Definition
Income tax is the main source of income for the government, collected from individuals and businesses based on their income. The government uses tax money to fund roads, healthcare, education and other essential services.
In India income tax is progressive based on slabs, where higher income groups pay higher tax rates. Individuals above a certain limit have to file their Income Tax Returns (ITR) every year to comply with tax laws.
What is Income Tax?
Definition:
Income tax is a direct tax collected by the government from individuals, businesses and other entities. It is governed by the Income Tax Act, 1961 and managed by the Income Tax Department of India.
Sources of Taxable Income:
When filing income tax, individuals have to disclose income from all sources, including:
- Salary & Wages – Income from employment.
- Business & Profession – Profits earned by self employed individuals and businesses.
- Capital Gains – Profits from sale of shares, properties and other assets.
- House Property – Rental income from real estate.
- Other Sources – Interest income, dividends, lottery winnings etc.
Tax Deductions & Savings:
Government encourages savings and investments through tax benefits under various sections:
- Section 80C – Investments in PPF, ELSS, NSC, EPF and life insurance (Deduction up to ₹1,50,000).
- Section 80D – Health insurance premium deductions.
- Section 24(b) – Home loan interest deduction.
- Section 80E – Education loan interest deduction.
How to File Income Tax Returns (ITR)
Pre-requisites for E-Filing:
- PAN (Permanent Account Number)
- Aadhaar Card (mandatory for linking with PAN)
- Bank Account Details (for tax refunds)
- Form 16 (for salaried employees)
- Investment & Deduction Proofs
E-Filing on Government Portal:
- Visit Income Tax Department Website → https://www.incometax.gov.in
- Download ITR Software for the relevant assessment year.
- Enter Income Details – Salary, business income, capital gains etc.
- Pre-fill Tax Information – Portal auto-fills the details from tax records.
- Compute Tax – System will calculate tax payable/refund based on the entries.
- Pay Tax (if applicable) – If tax is due, pay online.
- Generate & Upload XML – Save the form and upload to the portal.
- E-Verify – Verify through Aadhaar OTP, net banking or digital signature.
- Submit – A confirmation email/SMS is sent after submission.
After Filing:
- Refund: If excess tax is paid, a refund will be processed within 30-45 days.
- Rectification: Taxpayers can edit ITR if mistakes are found.
Key Takeaways
Filing ITR is mandatory and helps build a nation. File before time, claim deductions, and be compliant to avoid fines.
