Basic Terms (Income Tax)

Basic Terms
Presentation
Tripathi Online Educare

A) Person – u/s 2(31)
1. An Individual.
2. A Hindu Undivided Family.
3. A Company.
4. A Partnership Firm.
5. An Association of Person or-
Body of Individual.
6. A Local Authority.
7. A Artificial Juridical Person.
B) Income – u/s 2(24)
C) Assessee – u/s 2(7)
D) Assessment – u/s 2(8)
E) Assessment Year – u/s 2(9)
F) Previous Year – u/s 3

Example

Previous Year u/s 3
X sets up a new business on March 3, 2017. What is the
previous year for the assessment year 2017-18?
Solution:
Previous year for the assessment year 2017-18 is the
period commencing on March 3, 2017 and ending on March
31, 2017.

Previous Year u/s 3
X joins an Indian company on January 23, 2016. Prior to January 23, 2016, he is
not in employment. He has no other source of income. What are the previous
years of the assessment years 2016-17 and 2017-18?
Solution:
Previous years for the assessment years 2015-16 and 2016-17 will be as under:
Assessment Year Previous Year
2016-17 January 23, 2016 to March 31, 2016
2017-18 April 1, 2016 to March 31, 2017

Person u/s 2(31)
Determine the status of the following:
1. Delhi University
Ans: Artificial Juridical Person
2. DCM Ltd.
Ans: A Company
3. Delhi Municipal Corporation
Ans: A Local Authority
4. Taxmann Publication Pvt Ltd
Ans: A Company

Person u/s 2(31)
Determine the status of the following:
5. Laxmi Commercial Bank Ltd.
Ans: A Company
6. ABC Group Housing Co-operative Society.
Ans: An Association of Person
7. XY & Co., firm of X & Y
Ans: A Firm
8. A joint family of X, Mrs. X and their sons A & B.
Ans: A Hindu Undivided Family

Assessee u/s 2(7)
1. Income of X (age 35 years) is Rs. 2,50,000 for the assessment year 2017-18. He
does not file his return of income because his income is not more than the amount
of exempted slab. Income tax department does not take any action against him. He
is not an “assessee” because no tax or any other sum is due from him.
2. Income of Y (age 38 years) is Rs.2,55,000 for the assessment year 2017-18. He does
not file his return of income. Since he is supposed to file his return of income
(income being more than exempted slab of Rs.2,50,000), he is an “assessee”.
3. Income of Z (age 51 years) is Rs.75,000 for the assessment year 2017-18. He files
his return of income (even if his taxable income is less than Rs.2,50,000).
Assessment order is passed by the Assessing Officer without any adjustment. Z is
an “assessee”.

Assessee u/s 2(7)
4. Income of A for the assessment year 2017-18 is (-) Rs.60,000. He files his
return of income. He is an “assessee”.
5. Income of B (age 28 years) is less than Rs.2,50,000 for the assessment
year 2017-18. He files his return of income to claim refund of tax deducted by X
Ltd. on interest paid to him. B is an “assessee”.
6. Income of C (age 30 years) is less than Rs.2,50,000 for the assessment
year 2017-18. He does not file his return of income. During 2016-17, he has
paid salary of Rs.2,90,000 to an employee. Though he is supposed to deduct
tax at source, yet due to ignorance of law, no tax is deducted by him. In this
case, C is an “assessee” as he has failed to deduct tax at source. This rule is
applicable even if his own taxable income is below Rs.2,50,000.

Income u/s 2(24)
1. X Ltd has 50 employees. Employees have formed a tea club in the office. Each
one of them contributes Rs.80 per month to the club. Club provides tea in tea
breaks. During the financial year 2016-17, the excess of receipt over expenditure of
the club is Rs.470. It cannot be taken as taxable income of the club as it is surplus
arising to a mutual activity for the mutual benefit of the members.
2. XY Trust is created for public charitable purposes. On June 10,2016, it receives
a sum of Rs.1,00,000 as voluntary contribution (not being with any specific
direction) from a business house. Rs.1,00,000 would be included in the income of
the trust.
3. X is employed by A Ltd. Apart from salary, he has been provided a rent free
house by the employer. The value of perquisite in respect of rent free house is
taxable as income in the hands of X.

Income u/s 2(24)
4. X is employed by A Ltd. He gets Rs. 3,000 per month as conveyance allowance
apart from salary. Rs.3,000 per month is treated as income {any amount which is
spent for official purpose out of conveyance allowance is exempt under section
10(14)}.
5. The following illustrations are given to have better understanding:
a) X is a director in a company. The company provides a domestic servant for
private purposes. The perquisite value of domestic servant is treated as income
of X.
b) X holds 20% equity share capital in A Ltd. A Ltd repays a loan of Rs.15,000 on
behalf of X. Rs. 15,000 is treated as income of X.
c) B is a director in C Ltd. C Ltd pays a sum of Rs.17,000 to ITC Hotels of behalf of
Mrs. B (the payment is made only because B is director in C Ltd.). Rs. 17,000 is
treated of income of B.

Income u/s 2(24)
6. X is one of trustees of a charitable trust. The trust provides him a
residential accommodation. The perquisite value of the accommodation is
treated as income of X.
7. X is an agent of A Ltd. He gets a compensation of Rs.2,00,000 at the time of
termination of his agency from A Ltd. Rs.2,00,000 is treated as income of X.

Person leaving India u/s 174
X, a foreign citizen, is residing in India since 2002. While completing
assessment for the assessment year 2016-17, on February 14, 2017, the
Assessing Officer comes to know that X will leave India on April 12, 2017 with
no intention of returning. In this case, the Assessing Officer will make three
assessments for the assessment year 2016-17:
a. regular assessment for the previous year 2015-16 (ie income of the period
April 1, 2015 to March 31, 2016)
b. assessment for the income of the period April 1, 2016 to March 31, 2017 &
c. assessment for the income of the period April 1, 2017 to April 12, 2017.
The above three income assessments shall be completed separately. For the
first assessment, tax shall be chargeable at the rates applicable for the
assessment year 2016-17. For the second and third assessments, tax shall be
chargeable at the rates applicable for the assessment year 2017-18.

Association/Bodies formed for short duration
u/s 174A
X Co. is an association of two individuals X & Y. It is formed on April 10, 2013 for the
purpose of completing a contract given by a French company in India. It is likely to be
dissolved on September 10, 2014. While processing the return submitted by the
association for the assessment year 2014-15, the Assessing Officer comes to know on
August 6, 2014 about the probable date of dissolution. In this case, the Assessing Officer
will make two assessments for the assessment year 2014-15:
a. regular assessment for the previous year 2013-14 (ie income of the period April 10,
2013 to March 31, 2014) &
b. assessment for the income of the period April 1, 2014 to September 10, 2014.
The above two income assessments shall be completed separately. For the first
assessment, tax shall be chargeable at the rates applicable for the assessment year
2014-15. For the second assessment, tax shall be chargeable at the rates applicable for
the assessment year 2015-16.

Explanation

INDIVIDUAL
1. Not divided, or not to be divided; existing as one entity, or distinct being or
object; single; one; as, an individual man, animal, or city.
2. A single person, animal, or thing of any kind; a thing or being incapable of
separation or division, without losing its identity; especially, a human being; a
person.

HINDU UNDIVIDED FAMILY
A Hindu Joint Family or Hindu undivided family (HUF) or a Joint Family is an
extended family arrangement prevalent among Hindus of the Indian subcontinent,
consisting of many generations living under the same roof. ...
Dabur’s Family Tree

COMPANY
1. A company is a form of business organization.
2. The Company may refer to: Organizations: * The Central Intelligence Agency
(CIA), an American agency * The Indian mafia, an organised body of criminals
based in India
3. A company is a military unit, typically consisting of 75-200 soldiers and usually
commanded by a Captain or a Major. Most companies are formed of three to
five platoons although the exact number may vary by country, unit, and
structure. …

A PARTNERSHIP FIRM
"Partnership" is the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all. Persons who
have entered into partnership with one another are called individually "partners"
and collectively a "firm", and the name under which their business is carried on
is called the"firm name“.

ASSOCIATION OF PERSON
When there is a combination of persons formed for the promotion of a joint
enterprise, in other words, when co-adventurers are banded together in common
action, they are assessable as an "association of persons", when they do not in law
constitute a partnership.

BODY OF INDIVIDUALS
The words ‘body of individuals’ occurring in the Income-tax Act in the definition of the
word ‘person’ in section 2(31), therefore, could only mean a combination of
individuals who carry on some activity with the object of earning income .

LOCAL AUTHORITY
The elected representatives of the local people constitute Local Self-Government.
It has authority for meeting local needs. It has also the power to collect necessary
funds for performing its functions.

ARTIFICIAL JURIDICAL PERSON
Any entity having a separate legal existence, not covered under any of the above
categories, falls under this category e.g. an Idol, a corporation established under a
special act (e.g. Life Insurance Corporation), a University.

INCOME u/s 2(34)
The amount of money one earns. This can be through one's job or through
investments, etc. The financial gain (earned or unearned) accruing over a given
period of time. Income is the consumption and savings opportunity gained by an
entity within a specified time frame, which is generally expressed in monetary terms.
...

ASSESSEE u/s 2(7)
“Assessee” means a person by whom income tax or any other sum of money is
payable under the Act. It includes every person in respect of whom any proceeding
under the Act has been taken for the assessment of his income or loss or the
amount of refund due to him. ...

ASSESSMENT u/s 2(8)
An assessment means the process of determining and computing the amount of
income and the tax due of a person. An assessment fixes the liability of the assessee
to pay the assessed tax on the assessed income for the assessment year.

ASSESSMENT YEAR u/s 2(9)
“Assessment year” means the period starting from April 1 and ending on March 31 of
the next year. Example- Assessment year 2015-16 which will commence on April 1,
will end on March 31,. ...
PREVIOUS YEAR u/s 3
Section 3 of the act defines previous year as follows :
For the purpose of this act previous year means the financial year immediately
preceding the assessment year.

Thank You!

Basic Terms (Income Tax)

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