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Income Tax

Definition

Income Tax is a type of direct tax. This tax impacts and lies on the same person based on their earnings and revenue. Every year the taxpayer must file Income Tax Returns (ITR) after which they will either need to pay the tax or be eligible for a tax refund.

Service Planing

Importance

  • Income tax is imposed on individuals by the government to collect the revenue and reduce the deficit in the economy
  • Income tax is used to fund public services, pay government obligations, and provide goods for citizens.
  • It also helps the government by providing the stability in their expenses for the infrastructural development of the country.
  • It induces government for new schemes and policy.

Benefits

  • Income tax is used as income proof and identity proof which holds the legal value and is recorded by the government.
  • If one has filed an income tax return, one is liable to claim deductions to reduce the burden on the taxpayers.
  • Income tax is useful to safeguard oneself from some penalties imposed on default.
  • ITR filing allows deductions in the interests on many kinds of loans.
  • It also helps in Visa processing.

Eligibility

  • Individuals with gross annual income above 2.5 Lakh (for below 60 years), 3 Lakh (for above 60 years but below 80 years), and 5 Lakh (for above 80 years).
  • One who has deposited an amount of more than 1 crore in one or more current bank accounts.
  • One who has incurred an expenditure of more than 1 lakh on electricity consumption.
  • One who has incurred an expenditure of more than 2 lakh on foreign tour.

Sub Categories

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Subcategory

Income Tax

1. Tax Audit

The tax audit is the process of verification and inspection through which it is analyzed if the taxpayer, fulfills its tax obligations. Section 44AB of the Income Tax Act, 1961, lays down the provisions for income tax audits.

Need

  • Tax Audit maintains all the records of books of accounts regarding the revenue and expenditure.
  • It assures the shareholders about the figures in the accounts are correct.
  • It helps in identifying weaknesses in the system and provides suggestions that provide financial benefit to the business.
  • It ensures that the total income and the deductions are correctly entered in the books.
  • It restricts fraudulent practices in the business.

Document Required

  • The financial statements of the company i.e., Statement of Profit and loss, Balance sheet and cash flow statement.

2. Consultancy/Advise

A tax Consultant or advisor is a financial expert with advanced knowledge of tax accounting and tax law and helps people and organizations in paying their taxes.

Need

  • It is important to hire someone with immense experience and expertise in the field of taxes.
  • Offering professional advice on financial matters.
  • Preparation of monthly or annual financial reports.
  • Assistance in taking loans and auditing services.
  • It is needed for Bookkeeping services.

Document Required

  • Form ITR-5
  • Digital signature of all the partners.

3. Appeals (Depends)

The appeal is the process of requesting in a legal way by submitting the question to a higher court or court of appeal.

Need

  • For Indian taxpayers who believe they have been incorrectly or unfairly taxed.
  • Reduce errors in the total income assumed to be payable by the taxpayer, the tax that has been assessed as payable by the individual or organizations.

Document Required

  • Form No. 35 (including statement not of facts and grounds of Appeal).
  • One certified copy of the f order, appealed against.
  • Notice of demand
  • Details of the challan (i.e., BSR code, date of payment of fee, serial number, and amount of fee)

4. Tax Planning

Tax planning refers to analysing the financial situation of an individual or organization to minimize the tax liability.

Need

  • Facilitates the smooth functioning of the financial planning process.
  • Helps channel taxable income to various investment plans.
  • enables corporates to contribute toward the economic growth of our country.
  • Compliance regarding tax payment reduces legal hassles.
  • Ensure economic stability.
  • Reduces tax liabilities.

Document Required

  • Bank statement/passbook for interest on a savings account.
  • Interest income statement for fixed deposits.
  • TDS certificate issued by banks and others.

5. Partnership Returns

A partnership firm is a type of entity where more than one person is carrying out business under one entity.

Need

  • Filing returns is a sign that you are responsible.
  • Filing returns may prove useful in case of revised returns .
  • If you want to claim adjustment against past losses, a return is necessary .
  • Your loan or card company may want to see your return.
  • Filing returns is mandatory in some other cases also.

Document Required

  • Bank statement/passbook for interest on a savings account.
  • Interest income statement for fixed deposits.
  • TDS certificate issued by banks and others.

6. Individual Returns

An Income tax return is a form used to file information about an individual’s income and tax to the Income Tax Department.

Need

  • capital losses and gains will get an adjustment.
  • Helps to claim tax deductions very easily.
  • Helps in providing tax refunds.
  • Helps in taking loans.
  • Owning assets will become easier.

Document Required

  • PAN Card number
  • Aadhar card number
  • Bank account details and IFSC code
  • Form 16, 16A, and 26AS
  • Self-assessment or Advance Tax payment challan

7. Company Returns

The company income tax return is a statement of income and expenditure of the business. It also contains details of the assets and liabilities held by the business.

Need

  • Apply for a Loan
  • Saves from Penalty and Prosecution
  • Obtain Government Tenders
  • Carry Forward Loss
  • Avail of Presumptive Taxation Scheme
  • Claim Depreciation

Document Required

  • The Balance Sheet of the financial year
  • Records of audit (if applicable)
  • Certificates of the tax Deduction on the source (TDS)
  • Challan copy of income tax payment (advance tax, self assessment tax).

8. TDS Returns

TDS (Tax deducted at source) Return is a quarterly statement submitted by the deductor to the Income Tax Department which shows a summary of all the entries for TDS.

Need

  • Helps the government agencies prevent people or entities from tax evasions.
  • Widens the base of tax collection for the government.
  • Provides the government of India with a steady source of revenue.
  • It helps the government to keep track and record the people who are filing TDS regularly.

Document Required

  • Tax payment challans (Self-assessment, advance tax)
  • PAN card
  • In response to a notice received from the Income Tax Department-You needs the details of the Original return or details of the notice Bank account details.