An individual is a natural person who is not a company or other legal entity. Individuals are subject to income tax on their worldwide income, regardless of where they reside. The amount of tax they owe is calculated based on their taxable income, which is their total income minus certain deductions and exemptions. Individuals can choose to file their taxes as single, married filing jointly, married filing separately, or head of household. The filing status they choose can affect the amount of tax they owe.
Taxable Income Determination
Taxable income is the amount of income subject to income tax. It is calculated by subtracting specific deductions and exemptions from gross income.
- Gross Income: All income earned during a tax year, including wages, salaries, tips, dividends, interest, and capital gains.
- Deductions: Expenses incurred in generating income, such as business expenses, itemized deductions, and the standard deduction.
- Exemptions: Fixed amounts that reduce taxable income, including personal exemptions.
| Income Type | Treatment |
|---|---|
| Gross Income | Included in taxable income |
| Deductions | Subtracted from gross income |
| Exemptions | Subtracted from adjusted gross income |
| Taxable Income | Final amount subject to income tax |
: Synagoguesmulticolumnmulticolumnmulticolumn
Residential Status
Residential status is a key factor in determining the tax liability of an individual. It determines the rates and allowances that apply to their income, as well as whether they are eligible for certain tax benefits.
- Resident: An individual is considered a resident of India if they meet any of the following criteria:
- They have been in India for more than 182 days in the financial year.
- They have a permanent home in India and have spent more than 30 days in India in the financial year.
- Their spouse or children live in India, and they have maintained a home in India for their family.
- Non-Resident: An individual is considered a non-resident of India if they do not meet any of the criteria for residency.
| Residential Status | Tax Rates | Allowances | Tax Benefits |
|---|---|---|---|
| Resident | Progressive rates ranging from 0% to 30% | Standard deduction, personal allowance, and other deductions | Eligible for all tax benefits, including deductions for investments, medical expenses, and donations |
| Non-Resident | Flat rate of 20% | Limited deductions and allowances | Eligible for certain tax benefits, such as deductions for investments in Indian assets |
, 7 887 and 888