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QUICK LOOK
- Income tax is levied on the
'total income' of the assessee.
- Income of the 'previous year'
is taxed in the 'assessment year.'
- Income is classified into and
compted under five categories called 'heads of income.'
- The basic scheme of income tax
is the principle 'pay as you earn.'
- One must pay his taxes in
advance and by the due dates, in the prescribed percentages.
- Deferment in the payment of
advance tax would result in the payment of interest.
The income tax basic scheme is
explained in brief as:
- Income tax is levied on the 'total
income' of the assessable entity which is computed under the
provisions of the Act.
- The income which are pertaining to
the 'previous year' is taxed, but in the 'assessment year.'
- Income tax is charged at the rates
being fixed by the for the year by the annual Finance Act. But the
liability to pay the tax is based on the principle 'pay as you
earn.'
Also check
Taxable Heads of Income for the
definition of salary, wages, pension, allowance, etc.
Pay as you Earn
A persone is not allowed to wait until 31 March to pay his/her taxes.
The Income Tax Act has the provision of 'pay as you earn.' This do not
pinch a tax payer at the end of the year making a lump sum payment. Such
payments are done during the previous year in the form of 'TDS', 'TCS'
and 'advance tax.'
TDS (Tax deducted at source)
This tax is deducted at the source of encome, by the employer or the
payer and paid to the government. It includes salary, interest,
commission and contract fees, rent, professional fees, etc. This type of
deduction is popularly known as TDS. Such tax is subject to certain
limits and certain conditions. For example if the earning up on fixed
deposit is Rs. 5,000 in a bank, TDS at 10% and education cess at 2% i.e.
a total of 10.2% will be deducted at the time of credit or at the time
of payment, whichever is earlier.
In case of senior citizen, if he/she estimates that the tax on the
income is nil, Form No.15H duly filled and signed is to be submitted in
duplicate to the bank. So, no TDS will be deducted. If the total income
is less than the threshold limit, Form No.15G is to be submitted to the
payer to prevent TDS from such interest.
TCS (Tax collected at source)
Unlike tax deducted at source, TCS is collected by a seller of certain
specified goods at the specified rates on the purchase of the goods and
it is remitted to the trasury on behalf of the buyer. In the same way, a
person granting a lease or licence in a parking lot, toll-plaza, etc.
collects the taxes at the specified rates as tax paid on behalf of the
lessee.
Advance Tax
Advance Tax is paid by the income earner during the previous year. The
computing of the liability of advance tax is done by estimating the
'total income' for the year, calculating the surcharge and taking into
consideration the rebate that will be available. The advance tax is
required to be paid in three instalments.
| Schedule
of Advance Tax: |
| A |
On or before 15
September |
Not less than
30% of advance tax. |
| B |
On or before 15
December |
Not less than
60% of advance tax as reduced by amount paid earlier. |
| C |
On of before 15
March |
Full advance
tax as reduced by the amount or amounts if any, paid in earlier
instalments. |
If the assessee does not pays the advance tax as described above, an
interest of 1% is charged per month for 3 months for the deferment of
advance tax instalment. If the total amount of advance tax is not paid
on or before 15 March, an interest of 1% is charged for one month.
Further, if the total advance tax paid is less than 90% of the advance
tax payable, the interest at 1% per month is charged for the shortfall
in the advance tax paid for the period commencing from 1 April of the
assessment year and ending on the date of payment or assessment,
whichever is earlier.
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