Tax – Income Tax Guide
Tax is a sum of money levied on persons or property to use it for progress of the country. Every person, who is an assessee and earns more than the maximum exemption limit, has to pay Income Tax according to the Indian Income Tax Act. In India income tax law is very complicated and hard to understand for a common man. If an assessee plans his Tax system according to his Income in a well planned way, it is not very difficult for him to comply with the Income Tax laws.
According to the Indian Income Tax Act a tax payer can minimize his tax liability if he plans his tax system in accordance with law and it can be done by making arrangement of one’s financial affairs within the limits of Income Tax law to get the maximum benefit of deductions, exemptions, rebates and relief’s. This may be helpful to reduce the tax liability of an assessee. Every assessee earning the amount exceeding the maximum exemption limit has to pay the Income Tax at the specified rate or rates of the Finance Act. The Income Tax is charged on the total income of the previous year of the relevant assessment year.
The Assessment Year starts from 1st April every year and ends on 31st March of the next year. The Income Tax is assessed on the assessed income on 31st March of previous / Financial Year. The Assessment year is the year in which Income Tax is charged on the previous year Income. A period of 12 months before the assessment year is called the ‘Previous Year’ or the ‘Financial Year’ or the ‘Accounting year’. [Sec 2(9) & Sec 3]
Example: – For the ‘Assessment year 2009-2010’, the ‘Previous Year’ or the ‘Financial Year’ or the ‘Accounting Year’ is from 1st April 2008 to 31st March 2009.
Example: – For the ‘Assessment year 2008-2009’, the ‘Previous Year’ or the ‘Financial Year’ or the ‘Accounting Year’ is from 1st April 2007 to 31st March 2008.
It is necessary for every Tax Payer to file the Income Tax returns whose income is more than the maximum exemption limit. If income tax returns are not filed by the Tax Payer, penalty is levied on him under the Income Tax Act.