I have always detested the fact that why weren’t we taught about income taxes and related stuff in school. Why should I be a commerce student to learn it? I will need it in my life, no matter what.
Because as exciting as it is when you start earning, you also have to pay taxes. Who knows people don’t pay taxes because they are absolutely clueless and therefore don’t enter this territory? Just kidding!
Although we throw around the term very easily but we barely know our way through it. Being part of the millennials, I know that a lot of people are clueless about the same.
So I would like to help out with the problem by trying to simplify it.
A very simplistic definition is that income tax is levied on one’s personal income. It varies from individual to individual or from tax payer to tax payer in accordance with their income.
Notice, I wrote tax payer separately because the taxpayer is not always an individual. A taxpayer is anyone who earns an income. They are all categorised under the IT Act as – Individual, HUF (Hindu Undivided Family), Association of Persons, Body of Individuals, Firms, Companies, Local Authorities, and Artificial Jurisdical Person.
DIRECT AND INDIRECT TAXES
A simple example can explain this concept. Direct are those taxes that are levied on your income. Indirect are those that you pay through another entity. For example, you go to a restaurant and they charge you a Service tax (not Service charge), VAT, etc. THAT ultimately goes to the government.
It is calculated on a yearly basis. You might have heard people saying that 31st March is when the ‘closing’ happens. It begins from 1st April and ends on 31st March. That is one Financial Year.
HOW DO YOU FILE AN INCOME TAX?
Thank the Lord that technology is advancing and everything can be done online. Earlier, filing an income tax would entail a lot of paper work and since it was all done manually, the margin of error was obviously high. Moreover your information is better secured. There is high confidentiality since the data is not accessible to anyone else.
Moreover the online process makes things more convenient anyway. It is available24/7 by the virtue of being online.
Some added perks of income tax efiling incentivise you to take it up. It makes it easier for you to get your VISA stamped and get loans sanctioned easily.
It will make you a regular and avoid any penalties on your part.
So now you know, go ahead! Be a good citizen.
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Views presented in the article are those of the author and not of ED.