This document provides an overview of income tax law in India. It discusses key concepts such as the history of income tax in India, heads of income (salary, house property, business, capital gains, other sources), important terms like assessee and residential status, and the incidence of tax based on residential status (resident, resident but not ordinarily resident, non-resident). The residential status of an individual depends on the number of days spent in India in the previous year or over the last few years. The incidence of tax, or who bears the tax burden, depends on the residential status of the assessee and where the income is earned and received.

1. INCOME TAX – I
PART-I
Mrs. S.K.SUDHA., M.Com.,M.Phil.,DGT.,PGDCA.,
Assistant Professor ,
Commerce Department,
E.M.G.Yadava Women’s College, Madurai

2. POINTS OF PRESENTATION
INTRODUCTION
HISTORY OF INCOME TAX
HEADS OF INCOME
IMPORTANT TERMS
RESIDENTIAL STATUS
INCIDENCE OF TAX

3. INTRODUCTION
 The present law of Income Tax is contained in the Income Tax Act, 1961. The Income
Tax Act 1961. The Income Tax contains the provision for determination of taxable
income, determination of tax liability, procedure for assessment, appeal, penalties
and prosecutions. It also lays down the powers and duties of various income tax
authorities.
 The Income Tax Law comprises the Income Tax Act 1961, Income Tax Rules 1962,
Notifications and Circulars issued by Central Board Of Direct Taxes (CBDT),
Annual Finance Acts and Judicial Pronouncements by Supreme Court and High
Courts.

4. MEANING OF TAX
Tax is a compulsory contribution to state revenue, levied by the
government on workers income and business profits or added to the
cost of some goods, services and transactions. It may be direct tax or
indirect tax.
Direct tax is a tax, such as income tax, which is levied on the income
or profits of the person who pays it, rather than on goods or services.
Indirect Tax is levied on goods and services rather than on income or
profits.

5. HISTORY OF INCOME TAX
 In modern India, Tax was introduced for the first time in 1860 by
SIR JAMES WILSON in order to meet the losses sustained on account
of military of 1857. This was the first Income Tax Act of modern India.
In Independent India the Income Tax Act 1922 was replaced with
Income Tax Act 1961 which was implemented on 1st April 1962 and it
is still in force.
Since 1962 several amendments of far reaching nature have been
made in Income Tax Act by the Union Budget even year.

6. HEADS OF INCOME
Income
from
salary
Income
from
House
property
Income
from
Business &
Profession
Income
from
Capital
Gain
Income
from Other
Sources

7. IMPORTANT TERMS
 Assesee
Assessment Year
Residential Status
Incidence of Tax

8. ASSESSEE
As per section 2(7) of the Act, assesse means a person by whom any tax or any other sum of
money is payable under the Act and includes:
a) every person in respect of whom any proceeding under this Act has been taken for the
assessment of his income or assessment of fringe benefits or of the income of any other
person in respect of which he is assessable or to determine the amount of refund due to
him or to such other person.
b) every person who is deemed to be an assesse under any provision of this Act.
c) every person who is deemed to be an assesse in default under any provision of
this Act

9. ASSESSMENT YEAR & PREVIOUS YEAR
• Assessment year means the period
starting from April 1 and ending 31st
March of the next year.
• Previous Year means the financial year
immediately before the assessment
year
Assessment Year
1.4.2020 to 31.03.2021
Previous Year
1.04.2019 to 31. 03.2020

10. BASIC RULES FOR DETERMINING
RESIDENTIAL STATUS
• Citizenship and Residential status are separate
• Determined on the basis of residence of the previous year
• Status various from year to year – It may change from one Previous year to another
previous year
• Stay at one place – Assesse may have different place of residence in the same
previous year.
• Stay in India continuously-may be in and out of India any number of items.
• Types of accommodation for stay is immaterial
• Day of arrival in India as well as the day of departure shall be counted as stay in
India
• Person of Indian Origin

11. RESIDENTIAL STATUS
• INDIVIDUAL AND HUF
Resident
Resident but not Ordinarily Resident in India
Non Resident
 FOR OTHERS
Resident
Non- Resident

12. RESIDENTIAL STATUS OF AN INDIVIDUAL
BASIC CONDITIONS:
An Individual is said to be resident of India in any previous year, if he satisfies at
least any one of the following basic conditions
(i) Assessee has been resided in India during the previous year for the period of
182 days or more
(ii) Assessee has been resided in India for the period of 60 days during the
previous year and 365 days or more in the 4 yrs preceeding the previous year

13. RESIDENT AND ORDINARY RESIDENT IN
INDIA
ADDITIONAL CODITIONS:
A resident Individual is treated as resident and ordinarily resident in
India, if satisfies the following two additional conditions.
(i) Assessee is resident in at least 2 out of 10 years before the previous
year
(ii) Assessee has been in India for 730 days or more during 7 years
preceding the previous year.
In brief, it can be said that, an individual becomes resident and ordinarily
resident in India, if he satisfies at least any one of the basic conditions and the
two additional conditions

14. RESIDENT BUT NOT ORDINARY RESIDENT
• An Individual who satisfies atleast one of the basic conditions but not satisfy the
two
• Additional conditions is treated as a resident but not ordinarily resident of India.
NON RESIDENT
An Individual is non resident of India during the previous year, if he satisfied
none of the basic conditions.

15. INCIDENCE OF TAX
 Incidence of tax or tax burden is the analysis of the effect of a
particular tax on the distribution of economic welfare.
 Tax incidence is said to Fall upon that the group ultimately bears
the burden of to pay tax.
 It is the true the ultimate resting of a tax upon individuals or class
who cannot shift it future.

16. INCIDENCE OF TAX & STATUS OF
ASSESSEE
Different Type of Incomes Resident Not Ordinary
Resident
Non-Resident
1. Income received or deemed to be received in
India. It is immaterial whether it is earned in
India or in Foreign country
Taxable Taxable Taxable
2. Income earned in India whether received in
India or Outside India
Taxable Taxable Taxable
3. Income earned and received outside India
from a business controlled or profession setup
in India. Income may or may not be remitted to
India
Taxable Taxable Not Taxable

17. Different Type of Incomes Resident Not Ordinary
Resident
Non-Resident
4. Income earned or received outside
India from a business controlled or
profession set – up outside India
Taxable Not Taxable Not Taxable
5. Income earned and received
outside India from any other source.
Taxable Not Taxable Not Taxable
6. Past untaxed income is remitted to
India during the current previous
year.
Not Taxable Not Taxable Not Taxable