Monday, March 7, 2011

Tax Shax for Dummies

‘Sir aapko tax bharne ko aayega’- As good as 90% of the people at the receiving end of this comment would remove a large white hanky and wipe their forehead- (and might I tell u we have a well ventilated office so make no reservations)……Then the next thing they want to know is the extent of damage ‘Kitna madam?’…….Irrespective of what the amount is, the reaction is a huuuuge sigh accompanied with ‘Thoda kam kar do na’….Gives the impression almost as if we are in a sabzi mandi selling pyaaz and aalloo…. looting our customers by charging a whole extra rupee in this hard time of ‘recession’.

Just about everyone unrelated to this subject I’ve come across, is almost wary of the tax ka topic……BORING ….that’s what the grey cells tell them….but fact remains….it’s important to know about it….at least if u intend to get rich someday in your own country and don’t want to be swindled by an XYZ…..You see all good things, in India at least, come with a ‘taxes apply’ wala tag.

So what follows forth are the basic elements of our tax system.
But before that I’d like you to know that these are laws pertaining to income earned between 1st April 2010 to 31st March 2011 alone! – underline underline!!!

WHAT is Income Tax
You earn an income and you pay tax on it. That’s income tax- Simple as that! And because it’s almost too easy for you, here’s the different categories based on which income is classified-:

Ø Salary- You work for your boss, he gives you a paycheck at the end of the month. That’s income from Salary.

Ø Property- You buy property for yourself or your dad buys it registering it in your name. You then find an attractive person to rent it to.
That rent = Income from Property.

Ø Profession- In case the work you do, gets you money that is termed as ‘fees’, then that makes you a professional and your hard earned money gets taxed under this head

Ø Capital Gains- The profit you make on purchase and sale of shares or real estate finds its way to the noose in this category.

Ø Other Sources- All the money you earn can’t really be kept in the house…..under your bed…can’t trust aajkal ke domestic helpers….so the next best option is to put it all in a Bank in a Savings Account. This account pays you interest for keeping your money with them…and the interest you receive forms ……Income from Other Sources.
(Note- If you are a Muslim, it is not permissible to earn income by way of interest, so you might consider putting your money in a Current Account….where you have Security + No Interest + Overdraft facility).


WHY do you have to pay Income Tax
The money collected from income tax goes on to fund Government activities such as electricity on roads, public security, making newer flyovers etc………… an unfair share also goes into miscellaneous people’s private pockets….but then kya kare……no system is perfect.
The question arising from this is, What if we do not pay Income Tax?

Once on the NDTV show, We the people, hosted by Barkha Dutt…… a discussion about the terrorist attack in Mumbai was being held and the gist of what they said was on these lines-
The Government is ineffective, so let’s not cooperate with it, Let’s all not pay taxes…..zyada se zyada we won’t have electricity in the house…and they can’t possibly put so many people in Jail……………
Unfortunately, that’s an incorrect and misleading statement. The consequence of non-payment of tax is prosecution. In other words, you go on a trial…stand in the adaalat ka kadgharaa and have the judge saab tell you to pay the money in addition to a penalty *over 100% of the tax evaded*, and if you don’t do that…..thennnn ho jaayegi ghar ki neelami (you know what that is right?....picturein to dekhte hi honge)


WHO is supposed to pay Income Tax
Any person who earns an annual income of over Rs.1,60,000/- in case of a guy and Rs.1,90,000/- for a girl, needs to pay Income Tax. (Feminist in me says…Huhh!!!)
The amount you pay as tax depends on the slab rates that are released in the Budget of the previous year. In depth info on that can be referred to from the former Budget post.


WHEN do you have to pay Income Tax
The last date of payment of Income Tax is 31st July 2011. And in case you are really rich……( that is…..annual sales exceeding Rs.60,00,000/- or annual fee receipts exceeding Rs.15,00,000/-), then the last date of tax payment is 30th September 2011. Isse late kiya to one lakh rupees ka fine lagega boss.


WHERE do you pay Income Tax
At the Income tax Office aur kaha! There’s also the option of e-filing but my suggestion is, avoid, avoid, avoid!!!! And I say this because the form that needs to be filled is extremely confusing, super pakaao and also needs to be signed digitally……..which means an additional expenditure….wo bhi for your own signature! Also, it needs to be renewed every 2 years and there’s nothing fancy about it…..looks just like a barcode!!!

That, I think is about the basic stuff you need to know. In the unlikely event of you wanting to get any further information, you could look up the Government website. That’s- http://www.incometaxindia.gov.in/
And still better option, main to hoo hi…..consultation charges starting from Rupees One Thousand Only!


P.S. - Last date for payment of Advance Tax- 15th March 2011.
Buck up!

14 comments:

IRFANUDDIN said...

Don't you think that apart from Govt. Employees there are very few who pay their tax properly...


BTW this is the only time when i think... Kaash bhagvan mujhe bhi Rs.1,90,000/ wale privileged class mein rakhta...:P

Jokes apart.. being a Tax expert don't you think that this figure of Rs.1,60,000/ or Rs.1,90,000/ should have been little bigger.

cloud nine said...

hehehe....NRIs saved from tax:P

Talha said...

Hmm i get income tax deducted from my pay so no worries :)

Asma said...

Income tax is necessary evil from the government

coolkamikazecat said...

I will be paying taxes from this year.....finally....hmph - and yay!

Sadiya Merchant said...

@ irfanuddin- lol. govt employees pay their taxes correctly???? given the state of under d table dealings, i seriously doubt dat!
also, d tax formalities r such dat it is absolutely impossibl fr even an honest guy to be able to come out one hundred precent clean. der is always a compromise sumwhr.
aap dhairya rakho, aapki bhi application Allah consider karenge :)
n abt d treshold limit, wel all i can say is it was n cud hav bn wrse!

@ cloudnine- hmm. hate to play spoiler bt if u earn income in india frm say an investment in real estate, u stil get caught in d mess :)
dats a lot of conditions apply btw

@ talha- tax deducted at source n tax filing is not the same. if dey file ur tax return too, invest fr u in places whr deductions apply den one wrd- grt! :)

@ asma- true. jus hope d administrators were honest

@ kamikaze- hieee! hehe congratulations and aww m sorry :P

A Great Liar said...

Taxes never made much sense to me, least of all, the income tax.

I mean, here is the thing, I work hard to earn a buck, and pay tax on it, and when I buy a property from that buck minus the tax I have paid, I pay another tax called the property tax, and it simply doesnt stop here. Everything I buy from that amount I have already paid tax for, i keep paying the tax.

Makes sense?

Or may be it is just me... :(

Sadiya Merchant said...

@ a great liar- reminds me of a quote
'The hardest thing in the world to understand is the income tax'- albert einstein...so don b too hard on urself :)

moving to your query, i will try my best to set things right fr u :)
bt before dat, i am talkin abt indian tax laws here, n im positive its d same in pakistan bt i dont wish to tk any guarantee fr it.

rite...here goes!
1- u earn salary, u pay income tax so no confusion dere

2- frm d salary, u buy a property bt property tax may i point out is a corporation tax n NOT INCOME TAX. also, it is fully deductible frm rental income at d time of payin income tax u/s.24

3- wen u say taxes fr all odr things, wid dat i assume u mean indirect tax or sales tax or VAT, which again can b allowed as full credit on any payables frm ur end.

*no im nt done so hoping u havnt dosed off alredy*

u pay taxes on a lot of pretexts i do not deny, howevr wen u question its sensibility dere's sum opposition u got dere cos frankly i HATE dis field more dan u can imagine bt as regards d text, d amount of thought behind it, n its lucidity goes....one wrd- respect!

if u stil feel my explanation inadequate, den feel free to get baq :)

Sidrah said...

hawwww.. me not likey =(

A Great Liar said...

@Sadiya Merchant: Thank you. And I absolutely got it. And u bet it is the same on this side of the fence, if not worse. Perhaps all that is missing is a presidential(zardari!) tax.

Sadiya Merchant said...

@ sidrah- hehe. yea its nt pretty...but sum1's gotta do it :)

@ a great liar- lol!

Suchi said...

Reading this post reminds me of my father. It is his lot in life to remind me and my bro about tax returns, investments and insurance. We just do what he tells us to and he keeps telling us to become more proactive...bwt good post :)

Suchi said...

P.S. I love your footnote :-)

Sadiya Merchant said...

@ suchi- hehe yea i kno tax formalities r huuuge hassles...especially d number of forms!!