How Income Tax Impacts Your Wallet: Insights for Individuals : The Tribune India

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How Income Tax Impacts Your Wallet: Insights for Individuals

How Income Tax Impacts Your Wallet: Insights for Individuals


Income tax is a significant aspect of personal finance that affects individuals on various levels. Whether you're a fresh graduate entering the workforce or a self-employed professional, understanding how income tax impacts your wallet is essential for financial planning. This blog will discuss income tax, explore its implications for individuals, and provide insights to help you navigate this crucial aspect of finance.

Understanding Income Tax

Income tax is a tax levied by the government on the income generated by individuals and entities within their jurisdiction. The amount of tax you owe is typically based on your taxable income, which is the total income you receive minus any allowable deductions and exemptions. Income tax rates can vary depending on your income level and filing status, with higher-income earners generally subject to higher tax rates.

7 Ways Income Tax Affects Your Wallet

Here are seven ways Income Tax Returns (ITRs) affect your wallet:

  1. Tax Refunds: E-filing income tax returns allows individuals to claim back any excess Tax Deducted at Source (TDS), ensuring they receive the correct amount of tax refund.
  2. Access to Financial Support: Showing ITR records is crucial for self-employed individuals running GST-registered businesses when applying for high-value loans, as it demonstrates their income levels to loan providers. This influences the approvals, loan rates, repayment tenures and other terms.
  3. Funding Opportunities: When seeking funding for startup ventures, investors often scrutinise ITR details to assess financial stability and profitability, impacting the availability of financing for business growth and personal wealth.
  4. Penalty Avoidance: Delayed filing of income tax returns can lead to hefty penalties, impacting immediate financial resources. Adhering to tax regulations prevents unnecessary financial losses.
  5. Tax Deductions: Compliance with income tax regulations enables individuals to claim deductions under Chapter VIA, reducing taxable income and potentially increasing disposable income.
  6. Inflation Impact: Taxation on commodities can contribute to inflation, influencing the overall cost of living and affecting purchasing power, thereby directly impacting an individual's wallet.
  7. Access to Financial Services: Showing ITR records is crucial for purchasing high coverage insurance policies, as it demonstrates income levels to insurance companies. This influences the coverage one receives, potentially impacting savings and financial security.

Now that you know how income tax affects your finances, let's discuss what is required to make income tax payments online.

Prerequisites of Online Income Tax Payment

Before initiating online tax payment, ensure you have the following:

  • Valid PAN (Permanent Account Number): Your PAN is a unique identification number issued by the Income Tax Department of India. It's essential for all financial transactions, including tax payments.
  • Debit Card/Credit Card/Net banking facility/UPI: You'll need one of these payment methods to complete the online tax payment. Ensure your chosen method is linked to your bank account and has sufficient funds available.
  • Valid Mobile number to receive OTP: The One Time Password (OTP) verification adds an extra layer of security to your transaction. Ensure the mobile number registered with your bank is active and can receive text messages.

Step-by-Step Guide on e-filing Income Tax

  • Visit the e-Filing Portal: Go to the Income Tax Department's e-Filing income tax portal at 'www.incometax.gov.in'. Navigate to the 'Quick Links' section and select 'e-Pay Tax'.
  • Provide PAN Details: On the e-Pay Tax page, enter your PAN details as prompted. After entering your PAN, proceed with the OTP verification sent to your registered mobile number.
  • Verify Success Message: Once OTP verification is successful, a confirmation message displaying your PAN and masked name will appear. Click 'Continue' to proceed with the tax payment.
  • Select Income-tax Option: Under the 'Income-tax' window, select 'Proceed' to move forward with the tax payment process.
  • Choose Assessment Year and Payment Type: Select the appropriate assessment year and type of payment, such as self-assessment tax or advance tax. Click 'Continue' to proceed.
  • Enter Tax Payment Details: Fill in accurate details of your tax payment under the relevant categories. Review the information carefully before clicking 'Continue'.
  • Select Payment Mode: Choose your preferred payment mode from the options provided, such as Net Banking, Debit Card, or Payment Gateway. Click 'Continue' to proceed.
  • Preview and Verify Details: Review all the payment details carefully. Once verified, click 'Pay Now' to proceed with the payment transaction.
  • Submit to Bank: After reviewing the terms and conditions, tick the checkbox and click 'Submit to Bank' to initiate the payment transaction. You'll be redirected to the bank's payment page.
  • Download Challan Form: After successful payment, download the Challan Form (CRN) for your records. This document serves as proof of your tax payment.

Conclusion

Income tax is a significant component of personal finance, impacting individuals’ wallets in various ways. Understanding the different types of direct income taxes, the documents required for tax calculation, and the process of tax payment is essential for financial planning and compliance. Taxpayers with access to reliable financial institutions like Kotak Mahindra Bank's net banking facilities can pay their taxes online.

 

 

 

Disclaimer: This article is part of sponsored content programme. The Tribune is not responsible for the content including the data in the text and has no role in its selection.


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