![ (i) Income of the Non-resident Shipping
Company [Sec.172]
(ii) Income of Persons Leaving India [Sec.174]
(iii) Association Formed for Particular Event or
Purpose [Sec.174 A]
(iv) Income of Persons Trying to Transfer his
Assets [Sec.175]
(v) Income from Discontinued Business
[Sec.176]](https://image.slidesharecdn.com/introductiontoincometax-220518182151-13426450/85/Introduction-to-Income-Tax-ppt-30-320.jpg)
Introduction to Income Tax.ppt
- 1. Presented By Ms. N. Karpagam Assistant Professor PG & Research Department of Commerce Marudhar Kesari Jain College for Women Vaniyambadi
- 2. Income Tax is one of the Direct Tax. It is levied on the Income of the General Public. For this purpose, income of the public is divided into five heads of Income.
- 3. There are five heads of income ◦ Income from the head Salary ◦ Income from the head House Property ◦ Income from the head Business or Profession ◦ Income from the head Capital Gain ◦ Income from the head Other Sources
- 4. (i) Income Tax Act, 1961. (ii) Income Tax Rules, 1962. (iii) Circulars issued by the Central Board of Direct Taxes (CBDT) (iv) Judicial Decisions and (v) Annual Finance Act
- 5. The Income Tax Act, 1961 became effective from the 1st day of April,1962. It contains 298 sections and XIV schedules for the determination of taxable income, determination of tax liability, procedure for assessments, appeals, penalties and prosecutions.
- 6. The Legislaters has left many things to be decided by the department, and a mention to this effects is made in the relevant sections of the Income Tax Act, 1961. The section 295 of the Income Tax Act has given powers to the Central Board of Direct Taxes (CBDT) to make any rules regarding income tax. These rules are known as Income Tax Rules, 1962
- 7. To deal with certain specific problems, the Central Board of Direct Taxes issues circulars from time to time. These circulars do not take the place of law but for the guidance of the officers and public.
- 8. In the course of assessment proceedings sometimes there may arise a dispute between the department and the assessee over the interpretation of some of the provisions of the Act. The Department’s interpretation of the law may be objected by the assessee as unreasonable and incorrect. To redress such grievances the assessee can go to Court of Law as is prescribed in the Act. In such Basic Concepts cases any decisions given by the Supreme Court become a law which will be binding on the income tax department as well as on the tax payers
- 9. The Finance Bill which declares the financial prospects of the Central Government for the next financial year. The Finance Bill mentions the rates of income tax and other taxes, rebates and reliefs. (The Annual Finance Bill 2020 (2) was placed before the New Parliament by the Finance Minister
- 10. (i) Income tax is charged for every assessment year. (ii) It is charged on every person as specified under section 2(31) of the Act. (iii) It is charged on the total income earned by the person during the previous year. (iv) Total income is computed in accordance with the provisions of the Act.
- 11. (v) The tax is levied at the rates prescribed by the Finance Act. (vi) Income tax shall be deducted at source or paid in advance, where it is so deductible or payable under any provision of the Act. (vii) Income Tax Act, as amended on 1st April of any financial year shall apply for assessment of the year.
- 12. According to Section 2(31) of the Income Tax Act, 1961, the term, person includes the following An Individual A Hindu Undivided Family Company Firm Association of Persons & Body of Individuals Local Authority Artificial and Judicial Persons
- 13. According to Section 2(7) of the Income Tax Act, 1961, the term, Assessee means any persons whose accounts are taken for assessment whether by voluntarily or compulsorily. He is a person by whom any tax or any other sum of money like interest, fine or penalty payable under the Income Tax Act,1961.
- 14. The term assessee is divided into three categories as under: (1) Ordinary Assessee (2)Deemed Assessee (3) Assessee in Default.
- 15. Any person against whom some proceedings under Income Tax Act are going on. For example, Mr.A carries on a small provision stores. His annual income does not exceed Rs.2,50,000. He does not have any idea about Income Tax. However the Income Tax Department issues notice to him to submit statement of Income. He has approached an Auditor and filed Return of Income showing taxable income as Rs.2,00,000. The Income Tax Department accepted the Return of Income. Here, issue of notice by the department is an act of proceedings under the Income Tax Act. So, he is considered as an Assessee even though he is not liable to pay any tax.
- 16. Any person who has filed Return of Loss under sec. 139 (3). For example, Mr.A carries on small business enterprise. During the previous year he suffered a loss of Rs.50,000 from business due to loss by fire. He filed return with department showing the loss amount. Here, he does not liable to pay any amount of income tax, however he is treated as an assessee on the reason that he has filed return of loss.
- 17. Any person, by whom any amount of penalty or interest is payable. For example, Mr. A business man was levied income tax during the preceding previous year Rs.1,00,000. However he fails to pay the income tax. During the previous year he paid that amount of income tax. The department issued notice to him to pay penalty for delayed payment amounting to Rs.10,000. Here, he is treated as an assessee even though he has no taxable income during the current previous year.
- 18. Any person, who is eligible to get refund of tax. For example, Mr. A is working as a manager in a company. The company deducts Rs.2,000 monthly as income tax and deposited with the income tax department. However at the end of previous year the actual amount of income tax comes to Rs.20,000 as per return of income. Here, he is eligible for claiming refund of tax amounting to (2,000 x 12 = 24,000 - 20,000) Rs.4,000.Here, he is treated as an assessee on the basis of income tax refund.
- 19. In case of a deceased person, the executor or legal representative will become deemed assessee. For example, Mr. A is a retired Government Officer having Rs.1,00,000 from income from house property. He is blessed with only one son. During the previous year he suddenly died. Here, the son of Mr. A is treated as an assessee in the capacity of legal representative.
- 20. In case of a Minor or Lunatic or person of unsound mind, the guardian is considered as deemed assessee. For example, Mr. A retired person from Private Company does not have any taxable income. But his son carries on a business with taxable income of Rs.5,00,000. During the previous year his son met with an accident and became a person of unsound mind. Here, Mr. A will be treated an assessee in respect of income from business in the capacity of guardian of unsound mind person.
- 21. In case of a Non-resident having income in India, any person representing him is deemed as assessee. For example, Mr. A in retired Government Officer in India. His pension income is not taxable being less than the exempted limit. His son is working in America and settled there as American Citizen. His son bought house properties in India which fetch annual rental income of Rs.5,00,000. Here, Mr. A treated as an assessee in respect of income from house properties of his son in the capacity of legal representative of non resident.
- 22. Any person who fails to perform any statutory obligations as per the Act is called as an assessee in default. For example, any employer who is liable to deduct tax payment of salary to his employees, fails to do so, he will be assessed as assessee in default.
- 23. According to Section 2(8) of the Income Tax Act, 1961, The term assessment means the procedure by which the Income of an assessee is determined by the Assessing Officer of the Income Tax Department of Government of India. It may be by way of a normal assessment or by way of reassessment of an income previously assessed.
- 24. The financial year in which tax is paid is called Assessment Year. According to Section 2(9) of the Income Tax Act, 1961, Assessment Year means the period of twelve months commencing on the First day of April every year and ending on last day of March of next year. For example, the current Assessment Year started on 1st April 2021 and ending on 31st March 2022.
- 25. The year in respect of the income of which tax is levied is called Previous Year. According to Section 2(34) of the Income Tax Act, 1961, Previous year means the financial year immediately preceding the assessment year. For example, the current previous year is 2020-21 which commenced on 1st April 2020 and ended on 31st March 2021.
- 26. (i) Uniform Previous Year (ii) Previous Year May be Less than Twelve Months ◦ (a) Newly Set up Business ◦ (b) Discontinued Business
- 27. All assesses are required to follow a uniform previous year, that is financial year commencing from 1st April and ending on 31st March, as their previous year in respect of all sources of their income. The purpose of income tax Financial Year is taken as Previous Year.
- 28. (a) Newly Set up Business : In case a business or profession is newly set up the period beginning from the date of setting up of the business and ending of the last day of that financial year i.e. 31st March shall be the first previous year for that business. For example, if a new business is setup on 01.11.2020 then the first previous year for that business will be the period of 5 months starting from 01.11.2020 to 31.03.2021.
- 29. In case a business or profession discontinued during the previous year, the previous year will be only up to the date of discontinuation of business. For example, if a partnership firm dissolved on 30th April 2020 then the previous year consists only one month.
- 30. (i) Income of the Non-resident Shipping Company [Sec.172] (ii) Income of Persons Leaving India [Sec.174] (iii) Association Formed for Particular Event or Purpose [Sec.174 A] (iv) Income of Persons Trying to Transfer his Assets [Sec.175] (v) Income from Discontinued Business [Sec.176]
- 31. Previous Year: (1) The previous year is a period during which the Income is earned by the General Public. (2) The previous year may be 12 months or sometimes less than 12 months. (3) For the current period the previous year is from 01.04.2020 to 31.03.2021 Assessment Year: (1) The assessment year is a period during which Tax on Income is levied and collected by the Government. (2) The assessment year is compulsorily for 12 months. (3) The assessment year is from 01.04.2021 to 31.03.2022.
- 32. According to section 2(24) of the Income Tax Act, 1961 the term income includes the following items : (i) Profits and Gains. (ii) Dividend. (iii) Voluntary contributions received by a trust. (iv) The value of perquisites or profits in lieu of salary. (v) Any special allowance granted to the assessee to meet personal expenses. (vi) Any allowance granted to meet personal expenses for the increased cost of living. (vii) The value of benefit obtained from a company by a director. (viii) The value of any benefit obtained by any representative assessee. (ix) Any income chargeable under the head business.
- 33. (x) Any value of benefit from profession. (xi) Any capital gains. (xii) Insurance profit. (xiii) Casual incomes. (xiv) Any sum received under Keyman Insurance Policy. (Insurance Policy on employees) (xv) Advance Money Received for Capital Assets. (xvi) Gift Income exceeding Rs. 50,000. (xvii) Issue of shares at premium. (xviii) Fair market value of inventory converted into Capital Assets. (xix) Any compensation for modification of terms of employment.
- 34. (i) Sources of Income (ii) Basis of Income (iii) Form of Income (iv) Nature of Income (v) Title of Income (vi) Quantum of Income (vii) Tax free Income (viii) Real Income alone is Taxable (ix) Negative Income (x) Application of Income (xi) Diversion of Income