Direct Tax: Overview Types of Direct taxes, Residential Status of Assessee and many more

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of IT, Govt. of India, under E-Governance scheme;
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Authority;
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3. What is a Tax ?
A fee levied by a government on
a product, income, or on activity such
as gambling, betting, lotteries etc.
Main Source to
Finance Govt.
Expenditure.
failure to pay, or
evasion of or resistance
to tax, is usually
punishable by law.

4. Direct Taxes ?
Direct Taxes, as the name suggests, are taxes that are
directly paid to the government by the Assessee.
They are called so as the burden of taxation falls directly on
the tax payer and cannot be transferred onto anyone else.
overall control for administration of Direct Taxes lies with the Union Finance
Ministry which functions through Income Tax Department with the Central
Board of Direct Taxes (CBDT) at its apex. The CBDT is a statutory authority
functioning under the Central Board of Revenue Act, 1963.

5. Types Of DT
Income
Tax
Corporation
Tax
Security
Transaction
Tax (STT)
Dividend
Distribution
Taxes (DDT)
Minimum
Alternate
Tax (MAT)
Property
Tax

6. Income Tax ?
• Income Tax is a tax which is levied on the total taxable income of the assessee.
It came into effect from 1 April,1962. It is administered by CBDT, which is
empowered with the provisions of the Income Tax Act, 1961.
• Assessee whose income exceeds the maximum amount, which is not
chargeable to the income tax, shall be chargeable to the income tax at the rate
or rates prescribed under the finance act for the relevant assessment year, shall
be determined on basis of his residential status, i.e. Whether assessee is a
Resident and Ordinarily Resident/ Non-Ordinarily Resident/ Non-Resident.
• All residents are taxable for all their income, including income outside India.
• Non residents are taxable only for the income received in India or Income
accrued in India.
• Not-ordinarily residents are taxable in relation to income received in India or
income accrued in India and income from business or profession controlled
from India.

7. Categories of India’s Income Tax Assessees:-
Individual resident aged below 60 years
Senior Citizen
Super Senior Citizen
NRI / HUF / AOP / BOI / AJP
Co-operative Society
Firm
Local Authority
Domestic Company
Other Company

8. Residential Status
Type of person Control & management of
affairs are wholly in India
Control & management of
affairs are wholly outside
India
Control & management of
affairs are partly in India &
partly outside India
HUF/ Firm Resident Non-resident Resident
AOP / BOI Resident Non-resident Resident
Indian company Resident Resident Resident
Other company Resident Non-resident Non-resident
Any other person except an
individual
Resident Non-resident Resident
Note:- Individuals will be Resident when they Reside in India for 182 days or more; or 60 days
or more in PY and 365 days or more in 4 years immediately preceding relevant PY’s.
However, Ordinarily Resident, when he is resident for at least for 2/10 PY’s, or 730 Days in 7
Years, immediately preceding relevant PY. HUF will be ordinarily resident, when Karta satisfies
the conditions of ordinarily resident.

9. Heads of Incomes in Income Tax
Income from Salary;
Income from House property;
Income from Profits and gains from business; or profession;
Income from capital gains;
Income from other sources.

10. Income From Salary
Income can be taxed under the head salaries,
when there is a Employee-Employer Relationship
between payee and payer. If this relationship is
not exist, or in future, it is ceased to exist. Then,
the income would not be deemed under the head
Salary. If there is no Element of employer and
employee relationship, then the income shall not
be accessible under this head of Income.

11. Income From House Property
Tax on income from house property is the tax on rental
income which is being earned from house property. However,
in case the property is not Rented out, tax would be levied on
expected rent that would have been received if this property
was rented out. Various deduction like Municipal tax paid by
owner only, Standard Deduction (@30% of net annual value)
and interest on loan taken for the purpose of house property
under the section 24.

12. Income from PGBP
The income under this head belongs to section-28
of income tax act. Any income from trade /
commerce/ business/ profession/ manufacture
under this head of income after deduction certain
specified Expenses under section-30 to 37. And,
in case of Business of plying, transportation etc.,
presumptive income is calculated under the
section-44AD and 44AE.

13. Income from Capital Gains
Any profit or gains arising from transfer of capital asset [defined under
section-2(14)] effected in financial year shall be chargeable to tax under
this head and shall deemed to be income in the year of transfer took
place unless capital gain is exempt under the section- 54, 54B, 54D,
54EC, 54ED, 54F, 54G and 54GA. But even after this certain assets
relating to stock in trade for business and personal effects are not
included under this head. Here, if transfer took place after 1 year in
case of shares and 3 years in case of other assets, then gain/loss would
be considered as Long term capital gain, else will be Short term capital
gain.

14. Income from other sources
Any income which is not chargeable to tax under
the previous 4 heads would be chargeable under
this head of income provided that income is not
exempt from the computation of total income
under the section-10 or as per the provisions of
Chapter-VIA of the income tax act, 1961.

15. Corporate Tax
• Corporate Taxes are annual taxes payable on the income of a corporates
operating in India. For the purpose of taxation, companies in India are broadly
classified into domestic companies and foreign companies.
• The rate at which Corporates are taxed in India is 30% plus a 3% cess. Thus the
total comes to 30.9%. Further if the taxable income is more than Rs. 10 million,
then there is an additional surcharge of 12% also levied on the base tax rate.
• The companies and business organizations in India are taxed on the income from
their worldwide transactions under the provisions of Income Tax Act, 1961.
• A corporation is deemed to be resident in India if it is incorporated in India or if
it’s control and management is situated entirely in India.
• In case of non resident corporations, tax is levied on the income which is earned
from their business transactions in India or any other Indian sources depending
on bilateral agreement of that country.

16. Property Tax
• Property tax or 'house tax' is a local tax on buildings, along with
appurtenant land, and imposed on owners.
• The tax power is vested in the states and it is delegated by law to the local
bodies, specifying the valuation method, and collection procedures.
• The tax base is the annual rental value (ARV) or area-based rating. Owner-
occupied and other properties not producing rent are assessed on cost and
then converted into ARV by applying a percentage of cost, usually six
percent.
• Vacant land is generally exempted from the assessment. The properties
lying under control of Central are exempted from the taxation.

17. Security Transaction Tax
• STT is a tax being levied on all transactions done on the stock exchanges.
• STT is applicable on purchase or sale of equity shares, derivatives, equity
oriented funds and equity oriented Mutual Funds.
• Current STT on purchase or sell of an equity share is 0.075%.
• Selling the shares after 12 months comes under LTCG and one need not
have to pay any tax on that gain.
• In the case of selling the shares before 12 months, one has to pay
STCG @10% flat on that gain.
• However, for a trader, all his gains will be treated as trading (Business) and
he has to pay tax as per tax slabs. In this case, the transaction tax paid by
him can be claimed back/adjusted in tax to be paid.

18. Dividend Distribution Tax
• Under Section 115-O of the Income Tax Act, any amount
declared, distributed or paid by a domestic company by way
of dividend shall be chargeable to dividend tax. So, if a
company declares divided, it has to pay an effective rate of
16.995% on the dividends declared.
• This is apart from the 30.9 % of Corporate taxes. The
objective for this tax is that after paying this tax, the
dividend declared becomes tax free in the hands of the
recipient of dividend.

19. Minimum Alternate Tax
• Normally, a company is liable to pay tax on the income computed in
accordance with the provisions of the income tax Act, but many a
times due to exemptions under the income tax Act, there is huge
actual profit as shown in the profit and loss account of the company
but no taxable income.
• To overcome this issue, and in order to bring such companies under
the income tax act net, the concept of Minimum Alternate Tax (MAT)
has been introduced. The present rate of MAT is 19.05%.

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