Procedure for calculating personal income tax

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Personal income tax is considered the most significant tax in the country. It is forced to pay all persons receiving official income. It is levied on salaries, dividends or other cash receipts recorded in an official way. Therefore, every person planning a legitimate job should know how personal income tax is calculated and paid. If this process is not completed in a timely manner, then this becomes the basis for bringing violators to administrative responsibility, therefore, significant fines and pen alties are charged. The amount of the fee is fully controlled by law, since it is the federal authorities who set the tax rate, tax period and other parameters.

The concept of tax

Personal income tax is considered a significant fee that is paid to the state budget by every officially working person. The tax on personal income is transferred not only by employees, but also by company executives, shareholders,government employees or self-employed professionals.

The fee is charged exclusively on the income of citizens, and the individuals themselves may have different statuses. Therefore, they pay personal income tax:

• residents of the country, who may be Russian citizens or foreigners staying on the territory of the Russian Federation for more than 183 days;
• non-residents with foreign citizenship, but at the same time doing business in Russia, therefore, make a profit in the country.

To calculate this fee, standard rates are used, which are set depending on the status of taxpayers. For employees, the payment of taxes on personal income is carried out by employers. Individual entrepreneurs must calculate and transfer payments themselves, but for the heads of companies this process is carried out by hired accountants.

What is the fee for?

Initially, you should figure out what is the object of taxation. Personal income tax is collected and calculated only on certain types of income, which include:

• Funds received as a result of the sale of various property owned by a citizen for less than three or five years. Three years applies to valuables that were transferred to a person's ownership on the basis of gratuitous transactions, for example, when forming a donation or transferring an object by inheritance. Five years (since 2016) applies to those purchased with own fundsitems.
• Profit resulting from the leasing of certain property, and the process must be carried out legally, therefore, it is required to register the lease with Rosreestr.
• Salary, allowances, bonuses and cash incentives received by a citizen in official work.
• Dividends paid by different companies to all holders of securities.
• Gifts, the value of which exceeds 4 thousand rubles. per year.
• Other types of income.

But there are some types of income that are not subject to personal income tax in the Russian Federation.

Which receipts are exempt?

Fee is not calculated on certain types of income. These include:

• money received from the sale of a property owned by a person for more than three or five years;
• money inherited from a deceased relative;
• income received as a result of the preparation of a donation, and these funds should be transferred exclusively between relatives;
• many government benefits, except for temporary disability benefits;
• pensions;
• rewards given to donors;
• many types of compensation;
• support that can be paid for children, parents or dependents;
• grants received by a citizen as part of the support of the educational sphere or science, culture or art;
• prizes thatmay be granted by Russian or foreign authorities if there are any scientific, cultural or other types of achievements;
• material assistance;
• income received from the sale of various products obtained as a result of farming;
• scholarships received by students, various doctors, graduate students or other citizens studying or working in educational institutions;
• sports prizes in cash or in-kind gifts;
• IP operating under simplified regimes.

All types of income from which personal income tax is not charged are listed in Art. 217 NK.

What rate is used?

When calculating any type of fee, you should take into account the rate set by the state authorities. Individual income tax rates differ significantly depending on the status of the taxpayer. Accordingly, they will be different for different payers.

• 9% - this rate is applied when calculating personal income tax on dividends if they were received before 2015. Additionally, this includes income received by the founders of trust management.
• 13% - used for residents and non-residents of the Russian Federation. It is this personal income tax rate that is standard, as it is used when calculating the tax on salaries, various remunerations, bonuses, additional payments, income from the sale of real estate or other types of cash.receipts. Also, this rate is used for non-residents who work in the Russian Federation under an employment contract, as qualified specialists, as part of a program that provides assistance in the voluntary resettlement of compatriots, as well as when working as a crew member of ships sailing under the Russian flag.
• 15% - this rate is applied when non-residents receive dividends from Russian companies.
• 30% - other income of non-residents is subject to this rate.
• 35% - applies to several specific incomes. These include various winnings and prizes, interest on bank deposits if they exceed a strictly established value, income received as a result of savings on interest or for the use of money by members of credit cooperatives.

Citizens who are employees should not independently deal with calculations, since this process is implemented by the employer for them. But they can verify the correctness of the calculations themselves, so they need to know what rate is used for this.

What deductions apply?

When determining the tax base, it is allowed to use different deductions. They are presented in several varieties. If personal income tax deductions are used, they significantly reduce the tax base. They can be standard, social, professional or property.

If one taxpayer can count on several standard deductions at once, thenonly one, but the most maximum. The exception is the deductions for children, which are provided without taking into account other benefits.

Procedure and terms of fee payment

It is the tax agents who should be involved in the calculation, withholding and transfer of personal income tax to the Federal Tax Service. These agents are employers or companies that pay dividends to shareholders. Additionally, under Art. 226 and Art. 227 Tax Code includes professionals in private practice.

Also, agents are branches or representative offices of foreign companies operating in the territory of the Russian Federation and arranging official work for Russian specialists. This leads to the fact that Russian citizens receive a certain income from which personal income tax should be paid.

Should I file a declaration?

If there are incomes for which the citizens themselves must calculate and pay the fee, they must also prepare a declaration. For this, the form 3-NDFL (personal income tax) is applied. It must be prepared and submitted to the Federal Tax Service by April 30 of the next year.

Filling it out is quite simple, since only reliable data from official documents is entered. When filling out a personal income tax return, the requirements and recommendations are taken into account:

• can be filled in manually or on a computer;
• A document can be transferred in person when visiting a branch of the Federal Tax Service, by mail or via the Internet, and it is also allowed to use the help of a representative who has a notarycertified power of attorney;
• all information is entered in strictly designated lines;
• necessarily the document contains information about the income received, as well as the correct calculation of the fee itself;
• it is optimal to use special programs issued directly by the Federal Tax Service to draw up a declaration.

If any violations are detected, you will have to quickly redo the document. You can fill out a personal income tax return with the help of invited specialists. In this case, it is enough just to give them the necessary information to fill out the document.

Declaration 3-NDFL on personal income taxes is required to be drawn up independently if the money is not received at work, but as a result of renting out an object or selling real estate. If strictly established deadlines are violated, this will lead to the fact that the taxpayer will be held administratively liable, so he will have to pay significant fines. When filling out an income tax return for individuals, one should not forget about the possible deductions that a citizen can apply to reduce the tax base.

When is a declaration required?

The need to form this document arises for individuals who have received different types of income. This is usually required when receiving funds presented by:

• remunerations received from citizens or companies that do not act as tax agents for personal income tax;
• profit from the sale of various real estate, whichbelonged to a person for less than three or five years;
• receiving money from various foreign sources;
• rewards that a person received while having the status of an heir;
• profit represented by gifts of shares, cars, real estate, shares or other valuables.

Additionally, a declaration is required to be made by entrepreneurs working on the OSNO, as well as people with private practice. If a person needs to return the previously paid personal income tax, then he will also have to submit a declaration to the FTS department on his own.

How is the calculation done?

To determine the correct amount of tax, you should decide on the calculation rules. For this, the standard formula is applied: tax basetax rate. When determining the base, it is recommended to first reduce the amount of income for deductions.

If you understand the rules for calculating personal income tax, you can make sure that the determination of the collection by employers or employees of the Federal Tax Service is correct.

Calculation example

For example, a woman receives a monthly salary of 42 thousand rubles. It is important to determine how much money the employer deducts per month as personal income tax. Since there is a standard salary, the regular rate of 13% is used.

The tax amount is: 42,000 x 13%=5460 rubles. Due to monthly personal income tax deduction, the income will be equal to: 42,000 - 5460=36,540 rubles

Thus, it is enough just to understandrules for calculating personal income tax. Personal income tax is charged monthly, but you do not need to do the calculations yourself every month, since this responsibility falls on the tax agent represented by the employer.

When do you need a 2-personal income tax certificate?

This document is compiled by each company, after which it is submitted to the Federal Tax Service. Additionally, a 2-NDFL certificate (on personal income taxes) is often required for the citizens themselves, for example, when applying for loans or receiving a property deduction.

This certificate contains all information about the income of a citizen, as well as the taxes transferred to the Federal Tax Service.

This personal income tax statement includes information on:

• companies where the taxpayer is officially employed;
• direct citizen;
• received income in the company, which is charged 13%;
• provided tax deductions;
• correct calculation of cash receipts, deductions and fees.

This information is used to draw up a 3-NDFL declaration. You can generate a certificate for a different amount of time, but most often a document is required for a year of work. If a citizen leaves the main place of employment, the employer issues a certificate for the last three years.

Standardly, this document is prepared literally in one day, but it is valid for one month, so often when applying for a mortgage or other large loan, you need to receive a certificate several times within a short period of time.

Will there be progressive taxation?

Various news are constantly appearing, on the basis of which it is planned to increase personal income tax or even change the rules for its calculation. Officials are considering the possibility of levying a progressive tax on personal income. Personal income tax in this case will be calculated and paid individually by each citizen.

It is planned to increase the personal income tax rate in the near future, and it is assumed that a progressive system for calculating the fee will be introduced. It lies in the fact that the rate will depend on the income of a citizen. At the same time, a maximum of 20% can be charged from cash receipts.

Progressive system assumes that the rate will vary depending on the income of the taxpayer. This is considered fair, since people who receive low wages will continue to pay 13%, but if a person has significant cash receipts, then the personal income tax rate will be high. This is considered more fair, and will also allow such a system to control the income of citizens by the state.

But the progressive system also has many disadvantages. These include the fact that citizens will have a reduced incentive to work, and people will try in various ways to reduce their official income. Additionally, citizens' savings will be significantly reduced. Therefore, there is no exact information about the introduction of such a system yet, but if it is implemented, it will lead not only to positive results, but also to minuses forstate.

Conclusion

Thus, personal income tax is a significant type of tax paid on all incoming income. It is usually calculated by tax agents represented by employers or companies paying dividends on shares. But at the same time, such incomes often arise for which citizens have to report on their own. To do this, they must not only correctly calculate the amount of the fee, but also draw up a declaration in the form of 3-personal income tax, which is then submitted until April 30 to the Federal Tax Service.

Tax evasion or late submission of the declaration is the basis for bringing citizens to administrative responsibility, therefore, fines are charged that increase the amount that in any case will have to be paid to the state. Therefore, each taxpayer should have a good understanding of the rules for calculating and transferring tax, as well as the nuances of generating and submitting reports.