Skip to content

TAX_ENGINE_STANDARDS.md

Latest commit

 

History

History
65 lines (50 loc) · 2.55 KB

TAX_ENGINE_STANDARDS.md

File metadata and controls

65 lines (50 loc) · 2.55 KB

Indian Tax Engine Standards & Logic (FY 2024-25)

This document outlines the business rules, legal sections, and calculation standards implemented in the Tax Engine.

🏗️ Architecture: "Rule-Based Plugin Model"

To ensure the engine is adaptable to future Budget changes (which happen annually in India), we use a decoupled architecture:

  1. Regime Strategy: Separate logic blocks for the OLD and NEW tax regimes.
  2. Deduction Providers: Plugins that handle specific deduction types (Standard Deduction, 80C, 80D, etc.).
  3. Persona-Specific Logic: Handling presumptive taxation for professionals and business owners separately.

📋 Standards by Economic Persona

1. Full-Time Employee (Salaried)

  • Income Type: Salary income.
  • Standard Deduction (Sec 16ia):
    • New Regime (FY 24-25): ₹75,000 (Upgraded from ₹50,000 in July 2024 Budget).
    • Old Regime: ₹50,000.
  • Exemptions (Old Regime Only): HRA, LTA, Professional Tax.

2. Self-Employed (Professionals - Doctors, Consultants)

  • Income Type: Profits and Gains of Business or Profession.
  • Sec 44ADA (Presumptive Taxation):
    • Eligible if turnover < ₹50 Lakhs (or ₹75 Lakhs if 95% is digital).
    • Calculated as 50% of Total Turnover as taxable income (assuming 50% expenses).
  • Deductions: No separate Standard Deduction is allowed if opting for 44ADA.

3. Business Owner (Small Traders/Retailers)

  • Income Type: Profits and Gains of Business.
  • Sec 44AD (Presumptive Taxation):
    • Eligible if turnover < ₹2 Crores.
    • Calculated as 6% of Turnover (if received digitally) or 8% (if cash).
    • Current Implementation: Fixed at 6% (Modern/Digital focus).

💹 Tax Slab Standards (FY 2024-25)

New Tax Regime (Default)

Income Slab (₹) Rate
Up to 3,00,000 Nil
3,00,001 - 7,00,000 5%
7,00,001 - 10,00,000 10%
10,00,001 - 12,00,000 15%
12,00,001 - 15,00,000 20%
Above 15,00,000 30%
  • Rebate (Sec 87A): Available if taxable income ≤ ₹7,00,000. Effectively NO TAX for income up to ₹7.75L (including Standard Deduction).

Old Tax Regime (Optional)

Income Slab (₹) Rate
Up to 2,50,000 Nil
2,50,001 - 5,00,000 5%
5,00,001 - 10,00,000 20%
Above 10,00,000 30%

🛡️ Surcharges & Cess

  • Health and Education Cess: Fixed at 4% of the Base Tax.
  • Surcharge: Applied for high-income earners (usually above ₹50L). [Next Phase Implementation]