Taxation in India: Personal Taxation and Planning

1. Basic Tax Structure in India

A. Types of Taxes

1. Direct Taxes – Paid directly by individuals to government
   • Income Tax (IT)
   • Corporate Tax
2. Indirect Taxes – Collected by intermediaries
   • GST
   • Customs Duty

B. Personal Income Tax

• Applies to individuals, HUFs, and certain others
• Based on total income from various sources

C. Income Heads for Individuals

1. Salary Income – Salary, bonus, allowances
2. Income from House Property – Rent income, property taxes
3. Profits and Gains of Business/Profession
4. Capital Gains – Sale of assets
5. Income from Other Sources – Interest, dividends, lottery

2. Exemptions and Deductions for Individuals

A. Exemptions

• Certain allowances and income are fully or partially exempt under the Income Tax Act
  Examples:
• House Rent Allowance (HRA)
• Leave Travel Allowance (LTA)
• Agricultural income (fully exempt)

B. Deductions

• Reduce taxable income under Section 80
  Popular deductions:
• Section 80C – Investments in PPF, EPF, Life Insurance, ELSS (₹1,50,000 max)
• Section 80D – Medical insurance premiums
• Section 80E – Education loan interest
• Section 24(b) – Home loan interest for property

3. Computation of Income Tax

Steps:

1. Calculate Gross Total Income from all sources
2. Apply Exemptions (HRA, LTA, etc.)
3. Apply Deductions under Sections 80C, 80D, etc.
4. Arrive at Taxable Income
5. Apply Income Tax Slabs
6. Deduct Rebate (if applicable) and compute final tax liability

4. Submission of Income Tax Returns (ITR)

Meaning

An Income Tax Return (ITR) is a form used by taxpayers to report their income, deductions, and tax liability to the government.

Process

1. Collect income and deduction details
2. Choose the correct ITR form (ITR-1 to ITR-7)
3. Fill details online/offline
4. Verify and submit (digital signature or Aadhaar OTP)
5. Keep acknowledgment (ITR-V) for records

Modes of Filing

• E-filing – Online submission through Income Tax e-Filing portal
• Offline filing – Submission of ITR physically (less common)

5. Advance Tax and Tax Deducted at Source (TDS)

A. Advance Tax

• Tax paid in installments during the financial year instead of lump sum
• Applicable if tax liability exceeds ₹10,000
• Installments:
  • 15% by 15 June
  • 45% by 15 September
  • 75% by 15 December
  • 100% by 15 March

B. Tax Deducted at Source (TDS)

• Tax collected at the source of income by the payer
• Examples: Salary (employer deducts), Bank interest (bank deducts)
• Helps prevent tax evasion
• TDS can be claimed as advance payment while filing ITR

6. Learning Outcome (LO)

After studying this module, students will be able to:

• Understand personal taxation structure in India
• Identify exemptions and deductions for individuals
• Compute income tax accurately
• File ITR online/offline
• Understand advance tax and TDS mechanisms

Conclusion

Understanding personal taxation is essential for financial planning, compliance, and maximizing savings. Awareness of exemptions, deductions, advance tax, and TDS enables individuals to reduce tax liability legally, ensure timely submission of ITR, and contribute to national development.

📌 UG Exam Writing Tips

• Start with definitions of tax and personal taxation
• Include income heads, exemptions, and deductions
• Explain computation with examples
• Mention e-filing process
• End with the significance of tax planning

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✔️ MCQs with answers
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✔️ Hindi / Odia medium version

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