Exceptions to the Tax Slab

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October 23, 2018

One must bear in mind that not all income can be taxed on slab basis. Capital gains income is an exception to this rule. Capital gains are taxed depending on the asset you own and how long you’ve had it. The holding period would determine if an asset is long term or short term. The holding period to determine nature of asset also differs for different assets. A quick glance of holding periods, nature of asset and the rate of tax for each of them is given below.

Residents and non residents:

Levy of income tax in India is dependent on the residential status of a taxpayer. Individuals who qualify as a resident in India must pay tax on their global income in India i.e. income earned in India and abroad. Whereas, those who qualify as Non-residents need to pay taxes only on their Indian income. The residential status has to be determined separately for every financial year for which income and taxes are computed.

Defining Income

Income has been very widely defined in the Income-tax Act. In simple words, income includes salary, pension, rental income, profits out of any business or profession, any profit made out of the sale of any specified asset, interest income, dividends, royalty income etc. The law classifies income under 5 major heads as already mentioned above.

Salary Income
House Property income
Profits and Gains from Business or Profession
Capital Gains
Income from other Sources

The law also allows a taxpayer to claim deductions specific to each such income and hence to avail the appropriate deductions, it is important that you classify income under the right heads. Eg. A salaried taxpayer can claim a standard deduction of Rs 40,000 while a taxpayer having rental income from a flat can claim municipal taxes as a deduction.

Income Tax deductions

There are broad themes to what the government incentivizes. These are either in the form of:

Various deductions available under Section 80 of the Income Tax Act which can be claimed from the Total Income or
Deductions that are specific to each source of income.

Some of the key deductions have been discussed here:

Home ownership

Stamp duty and Registration under Section 80C
Home loan principal and interest
First time homeowner benefit of Rs.50,000 under Section 80EE

Location: Kerala, India

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