INCOME TAXINCOME TAX

You earn itYou earn it

&&

The GovernmentThe Government

takes a part (a big part) of ittakes a part (a big part) of it

Sources of Income

Agricultural Income

Income from Salaries

Income from House Property

Profits & Gains from Business OR Profession

Capital Gains

Income from Other Sources

You are going to be taxed anyways ………….

So grin and bear it!!

We could pay taxes with a smile,

but normally CA$H is required!!

The definition of the term “Income” in Sec. 2(24) is inclusive and not exhaustive

It may be broadly defined as the true increase in the amount of wealth which comes to a person during a fixed

period of timePeriodical monetary return with regularity

May be recurring

GROSS TOTAL INCOME

As per Section 14, income of a person is computed under the

following heads:

Salaries

Income from House Property

Profits & Gains from Business or Profession

Capital Gains

Income from Other Sources

A source of income which does not specifically fall under any one of the other four heads of income is to be computed and brought to charge under the head:

“Income from Other Sources”.Sec. 56(1)

Section 56(2) enacts that in particular and without prejudice to the generality of the provisions of sub section (1), the following incomes shall be chargeable under the head Income from Other Sources.

i. Dividends

ii. Winnings from lotteries, crossword puzzles, horse races, card games, gambling or betting

iii. Interest on securities

iv. Income from machinery, plant or furniture let on hire

v. Sum received from Keyman Insurance Policy

vi. Income from sub-letting of a house property

vii. Casual income & non-recurring income

viii.Insurance commission

ix. Family pension

x. Directors Sitting Fee

ConditionsConditions

There is an income

Income shall not be exempt

Not covered by other heads

Examples:

Casual Income

Subletting

Undisclosed sources

Salaries payable to a Member of Parliament

Family pension received by family members of a deceased employee

Income to also include any sum of money (i.e., gift) exceeding the specified amount received by an individual / HUF, if it exceeds Rs. 50,000, but will not apply to a sum of money received from:

from any relative; or on the occasion of the marriage of the individual; or under a will or by way of inheritance; or in contemplation of death of the payer; or from any fund or foundation or university or other

educational institution or hospital or medical institution; or from any trust or institution registered u/s 12AA

In other words…………….

you just can’t escape being

T - axed

BUT…… all is not lost!

You do get some deductions (Section 57)

In respect of income from machinery, plant or furniture let on hire:

amount paid on account of current repairs to premises [Sec 30(a)(ii); amount paid on account of current repairs to machinery, plant or

furniture premium paid for insurance against risk of damage to premises depreciation on building, machinery, plant or furniture [Sec 32(1)

and 32(1A)] benefit of unabsorbed depreciation

In respect of income in the nature of family pension:

a deduction of a sum equal to 33⅓ % of such income subject to a ceiling limit of Rs. 15,000 [Section 57(iia)]

Any other expenditure (not being in the nature capital expenditure) laid out or expended wholly or exclusively for the purposes of making or earning such income. [Section 57(iii)]

Method of Accounting&

Tax

MERCANTILE

CASH SYSTEM

Due Basis

On receipt/payment basis

Any dividend declared, distributed or paid by a company to its shareholders is chargeable under this head.

Includes any distribution of:

company’s assets

debentures, debenture stock, deposit certificates and bonus to preference share holders

liquidation of company

reduction of capital

any payment made to a shareholder, holding substantial interest, in a closely held company

Dividend from domesticCompany EXEMPT

from lotteries, crossword puzzles, horse races, card games, gambling or betting

Winnings

Under Sec. 56(2)(ib), amount taxable is

WINNINGS

“Lottery” includes winnings from prizes awarded to any person by draw of lots or by chance.

Also includes game shows, entertainment programs on TV or electronic mode

Interest on any security of the Central/State Government.

Interest on debentures/other securities for money issued by/on behalf of a local authority/company

established by a Central/State/Provincial Act.

Section 56(2)(id)Section 56(2)(id)

Interest exempt from taxInterest exempt from tax

Interest on the following is exempt from tax:

Notified securities, bonds or certificates.

7 % Capital Investment Bonds

Interest received by a NRI from Notified Bonds

Interest payable to any foreign bank performing central banking functions outside India

Gold Deposit Bonds

Receipts without consideration

to be treated as income:

Following conditions are to be satisfied U/S 56(2)(vi):

The recipient is an individual/HUF

Any sum of money is received without consideration on or after April 1,2006

The aggregate amount received exceeds Rs 50,000

Permissible DeductionsPermissible Deductions

Commission/remuneration for realising dividend/interest on securitiesEmployee’s contribution towards staff welfare schemes

Repairs/Depreciation in let out of plant, machinery, furniture & building

Standard Deduction in the case of family pension

Other expenses for earning income

The Income Tax Department is The Income Tax Department is “trying”“trying” to to make make

“easier”“easier” for the tax payer!! for the tax payer!!

They are also trying to improve theirThey are also trying to improve their “image”“image”

Specific Disallowances U/S 58:Specific Disallowances U/S 58:

Personal Expenses

Interest

Salary

Wealth Tax

Amount Specified by Sec 40 A

Expenditure in respect of Royalty & Technical Fees received by a foreign CompanyExpenditure in respect of winnings from Lottery

YOUR INCOME

WHEN YOUEARNED IT

THETAXMAN

WHATYOU ARE

LEFTWITH

Be a responsible citizenand pay your taxes on time

(for listening)

Flat.broke@gmail.com

Contact me on:

GOD-HELP-US

(463-4357-87)

Christopher Rodricks - 05A018 | Neville Unvalla – 05A031