namaskar reader my name is Pritam in this blog. I am going to describe income tax.
INCOME
When you generate money from somewhere it basically became
your income in the other term when you generate
profit its became your income.
TAX
as you live in a country you are provided education, ration, water, electricity other things the government also expect some money from you when you are capable to earn .which is goes toward nation-building. The amount you give to nation-building is known as Tax. Tax is decided by the government.
NOW when you combine these two words income + tax is said as income tax.
INCOME TAX has two branches 1 salary 2 business
Salary
when you generate money working on a company or organization that is called salary income. in salary, you do not need to do many things for taxation all you have to ask your company about that and that's it your work is done. All the MNC houses already did it for their employee you need not ask for that because they have already done it for you.
In salary class, you have only to plan the next step deduction which is given by the government.
which is known as 80(C) 80(D)80(E), if you want to know more about the highest deduction you can click on to read.
In80(C) tax deduction up to 1.5 lakh
In 80(D) tax deduction up to 50 thousand
In 80(E) tax can be deducted up to 1200 per child
Business Income
when you do business you earn profit but you do not need to pay tax on the profit you have to pay tax on net profit. after you expense how much money is left that called your net income
PROFIT - EXPENCES = NET PROFIT
where a salaried person gives tax on their salary income business person gives tax on their net income.
A business person has advantages in income tax government give this reduction because more jobs can be created by doing business and not many people want to do business due to the risk involved in the business. The government knows the benefit of the business and its contribution towards job creation so the government gives a tax reduction to the businessman.
In the above table, you can see that if you earn 2.5 lakh then you did not have to give any tax.
then the next category is earning slab up to 5 lakh this category person gets a deduction up to 5 lakh with the deduction they give zero tax.
5-7.5 lakh then you have to give 10 % as tax.
7.5-10 lakh then you have to give 15% as tax.10-12.5 lakh then you have to give 20% as tax.
12.5-15 lakh then you have to give 25% as tax.
15 lakh then you have to give 30% as tax.
According to your slab, you have to pay your tax. Always remember you always have to plan for tax so that only you can get the maximum benefit.
for better understanding, I am going to explain you with example
4 friend name
Rahul - 2.5 lakh
Basanta- 7 lakh
RAJ- 12 lakh
Pratap - 20 lakh
Pratap as a businessman earns 20 lakh but remember tax is always with net profit.
here how much they pay as tax we going to see
As you know there has no tax up to 2.5 lakh so Rahul did not have to pay any tax because he is coming under zero taxation. He just has to file the ITR to provide his income to the government.
Basanta can claim 80(c) up to 1.5 lakh as he invests in a tax-saving scheme
as he did health insurance. so he can claim 80(d) WHICH I up to 50 k.
Basanta also gets a deduction under 80(EE) which is 1200 per child.
but altogether he can get a maximum of 2.5 lakh .after that he needs to pay tax. as you can see above table that he is paying 20 thousand as tax.
in the above table, you can see that after the nill slab RAJ has to pay tax on his income he has to pay
5-7.5 lakh 10 % as tax. which is 25000
7.5-10 lakh 15% as tax. which is 37500
10-12.5 lakh 20% as tax. which is 63500
RAJ has to pay around one lakh fifty thousand as TAX. According to the tax, amount raj is working one month in a job to build the nation.
now come to Pratap
Pratap as a businessman Pratap has total earning of 20 lakh but he also has some business expenses so
EARNING - EXPENCESS = NET PROFIT
20lakh - 10 lakh = 10 lakh
A business person also gets a tax deduction on depreciating assets. if now Pratap pays the income tax then he has to pay 63000 as tax but if he gives this money as a salary to three-person per head income will be 3.33lak which means no one going to pay tax. because according to the tax slab up to 5 lakh there has a nill tax. so businesses person has a lot of benefits while taxing because they are the income generator of the economy and job creators to the nation.
for which they can get a tax deduction by GOVERNMENT.
THANK YOU.
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