4. CONTENT
• Meaning and terms used:
• Person
• Assessee
• Assessment year
• Previous year
• Income (definition and Concepts)
• Gross Total Income
• Total Income
• Deemed Income,
• Rate of Income Tax
• Income Tax Authorities
• Kinds of Assessments
• Assessment procedure
• PAN
5. • Meaning of Tax
• Tax is a part of income of persons which the government collects from the
persons. The tax so collected is used for providing numerous facilities like,
water and drainage system, protection against enemies, developing
infrastructure, education etc.
• In simple terms tax is a source of revenue of the Government.
6. Introduction
• Income tax is a tax of central government which is collected from the persons
on their earned income.
• For this purpose, the Central Government has passed a separate Act i.e.
Income-Tax Act, 1961.
• The taxes so collected by the government form a pool of resources to be used
of the collective benefits of the public.
7. Types of Taxes
There are mainly two types of taxes:
1. Direct Taxes:-
Direct taxes are taxes that are directly paid to the government by the
taxpayer. It charges the person directly by the government. The burden
of the taxes cannot be transferred from one person to another.
For example: - Income Tax, Gift Tax.
8. • Indirect Taxes:
• Indirect taxes are applied on the manufacture or sale of goods and services.
The burden of the taxes is transferred from one person to another. These are
initially paid to the government by an intermediary, who then adds the
amount of the tax paid to the value of the goods or services and passes on
the total amount to the end user.
• For example:- GST, Custom Duty
9.
10. • An Individual:- an individual is a natural person including male,
female, major, minor or even a lunatic.
• A Hindu Undivided Family (HUF):- It is a family that consists of a
common ancestor and his lineal male descendants and their wives
and unmarried daughters.
• A company: as per sec 2(17) of Income Tax Act, a ‘company is defined
i. any Indian company, or
ii. Any body corporate incorporated by or under the laws of a country outside
India; or
iii. Any institutions, association or body which is or was assessable or was
assessed as a company for any assessment year
iv. Any institution, association or body, whether incorporated or not and
whether Indian or non-Indian, which is declared by general or special order
of the Board to be a company.
11.
12. Assessee Sec- 2(7)
• The assessee means a person by whom any tax or any other sum of
money is payable under Income Tax Act.
• Any other sum includes a fine, an interest, a penalty or a surcharge on
income tax.
• Assessee is divided into 3 categories
i. Ordinary Assessee
ii. Representative Assessee or deemed assessee
iii. Assessee-in-default
13. Assessment sec 2(8)
• Assessment is a process of determining the correctness of total income
of an assessee and determining the amount of tax payable him.
14. • Assessment Year Sec. 2(9):
Assessment Year means the period of 12 months commencing on the 1st day
of April every year ends on 31st March of the following year. Income earned
during the previous year will be assessed in Assessment Year.
• Previous Year Sec. 3:
It is a period of 12 months immediately preceeding the Assessment year. It
is a period during which income earned will be assessed in Assessment
Year. Previous Year also known as accounting year or income year.
15.
16. • Previous year incase of newly set up business:
• The previous year incase of newly started business shall be the period from
the date of starting the business to 31st March next following.
• For example , if a newly business has started its operation from 01-10-
2019,then previous year shall be period from 1-10-2019 to 31-03-2019.
17. General Rule of Previous Year
• The income of the person which is earned during the previous year will be
assessed in the assessment year is called general rule of previous year.
• Exceptions to General Rule of Previous Year
1. Income of non-residents from shipping business: section 172
2. Income of person leaving India: Section 174
3. AOP/BOI/Artificial Juridical Person formed for a particular purpose:
Section 174A
4. Income of a person trying to transfer his assets with a view to avoiding
payment of tax: section 175
5. Income of a discontinued business or profession: Section 176
18. Income Sec 2(24)
• Definition -https://www.caclub.in/income-meaning-s-224-income-
tax/
• Income is inclusive in nature.
• Any receipt which satisfies the basic condition of being income is also
treated as income.
19. Deemed Income sec.41
• The following receipts are considered to be incomes frombusiness or
profession and hence, taxable;
1. Recovery of loss or expenditure previously allowed
2. Remission or cessation of liability
3. Bad debts recovered
4. Excess on sale of assets
5. Income of discontinued business
20. Heads of income
1. Income from salary,
2. Income from house property,
3. Income from profits or gains of business,
4. Capital gains and
5. Income from other sources.
21. Gross Total Income: Sec. 80B(5)
• It is the aggregate taxable income under the different heads of
income such as income from salary, income from house property,
income from profits or gains of business, capital gains and income
from other sources.
• i.e. Total Income computed in accordance with the provision of the
act before making any deductions under section 80 C to 80 U.
22. Total Income Sec. 2(45)
• Total income is the income of assessee from all sources on which he
has to pay income tax. In other words it is a income under all the five
heads after making deduction under section 80C to 80U.
26. SOME IMPORTANT POINTS:
• The income tax rates are applied to the annual income calculated. Thereafter
Surcharge and Cess is added to the tax payable.
• A surcharge is also applicable slab wise. The surcharge is calculated on the Tax
amount. If the income is:
• Above Rs.50,00,000 and up to Rs.1 crore – then 10% surcharge is applicable
• Above Rs.1 crore and up to Rs.2 crore – then 15% surcharge is applicable.
• In the Union Budget 2019-20, a new surcharge on income tax for super-rich
individuals has been levied. So, individuals earning:
• Between Rs.2 crores and up to Rs.5 crore –then 25% surcharge is
applicable;
• For Above Rs. 5 crore – then 37% surcharge is applicable.
• An additional Cess of 4% for Health & Education is applicable to the
income tax plus surcharge.
27. Income Tax Authorities
• The Income Tax Department , also referred to as IT Department, is a government agency in charge
of monitoring the income tax collection by the Government of India. It functions under the
Department of Revenue of the Ministry of Finance.
• The following are the Income Tax Authorities
1. The Central Board of Direct Taxes(CBDT) constituted under the Central Boards of Revenue Act, 1963.
2. Directors-General of Income-tax or chief commissioners of Income-tax,
3. Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax(Appeals)
4. Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional
Commissioners of Income-tax(Appeals)
5. Joint Directors of income-tax or joint commissioners of income-tax
6. Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of
Income-tax(Appeals)
7. Assistant Directors of Income-tax or Assistant Commissioners of Income-tax
8. Income-tax Officers
9. Tax Recovery Officers
10. Inspectors of Income-tax
28. Kinds of Assessment
1. Self Assessment: Sec.140A
2. Assessment on the basis of Return : Sec. 143(1)
3. Regular Assessment: Sec. 143(3)
a. Assessment on the basis of evidence: Sec. 143(3)
b. Best Judgment Assessment: Sec. 144
4. Income Escaping Assessment or Reassessment: Sec.147
29. Self Assessment
• The assessee himself determines the income tax payable.
• The tax department has made available various forms for filing income tax
return.
• The assessee consolidates his income from various sources and adjusts the
same against losses or deductions or various exemptions if any, available to
him during the year.
• The total income of the assessee is then arrived at.
• The assessee reduces the TDS and Advance Tax from that amount to
determine the tax payable on such income. Tax, if still payable by him, is
called self assessment tax and must be paid by him before he files his
return of income.
• This process is known as Self Assessment
30. Regular Assessment
• The income tax department authorizes the Assessing Officer or
Income Tax authority, not below the rank of an income tax officer, to
conduct this assessment.
• The purpose is to ensure that the assessee has neither understated
his income or overstated any expense or loss or underpaid any tax.
a. Assessment on the basis of evidence: Sec. 143(3)
b. Best Judgment Assessment: Sec. 144
31. Assessment under section 143(3)
• This is a detailed assessment and is referred to as scrutiny
assessment. At this stage a detailed scrutiny of the return of income
will be carried out to confirm the correctness and genuineness of
various claims, deductions, etc., made by the taxpayer in the return of
income.
32. Best Judgment Assessment
This assessment gets invoked in the following scenarios:
a. If the assessee fails to respond to a notice issued by the department
instructs him to produce certain information or books of accounts
b. If he/she fails to comply with a Special Audit ordered by the Income tax
authorities
c. The assessee fails to file the return within due date or such extended time
limit as allowed by the CBDT
d. The assessee fails to comply with the terms as contained in the notice
issued under Summary Assessment
After providing an opportunity to hear the assessee’s argument, the
assessing officer passes an order based on all the relevant materials and
evidence available to him. This is known as Best Judgment Assessment.
33. Income Escaping Assessment
When the assessing officer has sufficient reasons to believe that any
taxable income has escaped assessment, he has the authority to assess or
reassess the assessee’s income. The time limit for issuing a notice to
reopen an assessment is 4 years from the end of the relevant assessment
Year. Some scenarios where reassessment gets triggered are given below.
a. The assessee has taxable income but has not yet filed his return.
b. The assessee, after filing the income tax return, is found to have either
understated his income or claimed excess allowances or deductions.
c. The assessee has failed to furnish reports on international transactions,
where he is required to do so.
34.
35. Permanent Account Number
• PAN is issued by the Income Tax Department which contains a 10 character
alpha numeric number to each assessee to identify the returns, tax payments
and quick disposal of refunds or assessments.
• According to section 139(A) following persons are required to get the
permanent account number:-
• if his total income or the total income of any other person in respect of which he is assessable
under this Act during any previous year exceeded the maximum amount which is not
chargeable to income-tax; or
• if he is carrying on any business or profession whose total sales, turnover or gross receipts are
or is likely to exceed Rs. 5,00,000 in any previous year; or
• he is required to furnish a return of income under section 139(4A), i.e., return of trust and
charitable institutions.
• An employer who is required to furnish a return of fringe benefits tax u/s 115
• Any person registered under Central Sales Tax Act or General Sales Tax law. Exporters and
importers required to obtain import-export code and service tax assesses are to apply for PAN.
• Ex- ABCDE1999J
