Income Tax Returns: Taxable income can be defined as any income you earn during the tax year. Under this, all components of income are included starting from monthly salary, dividends from stocks, other investment income, pensions, capital gains, rental income, business income, hobby income and others. Based on the total income earned by a person from all sources, the income tax is calculated.
The taxable income is applicable to all individuals including Hindu Undivided Families (HUFs), companies, firms, bodies of individuals, local authorities and other bodies that have earnings. The tax levied depends on their income and is as per Income Tax Act, 1961.
Income-tax is to be paid by every person. The term ‘person’ as defined under the Income-tax Act under section 2(3) covers in its ambit natural as well as artificial persons.
As per the law, to charge Income-tax, the term ‘person’ includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authorities and any artificial juridical person not covered under any of the above.
Income tax is levied on a person who was in India for 182 days during the previous tax year or a person who was in India for at least 60 days during the previous tax year and for at least 365 days during the preceding four years.
Types of taxable income
Different types of taxable incomes are:
How to calculate your taxable income
Depending on the annual income (from all sources) and the tax regime (new tax regime or old tax regime) selected, one can calculate the amount taxable.
Steps to calculate your taxable income:
> To calculate the final taxable income, you will have to first see your sources of money inflow.
> The income tax regulations allow individuals to derive income from five sources, viz. Income from Salary, Income from Business or Property, Income from Capital Gains, Income from House Property, and Income from Other Sources.
> After you decide on your taxable income, one has to apply the tax rates before subtracting taxes already paid through advance tax or TCS/TDS from the tax amount due.
Salaries and deductions
On salaries, one has to add up all the salary components, along with Form 16 for the previous fiscal year and add every emolument.
The second step is deductions. One has to deduct the non-taxable portion of partially taxable allowances, such as HRA and LTA.
Following this, one has to deduct the professional tax and the standard deduction from your salary. The standard deduction for salaried individuals is Rs 52,500 at present under both tax regimes.
If you have any other sources of income, such as interest, fees, commission, rental income, or capital gains, add them to the total amount.
Add all the components to know your gross total income.