⭐ Income Tax
Income Tax is a direct tax that the government charges on the income earned by individuals, businesses, and other entities during a financial year.
It is paid directly by the person who earns the income—you cannot shift this tax to someone else, which is why it is called a direct tax.
⭐ Why is Income Tax Collected?
The government uses income tax money for:
- Building roads, schools, hospitals
- Defence and national security
- Public welfare schemes
- Government salaries and development work
⭐ Who Has to Pay Income Tax?
You must pay income tax if your annual income exceeds the exemption limit set by the government.
Income sources include:
- Salary
- Business or profession
- House property
- Capital gains (e.g., profits from selling shares/land)
- Income from other sources (interest, gifts, lottery, etc.)
⭐ Types of Income Tax in India
- Personal Income Tax (for individuals)
- Corporate Income Tax (for companies)
⭐ Income Tax Slabs (Individuals under New Regime – FY 2024-25)
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 3 lakhs | 0% |
| 3 – 7 lakhs | 5% |
| 7 – 10 lakhs | 10% |
| 10 – 12 lakhs | 15% |
| 12 – 15 lakhs | 20% |
| Above 15 lakhs | 30% |
(These may change each year in the Budget.)
⭐ Important Terms
1. Taxpayer
A person/entity who pays tax.
2. Assessment Year (AY)
The year in which you file the tax return for the previous financial year.
3. Financial Year (FY)
The year in which you earn income (April 1 to March 31).
4. Deductions
Amounts you can subtract from your income to lower your tax (e.g., under Section 80C, 80D, 80E).
5. TDS (Tax Deducted at Source)
Tax deducted from salary or payments before you receive them.
⭐ Example
If your annual income is ₹8,00,000:
- First ₹3,00,000 → No tax
- Next ₹4,00,000 (3–7 lakh) → 5% = ₹20,000
- Next ₹1,00,000 (7–8 lakh) → 10% = ₹10,000
Total Tax = ₹30,000 (excluding cess)