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Want to educate yourself on income tax? Here are 9 basic facts to begin with

Here’s a quick look at 9 basic facts that can help you understand many essential things about income tax for individual taxpayer.

    • For individual taxpayers, the term financial year generally refers to the 12-month period beginning on April 1st and ending on March 31st. The financial year that we’re in at present is 2019-2020.
    • Assessment year is the 12-month period that follows the financial year. The income you earn in the financial year is evaluated in the relevant assessment year. The assessment year for the current financial year is 2020-2021.
  • There are five heads of income that are taxed under the Income Tax Act. They include
    • Salaried income
    • Income from house property
    • Profits and gains from business or profession,
    • Long-term and short-term capital gains
    • Income from other sources.
  • For the financial year ending on 31st March 2020, total income below ₹ 2,50,000 is exempted. This is known as the basic exemption limit. For senior citizens above 60 years (but below 80 years) of age, the exemption limit is ₹ 3,00,000, and for senior citizens aged 80 and above, it is ₹ 5,00,000.
  • If you’ve invested in specified instruments or products, you can claim deductions from your total taxable income. These deductions are mentioned in chapter VI-A of the Income Tax Act. Total of investments under section 80C, 80CCC, and 80CCD can be claimed as deductions up to ₹ 1,50,000. Investments like Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Employees Provident Fund (EPF), and National Savings Certificate (NSC) fall under these sections.
  • You can also claim deductions for your health insurance premium, medical expenditures, and preventive health checkups under sections 80D, 80DD, and 80DDB respectively. Health insurance premium paid for self, spouse, dependent children, and parents aged below 60 is allowed up to ₹ 25,000. Premium paid for parents aged above 60 years can be claimed up to ₹ 50,000.
  • For individuals, the due date for filing income tax returns for a particular financial year falls on July 31st of the corresponding assessment year. Sometimes, the government extends the due date for filing these returns.
  • Late filing of income tax return could make you suffer a penalty, depending on your income and on when you file the return. If you file your return after the due date but before December 31st, you incur a penalty of ₹ 5,000. After December 31st, the penalty goes up to ₹ 10,000. As a relief measure for small taxpayers, the penalty in either case will be limited to a maximum of ₹ 1,000 if the income doesn’t exceed ₹ 5,00,000.
  • If, in any financial year, your tax liability is less than the TDS or advance tax paid, you can claim a refund for the excess tax amount when you file your income tax returns.
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