Dr.

RAM MANOHAR LOHIYA NATIONAL

LAW UNIVERSITY

ACADEMIC SESSION: 2023-2024

TAXATION

A COMPREHENSIVE STUDY OF INCOME TAX

DEPARTMENT IN INDIA: STRUCTURE AND FUNCTIONS

Submitted to: Submitted by:

Dr. Bhanu Pratap Singh Saddhvi Nayak

Associate Professor (Law) 200101114

RMLNLU 7th semester (Section B)

B.A.LLB.(Hons.)
 CONTENTS

S.NO. Topic Pg.NO.

1. Declaration 3
2. Acknowledgement 4
3. Introduction 5-6
4. Objectives 6-7
5. Literature Review 7-8
6. Methodology 8
7. Scope and Significance 9
8. Characteristics of good tax system 9-13

9. Tax deduction 13

10. Tax exemptions 14-16

11. Tax returns 16

12. Online tax in India 16-17

13. E- filling 17-18

14. The process of tax filling in India 18-21

15. Tax penalities 21-22

16. Conclusion 22-23

17. Bibliography 23
 DECLARATION

I hereby declare that the project work entitled “A

Comprehensive Study of Income Tax Department in India:
Structure and Functions” submitted to the Dr. Ram Manohar
Lohiya National Law University, Lucknow is a record of an
original work done by me under the guidance of Dr. Bhanu
Pratap Singh, faculty of law, the Dr. Ram Manohar Lohiya
National Law University and this project is submitted in the
partial fulfillment of the requirements for the award of the
degree of B.A.L.L.B (Hons.). The results embodied in this have
not been submitted to any other University or Institute for the
award of any degree or diploma.
 ACKNOWLEDGEMENT

This research paper would not have been accomplished without the
generous contributions of individuals. First of all, I express my
gratitude to the Almighty, who aided me with his strength, wisdom and
patience to complete this project as a term paper.

Additionally, I express my gratitude and deep regards to my teacher

Dr. Bhanu Pratap Singh for giving me the freedom to work on “A
Comprehensive Study of Income Tax Department in India:
Structure and Functions” and also for his exemplary guidance,
monitoring and constant encouragement throughout the course of this
research paper.

I would also like to thank the authorities of Dr. Madhu Limaye

Library who provided the remote access of the library to provide the
research material.

Moreover, I also thank all my batchmates and seniors who aided me

along the way, and my family and friends for their constant
encouragement without which this assignment would not have been
possible.I know that despite my best effort some discrepancies might
have crept in which I believe my humble professor would forgive.

THANKING YOU ALL.

Saddhvi Nayak.
 INTRODUCTION

The word ‘income’ has special meaning with reference to income-tax. It inter alia includes
gains derived on transfer of a capital asset. Since these are not annual accruals, these are
treated on a different footing for taxation purpose. Income tax is levied by the Central
Government under entry 82 of the Union of Schedule VII to Constitution of India. This entry
deals with ‘Tax on income other than agricultural income’. This task is achieved by the
enactment of the Income Tax Act, 1961[“The Act”].
The Act provides for the scope and machinery for levy and collection of Income Tax in India.
It is supported by Income Tax Rules, 1962 and several other subordinate rules and
regulations. Besides, circulars and notifications are issued by the Central Board of Direct
Taxes (CBDT) and sometimes by the Ministry of Finance, Government of India dealing with
various aspects of the levy of Income tax. Unless otherwise stated, references to the sections
will be the reference to the sections of the Income Tax Act, 1961.Section 4, which is the
charging section, provides that Income tax is a tax on the total income of a person called the
assessee of the previous year relevant to the assessment year at the rates prescribed in
the relevant Finance Act.
Income tax in India is levied by the Government of India on taxable income of individuals,
companies, Hindu Undivided Families (HUFs), co-operative societies, firms, and trusts
(recognized as association of persons and body of individuals) and any other artificial person.
Imposition of tax is different for every individual. Income tax imposition is regulated by the
Indian Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) has the overall
responsibility of regulating the Income Tax Department in India. It is a division of the
Department of Revenue under the Ministry of Finance, Government of India. Income tax is a
tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment
Year, on the Total Income earned in the Previous Year by every Person.

MEANING AND DEFINITION

In Income Tax in India are divided in to two types they are:
1. Direct Taxes
2. Indirect Taxes.
Income Tax, Wealth Tax, etc., where the entire burden falls in the taxpayer directly is called
as Direct Taxes, whereas like Service Tax, VAT, etc., are called as indirect taxes as these will
be passed on through a third party.
Income tax can be defined as all sources of income other than agricultural income which
Central Government collects levies on that and shares the same with the states.
As per Income Tax Act of 1961, all persons who are considered as an assessee determined on
the basis of the person’s residential status in India and their when their income exceeds the
maximum exemption in the prescribed limit and the income tax will be levied at the
prescribed rates according to finance act, such type of income tax has to be paid on the total
income in the previous year to be paid in relevant assessment year.

OBJECTIVES
 Raising revenue: The primary purpose of taxes is to raise the revenue for the government.
The modern government has to perform several functions for the welfare of the public.
The performance of these functions involves substantial amount of public expenditure.
 Regulation of consumption and production: Taxes are sometimes used to discourage the
consumption and production of unnecessary or harmful goods like liquor, tobacco etc.
This also results in the diversion of production form luxury goods to necessities.
 Encouraging domestic industries: Taxes in the form of custom duties are used to reduce
the import of certain goods that are domestically available and thereby the domestic
industries for the production of these goods. For example, high customs duties on goods
like TV, AC etc switch over the demand for the foreign brands.
 Stimulating investments: The instrument of taxation can also be used in the stimulating
investment of the private sector. This can be done by providing various tax-incentives in
the form of tax-holidays, investment allowance and lower profits.
 Reducing income inequalities: Taxation policy of the government is often used in
reducing the income inequalities of incomes and assets. Inequality of income can be
reduced by the system of progressive taxation under which the rich people are required to
pay much more taxes than poor. The taxes collected from the rich can further be utilized
for providing social services which benefit the low income groups.
 Promoting economic growth: Taxation policy can also be used for promoting economic
development of the country. The revenue collected by the government can be used in
 promoting development of industries and agriculture. The government can also use these
funds in building a better infrastructure like transport and communication, power etc.
 Development of backward regions: Tax system can be used in ensuring the development
of backward regions. Entrepreneurs can be motivated to set up their industries in the
backward regions by providing tax concessions to them.
 Ensuring price stability: Direct taxes like income tax can be used to ensure price stability.
These taxes reduce the disposable income of individuals and thereby reduce their
purchasing power. This results in the fall in aggregate demand in the economy and thereby
reducing demand-pull inflation.

LITERATURE REVIEW
Kumat, 2014
In his research paper on Taxation laws of India- overview and fiscal analysis focuses on the
overview of Indian tax system and challenges ahead. He thinks that there should be a
coordinated consumption tax system. He also states that improving the productivity of Indian
tax system continues to be a major challenge in India.
Jha, 2013
In his research paper on Tax structure in India & its effect on corporate and individual in
India suggests that high dependence on indirect taxes should be reduced and direct
taxes should be in increased on super rich to compensate the losses. He also states that
corporate tax evasion techniques like transfer pricing should be checked.
Rao, 2005
In his research paper on Tax system reforms in India: achievement and challenges, ahead
focuses on the union and state level reforms. He state that the reforms are just the beginning
and considerable distance in reforming the tax system is yet to be covered.
Jayakumar and Elavarasan (2015)
This paper concerns about Impact of Tax Reforms among Salaried Assesses. The aim of the
paper is find out whether and how the tax reforms affect the level of salaried assesses.
Conveyance non-random sampling method was used and100 tax payers were returned and
usable in the pilot study. This study data were analyses descriptive statistics, Chi square test
and Anova test the formulated hypotheses and the significant relationship between assesses
personal information and opinion level of tax allowances. Tax payers are asked to indicate
their level of agreement with a given statement by of a Likert’s five point scale. This study
shows that, overall the assesses have been negative opinion towards Impact of Tax Reforms
made tax system in India.
Sopan Kasinath (2013)
The taxpayers in India are the elite group and contribute tax purely in the economic growth
and development of Indian economy. Direct and indirect taxes are one of the sources of
revenue to the government for the welfare of the general public. As per the income tax act,
1961, the taxpayers should avail the deductions of Rs. 100,000 for reduce the tax liability. Tax
payers can reduce the tax liability through tax avoidance but not through tax evasion.

METHODOLOGY
Research Design
The research methodology shall be descriptive in nature. The study shall be based on the
secondary literature and data with respect to historical perspective, tax policy, its structure,
and present status.
Primary Data
For the purpose of case study primary data have been collected through phone calls, social
network and interview.
Secondary Data
For the study purpose the required secondary data is collected by using various published
sources. Some government publications are also used for national and state level information.
General taxation information is collected from various types of office records, committee
reports and articles and books published on the issue. Information related to Income-Tax
Department of India has been collected through the internet surfing.
Sampling Methodology
The Primary data have been collected through a survey with a pre-tasted structured
Questionnaire on a sample of randomly selected 50 people in which some are,
business persons, service holders, working women and some people who belong to 20-60
age group. The data is collected to know the individual perception towards income tax system.
 SCOPE AND SIGNIFICANCE
 This project studies the tax planning for individuals assessed to Income Tax.
 The study relates to non-specific and generalized tax planning, eliminating the need of
sample/population analysis.
 Basic methodology implemented in this study is subjected to various pros & cons, and
diverse insurance plans at different income levels of individual assesses.
 This study may include comparative and analytical study of more than one tax saving
plans and instruments.
 This study covers individual income tax assesses only and does not hold good for
corporate taxpayers.

CHARACTERISTICS OF GOOD TAX SYSTEM

A good tax system should adhere to certain principle that becomes the characteristics of
good tax system. These principles are called canons of taxation.
 CANONS OF EQUALITY: Canon of equality states that persons should be allowed to
pay their taxes as per their ability to pay. The burden of tax should be fair and just.
Equality of tax burden can be achieved if the rich people are taxed more than the poor
people not only in terms of tax but also in the terms of tax rate. This canon tries to
achieve the objectives of economic justice.
 CANON OF CERTAINTY: The canon of certainty implies that the tax-payer should
be informed about every detail relating to the payment of each and every kind of taxes.
 CANON OF ECONOMY: Every tax has a system of cost of collection which is the
administrative cost of collection. The canon of economy should be such that the cost
of collection should be minimum. It will be useless to impose a tax that involves huge
expenditure in its collection.
 CANON OF PRODUCTIVITY: All taxes should be productive. The canon of
productivity implies two things. In the first place, the tax system should be able to
generate enough revenue to meet the required expenditure. Secondly, taxes should be
imposed in such a way as not to obstruct and discourage production.
  CANON OF ELASTICITY: The canon of elasticity implies that the taxes should be
levied that the yields of the taxes can be easily increased or decreased as per the need
of the government.
 CANON OF DIVERSITY: The canon of diversity requires that the tax system should
be such that the government depends on the number of the taxes so that every class of
citizen may be called upon to contribute something towards the state revenue.
 CANON OF SIMPLICITY: The tax system should be easy and simple so that the tax
payer can easily understand its implication, the basis and the method of calculation etc.
without the costly help of the expert.

WHO IS LIABLE TO PAY INCOME TAX?

There are seven categories of persons chargeable to tax under the Act.
a) An individual
b) A Hindu undivided family
c) A company
d) A firm
e) An association of person or body of individuals ,whether incorporated or not
f) A local authority
g) Every artificial juridical person not falling within any of the preceding categories.
Therefore any person not falling in the above mentioned categories, may still fall in the four
corners of the term “person” and accordingly may be liable to tax under section 4. The person
by whom income tax or other sum of money is payable under the Act is the ASSESSEE.

RESIDENTIAL STATUS
 Resident Ordinarily Residents: Under this category, person must be living in India at least
182 days during previous year Or must have been in India 365 days during 4 years
preceding previous year and 60 days in previous year. Ordinary residents are always
taxable on their income earned both in India and Abroad.
 Resident but not Ordinarily Residents: Must have been a nonresident in India 9 out of 10
years preceding previous year or have been in India in total 729 or less days out of last 7
years preceding the previous year. Not residents are taxable in relation to income received
 in India or income accrued or deemed to be accrue or arise in India and income from
business or profession controlled from India.
 Non Residents: Non Residents are exempt from tax if accrue or arise or deemed to be
accrue or arise outside India. Taxable if income is earned from business or profession
setting in India or having their head office in India.

INDIVIDUAL HEADS OF INCOME

 Income from Salary
All income received as salary under Employer-Employee relationship is taxed under this head.
Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as
Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the
tax deductions and net paid income. In addition, the Form 16 will contain any other
deductions provided from salary such as:
1. Medical reimbursement: Up to 15,000 per year is tax free if supported by bills.
2. Transport allowance: Up to 800 per month (9,600 per year) is tax free if provided as
transport allowance. No bills are required for this amount.
3. Conveyance allowance: is tax exempt.
4. Professional taxes: Most states tax employment on a per-professional basis, usually a
slabbed amount based on gross income. Such taxes paid are deductible from income
tax.
5. House rent allowance: the least of the following is available as exemption Actual HRA
received.
 50%/40%(metro/non-metro) of basic salary
 Rent paid minus 10% of 'salary'. basic Salary for this purpose is basic + DA
forming part + commission on sale on fixed rate.
The exemption for HRA u/s 10(13A) is the least of all the above three factors. Perquisites and
Exemptions u/s 10. The term "Perquisite" includes value of any benefit or amenity/value of
any concession provided by the employer to the employees. Perquisite Valuation does not
include certain medical benefits. Section 10 exemptions are available for the following
perquisites:
i. Leave Travel Concession u/s 10(5)
 ii. Perquisites paid to Indian Citizens Employed Abroad 10(7) no
iii. Tax Paid on Behalf of Any Employee by the Employer 10(10CC)
iv. Any sum received under Life Insurance Company
 Income from House property
Income from House property is computed by taking into account what is called Gross Annual
Value of the property. The annual value in case of a self occupied house is to be taken as NIL.
(However if there is more than one self occupied house then the annual value of the other
house/s is taxable.) From this, deduct Municipal Tax paid and you get the Net Annual Value.
From this Net Annual Value, deduct:
1. 30% of Net value as repair cost (This is a mandatory deduction)
2. No other deduction available.
3. Interest paid or payable on a housing loan against this house.
In the case of a self occupied house interest paid or payable is subject to a maximum limit of
Rs.1,50,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3
years) and Rs.30,000 (if the loan is taken before 1 April 1999). For l non self-occupied homes,
all interest is deductible, with no upper limits. The balance is added to taxable income.
 Income from Business or Profession
Income arising from profits and gains of any Business or Profession; income derived by a
Trade/ Professional/ similar Association by performing specific services for its members; any
benefit from business whether convertible into money or not, incentives for exporters; any
salary, interest, bonus, commission or remuneration received by Partner of a firm; any amount
received under a Key man Insurance Policy which also covers Bonus; income from managing
agency and speculative transactions; is taxable.
 Income from Capital Gains
Under section 2(14) of the I.T. Act, 1961, Capital asset is defined as property of any kind held
by an assesse such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does
not consist of items like stock-in-trade for businesses or for personal effects. Capital gains
arise by transfer of such capital assets.
Long term and short term capital assets are considered for tax purposes. Long term assets are
those assets which are held by a person for three years except in case of shares or mutual
funds which becomes long term just after one year of holding. Sale of long term assets give
rise to long term capital gains which are taxable as below:
1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on
shares/securities/ mutual funds on which Securities Transaction Tax (STT) has been
deducted and paid, no tax is payable. Higher capital gains taxes will apply only on those
transactions where STT is not paid.
2. For other shares & securities, person has an option to either index costs to inflation and
pay 20% of indexed gains, or pay 10% of non indexed gains.
3. For all other long term capital gains, indexation benefit is available and tax rate is 20%
 Income from Other Sources
This is a residual head , under this head income which does not meet criteria to go to other
heads is taxed. There are also some specific incomes which are to be taxed under this head.
1. Income by way of Dividends.
2. Income from horse races
3. Income from winning bull races
4. Any amount received from key man insurance policy as donation.
5. Income from shares (dividend other than Indian company).

TAX DEDUCTION
There are various India Tax Deductions or tax exemptions provided by the Indian Income Tax
Act. The tax deductions help to deduct an amount from the taxable income and help to save
tax. Each year, one can save thousands of rupees in income tax through income tax
exemptions.
The Central Board for Direct Taxes (CBDT) governs the Indian Income Tax department. The
department is also part of the Department of Revenue which is managed under the Indian
Revenue Service (IRS) under the Ministry of Finance Government of India.
Income taxes are imposed by the government of India on taxable income of Hindu Undivided
Families (HUFs), companies, individuals, firms, co-operative societies and trusts (which are
identified as a body of Individuals and Association of Persons) and any other artificial person.
There are separate levy of taxes on each person which are governed by the Indian income tax
act 1961.
 TAX EXEMPTIONS
According to Income Tax Act, 1961 there is a provision of exemptions in income tax. Tax
Exemption induces reduction of the tax burden on a specific section of the society to achieve
some level of equilibrium among all. To encourage some economic activities through the
process of reduction of the tax burden on some organizations or individuals involved in that
activity is also another cause for Tax Exemptions.
Tax Exemptions have the authority to bring about social and economic changes within the
society followed by unprecedented consequences. However, for such exemptions on tax some
conditions are mandatory to follow. Some of them are like –
 The age of the individual taxpayer
 The public services performed by the individual taxpayers
 The type of property owned by the individual
 The geographic location of property
 The net income of the individual paying the tax
 The value of the taxable property
India tax exemptions are specified incomes on which a person can get exemptions. It means
that at the time of calculating annual income, this type of income will not come under the
purview of tax.
Some of these exempted incomes are as follows:
 Agriculture Income.
 Share of partner in total income of a firm which is assessed separately.
 Interest on securities and bonds including premium on redemption of bonds by Non
Residents.
 Interests on amounts in Non-resident (External) account in any bank in India being
maintained as per FERA, 1973.
 Interest on specified central Government's savings certificates which were subscribed
to in convertible foreign exchange remitted from a country outside India as per FERA
by an individual citizen.
 Income of individuals engaged in research work in India under duly approved research
schemes and remuneration received from foreign government for training in a
government office or undertaking as employee.
  Gratuity not exceeding Rs.3.5 lakhs.
 Receipt in respect of commutation of pension as per specified limits.
 Leave encashment not exceeding 8 months salary and subject to specified conditions.
 Receipt of amount on voluntary retirement up to 5,00,000.
 Payment on a Life insurance policy, including bonus thereon but excluding there from
amounts received u/s 80DDA(3).
 Receipt of Payment from Public provident fund or Statutory Provident Fund.
 Receipt of Payment from superannuation fund.
 Special benefits and allowance to employee viz., house rent allowance.
 Interest payable to any bank incorporated outside India and approved by RBI.
 Scholarships granted to meet the cost of education.
 Receipt of any amount in connection with an award instituted by Government etc.
 Income of a university or other educational institution.
 Income of a hospital or other such institution working exclusively for philanthropic
purposes.
 Income of news agency having been set up in India for the sole purpose of collection
& distribution of news.
 Income of specified mutual funds registered and/or set up under /by SEBI Act, 1992.
 Income of Exchange risk administration fund having been set up by public financial
institutions either jointly or separately as per specified conditions.
 Some other categories includes combat-pay to military officers, inheritances, payments
for personal injuries, employee discounts, and income from local bonds.
There are a number of protected classes like widows, people above 65, war-retired persons,
and disabled persons
However, one should not get confused with the concepts of Tax Deduction and Tax
Exemption, as when an expense received by a taxpayer is deduced from the gross income it
results in the lowering of the net taxable income it is tax deduction and not Tax Exemption.
There are many types of income and benefits being exempted from income taxes to a limited
extent.
 FORMS OF INCOME TAX
1. ITR-1 SAHAJ Indian Individual Income tax Return.
2. ITR-2 :For Individuals and HUFs not having Income from Business or Profession.
3. ITR-3
4. ITR-4
5. ITR-5
6. ITR-6
7. ITR-7

TAX RETURNS
There are five categories of Income Tax returns.
1. Normal Return: Returns filed within the return filing due date. that is 31 July of
concerned previous year.
2. Belated Return: In case of failure to file the return on or before the due date, belated
return can be filed before the expiry of one year from the end of the relevant
assessment year.
3. Revised Return: In case of any omission or any wrong statement mentioned in the
normal return can be revised at any time before the expiry of one year from the end of
the relevant assessment year.
4. Defective Return: Assessing Officer considers that the return is defective, he may
intimate the defect. One has to rectify the defect within a period of fifteen days from
the date of such intimation. If the assessee wants more time, he can file an application
to the A O and a further 15 days can be granted at the instance of the A O.
5. Returns In Response To Notices: Assessing officer in the process of making
assessment, may serve a notice under various sections like 142(1), 148(1), 153A(a) or
153C. Returns are required to be furnished within the date specified on the respective
notices.

ONLINE TAX IN INDIA

In India, online tax filing has become an integral part of the process of registering tax returns.
With the increasing penetration of internet and rising levels of web awareness and work
pressure among tax payers, many people now prefer to fill the tax according to their
convenience and avoid the cues.

HOW TO FILE ONLINE TAX IN INDIA

The basic steps for filing tax returns online in India can be mentioned as below:
 Customers need to sign up with the service provider to be able to avail their services.
 After signing up, customers need to enter their financial details. The returns will be
generated on the basis of the entries.
 Once the data is entered the software reviews it.
 After the computation is done, the clients need to give the payment on the basis of the
filing plan chosen by them.
 Next, the user needs to authorize the service provider to file the tax returns on their
behalf.
 The acknowledgment will be provided via e-mail once the process is completed and
the document is signed digitally. The customer receives an ITR-V if the document is
not signed digitally.
Following are the major benefits for tax payers who use the tax filing portals:
 These companies provide the users in depth knowledge of tax laws.
 The technology used by these companies is comparable to the best banks across the
world.
 Tax computation services are provided free of cost. Tax payers only need to pay when
they are filing the tax returns.
 They do not put the users off with unnecessary pop-ups or advertisements.
 Majority of these sites are backed by the Income Tax Department. This means that
these companies are authorized to file tax returns with the IT department on behalf of
their customers.
 Tax returns can be prepared and filed by customers from any income class.

E-FILLING
A. Select appropriate type of Return.
B. Download Return Preparation Software for selected Return Form.
 C. Fill your return offline and generate a XML file.
D. Register and create a user id/password AT Incomtaxindiaefiling.gov.in
E. Login and select relevant Assessment year on left panel under "Submit Return"
F. In Next screen ,select the form Name (whichever is applicable in your case)
(i) Select digital signature NO
(ii) In next screen Browse and select XML file prepared by you and click on
"Upload" button
G. On successful upload acknowledgement details would be displayed. Click on "Print"
to generate printout of acknowledgement/ITR-V Form.
H. In case the return is digitally signed, on generation of "Acknowledgement" the Return
Filing process gets completed.
I. In case the return is not digitally signed, on successful uploading of e-Return, the ITR-
V Form would be generated which needs to be printed by the tax payers.
This is an acknowledgement cum verification form.
A duly signed ITR-V form should be mailed to
“Income Tax Department – CPC, Post Bag No - 1, Electronic City Post Office, Bengaluru-
560100, Karnataka,” BY ORDINARY POST OR SPEED POST ONLY within 120 days of
transmitting the data electronically.
ITR-V sent by Registered Post or Courier will not be accepted.
No Form ITR-V shall be received in any other office of the Income-tax Department or in any
other manner. In case, Form ITR-V, is furnished after the above mentioned period, it will be
deemed that the return in respect of which the Form ITR-V has been filed was never furnished
and it shall be incumbent on the assessee to electronically re-transmit the data and follow it up
by submitting the new Form ITRV within 120 days. This completes the Return filing process
for non-digitally signed Returns.

THE PROCESS OF TAX FILLING IN INDIA

Many people are, naturally, unhappy to see the tax deducted at source (TDS) eroding their
salaried income. They are a bit happy too, in a way, as they feel the major task of paying tax is
finished with & they need not worry about anything. Well, they are so wrong! Anybody who
pays tax has to also file income tax returns.
Every single person who pays tax in India has to file his/her income tax. Do not assume that
just because you do not have your own business and are getting a salary working for
somebody, that you don’t need to file the tax returns. Yes, even a salaried individual in India
has to file income tax returns.

Many salaried people think that the tax is deducted at source (called TDS), but are unaware
that it is not only their income from a job that is taxed. Their income from any other source is
also liable for tax, such as if they are earning a part-time income from an online job, are
having fixed deposits in a Bank, etc. So you must file your income tax returns before the end
of the financial year.

The process of tax filing involves submission of tax along with necessary documents
declaring yearly income of the individual or company. In India the process of tax filing is
governed by the Ministry of Finance. The Ministry of Finance of Government of India has
different departments that are involved with the process of tax collection.

The most important department that is associated with the process of tax filing in India is the
Department of Income Tax, Government of India. The corpus accumulated from individuals
and companies as income tax are forwarded to the Ministry of Finance, Government of India.
The revenue so collected is used to run the Government of India machineries. The whole
process of tax filing in India is done in accordance with the Income tax acts and rules as
promulgated by the Department of Income Tax, Government of India. The main purpose of
filing tax returns in India is to have records of structured information. The tax of an individual
or a company is submitted against an account number which is an unique combination of
alpha-numeric character called Permanent Account Number (PAN). This PAN enables the
taxing authority to record each and every relevant details pertaining to tax declaration of a
particular person or company in India. This is a fool proof process and there is no place for
discrepancies.

Over the years the process of tax filing in India has made tremendous progress. Gone are the
days when one had to wait for endless hours to see his yearly tax declaration being verified
and accepted. Today, the department of Income Tax under the government of India has
facilitated its citizens with e-fling process. The procedure involves filing of income tax returns
over Internet. This has in fact simplified the arduous mechanical tax declaration process in
India. Now an individual or company can file his tax according to his convenience by simply
quoting the unique PAN. All the required information regarding filing process and necessary
documents are mentioned therein. The concerned individual or company should fill-up the
relevant electronic form according to the instructions given therein.

The important declarations that are to be made while undertaking the process of e-filing tax
are as follows -

Information required for individual tax payer -

 A copy of last year's tax return

 Bank Statement
 TDS certificates
 Savings certificates / Deductions
 Interest statement showing interest paid to the individual throughout the year

Information required for corporate tax payer –

 A copy of last year's tax return

 Bank Statement
 TDS certificates
 Savings certificates/Deductions
 Interest statement showing interest paid to the corporate throughout the year
 Profit and Loss Account
 Balance Sheet

Is there a fine for not filing income tax returns in India?

Yes, there definitely is a fine for not filing income tax returns in India. For every month
delayed, you are paying 1.5% per month. If you do not file your income tax returns before the
last date of the assessment year (March 31st), you will have to pay a fine of Rs.5000/-.

What is the last date of filing income tax returns in India?

1. For those with income above INR 40lakhs, the last date for filing income tax returns in
India is September 31st.

2. For those whose income is below INR 40lakhs, the last date for filing income tax returns in
India is July 31st.

3. For both the above groups of tax payers, they can still file their income tax returns before
March 31st; but then each month delayed means more interest to be paid on the delayed tax.

TAX PENALTIES

The major number of penalties initiated every year as a ritual by Income Tax Authorities is
under section 271(1)(c)which is for either concealment of income or for furnishing inaccurate
particulars of income.

"If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of
any proceedings under this Act, is satisfied that any person-

(a) has failed to comply with a notice under sub-section (1) of section 142 or subsection (2) of
section 143 or fails to comply with a direction issued under sub-section (2A) of section 142,
or

(b) has concealed the particulars of his income or furnished inaccurate particulars of such
income,

he may direct that such person shall pay by way of penalty,-

(ii) in the cases referred to in clause (a), in addition to any tax payable by him, a sum of ten
thousand rupees for each such failure;

(iii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which
shall not be less than, but which shall not exceed three times, the amount of tax sought to be
evaded by reason of the concealment of particulars of his income or the furnishing of
inaccurate particulars of such income.
 TAXABLE HEADS OF INCOME

Remuneration for work done in India is taxable irrespective of the place of receipt.

Remuneration includes:

 Tax upon salaries and wages

 Tax upon pension
 Tax upon bonus, fees & commissions
 Tax upon Gratuity
 Tax upon Annuity
 Tax upon profits in lieu of or in addition to salary
 Tax upon advance salary and perquisites

Others:

 Tax upon Allowances

 Tax upon Deferred compensation
 Tax equalisation

CONCLUSION

At the end of this study, we can say that given the rising standards of Indian individuals and
upward economy of the country, prudent tax planning before-hand is must for all the citizens
to make the most of their incomes. However, the mix of tax saving instruments, planning
horizon would depend on an individual’s total taxable income and age in the particular
financial year.

This thesis examines the process of defining a taxpayer from a specific point of view, namely
the issue that has to be dealt with beforehand: classifying the legal structure by means of
which the taxable income is acquired. Only in recent decades the fiscal legislator has become
aware of the technique of fiscal transparency and the possibilities and consequences of
conflicting classifications of a single entity under two or more legal systems. The matter of
classifying an entity has, to this very day, hardly been integrated into Belgian legislation. This
thesis is an attempt, by means of a general framework of concepts, to clarify this issue.
However, the way in which an entity is classified, as well as the extent to which foreign
taxation under possibly divergent classifications is taken into consideration, remains
ultimately a matter of government policy. It is for that reason that we have limited ourselves
in this thesis to formulate some proposals. They may or may not be adopted in both internal
national legislation and in double tax conventions that have already been concluded or may be
concluded in the future. It is the hope of the author that this work may serve to contribute to a
further 22 awakening to the outlined problems and the proposal of suitable techniques that
may be helpful in the realization of new policies in an efficient and effective way

BIBLIOGRAPHY

Books:

 T. N. Manoharan (2007), Direct Tax Laws (7th edition), Snowwhite Publications

P.Ltd., New Delhi.
 Dr. Vinod K. Singhania (2007), Students Guide to Income Tax, Taxman Publications,
New Delhi
 Income Tax Ready Reckoner – A.Y. 2007-08, TaxMann Publications, New Delhi

Websites:

 http://in.taxes.yahoo.com/taxcentre/ninstax.html
 www.efiling.incometaxofinfia.gov.in
 emudra
 http://in.biz.yahoo.com/taxcentre/section80.html
 http://www.bajajcapital.com/financial-planning/tax-planning
 http://www.incometaxindia.gov.in