click Continue
  4. Provide ‘PAN of the Organisation/Entity*’‘Organisation Name*’‘Date of Incorporation*’.
    In case of ‘Company’ user, select the ‘Type of company’
  5. Click ‘Continue’
  6. Fill in the following details:
    • Password Details
    • Personal Details of Principal Contact
    • Contact Details of Principal Contact
    • Address of Organisation/Entity
    • Click ‘Submit’
  7. After registration,
    For Residents, a six digit OTP1 and OTP2 will be shared on your mobile number and email ID, specified at the time of registration.
    For Non-residents, OTP will be shared on your primary email ID, specified at the time of registration.
  8. Enter the correct OTP to complete the registration process
  9. https://www.incometaxindia.gov.in/Pages/tax-services/registration-e-filing.aspx

4 March 2020

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 4th March, 2020 PRESS RELEASE TDS Surveys by Income Tax Department unearths huge defaults in deduction and deposit In a major breakthrough, the TDS wing of the Income Tax Department has unearthed default of tax deducted at source (TDS) of Rs. 324 crore in the case of a major Telecom Operator in Delhi. The company did not make the required TDS of 10% u/s 194J of the Income-tax Act, 1961 on technical contracts worth Rs. 4000 crore. The amount is further liable to go up once the enquiry is completed. Several hospitals of the city were found openly flouting the norms of TDS and tax collected at source (TCS) and were paying less tax to the Income Tax Department. During the survey, at two premier hospitals, one with more than 2500 bed capacity and the other with 700 bed capacity, it was found that the former was not making any TDS on construction contracts as statutorily required u/s 194C/ 194J, while the latter was deducting tax at the rate of 10% only on salary paid to the doctors, instead of the present TDS rate of 30% applicable for salary payments. Enquiries during the survey revealed that the terms of appointment between the hospital and the doctors indicated an employer-employee relationship on which the hospital was required to deduct tax at 30% instead of 10% as was being made by the hospital. TDS defaults of Rs. 70 crore and Rs. 20 crore respectively were detected in the said hospitals. Further enquiry revealed that the hospitals were also not making the required TDS at 10% from the maintenance charges paid for the hitech sophisticated operation theatre and diagnostic equipments. Furthermore, it was seen that many hospitals were still not complying with the TCS norms which came into effect from June 1, 2016 under which, on any cash payment received in excess of Rs. 2 lakh, the hospital was required to collect TCS @1% and deposit it to the Government account. In another TDS survey conducted on a prominent Real Estate Group in Delhi in the first week of the March, 2020, after credible data analysis of previous years, analysis of TDS compliance patterns by the various group companies, their ITR filings and tax auditor reports and real time data generated by CPC-TDS, it was seen that the deductor having already deducted tax in earlier years, had not deposited the deducted taxes in government account. During the survey, verification and analysis indicated outstanding TDS liability and interest payable of Rs. 214 crore. Major TDS default related to the payment of interest on outstanding loans. The Real Estate Company had taken huge loans on which interest payments were credited from time to time, TDS was duly deducted during various financial years but was not deposited to Government account. Since it was a case of non-compliance, interest at the rate of 1.5% for every month or part of the month is to be paid from the date on which such tax is deducted to the date on which such tax is actually deposited to Government account. In another action by the TDS Wing of the Department, TDS default of approximately Rs. 3200 crore was detected in the case of a major oil company pursuant to survey u/s 133A of the Act. The defaults included short deduction of tax and non deduction of tax respectively. Short deduction of tax pertained to TDS u/s 194J for several years on payment of Fee for Technical Services for installation and maintenance of high tech oil refineries, payments for chemical process of regasification and transportation of LNG. Default of non deduction was detected on composite contracts involving service and purchase of products on which TDS @2% should have been deducted but which was not deducted resulting in the said default. The Income Tax Department has, in recent times, stepped up enforcement action against TDS default cases as this category of revenue contributes to over 45% of the total direct tax collection in the country. As per Rules, the TDS has to be paid to the credit of the central government within seven days from the end of the month in which the deduction is made.

https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/828/PressRelease_TDS_Surveys_by_ITD_4_3_20.pdf

Condonation shall be allowed if the application for condonation of delay in filing of Form 9A and Form 10 has been filed and return of income has been filed on or before March 31 of respective AYs 2016-17, 2017-18 and 2018-19. CBDT, with the view to prevent hardship to the assessee, has decided that where the application for condonation of delay in filing Form 9A and Form 10 has been filed, and the Return of Income has been filed on or before 31st March of the respective assessment years i.e. Assessment Years 2016-17, 2017-18 and 2018-19, the Commissioners of Income-tax (Exemptions) are authorised u/s 119(2)(b) of the Act, to admit such belated applications for condonation of delay in filing Return of Income and decide on merit. For all other application for condonation of delay not mentioned above, the power of condonation of delay u/s 119(2)(b) of the Act will continue with the respective authorities as per the extant Rules and Practice.

https://www.incometaxindia.gov.in/communications/circular/circular_no_6_2020.pdf