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Tax Free Investments
When you got your first paycheck at the new job, you might be expecting more. You got your first paycheck after deduction of some large amount from it. Where is the money gone? The culprit is Income Tax! Income tax is the tax levied on the individuals or companies on their income. Income tax is the very important part of revenue system of any government. Some of the taxes levied by the government are collected at the time of sale or services but income tax is a yearly amount which is collected at the end of the fiscal year. Governments bill individuals or companies on their earning through salary or investment profits. Income tax keeps increasing with the increasing level of reportable income.
The system of levying income tax is very old in most of the countries. Earlier, when barter system was there, rulers used to take a share in the earnings of individuals, especially wealthy people. This money earned by government is used in various expenses in running the government. The income tax system, you see in present times, is the result of many reforms. Income tax can be levied on the profit of positive income only. You are not liable to pay any tax on the loss incurred or no income. In all the countries, there is a pretax limit for all the income. All the individuals can have some amount of non-taxable income. This amount is stated in the state laws about the income tax. If you have not earned up to that limit, you are liable to any income tax.
All the employees on the payroll of a company get their paychecks after a deduction of certain amount as the income tax. However there are many kinds of rebates which the individuals claim in the final calculation of the income tax. The income tax deducted at the time of getting a paycheck is called as the Tax deducted at source. This amount can be the more than the final amount of income tax calculated after taking into account various rebates allowed. You can claim the refund of that extra amount while filing your income tax return.
It is obligatory for all the companies and individuals to file their income tax return at a specified period in the year. For this, there are certain forms which you need to fill up. You can take the services of a chartered accountant to file income tax return for you.