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Calculate your tax, in 5 minutes flat!
Sunil Dhawan and Swami Saran Sharma, Outlook Money | February 09, 2007
"When there is an income tax, the just man will pay more and the unjust less on the same amount of income."
Greek philosopher Plato left this world about 350 years before Christ, but in this quote, he said something that would apply at all times, in all lands. When you add the incomes under all the five heads and account for the deductions to get your total taxable income, the amount on which you have to pay tax, Plato's quote might find an echo in your mind too.
There's some relief for those with an annual income of Rs 100,000 or less -- they don't have to pay tax. The limit is Rs 135,000 and Rs 185,000 for women and those above 65 years of age, respectively. The tax payable at different income levels is shown in the table.
Remember, filing of return is compulsory if your taxable income exceeds the basic limit indicated above, even if the tax payable is nil. You need to file returns even if you have incurred losses as a businessman or professional.
A surcharge and an education cess is levied on the amount of tax payable. The surcharge is 10 per cent of the tax amount and has to be paid if your annual income exceeds Rs 10 lakh (Rs 1 million).
The education cess of 2 per cent has to be paid if your annual income is above Rs 100,000. These charges push the tax rate of 10 per cent to 10.2 per cent, 20 per cent to 20.4 per cent and the highest tax slab to 30.6. For those with income exceeding Rs 10 lakh, the rate becomes 33.6 per cent, including surcharge and education cess.
If the tax already deducted by your employer is more than the tax payable, you are eligible to get a refund of the excess amount. Mention the details of your bank account in the tax form so that the refund gets credited to it.
The fundamental rule of income tax is that tax becomes due as soon as income is earned. In the case of salaried employees, tax is deducted every month after estimating the total income for the year and accounting for deductions.
As far as business income is concerned, it is difficult to estimate income from day-to-day transactions. Therefore, tax is charged on estimation of income basis. As a thumb rule, if your income from a business or profession comes to Rs 100 at the end of a financial year, the income tax department assumes that Rs 30 (30 per cent) of it accrued up to September, Rs 60 (60 per cent) accrued up to December and the total income, that is, Rs 100, accrued till March.
You are supposed to match this income pattern while depositing self-assessment tax. You will have to pay a penalty in the form of interest on the due amount if you don't pay, pay less, or defer paying the advance tax.
Don't worry if you have paid all the taxes, but not filed your return by the due date, as the IT Act permits you to file the return till the end of assessment year. However, if you don't meet this deadline too, you are liable to pay a penalty of Rs 5,000.American Novelist Herman Wouk said, "The only imaginative fiction being written today is income tax returns." Our advice: do your bit as a responsible citizen of the country, pay taxes on time, stay away from fiction, and relax.