2. Topics to be covered
1. What is incometax and when incometax came into force ?
2. What is Assesse and what are the types of Assessee ?
3. Exemption limits ( slab rates )
4. What is person ?
5. What is Assessment year ?
6. Why do citizens need to pay their tax ?
7. What is Direct and indirect tax and components?
8. What is GST and components of GST ?
9. What are the 5 heads of income tax ?
3. Introduction to Income Tax
It is tax you pay directly to the government on the basis of
your income or profit earned . It is collectedby government
of India .
It is calculatedon the income of previous year, but it is to be
paid in the consecutive year as Assessment year .
4. Assessee and types
Assesse means any person who is liable to pay tax , penalty , and interest to the Income
tax Authority
Types of Assessee
There are three types of Assessee
1. Ordinary Assessee
2. Deemed Assessee
3. Assessee in default
5. Ordinary Assessee : An ordinary Assessee is one who has to pay any tax , penalty, and
interest to the income tax authority or who is eligible for any refund of tax from the tax
authorities
DeemedAssessee : DeemedAssessee is also known as representative assessee. This type
of assesseeis not only responsible for his income but also responsible for the incomeof the
other person to whom he act as a representative.
Assessee in Default : If any person fails to fulfill his duty or obligation,then he is termed as
assessee in default . For example, if a person who shouldsubmit a return of income fails to
do so then he is assessee in default
6. Exemption limits ( slab rates )
For an individual below 60 years of age, the basic exemption limit is of Rs 2.5 lakh. For
senior citizens (aged 60 years and above but below 80 years ) the basic income
exemption limit is of Rs 3 lakh . For super senior citizens ( aged 80 years and above ), the
basic income exemptionlimit is Rs 5 lakh .
7. What is Person ?
Person :
A Person includes the following :
1. Individual– Any naturalhuman being created by God ( male , female , lunatic , child , idiot
etc…,)
2. An Hindu Undivided Family ( HUF )
3. A firm – as defined by the partnership Act
4. A company – as defined by the companies Act
5. An AOPand BOI
6. A local authority and municipal corporation
7. Any artificial and judicial person
8. What is Assessment year ?
Assessment year refer to twelve months starting from 1st day of every
April of a particular year and ending on 31st March of the next year .
The current Assessment year starts from 1st April 2022 and ends on 31st
March 2023
Assessment year = 1-04-2022 to 31-03-2023
( 2022-2023)
9. DIRECT TAX
1. DIRECT TAX : It is defined as the tax imposedon a tax payer and is
required to be paid to the government . Also , an individual cannot
pass or assign another person to pay the taxes on this behalf.
Direct taxes are overlooked by the Central Board of Direct taxes ( CBST)
10. INDIRECT TAX
1. INDIRECT TAX : Taxes that are leviedon services and products are called indirect tax ,
collectedby the seller of the service or product .
There is only one indirect tax leviedby the government currently , called GST ( goods and
services tax ) .
11. Components Of Direct & Indirect Taxes
DIRECT TAXES INDIRECT TAXES
● Corporation Tax. ● Exercise Duty
● Income Tax. ● Custom Duty
● Wealth Tax ● Service Tax
● Others ● VAT
● CST
12. GST
It is an indirect tax which has replaced many indirect taxes in India such as the excise duty ,
VAT , services tax, etc.
The Goods and services tax Act was passed in the parliament on 29th March 2017 and came
into effect on 2st July 2017
Components of GST :
1. Central GST ( CGST )
2. State GST ( GST )
3. Integrated GST ( IGST )
4. Union Territory GST ( UTGST )
13. 5 heads of Income tax
A person may earn and receive incomefrom different sources during the tax year. For the
purpose of charge of incometax and calculationof tax payable ,the incomeis classified
under 5 heads . These heads of income have been specifiedin section 11 of income tax
ordinance ,2001.
The income is computed in the following 5 heads of income :
1. Income from salary
2. Income from house property
3. Income from profits and gains from business and profession
4. Income from Capital gains
5. Income from others sources.
14. Income from salary
All income received as salary under employer-employee relationshipis
taxed under this head , on due or receipt basis , whichever arises earlier
. Employers must withholdtax compulsorily ( subject to section 192 ), if
income exceeds minimum exemption limit, as Tax Deducted At Source (
TDS ) , and provide their employees with a form 16 which shows the tax
deductions and net paid income .
Remunerationwhich is receivedby an individual for services rendered
by him to undertake a contract whether it is expressed or implied
There has to be “employer- employee”relationship.
15. Income from House property
Incomefrom House property is the income earned by an individual (mainly
rent ) through the ownershipof a property which may consist of a residential
building , flat , shop or land attached to it .
This Act is mainly governedby section22 – 27 of Income Tax Act 1961
The income from this head is not based upon the actual income from the
property but national income or annual value of that building
There are two types of House properties :
1. Let out
2. Self occupied
16. Income from profits and gains from
business and profession
The value of any benefit or perquisite, whether convertible into money or
not , or cash or in kind of partly in cash and partly in kind, arising from the
exerciseof business or a profession, is chargeable to tax as “ profits and
gains of business and profession” .
Business includes Trade, Commerceor Manufacture or any adventure in
the nature of Trade , Commerceor Manufacture.
Profession means an occupation requiring specializedknowledge and skill.
Profits and gains of business or profession are covered in under sections 28
to 44 of incometax Act .
This head is the most important source of tax collection for the
government.
The computation of income under this head is a very complex and difficult
process.
17. Income from Capital Gains
Capital gains are the profits that capitalizedby selling an investment , such as
stocks , bonds , or real estate .Capital gains taxes are lower than ordinary
income taxes, providing an advantage to investors over wage workers .
Moreover , capital losses can sometimes be deducted from one’s total tax bill
.
Section 45 provides that any profits or gains arising from the transfer of a
capital asset effected in the previous year shall be chargeable to income tax
under the head capital gains . Examples of assets are a flat or apartments ,
land , shares , mutual funds ,gold among many others .
Short term capital gains ( within one year of purchase ) are taxes as ordinary
income .
Long term capital gains are taxed at a lower rate .
18. Income from Other Sources
Incomefrom Other sources is a residuary head of incomeand sweeps in all
such incomes which fall outside the other four heads of income. However
,certain incomes will always be taxable under the head income from other
sources, such as winning from lotteries , gifts , interest on enhanced
compensation.
Any income ,profit or gains of the assessee,which cannot be includedin any
other heads of income ( salary/house property/business or profession/capital
gains ) is chargeable under the head of income from other sources .
Computed and brought to charge under section 39 of IncomeTax Ordinance
