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Income tax in India is a tax payable on the Total Income earned (revenue or capital) in the Previous Year by every Person at the rate enacted by the Union Budget (Finance Act) for every Assessment Year.

  • All revenue income is chargeable to tax unless it is income exempt from tax.
  • All capital profits are not chargeable to tax unless specifically made chargeable

Residential status and income tax in india

The residential status of a person in India determines the inclusion of a particular income in his Total Income for income-tax.

    There are three residential status in India
  • Residents (or) Resident & Ordinarily Residents: taxable for all their income, including income outside India
  • Resident but not Ordinarily Residents: taxable in relation to income received in India or income accrued in India and income from business or profession controlled from India.
  • Non Residents: Taxable only for the income received in India or Income accrued in India.

List of income comes under taxation

    Of the total income of a person, five heads are taxable
  • Income from Salary
  • Income from House Property
  • Income from Business and Profession
  • Income from Capital Gains
  • Income from Other sources

Dividend income paid by Companies and Mutual Funds are exempt from tax. Before distribution, the companies are required to pay a 15% dividend distribution tax and surcharge of 3% .

    The proceeds of an insurance policy (by way of an insurance claim, or by maturity) received from an Insurance company as is generally exempt. Exceptions to this rule are:
  • any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA - this refers to specific policies for disabled dependants; or
  • any sum received under a Keyman insurance policy; or
  • any sum received under policies issued on or after 1 April 2003 where premium paid is greater than 1/5th the sum assured

** Maturity proceeds of a Public Provident Fund (PPF) account are also exempt from income tax.

What is PAN Number?

PAN is an all India, unique number of 10 characters allotted by the Income Tax Department. It is permanent for your life, and will not change with change of your address or station, or change of your Assessing Officer, etc. A PAN number is essential for filing returns.

The government provides various options for tax rebates. Investing in the beginning or during the financial year reduces the amount of net tax to be paid by you at the time of filing your returns. General Provident Fund (GPF), NSC/NSS, Public Provident Fund (PPF), Life Insurance Premium, Employee's Provident Fund Scheme, etc. are some of the common tax-saving instruments.

PERSONAL income TAX slab-RATES

For individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI): For the Assessment Year 2009-10

Taxable income slab (Rs.) Rate (%)
Up to 1,50,000
Up to 1,80,000 (for women)
Up to 2,25,000 (for resident individual of 65 years or above)		 NIL
1,50,001 – 3,00,000 10
3,00,001 – 5,00,000 20
5,00,001 upwards 30*

*A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs 1,000,000.

    Note : -
  • Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.
  • A marginal relief may be provided to ensure that the additional IT payable, including surcharge, on excess of income over Rs 1,000,000 is limited to an amount by which the income is more than this mentioned amount.
  • Agricultural income is exempt from income-tax.