India’s government put out several tax acts to promote equity among the legal residents and generate much tax revenue. Who put out the Income-tax Act 1961 for the same purpose.
The tax system in India:
income tax is the most common method of earning in India’s federal republic since its creation today. It enables the government to finance the development projects in the country and make sure that everyone equally contributes to it. However, this method is more efficient in countries with higher literacy and high-income group population.
The majority of India’s citizens are literate and pay taxes that is one of the reasons why the Republic of India’s economy is flourishing. It allows the country to finance all its needs by itself and not remain dependent on other sources such as the sale of assets and loans on interest from other developed countries. The government should make sure that the income taxes levied on individuals are not unfair in the republic of Indi.
The income taxes in the republic of India are progressive. When income taxes are developed, as individuals’ income rises, the taxes levied on them also increase. As the income of individuals living in India’s republic falls, the taxes levied on them also falls.
Imposing progressive income taxes means that the government cares about the low-income groups. The governments set low rates of taxes for low-income groups and high rates of taxes on high-income groups. The progressive income taxation method imposed by the Republic of India has a few drawbacks. Although the government will make the low-income groups happy, the high-income groups are dissatisfied with the government’s decision-making.
One other drawback of progressive income taxation is that it is a disincentive for the people’s financial evolution included in the low-income groups. The understanding that as they start to earn more and become financially stable in the economy, the government will increase taxes on them, adding to their problems.
As a result, they tend to earn a smaller amount to save themselves from giving higher taxes or migrate from India’s republic to another country where taxes are minor. However, the tax system in the republic of India differs in the different states. For instance, the taxes in highly developed states have skyrocketed in recent years and have led to several financial constraints, especially for people with high earning and many assets.
In other rural areas, the situation is different. The majority of the populating is needy and dependent on the income they earn from harvesting crops and selling them every season. People are illiterate, and the job is scarce. Subsequently, the income tax is also lower as the overall tax in the country is progressive. Moreover, as many people residing in these rural areas have no income tax concept, most don’t pay income taxes. Even if they are aware of income tax, they refrain from paying to save more for themselves.
The governing agency responsible for governing such regions has less control over these people. They usually don’t forcibly take taxes from these poor people unless the country’s financial situation worsens. They fear that the people will retaliate. One more reason for this is that they try to satisfy these people as much as they can to vote in Favour of their electoral party or candidate in future elections in that region.
The Indian income tax act 1961 and its proposals:
The income tax act 1961 imposed on India’s republic is a statute that charges income tax in India. It allows the government to collect adequate revenue, administrate the procedure, and recover the country’s income tax. In the later years, the Indian republic put forward a draft statute known as the direct taxes code intended to replace the income tax act 1961 and the wealth tax act 1957. However, the bill did not prove beneficial for the country’s governance and was later removed.
According to the sources of the official website of the Indian tax department, the income tax act contains 23 individual chapters and exactly 298 sections. The different sections have different terms and conditions for taxation in the Republic of India. The other areas are designed to overcome any possible conflict between the government and the taxpayer. It happens if such a situation arises.
According to the Indian government, the income tax act is applicable on:
- Any amount of salary of an individual
- The income from house property
- The number of capital gains
- Any income generated for a business or any other profession
- And revenue from other sources
In the February of every year, the Indian government comes out with a budget that includes the amendments of the income tax acts. Each year they can make changes according to the budget and fix the issues to manage the tax system more efficiently in the coming year. The changes can be an increase or decrease in the income tax rates or an increase in the tax on one specific element of the relevant tax subjects and a reduction in the other issue’s tax rate.
One example of this is when in 2017, the Indian finance minister announced that the income tax rate of the people who earn the income from Rs 2.5 lac to 5 lacs would be reduced from 10 percent to 5 percent. It was a moment of relief for the majority of the middle-class families residing in the Indian republic.
Furthermore, another decisive decision undertaken by the finance minister of the Republic of Indian in 2018 was when who reimbursed the tax rate on long-term capital gains in the budget of 2018. The decision undertaken in 2018 meant that if any long-term shares or assets had an individual taxed at a rate of 10 percent of the value. There would be an LTGC tax of ten percent of the value of the possessions.
In recent years, the Indian finance minister Nirmala Sitharmar introduced a newly developed advanced taxation system that has reduced the income tax rates. The system has become operational from the year 2020 and intends to remain intact until 2021. Whenever such amendments or bills are put forwarded by ministries, they become applicable upon the prime minister’s approval. It happens in the Republic of India.
Income taxpayers in the Republic of India:
In India’s republic, every legal citizen residing in e country is liable to pay an income tax rate to India’s government if his above two lacks monthly. The income applicable for senior citizens is three lacks per month. During the budget year of 2017 to 2018, nearly seven prevent of the citizen in Indian filed for an income tax return, and it results in a collection of 19.5 lac crore Rs indirect tax revenue. It was beneficial for the government as it utilized it in several industrial projects and provided merit and public goods. The revenue generated was twenty percent higher than what it was in the previous year. Hence, the government aims to make a minor adjustment to this scheme to maintain the same revenue generation process.
One downfall of this is that the citizen is not pleased with the acts of the governments. It has become difficult for people to manage their expenses due to the rise in tax rates and the majority of the people involved in these financial crises are mainly poor farmers. These farmers are primarily dependent on their crops for income, and an increase in tax on crops has resulted in outrage among the farming community.
Deductions in income tax allowed under the income tax act 1961:
According to the income tax act 1961, India’s republic has permitted several deductions to citizens’ income tax to help ease their financial constraints. The tax act’s different subsections allow various assumptions, and people can choose what they like according to their needs and wants.
Section 80 to 80c: this section includes the three subsections: the section 80c, 80ccc, and 80ccd. It allows an individual to decrease his tax amount up to rs150000. It is only permitted if the individual terms and conditions comply with that of the government’s requirement.
Section 80ccd: section 80ccd of the income tax act 1961 allows deductions to be made to an individual’s income tax if he fulfills the conditions required. One is eligible for tax deductions if he is known to have contributed to the New Pension Scheme and the Atal Pension Yojana.
Section 80D: the following section allows a deduction to income tax of an individual to be made if the person has to cover his medical expense or anyone’s medical expenses in his family. Suppose he is already paying for medical premiums, which will apply the same rule. The main idea is to ease the financial constraints as the individual is already paying many medical bills.
Section 80DD: section 80DD of the income tax act 1961 allows a specific group of individuals to avail tax deduction in their income if they fulfill the required criteria. The people included in this group are those that are mentally and physically disabled. The main idea is that it is already difficult for disabled individuals to earn a living, and by having income tax reductions, the government can ease their financial issues.
Section 80DDB: section 80DDB of the income tax act 1961 gives tax deduction permission for individuals indulged in a specific form of medical illness that is taking a significant amount out of their pockets and is further creating financial problems for the individuals. The tax deduction makes their lives easier.
Section 80TTA: section 80TTA provides a deduction of Rs 10000 on income tax on interest. This specific deduction is available for individuals and HUF.
Section 80U: It allows deductions of up to Rs 100000 to be made for people who are indulged in the form of physical illness. It also applies to any physical disability.
Section 119 (2) (b) of the income tax act 1961:
Section 119 of the income tax act 1961 empowers the lower authorities of the finance ministries to make decisive decisions regarding the citizens’ implementation of income tax. Moreover, it instructs the Central Board of Taxes (CBT) to provide instructions to the authorities’ lower level. Also, section 119 (2) (b) of the income tax act 1961 instructs the Central Board of Taxes to lay down several steps for the lower authorities to follow when imposing income tax rules on individuals.
One of those rules is that it will allow any claim for an exception or the deduction of an amount of income, refund, and income relief to take place even though the time duration to file the claim has passed the deadline. However, there is strictness that only the lower authorities working under the instructions of the Central Board of Taxes can make such a claim, and it is not the taxpayer’s authority.
Although section 119 (2) (b) of the income tax act 1961 allows one to file a claim for the deductions of income tax to occur after the due date has passed. Some conditions must be fulfilled, or this claim can also be rejected by the authority if the required information is not provided or if the provided information is inadequate. One reason for rejection can be that the individual’s report is not satisfactory. He is trying to fool the authority to give him the benefits of section 119 (2) (b) even though his lifestyle does not make him eligible.
Another reason for this rejection is that an individual may provide information tampered with or not legal documentation. For example, he can give a fake medical report of an illness that he does not have. In this case, the individual’s claim will be rejected, and such people can also be fined for trying to tackle the income tax system and enjoy the benefits that they don’t deserve.
Acceptance and rejection of claims under section 119 (2) (b):
The Central Board of Taxes has set out guidelines for acceptance and rejections of claims under section 119 (2) (b). The claim is rejected if the claim’s amount does not exceed the limit of Rs 10 lac. The Commissioner of income tax or the Principal Commissioner of income tax has the authority to deal with when this situation arises.
A claim is accepted or rejected under section 119 of the income tax act 1961, where the amount of claim is less than Rs 50 lac, and the amount is more than Rs 10 lac. The principal chief commissioner of income tax or the Chief Commissioner of income tax has been given the authority to deal when such a situation arises. Lastly, when the amount of the claim issued is more than Rs 50 lac, then the Central Board of taxes has the authority to resolve the issue.
The time limit for accepting claims:
There is a time limit under which the claims are accepted. This time limit for the refund or exemption in income tax only remains for about six. The court will close an individual’s case after six days if he fails to file a claim under that period.
Steps to file for a return under Section 119 :
One has t login into his income tax portal, and on the drop, menu selects the option of income tax returns. Following this, one has to choose the specific year he files for the return and then choose the file as filing against the notice. Moreover, the individual then has to select the filing section as 139, with section 119 (2) (b) of the income tax act 1961. An XML file is then uploaded, and the process ends after finalizing verification of the provided file
Section 1192b of the tax act passed by the Indian republic in 1961 aimed to generate adequate revenue for the state to work on international and national development projects. At the same time, it provided public and merit goods to the citizens of India. The act was formed so that it would not drain the majority of the citizen from their wealth. It is because the majority of people residing in India were poor.