Income earned during the previous year (April 1, 2010 to 31st March 2011) is taxable in the immediately following assessment year. It is imperative for individuals to have basic knowledge about computing taxable income. We have tried to provide an elementary write up on this topic:
Step 1 – Income of salaried individual is to be computed under the following heads of income:
- Income from Salary
- Income from House property
- Income from Business and Profession
- Income from Capital Gains
- Income from Other sources
While computing income under the aforesaid heads, applicable exemptions should be claimed as provided in sections 10 to 13A. The provisions for clubbing of income should also be considered.
Step 2- After computing the income under the different heads, losses of the year or brought forward losses of the earlier years are to be set off. The income after such set off is called Gross Total Income (GTI).
Step 3 -After computing the gross total income the deductions under chapter VIA should be claimed.
Step 4 – The income arrived at after providing the deductions under chapter VIA is rounded off u/s 288A to the nearest Rs. 10 and it is called Total Income or Taxable Income.
After computing total income, tax is computed on such total income at the rate applicable for the relevant assessment year. For this purpose due consideration is to be made for long term capital gain (LTCG). LTCG on transfer of specified listed shares, on which security transaction tax (STT) is paid, shall be exempt. Further, the agricultural income is also to be considered for rate purposes.
Step 5 -After adding the surcharge to the tax liability the relief u/s 89 is claimed.
The tax liability arrived at after claiming the said relief is the final tax liability and in case proper advance tax is not paid or the return is not filed within due date, the tax liability is to be further increased by adding interest u/s 234A, 234B, 234C.
The aforesaid tax liability is then reduced by the prepaid taxes like TDS on own income or on income of other person included in the total income of the assessee, Tax collected at source (TCS) and advance tax paid.
If tax liability is more than prepaid taxes, the difference should be paid as self assessment tax and in case where the prepaid taxes exceed the tax liability refund should be claimed.
Taxmantra.com provides most hassle free tax return filing/ online return filing experience. Once you have collected, your salary certificate and other documents, we request you to please log in to www.taxmantra.com/ereturns or you can also directly mail at firstname.lastname@example.org to submit the details. Upon receiving the documents, we would contact you to file your return of income.