By Tax Advisory Team March 15, 2024
Introduction Navigating the Indian tax structure is crucial for financial planning and regulatory compliance for both individuals and businesses. The system is broadly divided into Direct Taxes, like Income Tax, and Indirect Taxes, primarily the Goods and Services Tax (GST). This guide provides a clear overview of these key concepts to help you stay informed and compliant.
Direct Taxes: Income Tax and TDS What is Income Tax? Income Tax is a direct tax levied by the Central Government on the income earned by individuals, Hindu Undivided Families (HUFs), companies, and other entities in a financial year (April 1 to March 31).
Income Tax Slabs (FY 2023-24 / AY 2024-25) Tax rates for Individuals and HUFs under the old and new tax regimes are as follows:
New Tax Regime (Default)
Income Range (₹) Tax Rate Up to 3,00,000 Nil 3,00,001 to 6,00,000 5% 6,00,001 to 9,00,000 10% 9,00,001 to 12,00,000 15% 12,00,001 to 15,00,000 20% Above 15,00,000 30% Note: The new regime offers lower rates but with significantly fewer exemptions and deductions.
Tax Deducted at Source (TDS) TDS is a mechanism where a person (deductor) making a specified payment (like salary, interest, professional fees) is required to deduct tax at source before making the full payment to the receiver (deductee). The deductee then gets credit for the TDS amount against their final tax liability.
Common TDS Rates for Individuals:
Section Nature of Payment TDS Rate 192 Salary As per income slab 194 Dividend 10% 194A Interest by Bank 10% 194C Payment to Contractor 1% (Ind)/2% (Firm) 194J Professional/Technical Fees 10% 194I Rent 2% (Machinery)/10% (Land) Income Tax Return (ITR) Filing an Income Tax Return (ITR) is a mandatory statement of your income and taxes filed with the Income Tax Department. The due date for individuals is typically July 31st of the assessment year.
Indirect Taxes: The Goods and Services Tax (GST) What is GST? The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax levied on every value addition. It has subsumed multiple central and state taxes like VAT, Service Tax, and Excise Duty.
GST Tax Slabs Goods and services are categorized under different tax slabs:
GST Slab Category of Goods/Services 0% Essential items like fresh food grains, milk, eggs. 5% Common household items like spices, tea, coal. 12% Processed foods, computers, mobile phones. 18% Most common slab for items like soap, toothpaste, capital goods. 28% Luxury and sin goods like automobiles, premium watches, aerated drinks. Input Tax Credit (ITC) This is a fundamental feature of GST. ITC allows businesses to claim credit for the tax already paid on their purchases (inputs) against the tax liability on their sales (output). This eliminates the “tax on tax” or cascading effect.
Example: A manufacturer pays ₹1,800 GST on raw materials. He then manufactures a product and charges ₹3,600 GST on the sale. His net GST liability to the government will be ₹3,600 (output) - ₹1,800 (ITC) = ₹1,800.
GST Returns Regular businesses registered under GST must file monthly and annual returns, detailing their outward supplies, inward supplies, and tax paid. Key returns include:
GSTR-1: Details of outward supplies.
GSTR-3B: A simplified summary return for paying tax.
GSTR-9: Annual return.
Key Compliance Dates (2024) Period Compliance Due Date March 2024 GSTR-1 & GSTR-3B April 11 & 20, 2024 FY 2023-24 ITR for Individuals July 31, 2024 April 2024 GSTR-1 & GSTR-3B May 11 & 20, 2024 Conclusion Understanding TDS rates, income tax slabs, GST provisions, and the mechanism of Input Tax Credit (ITC) is essential for making informed financial decisions and ensuring seamless compliance. The tax landscape can change with annual budgets, so it is always advisable to consult with a tax professional for advice tailored to your specific situation.
Disclaimer: This article is for informational purposes only and does not constitute tax advice. Please consult with a qualified chartered accountant or tax advisor for guidance on your specific tax matters.