Basic Concepts in Tax

7/31/2019 Basic Concepts in Tax

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BASICCONCEPTS

DR.N.K.GUPTA


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Incometax Act of 1961:

On the basis of the

recommendations made bythe various committees, anew Act of Income-tax hadbeen passed during theyear 1961 termed as theIncome - Tax Act, 1961..


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This Act came into force from 1st April, 1962.

This Act contains more than 400 sections and a

number of sub-sections and 10 schedules. The

IncomeTax department framed 121 rules for

the effective application of this Act. These

rules are termed as Income - Tax Rules of

1962. It also includes a number of sub - rules


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INCOME SECTION 2(24)

ANY AMOUNT RECEIVED OR DEEMED

TO BE RECEIVED OR EARNED OR

DEEMED TO BE EARNED DURINGTHE PREVIOUS YEAR.


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SALARY

RENT

BUSINESS PROFITS

CAPITAL PROFITS

INTEREST

ANY OTHER SOURCE


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IN GENERAL INCOME SHOULD BE OF

REVENUE NATURE

HOWEVER CAPITAL GAINS ARE ALSO

TREATED AS INCOME


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DEFINITE SOURCE

LEGAL /ILLEGAL BOTH

RECEIPT OR ACCRUE WHICH EVER IS

EARLIER

MEASURABLE IN TERMS OF MONEY

FROM OUTSIDE

INCLUDES GIFTS


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GIFTS UP TO RS. 50,000 IN ALL IN A

YEAR EXEMPT BEYOND WHICH IT IS

TREATED AS INCOME


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FROM A RELATIVE

SP0USE OF INDIVIDUAL

BROTHER OR SISTER OF THE INDIVIDUAL

BROTHER OR SISTER OF THE SPOUSE OFTHE INDIVIDUAL

BROTHER OR SISTER OF EITHER OF THEPARENTS OF THE INDIVIDUAL

ANY LINEAL ASCENDANT OR DESCENDANTOF THE INDIVIDUAL OR SPOUSE OFTHEINDIVIDUAL

SPOUSE OR THE PERSONS REFERREDABOVE


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UNDER A WILL OR BY WAY OFINHERETANCE

ON THE OCCASIONOF THE MARRIAGE

OF THE INDIVIDUAL IN CONTEMPLATIONOF DEATH OF THE

PAYERLOCAL AUTHORITYANY OTHE FUND, TRUST OR

INSTITUTION MENTIONED INSEC.10(23C) OR 12 AA


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REGULAR INCOME

CASUAL INCOME

CAPITAL GAINS

ILLEGAL INCOME


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Assessment

The Act provides a mechanism for

computing the tax relating to the income of

an assessee pertaining to an assessment year.

Such computation is made after allowingvarious deductions, exemptions, and rebates

to the assessee, and is called assessment.


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Assessment year

Assessment year is the year in which the income

of the previous year is to be assessed to tax. Gotmore confused? An illustration will clarify the

matter. Income of the Financial Year 2010-11

will be assessed to tax in the assessment year

2011-12, that is to say , the rates of Assessment

year 2011-12, will be applied to income of the

Financial year 2010-11. Incidentally, Financial

Year is referred to as the Previous Year in theAct.


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Previous year

Defined.

For the purposes of this Act, previous year meansthe financial year immediately preceding the

assessment year :

Provided that, in the case of a business or profession

newly set up, or a source of income newly coming

into existence, in the said financial year, the previous

year shall be the period beginning with the date of

setting up of the business or profession or, as the casemay be, the date on which the source of income

newly comes into existence and ending with the said

financial year.
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N.R.SHIPPING COMPANIES (172)

PERSON LEAVING INDIA ( 174)

BODY FORMED FOR SPECIFIC EVENT

(174A)

PERSON TRANSFERING THE ASSETS TO

SAVE TAX (175)

DISCONTINUED BUSINESS (176)


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Assessee

Assesseeis a person by whom any tax or any other

sum of money is payable under the Act.


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AN ASSESSEE IS A PERSON WHO IS

LIABLE TO PAY TAX

LIABLE TO FILE RETURN OF INCOME

OR LOSS

LIABLE TO APPEAR BEFORE THE TAX

AUTHORITIES EWITHER ON HIS OWN

BEHALF OR ON BEHALF OT OTHERSASSESSEE IN DEFAULT


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Person

Its include

An individualA Hindu undivided family

A company

A firm

An association of persons or a body of

individuals whether

incorporated or not

A local authority, and Every artificial juridical person, not falling

within any of the

preceding sub-clauses


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INCOME FROM SALARIES+

INCOME FROM HOUSE PROPERTIES+

PROFITS FROM BUSINESS AND

PROFESSION+

CAPITAL GAINS+

INCOME FROM OTHER SOURCES


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GROSS TOTAL INCOME

LESS: DEDUCTION FROM

SECTION

80 C TO 80 U


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ANY RENT OR REVENUE DERIVED

FROM AGRICULTURAL LAND USED

FOR

AGRICULTURAL PURPOSE

AGRICULTURAL PROCESS AND

SALE OF AGRICULTURAL PRODUCT ON

WHICH ABOVE PROCESS IS DONE


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INCOME FROM HOUSE PROPERTY

WHICH IS SITUATED ON THE

AGRICULTURAL LAND OR IN THE

IMMEDIATE VICINITY OFAGRICULTURAL LAND AND USED FOR

STORE HOUSE OR

OUT HOUSE


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SUGAR FACTORY

TOTAL INCOME LESS MARKET PRICE OF

SUGAR CANE

TEA ESTATES60 % AGRICULTURAL INCOME

LATEX

65% AGRICULTURAL INCOME


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COFEE

IF COFEE IS GROWN ,CURED AND

SOLD THEN 75% AGRICULTURAL

IF COFEE GROWN, CURED,ROASTED,GROUNDED AND SOLD

THEN 60% IS AGRICULTURAL


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STEP 1- ADD AGRICULTURAL INCOME

AND NON AGRICULTURAL INCOME

THEN CALCULATE TAX

STEP 2- ADD AGRICULTURAL INCOMEAND TAX FREE INCOME THEN

CALCULATE TAX

STEP 3- TAX= STEP1-STEP 2


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Total Income of an assessee is calculated as

under:

Income of the assessee is computed under the

following heads:

Income from Salaries

Income from House Property

Profits or gains of Business or Profession

Capital gains

Income from other sources


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Basic Concepts in Tax

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