Your Earnings, Your Future: A Tax Guide

Understanding Income Sources

Taxes depend on where your money comes from. The Income Tax Act classifies income into 5 main heads.

💼 1. Salary

Source: Wages, pensions, bonuses from an employer.

Note: Standard Deduction(₹50,000 in Old Regime/₹75,000 in New Regime) is available here.

🏠 2. House Property

Source: Rent received from owned properties.

Benefit: Deduction allowed on Home Loan Interest.

📈 3. Capital Gains

Source: Profit from selling assets (Stocks, Gold, Property).

Types: Short Term (STCG) vs Long Term (LTCG).

🧩 4. Other Sources

Source: Interest (Savings/FD), Dividends, Lottery.

Note: Often overlooked but fully taxable.

Tax Structure and Slabs

India has a progressive tax system. You can choose between the Old Regime (with deductions) and the New Regime (lower rates, no deductions).

🏛️ 1. Old Regime

Feature: Higher tax rates but allows deductions (80C, HRA).

Best for: People with high investments/expenses to claim.

✨ 2. New Regime

Feature: Lower tax rates but zero deductions allowed.

Best for: People who want simplicity and don't invest much.

📊 3. Tax Slabs

Concept: Income is taxed in chunks (e.g., 0-3L is tax-free).

Note: Only income *above* a slab limit is taxed at that rate.

🎁 4. Rebate u/s 87A

Benefit: Zero tax if total income is ≤ ₹12 Lakhs (New Regime).

Impact: Huge relief for entry-level earners.

Tax Deductions (Old Regime Only)

Save tax legally! These sections of the Income Tax Act allow you to reduce your taxable income.

🛡️ 1. Section 80C

Limit: Up to ₹1.5 Lakhs.

Options: EPF, PPF, ELSS Mutual Funds, Life Insurance.

🏥 2. Section 80D

Benefit: Deduction for Health Insurance Premiums.

Limit: ₹25k (Self) + ₹50k (Senior Citizen Parents).

🏡 3. HRA & Home Loan

Rent: Claim HRA exemption if living on rent.

Loan: Claim up to ₹2L interest deduction (Sec 24).

🎓 4. Section 80E

Benefit: Interest paid on Education Loan.

Limit: No upper limit for 8 years.

Filing an Income Tax Return (ITR)

Filing an ITR is mandatory if your income exceeds the basic limit. It’s also proof of income for loans and visas.

📝 1. Form 16

Concept: A certificate from your employer listing salary and tax deducted (TDS).

Usage: Essential for salaried employees to file ITR.

💻 2. AIS / TIS

Concept: Annual Information Statement showing all your financial transactions.

Usage: Cross-verify this to ensure no income is missed.

📅 3. Deadline

Date: Typically July 31st for individuals.

Result: Late filing attracts a penalty of up to ₹5,000.

✔️ 4. Choosing Forms

ITR-1 (Sahaj): For Salary/Pension & 1 House Property (Total < ₹50L).

ITR-2/3/4: For Business income, Capital Gains, etc.

Penalties and Compliance

Paying taxes isn't optional. Ignoring them leads to fines and notices. Stay compliant to stay stress-free.

⚠️ 1. Late Filing Fee

Rule: Filing after the deadline.

Penalty: Up to ₹5,000 fine + inability to carry forward losses.

🔍 2. Defective Return

Concept: Mismatch between ITR and actual data (AIS).

Result: You receive a notice to correct it within 15 days.

🛑 3. Tax Evasion

Action: Hiding income or faking deductions.

Penalty: 50-200% of tax evaded + potential jail time.

⏳ 4. Advance Tax

Rule: If tax liability > ₹10k, pay in quarterly installments.

Result: Missing this attracts 1% interest per month.