Income Tax System In India - Complete Guide, Types, Rules, IT Returns, Slabs, e Filing

Indian Income Tax System

Indian Tax System in India is ages old and has undergone several modifications on a timely basis and has molded into the form it is in today! The Tax System in India is one of the most incomes generating section for the government body and under this system; every person who earns an income is taxable. Only, the taxable amount varies depending on the income and source of income of each person.

In this article, various features of Indian Income Tax are addressed for the readers:
      • What is Income Tax?
      • What does the Income Tax act imply?
      • What are the different Income Tax rules?
      • Who are liable to pay Income Tax?
      • What is the procedure for online Income Tax payment?
      • How to E-file Income Tax Return?
      • What are the Income Tax slabs for FY 2019-20?
      • How to calculate Income Tax?

What is Income Tax?

Tax is imposed on individuals or organizational entities and this imposition of tax is based on income or taxable income (profit) of these parties. Each category of taxpayer has corresponding tax imposition scheme too.

Tax rate is directly proportional to the income generated i.e. when the taxable income increases, so does the tax rate. However, taxable amount of each person or entity depends on the tax spectrum under which they belong.

Income Tax remitted to the government is solely used for funding public services and amenities fulfill government commitments, provide things for the public and everything that contribute to the splendor of both nation and its people.   

What does the Income Tax Act imply?

The Income Tax Act comes under Section 1, Income Tax Act, 1961-2019 (No. 2). As per the Income Tax Department, the Income Tax Act, 1961 (43 of 1961) (as amended by act no. 23 of 2019) is defined as:

“An act to consolidate and amend the law relating to income-tax and super-tax.”

What are the different Income Tax rules?

The Income Tax Act passed in 1961 is the Legislative Act under which the administration and governance of the country’s income tax system and laws are applied and enforced. Every represented or amended Income Tax rule strictly works in conjuncture with the Income Tax Act. The Income Tax rules can never overpower the Income Tax Act.  

Who are Liable to Pay Income Tax?

The liability of remitting the Income Tax applies to the following parties:

      • Artificial Juridical Individuals
      • Hindu Undivided Family (HUF)
      • Companies
      • Corporate Firms
      • Association of Persons (AOPs)
      • Body of Individuals (BOIs)
      • Local Authorities

If we consider the income on which tax is imposed, following are the main criteria:

     • Salary
     • Business
     • Profession
     • Capital gains
     • Income from house properties
     • Other sources that generate income

What is the procedure of Online Income Tax payment?

Income Tax department has made it easy for the taxpayers to make online remittance of Income Tax. The user should have net banking facility with a registered bank. The user will be asked to submit the Permanent Account Number (PAN) and Tax Deduction & Collection Number (TAN) for validation.

Paying direct taxes through e-payment facility includes the following steps:

      1. Visit the Income Tax Return (ITR) E-filing website
      2. Select Challan 280
      3. Enter your personal details
      4. Choose the payment mode
      5. Cross-verify the information entered
      6. Receipt of Challan 280 (Taxpayer Counterfoil) is generated (the copy of which is to be saved as customer’s proof of payment)

How to E-file Income Tax Return?

The process of E-filing ITR involves the following steps:

     1. From the download page, the user can download the ITR preparation software for the relevant valuation year
     2. Using the downloaded IT preparation software, the user can start preparing the return
     3. The user has to be ready with the file with information about your income, tax payments, deduction, form 16 (provided by the employer) etc.
    4. Use the Pre-fill button to prepopulate personal details and TDS and ensure that nothing is left out after critically comparing the entered information
    5. After entering the data, then user can click on Calculate to calculate the tax and interest liability and arriving at the final result of Tax payable or refund
    6. If there is any tax payable pending, the user should enter the details in the appropriate schedule until the tax payable totals to zero
    7. Log-in to E-filing website with the user credentials like User ID, Password, Date of Birth/ Date of Incorporation along with the Captcha code
    8. Go to E-file and select Upload Return 
    9. Select the apt ITR, Assessment Year and previously saved XML file
    10. Upload the E-file registered Digital Signature Certificate (DSC), if applicable
    11. Select Submit button
    12. On submission, ITR-V will be generated, if DSC is not used. The user will receive ITR-V through registered mail id. If ITR is uploaded with DSC, Return Filing Process is completed.


If the return is not uploaded with DSC, the ITR-V should be printed, signed and submitted to the CPC within 120 days of date of E-filing. Only once the user submits the signed ITR-V, will the return be processed. The user has to regularly check the reminder mails and messages for about the non-receipt of ITR-V

  • What are the Income Tax slabs for the AY 2019-20?

    • Tax slab for Individual (resident or non-resident) or HUF or BOI or any other artificial juridical person:

     Taxable Income

     Tax Rate

     Up to RS.2,50,000


     RS.2,50,000 to RS.5,00,000


     RS.5,00,000 to RS.10,00,000


     Above RS.10,00,000


    • Tax slab for resident senior citizen (60 years to 80 years)

     Taxable Income

     Tax Rate

     Up to RS.3,00,000


     RS.3,00,000 to RS.5,00,000


     RS.5,00,000 to RS.10,00,000


     Above RS.10,00,000


    • Tax slab for resident super senior citizen (80 years or more)

     Taxable Income

     Tax Rate

     Up to RS.5,00,000


     RS.5,00,000 to RS.10,00,000


     Above RS.10,00,000


    • Partnership firm

    A partnership firm including LLPs is taxable at 30%. The amount of income tax will increase by a surcharge at the rate of 12% for income exceeding RS.1Cr. The amount of income tax and applicable surcharge shall further increase by Health & Education Cess calculated at the rate of 4% of such income tax and surcharge.

    • Local Authority

    Local Authority is taxable at 30%. The amount of income tax will increase by a surcharge at the rate of 12% for income exceeding RS.1Cr. The amount of income tax and applicable surcharge shall further increase by Health & Education Cess calculated at the rate of 4% of such income tax and surcharge.

    • Domestic Company

 Domestic Company

 AY 2019-20

 Where its total turnover or gross receipt during the previous year 2016-17 does not exceed Rs.250Cr


 Where its total turnover or gross receipt during the previous year 2017-18 does not exceed Rs.400Cr


 Where it opted for Section 115BA


 Where it opted for Section 115BAA


 Where it opted for Section 115BAB


 Any other domestic company


Additionally, the amount of income tax shall be subjected to Surcharge and Health & Education Cess.

  • Foreign company

 Nature of Income

 Tax Rate

 Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government


 Any other income


Additionally, the amount of income tax shall be subjected to Surcharge and Health & Education Cess.

  • Co-operative society

 Taxable Income

 Tax Rate

 Up to RS.10,000


 RS.10,000 to RS.20,000


 Above RS.20,000


Additionally, the amount of income tax shall be subjected to Surcharge and Health & Education Cess.

How to calculate Income Tax?

Calculating Income Tax depends on a number of factors as mentioned below:

     • The tax slab under which the taxpayer falls
     • Salaried or non-salaried
     • If you are a salaried taxpayer, what are the allowances that make you tax-exempted?

For a variety of taxpayers, there are tax exemptions and tax deductions based on the nature of their income. The calculation of Income Tax varies for salaried person and unsalaried person. The main steps involved for a salaried person to calculate the Income Tax are:

     1. Calculation of taxable HRA
     2. Calculation of taxable income from salary
     3. Calculation of total deductions
     4. Calculation of gross income that is taxable
     5. Calculation of income tax liability

Income Tax rule is one legislative rule that applies to a large proportion of the Indian population. Anyone with an income is liable to pay the government a tax. This tax paid to the government is employed for the benefit of the citizens in the form of amenities and other planning. Income Tax is one of the strong pillars of the Indian legislature.

Other Blogs

Seven Major changes in Income Tax Rules, in effect from September 1, 2019.

Government has introduced 7 new changes in the Incone Tax Laws that has come into effect from September 1, 2019


SoP for Filing Kerala Flood Cess Return and payment

For filing return and payment of Kerala Flood Cess, every taxpayer has to register into the Kerala Flood Cess Portal available on the website of Kerala State Goods and Services Tax Department.


Thirty seventh GST Council Meeting - Key Highlights

The 37th GST council has been held in Panaji on September 20, 2019.The meeting wrapped up with several decisions ranging from relaxations in annual return filing, rate revisions, deferment of new GST


State Government to Levy Kerala Flood Cess

Kerala is still in the path of repossession after the trauma it got from the floods last year.


How to Calculate Kerala Flood Cess ?

The government of Kerala has been given the green flag for levying 1% Kerala Flood Cess on goods and services.


Highlights of Union Budget 2019

Check out the highligts of India Union Budget 2019 presented by Finance Minister Nirmala Sitharaman


Central Government issues yet another amendment on Kerala Flood Cess

The latest amendment that is merged in Kerala Flood Cess is described below.


What is GST?

The Goods and Service Tax (GST) is an indirect/consumption tax levied on the supply of goods. Currently, GST is divided into 5 tax slabs for collection of tax- 0%, 5%, 12%, 18% and 28%.The Goods & Service Tax came into effect on July 1, 2017 as per the 101st Amendment of the Constitution of India by the Indian Government.


GST to Hire E-invoicing

E-invoicing is simply a form of electronic billing and it allows easy monitoring of transaction documents.


GSTN Releases the New Return Prototype

GSTN has come up with a web-based prototype which is an interactive demo version of the "Offline Tools Of New Return"


GSTR 9 : Annual Return Filing, Eligibility, Format & Rules

Last date to file GSTR-9 is 30 November 2019.GSTR-9 is an annual return to be filed once in a year by the registered taxpayers under GST.


E-invoices replace GST Invoices: E-Invoicing Benefits, Implementation and How does it works?

E-invoicing is the electronic format of an already generated standard invoice. It facilitates the automation of multi-purpose reporting through one-time input of invoice details.


Home Loan Benefits - Income Tax Deductions and Tax exemption on Housing Loan.

Details about the Tax benefit on Housing loan,Tax rebate on Home loan, Home loan interest deduction. Know more about Income tax exemption and home loan income tax benefit.


What is Input Tax Credit under GST - How to Claim and Calculate it?

Input Tax Credit(ITC) reduces taxes paid on inputs from taxes that are to be paid on output. Input Credit Mechanism is available to you when you are covered under the GST Act.


New Simplified GST Return Forms - Sahaj & Sugam

Sahaj & Sugam new GST Return Forms where announced by GST Council to ease the filing for registered GST taxpayers.


Working of E-Invoicing under GST

E-invoicing, new GST invoicing format is starting from 1st January 2020 on voluntary basis.In this system GST network will generate a unique invoice number, also called unique Invoice Reference Number


What if You DON'T file your Returns by December 31, 2019?

The final date for Income Tax Return filing is December 31, 2019. Every person whose total income in the FY 2019 exceeds Rs.2.5lakh are liable to file ITR.


Key Highlights of 38th GST Council Meeting - 28% Tax on Lotteries- GSTR 9 & 9C Deadlines Extended.

Highlights of GST Council Meet - due date for GSTR-9 and GSTR-9C for the FY 2017-18 has been extended and 28% Tax on all lotteries. Find more updates from the 38th GST Council Meeting.


What is Pre-budget Memorandum?

What is Pre-budget Memorandum? Who created Pre-budget Memorandum? Major suggestions in 2020 Pre-budget Memorandum.


GST Revenue Collection

The GST collection has crossed 1 Lakh Cr for the second consecutive month. This indicates that the consumption has boosted despite all the initial chaos about GST.


What is Reverse Charge Mechanism?

Reverse Charge Mechanism(RCM) in GST means that the receiver of the goods or services is liable to pay the tax and not the supplier.


What is the income tax slab for FY 2020 - 21?

Find out the new Income Tax slab tax rates in India for FY 2020-21


Employee State Insurance (ESI) - Here is what you should know...

This article familiarizes you about Employee State Insurance (ESI) Scheme and its eligibility, applicability and benefits for employees.


Everything about GST Composition Scheme

Is GST Composition Scheme beneficial? Have a look on GST Composition Scheme in detail with its benefits, conditions, tax rates etc.


39th GST Council Meeting

The 39th GST Council Meeting has been held on March 14, 2020 at New Delhi. Here's all you need to know.


IGST: What to Know & Its Overview

GST has many tax subsets alongside rules and sections to follow. What IGST is and what are the associated elements of it are illustrated here...


ITR filing deadline for FY19 extended till 30 June 2020

Income Tax & GST Return Extended till June 30 owing to COVID-19 Outbreak!


Corona Virus: Rs 1.7 lakh cr economic relief package announced by Finance Minister Nirmala Sitharaman

FM Sitharaman is announcing the most-awaited economic relief package amid the Covid-19 pandemic.


Online Income Tax Challans

Income Tax Payment with Online Challans. Find about how to pay advance tax, self assessment tax online.


A Complete Guide On Job Work Under GST India

The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the goods after processing from the job-worker without the payment of GST.


What is GST Return?

Complete guide about GST Returns - The different types of GST returns, who should file these returns and when to file GST returns. Read now


What is RBI Moratorium?

The moratorium means that the borrowers would not have to pay the loan EMI installments during the moratorium period. Read to know more about the facts of RBI's moratorium.


Highlights of 40th GST Council Meet

Highlights of 40th GST Council Meeting dated 12th June 2020.


What is GST Demand & Recovery?

As per the provisions of recovery of tax in GST, if the amount payable by a taxable person, remains unpaid, even after 3 months from the date of issuing the order for demand of tax, then the recovery of tax under GST will be initiated.


GST Return due dates

GST return due dates and interest related queries have been extended and solved respectively through the various circulars and notifications published by the government.


Types of GST

The GST types are determined based on the province in which the goods and/or services are exchanged and transactions made. The types of GST include: • Central Goods & Services Tax (CGST) • State Goods & Services Tax (SGST) • Union Territory GST (UTGST) • Integrated GST (ITGST)


What is GST Framework?

GST framework is a design made by the India Government that would eliminate most of the indirect taxes like VAT, customs duty, excise duty, CST, service tax, entertainment tax, and bring it all under a single tax structure called GST.


GST Classification

GST classification is the diverse broad categories into which goods and services are categorized, taking into consideration certain specific set of factors.


GST Registration

GST Registration is that part of the GST regime in which every business with turnover of Rs.40 Lakhs should register as a normal tax payer. The threshold turnover limit for GST registration for NE and hill states is Rs.10 lakh.