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May 31, 2022

Income Tax for First-Time Tax Return Filers – FAQs

by CA Shivam Jaiswal in Income Tax

Income Tax for First-Time Tax Return Filers – FAQs

 What is the definition of income tax?

ANS : It is a tax charged by the Indian government on all individuals’ earnings. The Income-tax Act of 1961 contains the provisions governing income tax.

What is the income-tax administrative framework?

ANS : The Ministry of Finance is in charge of the Indian government’s revenue functions. The Central Board of Direct Taxes has been tasked by the Finance Ministry with the job of administering direct taxes such as income tax, wealth tax, and so on (CBDT). The CBDT is part of the Ministry of Finance’s Department of Revenue. The CBDT provides critical inputs for direct tax policy formulation and planning, as well as administering direct tax laws through the Income-tax Department. As a result, the Income-tax Department administers the Income-tax Law under the administration and supervision of the CBDT.

  What is the time period during which a person’s earnings are considered for income tax purposes?

ANS : A person’s annual income is subject to income tax. Under the Income Tax Law, a year begins on April 1st and ends on March 31st of the following calendar year. The year is divided into two categories by the Income Tax Law: (1) previous year and (2) assessment year. The prior year is the year in which money is earned, and the assessment year is the year in which the income is taxed.

Q.4  Who is responsible for paying income tax?

ANS : Every individual is required to pay income tax. The term ‘person,’ as defined in section 2(3) of the Income Tax Act, includes both natural and artificial individuals.

Individuals, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of Individuals [BOIs], Firms, LLPs, Companies, Local Authority, and any artificial juridical person not covered by any of the above are all considered “persons” for the purpose of charging income tax. As a result of the definition of the term ‘person,’ it is clear that, in addition to a natural person, i.e., an individual, any artificial entity will be subject to income tax.

Q.5 What methods does the government use to collect income tax?

ANS : The government collects taxes in three ways: a) voluntary payment by taxpayers into various designated banks; b) compulsory payment by taxpayers into various designated banks; and c) compulsory payment by taxpayers into various designated banks. For example, taxpayers must pay Advance Tax and Self Assessment Tax, as well as taxes deducted at source (TDS) from the receiver’s income and taxes collected at source (TCS). Every person earning money has a fundamental obligation to appropriately compute his income and pay taxes.

Q.6 What are the tax rates that apply?

ANS : Every year, the Finance Act, which is passed by Parliament, contains the rates of income tax and corporate taxes. You can also check your tax liability using http://www.incometaxindia.gov.in’s free online tax calculator.

Q.7 Income-tax on corporations and Income-tax on other than corporations are terms seen on the Challan. What exactly do they indicate?

ANS : Corporate tax is the tax that firms must pay on their earnings, and it is designated as Income-tax on Companies (Corporation tax)-0020 on the challan for payment. Income-tax is the name of the tax paid by non-corporate assessees, and it should be noted as Income-tax (other than Companies)-0021 on the challan for payment.

Q.8 What is the process for calculating and paying advance tax?

ANS : Advance tax is determined based on the anticipated tax liability for the year. The advance tax is paid in instalments as follows:

  1. In the case of all assessees (other than those who are eligible as defined in sections 44AD and 44ADA):
  2. At least 15% – On or before the 15th of June
  3. At least 45 percent – By the 15th of September.
  4. At least 75% – On or before the 15th of December
  5. At least 100% – On or before the 15th of March
  • In the case of an eligible assessee, see sections 44AD and 44ADA:

100% — By the 15th of March, at the latest.

Note that any tax paid on or before March 31st is recognised as advance tax paid during the same fiscal year.

Advance tax is deposited on challan ITNS 280 by ticking the appropriate column, i.e. advance tax.

Q.9  What does regular assessment tax include, and how is it paid?

ANS : Every individual is responsible for appropriately computing and paying his or her taxes under the Income Tax Act. When the Department discovers that income has been understated and that tax is owed as a result, it takes steps to calculate the exact tax amount that should have been paid. Tax on regular assessment is the name given to the demand placed on the person. The regular assessment-400 tax must be paid within 30 days of receiving the demand notification.

Q.10  What precautions should I take before filling out the challan for tax payment?

ANS : Apart from other items, one should clearly specify the following while paying taxes:

  • Corporation Tax/Income Tax, for example, is a type of payment (other than companies) Tax amount and payment method
  • Type of payment [e.g., advance tax, self-assessment tax, regular assessment tax, dividend tax, tax on income distributed to unit holders, surtax]
  • Year of assessment
  • The PAN [Permanent Account Number] is a unique identification number assigned by the IT Department.

Q.11  Is it necessary for me to demand proof of payment from the banker to whom I’ve sent the challan?

ANS : The bank should stamp and return the counter-foil of the Income-tax Challan filed by taxpayers. Please double-check that the bank stamp includes the BSR (Bankers Serial Number Code), the Challan Identification Number (CIN), and the payment date.

Q.12  How can I be sure that the government has received the money I put in the bank as taxes?

ANS : Challan Status Enquiry is an online service provided by the NSDL website [http://www.tin-ns dl.com]. You can also check your tax credit by going to https://www.incometax.gov.in/iec/foportal and accessing your Form 26AS from your e-filing account. The credit of TDS/TCS in your account will also be disclosed on Form 26AS.

Q.13 What should I do if my tax payment information isn’t found on the internet for my name?

ANS : The following are some of the reasons why your Form 26AS shows no credit:

1. The deductor/collector has not filed his TDS/TCS statement

 2. You have not provided your PAN to the deductor/collector

 3. You have provided an incorrect PAN to the deductor/collector

 4. The deductor/collector has made an error in quoting your PAN in the TDS/TCS return

 5. The deductor/collector has not quoted your PAN

6. The challan information against which your TDS/TCS was deposited were incorrectly quoted in the deductor’s statement or in the challan details submitted by the bank.

You can request the deductor to correct these errors:

1. To file a TDS/TCS statement if one has not been filed

 2. To correct the PAN using a PAN correction statement in a TDS/TCS statement that has already been uploaded if it has made an error in the PAN quoted

3. To correct the PAN using a PAN correction statement in a TDS/TCS statement that has already been uploaded if it has made an error in the PAN quoted

 3. To provide a corrective statement if the deductor filed a TDS/TCS statement and mistakenly left out your information or if you did not give him your PAN before he filed the TDS/TCS report

 4. To issue a correction statement if the deductor filed a TDS/TCS statement with an error in the challan details

5. To contact the bank to correct any amount errors in the challan details uploaded by the bank. ​

Q.14 Is my liability under the Income Tax Act discharged once my taxes have been paid?

ANS : No, you are responsible for ensuring that the tax credits are available in your tax credit statement and TDS/TCS certificates, and that full details of your income and tax payment are given to the Income-tax Department in the form of a Return of Income, which must be filed by the due date.

Q.15 What is the role of an Assessing Officer?

ANS : He or she is an officer of the Internal Revenue Service with jurisdiction over a specific geographical region in a city/town or a group of people. You can learn about the officer in charge of enforcing the legislation from the PRO or the Departmental website http://www.incometaxindia.gov.in, which may be dependent on your geographical jurisdiction or the type of income you receive. Section 2(7A) of the Income Tax Act might also be used.

Q.16 Every person’s earnings are subject to income tax. What is considered income under the Income Tax Act?

ANS : The term “income” has a very broad and encompassing meaning under the Income Tax Law. In the case of a salaried employee, everything they receive from their employer in cash, kind, or as a benefit is considered income. A businessman’s net profit will be his source of revenue. Interest, dividends, commissions, and other types of income can all come from assets. Furthermore, money may be produced by the sale of capital assets such as buildings, gold, and so on. Income shall be computed in accordance with the applicable provisions of the Income-tax Act of 1961, which establishes detailed conditions for calculating taxable income under various kinds of income.

Q.17 What is the difference between exempt and taxable income?

ANS : Exempt income is income that is not subject to taxation because it is specifically exempt from taxation under the Income Tax Law. Taxable incomes are earnings that are subject to taxation.

Q.18 What is the difference between revenue and capital receipt?

ANS : Receipts are divided into two types: A) Receipt of revenue; B) Receipt of capital. Salary, business profit, interest income, and other periodic revenue receipts are examples. Capital receipts are typically one-time events, such as receipts for the sale of a home, personal jewellery, and so on.

Q.19 Is tax applied to all receipts, including capital and revenue receipts?

ANS : All revenue receipts are taxable unless they are specifically granted exemption from tax, and all capital receipts are exempt from tax unless there is a special provision for taxing them, according to the Income-tax Law.

Q.20 I work in agriculture. Is my earnings taxable?

ANS : Agricultural revenue is exempt from taxation. If you have non-agricultural income as well, your agricultural revenue will be taken into account for rate purposes when determining non-agricultural income. Refer to section 2(IA) of the Income-tax Act for the definition of Agricultural Income.

Q.21 Is income from animal husbandry classified agricultural income under the Income Tax Law?

ANS : No

Q.22 Is it necessary for me to keep any records or proof of earnings?

ANS : You must keep proof of earnings and the records required by the Income-tax Act for each source of income. If no such records are required, you should keep acceptable records to support your income claim.

Q.23 Is it necessary for me to keep track of my revenues and expenses as an agriculturist?

ANS : Even if your only source of income is agriculture, you should keep track of your agricultural earnings and expenses.

Q.24 Is it necessary for me to pay income tax if I win a lottery or prize money in a competition?

ANS : Yes, such winnings are subject to a 30 percent flat tax rate with no baseline exemption ceiling. In this instance, the prize money payer will usually deduct tax at source (i.e., TDS) from your winnings and only give you the remaining amount.

Q.25 Can I claim any form of relief for double taxation if my income is taxed both in India and abroad?

ANS : Yes, you can seek relief for income that is taxed both in India and abroad. Relief is granted either in accordance with the provisions of a double taxation avoidance agreement entered into by the Government of India with that country (if any) or by giving relief under section 91 of the Act in respect of tax paid in that country.

Q.26 What does it mean to be a professional?

ANS : The term “profession” refers to the independent use of one’s talents and knowledge. The terms “profession” and “vocation” are interchangeable. Legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, artists, writers, and other professions are examples.

Q.27 What books of account must a person carrying on a company or profession keep in order to comply with the Income-tax Act?

ANS : A person engaged in business or in a non-specified profession is not required to keep any specific books of account under the Income Tax Act. However, such a person is required to retain and maintain such books of account and other documentation as may be required by the Assessing Officer in order for the Assessing Officer to determine his total income in compliance with the Act’s provisions.

particularsIndividual or HUFAny other assessee
If you have an existing business or profession, your income or gross turnover in any of the previous three years exceeded the following: Business or profession-related incomeIn a business or profession, turnover/gross receipts  Rs . 2,50,000 Rs. 25,00,000Rs. 1,20,000 Rs. 10,00,000
In the event of a newly established firm or profession, the first year’s income or gross turnover is likely to exceed the following- Business or profession-related incomeIn a business or profession, turnover/gross receiptsRs . 2,50,000 Rs. 25,00,000Rs. 1,20,000 Rs. 10,00,000

The Companies Act mandates the keeping of books of account for businesses. Furthermore, the Institute of Chartered Accountants of India has established a number of accounting standards and guidelines that businesses must adhere to. If the annual receipts from the profession exceed Rs. 1,50,000 in each of the three years immediately preceding the previous year, a professional who is engaged in a specified profession is required to keep certain prescribed books of account (in case of newly set up profession, his annual receipts in the profession for that year are likely to exceed Rs. 1,50,000).

Legal, medical, engineering, architectural, accounting, corporate secretary, technical consultancy, interior decoration, authorised representative, film artist, or information technology are all examples of specified professions.

Section 44AA of the Income-tax Rules, 1962, read with Rule 6F of the Income-tax Rules, 1962, for more information on the provisions relating to the preservation of books of account.

Q.28 How long should business books of account be kept and where should they be kept?

ANS : All accounting books and related papers should be stored at the primary place of business, i.e., where the business or profession is normally conducted. These papers should be kept for at least six years after the end of the relevant Assessment year, or for a total of seven financial years from the end of the relevant year. When an assessment is reopened, however, any books of account and other documentation that were retained and maintained at the time of the reopening should continue to be kept and maintained until the reopened assessment is completed.

Q.29 Why hasn’t my name been updated on the NSDL website?

ANS : An assessee may raise a grievance if the details on his or her PAN do not match those on the income tax portal. For instructions on how to file a PAN-related grievance, go to https://www.incometaxindia.gov.in/Pages/tax-services/pan-grievances.aspx.

Q.30 How can I find out if my Aadhaar and PAN are linked?

ANS : You can check the status of your Aadhaar-PAN linking at https://eportal.incometax.gov.in/iec/foservices/#/pre-login/bl-link-aadhaar.

Q.31 Could you please send me the email address of the income tax ombudsman?

ANS : To check a list of income tax ombudsman email addresses, go to https://www.incometaxindia.gov.in/Pages/ombudsman/know-your-ombudsman.aspx.

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