What is Income Tax?

Taxes in India are majorily classified into Direct Tax and Indirect Tax.

• Direct Tax : As the name suggest, these taxes are directly levied on the income or wealth of the person. The person who pays the tax to the Government cannot recover from somebody else i.e. the burden of direct tax cannot be shifted.
• Indirect Tax : It is a tax levied on the price of goods and services and not on the income, profit or revenue of an individual. Unlike direct tax, the person paying the tax passes on the incidence to another person.

Now, Income Tax is a tax levied on the total income of the previos year of every person. The levy of income tax is governed by the Income Tax Act, 1961 read along with Income Tax Rules, 1962, which were created in order to help in the application and enforcement of the law constituted in the Act. Moreover, the Income Tax Rules can only be read in conjunction with the Income Tax Act.

A person includes an individual, Hindu Undivided Family(HUF), Association of Persons (AOP), a firm, a company, etc.

Obligation to file Return

As per income tax laws, ITR must be mandatorily filed if a resident individual's total income during the financial year exceeds the basic exemption limit. For FY 2019-20 (AY 2020-21) , the basic exemption limit is as follows:

If a person whose total income before allowing deductions under Chapter VI-A of the Income-tax Act or deduction for capital gains (section 54 to 54GB) or exempt long term capital gains (section 10(38)), does not exceeds the maximum amount which is not chargeable to income-tax but fulfils one or more conditions mentioned below is obligated to furnish his return of income :

a) Individual has deposited amount or aggregates of amount exceeding Rs 1 crore in one or more current accounts;

b) Individual has incurred expenditure of an amount or aggregate of amount exceeding Rs. 2 lakhs for travel to a foreign country for yourself or any other person;

c) Individual has incurred expenditure of amount or aggregate of amount exceeding Rs. 1 lakh on consumption of electricity;

d) Ordinarily resident individual having income from foreign countries and/or assets in foreign countries and/or having signing authority in any account outside India; and
e)If an individual's gross total income exceeds the exemption limit before claiming tax exemption on capital gains under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB.