Income Tax Free Essays

1. Near year end, P, a cash basis, calendar year taxpayer, paid for various deductible expenses as described below. 1. We will write a custom essay sample on Income Tax or any similar topic only for you Order Now The payment was dropped in the mail before year end. 2. P gave a note evidencing her promise to pay the amount in three months. 3. The amount was charged on her Master Card on December 28. The charge appeared on her bill for the period December 1 through December 31, which she received in January and which she paid on January 20. The bank actually paid the expense in January. 4. The amount was paid using the pay by phone service provided by her bank. P called in the charge on December 20. The bank sent her a statement indicating that it had paid the charge on January 3. P may deduct the expense in which cases? a. 1 b. 1 and 2 c. 1 and 3 d. 1, 3, and 4 e. 1, 2, 3, and 4 2. The crucial reason for determining whether an item is deductible as an expense under  § 162 or under  § 212 is that a. production of income expenses are not deductible. b.  § 162 business expenses usually are deductions for A. G. I. , while  § 212 production of income expenses usually are miscellaneous itemized deductions. c.  § 162 business expenses are deductions from A. G. I. , while  § 212 production of income expenses are deductions for A. G. I. d. it resolves certain ownership questions. 3. C purchased two cars in 2010 a Corvette for $20,000 and a Buick for $10,000. Both cars were used solely for personal purposes. During the year, C sold the Corvette to a car collector for $24,000 and the Buick for $7,000. Based on these two transactions he will report a. a gain of $1,000. b. a gain of $4,000. c. a gain of $4,000 and a loss of $3,000. d. no gain or loss. 4. F, a calendar year, cash basis taxpayer, started a business on June 1. Her lease required monthly payments of $1,000 beginning on June 1. Insurance for the premises, also begun on June 1, was to be paid every six months and cost $600 for each six month period (she paid her premiums due on June 1 and December 1). F’s deductions for these expenses total a. $7,000. b. $7,100. c. $7,600. d. $8,200. $1,000 * 7 months = $7,000 rent expense $600 premium paid 6/1 = 600 insurance expense $600 premium paid 12/1 = 600 7,000 + 600 + 600 = $8,200 insurance expense 5. Which of the following is not a deduction for A. G. I.? a. Lawn mowing expense for a rental property actively managed by the taxpayer. . Deductible expenses related to a physician’s home office. c. Employee transportation expense not reimbursed by the employer. d. Employee transportation expense reimbursed by the employer and included in employee’s income. 6K is an attorney who had to travel to Chicago for a trial. Her law firm reimbursed her for the $1,200 hotel bill and $200 for f ood, but only half of her $200 entertainment expense eligible for deduction under  § 162. If the law firm includes the $1,500 in K’s compensation on her Form W 2, she may a. include the $1,500 as a miscellaneous itemized deduction. b. educt the $1,500 for A. G. I. c. include the $100 unreimbursed entertainment expense with the miscellaneous itemized deductions. d. Both b and c are true. 7F, an attorney in New York, also operates a small farm in New Jersey. During the year, he reported the following income and expenses from the farm: Gross income$8,000 Depreciation(3,000) Property taxes(6,000) Other operating expenses(4,000) Assuming the activity is considered a hobby, F may deduct a. taxes $6,000, other $0, depreciation $0. b. taxes $6,000, other $0, depreciation $2,000. c. taxes $6,000, other $2,000, depreciation $0. . taxes $6,000, other $4,000, depreciation $3,000. 8Which one of the following would qualify, at least in part, as a deductible educational expense? a. The co st of transportation between home and school on a nonworking day. b. Transportation between work and school on a working day. c. Both of the above. d. Neither of the above. 9. C obtained a new job in Alaska with HJ Engineering. She incurred the following moving expenses: Transportation of furniture and household goods$1,000 House hunting trip1,900 Attorney’s fees on sale of former residence1,400 Assuming C is eligible to deduct her moving expenses, what is the amount of the deduction? a. $1,000 b. $2,900 c. $3,400 d. $3,900 e. $4,400 10. Which of the following statements regarding deductions for home office expenses is true? a. Deductions may be taken only if the home office is used for the taxpayer’s main business. b. Deductions may be taken if the home office is used regularly for meeting clients or customers in the normal course of the taxpayer’s business. c. Deductions may not be claimed if the taxpayer merely performs administrative tasks related to his business in the home office. d. All of above are true. e. None of the above is true. 11. K is an attorney who had to travel to Chicago for a trial. Her law firm reimbursed her for the $1,200 hotel bill and $200 for food, but only half of her $200 entertainment expense eligible for deduction under  § 162. If the law firm includes the $1,500 in K’s compensation on her Form W 2, she may a. include the $1,500 as a miscellaneous itemized deduction. b. deduct the $1,500 for A. G. I. c. include the $100 unreimbursed entertainment expense with the miscellaneous itemized deductions. d. Both b and c are true. 12. Which one of the following statements is true? . The expenses of commuting are personal, and as such are never deductible regardless of the surrounding circumstances. b. The expenses of commuting from Job A to Job B are deductible to the extent that the distance between Jobs A and B does not exceed the distance from home to Job A. c. The expenses of commuting to a temporary assignment and returning the same day when the temporary assignment is outside the vicinity in which the taxpayer conducts his business (the tax home) are deductible and are determined based on the cost of transportation from the employee’s office to the temporary location. . b and c are true. e. All are false. 13. Which statement concerning deductible transportation costs is true? a. B drives 20 miles to his office, then later in the day drives to meet a client at the client’s office. By the time he gets home that night he has driven 63 miles. He can deduct the cost of driving 23 miles. b. F, an architect, usually drives 40 miles round trip from home to office. Today, she skips the office and drives directly to a job site to inspect the construction. Her round trip is 50 miles. She may deduct a cost of 50 miles. c. M, a contractor, works out of her home. She may deduct the cost of driving to a client’s place of business. d. More than one answer is true. e. All are true. 14S maintains a principal residence in St. Louis, Missouri. He lays brick for a living. S’s employer asked him to go to Chicago, Illinois to work on a single job for six months. Due to difficulties with weather, S was forced to stay in Chicago for a total of eleven months. S wants to deduct a portion of the cost of meals and lodging in Chicago while on the job. S will be a. denied the deduction because the job in Chicago was only a temporary assignment. . allowed the deduction because the job in Chicago will be considered temporary, as it was not an indefinite assignment. c. allowed the deduction because the job in Chicago will be considered indefinite, as it was not a temporary assignment. d. denied the deduction because living expenses are always nondeductible personal expenses. 15D owns and operates her own real estate business. She loves to entertain . Indicate which of the following statements is true. Assume the expenditure is deductible unless otherwise implied. a. D takes her new neighbor to the ball game. The expense is deductible, assuming D’s entertainment expense creates goodwill that may lead the individual to become D’s client if and when he decides to sell his house. b. D takes a prospective client to the theater. Unless the taxpayer can prove otherwise, the IRS presumes the expense is not deductible because the nature of the event precludes business discussion. c. D holds a golf outing for all of her employees. D may deduct the expense, assuming it is primarily for her employees. d. More than one but less than all of the statements above are true. e. None of the statements above is true. How to cite Income Tax, Papers Income Tax Free Essays History Income tax levels in India were very high during 1950-1980, in 1970-71 there were 11 tax slabs with highest tax rate being 93. 5% including surcharges. In 1973-74 highest rate was 97. We will write a custom essay sample on Income Tax or any similar topic only for you Order Now 5%. But to reduce tax evasion tax rates were reduced later on, by â€Å"1992-93† maximum tax rates were reduced to 40%. [2][3] [edit]Residential status, Scope of taxable income Charge [edit]Charge to Income-tax Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an assesse, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status. Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year by every Person. The chargeability is based on nature of income, i. e. , whether it is revenue or capital. The rates of taxation of income are-: Income Tax Rates/Slabs Rate (%) (applicable for assessment year 2013-14) Net income range (For resident woman below 60 years on the last day of the previous year)Net income range (For resident senior citizen1)Net income range (For super senior citizen2)Net income range (For any other person excluding companies and co-operative societies)Income Tax rates3 Up to Rs. 200000Up to Rs. 250000Up to Rs. 500000Up to Rs. 200000Nil Rs. 200001-500000Rs. 250001-500000-Rs. 200001-50000010% Rs. 500001-1000000Rs. 500001-1000000Rs. 00001-1000000Rs. 500001-100000020% Above Rs. 1000000Above Rs. 1000000Above Rs. 1000000Above Rs. 100000030% ^1 Senior citizen is one who is 60 years or more at any time during the previous year but not more than 80 years on the last day of the previous year. ^2 Super senior citizen is one who is 80 years or more at any time during the previous year. ^3 Surcharge isn’t applicable for any person excluding companies whose taxable in come exceed Rs. 1 crore. Education cess at 2% and Secondary and higher education cess at 1% of income-tax applicable for all person. These slab-rates aren’t applicable for the incomes which are to be taxed at special rates under section 111A, 112, 115, 161, 164 and 167. For instance, long-term capital gains (except the one mentioned in section 10(38))for all assessees is taxable at 20%. [edit]Residential Status The residential status of the assessee is useful in determining the scope or chargeability of the income for the assessee, i. e, whether taxable or not. For an individual person, to be a resident, any one of the following basic conditions must be satisfied:- Presence of at least 182 days in India during the previous year. Presence of at least 60 days in India during the previous year and 365 days during 4 years immediately preceding the relevant previous year. However, in case the individual is an Indian citizen who leaves India during the previous year for the purpose of employment (or as a member of a crew of an Indian ship) or in case the individual is a person of Indian origin who comes on a visit to India during the previous year, then only the first of the above basic condition is applicable. To determine whether the resident individual is ordinarily resident the following both additional conditions are to be satisfied:- Resident in India in at least 2 out of 10 years immediately preceding the relevant previous year. Presence of at least 730 days in India during 7 years immediately preceding the relevant previous year. If the individual resident satisfies only one or none of the additional conditions, then he is not ordinarily resident. In case the person is not an individual or an HUF, then the residential status can only be either resident or non-resident) [edit]Residential status of a person other than an individual Type of personControl management of affairs of the taxpayer is wholly in IndiaControl management of affairs of the taxpayer is wholly outside IndiaControl management of affairs of the taxpayer is partly in India partly outside India HUF1ResidentNon-residentResident FirmResidentNon-residentResident Association of personsResidentNon-residentResident Indian company2ResidentResidentResident Foreign company3ResidentNon-residentNon-resident Any other person except an individualResidentNon-residentResident ^1 After determining whether an HUF is resident or non-resident, the additional conditions (as laid down for an individual) should be checked for the karta to determine whether the HUF is ordinary or not-ordinary resident. ^2 An Indian company is the one which satisfies the conditions as laid down under section 2(26) of the Act. ^3 Foreign company is the one which satisfies the conditions as laid down under section 2(23A) of the Act. [edit]Scope of total income Indian income1 is always taxable in India notwithstanding residential status of the taxpayer. Foreign income1 is not taxable in the hands of a non-resident in India. For resident (in case of firm, association of persons, company and every other person) or resident ordinarily resident (in case of an individual or an HUF), foreign income is always taxable. For resident but not ordinarily resident foreign income is taxable only if it is business income and business is controlled wholly or partly in India or it is a professional income and profession is set up in India. 1 Foreign income is the one which satisfies both the following conditions:- Income is not received (or not deemed to be received under section 7) in India, and Income doesn’t accrue (or doesn’t deemed to be accrued under section 9) in India. If such an income satisfies one or none the above conditions then it is an Indian income. [edit]Heads of Income The total income of a person is segregated into five hea ds:- Income from Salary Income from house property Income from business or profession Capital Gain and Income from other sources [edit]Income from Salary All income received as salary under Employer-Employee relationship is taxed under this head, on due or receipt basis, whichever arises earlier. Employers must withhold tax compulsorily (subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and net paid income. The Act contains exemptions including (the list isn’t exhaustive):- ParticularsRelevant section for computing exemption Leave travel concession10(5) Death-cum-Retirement Gratuity10(10) Commuted value of Pension (not taxable for specified Government employees)10(10A) Leave encashment10(10AA) Retrenchment Compensation10(10B) Compensation received at time of Voluntary Retirement10(10C) Tax on perquisite paid by employer10(10CC) Amount received from Superannuation Fund to legal heirs of employee10(13) House Rent Allowance10(13A) Some Special Allowances10(14) The Act contains list of Perquisites which are always taxable in all cases and a list of Perquisites which are exempt in all cases (List I). All other Perquisites are to be calculated according to specified provision and rules for each. Only two deductions are allowed under Section 16, viz. Professional Tax and Entertainment Allowance (the latter only available for specified government employees). [edit]Income from House property Income under this head is taxable if the assessee is the owner of a property consisting of building or land appurtenant thereto and is not used by him for his business or professional purpose. An individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Self-occupied if it is used for own or family’s residential purpose. In that case, the Net Annual Value (as explained below) will be nil. Such a benefit can only be claimed for one house property. However, the individual (or HUF) will still be entitled to to claim Interest on borrowed capital as deduction under section 24, subject to some conditions. In the case of a self occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of Rs. 1,50,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and Rs. 30,000 (if the loan is taken before 1 April 1999). For let-out property, all interest is deductible, with no upper limits. The balance is added to taxable income. The computation of income from let-out property is as under:- Gross Annual Value (GAV)1xxxx Less:Municipal Taxes paid(xxx) Net Annual Value (NAV)xxxx Less:Deductions under section 242(xxx) Income from House propertyxxxx ^1 The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable during the year. The ALV is higher of fair rent and municipal value, but restricted to standard rent fixed by Rent Control Act. 2 Only two deductions are allowed under this heaad by virtue of section 24, viz. , 30% of Net annual value as Standard deduction Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals or reconstruction of property (subject to certain provisions). Income from Business or Profession The income referred to in section 28, i. e. , the incomes chargeable as â€Å"Income from Business or Profession† shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz. Sections 44 to 44DA (except sections 44AA, 44AB 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. In summary, the sections relating to computation of business income can be grouped as under: – Specific deductionsSections 30 to 37 cover expenses which are expressly allowed as deduction while computing business income. Specific disallowanceSections 40, 40A and 43B cover inadmissible expenses. Deemed IncomesSections 33AB, 33ABA, 33AC, 35A, 35ABB, 41. Special provisionsSections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA, 44DB. Presumptive IncomeSections 44AD, 44AE. The computation of income under the head â€Å"Profits and Gains of Business or Profession† depends on the particulars and information available. [4] If regular books of accounts are not maintained, then the computation would be as under: – Income (including Deemed Incomes) chargeable as income under this head xxx Less: Expenses deductible (net of disallowances) under this ead xxx Profits and Gains of Business or Profession xxx However, if regular books of accounts have been maintained and Profit and Loss Account has been prepared, then the computation would be as under: – Net Profit as per Profit and Loss Account xxx Add : Inadmissible Expenses debited to Profit and Loss Account xxx Deemed Incomes not credited to Profit and Loss Account xxx xxx Less: Deductible Expenses not debited to Profit and Loss Account xxx Incomes chargeable under other heads credited to Profit Loss A/c xxx xxx Profits and Gains of Business or Profession xxx [edit]Income from Capital Gains Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of the I. T. Act, 1961 as property of any kind held by an assessee such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for businesses and personal effects. Transfer has been defined under section 2(47) to include sale, exchange, relinquishment of asset extinguishment of rights in an asset, etc. Certain transactions are not regarded as ‘Transfer’ under section 47. Computation of Capital Gains:- Full value of consideration1xxx Less:Cost of acquisition2(xx) Less:Cost of improvement2(xx) Less:Expenditure pertaining to transfer incurred by the transferor(xx) ^1 In case of transfer of land or building, if sale consideration is less than the stamp duty valuation, then such stamp duty value shall be taken as full value of consideration by virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation before the Assessing Officer. ^2 Cost of acquisition cost of improvement shall be indexed in case the capital asset is long term. For tax purposes, there are two types of capital assets: Long term and short term. Transfer of long term assets gives rise to long term capital gains. The benefit of indexation is available only for long term capital assets. If the period of holding is more than 36 months, the capital asset is long term, otherwise it is short term. However, in the below mentioned cases, the capital asset held for more than 12 months will be treated as long term:- Any share in any company Government securities Listed debentures Units of UTI or mutual fund, and Zero-coupon bond Also, in certain cases, indexation benefit is not be available even though the capital asset is long term. Such cases include depreciable asset (Section 50), Slump Sale (Section 50B), Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the Act. There are different scheme of taxation of long term capital gains. These are: As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no tax is payable. STT has been applied on all stock market transactions since October 2004 but does not apply to off-market transactions and company buybacks; therefore, the higher capital gains taxes will apply to such transactions where STT is not paid. In case of other shares and securities, person has an option to either index costs to inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The cost inflation index rates are released by the I-T department each year. In case of all other long term capital gains, indexation benefit is available and tax rate is 20%. All capital gains that are not long term are short term capital gains, which are taxed as such: Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from Assessment Year (AY) 2005-06 as per Finance Act 2004. With effect from AY 2009-10 the tax rate is 15%. In all other cases, it is part of gross total income and normal tax rate is applicable. For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not paid). Besides exemptions under section 10(33), 10(37) 10(38) certain specific exemptions are available under section 54, 54B, 54D, 54EC, 54F, 54G 54GA. [edit]Income from Other Sources This is a residual head, under this head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are to be always taxed under this head. Income by way of Dividends. Income from horse races/lotteries. Employees’ contribution towards staff welfare scheme. Interest on securities (debentures, Government securities and bonds). Any amount received from keyman insurance policy as donation. Gifts (subject to certain conditions and exemptions). Interest on compensation/enhanced compensation. edit]Permissible deductions from Gross Total Income This section requires expansion. (November 2012) While exemptions is on income some deduction in calculation of taxable income is allowed for certain payments given under Chapter VI-A ie. , sections 80C to 80U. [edit] Section 80C Deductions Section 80C of the Income Tax Act [1] allows certain investments and expenditure to be deducted from total income up to the maximum of 1 lac. The total limit under this section is ? 100,000 ) which can be any combination of the below: Contribution to Provident Fund or Public Provident Fund. PPF provides 8. 8% [5] return compounded annually. Maximum limit to contribute in it is 100,000 for each year. It is a long term investment with complete withdrawal not possible till 15 years though partial withdrawal is possible after 5 years. The interest earned on PPF investments is not taxable. Besides, there is employee providend fund which is deducted from the salary of the person. This is about 10% to 12% of the BASIC salary component. Recent changes are being discussed regarding reducing the instances of withdrawal from EPF especially when one changes the job. EPF has the option of full settlement on leaving the job, taking VRS, retirement after 58. It also has options of withdrawal for certain expenses related to home, marriage or medical. EPF contribution includes 12% of basic salary from employee and employer. It is distributed in ratio of 8. 33:3. 7 in Pension fund and Providend fund Payment of life insurance premium. It is allowed on premium paid on self, spouse and children even if they are not dependent on father or mother. Investment in pension Plans. National Pension Scheme i s meant to save money for the post retirement which invests money in different combination of equity and debt. depending upon age up to 50% can go in equity. Annuity payable after retirement is dependent upon age. NPS has six fund managers. Individual can make minimum contribution of Rs6000/- . It has 22 point of purchase (banks). Investment in Equity Linked Savings schemes (ELSS) of mutual funds. Among other investment opportunities, ELSS has the least lock-in period of 3 years. However, one should note that after the Direct Tax Code is in place, ELSS will no longer be an investment for 80C deduction. Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit) Tax saving Fixed Deposits provided by banks for a tenure of 5 years. Interest is also taxable. Payments towards principal repayment of housing loans. Also any registration fee or stamp duty paid. Payments towards tuition fees for children to any school or college or university or similar institution (Only for 2 children) Post office investments The investment can be from any source and not necessarily from income chargeable to tax. edit]Section 80CCF: Investment in Infrastructure Bonds From April, 1 2011, a maximum of ? 20,000 is deductible under section 80CCF provided that amount is invested in infrastructure bonds. This is in addition to the 100,000 deduction allowed under Section 80C. However this deduction has not been extend ed to Financial year 2012-13. [6] Omiitted with effect from F. Y. 2012-13. [edit]Section 80D: Medical Insurance Premiums Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to 35,000. 00 (? 15,000. 00 for premium payments towards policies on self, spouse and children and ? 15,000. 00 for premium payment towards non-senior citizen dependent parents or ? 20,000. 0 for premium payment towards senior citizen dependent). This deduction is in addition to ? 1,00,000 savings under IT deductions clause 80C. For consideration under a senior citizen category, the incumbent’s age should be 60 years during any part of the current fiscal, e. g. for the fiscal year 2010-11, the incumbent should already be 60 as on March 31, 2011), This deduction is also applicable to the cheques paid by proprietor firm. [edit]Interest on Housing Loans Section For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt from tax. This deduc tion is in addition to the deductions under sections 80C, 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1, 1999. If the house is not occupied due to employment, the house will be considered self occupied. For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act. However, the rent is to be shown as income from such properties. 30% of rent received and municipal taxes paid are available for deduction of tax. The losses from all properties shall be allowed to be adjusted against salary income at the source itself. Therefore, refund claims of T. D. S. deducted in excess, on this count, will no more be necessary. 7] [edit]Section 80DDB : Deduction in respect of Medical Treatment, etc Deduction is allowed to resident individual or HUF in respect of expenditure actually during the PY incurred for the medical treatment of specified disease or ailment as specified in the rules 11DD for himself or a d ependent relative or a member of a HUF[8] [edit]Refund Status State Bank of India (SBI) is the refund banker to the Indian Income Tax Department(ITD). Your tax refund details are sent to SBI, by the Income tax department. Then SBI will process the refund, and send you the refund intimation. While filing your return you can choose any one of the two Refund modes ECS or Paper(cheque). The refund status can be checked online at the NSDL site. [edit]Due Date of submission of return The due date of submission of return shall be ascertained according to section 139(1) of the Act as under:- September 30 of the Assessment Year(AY)-If the assessee is a company (not having any inter-nation transaction), or -If the assessee is any person other than a company whose books of accounts are required to be audited under any law, or -If the assessee is a working partner in a firm whose books of accounts are required to be audited under any law. November 30 of the AYIf the assessee is a company and it is required to furnish report under section 92E pertaining to international transactions. July 31 of the AYIn any other case. [edit]Advance Tax Under this scheme, every assessee is required to pay tax in a particular financial year, preceding the assessment year, on an estimated basis. However, if such estimated income is less than Rs. 10000, then no advance tax is payable. The due dates of payment of advance tax are:- In case of corporate assesseeOtherwise On or before 15 June of the previous yearUpto 15% of advance tax payable- On or before 15 September of the previous yearUpto 45% of advance tax payableUpto 30% of advance tax payable On or before 15 December of the previous yearUpto 75% of advance tax payableUpto 60% of advance tax payable On or before 15 March of the previous yearUpto 100% of advance tax payableUpto 100% of advance tax payable Any default in payment of advance tax attracts penalty under section 234B and any deferment of advance tax attracts penalty under section 234C. [edit]Tax deducted at Source (TDS) The general rule is that the total income of an assessee for the previous year is taxable in the relevant assessment year. however income-tax is recovered from the assessee in the previous year itself by way of TDS. The relevant provisions therein are listed below. (To be used for reference only. The detailed provisions therein are not listed below. 1) SectionNature of paymentThreshold limit (upto which no tax is deductible)TDS to be deducted 192Salary to any personExemption limitAs specified for individual in Part III of I Schedule 193 2Interest on securities to any residentSubject to detailed provisions of given section10% 194A 2Interest (other than interest on securities) to any residentRs. 10000 (for Bank/cooperative bank) Rs. 5000 otherwise10% 194BWinning from lotteries etc. to any personRs. 1000030% 194BBWinning from horse races to any personRs. 500030% 94C 2Payment to resident contractorsRs. 30000 (for single contract) Rs. 75000 (for aggregate consideration in a financial year)2% (for companies/firms) 1% otherwise 194DInsurance commission to residentRs. 2000010% 194EPayment to non-resident sportsmen or sports associationNot applicable10% 194EEPayment of deposit under National Savings S cheme to any personRs. 250020% 194GCommission on sale of lottery tickets to any personRs. 100010% 194H 2Commission/brokerage to a residentRs. 500010% 194-I 2Rents paid to any residentRs. 1800002% (for plant,machinery,equipment) 10% (for land,building,furniture) 194J 2Fees for professional/technical services; RoyaltyRs. 000010% 194LBInterest paid by Infrastructure Development Fund under section 10(47) to non-resident or foreign company-5% 195Interest or other sums (not being salary) paid to non-residents or foreign company except under section 115O-As per double taxation avoidance treaty ^1 At what time tax has to be deducted at source and some other specifications are subject to the above sections. ^2 In most cases, these payments shall not to deducted by an individual or an HUF if books of accounts are not required to be audited in the immediately preceding financial year. In most cases, the tax deducted should be deposited within 7 days from the end of the month in which tax was deducted. [edit]Corporate Income tax For companies, income is taxed at a flat rate of 30% for Indian companies, with a 5% surcharge applied on the tax paid by companies with gross turnover over ? 1 crore (10 million). Foreign companies pay 40%. [9] An education cess of 3% (on both the tax and the surcharge) are payable, yielding effective tax rates of 32. 5% for domestic companies and 41. 2% for foreign companies. [10] From 2005-06, electronic filing of company returns is mandatory. [11] [edit]Tax Returns There are five categories of Income Tax returns. Normal Return Belated Return Revised Return Defective Return Returns In Response To Notices [edit]Normal Return Returns filed within the return filing due date, that is 31 July or 30 September of concerned assessment year. [12] [edit]Belated Return In case of failure to file the return on or before the due date, belated return can be filed before the expiry of one year from the end of the relevant assessment year. [edit]Revised Return In case of any omission or any wrong statement mentioned in the normal return can be revised at any time before the expiry of one year from the end of the relevant assessment year. [edit]Defective Return Assessing Officer considers that the return is defective, he may intimate the defect. One has to rectify the defect within a period of fifteen days from the date of such intimation. If the assessee wants more time, he can file an application to the A O and a further 15 days can be granted at the instance of the A O. [edit]Returns In Response To Notices Assessing officer in the process of making assessment, may serve a notice under various sections like 142(1), 148(1), 153A(a) or 153C. Returns are required to be furnished within the date specified on the respective notices. [edit]Annual Information Return and Statements [edit]Annual Information Return Those who is responsible for registering, or, maintaining books of account or other documents containing a record of any specified financial transaction,[13] shall furnish an annual information return in Form No. 61A. [edit]Statements By Producers Producers of a cinematographic film during the financial year shall, prepare and deliver to the Assessing Officer a statement in the Form No. 2A, within 30 days from the end of such financial year or within 30 days from the date of the completion of the production of the film, whichever is earlier. [edit]Statements By Non-Resident Having A Liaison Office In India With effect from 01,June 2011, Non-Resident having a liaison office in India sha ll prepare and deliver a statement in Form No. 49C to the Assessing Officer within sixty days from the end of such financial year. [edit]Tax Penalties The major number of penalties initiated every year as a ritual by I-T Authorities is under section 271(1)(c)[14] which is for either concealment of income or for furnishing inaccurate particulars of income. 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- (b) 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 (c) 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 fa ilure; (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. How to cite Income Tax, Papers