About Tax

1.  What is Tax?

Tax is imposition financial charge or other levy upon a taxpayer by a state or other the functional equivalent of the  state.

2.How many Types of Taxes are there and what are they?

There are two types of Taxes in India – 1.Direct Taxes, 2.Indirect Taxes  The Taxes whose burden falls directly on the Tax payers are the Direct Taxes like Income Tax, Wealth Tax etc.,  The taxes in which the burden is passed on to a third party are called Indirect Taxes like Service Tax, VAT etc.

3.What is Income Tax?

An income tax is a tax levied on the financial income of persons, corporations, or other legal entities.

4. Who has to pay Income Tax?

A Person, corporations or other legal entities, whose earned Income in India, exceeds a prescribed limit has to pay  Tax

5.What is the meaning of Previous Year and Assessment Year?

Previous Year is the Financial Year ending on 31st March every year. Assessment Year is the period of 12 Months  commencing on the 1st day of April immediately after the Previous Year. For eg. For Previous Year/Financial year  ending 31.03.2010, the Assessment Year is 2010-11(01.04.2010-31.03.2011).

6.What happens if I don’t pay the Income Tax?

A Person, corporations or other legal entities, whose earned Income in India, exceeds a prescribed limit has to pay  tax.Any person who willfully attempts to evade the payment of any tax, penalty or interest levied under Income Tax is  liable to be prosecuted u/s 276C(2) of Income Tax Act, 1961.

7.Whether I can get refund in case I pay any extra tax by mistake?

If a person has paid more tax than he is required to pay by the tax rules, he may seek refund of the excess amount  deposited. The refund will be made after processing of the income tax return.

8.What are tax penalties?

“If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under  this Act, is satisfied that any person-  (a) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to  comply with a direction issued under sub-section (2A) of section 142, or  (b) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that  such person shall pay by way of penalty,-  (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each  such failure;  (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but  which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of  particulars of his income or the furnishing of inaccurate particulars of such income”

9.How I can know as to how much Tax had been paid by me so far ?

You can know the details of tax paid by you for any financial year online for which you have to register with the  NSDL’s website www.tin-nsdl.com.

10.I have paid more Income Tax than what I have to pay. Can I get the refund of the excess amount  paid by me? 

Yes. The refund can be claimed while filing the Return of Income Tax showing the amount of income tax excess  deposited/deducted as refundable in the appropriate column. The assessing officer shall grant the refund.

11.What happens if I have paid the Income Tax but did not file the Return?

Any person who willfully fails to furnish in due time return of Income or return of fringe benefits is liable to be  prosecuted u/s 276CC of Income Tax Act, 1961.

12.  How can I pay the Income Tax? 

For Salaried Persons: Income Tax can be paid on the basis of Form 16 Certificate, which is issued by the employer  which contains the details of salary received from the employer. The employer would have deducted the income tax  (TDS – tax deducted at source) while making the payment of your salary on monthly basis. The details of tax  deducted by the employer shall be available in form 16 and pay-slips given. The persons receiving any other income  (other than salary) shall get the details of TDS deducted by the paying person / entity in form 16A.

13.Who is an Assessee? 

‘Assessee’ as a person by whom any tax or any other sum of money is payable under Income Tax Act, 1961

14. What are the various heads of Taxable Income? 

a. Income from Salary  b. Income from House Property  c. Income from profits and gains of Business or Profession  d. Income from Capital gains  e. Income from Other sources.

15.   What are the items which are included under the Head “Salary”? 

Salary includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment,  in whatever name called from one or more employers, as the case may be, but does not include the following,  namely:

a. dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits  of the employee concerned;

b. employer’s contribution to the provident fund account of the employee;

c. allowances which are exempted from payment of tax;

d. the value of perquisites specified in sub-section (2) of section 17 of the Income-tax Act;

It also includes the following:

a. Wages;

b. Any annuity or pension;

c. Any gratuity;

d. Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;

e. Any advance of salary;

f. Any payment received by an employee in respect of any period of leave not availed of by him;

g. The annual accreditation to the balance at the credit of an employee participating in a recognized provident fund, to  the extent to which it is chargeable to tax under Rule 6 of Part A of the Fourth Schedule; and

h. The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of  part A of the Fourth Schedule of an employee participating in a recognized provident fund, to the extent to which it is  chargeable to tax under sub-rule (4) thereof.

16.How about the amount of Salary arrears which I have received? 

Relief U/S 89  Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in  any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3)  of section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the  Explanation to clause (iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate  higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made  to him in this behalf, grant such relief as may be prescribed.

17.What is PAN?

PAN(Permanent Account Number) is unique alphanumeric combination issued to all juristic entities identifiable under the Indian Income Tax Act 1961. It is issued by the Indian Income Tax Department under the auspices of the Central Board for Direct Taxes (CBDT).

18. Who has to obtain PAN? 

Every person, whose taxable income exceeds the basic exemption limit during an accounting year, is  required to obtain Permanent Account Number by making an application in form No 49A.

19.Why Is It Necessary To Have PAN? 

It is mandatory to quote PAN on return of income, all correspondence with any income tax authority. It is  also necessary to quote PAN in all transactions such as sale and purchase of properties or payments in  cash, travel to foreign country. Similarly, the PAN is necessary for making term deposit for Rs. 50000/-  and above with the bank.

20. Is it compulsory to quote PAN on return of income? 

Yes, it is mandatory to quote PAN on return of income

21.Who must have a PAN? 

All existing assesses or taxpayers or persons who are required to furnish a return of income, even on behalf of others, intends to enter into financial transaction where PAN is mandatory, must obtain PAN

22.What is TDS? 

TDS (Tax Deduction at Source) means the tax required to be paid by the Assessee, which is deducted by the person paying the income to him the prescribed rate.

23.What is TDS Certificate? 

A certificate issued by the person deducting tax as per the provisions of Sec 203 of Income Tax Act issued to the person whose income tax has been deducted specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as have been prescribed.   This certificate enables the payee to get the credit of TDS in the Return of Income.  TDS Certificates are issued within the prescribed time in the prescribed forms as under:  Form 16 : For Salaries : This certificate will be having the details of the employee’s Income from salary,  other sources declared by the employee, deductions claimed and tax deducted from the employee and  paid to the income tax department.  Form 16A: For Other payments.