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What is Income Tax
Income tax is a certain amount of money that individuals have to pay to the government based on the money they earn. When people work or have businesses, they earn money, and the government collects a part of that money as income tax to provide various services for the country, like building roads, schools, and hospitals.
Calculation
Now, let's talk about how income tax is calculated. Imagine you have a basket of fruits, and each fruit has a different color. In the same way, when you earn money, it is divided into different parts, and each part is called an income tax slab. Each slab has a different tax rate, which means you have to pay a certain percentage of your earnings as tax.
Example
For example, let's say you earn 100 rupees. The government may say that for the first 50 rupees, you don't have to pay any tax. But for the next 30 rupees, you have to pay 10% as tax. That means you have to give 3 rupees as tax. And for the remaining 20 rupees, you may have to pay 20% as tax, which would be 4 rupees. So, in total, you would have to pay 7 rupees as income tax.
Slabs and Percentages
The government uses these tax slabs and percentages to calculate how much tax each person needs to pay based on their earnings. It's important to remember that different countries have different tax rules and slabs, so the calculations can be different in each place.
Income Tax Return
When it's time to pay income tax, the government provides a form called an income tax return. People have to fill out this form and mention their earnings from different sources, like salary, business, or investments. Then, based on that information, the government calculates how much tax they have to pay.
Conclusion
Remember, income tax is an important part of contributing to the development of the country. By paying income tax, individuals help the government provide better infrastructure and services for everyone.
