Why calculation of income tax is important before filing your ITR?

Income Tax is a tax to be paid by every business and every individual that earns an income which is a significant amount on per annum basis through any services that they provide, savings account, products, pensions that they receive, businesses that they deal in, etc. in the country of India. The income tax that the person will pay in a particular year has to be filed and shown on a sheet. This process should be done and dusted within the prescribed deadline. After that date, no filings for the taxes will be accepted for the purpose of tax returns. Even non – resident Indians (NRIs) are to pay taxes in India but it will only be for the income or salaries that they have generated or received with services they worked for in India and not in the country that they are a resident of.

What are Income Tax Returns – ITRs?

The Income Tax returns are tax returns. They are taxes that are re – funded to the individuals in case they have paid any extra taxes while paying their income tax. In case the tax return sheet shows that there is an excess amount that has been paid in taxes by the tax – payer, it will be refunded to them by the income tax department’s officers. The income tax paid by the individual has to be mandatorily shown on a sheet and filed within a particular and prescribed deadline after which it will not be accepted. If the income tax paid is higher than the required amount or the basic amount, then a tax refund will be processed after the returns have been filed.

Calculation of Income Tax before filing ITR: Importance

Calculating your income tax before you file for the returns is a very important step to do. Why, you ask! This is why:

  • If you know how much taxes you have to pay, you will know how much returns you can file for.
  • Calculating income tax will help you determine what all returns you can apply for.
  • Calculating you income tax will help you file returns for all the income taxes you are being charged for.
  • Calculate it to see if you are to pay how much you are being charged as an income tax. There are a lot of slabs in the income tax range itself and it is important that you know where you lie in terms of age and income so that you end up paying only the amount that you should be.

How is calculation of Income Tax done?

There are different tax slabs for different amounts of salary and different tax slabs for people from different age brackets.

Below the age of 60 years: General

Income received per annum Tax on the income
Below INR 2.5 lakhs No tax applied
INR 2. 5 lakhs to 5 lakhs 5 %
INR 5 lakhs to INR 10 lakhs 20 %
More than INR 10 lakhs 30 %

From 60 years to 80 years of age: Senior Citizens

Income received per annum Tax on the income
Below INR 3 lakhs No tax applied
INR 3 lakhs to 5 lakhs 5 %
INR 5 lakhs to INR 10 lakhs 20 %
More than INR 10 lakhs 30 %

 

Above the age of 80 years: Super Seniors

Income received per annum Tax on the income
Below INR 5 lakhs No tax applied
INR 5 lakhs to 10 lakhs 5 %
More than INR 10 lakhs 30 %

 

Calculate your income tax on the basis of the slabs provided above and see how much you have to pay in taxes and then what all you can get a return on. If you are earning an amount less than the certain prescribed amount shown in each of the slabs, then you do not need to pay any income taxes on that as you are earning a mere income and that is not taxed as it is a very small amount. Only incomes over a significant amount are taxed.

On what all incomes will the income tax apply? Taxable Incomes

Incomes are received by an individual from various sources and they are all taxable. Some incomes are only taxable over a particular sum of amount which is a significant amount. The following are the incomes that you need to calculate your taxes on:

Income Type Income received or given: The nature of the income
Income from salaries The salaries income covers all the income received from salaries and pensions.
Income which is generated from various financial sources The various sources of income received by an individual are money savings bank, from fixed deposits, winning large amounts of money in legit game shows, etc.
Income generated from house property owned by the individual House property of a person will generate income in terms of the rent that they receive.
Rent money – Income received through renting a property to another party.
Income received from capital gains Capital gains are the incomes generated from the sale of your capital assets. These capital assets can be house properties, mutual funds, shares, etc.
Income from professions, businesses or free – lance work which is self – practiced by the individual The self – generated income that an individual receives is through working as individual entities and not in companies chartered accountants rendering their financial services, as a contactor working on project basis, doctors practicing on their own, tuition teachers in coaching centers, as a freelancer working on project basis, self – practicing lawyers, self – employed individual, running businesses, etc.

 

Calculation of income tax for all your incomes is a necessary step to take before filing your income tax returns for your own sake!

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