UNIT – 5

1 Define e-way bill ?

EWay Bill is an Electronic Way bill for movement of goods to be generated on the eWay

Bill Portal. A GST registered person cannot transport goods in a vehicle whose value
exceeds Rs. 50,000 (Single Invoice/bill/delivery challan) without an e-way bill that is
generated on ewaybillgst.gov.in.

2 What is DTAA?

A tax treaty between two or more countries to avoid taxing the same income twice is
known as Double Taxation Avoidance Agreement (DTAA). This means that there are
agreed rates of tax and jurisdiction on specified types of income arising in a country.
When a tax-payer resides in one country and earns income in another country, he is
covered under DTAA, if those two countries have one in place. DTAAs can be either
comprehensive, i.e. covering all types of income or specifically target certain types of
income. This depends on the types of businesses/holdings of citizens of one country in
another. Some of the common categories covered under DTAAs are services, salary,
property, capital gains, savings/fixed deposit accounts, etc.

3 What are the tests conducted to resolve the Residency issues in international
taxation

Several tests will be done to determine the tax residence of the assessees. They are as
follows Permanent Home
Personal & Economic Relations
Habitual Abode
Nationality
Mutual Agreement
4 What are tax havens? Give example

A tax haven is an offshore country that allows wealthy individuals and business owners
to bank with the country’s local institutions in order to avoid paying home country taxes
on gains or profits. These tax haven countries offer the benefit of little to no tax liability,
and company owners or consumers with considerable wealth do not usually need to be
citizens to take advantage of this kind of tax loophole.

As a result of this tax haven structure, business owners and wealthy consumers pay little
or even no taxes on their profits or personal finances. In other words, tax havens offer a
way for companies and affluent individuals to avoid higher corporate tax rates or income
tax in their home countries.

5 Write a detailed note on Tax Treaties

A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues
involving double taxation of passive and active income of each of their respective
citizens. Income tax treaties generally determine the amount of tax that a country can
apply to a taxpayer's income, capital, estate, or wealth. 1 An income tax treaty is also
called a Double Tax Agreement (DTA).2

Some countries are seen as being tax havens. Generally, a tax haven is a country or a
place with low or no corporate taxes that allow foreign investors to set up businesses
there. Tax havens typically do not enter into tax treaties.

6 What tests would you apply to determine the residence of an individual?

The residential status of taxpayers plays a key role in determining the scope of taxable
income for a financial year in India and there by the tax payable. For
an individual the residential status is determined solely by his/her physical presence in
India during the financial year.
 7 Explain the Bilateral and Unilateral tax treaty?

A bilateral tax agreement, a type of tax treaty signed by two nations, is an arrangement between
jurisdictions that mitigates the problem of double taxation that can occur when tax laws consider
an individual or company to be a resident of more than one country.

A bilateral tax agreement can improve the relations between two countries, encourage foreign
investment and trade, and reduce tax evasion.

KEY TAKEAWAYS

 A bilateral tax agreement is a treaty established between nations for the purposes of
avoiding double taxation on their citizens for income earned in either.
 When an individual or business earns income or invests in a foreign country, the issue of
which country should tax the investor’s earnings may arise.
 Both countries may enter into a bilateral tax agreement to determine which country
should tax the income to prevent the same income from getting taxed twice.
 Tax treaties such as these can also foster stronger economic, diplomatic, and political ties
over the long-run.

Unilateral relief, like double tax relief, aims to relieve double taxation. Subject to certain
conditions being satisfied and specific limits, unilateral relief:

1. •is generally provided by way of a credit against, and thereby reduces, UK income,
corporation or capital gains tax for foreign tax suffered on the same income or gain
2. •is available where tax relief is not available under a double tax treaty, and
3. •is available to:
1. ◦UK tax resident persons, and
2. ◦foreign resident persons whose UK branch or agency or, in the case of a
company, UK permanent establishment, suffers third country tax (ie foreign tax
imposed by a territory other than its territory of residence), but
 4. •does not apply to foreign tax imposed on income or gains attributable to a foreign
exempt permanent establishment of a UK tax resident company

Unilateral relief does not apply to foreign dividends that are exempt from UK corporation tax.
This is because if they are exempt, there is no UK tax which can be reduced by way of a credit
for any foreign tax paid.

8 Discuss the principal objectives of Indian Tax Treaties.

The objective of a tax treaty, broadly stated, is to facilitate cross-border trade and
investment by eliminating the tax impediments to these cross-border flows. This broad
objective is supplemented by several more specific, operational objectives. 44. Arguably,
the most important operational objective of bilateral tax treaties is the elimination of
double taxation. If income from cross-border trade and investment is taxed by two or
more countries without any relief, such double taxation would obviously discourage such
trade and investment. Many of the substantive provisions of the typical bilateral tax treaty
are directed at the achievement of this goal. For example, Article 4 (2) (Resident) of the
United Nations Model Convention contains tie-breaker rules to make a taxpayer who is
otherwise considered to be resident in both countries to be a resident in only one of the
countries for purposes of the treaty. They also limit or eliminate the source-country tax
on certain types of income and require residence countries to provide relief for source-
country taxes either by way of a foreign tax credit or an exemption for the foreign-source
income. 45. Originally, the focus of tax treaties was almost exclusively on solving the
problem of double taxation. Multinational enterprises were facing risks of substantial
double taxation, few countries provided unilateral relief for double taxation and treaty
networks were just being developed. Treaty solutions to most of the major double tax
problems were worked out in the mid-twentieth century, however, and they are now
routinely accepted by States when they enter into tax treaties. The one major exception is
the double tax problem arising from inconsistent applications by countries of the arm’s
length method for establishing transfer prices in transactions between related persons. 46.
The historical emphasis on the elimination of double taxation should not obscure the fact
that most tax treaties have another equally important operational objective — the
prevention of tax evasion and avoidance or double non-taxation. In other words, the
fundamental principle is that treaties should apply to ensure that income is taxed once,
and only once. This objective counterbalances the elimination of double taxation. Just as
double taxation imposes an inappropriate barrier to international commerce, the tolerance
of fiscal evasion and avoidance offers an inappropriate incentive to such commerce.
Although the elimination of tax evasion and avoidance is an objective of most tax treaties
recognized by both the United Nations and the OECD, there are few provisions in typical
tax treaties that are designed to achieve it. 47. In addition to the two principal operational
objectives of tax treaties, there are several ancillary objectives. One ancillary objective is
the elimination of discrimination against foreign nationals and non-residents. Any
country entering into a treaty wants to ensure that its residents who carry on business in
the other contracting State are treated the same as the residents of that other State who
carry on similar activities. A second ancillary objective is to facilitate administrative
cooperation between the contracting States. This administrative cooperation has three
main dimensions: exchange of information, assistance in the collection of taxes and
dispute resolution. 11 48. The exchange of information in the typical tax treaty can be an
important tool in combating tax evasion and avoidance and to ensure that taxpayers
receive treaty benefits. The United Nations and OECD Model Conventions both provide
that each contracting State will lend assistance in the collection of tax assessed by the
other State as if the tax were its own. Finally, most treaties provide a mechanism in their
treaties — the mutual agreement procedure — for resolving disputes concerning the
application of the treaty. This procedure is often used to resolve transfer pricing disputes.
49. One of the most important effects of tax treaties is to provide certainty for taxpayers.
Certainty concerning the tax consequences of cross-border investment is an important
factor in facilitating such investment. Tax treaties have an average life of approximately
15 years. As a result, non-resident investors know that, despite changes in the tax laws of
the source country, the basic limitations in the treaty on the source country’s right to tax
will continue to prevail. For example, if company A, a resident of country A, licenses
residents of country B to use intangible property developed by company A, company A
will know (for example) that the rate of withholding tax on royalties provided in the
 treaty between it and country B will continue to apply even if country B increases that
rate under its domestic law. 50. Although it may not be an objective of a tax treaty, the
allocation of tax revenues from cross-border activity between the two contracting States
is certainly an effect of the treaty. As a result, the treaty negotiators should be acutely
aware that the provisions of the treaties they are entering into will determine how much
tax revenue will be subject to domestic tax. For example, if a country agrees to a 5 per
cent rate of tax on interest under Article 11 (Interest), its tax on interest paid by residents
of the country to lenders resident in the other country will be limited to 5 per cent of the
total interest paid and the other country’s tax revenues will be whatever its tax rate on its
residents is less the 5 per cent tax paid to the source country.

UNIT 4

1 Explain the types of GST Levy able.

The 4 types of GST in India are:

 SGST (State Goods and Services Tax)

 CGST (Central Goods and Services Tax)
 IGST (Integrated Goods and Services Tax)
 UGST (Union Territory Goods and Services Tax)

There are four types of GST as explained below, these are:

SGST – GST imposed by specific State governments on the intra-State trade and services or
trade within the state is called SGST(State-GST). Here the revenues are earned by the State govt.
due to SGST as the transaction occurred within the state. For example – Suppose goods
manufactured and sold within Haryana state then SGST will be collected by the Haryana state.

UGST – In case of Union territories such as Chandigarh, instead of State govt. the GST is
collected by the Central administration and is referred to as UGST(Union-GST).

CGST – For an intra-State transaction of goods and services, CGST(Central-GST) is levied by

the Central government. It is collected along with the SGST or UGST, and the revenues
collected are distributed between the State and the Central govt. For example – If the goods or
services are provided within State Haryana, then along with SGST or UGST, CGST will also be
collected.IGST – Integrated GST is collected on goods and services transactions between
different states. It is also applied to imports or exports of goods and services. Here the SGST
portion of the tax collected is given to the state, which is the consumer of the said goods or
services. The IGST earned is then divided between the state and the central government.

2 Explain the features of GST structure in India.

The GST tax structure will bring about a drastic change in the current indirect tax system.
Currently, tax barriers have created a fragmented Indian market.

This has resulted in a cascading effect of taxes on cost making indigenous manufacture less
profitable. Also, the complex multiple taxes have raised the cost of compliance considerably.

The GST tax structure will comprise of the Central Goods and Services Tax (CGST), State
Goods and Services Tax (SGST) and Integrated Goods and Service Tax (IGST).

The four slab tiers of the GST tax structure will be 5 per cent, 12 per cent, 18 per cent and 28 per
cent. The  lowest rates will be applicable for essential items and the highest for luxury and
demerit goods. Moreover, these include SUVs, luxury cars and tobacco products. GST may go
up to 40 per cent after the GST Council proposed raising the peak rate.
Service tax will increase from its current levels of 14.5 per cent which will be negative for
service industries like airlines, telecom and insurance.

Currently, FMCGs pay about 24 to 25 per cent on excise duty, VAT and entry tax. Under the
GST tax structure, this may be reduced to 18 per cent, but at 28 per cent this may disappoint the
market. Also, telecom will be affected with a rate of 18 per cent from the current 15 per cent.

An additional tax up to 1% will be levied on the inter-state supply of goods. Therefore, these
goods do not come under VAT and have no input tax credit.
 3 Comparative study between GST and Earlier Indirect Taxation Regime

It is indeed a matter of surprise that the problems sustained in the earlier taxation regime has
more over eradicated by the coming of the GST rules and regulations. Keeping in mind that such
a reform in the taxation regime may have both advantages/disadvantages and positive/ negative
impacts on the entire economy of the country. So to have a clear understanding a comparative
analysis between the new and earlier system has been drawn with the help of the following sub-
points-

 Cascading effect- Input Tax Credit is one of the essential component in indirect tax system of our
country. The system of input tax credit is a core essential thing by which the suppliers are able to
take the credits of the inputs applied during the time of manufacturing of a particular commodity.
It was recorded during the earlier indirect taxation regime that credit of central sales tax and
other indirect taxes was not allowed in the previous structure. But during this current GST era
the whole concept of central sales tax has been eliminated, with the introduction of GST. Lets
take an illustration to have a better understanding, in the current GST regime the entire input tax
levied on the manufacturing of particular product before supply of the goods or at the time of
supply has to be borne by the supplier himself later on the one who is the recipient purchasing
the product from the supplier have to pay the entire value added amount inclusive of GST as per
the rate notified by the council to the supplier itself which makes it crystal clear that the supplier
takes the input tax credit from the recipient. It is also relevant to mention that this system of
availing input tax credit under the GST system is much more clear and apparent which avoid the
cascading effect and the amount of tax as per the GST rate  is getting segregated between the
central and state.
The problem of central sales tax previously applicable on interstate supply was not creditable and
as such there was a breakdown of the input tax credit chain. Again simultaneously the
manufacturers who were required to pay the excise duty on sale to dealer caused the same
breakdown of chain. The cascading effect was also present in the sectors of service provider like
CA professionals, solicitor firms who use to charge a hefty fees and thus the input tax credit
taken and availed by then was not apparently accountable leading to in equal distribution of
taxes.
 However to remove the cascading effect in the year 2005, the government has launched to levy
VAT  on sale of goods and services on intra-state supply to overcome the cascading effect, but to
an extent VAT has eliminated the cascading effect on the state indirect taxes, while the
complexities on other indirect taxes still suffered with the same problem.

 Multiplicity of taxes-The indirect taxation system encompasses both the center and state to levy
indirect taxes on goods and services which was previously arbitrary and unfair as compared from
the present GST system.  The central government used to impose taxes on the following –
Income tax, Basic custom duty, service tax, central excise.
Similarly the respective state governments used to levy taxes as VAT, stamp duties, land
revenue, state excise duty and other local taxes.

From the context of Indian taxation regime there were multiple indirect taxes which were to be
borne by the manufacturing units as input tax and finally by the end consumers. Further this were
controlled by government agencies vide notifications, orders and circulars which together
resulted to huge strict compliances.

However if we look at the past phases of the previous indirect taxation system, we can see that
taxes by the union government, state governments and local governments has resulted to
complexities and ramifications to the tax payer. In the light of the business entrepreneurs as a tax
payer there was a huge compliances in maintaining separate records for each of them.

If we try to comparatively analyze the previous phase of indirect taxation and the current phase
of GST regime, then we can see the system of current indirect taxation i.e. GST have subsumed
the majority of taxes which were previously imposed in the name of vat sales tax , central sales
tax etc and as such India witnesses a single unified structure of taxation regime which is much
more clear, apparent and feasible.

 Flexible compliance- The GST regime in India has significantly lowered the cost of computation
of taxable liability, as business entrepreneurs could easily hire CA professionals to engage them
in the maintenance of records and filing of returns. Moreover it has been analyzed that cost of
maintenance of records for filing the compliances are flexible and cheaper as compared to the
previous tax structure.
 Input Tax Credit- In the current GST regime, the availability for claiming input tax credit is
much more apparent than the old indirect taxation syste. Even it has been soothing for those
registered dealer who were unregistered under the previous law engaged in supplying of work
contract service to claim and enjoy ITC of inputs in stock.
Let us under the concept of input tax credit under GST system by the help of an example of
manufacturer of Khaitan Fan which is being manufactured by Khaitan Company. But before its
manufacturing the company has to purchase various inputs/raw materials for the purpose of
making the product. Now it is to be understood from the point of view of every manufacturer
who is supplying various spare parts and accessories which ultimately is required as a input for
the manufacturing of the fan. So every manufacturer and service provider supplying goods or
service to the company shall avail the input tax credit of GST which he has paid at first instance
in addition to the value of that product. But it should be taken in account that the rate of tax is
fixed for a particular product as determined by the government in consultation with GST Council
and as such it is uniform tax which is separate for a separate products as determined and thus the
rate does not vary from state to state/union territories Beside the center and the state can both
have a share to the amount of tax equally without any further confusion as on the basis of supply
of goods.

 Composition Levy – The scheme of composition levy on goods and services under the current
GST rules and regulations has brought some happiness in the small scale sectors and medium
enterprises which were previously over-burdened by large number of diversified multi-
dimensional taxes. The scheme of composition levy is more stringent as compared to the normal
levy under the GST system. Small scale enterprises can opt for this composition levy if their
business aggregate turnover does not exceed Rupees 75 Lakhs as per the current notification.
This proves to be more feasible and can be tactfully managed by the small scale enterprises.
Since one of the basic characteristics of GST is a destination based tax, it has recovered the
latches of uneven distribution of revenues between the two structured government as previously
it was evident due to the origin based tax i.e. CST. Moreover the GST regime has also replace
the earlier central taxes and duties such as excise duty, countervailing duty, central charges and
other local state taxes.
 Burden of tax is integrated and centralized- In the previous taxation regime, the tax burden on
the tax payer was considerably high and increasing. The introduction of GST significantly
brought a drastic change by reducing the tax burden an making it more integrated and
centralized. It is also more crystal clear that the burden in a equitable manner upon the
manufacturer and the consumer. Hence the imposition of GST has proved to be equalizing the
rate of tax collection between the center and the state in a wise and befitting manner.
 Concurrent power- Another distinctive feature in the current GST system is that both the center
and the state has the power to levy GST on the same subject matter which was not previously
present in the old indirect taxation regime. GST is basically a dual system of indirect tax
governance and thus the center and the state has been empowered with the concurrent power to
make laws with regard to the supply of goods and services.

4 Why GST is known as destination based taxation?

GST or goods or service tax is a destination-based tax because there goods and services get
consumed. In GST, exports are permitted with zero taxes whereas imports are taxed on par with
the domestic production.

5 Explain the process of registration in GST.

Step-by-step Guide explaining GST Registration Process Online

1. Step 1: Go to the GST Portal.
2. Step 2: Generate a TRN by Completing OTP Validation.
3. Step 3: OTP Verification & TRN Generation.
4. Step 4: TRN Generated.
5. Step 5: Log in with TRN.
6. Step 6: Submit Business Information.
7. Step 7: Submit Promoter Information.
6 Describe the challenges associated with GST in India.

GST is meant to simplify the Indian indirect tax regime by replacing a host of taxes by a single

unified tax, thereby subsuming central excise, service tax, VAT, entry tax, etc. Needless to
mention, RNR will impact India Inc adversely, if it is unduly higher than the
present tax structure.

7 Define the terms:

 Time of supply
 Place of supply
 Exempted supply and
 Zero rated supply

Time of supply means the point in time when goods/services are considered supplied'. When the
seller knows the 'time', it helps him identify due date for payment of taxes. CGST/SGST or IGST
must be paid at the time of supply. Goods and services have a separate basis to identify their time
of supply.

Usually, in case of goods, the place of supply is where the goods are delivered. So, the place of
supply of goods is the place where the ownership of goods changes. What if there is no
movement of goods. In this case, the place of supply is the location of goods at the time of
delivery to the recipient.

“Exempt supply” means supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax under section 11, or under section 6 of the Integrated
Goods and Services Tax Act, and includes non-taxable supply.
 By zero rating it is meant that the entire value chain of the supply is exempt from tax. This
means that in case of zero rating, not only is the output exempt from payment of tax, there is no
bar on taking/availing credit of taxes paid on the input side for making/providing the
output supply.

8 How different supplies are applied four rates in GST regime?

 (i) Composite Supply under GST.
 (ii) Principal Supply under GST.
 (iii) Mixed Supply under GST.
 (iv) Mixed Supply v. Composite Supply.
 (v) Exempt Supply & Non-Taxable Supply.
 (vi) Scope of Non-Taxable Supply.
 (vii) Inward & Outward Supply.
 (viii) Zero rated supply

9 Explain the role of GST council in implementation and monitoring of GST Regime in
India.

One-half of total number of members of GST Council shall constitute quorum for

meeting. Every decision of the GST Council shall be taken by majority not less than 3/4th of
weighted votes of members present and voting. 2. Votes of all State Governments taken together
shall have weightage of 2/3rd of total vote cast.

UNIT 3
 1 Describe Diversion of Income V/s Application of Income?

Diversion of Income is the process of diversion of income before it is earned by the assessee

(taxpayer). Such amounts are excluded from the total income of the assessee during income tax
computation as the income gets diverted to someone else before being earned by the assessee.

Application of Income means spending of Income after it is being earned by the assessee. Such

amount shall not be excluded from total income of the assessee as it is merely application of
earned income. In other words, applied income shall be taxable in the hands of the assessee.

2 Elaborate the types of Tax Planning.

Types of Tax Planning

Most people merely perceive tax planning as a process that helps them reduce their tax liabilities.
However, it is also about investing in the right securities at the right time to achieve your
financial goals.

Following are some of the various methods of tax planning:

1. Short-range tax planning

Under this method, tax planning is thought of and executed at the end of the fiscal year. Investors
resort to this planning in an attempt to search for ways to limit their tax liability legally when the
financial year comes to an end. This method does not partake long-term commitments. However,
it can still promote substantial tax savings.
2. Long-term tax planning
This plan is chalked out at the beginning of the fiscal and the taxpayer follows this plan
throughout the year. Unlike short-range tax planning, you might not be offered with immediate
tax benefits but it can prove useful in the long run.
3. Permissive tax planning
This method involves planning under various provisions of the Indian taxation laws. Tax
planning in India offers several provisions such as deductions, exemptions, contributions, and
 incentives. For instance, Section 80C of the Income Tax Act, 1961, offers several types of
deductions on various tax-saving instruments.
4. Purposive tax planning
Purposive tax planning involves using tax-saver instruments with a specific purpose in mind.
This ensures that you obtain optimal benefits from your investments. This includes accurately
selecting the appropriate investments, creating an apt agenda to replace assets (if required), and
diversification of business and income assets based on your residential status.

3 What is self-assessment? What are the consequences of non-payment of tax on “Self-

assessment”?

Self-assessment tax is the tax amount in excess of advance tax and TDS which is payable by the
income tax assessee. Usually, when filing income tax return an assessee computes the income
and corresponding taxes to be filed. However, in certain cases due to some discrepancy in
computation, taxes paid by the assessee as TDS or advance tax fall short of the actual total tax
payable. The balance tax that is needed to be paid with the tax authorities to discharge one's tax
liability is referred as self-assessment tax.

Tax paid as per section 140A(1) is called 'self assessment tax'. As per section 140A(3), if a
person fails to pay either wholly or partly self assessment tax or interest, then he will be treated
as assessee in default in respect of unpaid amount.

4 Write a short note on the following :

(i) Advance Tax (ii) TDS.

Advance tax is the amount of income tax that is paid much in advance rather than a lump-sum
payment at the year-end. Also known as earn tax, advance tax is to be paid in installments as per
the due dates decided by the income tax department.
Tax Deducted at Source

TDS full form is Tax Deducted at Source. Under this mechanism, if a person (deductor) is liable
to make payment to any other person (deductee) will deduct tax at source and transfer the
balance to the deductee. The TDS amount deducted will be remitted to the Central Government.

5 What is Tax management? List 5 ways of effective tax management in a company.

Tax management means, the management of finances, for the purpose of paying tax. Tax

Management deals with filing of Return in time, getting the accounts audited, deducting tax at
source etc. Tax Management helps in avoiding payment of interest, penalty, prosecution.

5 Steps to Managing Your Payroll Taxes

The best thing you can do to effectively manage your payroll taxes is to make all your payments
when they are due. If you’re late, you’ll get hit with costly penalties. With that in mind, here are
five other steps to managing your payroll taxes effectively.

Step #1: Understanding Who Your Taxable Workers Are

You need to determine which of your workers are truly employees and which are independent
contractors. Payroll taxes are only required for true employees. If you need to freshen up on the
difference between the independent contractors and employees, check out our blog here .
Typically, if a worker is economically reliant on you, they are then considered an employee.
Other factors for employment include the degree of control you exercise over the worker like
when, where, and how the work is done.

Step #2: Determine What Compensation is Taxable

After you have determined which workers are employees, you then need to determine which
forms of employee compensation are taxable and which forms reduce the amount of taxable
compensation. Aside from the obvious basic wages and salaries taxes, other compensations
you’ll want to consider are: expense reimbursements, tips, health and life insurance, fringe
benefits, bonuses, non-cash payments, and premiums.

Step #3: Determine Which Payroll Taxes Apply

Knowing the types of tax obligations that arise when you have employees and learning how to
compute and pay the amounts that must be paid is crucial to successfully managing your payroll
taxes. The IRS Publication 15, (Circular E) Employer’s Tax Guide can help you understand your
federal tax obligations, or, if you need someone to explain it in more layman’s terms, contact
your local LBMC representative.

Step #4: Familiarize Yourself with Payroll Tax Returns and Payments

IRS Publication 15 can also teach you about the forms, returns, filling, and payment procedures
for your payroll taxes. It’s important to be aware of deadlines and be sure to mark important
dates. Be sure to note that payment and filing schedules often differ, and unemployment taxes
are reported and paid separately from income tax and FICA payments. You’ll incur some pretty
hefty fines if you fail to make payments or file timely returns.

Step #5: Determine Your Self-Employment Taxes

If you don’t hire anyone to work for your business, you are always going to have at least one
employee — yourself. Incorporating yourself will make a big difference in your taxes, and if you
do so, you’ll likely have all the tax responsibilities as if you had hired another employee. If you
are a sole-proprietor, you’ll have to pay estimated income tax and self-employment (SECA)
taxes.

If you need guidance in effectively managing your payroll taxes, contact your local LBMC
Employment Partners’ representative. As one of the top payroll companies in Tennessee, we’ll
help guide you through each and every step of the way—from managing payroll to outsourcing
payroll to payroll tax services—ensuring that you are in compliance with all tax codes. Not only
that, but working with LBMC EP will help you avoid penalties: your payroll taxes will be filed
correctly and on time.
 UNIT 2

1 When is income chargeable under Other Sources?

 Income which is not exempt and cannot be charged under the heads of salary, income from house

property, profits and gains from business or profession, or capital gains, form income from other
sources for taxation purpose. 2. All dividends received are taxable under the head of income from other
sources.

2 What are the conditions for the taxability of income under the head Capital Gains?

Capital gains exemption is available in cases where the land or building which is compulsorily acquired
was used by the taxpayer for the purposes of the business during the two years immediately preceding the
date of compulsory acquisition and the assessee purchases any other land or building or constructs any
building .

UNIT 1

1 What is foreign income?

Foreign earned income is income you receive for performing personal services in

a foreign country. Where or how you are paid has no effect on the source of the income. ...
If you receive a specific amount for work done in the United States, you must report that amount
as U.S. source income.

2 What is tax?
Tax is one of the most common financial terms. Taxes are one of the primary sources of income
for the government through which it fulfils various projects and initiatives. They are levied by
the central and state governments.

3 Explain the process of administration of taxes in India.

The revenue functions of the Government of India are managed by the Ministry of Finance. The
Finance Ministry has entrusted the task of administration of direct taxes like Income-tax, Wealth
tax, etc., to the Central Board of Direct Taxes (CBDT). The CBDT is a part of Department of
Revenue in the Ministry of Finance.

CBDT provides essential inputs for policy framing and planning of direct taxes and also
administers the direct tax laws through the Income-tax Department. Thus, Income-tax Law is
administered by the Income-tax Department under the control and supervision of the CBDT.

4 Explain the constitutional provisions for levy and collection of taxes.

Section 9 of CGST Act/SGST Act and Section 5 of IGST Act are the Charging Sections for the
purposes of levy of GST. CGST and SGST shall be levied on all intra-state supplies of goods
and/or services and IGST shall be levied on all inter-state supplies of goods and/or services
respectively.

5 Who is assesse?

An income tax assessee is a person who pays tax or any sum of money under the provisions of
the Income Tax Act, 1961. The term 'assessee' covers everyone who has been assessed for his
income, the income of another person for which he is assessable, or the profit and loss he has
sustained.
6 Who is person according to Indian Income tax rules.

For the purposes of this clause, an association of persons or a body of individuals or a local
authority or an artificial juridical person shall be deemed to be a person, whether or not such
person or body or authority or juridical person was formed or established or incorporated with
the object of deriving income, profits or gains.

It may be noted that “assessee” under the Income Tax Act, 1961 is a person by whom any tax/
other dues are payable under that Act, i.e. income-tax is to be paid by a ‘person’.

The term ‘person’ as defined under the Income-tax Act covers in its ambit natural as well as
artificial persons.

For the purpose of charging Income-tax, the term ‘person’, under Section 2(31) of Income Tax,
includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of
individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person.

Thus, from the definition of the term ‘person’ it can be observed that, apart from a natural
person, i.e., an individual, any sort of artificial entity will also be liable to pay Income-tax.