Income Tax Introduction


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Income tax intro.

Income Tax Introduction

  1. 1. Income Tax Act, 1961 (Introduction & Basic Concepts) <ul><li>Passed in September 1961, </li></ul><ul><li>Came into operation w.e.f. 01.04.1962, </li></ul><ul><li>Extends to whole of India. </li></ul><ul><li>Rate of IT are given in the “Finance Act”, passed by the parliament every year. </li></ul>
  2. 2. <ul><ul><li>Income Tax is a Direct Tax. </li></ul></ul><ul><ul><li>In case of direct tax, the burden and incidence are on the same person who pays the tax, but in the case of indirect tax, the burden is on one and the incidence on another. </li></ul></ul><ul><ul><li>It is levied & collected by the Central Govt. </li></ul></ul>
  3. 3. Tax on “Income” <ul><li>Income is defined u/s 2(24) of the Act. </li></ul><ul><li>It is inclusive in nature, i.e., apart from items listed in the definition, any receipt which satisfies the basic condition of being income is also to be treated as income. </li></ul><ul><li>Income broadly includes: </li></ul><ul><li>Profits & Gains from Business and Profession </li></ul><ul><li>Salary Income </li></ul><ul><li>Dividend Income </li></ul><ul><li>Winnings from lotteries, crossword puzzles, races, games, gambling or betting. </li></ul>
  4. 4. “Income” (Contd..) <ul><li>Capital Gains, </li></ul><ul><li>Amount recd. under a Keyman Insurance Policy, </li></ul><ul><li>Voluntary Contributions recd. by a religious or charitable trust or scientific research association or a sports promotion association, </li></ul><ul><li>Allowances given to the assessee by his employee, </li></ul><ul><li>Gift recd. by individual & HUF, in excess of Rs.25000 on or after 01.09.2004. </li></ul>
  5. 5. ASSESSEE <ul><li>One who is assessed or is liable to pay tax. </li></ul><ul><li>According to sec. 2(7) assessee means & includes: </li></ul><ul><li>A person by whom any tax or any other sum is payable. </li></ul><ul><li>A person in respect of whom any proceeding under the Act is taken. </li></ul><ul><li>Every person : </li></ul><ul><li>who is assessable in respect of income or loss of another person, or </li></ul><ul><li>who is deemed to be an assessee, or </li></ul><ul><li>who is deemed to be assessee in default. </li></ul>
  6. 6. PERSON : Sec. 2(31) <ul><li>Individual </li></ul><ul><li>HUF </li></ul><ul><li>Company </li></ul><ul><li>Firm </li></ul><ul><li>AOP/BOI </li></ul><ul><li>Local Authority </li></ul><ul><li>Any artificial juridical person not falling under any of the above category. </li></ul>
  7. 7. Previous Yr. & Assessment Yr. <ul><li>PREVIOUS YEAR (P.Y.) </li></ul><ul><li>The yr. in which is income is earned is earned is known as Previous Year (P.Y.) and it is taxed in the next year called Assessment year (A.Y.). </li></ul><ul><li>Section 3: Fin. Yr. preceding the Assessment Year. </li></ul><ul><li>Before AY:1989-90 the assessees used to maintain their previous year by will, e.g., Calender Year, Diwali Year, etc. </li></ul><ul><li>In case of a newly set up business/profession or a source of income newly coming into existence during a Fin. Yr. the the previous year shall be the period beginning with the date of such setting up or such source coming into existence and ending with the said financial year, i.e., the immediately following March 31 st . </li></ul>
  8. 8. Computation of Income <ul><li>1.) Income from Salary XXXX </li></ul><ul><li>2.) Income from House Property XXX </li></ul><ul><li>3.) Income from Business/Profession XX </li></ul><ul><li>4.) Income from Capital Gains X </li></ul><ul><li>5.) Income from Other Sources XXXXX </li></ul><ul><li>GROSS TOTAL INCOME (Sec. 14) XXXX </li></ul><ul><li>Less:Deductions u/chap-VI-A (Sec.80CCC to 80U) XXX </li></ul><ul><li>TOTAL INCOME [Sec.2(45)] XXXX </li></ul><ul><li>Tax Due XXX </li></ul><ul><li>Less:Rebates and Reliefs u/Chap-VIII XX </li></ul><ul><li>Tax Payable XXXX </li></ul>
  9. 9. Exceptions to the Rule of P.Y. <ul><li>Income of person leaving India permanently or for a long period of time, </li></ul><ul><li>Income of person trying to alienate his assets with an intention to avoid tax, </li></ul><ul><li>Income of a discontinued business, </li></ul><ul><li>Income of non-resident shipping companies having no representative in India. </li></ul><ul><li>These incomes are taxed as the incomes of the assessment year immediately preceding the normal assessment year at the rates applicable to the former. </li></ul><ul><li>ASSESSMENT YEAR: Period of 12 months commencing on 1 st Apr. every yr. It is the fin. Yr. immediately succeeding the previous year. </li></ul>
  10. 10. Submission of Returns & Assessment <ul><li>Submission of Return </li></ul><ul><li>Following persons are required to file their returns in prescribed form and in prescribed manner: </li></ul><ul><li>Company from AY:2001-02, </li></ul><ul><li>Firm (From AY:2006-07), </li></ul><ul><li>Persons whose total income exceed the maximum amount not chargeable to tax, </li></ul><ul><li>Persons covered under 1/6 criteria. </li></ul><ul><li>Assessment </li></ul><ul><li>Assessment includes re-assessment. Various kinds of assessments are covered u/chap.-XIV. </li></ul>
  11. 11. Capital/Revenue & A/C-ing Methods <ul><li>Capital & Revenue Receipts : </li></ul><ul><li>See Book Pg4 </li></ul><ul><li>Capital & Revenue Expenditure : </li></ul><ul><li>See Book Pg5 </li></ul><ul><li>Accounting Methods </li></ul><ul><li>See Book Pg5 </li></ul>