Q1.Define Income and explain the concept of income.

The Income Tax Act does not attempt to provide any comprehensive definition of "income" for tax
purposes: but gives an inclusive definition in Section 2(24). Income - tax is a tax on income from various
sources, estimated according to sets of rules which vary according to the source of income from which it flows.
Most type of income can be broadly classified into three main categories;
(a) income derived by a person by rendering personal service:
(b) income from property
(c) income from the profits of a trade, profession or vocation.

income table can be presented as:

The term, ‘income’ is very important in economics, because all the types of income earned by
households are spent on purchasing of all goods and services required for daily consumption. When money
income is deflated by current price level, we get real income.
Hence, Real Income = Money Income /Current Price Level.
Some Concepts on Income

(i) National Income: In simple sense, it means sum total of money income earned by all is the
citizens in a country during a particular year. However, in economics, national income defined as
the total money value of all the final goods and services produced within a domestic territory of a
country during a given financial year along with the net factor income from abroad minus
depreciation.

(ii) Per capita Income: It defined as the total national income divided by total population of a
country during a particular year. It can be measured in both current year price level or base or
constant year price level. It gives a rough idea about standard of living of a country.

(iii) Personal Income: It is defined as the total national income minus undistributed corporate
income plus transfer payments. If we deduct income tax from the personal income, we get
personal disposable income.
Q2.Discuss the provisions of residential status of different assessee under income tax act 1961.

The concept of Residential Status has nothing to do with nationality or domestic of a person. An Indian, who is
a citizen of India can be non-resident for Income Tax purposes, whereas an American who is a citizen of
America can be Resident of India for Income Tax purposes. Residential Status of a person depends upon the
territorial connections of the person with this country, i.e. for how many days he has physically stayed in India.

Provisions of Residential status :-

I)Residential Status of an Individual :
There are 2 type of residential status
1.Resident
a) Ordinary Resident
b)Not ordinary Resident
2.Non-Resident
I) The basic condition of Resident :
1. A person (individual) should stay in India at least 182 days (or) more during the previous year.
2. A person should stay in India for at least 60days in the previous year AND 365day in 4 years
proceeding the previous year.
II) Additional condition of Resident:
1. A person should be resident for at least 2 years out of 10 years proceeding to the previous year.
2. A person should stay in India for at least 730 Days in 7 years proceeding to the previous year.

(a) Ordinary resident: ordinary resident' in India if he satisfies the following of the basic condition and two
additional conditions.
(b) Not ordinary resident: A person is said to be not ordinarily resident in India in any previous year if such
person is not ordinary resident.
2. Non-resident: An individual is a non resident in India if he satisfies none of the basic conditions. In the case
of non-resident, the additional conditions are not relevant
II. Residential Status of a Hindu Undivided Family: According to section 6(2), A Hindu undivided family
is non-resident in India if control and management of its affairs is wholly situated outside India.
III. Residential Status of the Firm and Association of Persons: A partnership firm and an association of
persons are said to be resident in India if control and management of their affairs are wholly or partly situated
within India during the relevant previous year.
VI. Residential Status of a Company :
A company is said to be a resident in India in any previous year, if
(i) it is an Indian company; or
(ii) its place of effective management, in that year, is in India.
V. Residential Status of Every Other Person: Every other person is resident in India if control and
management of his affairs is wholly or partly situated within India during the relevant previous year. On the
other hand, every other person is non-resident in India if control and management of his affairs is wholly
situated outside India.
Q3. Define the term Salary , State items under the head salary.

Sec 15 to 17, a salary is a form of periodic payment from an employer A to an employee, which may
be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is
paid separately, rather than on a periodic basis.
The term 'salary' is not exhaustively defined but it is defined in an inclusive manner. As per section 17(1),
salary Includes (i)wages, (ii) any annuity or pension (iii) any gratuity (iv) any advance of salary

(1) Chargeability (sec.15): Where any salary paid in advance is included in the total income of any person for
any previous year it shall not be included again in the total income of the person when the salary becomes
due.
(i) Employer and Employer Relationship:-
1. To fall under the head of sales, there should be an employer and employee relationship.
2. As employee could not be an agent of the employer.
3. Generally agent is paid commission not salary, wages as paid for the employee.
4. Salary means there should be the payer and the receiver for the work.
(ii)Meaning of salary: The term 'salary' is not exhaustively defined but it is defined in an inclusive
manner. As per section 17(1), salary Includes (i)wages, (ii) any annuity or pension (iii) any gratuity (iv) any
advance of salary
(iii) Year of Chargeability: Salary is chargeable to tax either on due basis or on receipt basis whichever
is earlier. Salary due in a previous year is taxable whether it is received or not during that previous year.
(iv) Place of Accrual: The place of accrual of salary is the place where the services are rendered.
Therefore, even if a non-resident is paid salary outside India in respect of services rendered in India, it is
deemed to accrue or arise in India by virtue of section 9.
(v) Partner's Salary : Any salary, bonus, commission or remuneration by whatever name called due to
cr received by a partner of a firm. From the firm shall not be treated as salary for the purpose of section 15,
but it shall be treated as income from business or profession for the purpose of section 28.
(vi) Perquisites (sec 17) :Perquisite is a gain on profit from employment in additional to Salary (or)
wages so they are added under the head salary while filling
(vii)Meaning of Profit in Lieu of Salary: Profits in lieu of salary means the payments made to an
employee in lieu salary even if these payments have no connection with the profits of the employer

(2)Deduction from Salaries (sec.16) : The income chargeable under the head ‘salaries’ is computed after
making the following deduction:
(i) Entertainment Allowance [Section 16(ii)]: Entertainment allowance is not eligible for exemption
but it only qualifies for deduction. Therefore, entertainment allowance is first included in gross salary and
then deduction is allowed.
(ii)Professional Tax : A deduction of any sum paid by the assessee on account of a tax on employment
within the meaning of clause (2) of Article 276 of the Constitution. livable by or under any law.

(3)Exemptions Relating to Income Chargeable under the Head Salaries(Sec.10)

1. Value of Travel Concession or Assistance [Sec. 10(5)]
Value of travel concession or assistance received by an individual from his employer or former
employer for himself and his family in connection with his proceeding,
(a)on leave to any place in India.
(b) to any place in India after retirement from service or termination of his service shall be exempt. Family for
the purpose of this provision means:-
(i) the spouse and children.
(ii)parents, brothers and sisters of the individual wholly mainly dependent on the individual.
2. Exemption in the Case of a Foreign National [Sec. 10(6)]
In the case of an individual who is not a citizen of India, the following shall be exempt :-
(i) the remuneration received by him as an official of an embassy, high commission, consulate, etc. or as a
member of staff of any such official is exempt.
(ii)Remuneration received by him as an employee of a foreign enterprise for services rendered during his stay
in India if the following conditions are fulfilled.
(iii) the remuneration for services rendered by such individual in connection with his employment on a foreign
ship where his total stay in India does not exceed, in the aggregate, 90 days in the previous year shall be
exempt.
(iv) any remuneration received by him as an employee of a foreign Government during his stay in India in
connection with his training in any undertaking owned by the Government or Government company or
statutory corporation or a registered society.
(3) Indian Citizen Employed Abroad by Government of India [Sec. 10(7)]
Any allowance or perquisite paid or allowed outside India by the Government to a citizen of India
for rendering service outside India is exempt.
(4)Death-Cum-Retirement Gratuity [Sec. 10(10)]
(i) Government Employee: Any death-cum-retirement gratuity received under the revised Pension Rules
by Government employees is wholly exempt from tax.
(ii) Employees Covered by the Payment of Gratuity Act, 1972.- Any gratuity received by an
employee covered by the Payment of Gratuity Act. 1972, is exempt from tax to the extent of the least of
the following : (a) 15 days' salary based on last drawn salary for each completed year of service or part of
the year in excess of 6 months. (b) Rs. 3,50,000. (c) gratuity actually received.
(iii) In the Case of Any Other Employee: Any gratuity received by any other employee on retirement,
death, termination or resignation is exempt from tax to the extent of the least of the following:-
(a) Rs. 3,50,000. (b)Rs. 3,50,000; or half-month's average salary for each (c) gratuity actually received.
(5) Commuted Pension [Sec. 10(10A)]
Any commuted pension received by a Government employee is wholly exempt from tax. A
non-Government employee can avail exemption to the following extent :
(a) if the employee is in receipt of gratuity, 1/3 of the amount of commuted pension which he would have
received had he commuted the whole (100%) of the pension;
(b) if the employee is not in receipt of gratuity, 1/2 of the amount of commuted pension which he would
have received had he commuted the whole (100%) of the pension.
(6) Leave Salary [Sec. 10(10AA)]
(i) Government Employee.-Any amount received as cash equivalent of leave in respect of period of
earned leave to his credit at the time of retirement whether on superannuation or otherwise, is exempt from
tax.
(ii) Non-Government Employee.-Leave salary is exempt from tax to the extent of the least of the
following: (a) Cash equivalent of the leave to the credit of the employee at the time of retirement
(b) The amount specified by the Government
(c) leave encashment actually received.
 (7) Retrenchment Compensation [Sec. 10(10B)]: Compensation received by a workman at the time of
retrenchment is exempt to the extent A the lower of the following : (1) Amount calculated under the Industrial
Disputes Act, 1947,
(2) Such amount not being less than Rs. 50,000 as the Central Government may, by notification in the
Official Gazette, specify in this behalf
(8) Voluntary Retirement Scheme [Sec. 10(10C)]
Any amount received by an employee of : (i) a public sector company: or (ii) any other company; or
(iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority: or (v)
cooperative society; or (vi) university: or (vii) Indian Institute of Technology
(9)Public Provident Fund (Sec. 10(11): Any payment from a provident fund to which the Provident Fund
Act, 1925 applies or from any other provident fund set up by the Central Government and notified by it in this
behalf in the Official Gazette
(10) Sukanya Samriddhi Account (Sec. 10(11A): Any payment from an account, opened in accordance with
the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873 (5 of 1873)
(11) Recognised Provident Fund (Sec. 10(12): The accumulated balance due and becoming payable to an
employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth
Schedule.
(12) National Pension System Trust [Sec. 10(12A) & (12B)] (12A) :Any payment from the National Pension
System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in
section 80CCD, to the extent it does not exceed forty per cent of the total amount payable to him at the time of
such closure or his opting out of the scheme.
(13) Approved Superannuation Fund [Sec. 10(13)] :Any payment from an approved superannuation fund is
exempt from tax if it is made
(i) on the death of a beneficiary
(ii) to an employee on his retirement at or after a specified age or on his becoming incapacitated period to
such retirement.
(iii) by way of refund of contributions on the death of a beneficiary.
(vi) by way of transfer to the account of the employee under a pension scheme referred to in section
80CCD and notified by the Central Government.
(14) House Rent Allowance (Sec. 10(13A): House rent allowance granted to an assessee by his employer is
exempt to the extent of the least of the following :(i) excess of rent paid over 10% of salary due for the relevant
period (ii) if the accommodation is in Kolkata, Chennai, Delhi and Mumbai-50% of salary and in any other
places-40% of salary; or (iii) actual allowance received.
(15) Special Allowances
The following allowances are prescribed by the Central Board of Direct Taxes under rule 2BB of the
income tax rules as exempt to the extent spent or specified here below:-
(i) any allowance granted and spent to meet the cost of
(a) travel on tour or on transfer.
(b) expenditure incurred on a helper in the performance of duties.
(c) the academic, research and training pursuits in educational and research institutions.
(d) purchase or maintenance of uniform for wear during the performance of duties.
(ii) any allowance granted to an employee to meet the hostel expenditure of his child is exempt up to Rs. 300
per month per child up to a maximum of two children.
(iii) compensatory field area allowance is exempt to the extent of Rs. 1300 per month.
(vi) children education allowance is exempt up to Rs. 1,000 per month per child up to a maximum of two
children.
(v) any special allowance in the nature of counter-insurgency allowance granted to the armed forces is exempt
to the extent of Rs. 1300 per month
Q4.What is meant by business and profession? What income are chargeable to income tax under the
head profits and gains of business or profession?

INTRODUCTION
According to Sec. 2(13) of the Income Tax "Business includes any trade, commerce or
manufacture or any adventure or concern in the nature of trade, commerce or manufacture.
According to Sec. 2(36) of the Income Tax "Profession" includes vocation, income from the
exercise of any profession or vocation which calls for an intellectual or manual skill, is covered under this
definition.

Incomes chargeable under the head "Profits and Gains of Business or Profession"
1. Income from business or profession carried on by the assessee at any time during the previous year.
2. Compensation or other payment received by:
(a) A person for managing the whole or substantially the whole of the affairs of an Indian company, or in
connection with the termination or his management, modification of the terms and conditions relating to it.
(b) Any person holding an agency in India for any part of activities connected with the business of any
other person or with the termination of the agency or modification of the terms and conditions relating to it.
(c)Any person in connection with the vesting in the Government, or in any Corporation owned or controlled
by the Government, of the management of any property or business.
3. Income derived by trade, professional or similar association from specific services rendered for its members.
4. Cash assistance received or receivable by an exporter under any Government scheme.
5. The value of any benefit or perquisite arising from a business or profession is also included in the income
from a business or profession. Voluntary payment made to a businessman or professional list are also included.
6. Profits on sale of import licence.
7. Any custom, duty or excise repaid or repayable as drawback to any person against exports under the
"Customs and Central Excise Duties Drawback Rule".
8. Any interest, salary bonus, commission or remuneration, due to or received by a partner of a firm from such
firm.
9. Any sum received or receivable, in cash or kind under an agreement for not carrying out any activity relating
to any business, and not sharing any know how, patent, copyright, trade-mark, licence, franchise, etc.
10. Any sum received under a key man insurance policy including the bonus on such policy.

Keyman Insurance Policy means a life insurance policy taken by a person on the life of another person
who is or was the employee of the first mentioned person and is or was connected with the business of the first
mentioned person.
Q5.What is annual Value? State the deductions that are allowed from the annual value in computing
income house property.

Definition: Annual Value is the amount for which the property might be let out on a yearly basis. ... As per
Section 23(1)(a) of the Income Tax Act, Annual Value of a home is the sum for which the property might
reasonably be expected to be let out from year to year.

DEDUCTIONS IN THE INCOME OF HOUSE PROPERTY: (Sec. 24)

In the computation of income from house property, the following deductions are allowed in
the annual value of the house property.
1. 30% of the annual value is deducted.
2. In case where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed
capital, the amount of interest payable on his capital borrowed. (upto a limit)
3. In the case of a house or part of a house which is in the occupation of the owner for his own residence, or
cannot be occupied due to his employment, business or profession at any other place, deduction should not
exceed Rs. 30,000/-.
4. If the property acquired or constructed with capital borrowed on or after the 1t day of April 1999 and the
construction or acquisition is completed within five years from the end of the financial year in which capital
was borrowed, the amount of deduction should not exceed the rate prescribed.
For claiming the deduction, the assessee must furnish a Certificate from the person to whom interest is
payable.
In case a loan is taken for purchase or construction of house property, the interest is allowed in 5 equal
installments starting from the year in which the house is purchased or completed.

ANNUAL VALUE OF HOUSE PROPERTY:

Income tax is chargeable on the house property, not in respect of any actual rent received, but in
respect of the annual value of house property.
The annual value of any house property is the sum for which the property is reasonably expected to
be let from year to year. So the annual value of house property means its fair rental value. The annual value of
house property shall be calculated in the following manner:
1. Where the property or any part of the property is let And the rent received by the owner is in excess of the
sum reasonably expected to let, the amount so received or receivable.
2. Vacancy allowance: Where the property or any part of the property is let and was vacant during the whole
or any part of the previous year, and due to the vacancy, the actual rent received or receivable is less than the
sum reasonably expected, then the amount so received or receivable is the annual value of the house property.
Even here, the taxes levied by the local authority like Corporation tax, Water tax, Sewage tax are deducted.
3.If the house property reserved by the owner for his own residence consisting of only one residential house
which is neither actually occupied by the owner, nor actually let to tenant, and no other benefit is derived from
the house by owner, then actual value of such house property is taken to be nil if the property was unoccupied
during the whole of the previous year.
4.If the house property reserved by the owner for his own purposes is more than one such house, the assesseee
may specify the annual value of the house, other than the house in respect of which the assesseee has exercised
an option as mentioned above
Q6.What is meant by perquisite ? Explain tax free perquisite.
"Perquisite" is a gain or profit from employment in addition to salary or wages. So, they are added under
the head 'Salaries' while filing I.T. returns.
Classification of Perquisites:
1. The value of rent- free accommodation provided by the employer to e employee;
2. The value of any concession in the matter of rent with respect to the accommodation provided by the
employer to the employee Le. value of the accommodation provided minus the amount charged by the
employer.
3. Value of any benefit provided free of cost or at concessional rate in case of a specified employee.
4. Any sum paid by the employer in respect of any obligation which, but for such payment, would have been
payable by the employee

PERQUISITES EXEMPTED FROM TAX: (TAX FREE PERQUISITES)

1) Agricultural Income [sec.10(1)] : Agricultural income is exempt from tax if it comes within the definition
of agricultural income' as given in sec. 2(1A) Agricultural income is taken into consideration to find out
tax on non-agricultural income.
2) Receipts by a member from a HUF [sec.10(2)]: Any sum received by an individual, as a member of a
HUF. either out of income of the family or out of income of estate belonging to the family, is exempt from
tax. The exemption is based upon the principle of avoidance of double taxation. Income of HUF is taxable
in its own hand.
3) Share of profit from partnership firm [sec.10(2A)]: Share of profit received by partners from a firm
which is assessed as firm is not taxable in the hands of partners.
4) Interest paid to non residents [sec.10(4)(i)]: in the case of a non-resident, interest on bonds or securities
notified by the Central Government including income by way of premium on the redemption of such bonds
Provided that the Central Government shall not specify, for the purposes of this sub-clause, such
securities or bonds on or after the 1st day of June, 2002.
5) Interest to non Resident [sec.10(4)(ii)]: in the case of a person resident outside India (under Section 2(g)
(ii) of the Foreign Exchange Regulation Act) income from interest on money standing to credit in a
Non-Resident (External) Account in India, in accordance with the said Act
6) Interest paid to Indian origin : in the case of an Indian citizen or a person of Indian origin who is a
non-resident, the interest from notified Central Government securities issued before the 1st day of June,
2002 if such certificates are subscribed in convertible foreign exchange remitted from outside through
official channels.
Q7.Define Agricultural income, Explain its characteristics,

(a) Any rent on revenue derived from land which is situated in India and is used for agricultural
purposes: It is not necessary that the land should be assesseed to land revenue or be subject to a local rate in
India.
(b) Any income derived from such land by:-
(i) Agriculture,
(ii) the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by e
cultivator or receiver of rent in kind to render the produce raised or received by him fit to be taken to
market.
(iii) the sale by a cultivator or receiver of rent in kind or produce raised or received by him in respect of
which no process has been performed other than a process of the natural described in (ii)
(c) any income attributable to farm buildings, provided:
(i) The building is situated on or near the land used for agricultural purposes and is required by the
cultivator or the recipient of agricultural income as a dwelling house, or a store house or an out house.
(ii) the land on or near which such building is situated for agricultural purposes and is required by the
cultivator as a dwelling house, or a store house or an out house.
(iii) the land on or near which such building is situated is assesseed to land revenue or is subject to a local
rate, if it is an urban area. If the land is outside an urban area, it may or may not be assesseed to land
revenue or be subject to a local rate,
The following are "agricultural income and exempted from income tax:
1.Raising of food grains, production of vegetables, true, flowers, coffee, tea, tobacco, cotton, jute, etc.
2. processes employed by a cultivator to make the produce saleable, like unginned cotton, sugar cane etc.
3 income from forestry operations like sowing, replanting etc.,
4.If any partnership firm wholly engaged in agricultural activities pays salary, share of profit.
commission, etc., such salary, etc., is agricultural income for the receiver.
5. Profits received by the land owner, rent of the building appurtenant to the agricultural farm is an
agricultural income for the receiver.
The following are not included under 'Agricultural income':
1. Income from sugar factory
2. Income accrued by sale of silk cocoons
3. Sale of forest trees, fruits, etc., which grow naturally without any agricultural processes.
4.Dividend declared by private limited company indulged in agricultural activities.
5. Dairy and sheep farm
6. Getting royalty for allowing digging minerals
COMPUTATION OF AGRICUM INCOME
Agricultural Income is exempt from Income Tax (Sec1001). However, the net agricultural
income is taken into account for determining the rates of Income Tax on in omen Hable for tax.
Only then, relief in tax is allowed. The net agricultural income shall be computed according to
the rules in the relevant Pinance Act in the following manner:
1 The Rent or revenue derived from and for agricultural purposes is computed as if it were Income from other
sources.
2. Income from any building required as dwelling house by the cultivator is computed as if t were Income
from house property.
3. Other agricultural income is computed as if it were income from profits and gains of business or profession
except income from sale of tea grown.
4. 60% of the income from sale of tea grown and manufactured in India shall be computed.
5. Loss from any source of agricultural income can be set off against income from any other source of
agricultural income in that previous year.
6. Any agricultural loss carried forward from last eight assessment years shall be set off against agricultural
income of the previous year.
7. The aggregate of items mentioned in points 1-4, and the adjustment of losses as in points 5 & 6, is the
Gross Agricultural Income.
8. From the gross Agricultural Income derived, the Agricultural Income tax payable to the State Government
in respect of that previous year is deducted. The balance is the net agricultural income
9. If the net agricultural income is a loss, the loss is ignored and the net agricultural income is deemed to be
nit.

Q8.Define tax, Explain the different types of tax.

India being a democratic and welfare state has to implement various welfare programmes in pursuance
of ideals and goals and enshrined in the constitution. To implement the various welfare programmes, they
government, Union or States needs hugged funds and hence levies on people various taxes to procure the
funds. Therefore, taxes are the Indian source of income of any government to implement the public welfare
programmes irrigation projects, construction of roads etc.
Meaning of tax : A compulsory contribution to state revenue, levied by the government on workers' income
and business profits, or added to the cost of some goods, services, and transactions. "higher taxes will dampen
consumer spending"

Characteristics (or Elements) of "Taxes"

(i) Taxes are imposed by the Government only.

(ii) A tax is a compulsory contribution of the taxpayer.
(iii) In the payment of a tax, the element of sacrifice is involved.
(iv) Payment of a tax is the personal obligation of the tax payer
(v) The aim of taxation is the welfare of the community as a whole.
(vi) A tax is a legal collection.
(vii) An element of force is there.
(viii) A tax is not imposed to realize the cost of benefits provided.
(ix) Taxes may be assessed on income or capital, but they are actually paid out of income.
(x) A tax may be imposed upon property or occupation or commodities, but they are actually paid by
individuals.
(xi) Taxes do not involve quid pro quo between the tax payer and the public authority

Types of Taxes
Taxes, the main source of earning of the government central or state or categorised under two heads
namely (1) direct taxes (2) Indirect taxes
1. Direct Tax:
Direct tax, as stated earlier, are taxes that are paid directly by you. These taxes are levied directly on
an entity or an individual and cannot be transferred into anyone else.
i) Income Tax Act: Among all taxes levied by Central Government, income tax paid by employees,
professionals like doctors lawyers, businessmen etc. contribute a lot for economy of the Nation. The
law relating to income tax is governed by the Income Tax Act, 1961 which sets out the rules and
regulations for governance and prompt payment of tax in India.
ii) Wealth Tax Act: The Wealth Tax Act was enacted in 1951 and is responsible for the taxation
related to the net wealth of an Individual, a company or a Hindu Unified Family. The simplest
calculation of wealth tax was that if the net wealth exceeded Rs. 30 lakhs, then 1% of the amount
that exceeded Rs. 30 lakhs was payable as tax. It was abolished in the budget announced in 2015.
iii) Gift Tax Act :The Gift Tax Act came into existence in 1958 and stated that if an individual
received gifts, monetary or valuables, as gifts, a tax was to be to be paid on such gifts. The tax on
such gifts was maintained at 30% but it was abolished in 1998. Initially if a gift was given, and it
was something like property. jewellery, shares etc.
iv) Expenditure Tax Act: This is an act that came into existence in 1987 and deals with the expenses
you, as an individual, may incur while availing the services of a hotel or a restaurant. It is
applicable to all of India except Jammu and Kashmir. It states that certain expenses are chargeable
under this act if they exceed Rs. 3,000 in the case of a hotel and all expenses incurred in a
restaurant.
v) Interest Tax Act: The Interest Tax Act of 1974 deals with the tax that on interest earned in certain
specific was payable situations. In the last amendment to the act it was stated that the act does not
apply to interest that was earned after March 2000.
vi) Capital Gains Tax : This is a tax that is payable whenever you receive sizable amount of money. It
could be from an investment or from the sale of a property, It is usually of two types, short term
capital gains from Investments held for less than 36 months and long term capital gains from
investments held for longer than 36 months.
 vii) Perquisite Tax : Perquisites are all the perks or privileges that employers may extend to employees.
These privileges may include a house provided by the company or a car for very use, given to you
by the company.
viii) Corporate Tax : Corporate tax is the income tax that is paid by companies from the revenue they
earn. This tax also comes with a slab of its own that decides how much tax the company has to pay.

2. Indirect Tax : By definition, indirect taxes are those taxes that are levied on goods or services. They differ
from direct taxes because they are not levied on a person who pays them directly to the government; they are
instead levied on products and are collected by an intermediary, the person selling the product. The most
common examples of indirect tax can be VAT (Value Added Tax), Taxes on Imported Goods, Sales Tax, etc.
These taxes are levied by adding them to the price of the service or product which tends to push the cost of the
product up.
i) Sales Tax : As the name suggests, sales tax is a tax that is levied on the sale of a product. This
product can be something that was produced in India or imported and can even cover services
rendered.
ii) Service Tax : sales tax is added to the price of goods sold in India, so is service tax added to
services provided in India In the reading of the budget 2015, it was announced that the service tax
will be raised from 12.36% to 14%. It is not applicable on goods but on companies that provide
services and is collected every month or once every quarter based on how the services are
provided.
iii) Value Added Tax : The value added tax is a tax that is levied at the discretion of the state
government and not all states implemented it when it was first announced. The tax is levied on
various goods sold in the state and the amount of the tax is decided by the state itself.
iv) Custom duty & Octopi : When you purchase anything that needs to be imported from another
country, a charge is applied on it and that is the customs duty. It applies to all the products that
come in via land, sea or air.
v) Excise Duty : This is a tax that is levied on all the goods manufactured or produced in India. It is
different from customs duty because it is applicable only on things produced in India and is also
known as the Central Value Added Tax or CENVAT.
vi) Goods and Service Tax : Goods and Service Tax (GST) is a value added tax, levied at all points
in the supply chain with credit allowed for any tax paid on inputs acquired for use in making the
supply. It would apply to both goods and services in a comprehensive manner with exemption
restricted to a minimum.

Q9. Discuss in brief the provision regarding appeal under Income Tax Act 19612

Introduction: Appeal proceeding taken to rectify an erroneous decisions of a court right to appeal under
IT law is a creation of statute not an inherent right. Income tax liability is determined at the level of assessing
officer first. Sec.252 to 255 of Income Tax Act deals with Appeal provision A tax payer aggrieved by various
action of assessing officer can appeal before Commissioner of Income Tax. Further appeal can be preferred
before the Income Tax Appellate Tribunal. On substantial question of law further appeal can file before the
High Court and even to the Supreme Court with the ladder up approach appeal procedure.
 i)Appeal before the Commissioner
ii)Appeal before the High Court
iii)Appeal before Supreme Court

1)When appeal can be filed before the Commissioner: When a tax payer is adverse by various income tax
authorities appeal can be filed before the commissioner

a)Form of Appeal: Form No.35

Name and address of tax payer, permanent account number, assessment year details which appeal is
filed, etc. are to be filed in Form No.35.
It should be signed and verified by individual tax payer or person assigned. Payment of accepted tax
liability must be paid before filing appeal. An appeal will be admitted by the Commissioner only if tax as per
the returned income is filed.
b)Fee: Fee to be paid before filing appeal to commissioner depends upon the total income determine by the
assessing officer.
An appeal to be filed before the commissioner within 30 days of the date of service of notice of
demand relating to assessment or penalty order or the date of service of order sought to be appealed.
On receipt of form No 35 commissioner of income tax fixes date and place of hearing the appeal by
issuing notice to the tax payer and assessing officer against whose order appeal is preferred
c)Filing of additional evidence: During appeal proceedings the tax payer is not entitled to produce any
evidence whether oral or documentary other than what was already produced before the assessing officer.
d)Decision: Hearing is concluded when commissioner passes order in writing disposing of appeal and stating
the decision on each ground of appeal with reason.
e) When appeal can be filed before income tax appellate tribunal: Sec. 252 to 25s deals with it. Appeal
can be filed before the Appellate Tribunal if order by Commissioner us.263 revising assessing officer's order
if considered prejudicial interest to revenue.
Form No.36 to be filed in triplicate and is to be accompanied by two copies of order appealed against.
A fee to be paid according total income as computed by assessing officer. Where the subject matter of
appeal relates to another matter fee of Rs.500/- is to be paid. An application for stay of demand is to be
accompanied by fee of Rs.500/-. The order appealed is communicated to tax payer or the Commissioner
within 60 days.
Normally appeals are heard by a bench comprising one judicial member and one accountant member.
Appeals were total income computed by assessing officers does not exceed RS. 5 Lakhs may be disposed by
single member bench. /bench normally pronounces its order in court.
2) High Court: Appeal against appellate tribunal order lies with the High Court, wherein it accepts the cases
which involved the substantial question of law. Within 120 days the tax payer or chief commissioner should
appeal before the High Court. High Court hears appeal only on question of law so formulated. Appeal filed
before high court is heard by bench of not less than 2 judges and the decision by majority
3) Supreme Court: Under Article 136of the Constitution of India against the order of High Court the tax
payer or the commissioner can appeal before the Supreme Court

Q10.Draw a format of taxable income from salary after due deduction.

Following is the procedure for the calculation of taxable income on salary:

1.Gather your salary slips along with Form 16 for the current fiscal year and add every emolument such
as basic salary, HRA, TA, DA, DA on TA, and other reimbursements and allowances that are mentioned
in your Form 16 (Part B) and salary slips.
2. The bonus received during the financial year must be added for the income that is being calculated.
3.The total is your gross salary, from which you will have to deduct the exempted portion of House Rent
Allowance, Transport Allowance (for which the maximum exemption is Rs.19,200 per year), Medical
 reimbursement (for which the maximum exemption is Rs.15,000), and all other reimbursements
provided the actual bills in respect of the expenses incurred.
4.The result is your net income from salary.
For individuals who are under 60 years of age:

Education Secondary and Higher

Net Income Income Tax Rate
Cess Education Cess

Up to Rs.2.5
Nil Nil Nil
lakhs

2% of 1% of
Rs.2.5 lakhs to 5% of (Total income – Rs.2.5
income income
Rs.5 lakhs lakhs)
tax tax

Rs.5 lakhs to Rs.25,000 + 20% of (Total 2% of

1% of income tax
Rs.10 lakhs income – Rs.5 lakhs) income tax

Above Rs.10 Rs.1,12,500 + 30% of (Total 2% of

1% of income tax
lakhs income – Rs.10 lakhs) income tax

Q11. Draw a format of taxable income from other sources

Any income which does not fall under any other head of income i.e. income from business/ profession,
income from salary, capital gain and house property then it will be called as income from other sources.

Illustration:
Compute the income from other sources of Mr. as per the details given below for financial year 2016-17:-
 Interest received on debentures 15000/=
Interest received from taxable bonds 20000-=
Interest received from Public Provident Fund 30000/=
Dividend received mutual funds 10000/=
Solution: Interest received on fix Deposits with Bank 12000/=
Accused Interest on kisan vikas patra 8000/=
Accused interest on national saving 5000/=
certificates
Interest received on income tax refund 4000/=
Gift received from a friend 60000/=
Winning from television shows 100000/=

Interest received on debentures 15000/=

Interest received from taxable bonds 20000-=
Interest received from Public Provident Fund 0
(Exempted) 30000/=
Dividend received mutual funds (Exempted) 0
10000/=
Interest received on fix Deposits with Bank 12000/=
Accused Interest on kisan vikas patra 8000/=
Accused interest on national saving 5000/=
certificates
Interest received on income tax refund 4000/=
Gift received from a friend (exempted if 60000/=
amount is 50000/= or less)