GST Compliance checklist for Small Enterprises

Income tax is one of the direct taxes that is levied on individuals based on their total income. This income is categorized across different categories based on the nature or source of the income. Individuals usually file separate returns and pay or claim taxes due or refunds. Hindu Undivided families can file a joint single return of all family members, which is the other exception to income taxes.

What are the key categories of income?

Income from salary

The income can be consistent like salary, pension (generated due to employment), commissions or incentives. These are usually recurring payments and not one-time income. This type of income is broadly classified as ‘Income from Salary’. There is minimum effort for IT complaince for people having income only under this particular category.

Income from Capital Gains

This section deals with income generated through the sale of an asset. Could be home, could be stocks, could be jewelry, could be mutual funds, or any other major movable or immovable asset.

Tax slabs and its Exceptions

The biggest aspect of income tax complaince is tax slabs and its exceptions. Every year during the budget most people look forward to the revision of tax slabs for relief or reduced tax liability. The tax slabs vary for senior citizens and are dynamic by nature. It is not necessary to know tax slabs or its exceptions for income tax e-filing as the software or form automatically calculates the taxes based on slabs, however for smart tax planning having knowledge of tax slabs and exceptions can be really helpful.

Exceptions may include with respect to capital gain transactions arising from house property, mutual funds, shares, fixed maturity funds, etc. The rate may be categorized differently based on the type of transaction short term or long term. Irrespective of the slabs, usually for long terms, beyond the basic exemption of say 2.5 Lacs (dynamic with tax law changes), the rate may be capped to 20% (estimate, may vary from actual) for such long-term gains reported on the return.

Deductions and Exemptions

Apart from exceptions and tax slabs, there are several deductions and exemptions under several sections of the Income Tax Act that can further minimize tax liability. In order to know about the eligible deductions and exemptions or to make investments to exercise those benefits, the use of professional income tax compliance service providers can be the best option. They may also provide for income tax fillings and help you manage your tax liability and refunds.