Income tax in India is governed by the Income Tax Act, 1961, and is levied by the Central Government on individuals, companies, and other entities. The tax structure in India is progressive, which means the rate of tax increases with the level of income. In India, both residents and non-residents are subject to income tax, although the specifics of taxation depend on the type of taxpayer, the income earned, and their residential status.

Here’s an overview of the key aspects of income tax in India:

1. Income Tax Slabs for Individuals (FY 2024-25)

The income tax system for individuals is divided into two tax regimes:

• Old Regime: Offers various exemptions and deductions, like HRA, 80C, etc.
• New Regime: Does not offer exemptions or deductions but provides reduced tax rates.

A. Income Tax Slabs – Old Regime (with Deductions)

For individuals below 60 years of age:

• Rebate under Section 87A: If your total taxable income is below ₹5 lakh, you are eligible for a rebate of ₹12,500.
• Deductions: Under this regime, you can avail of various deductions such as:
  • Section 80C: Investments up to ₹1.5 lakh in instruments like PPF, EPF, Life Insurance Premium, etc.
  • Section 80D: Deduction for premiums on health insurance (up to ₹25,000, and ₹50,000 for senior citizens).
  • Section 24(b): Interest on home loan (up to ₹2 lakh).

B. Income Tax Slabs – New Regime (No Deductions)

In the New Regime, the following tax rates apply:

• No exemptions or deductions are allowed under this regime, except for the rebate under Section 87A (if applicable).
• This regime offers lower tax rates but does not allow you to claim any deductions, like those for 80C or 80D.

2. Taxation for Senior Citizens (Age 60 or Above)

Senior citizens are provided some tax relief in the Old Regime:

Senior citizens (aged 80 and above) also have higher exemptions for income up to ₹5 lakh.

3. Taxation for Corporates (Companies)

The tax rates for companies in India are as follows:

A. Domestic Companies

1. Small Companies (Turnover up to ₹400 crore in FY 2023-24):
   • Tax Rate: 25% (with no minimum alternate tax (MAT)).
2. Other Companies:
   • Tax Rate: 30%, but with the option to avail the New Regime tax rate of 22% (without any deductions or exemptions).

   For companies opting for the new regime:

   • The tax rate is 22% (plus applicable surcharge and cess), but they cannot claim deductions or exemptions like those for 80C, 10AA (SEZ), etc.
   • Minimum Alternate Tax (MAT) applies to companies that claim exemptions under the Income Tax Act. It is charged at 15% (plus surcharge and cess) on the book profits of the company.
3. Tax on dividend: Dividends are taxed in the hands of shareholders.

B. Foreign Companies

• Foreign companies are taxed at 40% (plus surcharge and cess), but the tax may be subject to bilateral treaties under Double Taxation Avoidance Agreements (DTAA).

4. Tax Deducted at Source (TDS)

• TDS is a mechanism where tax is deducted at the source of income (before it reaches the individual).
• Common income sources subject to TDS include:
  • Salary: Tax deducted by the employer.
  • Interest on Savings Account: Tax deducted by banks if it exceeds ₹10,000 per annum.
  • Rent Payments: Tax deducted by the payer if rent exceeds ₹2.4 lakh per year.
  • Professional Fees: Tax deducted on professional fees if the payment exceeds ₹30,000.

TDS Rates vary depending on the nature of income and the status of the taxpayer (e.g., senior citizen, non-resident). You can view the applicable TDS rates on the official government website.

5. Capital Gains Tax

Capital gains tax is levied on the profits from the sale of capital assets (like property, stocks, mutual funds, etc.).

A. Short-Term Capital Gains (STCG)

• For equity shares and mutual funds: Taxed at 15% if sold within 1 year.
• For other assets (real estate, etc.): Taxed at 15% if held for less than 3 years.

B. Long-Term Capital Gains (LTCG)

• For equity shares and mutual funds: Taxed at 10% on gains above ₹1 lakh in a financial year, if held for more than 1 year.
• For real estate: Taxed at 20% (after indexation) if held for more than 2 years.

Indexation:

• The benefit of indexation applies to long-term capital gains on assets like real estate. It adjusts the purchase price of the asset based on inflation, reducing the taxable capital gain.

6. Other Important Taxes

A. Goods and Services Tax (GST)

• GST is a consumption-based tax levied on the sale of goods and services in India. GST is applicable to businesses with an annual turnover above ₹20 lakh (₹10 lakh for special category states).
• GST is divided into four main categories:
  • 0%: Exempt goods and services.
  • 5%: For essential goods.
  • 12%, 18%, 28%: For various goods and services, including luxury items.

B. Dividend Tax

• Dividends paid by Indian companies are taxable in the hands of the recipient (shareholder) at a rate of 10% for residents and 20% (with a surcharge) for non-residents.

C. Other Taxes

• Wealth Tax: Abolished since 2015.
• Securities Transaction Tax (STT): Levied on transactions in securities (equity shares, mutual funds, etc.) traded on Indian stock exchanges.

7. Filing Income Tax Returns (ITR)

• Income tax returns (ITR) must be filed annually by individuals, companies, and other entities. The due date for filing returns is typically 31st July for individuals and 30th September for companies (or later if extended by the government).
• The returns must be filed online via the Income Tax Department’s e-filing portal.

ITR Forms:

• ITR-1: For salaried individuals with income from salary, interest, or pension.
• ITR-2: For individuals and Hindu Undivided Families (HUFs) with income from multiple sources.
• ITR-3: For individuals or HUFs with income from business or profession.
• ITR-5: For LLPs, firms, and other business entities.
• ITR-6: For companies.
• ITR-7: For trusts, political parties, etc.