FW: Things U must Know about ..TAX !!
Thallapalli, Prabhakar
Hi Everyone,
Useful for those who wants to know about TAX
What is Income Tax?
Income tax is a charge or levy collected by the government based on what you earn. Tax laws are broadly based on laws of equity. Which means the more you earn, the more you pay. Sounds fair, doesn't it?
For sheer convenience, income (or what you earn) has been categorised as follows:
1) Salary
2) House/ Property
3) Business and Profession
4) Capital Gains
Don't feel too thrilled in case your 'income' does not fit into any of the above categories. There is one more head for the leftovers. It's called:
5) Other Sources
Though the charge or levy on each of the heads is the same, certain special concessions are available for each category. An individual is supposed to includel his/ her income under all these heads when calculating his entire income.
Who has to pay tax?
Since tax is a charge on income, it includes everyone. All individuals, whether Indian or not, have to pay tax on income earned in India. This tax is the individual's contribution towards the development and well-being of the country.
What are the current tax rates?
Once a year, the parliament comes out with the nation's annual budget.
This budget is presented by the finance minister, approved and passed by Parliament and signed by the president. The budget fixes the income tax rates for the year.
Take a look at the current rates.
Income Slab
Surcharge
(10 percent)Education Cess
(2 percent)Tax Rate
Rs 0 � Rs 50,000
No
No
0 percent
Rs 50,001 � Rs 60,000
No
Yes
10 percent
Rs 60,001 � Rs 1,50,000
No
Yes
20 percent
Rs 1,50,001 � Rs 8,50,000
No
Yes
30 percent
Exceeds Rs 8,50,000
Yes
Yes
30 percent
How is income tax calculated?
Let's assume Mr X earns an annual income of Rs 4,50,000.
Income
Tax rates
What it means for the tax payer
Rs 0 � Rs 50,000
No tax
--
Rs 50,001 � Rs 60,000
10 percent
Since no tax is levied up to Rs 50,000, tax in this case is calculated on Rs 10,000 (Rs 60,000 � Rs 50,000).
Rs 10,000 x 10 percent = Rs 1,000
Rs 60,001 � Rs 1,50,000
20 percent
Since you have already paid tax on Rs 60,000, you now pay tax on Rs 90,000 (Rs 1,50,000 � Rs 60,000).
Rs 90,000 x 20 percent = Rs 18,000
Above Rs 1,50,000
30 percent
You have already paid tax on Rs 1,50,000, so you now pay tax on Rs 3,00,000 (Rs 4,50,000 � Rs 1,50,000).
(Rs 3,00,000 x 30%) = Rs 90,000
Total Tax
Rs 1,000 + Rs 18,000 + Rs 90,000 = Rs 1,09,000
Surcharge
10 percent
Not applicable
Education Cess
2 percent
Rs 2,180
Total tax payable
Rs 1,11,180
Now, let's take a look at Mr Y.
He earns an annual income of Rs 9,00,000, so he ends up paying a surcharge as well.
Income
Tax rates
What it means for the tax payer
Rs 0 � Rs 50,000
No tax
--
Rs 50,001 � Rs 60,000
10 percent
Since no tax is levied up to Rs 50,000, tax in this case is calculated on Rs 10,000 (Rs 60,000 � Rs 50,000)
(Rs 10,000 x 10 percent) = Rs 1,000
Rs 60,001 � Rs 1,50,000
20 percent
Since you have already paid tax on Rs 60,000, you now pay tax on Rs 90,000 (Rs 1,50,000 � Rs 60,000)
(Rs 90,000 x 20 percent) = Rs 18,000
Above Rs 1,50,000
30 percent
You have already paid tax on Rs 1,50,000, so you now pay tax on Rs 7,50,000 (Rs 9,00,000 � Rs 1,50,000)
(Rs 7,50,000 x 30 percent) = Rs 2,25,000
Total Tax
Rs 1,000 + Rs 18,000 + Rs 2,25,000 = Rs 2,44,000
Surcharge
10 percent
(Rs 2,44,000 x 10 percent) = Rs 24,400
Tax including surcharge
Rs 2,44,000 + Rs 24,400 = Rs 2,68,400
Education Cess
2 percent
(Rs 2,68,400 x 2 percent) = Rs 5,368
Total Tax Payable
Rs 2,73,768
Hey, cheer up! You won't end up paying that much if you invest smartly.
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