2. TAX
Tax levied by the government is a multidimensional instrument. It helps resource
mobilization, helps government to take up schemes and projects for economic
development.
INTRODUCTION OF TAX
3. .
Types of Tax
1. Direct Tax 2. Indirect Tax
1. Direct Tax:
The impact and the incidence of tax fall on the same person. In short, a tax wherein the
the tax payer and the tax bearer are the same person. Such as, Income tax, Wealth tax
(property tax)
2. Indirect Tax:
The impact and incidence of tax fall on different persons. In short, tax is imposed on one
person, but paid partly or wholly by another (shifted to another.) Such as, Sales tax, Excise duties,
duties, Customs duties…
4. .
INCOME TAX ACT 1961
In India income tax introduced by Sir.James Wilson 1860. In 1918 the Act was passed & it
replaced in 1922. Income-tax Act, 1961 it amended 1st April 1962, i.e., Income-tax Rules, 1962.
Came into force w.e.f. 1st April, 1962. Extends to whole of India. Even J&K, Sikkim.
It consists of more than 298 sections, 23 chapters and 12 schedules. The number of sub-sections,
provisions and Explanations runs into several hundreds.
The Act determines which persons are liable to pay tax and in respect of which income.
However, the Act does not prescribe the rates of Income Tax. The rates of Income-tax are
prescribed every year by the Finance Act (popularly known as “The Budget”).
5. .
Some of the important definitions contained in the Act are of
Person
Income
Assessee
Assessment Year (2020-2021)
Previous Year (2019-2020)
Gross Total Income
Total Income
6. .
Persons
Person U/S 2 (31) includes
An individual
A Hindu undivided family
A company
A firm
AOP-association of person
BOI – body of individual
Every other artificial juridical person.
7. .
Income
Profit and Gains
Dividend
Voluntary Contribution received by a Trust
The Value of any Perquisite (Perks) or profit in lieu of Salary Taxable U/S 17 (2) (3).
Any Special Allowances or benefit, other than Perquisite included under sub-class (iii)
Any some paid as obligation by the Company.
Any Capital Gain
Any some received under key man Insurance Policy.
8. .
Type of assessee
Ordinary assessee
Representative (or) Deemed assessee
Assessee- in- default
a) Ordinary assessee:
Any person who is pays the tax, penalty and who is eligible for any refund to tax from the tax
authority.
b) Representative (or) Deemed assessee:
Any person who is responsible for income of other person to whom the act as an representative.
representative. Eg. A person pay for tax instead of Minor’s income.
C) Assessee in Default
If any person fails to fulfil his duty or obligations called as Assessee in default.
Assessee
Assessee means a person by whom any tax or any other sum of money is payable under this act.
9. .
Assessment Year (2020-21)
Assessment year U/S 2 (9) means the period starting from April 1 and ending on march 31 of the
the next year, which is income earned is charged to tax.
E.g. - Assessment year 2020-2021 which commenced on April 1, 2020 and will end on March 31, 2021.
2021.
Previous Year/ Financial Year (2019-2020)
The Previous Year u/s 2(34) the financial year immediately preceding the assessment year whine is
whine is income earned year.
E.g.: For the assessment year 2020–2021, the previous year is F.Y. 2019-2020.
Previous year 2019-2020 which commenced on April 1, 2019 and will end on March 31, 2020.
10. .
Gross Total Income
Aggregate Five Heads of Income is called Gross Total Income.
GTI = Salary Income + House Property Income+ Business Or Profession Income + Capital
Gains + Other Sources Income + Clubbing Of Income – Set Off Losses.
Total income [sec 2 (45)]
Total income means the total amount of income referred to in sec 5 computed in the manner laid
down in this act. In other words, total income means income remaining after allowing deduction U/S
(80 c to 80 u) from gross total income.
Total Income = GTI – Deduction (U/S) 80
11. .
Heads of income ( sec14)
There are Five Heads are:
Income from Salaries
Income from House Property
Income from Profit and Gains of Business or Profession
Income from Capital Gains and
Income from Other Sources
12. .
Basic conditions U/S 6 (1)
I) He must be in India for a period of 182 days
Additional Condition: U/S 6(6)
i) He must be an India / resident at
least 2/10 preceding the relevant P.Y
ii) He has been in India for at least 730
days in all during 7 P.Y proceeding
relevant P.Y
Residential Status
Resident - Ordinary Resident
- Not an Ordinary Resident
Non-Resident
13. .
Assessee Basic Condition Additional Condition
Resident
He must satisfy at one of the basic
conditions.
Not required.
Not
Ordinarily
Resident
He must satisfy at least one of the
basic conditions.
He must satisfy either one or both the
additional conditions given u/s 6(6).
Non-
Resident
Should not satisfy any of the basic
conditions.
Not required.
14. .
EXEMPTED INCOMES
Meaning
Exempted incomes are those incomes on which income tax is not charged. The exemptions may be based
on the nature of income, status of the assessee or any source of income.
Forms Of Exempted Incomes : Sec (10)
Agriculture income [sec10(1)]
Any some received by a HUF [sec 10 (2A)]
Share of income from the firm[sec 10 (4) (i)]
Interest paid to non-resident[sec10(6)]
Any gifts and awards
Remuneration of foreign trainee[sec 10 (6)]
15. .
Conti……
Income of a consultant[sec 10 (8A)]
Income of employees of consultant[ sec 10 (6)]
Gratuity (govt employee) [sec 10 (10)]
Computed value of pension received[sec 10 (10A)]
Income by way of tax on perks [sec 10 (10) (c)]
Any sum received under a life insurance policy[sec 10 (10D)]
Payment from recognised fund[sec 10 (12)]
House rent allowance[sec 10 (13A0]
Interest incomes[sec 10 (15)]
16. .
Agricultural Income sec.10 (1A)
Agricultural income is fully exempted from tax U/S 10 (1) and as such does not from part of
part of total income
Any rent or revenue derived from land which is situated in India and is used for agricultural
agricultural purpose
Any income derived from such land by agriculture
The performance by a cultivator or receiver of rent-in-kind of any process ordinarily
employed by a cultivator or receiver
