Direct Tax in India

Income tax is a direct tax collected by the Central Government and is levied on all income other than agricultural income on a person liable to pay such tax. The income tax on agricultural income is a state matter and only state governments can tax a person on agricultural income.

The Income Tax Act, 1961, is the law governing tax on income of an assessee (person who is liable to pay tax). This legislation comprehensively defines different assessees, the rate of tax applicable to each one, and other requirements.

In terms of income tax law, a person liable to pay tax includes the common citizen, an association of people, companies (domestic and foreign companies), firms, and LLPs.

The income of people and companies is computed under different heads and different types of deductions under the income tax law are applicable to different entities.

The heads of income envisaged under income tax law are:

1. Income from salary

2. Income from house property

3. Income from business and profession

4. Income from capital gain

5. Income from other sources

Tax rates for the assessment year 2017-18 Income Tax - Slab for Individual Tax Payers & HUF

Income SlabTax Rate

Income up to Rs 2,50,000* : No tax

Income from Rs 2,50,000 €“- Rs 5,00,000 : 5%

Income from Rs 5,00,000 €“ 10,00,000 : 20%

Income more than Rs 10,00,000 : 30%

Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore. Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.