Everyone who earns or gets an income in India is subject to income tax. (Yes, be it a resident or a non-resident of India). Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, Lottery winner’ have to pay tax on their prize money. For simpler classification, the Income Tax Department breaks down income into five heads:
|Head of Income||Nature of Income covered|
|Income from Salary||Income from salary and pension are covered under here|
|Income from Other Sources||Income from savings bank account interest, fixed deposits, winning KBC|
|Income from House Property||This is rental income mostly|
|Income from Capital Gains||Income from sale of a capital asset such as mutual funds, shares, house property|
|Income from Business and Profession||This is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors and lawyers who have them own practice, tuition teachers.|
A. TDS Return :
TDS Return is required to be filed by any person who is liable to deduct tax at source. A TDS Return is a quarterly statement which has to be submitted to the Income Tax Department of India. Submitting TDS Return is mandatory if you are a deductor. It should contain all details of TDS deducted and deposited by you for a particular quarter.
The first requirement for filing a TDS Return is to obtain a valid TAN (Tax deduction account number). You need to assess if you are required to deduct TDS on which payments. Usually, all types of payments such as Salaries, Interest, Professional Fees, Payment to Contractors, Rent of Machinery, Rent of Building etc. are covered under liable payments. There are prescribed rates for every type of TDS payment under the income tax act 1961.
If you are a deductor and has made payments to resident Indians with regards to any of above, you should file Form 24Q (TDS on salary payments) and Form 26Q (TDS on payments other than salaries) on a quarterly basis. If you have made any payments to non-residents, you are required to file Form 27Q on a quarterly basis.
Form 16A and Form 16 (TDS Certificates) can only be generated if you have correctly filed your TDS Returns.
B. Assessment Cases, Effective Tax Planning :
Every taxpayer has to furnish the details of his income to the Income-tax Department. These details are to be furnished by filing up his return of income. Once the return of income is filed up by the taxpayer, the next step is the processing of the return of income by the Income Tax Department. The Income Tax Department examines the return of income for its correctness. The process of examining the return of income by the Income-Tax department is called as “Assessment”.
Assessment could close quickly for some taxpayers, while it could prove to be quite gruelling for others. If you are not comfortable dealing with income tax officers, it is suggested that you take the help of Our Firm to help you with your case.
C. Effective Tax Planning :
Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to make the best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a financial year. Tax planning is a legal way of reducing income tax liabilities, however caution has to be maintained to ensure that the taxpayer isn’t knowingly indulging in tax evasion or tax avoidance.
Tax Planning Objectives:
The primary objectives of your tax planning should be the following :
- Reduction in overall tax liability
- Economic stability
- Growth of economy
- Litigation minimization
- Productive investment