Income tax is a direct tax that a government levies on the income of its citizens. The Income Tax Act, 1961, mandates that the central government collect this tax. The government can change the income slabs and tax rates every year in its Union Budget.
Income does not only mean money earned in the form of salary. It also includes income from house property, profits from business, gains from profession (such as bonus), capital gains income, and 'income from other sources'. The government also often provides certain leeway such that various deductions are made from an individual's income before the tax to be levied is calculated.
Income Tax Returns
Income Tax Returns (ITR) form are the basis of calculating a person's income tax. It is a statement showing the status of a person, all their sources of revenue, deductions and, lastly, the tax payable or tax refund, if any.
Income Tax slabs
What income tax rate a person pays depends on the slab they fall in. The government has categorised incomes into slabs like — up to Rs 250,000, Rs 250,000-Rs 5,00,000, Rs 5,00,000-Rs 1 million, and more than Rs 1 million. The rates on different slabs might be different based on age groups.
Tax on some components of income can be waived by the government. These tax reliefs are known as standard deductions.