Do you know the
difference between financial year and assessment year? Or gross total
income and total income? There are many such
tax
related terms like these that are not easily understood by lay taxpayers. While filing your
income tax return
(ITR) when you come across such confusing terms, it can put you in a
fix and you might end up making a mistake that can cost you dearly. Here
are five such pairs of
ITR
terms explained.
Financial year vs Assessment year
Financial year
:
For tax purposes, financial year (FY) is the year in which you earn
your income and also pay your taxes on this earned income. A financial
year starts on 1 April and ends on 31 March. So, if you have worked and
earned income in 2017-18, it will be considered the financial year.
Assessment year
:
On the other hand, assessment year (AY) is the year following the
financial year, in which your income is assessed. This also lasts from 1
April to 31 March and is the year in which you file your
income tax
returns for the taxes paid in the relevant financial year. In the above
example, if 2017-18 is the financial year, 2018-19 will be regarded as
assessment year.
Advance tax vs Self-assessment tax
Advance tax
:
If you are a salaried taxpayer with other sources of income, like
interest income, and your tax liability for the financial year exceeds
Rs 10,000 after accounting for the tax deducted by employer (TDS), you
will have to pay advance tax. This has to be paid in the financial year
preceding the assessment year in three instalments. The due dates are 15
September, 15 December and 15 March, and the penalty for not paying is
1% of the due amount per month.
Self-assessment tax
:
While calculating your tax liability, if you realise that some tax is
due after taking into account the TDS and advance tax, then you pay
self-assessment tax. This tax is paid in the assessment year before
filing the returns. You need to fill a tax challan, ITNS 280, and can do
it at specified bank branches or online.
Tax deducted at source vs Total tax
Tax deducted at source
:
This is the tax that is deducted from your income at the source of that
particular income, be it by your employer on salary, or by the bank on
deposits. The rate of deduction may vary for different sources and types
of incomes. The TDS, however, may not be the total tax that you are
liable to pay since you may have other sources of income which invite a
higher tax.
Total tax
:
This is the total tax that you pay on your entire income received from
all sources and could be more than the tax deducted at source by your
employer or other income sources. This means that TDS will not take care
of your entire tax liability and you will have to pay this additional
tax as self-assessment or advance tax before filing the returns.
Gross total income vs Total income
For salaried
individuals, Form 16 lists the total salary received and the taxable
income arrived at after relevant exemptions and deductions.
Gross total income
:
This is a total of all forms of incomes, including income from salary,
property, business or profession, profits or gains, and other sources
like interest, etc. From salary, the exempt allowances under Section 10,
such as conveyance, LTA, and HRA, are deducted, and other incomes
added, to arrive at the gross total income.
Total income
:
This is the income arrived at after deductions under Chapter VI-A,
which includes Sections from 80C to 80U. The final figure arrived at is
subject to tax. This is also known as the total taxable income.
5 confusing pairs of income tax terms
Assinar:
Postar comentários (Atom)
Nenhum comentário:
Postar um comentário