Income tax is the tax you are liable to pay to the government of India. The amount that you pay along with the other Indian citizens as your income tax will be used to pay for the infrastructural development of India as well as for paying the salaries of the central and state government employees. Let’s find out what you need to know about Income Tax in India.
The deadline for filing your ITR (Income Tax Returns) approaches fast. It is important that you file your ITR before the deadline if you want to avoid the penalty as a salaried person. Income tax, in simple terms, is a tax levied on the income of every individual by the Government of India. The provisions that govern the Income-tax department come under the Income-tax Act of India, 1961.
All salaried individuals are supposed to file ITR. You can take the help of an income tax calculator. But before you file ITR, here are a few important things you need to know.
What is a salary income?
The Income-tax department of India states, “Under Section 17 of the Income-tax Act of India, the term ‘salary’ is defined. However, not going into the full technical definition, in simple terms, whatever is received by the employee from their employer in cash, kind or as any facility [perquisite] is considered a salary of that employee.”
What are allowances?
As per the Income Tax department of India, “The fixed periodic amounts that are paid to you by your employer other than salary so that some particular requirements of the employee can be met are allowances. For example, transport allowance, tiffin allowance, uniform allowance, etc.”
There are three types of allowances that are considered under the Income-tax Act. They are fully exempted allowances, taxable allowances, and partially exempted allowances.
Is the pension income that is being received taxed as salary income?
Yes, the pension income that you get after a certain age will be considered and taxed as salary income. But, as per the rules of the Income Tax department in India, the pension that is received from the UNO (United Nations Organization) is exempt.
Are arrears of the salary taxable?
As per the rules of the Income Tax department of India, arrears of the salary are taxable. “Yes. But the benefit of spreading over the income to the years with which it relates can be easily availed for a lower incidence of the tax. This is known as relief under Section 89 of the Income-tax Act.”
Is the leave encashment taxable as the salary?
“Leave encashment is taxable only if received while still in service. Leave encashment is exempt when it is received at the time of retirement in case the employee was/is a government employee. In case of a non-Government employee, encashment of leave will be subject to an exemption to the limit prescribed under the Income-tax Law,” the Income Tax department says.