Basics of income tax for beginners

Any person who has been paying income tax for a long time was once a beginner. It is not as easy for a beginner to pay income tax as it is for a person paying income tax for a long time. The confusion in the right assessment of the income and salary and calculation error creates trouble in the submission of the income tax for the first time income tax payees. No matter if you are a salaried businessman, or working in the HR or accounts department of any company, To pay income tax either you need to be eligible to pay income tax or you need to be responsible to do it for others.

Some of the beginners avoid paying tax on their own and take the support of the agents and other experts. .For the tax calculation assistance, the Canada tax calculator is a very popular software. To help beginners there are some very important basic points that can clear all the doubts and make the income tax calculation easy. So the beginners may follow these below mentioned basics of income tax to understand what difficulties make them do mistake and what is the right way of income tax calculation:

1. Define financial year:

As per different countries the way to define a financial year is also different. In Canada we calculate or define the financial year from the January 1st to December 31st. Maximum times people don’t know what exactly a financial year means. So the financial year is the same as the previous year. Suppose 2020 is running and we have to calculate the income tax for the year 2019. We will define this year from the 1st of January 2019 to 31st of December 2019. This is the right way to define a particular duration to calculate income tax without any confusion.

2. Know your salary:

It is found many times that beginners complain about the problem related to various misunderstandings about their salary. They don’t have an idea about what amount they need to include and what amount they need to exclude from their salary for the income tax calculation. It is also very important for the salaried income taxpayers to have their exact salary documents such as T4. The details and components will help you in identifying your salary.

3. Finalizing total income:

This is the biggest issue for both salaried and businessmen. What particulars come under the sources of income and what not becomes difficult to identify. This is how unintentionally people fail to generate the right income tax calculation. This is true that many of us hide our complete income and this is the wrong way to calculate income tax. You will have to pay much higher for that later on. So don’t go in the wrong direction and for the assistance in right income calculation you need to check your income on the behalf of five initial sources, given below:

• a) Income from salary: Our salary contains many other benefits such as leave encashment, allowance, and more. You need to include all these benefits and salary amount as your income.
• b) Income from the property: If you have a property like a home or other building which is on rent. You must be getting an income from that rented property. This is again your responsibility to include that income with your salary for the tax calculation.
• c) Income from capital assets: Sometimes we gain big profit on our capital amount or asset. This is not necessary that you always gain profits against the use of your capital amount or asset. You may also have to bear losses in the same condition. You need to add both in this type of income.
• d) Income from any profession or the business: If you are also handling a side business along with a salary based job, or only a businessman your income from your business will be included in the calculation of the income. The people who are handling any particular profession then also their income through their profession will take part in the total calculation of the income.
• e) Income from the other sources: The people are very smart and to match their lifestyle with the modern age they don’t rely on a single source of income. You may not realize but there are numerous other sources of income that are important to add in this income calculation. Your bank savings, fixed deposits, investment plans, and many other incomes will take part in the total income finalizing.

4. Deductions:

Once you have finalized your income now it turns to finalize all your deductions. Deductionswill give you relief by lessening the income tax amount. It is not that easy for the beginners to involve all their deduction as they have less knowledge and sometimes the knowledge is zero in this regard. For such types of people Canada tax calculator types helping hands can be a perfect solution. But if you want to do it on your own then learn to finalize all your deductions. Salary deductions, losses, liabilities, payments, and expenditures will take part in this section.

5. Payable income tax:

 After finalizing all your income and deduction you need to calculate your taxable income tax amount. Some of the standard deductions will also take part.

The above-mentioned steps will support you in remembering each small to major point related to income or deductions. Ontario tax brackets are also helpful in guiding for the right rate of interest for different payable income.

Be careful, use basics, and become a self-income tax analyser and payee. Why depend on someone else when you can do it on your own. But there are many people who are engaged in handling their business responsibilities and don't get time to look after their tax calculation. Such types of people may have either staff to handle all these tax and accounting related work or they take help of the paid services for the same. Go as per your convenience but pay tax as it is very important.