BBA - A BB2017004 * Let us begin by understanding the meaning of tax. Tax is a fee charged by a government on a product, income or activity. * There are two types of taxes: Direct taxes and Indirect taxes. * If tax is levied directly on the income or wealth of a person, it is a direct tax e.g. income tax, wealth tax. * If tax is levied on the price of a good or service, then it is called an indirect tax e.g. excise duty, custom duty, service tax and sales tax or value added tax. In the case of indirect taxes, the person paying the tax passes on the incidence to another person. * The reason for levy of taxes is that they constitute the basic source of revenue of the government. Revenue so raised is utilised for meeting the expenses of government like defence, provision of education, health care, infrastructure facilities like roads, dams, etc. * Every Individual and Hindu Undivided Family whose total income exceeds the exempted limit of income, shall be liable to pay income tax. Besides this, a Firm, a Company, a Co-operative Society, Association of Persons and Body of Individuals, etc. are also liable to pay income-tax. * Income-tax is a Direct Tax: Income-tax is borne by the person upon whom it is levied. It cannot be shifted to any other person. * Income-tax is a Central Tax: Income-tax is levied and collected by Central Government. * Income-tax is computed upon Net Taxable Income of Previous Year: Net taxable income during the previous year is computed as per the provisions of Income-tax. * Exempted Limit of Income: Certain amount of income is exempted from Income-tax Act. This amount is called exempted limit of income. Any income, which exceeds this limit shall be taxable. * Income-tax is Payable by every Assessee: Assessee includes an individual, Hindu undivided family, a firm, a company, every artificial person. * Income is the consumption and savings opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interest payments, rents, and other forms of earnings received in a given period of time." * Agricultural income refers to income earned or revenue derived from sources that include farming land, buildings on or identified with an agricultural land and commercial produce from a horticultural land. Agricultural income is defined under section 2(1A) of the Income Tax Act, 1961. * If an assessee, by chance or without any pre-expectation or accidently gets any income which is of non-recurring nature it is regarded as casual income. This income includes income includes income from lottery winnings, income from horse race, cross-word puzzles, playing cards, income from betting etc. * The term ‘Assessment year’ is considered very important in the study of income-tax. The income-tax is imposed on the net income of an assessee during assessment year related with previous years’ income. According to Section 2(9) of Income-tax Act, ‘Assessment ends on 31st March of next year. For example, assessment year 2018-19 means the year which shall start on 1st April, 2018 and will expire on 31st March, 2019. * Income-tax is levied on net taxable income of previous year. So it is very important to make clear the meaning of the term ‘Previous Year’. In simple words, a previous year is that year in which the income is earned and received. Previous year is also called ‘Financial Year’ or ‘Accounting Year’. In other words, previous year is a period of maximum twelve months which will certainly end on 31st March every year (prior to assessment year). For example, the period of previous year related to the assessment year 2018-19 ended on 31st March, 2018. * Gross total income of an assessee means the before deducting deductions under sections 80C and 80U. If an assessee has taxable salary income under only one head, then only that income under one head will be treated as Gross Total Income. For example, Shri Suresh, who is employed in a company, has taxable salary income of ₹4,80,000 in the previous year under the head ‘Income from Salaries’ only. He has no any other source of his income, then taxable salary of ₹4,80,000 shall be his gross total income. * The income, which is arrived after deducting deductions under sections 80C and 80U, is called Total Income. It is also known as Net Taxable Income. Income-tax is computed on this income. Net taxable income is rounded-off for calculating income-tax in multiple of ₹10. Total Income can never more than Gross Total Income. It will either equal to Gross Total Income or less than Gross Total Income. While computing Total Income, an assessee must have knowledge of all the deductions to be allowed u/s 80 of Income-tax Act. * Under section 2(31) of Income-tax Act, following are included in the term ‘Person’: a) An Individual, e.g., Ramesh, Hari, Sita, etc. b) A Hindu Undivided Family. c) A Company. d) A Firm. e) An Association of Persons and A Body of Individuals, e.g., Co-operative Society. f) A Local Body, e.g., Municipality, District Boards, etc. g) Any Artificial Juridical Person, e.g., any god or goddess. h) Any Artificial Person created by Law. * If an assessee saves the income-tax by not following provisions of tax laws clearly, it is called tax-evasion. It is also called theft of tax. It is a completely illegal way for escaping the tax. When the Government comes to know about it, the assessee may be penalized and he may also be prosecuted. In tax-evasion, the facts re concealed knowingly and false facts are presented. It is an immoral criminal and hateful work. It is also not in the welfare of an individual, society and nation. For example, A doctor does not show income earned through engaging himself in practicing privately and does not pay tax on such income, etc. * When an assessee brings reduction in his liability by following the legal provisions of Income-tax Act and taking advantages of weaknesses of the law, in this situation the Government suffers loss. But in this process tax laws are not neglected. This is called tax-avoidance. As soon as the Government comes to know any weakness of tax law, it makes some amendment and removes such weakness. Sometimes Government enforces any amendment to remove weakness of tax law from preceding date. In such case, the assessee has to refund tax to the Government since that preceding date. THANK-YOU