HEADS OF INCOME
Classification of income under different heads
- SALARIES
- INCOME FROM HOUSE PROPERTY
- PROFITS AND GAINS OF BUSINESS OR PROFESSION
- CAPITAL GAINS
- INCOME FROM OTHER SOURCES
Application of the rates of tax on the total income
The rates of tax for the different classes of assesses are prescribed by the Annual Finance Act.
For individuals, HUFs etc., there is a slab rate and basic exemption limit.
At present, the basic exemption limit is ` 2,50,000 for individuals. This means that no tax is payable by individuals with total income of up to ` 2,50,000. Those individuals whose total income is more than ` 2,50,000 butless than ` 5,00,000 have to pay tax on their total income in excess of ` 2,50,000 @ 10% and so on. The highest rate is 30%, which is attracted in respect of income in excess of ` 10,00,000.
For firms and companies, a flat rate of tax is prescribed. At present, the rate is 30% on the whole of their total income.
The tax rates have to be applied on the total income to arrive at the income-tax liability.
Surcharge : Surcharge is an additional tax payable over and above the income-tax.
Surcharge is levied as a percentage of income-tax. Surcharge is applicable only in the case of companies. The rate of surcharge for domestic companies is 5% and for foreign companies is 2%,if their total income exceeds ` 1 crore.
Education cess and secondary and higher education cess on income-tax: The
income-tax, as increased by the surcharge, if applicable, is to be further increased by an additional surcharge called education cess@2%.
The education cess on income-tax is for the purpose of providing universalized quality basic education. This is payable by all assesses who are liable to pay income-tax irrespective of their level of total income.
Further, “secondary and higher education
cess on income-tax” @1% of income-tax plus surcharge, if applicable, is leviable to fulfill the commitment of the Government to provide and finance secondary and higher education.
Surcharge : Surcharge is an additional tax payable over and above the income-tax.
Surcharge is levied as a percentage of income-tax. Surcharge is applicable only in the case of companies. The rate of surcharge for domestic companies is 5% and for foreign companies is 2%,if their total income exceeds ` 1 crore.
Education cess and secondary and higher education cess on income-tax: The
income-tax, as increased by the surcharge, if applicable, is to be further increased by an additional surcharge called education cess@2%.
The education cess on income-tax is for the purpose of providing universalized quality basic education. This is payable by all assesses who are liable to pay income-tax irrespective of their level of total income.
Further, “secondary and higher education
cess on income-tax” @1% of income-tax plus surcharge, if applicable, is leviable to fulfill the commitment of the Government to provide and finance secondary and higher education.
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