Income Tax

Income Tax in India

Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government eg restaurants, theatres and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government. Direct Taxes are broadly classified as :

• Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed
• Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporates has been prescribed by the income tax laws of India

Indirect taxes take many forms: service tax on restaurant bills and movie tickets, value-added tax or VAT on goods such as clothes and electronics. Goods and services tax, which has recently been introduced is a unified tax that has replaced all the indirect taxes that business owners have to deal with.

Head of Income	Nature of Income covered
Income from Salary	Income from salary and pension are covered under here
Income from Other Sources	Income from savings bank account interest, fixed deposits, winning KBC
Income from House Property	This is rental income mostly
Income from Capital Gains	Income from sale of a capital asset such as mutual funds, shares, house property
Income from Business and Profession	This is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors and lawyers who have their own practice, tuition teachers