Frequently Ask Questions Tax

What is Permanent Account Number (‘PAN’)?

PAN is a ten digit alphanumeric number issued by the Indian Income Tax Department. The PAN enables the Income Tax Department to link all the specified transactions to the taxpayer. It helps easy retrieval of information of the taxpayer and matches the same to investments, borrowings and other business activities.

What is TAN?

Tax Deduction and Collection Number (TAN) is a unique ten digit alphanumeric number to be obtained by all persons who are responsible for deduction or collecting tax at source.

What is the difference between direct tax and indirect tax?

Direct taxes are imposed on income and indirect taxes are levied on goods and services. Taxpayers pay direct tax directly to the government while indirect taxes are collected by intermediaries and passed on to the government.

What is Income Tax?

Income Tax is tax levied on the income of every person. The provisions of the Income Tax Act 1961 govern income tax in India.

What constitutes income for the purpose of Income Tax?

The word ‘income’ is very broad. In case of salaried employees, all that is received from employer in cash or kind is income. Incase of a businessman, net profit will constitute their income. Income from other sources – dividend, commission, interest etc. Income may also be earned on sale of capital asset – long term or short term and can be classified as ‘income from Capital Gains’.

What are the head of income as per the provisions of the Income Tax Act 1961?

Section 14 of the Income Tax Act 1961 has classified income heads as under :

  • Salaries
  • House Property
  • Profits and Gains from business or profession
  • Capital Gains
  • Income from Other Sources
What is a Return of Income?

An income tax return is a prescribed form in which the particulars of income earned by a person in a financial year and taxes paid on such income are submitted to the Income Tax Department. Different income tax return forms are prescribed for filing of returns for different status and nature of income.

What is tax deducted at source?

Tax Deducted at Source is commonly referred to as ‘TDS’. Under this system, tax is generally deducted at source or at the point of generation of income. The provision of TDS is applicable to payments such as interest, commission, professional fees, brokerage, salary. The TDS so deducted is required to be deposited with the government on or before the due date of filing of return of income.

What is tax audit?

Under tax audit, a taxpayer is required to get his books of accounts audited from the income tax point of view. Section 44AB of the Income Tax Act provides for classes of taxpayers who are required to get their books of accounts audited by a Chartered Accountant.

What is the due date for filing of tax audit report?

A tax audit report is required to be furnished before the tax authorities in the prescribed forms on or before 30th September 20xx of the Assessment Year.

How is advance tax calculated and paid?

Advance Tax is calculated and paid on the basis of the expected tax liability for the year. Advance tax is to be paid in the installments given below.

Incase of all taxpayers (other than eligible taxpayers referred to in s. 44AD and s. 44ADA)

  • Atleast 15 percent – on or before 15th June
  • Atleast 45 percent – on or before 15th September
  • Atleast 75 percent – on or before 15th December
  • Atleast 100 percent – on or before 15th March

For eligible taxpayers referred to in section 44AD and 44ADA

100 percent on or before 15th March.