INTRODUCTION

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

ADMINISTRATION OF THE ACT
1. Central Board of Direct taxes : The board is
constituted under the Centeral Board of
Revenue Act 1963 as the supreme authority
in the Department of Income tax.
2. Directors-General or chief Commissioners
of Income-tax : They are appointed by the
Central Gove subordinate the Board.
3. Directors or Commissioners of Income tax:
They are appointed by the central
Government and are subordinates to the
Director General or chief Commissioners of
their respective jurisdiction.
4. Additional Directors or Additional
Commissioners of Income tax or Additional
Commissioners of Income tax(appeals) : They
are also appointed by the central Government and
are subordinate to their higher authorities of their
jurisdiction.
5. Joint Directors or Joint Commissioners of
Income tax or Deputy commissioners of Income-
tax : They are also appointed by the central
Government and are subordinate to their
respective higher authorietes of their juridiction.
 6. Deputy Directors or Deputy
Commissioners of Income tax: They are also
appointed by the central Government and
are subordinates to their respective higher
authorizes of their jurisdiction.
 7. Assistant Directors or Assistant
Commissioners of Income tax : They are
also appointed by the central Government
and are subordinates to their respective
higher authorities of their Jurisdiction.
8.Assessing Officers :”They are the Assistant
Commissioners or Income tax Officers and are
subordinates to the Deputy Commissioners,
Commissioners and Directors of their respective
juridiction. The Deputy Commissioner may also be
assigned with the powers of an Assessing Officer.

9. Income Tax Officer : They are the Assessing

Officers and are subordinates to their higher
authorities.
10. Tax Recovery Officer: They are the Income-tax
Officers who have been entrusted exclusively with
the work of recovery of Income tax
 Tax Inspectors :They are subordinates to
the Assessing Officers and other higher
Officials of their respective jurisdiction.
APPELLATE AUTHORITIES
 Commissioners(Appeals) : They include additional Commissioners
(appeals). A person may file an appeal against certain orders of the
Assessing Officer. Assistant commissioner or commissioner and Deputy
commissioner
 Appellate Tribunal : A person may file an appeal against certain orders
of the commissioner or the commissioner or administration.
 Reference to High court : A person or the Commissioner may apply to the
Tribunal to refer the case to High court on the question of law or may
apply to the High court for such reference if the Tribunal refuses to do so.
 Appeal to High court: A person or the chief commissioner or the
Commissioner may file an appeal against the order of the Tribunal directly
to the High court, if this Court is satisfied that the case involves a
substantial question of law.
 Reference directly to the Supreme court : In case of conflicting decision
of different High Courts on the same question of law it may be referred
directly to the supreme court.
 Appeal to the Supreme court: This is the last appeal against the judgment
of High court.
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
 The Income may be received In kind and not necessarily in Cash.
 In General income is received from some definite source with and with certain
amount of regularity but Even a lumpsum received in certain cases is also
treated as income income subject to the provisions of the act.
 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.
 The receipts of income should be from outside because one cannot make profit out
of himself.
 Under the act Income is decided at the time of its first receipts. Incase the
amount received is not liable to take tax as income at the time of its first receipts, it
cannot treated as income subsequently even through it turns out to be an income.
 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
 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.
 These income earned casually during the
financial year without any effort.
 It is income an income by chance facrot.
 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.
DEEMED PROFIT
 Recovery of loss or Expenditure
 Remission or cessation
 Surplus on sale of assets
 Bad debts recoverd
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, dividend 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
INCOME PARTLY FROM AGRICULTURE
AND PARTLY FROM BUSINESS
 If a person is raising agriculture produce or receiving rent-in-kind
which has been utilized as raw material in his own business and sale
receipts of the same are included in the accounts of business the
market value of such agriculture produce should be deducted from the
total profit(Rule7).
 If a person derives income from sale of centrifugal letex or cenex
manufactured from rubber plants grown by him in India It should be
computed as if it is income from business and 35% of such income is
treated as busines income and the remaining 65% as agriculture
income.
 If a person derives income from sale of coffee grow and cured by the
seller in India it should be computed as if it is and income from
business and 25% of such income is treated as business income and the
remaining 75% as agriculture income. r
 If the income derived from the sale of coffee grown, crude, roasted
and grounded by the seller in India with or without mixing chicory
or other flavouring ingredients 40% of such income treated as
business income and the remaining 60% as agriculture income.
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 payble 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
ASSESSMENT YEAR

“Assessment year is a period of twelve months

commencing from April 1st of every calendar
year and ending on march 31st of the next
calendar year. The total Income of the
previous year of an assessee is assessed in
the following financial year known as
Assessement year.
PREVIOUS YEAR

The previous year in which income earned is

known as previous year.
In other word Previous year immediately
preceding the assessment year.
EXCEPTIONS OF PY

1. Newly setup business and profession

2. New employment
3. New Source of Income
CIRCUMSTANCES WHEN BOTH
PY AND AY IS THE SAME YEAR

1. Income of non-resident from shipping.

2. Income of Persons leaving India
permanently or for a longer period of time.
3. Income of bodies formed for short duration.
4. Income of a person who is trying to
alienate(transfer ownership of (property
rights) to another person or group) his
assets with a view to avoiding tax.
5. Income discontinued business.
GROSS TOTAL INCOME

“Gross total Income means the total Income

computed in accordance with the previous of
the Income tax act before making any
deduction u/s 80C to 80U”

“Income from all the concerned heads should

be aggregated and such total amount is
called the Gross Total Income”
TOTAL INCOME

“Total Income of an assessee means the

gross total Income as reduced by the
amount permissible as deduction under
Section 80C to 80U”