Important Keyword: Salary Income, Income Tax Department, E-Verify, Income Tax Compliance, Section 5(1).
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Tax Liability for Salary Income
Salary income under section 5(1) of the Income Tax Act encompasses various components received by an individual from their employer, including wages, annuities, pensions, gratuities, fees, commissions, perquisites, profits in lieu of salary, advance of salary, and leave encashment, among others.
However, taxpayers may encounter verification issues from the Income Tax Department (ITD) through SMS, calls, or emails for several reasons:
- Non-filing of Income Tax Returns (ITRs) for the given assessment year, leading to potential tax liabilities.
- Mismatch between the details provided by taxpayers and the information received by the Income Tax Department (ITD) for that assessment year.
- Reporting of significant transactions during a financial year that deviate from the taxpayer’s profile.
Responding to Verification Issues: Taxpayers facing verification issues must respond promptly. The response should be submitted online through the compliance portal provided by the Income Tax Department (ITD).
Ensuring compliance with tax regulations and addressing verification issues in a timely manner is crucial for taxpayers to avoid potential penalties or discrepancies in their income tax filings. By understanding these processes, taxpayers can navigate the taxation system more effectively and contribute to a transparent and efficient tax environment.
Verification issue in the computation of tax liability from Salary Income
| Code | Description | Response |
| A1 | Total receipts as per taxpayer pertaining to the above information | Amount |
| A2 | Less: Amount relating to another year/PAN | PAN year-wise list |
| A3 | Less: Amount covered in other information | Amount |
| A4 | Less: Exemption/Deduction/Expenditure/ Set off of Loss | Exemption/Deduction wise list |
| A5 | Income/Gains/Loss (A1-A2-A3-A4) | Computed |
Understanding salary components and their taxation is crucial for taxpayers.
Here’s a simplified guide to help individuals comprehend these processes:
A1- Total Receipts: This refers to the total gross salary received from the employer, including all salary components, to be mentioned as a final amount.
A2- Amount Relating to Other Year or PAN: If any part of the salary pertains to another person’s PAN or another assessment year, details should be provided in the PAN table.
A3- Amount Repeatedly Covered: Any mistakenly covered amounts should be mentioned under the Remarks section to nullify repetition.
A4- Exemption/Deduction/Expenditure/Set off of Loss: This section includes gross salary and various allowances exempted from taxation. Taxpayers need to select the correct category from the drop-down list, including exemptions related to house rent, leave travel, gratuity, perquisites, and others.
A5- Income/Gain/Loss: This section involves self-computation of taxable salary income using the formula A5=(A1-(A2+A3+A4)). If the computed income exceeds the minimum threshold of Rs. 2.5 lakh, taxpayers should file their Income Tax Returns (ITRs).
It’s essential for taxpayers to accurately declare their salary income and claim any applicable exemptions or deductions to ensure compliance with tax regulations. By understanding these concepts, individuals can navigate the taxation system more effectively and fulfill their tax obligations efficiently.
Read More: Compliance portal: Tax Liability on the Source of Investment
Web Stories: Compliance portal: Tax Liability on the Source of Investment
Official Income Tax Return filing website: https://incometaxindia.gov.in/
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