Income tax or taxable income is the amount of money people are entitled to pay to their respective countries from their yearly earnings. That is, if you are an employed citizen of your country, a fixed percentage of your earnings should be paid to the government. Failure to do so is a major crime and punishable under law.
Different states and countries have a different method for calculating the amount of taxes a person would have to pay every year. The person’s age, his income, his occupation, the amount of money spent on investment plans, insurance policies, educational plans, etc. are taken into consideration before calculating the taxable income. Generally, the following formula is applied in numerous countries the world over:
Taxable income = Amount of salary earned – deductions
Here, the deductions include money spent on insurance covers, investment policies, retirement plans and the like. These are deducted while calculating taxable income. If a person does not enroll or use these deductions, he will be entitled to pay more tax than the person who uses these investment plans.
Failure to pay taxable income is a serious offence. In most cases, the person is fined a large amount of money, sometimes even up to $100,000 depending on the reasons and frequency of evasion. In some cases, he may be jailed for five years or more. A person caught submitting false records of his income to evade paying large amount of tax will also be tried in the court of law and punished accordingly. Paying table income is a duty incumbent on every citizen.