Tally ERP 9 Feature Presentations Income Tax
The Income Tax Department functions under supervision and control of the Central Board of Direct Taxes (CBDT). It has around 60,000 personnel located in more than 500 cities and towns across the country. The field offices are divided into regions, and each region is headed by a Chief Commissioner of Income Tax. Every region is assigned annual performance targets, such as revenue collections, and is provided with necessary expenditure budget to meet its operating expenses. Right to Information
The Income Tax Act 1961 lays down the framework or the basis of charge and the computation of total income of a person. It also stipulates the manner in which it is to be brought to tax, defining in detail the exemptions, deductions, rebates and reliefs. The Act defines Income Tax Authorities, their jurisdiction and powers It also lays down the manner of enforcement of the Act by such authorities through an integrated process of assessments, collection and recovery, appeals and revisions, penalties and prosecutions. The Act is fast changing and dynamic in nature and undergoes amendments annually through the Finance Act.
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What is Income Tax?
The annual charge levied on both earned income (wages, salaries, commission) and unearned income (dividends, interest, rents). In addition to financing a government’s operations, progressive income taxation is designed to distribute wealth more evenly in a population and to serve as the automatic fiscal stabilizer to cushion the effects of economic cycles. Its two basic types are (1) Personal income tax, levied on incomes of individuals, households, partnerships, and sole proprietorships; and (2) Corporation income tax, levied on profits (net earnings) of incorporated firms. However, a presence of tax loopholes (whose number increases in direct proportion to the complexity of tax code) may allow some wealthy persons to escape higher taxes without violating the letter of the tax laws.
An income tax is a tax imposed on individuals or entities (taxpayers) that vary with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as companies tax or corporate tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions. Most jurisdictions exempt locally organized charitable organizations from tax.
Income tax generally is computed as the product of a tax rate times taxable income. The tax rate may increase as taxable income increases (referred to as graduated rates). Taxation rates may vary by type or characteristics of the taxpayer. Capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income.
Taxable income of taxpayers resident in the jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from the sale of property, including goods held for sale, is included in income. Income of a corporation’s shareholders usually includes distributions of profits from the corporation. Deductions typically include all income producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside the jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions.
Types of Income Tax:
- Capital gains tax is a tax on the sale of an investment, usually stocks, bonds, precious metals and property.
- Corporate tax is levied on the earnings or profits of a corporation.
- Dividend tax is a tax on dividends paid to shareholders of a company.
- Excess profits tax is a tax on unusually high profits levied on a corporation. This was largely levied in the United States in times of war to prevent war profiteering but has been proposed at other times.
- Flat tax, an income tax where everyone pays the same tax rate.
- Gift tax, a tax on gifts received.
- Gross receipts tax, a tax on revenues received by a corporation, even if they don’t profit.
- Hall–Rabushka flat tax, a flat tax on income that excludes investments.
- Inheritance tax, a tax paid on money gained through inheritance
- Negative income tax, an income tax where the poor receive payment from the government, instead of owing taxes.
- Windfall profits tax is a tax on profits gained by a company that has some kind of large unexpected profit.
Why Do Have To Pay Income Taxes?
The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax dollars also help to support common resources, such as police and firefighters. Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks.