Income Tax Compliance Lecture Notes

Introduction

• Importance of income tax compliance
• Steps to file an Income Tax Return (ITR), specifically ITR 1
• Aim: Empower attendees to file their income tax return with ease.

What is ITR 1?

• Alternate name: Sahaj
• Eligibility:
  • Salaried resident individuals with total annual income not more than ₹50 lakhs.
  • Eligible income sources:
    • Salary
    • Income from house property (only one property)
    • Other sources (FD interest, savings interest)
  • Ineligible income sources:
    • Horse racing, gambling, lottery winnings
  • Criteria:
    • No foreign property
    • No foreign income
    • Agricultural income should not be more than ₹5,000

Tax Slab Rates

For Individuals (Age < 60)

• Up to ₹2.5 lakhs: 0% tax
• ₹2.5 lakhs to ₹5 lakhs: 5% tax
• ₹5 lakhs to ₹10 lakhs: 20% tax
• Above ₹10 lakhs: 30% tax

For Senior Citizens (Age 60-80)

• Up to ₹3 lakhs: 0% tax
• ₹3 lakhs to ₹5 lakhs: 5% tax
• ₹5 lakhs to ₹10 lakhs: 20% tax
• Above ₹10 lakhs: 30% tax

For Super Senior Citizens (Age > 80)

• Up to ₹5 lakhs: 0% tax
• ₹5 lakhs to ₹10 lakhs: 20% tax
• Above ₹10 lakhs: 30% tax

Heads of Income

1. Salary Income

   • Components: Basic salary, allowances, perquisites
   • Deductions:
     • Standard Deduction (up to ₹50,000)
     • Entertainment Allowance (max ₹5,000 for government employees)
     • Professional Tax (max ₹2,500)

2. House Property Income

   • Revenue from rent or self-occupied property
   • Gross Annual Value: Municipal valuation, fair rent, or standard rent
   • Deductions:
     • 30% of Net Annual Value
     • Interest on housing loan

3. Profits and Gains from Business or Profession (PGBP)

   • Income from business profits or professional fees

4. Capital Gains

   • Income from transfer of capital assets (land, building)

5. Income from Other Sources

   • Any income not falling under the above categories

Set Off Concept

• Adjusting losses against income or profits within the same tax year
• Losses can be carried forward to future years
• Inter-head set off allows losses from one head to offset income from another

Chapter 6A Deductions

• Deductions from gross total income based on specific investments or expenses
• Key sections:
  • Section 80C: Life insurance, PPF, etc.
  • Section 80D: Medical insurance premiums
  • Section 80E: Interest on loans for higher education
  • Section 80G: Donations to charitable institutions

Exemptions under Section 10

• Types of income exempt from taxation:
  • Agricultural income
  • Gifts from relatives
  • Scholarships
  • Certain government gratuities

Practical Filing of ITR 1

• Simulated platform demonstration for filing ITR 1 using a case study (Mrs. Rupa)
• Key information gathered and filled:
  • Income details, deductions, tax liability
• Process includes confirming personal and income details, entering deductions, and calculating final tax payable

Conclusion

• Comprehensive overview aids in filing ITR 1
• Understanding forms, eligibility, income computation, and deductions
• Encouragement for compliance to optimize tax liabilities.