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Income Tax Guide 2022-23 - Laws, Slabs & Deductions, Rules, ITR Filing

Updated on: 30 Jun, 2022 01:16 PM

The most important source of revenue for the Indian government is income tax. It has been created in order to collect revenue for the country's growth and defence needs. Taxes on income, purchases, sales, and property assist the government in operating various government organizations and machinery.

The first Income Tax Act was passed in India in 1860. In India, the Income Tax Act of 1960 is now in effect. This guide explains everything that a taxpayer must know about income tax in detail.

What is Income Tax?


Individuals and corporations pay income tax, which is a sort of direct tax levied by the government on their earnings over the course of a year. It is determined using the tax slabs established by the Income Tax Department.

Who should Pay Income Tax?


Individuals and corporations pay income tax, which is a sort of direct tax levied by the government on their earnings over the course of a year. It is determined using the tax slabs established by the Income Tax Department.

  1. If your total income exceeds the basic exemption limit If an individual's income exceeds the maximum exemption level, i.e., 2.5 Lakhs in case of an individual having age of less than 60 years, 3 lakhs in case of resident senior citizen (age 60 years or more), 5 lakhs in case of resident super senior citizen (age 80 years or more), he or she must file a return. If you opt for the new tax regime, you are not eligible to claim the different exemptions available under the old tax regime.
    As per the old tax regime, the minimum exemption limit shall not be calculated after deducting the exemptions from capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB and deduction under Section 80C to 80U.
  2. If you have assets outside India It is necessary for an individual to file a tax return if he/she:
    - has (as a beneficiary or otherwise) any asset (including any financial interest in any company) located outside of India
    - has signing authority in any account located outside India
    - is a beneficiary of any asset located outside of India (including any financial interest in any organisation).

    This clause will apply to both residents and ordinary residents in India.

  3. If you deposit more than Rs 1 crore in a bank account If a person has deposited Rs 1 crore or more in one or more current accounts with a bank during the previous year, he/she must file his return.
    There has been no mention of the deposit placed in a Post Office current account. Thus, if a person deposits more than Rs 1 crore in a post office current account and his income is less than the basic exemption limit, he may not be obliged to file a return.
  4. If you spend Rs 2 lakh on international travel If an individual spent more than Rs 2 lakh on travel to a foreign nation for himself or for anybody else in the previous year, he must file a return.
  5. If your annual electricity bill is Rs 1 lakh If a person spent more than Rs 1 lakh on power consumption in the preceding year, he or she must file a return.
  6. If the gross receipts from a profession exceed Rs 10 lakh If a person's total gross receipts from his or her profession exceeded Rs 10 lakh in the preceding year, he or she must file a return.
  7. If the total amount of TDS and TCS is Rs 25,000 or more If the total amount of tax deducted at source (TDS) and tax collected at source (TCS) in his case during the previous year was Rs 25,000 or more, an individual (under 60 years of age) is required to file his return. In the event of a resident senior person, whose age is 60 years or more at any point during the preceding year, the Rs 25,000 threshold limit is increased to Rs 50,000.
  8. If turnover of your business is more than Rs 60 lakh If a person's total sales, turnover, or gross receipts for the preceding year exceeded Rs 60 lakh, he or she must file a tax return.
  9. If you have a deposit of Rs 50 lakh or more in a savings bank account If an individual's total deposit in one or more savings bank accounts during the previous year was Rs 50 lakh or more, he or she must file a return.

Types of Income


As per the rules stated in the Income Tax Act, 1961, there are five heads of income under which all your income can be categorised and taxed as per the provisions.

These heads of income are as follows –

  1. Income from salary This head of income is relevant for salaried employees who earn a salary from their employer. The salary that they earn and its various components are classified under this income head.
  2. Income from business/profession Any profits/ gains earned by carrying out a business activity is classified under this head of income. Like earning from running a small shop or proprietorship business etc. Further, earning of individuals who are engaged in a profession like Doctors, Chartered Accountants, Engineers is also classified under this head of income.
  3. Income from house property If you own a house and the house has been let out from which you earn a rental income, such an income would be recorded under this head of income
  4. Income from capital gains Capital gains are said to occur when there has been a sale of a capital asset and you have earned a profit from such sale. Capital assets mean a house property, flat, land, jewellery, mutual funds, shares etc.
  5. Income from other sources This head of income includes incomes which do not fall under any of the above-mentioned categories. For instance, interest income from deposits or bank accounts, dividends received, winnings from lotteries or games, etc.

Income Tax Slabs


Once the income is categorised under the above-mentioned heads, the gross taxable income is arrived at. From this income, tax-free deductions and exemptions are deducted to arrive at the net taxable income. The net taxable income is, then, subject to the calculation of tax liability. There are income tax slabs which specify the tax payable on the net taxable income. In India, income tax is charged on a progressive basis meaning as the income increases, so does the tax liability.
The income tax slab rates can be changed by the Government of India if felt necessary. Currently, the income tax slab rates are as follows –

Income Tax Slab Rates for FY 2020-21 (AY 2021-22) , FY 2021-22 (AY 2022-23) & FY 2022-23 (AY 2023-24

If Person is Resident Individual or HUF: -

Income of the assessee Rate of Tax under Existing Regime for FY 22-23, 21-22 and 20-21 (i.e, AY 23-24, 22-23 & 21-22) New Regime Slab Rates for FY 22-23, 21-22 and 20-21 (i.e, AY 23-24, 22-23 & 21-22)
Individuals with age less than 60 years or HUF Individuals with age 60years or more but less than 80 years Individuals with age 80 years or more Applicable for All Individuals or HUF
Rs 0.0 to Rs 2.5 Lakhs NIL NIL NIL NIL
Rs 2,50,001 to Rs 3.00 Lakhs 5% (tax rebate u/s 87a is available) NIL NIL 5% (tax rebate u/s 87a is available)
Rs. 3,00,001 to Rs 5.00 Lakhs 5% (tax rebate u/s 87a is available) NIL
Rs. 5,00,001 to Rs 7.5 Lakhs 20% 20% 20% 10%
Rs 7,50,001 to Rs 10.00 Lakhs 20% 20% 20% 15%
Rs 10,00,001 to Rs. 12.50 Lakhs 30% 30% 30% 20%
Rs. 12,50,001 to Rs. 15.00 Lakhs 30% 30% 30% 25%
Exceeding Rs. 15 Lakhs 30% 30% 30% 30%
Note:
1. In Addition to basic Income Tax as discussed above , Followings are also to be taken care of:-
- Surcharge: Surcharge is levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-
Rs. 50 Lakhs to Rs. 1 Crore Rs. 1 Crore to Rs. 2 Crores Rs. 2 Crores to Rs. 5 Crores More Than 5 Crores
10% 15% 25% 37%
- Health & Education Cess @4%
- Rebate u/s 87A (no tax will be payable on total income upto Rs.5 lakh in both regimes)
2. Certain income tax exemptions and deductions like section 80C, 80D,80TTB, HRA etc are available in the OLD tax regime but will not be available under the new tax regime.

Income tax slab for individuals aged up to 60 years (Applicable for FY 2021-22)
Income bracket Tax payable
Up to INR 250,000 Nil 
INR 250,001 to INR 500,000 5% of income exceeding INR 250,000
INR 500,001 to INR 10,00,000 INR 12,500 + 20% of the income exceeding INR 500,000
INR 10,00,001 and above INR 112,500 + 30% of the income exceeding INR 10,00,000

For senior citizens and very senior citizens, the tax slabs are different. They are as follows – Income tax slab for senior citizens (Applicable for FY 2021-22)

Income bracket Tax payable
Up to INR 300,000 Nil 
INR 300,001 to INR 500,000 5% of income exceeding INR 300,000
INR 500,001 to INR 10,00,000 INR 10,000 + 20% of the income exceeding INR 500,000
INR 10,00,001 and above INR 110,000 + 30% of the income exceeding INR 10,00,000

Income tax slab for very senior citizens aged 80 years and above (Applicable for FY 2021-22)
Income bracket Tax payable
Up to INR 500,000 Nil 
INR 500,001 to INR 10,00,000 20% of the income exceeding INR 500,000
INR 10,00,001 and above INR 100,000 + 30% of the income exceeding INR 10,00,000

Income Tax Slabs Under New Regime
Tax Slab(₹) New Tax Rates
0 – 2,50,000 0%
2,50,000 – 5,00,000 5%
5,00,000 – 7,50,000 10%
7,50,000 – 10,00,000 15%
10,00,000 – 12,50,000 20%
12,50,000 – 15,00,000 25%
15,00,000 & above 30%

Here are few terms which you should know as they help in tax calculations –

  • Financial year Financial year is the year in which you earn an income. It starts from April and ends on March of the next year. For instance, the current financial year is 2019-20. It started from 1st April 2019 and would end on 31st March 2020. Income that is within one financial year is taxed in the next financial year which is called the assessment year.
  • Assessment year Assessment year is the year in which your tax liability is calculated. It follows the financial year and calculates the liability on the income generated in that financial year. So, for the financial year 2019-20, the assessment year would be 2020-21 which would start from 1st April 2020 and end on 31st March 2021. Incomes earned up to 31st March, 2020 would be taxed in the financial year 2020-21 which would be called the assessment year.
  • Assessee The individual whose income is taxed is called an assessee in income tax parlance. It can be an individual like you, a company or a partnership firm, LLP etc.

Advance Tax


The calculation of tax liability in advance and paying the taxes to the government before the actual filing date is called advance tax. There are specified deadlines for the advance tax payments, which are listed below:

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax

Deductions from income under Chapter VI A of the Income Tax Act, 1961

As mentioned earlier, there are some tax-free deductions and exemptions which are allowed under the Income Tax Act, 1961. These deductions reduce the gross taxable income and help in the calculation of the net taxable income. The more the deductions that you claim, the lower would be your tax liability and vice-versa. The available deductions under Section 80 of the Income Tax Act are as follows –

Income tax section Deduction available
Section 80 C Deduction is available on eligible investments done and expenses incurred. The maximum deduction allowed under the section is INR 1.5 lakhs. It includes the following eligible investments and expenses –
  1. Life insurance premium
  2. Investment in five year fixed deposits
  3. Investment in EPF
  4. Investment in PPF
  5. Investment in mutual fund ELSS
  6. Tuition fee paid for up to two dependent children
  7. Principal repayment of home loan
  8. Investment in Senior Citizen Saving Scheme
  9. Investment in National Saving Certificates, etc.
Section 80 CCD (1B) This section allows an additional deduction of INR 50,000 if you invest in the National Pension  Scheme offered by the Government of India
Section 80 D Premiums paid for health insurance plans are allowed as a deduction under this section. The available limit of deduction is INR 25,000 which increases to INR 50,000 for senior citizens. Additionally, if premiums are paid for health insurance for parents, another INR 25,000 can be claimed as deduction which also increases to INR 50,000 if parents are senior citizens
Section 80 DD Deduction for maintenance of a disabled family member. The amount of the deduction is fixed at INR 75,000 if disability is 40% to 80% and INR 1.25 lakhs if disability is more than 80%
Section 80 DDB Deduction for treatment of named illnesses. The amount of deduction ranges from INR 40,000 to INR 80,000 depending on the age of the assessee
Section 80 E Deduction for interest paid on an education loan. The entire amount of interest is allowed as a deduction
Section 80 EEA Deduction for interest paid on home loan if you are a first time home buyer. To claim the deduction, the house should be up to INR 45 lakhs and the loan should be taken within 31st March 2020
Section 80 EEB Deduction on interest paid for a loan availed by the tax-payer to buy an electric vehicle. The deduction would be available if the loan is sanctioned between 1st April, 2019 and 31st March 2023. The maximum limit of deduction which is available is INR 1.5 lakhs
Section 80 G Deduction for donations made to charitable institutions. 50% or 100% of the donation can be claimed as deduction depending on the charity donated to
Section 80 GG Deduction for HRA if HRA is not a part of the salary component of an employee. The deduction would be lower of INR 5000/month, 25% of the income or rent paid over 10% of your income
Section 80 TTA Deduction for interest earned from savings accounts. The maximum limit is INR 10,000
Section 80 TTB Deduction for interest earned from savings accounts, fixed deposits, post-office deposits etc. by senior citizens. The maximum limit of deduction is INR 50,000
Section 80 U If the tax-payer is disabled, this deduction can be claimed. The deduction would be INR 75,000 if disability is between 40% and 80%. For severe disabilities, the deduction would be INR 1.25 lakhs

Other exemptions

Besides the above-mentioned popular deductions given in Section 80, there are other common exemptions which you can claim. These are as follows –

  • Exemption under Section 24 Section 24 of the Income Tax Act allows you an exemption on the home loan interest paid by you on a home loan that you have availed. The maximum exemption which you can claim under Section 24 is INR 2 lakhs.
  • Standard deduction Salaried employees can claim a standard deduction of INR 50,000 from their salary income.
  • Section 10 (10D) If you receive any benefit from a life insurance policy, such benefits would be tax-free under this section. There is no maximum limit of exemption. The entire benefit that you receive would be considered tax-free in your hands.

Income tax payable by NRIs

If you are a “resident individual”, you would be taxed on your global income which means the income earned from India as well as any foreign income that you might have earned would be taxable. In case of Non-Resident Indians (NRI’s), however, income tax is charged only on the portion of income which they earn in India. Foreign income would be taxed in the country in which they live.
So, understand the concept of income tax and how it is calculated so that you can calculate your tax liability and file your income tax returns every year without any ambiguity.

What is PAN?

PAN is an abbreviation for the Permanent Account Number. The Income Tax Department issues each Indian taxpayer with a unique 10-digit alphanumeric digit. A person's unique permanent account number is used to track all of their tax-related transactions and information. When a person has to pay advance tax or self-assessment tax, the PAN number must be mentioned. Also, when a person presents his PAN to institutions such as banks, mutual fund firms, and so on. The income tax agency receives financial information from such organisations via PAN. This permits the taxman to link all of the department's tax-related actions. As a result, the taxman may identify all of your financial activities simply by entering a permanent account number.

What is TAN?

TAN is an abbreviation for Tax Deduction and Collection Account Number. The Income Tax Department of India has assigned it a unique 10 digit alpha numeric digit. Everyone who is in charge of tax deduction (TDS) or collection (TCS) is responsible for acquiring a TAN. TDS/TCS returns, TDS/TCS payment challans, and TDS/TCS certificates must all include the TAN.

TDS - Tax Deducted at Source

When making payments to the recipient of income, the payer deducts tax at source for certain amounts. By reconciling the TDS amount with the ultimate tax liability, the income receiver can claim the TDS amount as a credit.

Self-Assessment Tax

The balance tax is the tax that the taxpayer must pay on his or her assessed income. After subtracting the advance tax and TDS from the total income tax computed on the assessed income, the self-assessment tax is determined.

Different Types of Income Tax Forms

Every year, the taxpayer must file an income tax return using the ITR forms established by the income tax department. The government has created seven ITR forms for taxpayers to use when filing their income tax returns. The taxpayer must fill out the relevant ITR forms and submit his tax return.
There are 7 types of Income Tax Forms. You can read more about the forms here.

Documents required for ITR Filing

A number of documents are required to file your income tax such as PAN Card, Form-16, Bank Account Details, AADHAAR card, etc. You can read a detailed guide here.

e-File Returns

The taxpayer must file his or her income tax return online using the IT department's e-filing portal. The taxpayer must first register on the government portal in order to file an income tax return. The taxpayer can then access the website and file his ITR. In addition, there is no need to manually send the acknowledgement of return to the Bangalore office. The income tax department now offers e-verification of ITRs in a variety of methods.

ITR-V

Document ITR-V is an income tax return verification form that is created after a taxpayer files and submits an income tax return to the Income Tax Department. The ITR-V must be e-verified or delivered to CPC Bangalore for verification at "Income Tax Department – CPC, Post Box No – 1, Electronic City Post Office, Bangalore – 560100, Karnataka." Only once the ITR has been verified will it be processed.

Frequently Asked Questions

Q- Do companies also pay taxes on the same income tax slab rates?

No, in case of companies, a corporate tax is payable which is determined using different tax rates.


Q- By when should the income tax return be filed?

You are required to file an income tax return of a financial year by 31st July of the assessment year. However, sometimes, the Government of India allows an extension on the last date of filing the income tax returns.


Q- Do I need to submit any proofs for claiming deductions?

Yes, proof of investments and expenses would have to be submitted to claim deductions which are available under different income tax sections. These proofs are submitted to your employer and not required to be submitted to the tax department unless asked by them through issuing a notice to you.


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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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