This document provides an overview of key concepts in Indian income tax law, including: - The different heads of income and what is included in gross total income. - Definitions of terms like previous year, assessment year, and types of taxpayers. - The differences between tax avoidance, tax planning, and tax evasion. - What constitutes agricultural income and rules around partly agricultural income.

1. Income Tax Law
&
Accounts
CA Aakansha Arora
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2. 🞂 Cash or Kind
🞂 Legal or Illegal Income
🞂 Receipt basis or Accrual basis
🞂 Gifts
🞂 Lump sum or Instalments
Concept of Income
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3. 🞂 Income from salaries
🞂 Income from House Property
🞂 Profits and gains of business and profession
🞂 Capital Gains
🞂 Income from other sources
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Heads of Income

4. Casual Income
Casual income means any receipts which are of
a casual and non-recurring nature. For
example, income earned by way of winnings
from lotteries, races including horse races,
crossword puzzles, etc.
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5. Assessment Year
“Assessment year” means the period of 12
months commencing on the 1st day of April
every year.
In India, the Govt. maintains its accounts for a
period of 12 months i.e. from 1st April to 31st
March every year. As such it is known as
financial year. The income tax department has
also selected same year for its assessment
procedure.
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6. Previous Year
The term previous year is very important
because it is the income earned during
previous year which is to be assessed to tax in
the assessment year.
As the word ‘Previous’ means ‘coming before’,
hence it can be simply said that the previous
year is the financial year preceding the
assessment year e.g. for assessment year
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7. In simple words, it may be said that the year in
which income is earned is called previous year
and the next year in which such income is
computed and put to tax is known as
assessment year
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8. G.T. I. = Salary Income + House Property
Income + Business or Profession Income+
Capital Gains + Other Sources Income +
Clubbing of Income – Set off of Losses
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Gross Total Income

9. ‘Total Income’ means income remaining after
allowing deductions under Chapter VIA (i.e.,
U/s 80C to 80U) from Gross Total Income.
It is important to note that income tax is
charged on total income at prescribed rate(s).
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Total Income

10. 🞂 INDIVIDUAL: It refers to a natural human
being whether male or female, minor or
major.
🞂 Hindu Undivided Family. It is a relationship
created due to operation of Hindu Law. The
manager of HUF is called “Karta” and its
members are called ‘Coparceners’.
🞂 COMPANY: It is an artificial person registered
under Indian Companies Act 1956 or any
other law.
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Person

11. 🞂 Local Authority: Municipality, Panchayat,
Cantonment Board, Port Trust etc. are called
local authorities.
🞂 Artificial Juridical Person. A public
corporation established under special Act of
legislature and a body having juristic
personality of its own are known to be
Artificial Juridical Persons. Universities are an
important example of this category.
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12. Tax Avoidance
It is an act of dodging tax without breaking the
Law. It means when a taxpayer arranges his
financial activities in such a manner that
although it is within the four corner of tax law
but takes advantages of loopholes which exists
in the Tax Law for reduction of tax a liability. In
other words though he has complied the letter
of law but not the sprit behind the law.
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13. Tax Evasion
Any illegal method which leads to reduction of
tax liability is known as Tax Evasion. The Tax
Evasion is resorted to by applying following
dishonest means :
🞂 Concealing the Income
🞂 Claiming excessive expenditure
🞂 Falsification of accounts
🞂 Willful violence of Rules
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14. 14
TAX AVOIDANCE TAX EVASION
(i) Where the payment of tax is avoided
though by complying with the
provisions of law but defeating the
intension of the law is known as tax
Avoidance.
Where the payment of tax is avoided
through illegal means or fraud is termed as
tax evasion.
(ii) Tax Avoidance is undertaken by
taking advantage of loop holes in law
Tax evasion is undertaken by employing
unfair means
(iii) Tax Avoidance is done through not
mollified intention but complying the
provision of law.
Tax Evasion is an unlawful way of paying tax
and defaulter may be punished.
(iv) Tax Avoidance looks like a tax
planning and is done before the tax
liability arises.
Tax evasion is blatant fraud and is done
after the tax liability has arisen.

15. Tax Planning
Tax Planning involves planning in order to avail
all exemptions, deductions and rebates
provided in Act. The Income Tax law
itself provides for various methods for Tax
Planning, Generally it is provided under
exemptions u/s 10, deductions u/s 80C to 80U
and rebates and relief’s.
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16. Agricultural Income
If the following conditions are satisfied the
income from land is treated as agricultural
income:
1. The land must be situated in India
2. The land must be used for agricultural
purposes, e.g. tilling, watering, sowing..
3. The receiver of income from the land must
have interest in the land, e.g. landlord,
tenant
4. The income should be direct from
agriculture
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17. Types Of Agricultural Income
1. Rent or revenue derived from land
2. Income from agricultural operations
3. Income from making produce fit for market
and sale from such produce, e.g. curing of
coffee, tea & tobacco, ginning of cotton..
4. Income from a house/building used for
agriculture
5. Income from saplings or seedlings
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18. Partly Agricultural Income
1. Profits of sugar factories
2. Income from growing and manufacturing
of tea- 60/40
3. Income from growing and manufacturing
of cenex- 65/35
4. Income from growing and manufacturing
of coffee- 75/25 or 60/40
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