Basics of Income Tax for Beginners

A person crosses off several anniversaries in his lifetime. Some common ones are getting your first job, getting married, starting a family, etc. Aside from them, the majority of us also frequently experience paying our first income tax, which is a big milestone.

People start to feel a bit self-conscious as the deadline for completing their income tax returns approaches because many believe it to be a rather difficult chore. And if this is your first time paying taxes, it might even feel impossible to you.

As a result, we have outlined the fundamentals of income tax in this section to assist those taxpayers who are planning to file their taxes for the first time.

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What is an assessment year and a financial year?

The 12-month period that starts on April 1 and ends on March 31 of the following year is known as the previous year, the financial year, or your tax year.

Regardless of when you begin your job, your tax year ends on March 31 and a new one begins on April 1.Planning your taxes for each fiscal year is crucial.

It is a phrase that is frequently used in connection with tax filing.

You will "assess" and submit your return for the prior year during the fiscal year that follows the prior one.

Therefore, the assessment year for the preceding year 2018–19 is 2019–20.

The year that you file your return for the prior year is the assessment year.

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Recognizing Your Salary

Get your salary information, pay slip, and tax statement from the payroll or HR department as soon as you start working. Here, you may get a general understanding of the key elements of your salary and how much tax will be subtracted from it as a result.

Example: If you live in a rental unit, you can save tax on the HRA that the majority of employers provide.

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Income that is subject to tax

You can be receiving income from a number of sources in addition to your wage. The total of all the income categories listed below is your total income.

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PPF

PPF is a time-honored and secure way to save your hard-earned money.

Deposits to the Public Provident Fund, or PPF, are among the most common deductions allowed under section 80C. A minimum of INR 500 and a maximum of INR 1,50,000 must be deposited to start a PPF account. PPF account deposits grow over time when you make further deposits for tax deductions in succeeding fiscal years.

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Standard Deduction

According to the 2018 Budget, salaried workers are entitled to a basic deduction from their gross pay of Rs 40,000. The medical reimbursement of INR 15,000 and the transportation allowance of INR 19,200 per fiscal year will be replaced by this standard deduction. The taxpayer will really receive an additional Rs 5,800 in income exemption. In the Interim Budget for 2019, the ceiling of Rs. 40,000 was raised to Rs. 50,000 starting in FY 2019–20.

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Tax deducted At Source

TDS denotes that the payer has already subtracted the applicable tax. Based on the guidelines established by the income tax department, the payer is required to deduct a certain amount of tax. Depending on the tax bracket you fall under each year, tax is subtracted.

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Financial Resources

1. Income from Salary

Every dollar you earn while performing your duties within the terms of your employment agreement.

2. Income from a home investment

income from a home or other structure that is either owned and used by the owner or rented out

3. Gross Capital Gains Income

Income from a capital asset sale's gain or loss

4. Income from a profession or business

income or loss resulting from operating a business or profession

5. Revenue from Unrelated Sources

Your income from savings accounts, fixed deposits, family pensions, and gifts is included in this residual head.

FAQs

1. How do I define advanced tax?

If your assessment indicates a tax burden of at least 10,000, it is a tax that you can pay in advance. The tax on your current income must be calculated and paid in four installments.

2. How can I tell if the tax has been paid to the government?

If your deposited tax is not showing up on Form 26AS, you can visit the Income Tax Portal. To monitor the status of the challan service, you can also visit the website of the National Securities Depository Limited (NSDL).