Irrespective of whether you do your own taxes or outsource it to your CA, it’s important that you understand it’s essential aspects to exercise effective supervision. So here are some important points that you need to know.

Important Terms

Financial Year

If you are paying taxes for income earned during April 2021 to March 2022, the financial year is 2021-2022 which is written in short as FY2122.

Assessment Year

It is the year in which you are paying your taxes. So for example if you are paying your taxes in April 2022 for FY2122 the assessment year would be 2022-2023 written as AY2223

Tax Principles Used to Fix Taxes

Ability to Pay / Progressive

Your income tax follows this ability to pay principal, where the proportion of tax to income increases with your income. The tax bracket that the government releases every year follows the Progressive Taxation system.

So any income earned during a financial year is taxed except the exempted amount. Incomes include, FD interests, dividends, freelancing etc over and above what you earn as your salary.

Benifit Tax / Regressive

These taxes are proportional to expenditure on certain goods or services. GST is an example of this tax. For example you pay 18% tax on toothpastes. Irrespective of whether you are rich or poor.

However the GST follows a slab of its own and only the luxory goods are taxed at higher rates.

Unless you operate a business you can ignore these types of taxes as there is little you can do about them.

What if I make a mistake while filing my income tax?

You can always file a revised return. It’s quite common to commit mistakes as the ITR forms aren’t that straight forward. However always try to submit it after verifying everything to save time later.

At times the income tax department may point out certain defects in your ITR. You are required to file a revised return in its response.

Are there any fine for paying taxes later than March?

You are charged a simple interest of 1% every month on any tax that is due which you haven’t paid before March of that year.

Just because government keeps extending last date to file your ITR doesn’t mean that it won’t penalise you. I have lost money due to this. In case you suspect that the tax paid by your firm is short of the real tax that is due, you should pay additional tax using the OLTAS.

The shortfall in tax can be due to interests earned on FD or other investments about which your firm does not know. You can inform your firm about any additional income every quarter and they usually adjust your monthly tax payments.