Income Tax: Types, Slab Rates and Heads

All About Income Tax

Income Tax is a type of tax that you directly pay to the government depending upon the income or profit you have earned during a financial year. The government further utilizes the received income tax amount in maintaining and developing the country’s infrastructure such as schools, hospitals etc. Content Index

1. Types of Taxes

In India, there are two types of taxes in India in the new tax regime under tax slabs in india and they are:

i. Direct Taxes Direct taxes are those taxes that are directly borne and paid by the individual person to the government. One common example of direct tax is Income tax. These taxes are known as direct taxes as there is no involvement of intermediary source and it is directly paid to the government under income tax rate.

ii. Indirect Taxes Indirect taxes are those taxes that are passed on to the intermediary sources for payment. GST is one such Indirect tax. For Example: Such as Taxes paid by the Customer at the time of buying the goods to Retailer, Retailer to Manufacture and Manufacture to Govt.

2. Definition of a person under the Income Tax Act

As per Section 2(31) of Income Tax Act under income tax slab 2021-22 a person includes:

• Individual
• BOI (Body of Individuals)
• HUF (Hindu Undivided Family)
• AOP (Association of Persons)
• Companies
• Firms
• Any Local Authorities
• All Artificial Juridical Persons

4. How Income Tax is collected by the government?

The government of India uses the below-mentioned three ways to collect the Income-tax even in income tax slab for ay 2021-22:

• Voluntary payment by a taxpayer
• TCS (Taxes Collected at Source)
• TDS (Taxes Deducted at Source)

5. Different Heads under Income Tax

Below listed are the major income heads under income tax slab 2020-21 from which the taxes are deducted. i. Income from Salaries This head will be applicable to those employees who are falling under section 15 of the Income Tax Act. It is important for an employer to disclose every single detail regarding the tax deductions and the net paid income to his/her employees in Form 16. ii. Income from Capital Gains According to this head, any amount of income earned by a taxpayer from the sale of capital assets is taxable. Note: For the purpose of Income Tax act capital assets includes lands, buildings, bonds, debentures, equities, jewellery, etc. iii. Income from House Property According to this head, the income tax will be levied on the rental income earned by a taxpayer by renting out his house. It shall be noted that the property cannot be used for professional/business purposes under this head. iv. Income (Profits) from Business According to section 30 to 43D of the Income Tax Act, any profits earned by a taxpayer either from business or through rendering professional services are considered to be taxable under this head. This is the reason why this head is also known as Profits and Gains from Business or Profession. v. Income from Other Sources Any income received by a taxpayer other than the above-listed sources falls under this head. Here is the list of income sources that comes under the head of other sources (This List is not exhaustive):

1. Lottery
2. Horse race winnings
3. Dividend Income
4. Pension received after the death of the pensioner
5. Gifts received
6. Interest earned and accrued