Income tax in India is a direct tax levied by the central government on the income earned by individuals, Hindu Undivided Families (HUFs), companies, firms, and other entities. It is an essential source of revenue used to fund public services and national development. The financial year in India runs from April 1 to March 31, and taxpayers are required to file their income tax returns (ITR) annually. The tax is levied based on income slabs, which may vary depending on the age and type of taxpayer. For example, individuals below 60 years of age with an annual income up to ₹2.5 lakhs are exempt from paying tax under the old regime.
The legal foundation of income tax in India is governed by the Income-tax Act, 1961. According to Section 14, income is categorized under five heads: Salary, House Property, Business or Profession, Capital Gains, and Other Sources. Section 80C offers deductions for investments in instruments like PPF, ELSS, and LIC premiums, up to a maximum of ₹1.5 lakhs annually. Further, Section 10(14) exempts certain allowances like House Rent Allowance (HRA), subject to conditions. The government also introduced a simplified tax regime under Section 115BAC, which offers lower tax rates with no deductions or exemptions. Taxpayers can choose between the old and new regimes based on what benefits them the most.
To make remembering key tax rules easier, consider the mnemonic “SHELT”:
- S – Sections (Know important ones like 80C, 10, 115BAC)
- H – Heads of Income (Five: Salary, House, Business, Capital Gains, Other Sources)
- E – Exemptions (Section 10, like HRA, LTA)
- L – Limits (₹2.5L exemption limit, ₹1.5L under 80C)
- T – Tax Regimes (Old vs. New under Section 115BAC)
Using “SHELT” can help any taxpayer stay on track while navigating India’s tax framework.
