slides on basic income tax structure

1. Direct Tax
BY CA BALA YADAV

2. TAX?

3. TAX
Latin-Word-TAXO-Means-RATE
Financial Charge/other levy
Imposed upon a tax payer (tax payer may a individual or legal entity)
By the state or the functional equivalent of a state
That failure to pay or evasion of or resistance
Is punishable by law.
Our tax system is based on our "ability to pay." The more money we earn,
the more taxes we pay. And the opposite is also true. If we earn a small
income, we pay less taxes.

4. A means by which governments finance their expenditure by imposing
charges on citizens and corporate entities.
Governments use taxation to encourage or discourage certain economic
decisions.
For example, reduction in taxable personal (or household) income by
the amount paid as interest on home mortgage loans results in greater
construction activity, and generates more jobs.

5. TYPE OF TAXES
DIRECT TAXES
• A tax that is paid directly by an
individual or organization to the
imposing entity.
• e.g income tax, wealth tax etc.
Burden of tax borne by the person
himself.
INDIRECT TAXES
• A tax that increases the price of a
good so that consumers are actually
paying the tax by paying more for
the products.
• e.g excise duty, vat, sales tax,
Service tax etc. Burden of tax
shifted to another person

6. Income
Tax Law
The Income Tax
Act, 1961
The Income
Tax Rules,
1962
Circulars,
Clarifications from
CBDT Time to
time
Judicial
Decision

7. CY FY AYPY

8. AY-Assessment Year- Section 2 (9) of Income Tax Act, 1961
A year in which income of an assessee of the previous year/last year needed to be assessed.
It is called as “tax year” in some of the countries. Assessment Year (AY) is a period of twelve months starting from
April 1st and ending on March 31st.
PY-Previous Year- Section 3 of Income Tax Act, 1961
A year in which income is earned to be taxed exactly in the immediately next/following assessment year.
It is also known as “income year” in some of the countries.

9. For Example – The income accrued in FY 2013-2014 its Assessment Year (AY) is 2014-2015. So, Financial Year
(FY) is the Previous Year (PY) while Assessment Year (AY) is the Current Year (CY) in which the income is being
assessed earned in Previous Year (PY). In the Assessment Year (AY) your total tax liability for the income earned in
the previous financial year is evaluated and computed. Therefore, tax for the income earned in the Previous Year
(PY) is paid in the Current Year (CY).
Previous Year in case of Newly Setup Business/Profession
First Previous Year Second & Subsequent Previous Year
Starting Point It Commences on the date
of setting date up of the
B/P or on the date when
the new source of income
comes into existence.
April 1
Ending point Immediately following
march 31
March 31st of the following year
Duration of Previous Year 12 months or less 12 months

10. Income of the Previous Year is not Taxable
in the immediate Assessment year
i.e. Exceptions
There are 5 cases in which income of previous year is not
taxable in immediate assessment year. Means Income is
Taxable in the Previous Year in which such Income is
earned.

11. Section 172
ShippingBusinessOf
Non-Residents

12. Section 174
Income of a person leaving India
either permanently or for a period of time

13. Section 174A
Association of person or body of individual,
formed or established for a particular event and purpose
and likely to be dissolved in the same year
in which the same was established.

14. Section 175
Person likely to transfer property to avoid tax

15. Section176
Discontinued Business

16. Some Important Terms & Definitions Under
INCOME TAX ACT, 1961
• Section 2(7) Section 2(8)
• Section 2(22) Section 2 (24)
• Section 2(25A) Section 2(26A)
• Section 2(26B) Section 2(29BA)
Section 2(31)

17. PERSON
u/s 2(31)
INDIVIDUAL AOP/BOI
ARTIFICIAL JURIDICIAL PERSON

18. A natural human being
i.e. male, female, person of sound and
unsound mind
It also includes minor child. However income of
minor child included in the income of a parent.
AN INDIVIDUAL

19. “
”
AS per Hindu Law, HUF means a family which consists
of all the persons lineally descended from a common
ancestors including their wives and unmarried
daughters.
HUF is not defined under tax laws.
FIRM as defined under Indian Partnership Act,
1932 and shall includes LLP’s. defined under
Limited Liability Partnership Act 2008

20. AOP/BOI
AOP
• As name suggest, two or more persons
• Join for a common purpose
• With a view to earn income.
• In AOP two or more persons joined hand in
income producing activity only.
• Companies, Individual , firm , HUF can be a
AOP Member.
• AOP have common design or will.
BOI
• As name suggest, consist of individuals
only for income earning activity.
• Companies , firm , HUF cannot be a
member of BOI.
• BOI may or may not have such common
design or will.

21. LOCAL
AUTHORITY Artificial Judicial Persons
• It is the rest category for the purpose of
income tax act.
• It includes entities which are not natural
person and act as separate entity in the
eyes of law.
• Artificial person with a juristic personality
fall under this category.
Panchayat
Municipality
Municipal Committee
District Board
Cantonment Board

22. Thank You