Basic Concepts of Income Tax updated with recent amendments

Introduction

The term income refers to the earnings or profits made by the individual or enterprise during a period. However, Income tax is a tax that is imposed on an individual or entity according to the profits and income earned by them. The individuals or entities are termed as "taxpayers" while the income and profits are known as "taxable incomes".

Generally, there are two types of tax: "Direct Tax" and "Indirect Tax". 

 Income can be generated by these five categories -

1. Salary Income
2. Rental Income
3. Income from Business and Profession
4. Capital Gains Income
5. Income from other sources

Additionally, the central government introduced the GST (Goods and Services Tax) in 2017. And it was introduced to consolidate a few taxes in one blanket. Similarly, Deduction is a term that is commonly used while filing returns or calculating taxability. It is the amount that the income tax department allows you to reduce from your income to bring down the tax liability.  

There are numerous income tax bloggers present on the web that may simplify your queries regarding the same. Language is not the barrier either if you want to explore more tax basics concepts in Hindi.

Recent income tax amendments (2021)

The union budget 2021 presented by the finance minister consists of more than 80 amendments to the income tax Act as well as other related Acts. Some of them are listed here-

• Taxability of interest on Provident Funds
• Exemption of cash allowance received in place of Leave Travel Concession(LTC)
• No depreciation shall be allowed on Goodwill
• Transfer of capital asset partner/member is on the dissolution of the firm shall be taxable as capital gain
• The time limit for filing a belated return or revised return is proposed to be reduced by 3 months
• Resident senior citizen age of 75 or above shall not be required to file the return of income
• No deduction for employees contribution if not deposited before the due date
• The time limit for transfer of residential house property extended, under section 54GB exemption
• TDS on purchase of goods, New Section 194Q. It is proposed to be dredged for deduction of TDS by a person whose turnover exceeds Rs. 10 crores.
• Relief from interest for any deficit in the advance tax liability due to dividend income.
• It is proposed to increase the threshold limit for tax audits to promote digital transactions.
• Notice to file the return of income can be issued by the prescribed authority to enable centralized issuance of notices in an automated manner.

 

Conclusion

The income tax we pay forms as the basic source of revenue for the government, which then is used for the people’s welfare through policies and distinct practices of the government. The above-mentioned are just a few amendments to the finance bill 2021 proposed by the finance minister Smt. Nirmal Sitharaman. For more thorough knowledge, feel free to visit tax consultant videos that are available on YouTube and other social media platforms.