To grasp the basic principles of income tax, we must first define it. It is an annual tax which is imposed on both individuals as well as businesses operating within the society by the government of the country. Income tax is the primary source of income for the government and the funds are used for the betterment of the society, such as public infrastructure, clean drinking water and proper sanitation.
Income Tax Forms Demystified
Taxpayers utilise the Income Tax Return (ITR) form to submit their earned income and any related taxes to the income tax department.
There are seven forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-7, one of which the taxpayer has to fill before the due date mentioned by the government. Which of the aforementioned seven forms is applicable to an individual depends on various factors, such as the taxpayer’s source/s of income, the total earnings received as well as the category of the taxpayer ( individual, comp[any, HUF).
The Basics about income Tax
There are some basic concepts you must grasp, as listed below:
- List your types of income– whether it is earned income (employment) or unearned (investments), you must clearly state your type/s while tax filing software
- State your taxable income clearly– Calculate your taxable income by subtracting allowed deductions from your yearly income.
- File your returns within the taxable period.
- Adhere to the fixed tax rate of your country.
- You are required to file income tax returns, providing details of income, deductions and credits. The form number for the same varies from one country to another.
- The Tax Authorities (Income Tax Department in India) handles all tax collection and enforcement and is responsible for federal income tax.
Maximising Deductions and Credits
According to the income tax act, one can calculate their taxable income by deducting their investments and other payments from their total yearly income. Deductions should not be confused with exemptions.
Exemptions are another way to reduce the amount of tax to be paid. Donations to charitable institutions are examples of cases for which payment of taxes is not required. This is an initiative of the government to encourage investments.
Common Mistakes to Avoid
Choosing the right ITR form for the category an individual falls under is a crucial part of filing tax returns. Selection of the wrong category may lead to a notice issued by the income tax department.
Filing of tax returns after the due date has passed can lead to a penalty. One should always keep all documents ready in time to avoid last minute hassles. If a person overlooks to mention one or more sources of income, it may lead to the individual falling under the radar or scrutiny of the tax department.
Neglecting to e-verify the itr filed within 120 days will lead to the tax returns being deemed invalid.
Why choose WebLedger for all your Income Tax concerns?
Do you wish to save a ton of money on CAs by filing your returns yourself, while also making no mistake? Worry not, for there is one single solution to all your problems. Presenting WebLedger, an income tax return filing software. Now experience stress free tax compliance with
- Streamlined filing process
- Comprehensive ITR services
- Intelligent bookkeeping integration
- Unmatched accuracy and compliance
WebLedger has a user-friendly interface with a simple design for booth first time filers as well as experienced users. The simple filing process has done away with the complexities of tax filing.
The various ITR filing options aim to be a perfect fit for every individual’s financial situation. Webledger aims to be an affordable solution as it believes in providing value without letting go of quality.
Income tax returns are an intricate part of the relationship between the government and the people, a pillar in the financial infrastructure of any nation. While often seen as a financial burden for the citizens, one must keep in mind that income tax, when judiciously filed and maintained records of, helps the financial situation of the state while also enabling benefits for its citizens.
You can easily rely on WebLedger for calculations and for following tax regulations as the platform guides users through the filing process with an eye for detail. It becomes an important instrument in the progress of society as a whole. Not only does it pay for essential public services, but also bridge the socioeconomic gap between the two extremes of the society.