Income tax regime

Income tax regime

Subject: Economy

Context:

Budget may tweak the new I-T regime-bring new ITR form.

Details:

The Budget is also likely to lay the roadmap for a common Income Tax Return Form.

Concept

• FY21 Budget laid a new personal income tax regime wherein income tax rates will be significantly reduced for individual taxpayers who forgo certain deductions and exemptions. 
• It gave taxpayers the option to choose between the old regime and the new tax regime.
• A similar tax regime for corporate taxpayers was introduced in September 2019 by significantly lowering rates and removing exemptions.
  • It reduced the base corporate tax for existing companies to 22 percent from 30 per cent
  • new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2024, to 15 per cent from 25 per cent.
  • Companies opting for these new tax rates will have to forego all exemptions and incentives.
• Old Tax regime– is a tax regime with various deductions and exemptions.
• Concessional (new) Tax Regime-It requires the taxpayer to forego certain specified deductions.
  • These include standard deduction of Rs 50,000, deduction under section 80C of Rs 1.50 lakh and interest on self-occupied property of Rs 2 lakh, deductions which are availed by most taxpayers.

Resent IT returns;

• Income Tax Return (ITR) is a form which a person is supposed to submit to the Income Tax Department of India.
• It contains information about the person’s income and the taxes to be paid on it during the year.
• Information filed in ITR should pertain to a particular financial year, i.e. starting on 1st April and ending on 31st March of the next year.
• The Income Tax Department has prescribed 7 types of ITR forms – ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and the applicability of the form will depend on the nature and amount of income and the type of taxpayer. ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) are simpler forms, for small and medium taxpayers.
  • ITR-1 SAHAJ-For individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand
  • ITR-2 is filed by people with income from residential property i.e. For Individuals and HUFs not having income from profits and gains of business or profession
  • ITR-3 For individuals and HUFs having income from profits and gains of business or profession
  • ITR-4 Sugam–For Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession
  • ITR-5-by Limited Liability Partnerships i.e. for persons other than- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7
  • ITR-6–by the businesses
  • ITR-7 is filed by trusts.