What is Income Tax and How Does It Work?
Income tax is an annual direct tax levied by governmental authorities on the monetary earnings of individuals, business professionals, and corporate bodies within a given financial period. Unlike flat sales levies, personal income taxes follow a progressive structure where higher tranches of income are assessed at increasing marginal tax percentages.
To calculate income tax accurately, tax authorities classify revenue streams into standard heads of income, including Salary, House Property, Capital Gains, Profits from Business/Profession, and Income from Other Sources. Eligible statutory deductions and rebates are then deducted to arrive at Net Taxable Income.