|Author: Vishal 10 Sep 2012 Member Level: Gold Points : 6 (Rs 6) Voting Score: 2|
1)PAN card is compulsory for different types of earning because
- if the assessee has taxable income then on his earning TDS(tax deducted at source) will be deducted.
You may have note that on salary it is paid after TDS. This is concept when government collect tax at actual source of income but at the and of the year you will be eligible for TDS certificate at amount which have been already deducted from your income.
So that for TDS deduction purpose PAN card detail isnecessary. But now a day for tracing tax avoidance it is made compulsory to provide PAN detail for every financial transactioni.e. To deposit cash in bank a/c more than Rs.50000, for purchasing asset worth exceeding Rs.500000 etc.
2) Income Tax is Revenue tax which collected by central government on income exceeding certain limit. Current income tax limit is as follow.
INCOME TAX SLABS
ASSESSMENT YEAR 2012-13
Taxable Income Tax Rate
Up to Rs. 180000 (Men)NIL
Up to Rs. 190000 (Women)NIL
Up to Rs. 250000 (Sr. Citizen age - 65 yrs.) NIL
From Rs. 180000 to 500000 (Men) 10% From Rs. 190000 to 500000 (Women) 10% From Rs. 250000 to 500000 (Sr. Citizen age - 65 yrs.) 10%
From Rs. 500000 to 800000 (Men)20%
From Rs. 500000 to 800000 (Women)20%
From Rs. 500000 to 800000 (Sr. Citizen age - 65 yrs.) 20%
Above Rs. 800000 (Men)30%
Above Rs. 800000 (Women) 30%
Above Rs. 800000 (Sr. Citizen age - 65 yrs.) 30%
This is basic limit for example Mr X has Rs.850000 income in the year of 2011-12 then tax calculation will be as follow
Up to 180000- tax- NIL
500000-180000=320000 tax= 320000*10%=32000
Then total tax will be Rs.107000.
3) Even if Person is BPL (Below Poverty Line) and starts earning taxable income with exceeding basic limit then he is definitely liable to tax. There is no loans and debts allowable as deduction from income Excepts it is business loss then it can be set off according to IT Act. For this you can read set off and carry forward chapterof IT Act,1962.
|Author: Manoj Chaurasia 11 Sep 2012 Member Level: Gold Points : 18 (Rs 15) Voting Score: 0|
To begin your answer a little understanding about PAN card, earning, investment, types of tax and few other terms is necessary for proper clarity.
Permanent Account Number is abbreviated as PAN, and the hard plastic form thing received by us on application to Income Tax department is called the PAN card. It is nothing but your account with Income Tax Department which has details about the tax paid by you to the department as well as the refund given to you in case any excess tax is being paid by you.
PAN card came into inception along with the Income Tax Act, 1961. It had in past few years gained much importance with the drastic changes that came into the Indian economy since 1990. With advent of globalization and opening of free economy, financial transactions gained huge importance and the means of earning and spending increased manifold.
In past the Income Tax Act required people with income to disclose their income and pay tax on the same by computing it on their own and then file the return. There was no concept of advance tax, tax deducted at source or tax collected at source. Any person with income used to compute his earning for the whole year, then calculate tax on the same and deposit it with department. After that file his return. Even today the process is applied but with few changes such as calculating the whole year income in advance and paying tax on the same. If you are a salaried person then your employer will deduct tax from your income and deposit it rather than you computing it in the end and then depositing it. The responsibility is now shifted from the employer to employer. This is the concept of TDS.
TDS is based on "pay as you earn" and TCS on "collect as it is being earned"
Now this tax is credited to the account of person from whom it is deducted with the help of identification called PAN. PAN serves as mean to assess the total income earned by you as it has details of the tax deposited in your account.
Since TDS and TCS have a fixed rate at which they are deducted so it is very much possible to compute your income if the tax deposited amount is available with the income tax department.
What i mean to say is that if tax deducted from your interest income is Rs. 10,000 then it is for sure that you have earned an interest income of Rs.1,00,000, since rate of tax on interest income is 10%. In addition it can also be computed that the total deposit in your bank account is around Rs. 25,00,000 if rate of interest is 4% for savings bank or Rs.16,66,667 if rate of interest is 6% or Rs.11,11,111 if you have made an FD @9%.
Similar case is with salaries as the tax slabs are predefined and hence an average rate can be computed for calculating the salary income earned during the year on the basis of tax deducted and deposited with the Income Tax Department.
PAN card is necessary for keeping records of the tax paid into your account and as explained above your earning can be very much computed accordingly. So in short PAN card is indirectly related to your earnings and not only for financial transactions.
Any financial transaction which leads to an increase in your income or earning is directly pointing towards the payment of tax as all the income received or earned in India is taxable except for few exceptions.
To give little more understanding that how important PAN becomes for giving details to Income Tax Department regarding your source of income is as follows:
If you make an investment in mutual funds over Rs. 2,00,000 then this details will be available to the Income Tax Department and it will also be reflected in your PAN card which can be seen online in Form 26AS which is available once you register your PAN number with the income tax site.
Now coming to your second question regarding Income Tax Regulation. Income Tax is not so small to be explained in brief but to summarize it i can tell you the following.
1. There are five heads of income: Salary, Business & profession, house property, capital gains and other sources.
2. There are conditions on which each head income is made taxable.
3. There are deductions available for each head of income. E.g. Expenses can be claimed from business income; standard deduction of 30% is available on rental income; indexation benefit is available in capital gains and expenses can be claimed from income from other sources and the deductions under section 80C which is known to most.
4. Lastly, the net taxable income is computed and taxed according to the slabs, which are 10%, 20% and 30%.
The tax which i have discussed here is all about direct tax. Now there is also indirect tax which we pay daily in some form or other, like when you purchase any commodity from market like a soap or any consumer goods
then you pay indirect taxes which are excise duty, customs, etc. When you use any service you pay service tax, education cess, secondary and higher education cess and many other which i haven't discussed here.
Now coming to the question regarding BPL. First the definition of BPL itself is very much disputed and the recent controversy of Rs.28 daily is sufficient for an individual to survive is known by all.
Our law says that if a person is earning a single rupee over 1,80,000 a year, then he is liable to tax as he has earned enough to sustain himself and also his family and to pay tax to the coffer of Income Tax Department.
So it does not matter if the person was below BPL in past or had any debts or loans or had any asset or not. He/she is liable to tax if the total income for an year exceeds Rs.1,80,000 for male and 1,90,000 for female.
There cannot be any justification for the same that if you had not earned in past and have now started earning does not give you any special status with regard to the payment of tax.
Loans or debt if taken from organised sector like banks for some specified purpose are only available for deduction from your income and not otherwise.
Loan which can be claimed as deduction are only home loan and education loan and no other, subject to certain conditions. Any loan taken for personal purpose or from any individual or unorganized sector institution does not qualify for any deduction. Even car loan from organised sector do not qualify for deduction as car comes into luxury. It applies to all on a flat basis whether a person is below or above BPL.
Special schemes available in villages by state government have some difference and they vary state to state and cannot be compared to this central act(Income Tax Act)and hence they cannot be discussed here.
Past debts have nothing to do with your present income, only debts which you have taken for earning current income have a link but that also is available as expense out of your business income if taken for business purpose and do not qualify for deduction like the education or home loan.
Hope your query is resolve.
|Author: Dr.Nikhil Ratna 12 Sep 2012 Member Level: Gold Points : 0 Voting Score: 0|
Thanks for the responses Manoj and vishal. Manoj, you have taken lot of pain in answering in all aspects.
"There cannot be any justification for the same that if you had not earned in past and have now started earning does not give you any special status with regard to the payment of tax. "
What I mean is though your gross current salary is taxable, if you are in enough debts that ruin your basic amenities or stands below the 28rs/day cut off, are you not special?
|Author: Manoj Chaurasia 12 Sep 2012 Member Level: Gold Points : 4 Voting Score: 0|
@ Dr. Nikhil
The language used by me may seem a bit harsh but at the same time it is not exactly my opinion but my anger which i have against many of the existing provisions of the Income Tax Act.
There is no denying that a common person in daily life pays tax for each and every expense he/she makes. To average it, in every Rs.1000 spent tax of Rs. 300 to 350 is paid directly or indirectly.
To let you know of one such provision where it is said that agricultural income is exempt from tax. This is the biggest lie which i came to know when i was studying the Income Tax Act. I am not going to explain it but you can very well find it if you search a little on google.
Limit of Rs.28/day decided by government and their bureaucrats was itself a blunder. It is easy for them to decide as such because they get a fixed salary and also a daily allowance for each and every activity like travelling allowance, free telephone facility, free electricity, free or subsidized accommodation and many other benefits. All these facilities are provided out of the pocket of common man and a limit of Rs.28 is given to us for survival. You cannot purchase a litre of milk with Rs.28.
My main intent is to let you know that we(common people) have to live within limited means but have to pay taxes by working day and night to the government.
Still if your sentiments were hurt then i apologize for the same but at the same time my statement stands at the same place not with intent to hurt but to express the hurt we face daily.
|Author: Dr.Nikhil Ratna 16 Sep 2012 Member Level: Gold Points : 0 Voting Score: 0|
Dear Manoj, No apology please. I appreciate your interest in attending this thread. At the end of the day, You got me and I got you.
The transparency of our system it too low. Persons employed in all central govt jobs or reputed and registered firms are automatically made to pay taxes, where as the politicians, film industry people etc are given enough space to cheat the system.
If I have a PAN card and if I do not associate that details in my all financial accounts and transactions, I can easily cheat the system. If you take a country like U.S there is one Id called social security number which centrally regulates all your movements in the country and no chance of escaping.