Introduction

Introduction

• Tax Introduction
• Meaning of Tax
• Definition of tax under Income tax act sec 2(43)
• Characteristic / feature of Tax
• Objective of Taxation
• Types of taxation
 Introduction
• The Importance of Income tax has increased
considerably in the present days because :
• It has major sources of revenue to the
government to be utilized for the social and
economical Development of the country
• It is one of the effective instrument of reducing
unequal distribution of wealth between reach
and poor
• It is also one of the means to solve the actual
problem of Unemployment
 Meaning of Tax
“ Tax is compulsory contribution or Payment of
money by various persons to the government
by virtue of its powers conforred under the
Constitution. The collected tax is used for
public purpose”

The contribution so received is not for any

specific services rendered to the tax payer
 Definition of tax under Income tax act sec
2(43)

• Tax means the income-tax chargeable under

the provision of the Income Tax act.
in general sense income-tax means, a tax on the

Income of the assessees whose income exceds

the specific limit in the previous year and is
chargeable at the prescribed rates
 Feature/characteristics of Tax

It is the compulsory payment of money by the

people to the government.
The Tax collect by the government is used for
the public purpose
The contribution received by the government
is not for any specific services rendered by it
to the tax payer
 Objectives of Taxation
• The objective of taxation is to generate revnue for financing
the expenditure on various plans and also government
expenditure.
• It is objective to achieve the socio-economic Development
by utilizing the tax revenue for the purpose etc
• It is objective is to prevent the concentration of wealth in the
hands of few person only.
• It is objective is to reduce the unequal distribution of wealth
between the rich and poor.
• It is objective is to provide the necessary amenities to the
common people by utilising the revenue
• Its objective is the redistribution of wealth for
the common benefit of the people.
• Its objective is also to create employment
opportunities to the people with a view to
solve the problem of unemployement.
 SCHEME OF INCOME TAX
Income from Salary xxxx
Income from House property xxxx
Profit and Gains of Business and profession xxxx
Capital Gain xxxx
Income other source xxxx
Gross Total Income xxxxxx
Deduction under section 80c to 80U xxxx
Total Income xxxxxx
What should we do If One Head of Income is profit and
one of Income head is loss

• Set off and Carry forward of losses

 DEFINITIONS
• Income Sec 2(24)
• Casual Income
• Agriculture Income Sec 2(1A)
• Person Sec 2(31)
• Assessing Officer Sec 2(7A)
• Assessee Sec 2(7)
• Assessment Sec 2(8)
• Assessment Year Sec 2(9)
• Previous Year Sec 2(34) & 3
• Gross Total Income 80B(5)
• Total Income Sec 2(45) &5
 INCOME
1. The Income may be received In kind and not necessarily in Cash.
2. In General income is received from some definite source and also treated as
income subject to the provisions of the act.
3. Income earned by illegal means is also liable to tax under the act. An assessee can
not avoid tax on the ground of illegality though he may be punishable under other
law.
4. Under the act Income is decided at the time of its first receipts.
5. If the Income is earned by a person it is taxable whether it is actually received
not. But it depends upon the method of accounting employed by him i.e whether
on cash basis or mercantile system
6. Any thing that is liable to tax is treated as income unless it is expressly exempt
under the act.
 Casual Income

• The casual income is a receipt which is of

both the casual and non recovering in nature.
• In general this is a receipt which is unforeseen
and unexpected.
• Example of casual Income are :
1. Winning from lotteries
2. Crossword puzzles
3. Card game
4. Gambling and Betting
Following are not treated as casual Income

1. Capital gain which are taxable u/s 45 of the act.

2. Receipts arising from business or the exercise of
profession or occupation
3. Receipts by way of addition to the remuneration
of an employee.
The voluntary payment received from the exercise
of an occupation is also not treated as casual
Income.
 Agriculture Income

“ Agriculture income means rent or revenue

derived from land which is situated in India
and is used for agriculture purpose”
 It means that
• Rent or Revenue should be derived from land. Rent
is a receipt in cash or in kind for grant of right to use
land. Revenue is an yield or Income from land.
• The land should be situated in India. The Income
from land situated outside India is not considered
under this provision.
• The land must be used for agriculture purpose it
means basic operations must be carried on the land.
• Such as basic operation are Tilling, sowing, planting,
cutting,
• Income arising from the performance of any
process ordinarily employed by a cultivator or
receiver of rent –in-kind to render the
produce fit to be taken to market. Income
arising to such persons by sale of such
produce is also considered as agriculture
income.
Income not considered as agriculture income
• Income from forest trees, grass, bamboos etc., of spontaneous growth is not
agriculture Income because there is no performance of agriculture operation
involving the human skill and labour.
• Profit made by a purchases of standing crop by reselling it at a higher price, is
not an agriculture income because he is neither the owner not the tenant
• Income from markets is not an agricultural income because this income is not
derived from the land by agriculture
• Income from stone quarries, mining royalties, sale of earth brick making, supply
of water for irrigation purpose and remuneration received by the manager of
agriculture farm. Are also not agriculture Income, Because here there is no
cultivation of land.
• Income arising form the transfer of land is also not a revenue derived from land.
• Similarly income from dairy farming, poultry farming, divided received from a
company engaged in agriculture and income form land used for storage of
agriculture produce are also not agricultural income derived from land.
• From the above example it is clear that the
agriculture income accrues only to the owner of
land , derive income by the performance of
agricultural operation on land.
• The AGRICULTURE INCOME EXEMPT FROM TAX
• Agriculture income taken into account only for the
purpose of determining the rate of tax applicable to
non-agriculture Income in the case of person other
than the a firm, a company, or local authority.
• If the loss in agriculture Income from agriculture is
treated as NILL
 Meaning of Person Sec 2(31)
• Individual
• Hindu Undivided family
• Firm
• Company
• Association of Person or body of Indidual
• Local Authority
• Artificial juridical person
 Individual

“It means natural person i.e any human being”

 Hindu Undivided family
“ It is a joint Hindu family possessing common
ancestral property, property acquired with
the aid of such ancestral property and having
coparcenary interest of male or female
members who are entitled claim partition or a
share on partition.”
 Firm

“It is partnership concern governed by the

Partnership act”
 Company
“It is an Indian company or a body corporate
incorporated under the laws of a country
outside India or any institution or association
or body already assessed as company or
declared as company by order of the Board.”
Association of Person or body of Individuals

“It is group of person who join together in a

common purpose to earn income.”
 Local Authority

“ They are Local Boards, Municipalities etc”

 Artificial Juridical Person

“It is a residuary head and covers all the

remaining person”
 Assessment Officer :Sec2(7A)
Assessing officer means the Assistant Commissioner or
Deputy Commissioner or Assistant Director or Deputy
Director or the Income tax officer who is vested with
the relevant jurisdiction by virtue of direction or
orders as may be issued by the Board u/s 120(1) or
(2) of this act. of this Act or under any other
provision of the act and the Joint Commissioner or
Joint Director who is Directed u/s 120(4)(b) to
exercise or perform any of the power and functions
assigned to an Assessing Officer under this act”
 Assessee Sec 2(7)
“Assessee means a person by whom any tax or any
other sum of money is paybale under Income tax act”
Deemed Assessee “A person deemed to be an assessee
e.g represntative assessee i.e agent of a non resident,
gurdian of a minor or manager of a idiot”
Assessee in default “ a Person who is responsible to
deduct tax at source, fails either to deduct tax at
source, fails to deduct the same or after deducting
tax fails to pay it to the credit of the Government”
 Assessment Sec 2(8)
• Assessment is comprised of the following to
stages :
• Computation of Total Income
• Determination of the tax payable on the total
income