basic concepts dr.n.k.gupta. income – tax act of 1961: on the basis of the recommendations made by...

BASIC CONCEPTS DR.N.K.GUPTA

Income – tax Act of 1961:

On the basis of the recommendations made by the various committees, a new Act of Income-tax had been passed during the year 1961 termed as the “Income - Tax Act, 1961”..

INTRODUCTIONINTRODUCTION 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 Income – Tax 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

BASIC CONCEPTS

INCOME SECTION 2(24)

ANY AMOUNT RECEIVED OR DEEMED TO BE RECEIVED OR EARNED OR DEEMED TO BE EARNED DURING THE PREVIOUS YEAR.

INCLUDES SALARY RENT BUSINESS PROFITS CAPITAL PROFITS INTEREST ANY OTHER SOURCE

INCOME (CONTD.)IN GENERAL INCOME SHOULD BE OF

REVENUE NATUREHOWEVER CAPITAL GAINS ARE ALSO

TREATED AS INCOME

FEATURES OF INCOME DEFINITE SOURCE LEGAL /ILLEGAL BOTH RECEIPT OR ACCRUE WHICH EVER IS

EARLIER MEASURABLE IN TERMS OF MONEY FROM OUTSIDE INCLUDES GIFTS

TREATMENT OF GIFTS GIFTS BEYOND RS. 50,000 IN ALL IN

A YEAR EXEMPT BEYOND WHICH IT IS TREATED AS INCOME

EXEMPTED GIFTS

• FROM A RELATIVE• SP0USE OF INDIVIDUAL• BROTHER OR SISTER OF THE INDIVIDUAL• BROTHER OR SISTER OF THE SPOUSE OF

THE INDIVIDUAL• BROTHER OR SISTER OF EITHER OF THE

PARENTS OF THE INDIVIDUAL• ANY LINEAL ASCENDANT OR DESCENDANT

OF THE INDIVIDUAL OR SPOUSE OF THEINDIVIDUAL

• SPOUSE OR THE PERSONS REFERRED ABOVE

EXEMPTED GIFTS

UNDER A WILL OR BY WAY OF INHERETANCE

ON THE OCCASIONOF THE MARRIAGE OF THE INDIVIDUAL

IN CONTEMPLATIONOF DEATH OF THE PAYER

LOCAL AUTHORITY ANY OTHE FUND, TRUST OR

INSTITUTION MENTIONED IN SEC.10(23C) OR 12 AA

TYPES OF INCOME REGULAR INCOME

CASUAL INCOME

CAPITAL GAINS

ILLEGAL INCOME

AssessmentThe 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 allowing various deductions, exemptions, and rebates to the assessee, and is called assessment.

Assessment yearAssessment year is the year in which the income of the previous year is to be assessed to tax. Got more confused? An illustration will clarify the matter. Income of the Financial Year 2009-10 will be assessed to tax in the assessment year 2010-11, that is to say , the rates of Assessment year 2010-11, will be applied to income of the Financial year 2009-10. Incidentally, Financial Year is referred to as the Previous Year in the Act.

Previous year defined. For the purposes of this Act, previous year means the 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 case may be, the date on which the source of income newly comes into existence and ending with the said financial year.

EXCEPTIONS TO THE PREVIOUS YEAR

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)

AssesseeAssessee is a person by whom any tax or any other sum of money is payable under the Act.

ASSESSEE 2 (7) 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 OTHERS

ASSESSEE IN DEFAULT

PersonIts include An individual A 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

GROSS TOTAL INCOME 80 B (5)

INCOME FROM SALARIES+ INCOME FROM HOUSE PROPERTIES+ PROFITS FROM BUSINESS AND

PROFESSION+ CAPITAL GAINS+ INCOME FROM OTHER SOURCES

TAXABLE INCOME 2(45) GROSS TOTAL INCOME LESS: DEDUCTION FROM SECTION 80 C TO 80 U

AGRICULTURAL INCOME 2(1A)

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

INCLUDES INCOME FROM HOUSE PROPERTY

WHICH IS SITUATED ON THE AGRICULTURAL LAND OR IN THE IMMEDIATE VICINITY OF AGRICULTURAL LAND AND USED FOR

STORE HOUSE OR OUT HOUSE

PARTLY AGRICULTURAL INCOME

SUGAR FACTORYTOTAL INCOME LESS MARKET PRICE OF

SUGAR CANE TEA ESTATES60 % AGRICULTURAL INCOME LATEX 65% AGRICULTURAL INCOME

CONTINUED COFEE IF COFEE IS GROWN ,CURED AND

SOLD THEN 75% AGRICULTURAL IF COFEE GROWN, CURED,

ROASTED,GROUNDED AND SOLD THEN 60% IS AGRICULTURAL

INTEGRTATION OF INCOME STEP 1- ADD AGRICULTURAL INCOME

AND NON AGRICULTURAL INCOME THEN CALCULATE TAX

STEP 2- ADD AGRICULTURAL INCOME AND TAX FREE INCOME THEN CALCULATE TAX

STEP 3- TAX= STEP1-STEP 2

Total Income of an assessee is calculated as under: Income of the assessee is computed under the following heads:

Income from SalariesIncome from House PropertyProfits or gains of Business or ProfessionCapital gainsIncome from other sources