intro of tax

8/9/2019 Intro of Tax

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TAXES ARE THE PRICES PAID FOR

THE CIVILIZED SOCIETYjAN INTRODUCTION OF

INCOME TAX ACT-1961

Dr Amit Kumar Sinha

[email protected]


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Definition of Income Tax

QUICK LOOK

Taxes in India are of two types, Direct Tax and

Indirect Tax.

Direct Tax, like income tax, wealth tax, etc. are thosewhose burden falls directly on the taxpayer.

The burden of indirect taxes, like service tax, VAT,

etc. can be passed on to a third party.


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TAXATION IN INDIA

The total income of an individual is determined on the basis

of his residential status in India.

According to Income Tax Act 1961, every person,

who is an assessee and whose total income exceeds

the maximum exemption limit, shall be chargeable to

the income tax at the rate or rates prescribed in the

finance act. Such income tax shall be paid on the totalincome of the previous year in the relevant

assessment year.


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Assesseej Every person in respect of whom any proceeding under

this Act has been taken for the assessment of his income or

of the income of any other person in respect of which he is

assessable, or of the loss sustained by him or by such otherperson, or the amount of refund due to him or to such other

person;

j Every person who is deemed to be an assessee under any

provision of this Act;

j Every person who is deemed to be an assessee in default

under any provision of this Act


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Assessment year

Assessment year means the period of

twelve months commencing on 1st April

every year and ending on 31st March of

the next year. Income of previous year of

an assessee is taxed during the following

assessment year at the rates prescribed by

the relevant Finance Act.


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CompanySection 2(17) of the act defines company. The term company

includes:

1. any Indian company

2. any corporate incorporated by or under the laws of

country outside India3. any institution, association or body which is or was

assessable or was assessed as a company for any

assessment year under the 1922Act or under the 1961

act 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

board to be a company only for such assessment year or

assessment years


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Indian company

j Indian company means a company formed and registeredunder the companies act, 1956. Any company formed andregistered under any law relating to companies formerly inforce in any part of India, other than Jammu and Kashmir

and the union territories as specified or a corporationestablished by or under a central, state or provincial act orany institution, association or a body which is declared bythe board to be company under section 2(17) are referredas Indian company. In the case of state of Jammu and

Kashmir, a company formed and registered under any lawfor the time being in force in the state. Similarly in case ofunion territories.


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Previous year

jThe Financial Year in which the income is

earned is known as the previous year. Any

financial year begins from 1st of April and

ends on subsequent 31st March. The

financial year beginning on 1st of April

2007 and ending on 31st March 2008 is the

previous year for the assessment year2008-2009.


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Income

j

There is no specific definition of income butfor statutory purposes there are certain

items which are listed under the head

income. These items include those heads

also which normally will not be termed asincome but for taxation we consider them as

income. These items are included under

section 2(24) of the income tax act, 1961.As per the definition in section 2(24), the

term income means and includes:


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INCOMEj profits and gains

j dividendsj voluntary contributions received by a trust

j the value of any perquisite or profit in lieu of salary taxable under clause (2)

and (3) of section 17 of the act

j any special allowance or benefit, other than those included above

j any allowance granted to the assessee either to meet his personal expenses orat a place where he ordinarily resides or to compensate him for the increasedcost of living

j capital gains

j any sum chargeable to income tax under section 28 of the income taxact

j any winnings from lotteries, crossword puzzles, races, including horseraces, card games and games of any sort or from gambling or betting

of any form or nature whatsoever

j any received as contribution to the assessee's provident fund


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Gross Total Income

jUnder the scheme of computation of total

income under the Income Tax Act, the

income falling under each head is to be

computed as per the relevant provisions of

the Act relating to computation of income

under that head. The aggregate of income

under each head is known as 'Gross TotalIncome'

intro of tax

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