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INFORMATION ON INCOME TAX
Income tax is a tax paid on income. It
is paid by employees and people who are self-employed and may also be
payable if you are not working but you have an income, such as a retirement
pension or an occupational pension. Not all types of income are taxable and
it will seldom be the case that all of your income is taxed. There is no
minimum age at which a person becomes liable to pay income tax. What matters
is your income. If this is below a certain level, no tax is payable.
There is no single definition in tax law
of income. Income tax law divides various types of income into schedules. If
an item comes within a schedule it counts as income and income tax must be
paid on it. The way the tax must be paid will depend on which schedule it
falls into. The most common schedules are Schedule E for employees and
Schedule D for the self-employed.
Income Tax - Income Tax
Rates/ Slab 2005-06
The Income Tax slabs announced by our
honourable Finance Minister, Mr. P. Chidambaram on 28th february' 05 in his
Union Budget for the Financial Year 2005 - 06 are as under:
| Taxable
income slab (Rs.) |
Rate
(%) |
1,00,000
1,35,000 (for women)
1,85,000 (for senior citizens) |
NIL |
| 1,00,001
- 1,50,000 |
10% |
| 1,50,001
- 2,50,000 |
20% |
| 2,50,001
upwards |
30% |
| 10,00,000
upwards |
30%* |
* A surcharge of 10% on income tax is levied
where taxable income exceeds Rs. 1 million which makes it effective 33%
including surcharge
Note : -
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Surcharge of 10% for those
whose taxable income is Rs 10 lakhs or more.
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A surcharge of 10% on
income tax is levied where taxable income exceeds Rs. 1 million which
makes it effective 33% including surcharge.
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Tax exemption on interest
in Non-Resident (external) Account and on interest payable by a
scheduled bank to Non-Resident Indians (NRI's).
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Tax exemption on the
interest payable by a scheduled bank to a non-resident or a person who
is not ordinarily resident on deposits in foreign currency where the
acceptance of such deposits by the bank is approved by the RBI.
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Standard deductions, as
well as Section 88 and 80L has been abolished.
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Section 88 i.e. Tax rebate
to assessees in respect of insurance premium, PF contribution, PPF, NSC,
etc. deleted. A new Section 80C introduced which allows a deduction from
income of up to Rs 1,00,000 in respect of insurance premium, PF
contributions and other schemes which were hitherto under Section 88.
In respect of educational loans
taken for pursuing higher studies, the deduction shall be allowable only in
respect of interest payment.
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To encourage pursuit of
higher education, the interest outflow would be eligible for deduction
for a period of 8 years without any ceiling. Repayment of the principal
amount would no longer be eligible for deduction.
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Rebate of Rs 5,000 has been
wiped off for women and rebate of Rs 20,000 from tax has been wiped off
for senior citizens.
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