When March arrives an alarm starts to ring in your head which reads Income Tax. After making all possible investments to save tax, it’s the time for Income Tax return filing which all about giving details of the income you have earned in that financial year. Source of Income of a person is bounded to 5 different sources and possibly there is no other way except these 5 declared; you can earn your income. The 5 source of income are:
- Business and profession
- Capital gains
- Income from other sources.
So when you are filing for income tax return you need to give detail of your source of income and based on that your income is decided for income tax deduction. Like a salaried person has to show the breakdown salary components. Property income is basically the rent landlord gets from its property. Business and professional income is all about the net gain after removing all the investment and cost incurred. Taxation is done on the final profit of the financial year. Capital gains are one earned from selling shares, property, mutual funds, etc.
When your income from above sources exceeds the set limit then you are legally bound for income tax return filing. There are categories based on which tax limit is based like there is higher income tax limit for senior citizens. There one more new category added called very senior citizen for all those above 80 years and above age.
Now we come an important term called taxable Income. Taxable income is the reduced income left after all the deduction that you have claimed has been made. Taxation is done only on that final deducted income. The tax rate depends upon the income bracket in which you fall. The rate gets higher with the rise in income. Be careful while you furnish income and investment related documents.