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Reviewed by Aug 01, 2021| Updated on
Tax returns are filed once per financial year or a calendar year. While some countries follow the calendar year, others follow a different period of reporting. A tax return facilitates reporting income under different heads of income. The gross income and the corresponding expenses have to be reported under the respective heads. The aggregate income is calculated on a 12-month basis taxpayers can also claim a tax credit for foreign taxes paid in respect of foreign income taxable in India.
The various heads of income would include income from employment - salaries income from land and building - house property income from transfer of capital assets - capital gains income from exercise of business or profession and income from residuary sources - other sources.
Upon aggregation of income from various sources, taxpayers can claim tax deductions and allowances as per the income tax law of the country. The deductions are allowed towards eligible investments such as life insurance premiums, government securities, government savings schemes, health insurance premium, and so on. In India, allowances are given on the expenditure incurred for residential accommodation and deductions for the purchase of residential house.
The annual net income so arrived at would be taxed as per the tax rates of the country. In India, individuals are taxed on a slab rate system. The basic slab rate begins at Rs 2.5 lakh with a tax rate of 5% for the income falling in the slab of Rs 2.5 to 5 lakh,20% tax rate in the slab of Rs 5 to 10 lakh,and 30% tax rate in the slab Rs 10 lakh and above.
Corporates, partnership firms, limited liability partnerships, and co-operative societies are taxed at a flat rate without a basic exemption limit. The rates vary from 15% for new manufacturing companies to 40% in case of foreign companies. Partnerships and LLPs are taxed at a rate of 30%.