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Introduction Definitions Tax & Its Types Charge of Income Tax Year (Assessment & Previous ) Person Assessee Assessment Income Receipt ( Capital & Revenue) Diversion & Application of Income Accounting Standard Residential Status Scope of income in respect of residential status Tax Structure of India
Introduction
Before Present Act, Income Tax Act, 1922 was prevailing Income Tax Act came in to force w.e.f. 1st April 1962 Scope extends to whole of India Act enacted by Parliament in the Twelfth year of the Republic of India The Act contains 298 sections and XIV schedules.
Tax means Fees charged by a government on a product, income or activity. Which constitute basic source of revenue to Government.
Direct Tax: In Direct Tax, Person who pays and bears tax is
Indirect Tax : In Indirect Tax, Person who pays and bears tax is
different. It is not directly paid by the person really bearing the tax
Direct Taxes 1. Income Tax 2. Wealth Tax
Indirect Taxes 1. Excise Duty 2. Custom Duty 3. Service Tax 4. Sales Tax / Value Added Tax
Year means a period of 12months commencing on 1st April every year & ending on 31st March of year in which tax is paid. Previous Year: As Per Section 3, Previous Year means the financial year immediately preceding the assessment year, in which income is earned. The rule of chargeability of income of previous year taxed in next year is not applicable to certain cases :U/s. U/s. U/s. a U/s. U/s. 172 Shipping business of non-resident 174 Persons leaving India 174A AOP / BOI / Artificial Juridical Person formed for particular event or purpose 175 Persons likely to alienate property to avoid tax 176 Discontinued business
Contd
between person who have agreed to share profit of business carried on by all any of them acting for all which should evidenced by instrument.
Company :
- any Indian company,
Private Company or Public Company any body corporate incorporated by or under the laws of a country outside India, or - any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Central Board of Direct Taxes to be a company.
Contd
Association of Person : An association of persons means one in which two or more persons i.e. individual as well as non-individual voluntarily join for a common purpose or common action i.e. for producing income. Body of individual : Body of individual means one in which two or more persons i.e. only human being voluntarily join for a common purpose or common action i.e. for producing income. Local authority : The term means a municipal committee, district board, body of port commissioners or other authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund
Artificial Juridical Persons :This category could cover every artificial juridical person not falling under other heads. An idol, or deity would be assessable in the status of an artificial juridical person.
Can the female blend her property with joint family? Can an individual of unsound mind be included in the definition of person ?
Coparceners. The Female member of joint family cannot blend separate property with joint family property.
Yes
Assessee : Person by whom any tax or any other sum payable under the Act. can be classified in four ways : First : A Person who is normally liable to pay tax under Act e.g. Individual, HUF , Firm etc. Second : A Person in respect of whom any proceeding is taken e.g. Assessment of amount of persons income Third : Every person who is deemed to be assessee e.g. Representative of any assessee Fourth : Person who is deemed to be an assessee in default under any provision of the Act. e.g. Person who has not deducted Tax at Source required under provisions of Act.
Contd
Golden Rule For Taxation of Receipts Capital receipts are exempt from tax unless they are expressly taxable Revenue receipts are taxable unless they are expressly exempt from tax.
Capital Receipt
Fixed capital is one which the owner keeps in his possession for making profit
Revenue Receipt
Circulating Capital is one which turned over, yields income or loss
A receipt referable to fixed capital would be a capital receipt. E.g. Receipt on sale of fixed asset, Receipt in lieu of source of income
A receipt referable to circulating capital would be a revenue receipt. E.g. Sales of goods in ordinary course of business, Compensation on termination of an agreement
Diversion Of Income
Income is received by person other than the person who is actually entitled for it
Application Of Income
Income is received by person Person who is actually entitled for it
Income which is diverted before Income which is required to applied to discharge of obligation after such It reaches to assessee it is reaches to assessee it is taxable not taxable e.g. Amount towards certain fund for the purpose of returning to it
e.g. Portion of salary retained by employer for compulsory deposit fund
Prudence - Provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information; (ii) Substance over form - The accounting treatment and presentation in financial statements of transactions and events should be governed by Contd
Yes
If an assessee is carrying on more than one business he can follow Cash System for one business and Mercantile (Accrual) System for the other business.
i) He has been in India during the previous year for a total period of 182 days or more, Or ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the previous year. Resident and ordinarily Resident & Resident but not ordinarily resident Any
One
He is a resident in any 2 out of the His total stay in India in the last 7 years preceding the relevant last 10 years preceding the any previous year is730 days or more. relevant previous year
Exception to Basic Condition : (1) Indian citizens, who leave India in any previous year as a member of the crew of an Indian ship or for purposes of employment outside India, or (2) Indian citizen or person of Indian origin engaged outside India in an employment or a business or profession or in any other vocation, who comes on a visit to India in any previous year A person is said to be of Indian origin if he or either of his parents or either of his grandparents were born in undivided India.
Non Resident
Control & Management of affairs of HUF is wholly out side India.
Resident
Control & Management of affairs of Firm/AOP or other person is wholly or partly in India.
Non Resident
Control & Management of affairs of Firm/AOP or other person is wholly outside India.
Firm , Association of Person & Other Person can not be ordinarily resident or not ordinarily resident
Status of Company
Resident
Indian Company
Non Resident
Control & Management of Foreign affairs of Company is Company wholly outside India. Control & Management of affairs of Company is wholly in India.
X X
X X