Introduction to Tax

Type of Direct Taxes

in India

Security Fringe
Income Gift Wealth Corporatio
Transactio Benefit
Tax Tax Tax n Tax
n Tax Tax

Introduced Introduced Introduce

in 1958 in 1957 d in 2004
Levied on every
purchase and sale
of securities listed
on a recognized
stock exchange.
Abolished Abolished Abolished
in 1998 in 2015 in 2010

Q Difference between Direct Tax & Indirect Tax.

Q
Q.
DEFINITIONS GIVEN IN SECTION 2
Q.

In India, Income Tax is payable by every Person on his

Total Income (Calculated depending upon his Residential
Status) which is earned during Previous Year at the rate of
tax applicable for the relevant Assessment Year.
 Income: Section 2 (24) : Income includes:
Q.
I. Profits and gains of any business and profession
II. Dividend
III. Voluntary contributions received by a trust
IV. Value of any perquisites or profits in lieu of salary
received by an employee
V. Any allowance or benefit granted to an employee to
meet official expenses.
VI. Any capital gains chargeable under Section 45
VII. Any winning from lotteries, crossword puzzles, races
including horse races, card games and other games.
Q.VIII. Any sum of money or value of property referred to
in Section 56 (2)
IX. Any consideration received by the company in which
the public is not substantially interested, for the issue
of shares as exceeds the fair market value of shares.
X. Any sum of money received as an advance or
otherwise in the course of negotiations for the transfer
of capital asset if such sum is forfeited and
negotiations do not result in a transfer of such capital
asset. [wef AY 2015-2016]
Q.⮚ Gross Total Income: Section 14: Gross total income means the
aggregate of income under all the five heads of income.
⮚Total Income: Section 2 (45): Total Income means the total amount
of income computed by deduction/deductions from gross total
income. In other words, from the gross total income, certain
deductions under Section 80C to 80U are allowed and the balance
income, after the deductions, is known as Total Income.
Q.⮚ PREVIOUS YEAR AND ASSESSMENT YEAR
♣ Previous year: Section 2 (34): Previous Year means the year
Q.
as defined in Section 3
Section 3: Previous year means the financial year immediately
preceding the assessment year.
♣ Assessment Year: Section 2 (9): Assessment Year (AY)
means the period of 12 months commencing on the 1st date of
April every year.
Q.NOTES

(a) A financial year is the period of 12 months starting

from 1st April till 31st March of the following year
(b) The Income earned in one financial year is taxable in
the next financial year.
(c) The year in which income is earned is called Previous
Year.
(e) And the year in which tax is computed is called
Assessment Year.
(f) One financial year plays a dual role. It can be a previous
year as well as the assessment year. In one year, it is
assessment year, and then, it will become the previous
year in the next year.
Q.
Q.⮚ PREVIOUS YEAR CAN BE A PERIOD OF LESS THAN 12
MONTHS: PROVISO TO SECTION 3.
✔ Income earned in a financial year is not assessed in
that financial year but in the following financial year.
TO this general rule, the following are the
exceptions:

1. SHIPPING BUSINESS OF NON-RESIDENTS: SECTION

172
2. ASSESSMENT OF PERSONS LEAVING INDIA: SECTION
174
3. ASSESSMENT OF AOP/BOI FORMED FOR A
PARTICULAR EVENT: SECTION 174A
Q.4. ASSESSMENT OF PERSONS LIKELY TO TRANSFER
PROPERTY TO AVOID TAX: SECTION 175
5. DISCONTINUED BUSINESS: SECTION 176
Q. COMPUTATION OF TOTAL INCOME
Income shall be computed under each head, i.e. expenses
incurred shall be deducted from the gross receipt as per the
provisions of the relevant head.
Income computed under each head shall be added up to
compute the gross total income.
Q.Certain concessions are allowed from the gross total income,
which is called deduction from gross total income under
section 80C to 80U.
After permitting the deductions, the remaining income is called
total income.
Computation of total income can be shown mathematically in the
manner given below:
Q.Total income of an assessee shall be computed in the following steps:
Computation of Total Income & Tax Liability
Q
Q.
Note:- Tax on LTCG under section 112A shall be @ 10% in excess
Q.
of Rs 100000
Total income Shall be rounded off u/s 288A in the multiples of
10, and for this purpose, any paisa shall be ignored, and if the last
digit is 5 or more, it will be rounded off to the higher multiple
otherwise it will be rounded off to the lower multiple.
Total income Tax Shall be rounded off u/s 288B in the
Q.
multiples of 10, and for this purpose, any paisa shall be
ignored, and if the last digit is 5 or more, it will be rounded
off to the higher multiple otherwise it will be rounded off to
the lower multiple.