While those running a business or into a profession get their taxes sorted and return filed through outsourcing or in-house accountants, the salaried employees are often found caught in the middle of this whole situation. The return filing season is here again and yet again you, a salaried employee, have no clue what to do and what not to do. So, let’s change that.
Know your Salary
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First of all, you have what we call a “Basic Salary”. The Basic Salary is the just that, the basis for every other component of your salary. For example, Your PF is deducted at 12% of your basic salary. Next, we have something called HRA- House Rent Allowance. The HRA is provided by the company as a percentage of the Basic Salary. The good news is that the HRA can be partially or fully exempt from taxes. Similarly, your Leave Travel Allowance can also be exempt from taxes up to the actual expenses. Next is Bonus which is fully taxable along with the Basic Salary. Then, there is Employee Contribution to Provident Fund (PF), a social security initiative by the Government of India. As mentioned earlier, Your PF is deducted at 12% of your basic salary. You will also find a professional tax being deducted from your salary. The PT is a tax levied by a state up to the amount of Rs.2,500. Finally, there is a standard deduction to the amount of Rs.50,000 from your total income. THAT’S YOUR SALARY!
Not to forget, you pay your taxes every month in the form of TDS. TDS is tax deducted at source. Your employer deducts a portion of your salary every month and pays it to the Income Tax Department. This will reflect on your return in form 16.
Know Your Income
You Salary may or may not be your total income. For the purpose of Income Tax Return Filing, you must calculate your total income. Your gross total income includes Income from Salary + Income from house property + Income from other sources + Income from capital gains + Income/loss from business and profession.
Know Your Taxes
Now that you know your gross total income, it is time to calculate the taxes. But before applying the tax rate, you must take the deductions like section 80 into consideration. You have to pay tax on the amount after such deductions. Tax Slabs? Here we go-
Income Tax Rates for taxpayers under 60 years of age in FY 2018-19, FY 2017-18 and FY 2016-17.
| Tax Slab | FY 2018-19 FY 2017-18 Tax Rate | Tax Slab | FY 2016-17 Tax Rate |
|---|---|---|---|
| Up to Rs 2,50,000 | No tax | Up to Rs 2,50,000 | No tax |
| Rs 2,50,000 – Rs 5,00,000 | 5% | Rs 2,50,000 – Rs 5,00,000 | 10% |
| Rs 5,00,000 – Rs 10,00,000 | 20% | Rs 5,00,000 – Rs 10,00,000 | 20% |
| Rs 10,00,000 and beyond | 30% | Rs 10,00,000 and beyond | 30% |
In addition to the tax rate, you are also supposed to pay Health and education cess (4%) and Higher education and secondary cess (3%). This is calculated on the sum of total income tax and surcharge.
That’s all? Yes that’s all! Now that wasn’t too difficult, was it? Happy Return Filing! Oh, and the last date is July 31, DO NOT FORGET!
