INSTITUTE-UNIVERSITY SCHOOL OF

BUSINESS
DEPARTMENT OF COMMERCE
Bachelors of Commerce
Income Tax Law and Accounts
CMT-344

Introduction to Income Tax

DISCOVER . LEARN . EMPOWER
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Introduction to
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Income Tax Act

Course Outcome
CO Title Level
Number

CO1 The student would be able to identify and calculate the Remember
income of five different heads as per Income Tax  
CO2 The student would be able to plan his tax liability using Understand
various deductions and provisions available  
CO3 The student would be to calculate the tax liability of Understand
Individual.

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 INCOME TAX

Introduction of Income tax,

Type of Taxes
Types of Direct Taxes
Advantages of Direct Taxes
Direct Taxes vs. Indirect Taxes

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WHAT IS TAX?

• Tax is 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. It may be direct tax or
indirect tax.
• Direct tax is a tax, such as income tax, which is levied on the income or
profits of the person who pays it, rather than on goods or services.
• Indirect Tax is levied on goods and services rather than on income or
profits.
Type of Taxes (Income Tax Act,1961)

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INTRODUCTION
• The present law of income tax is contained in the Income Tax Act,
1961. The Income tax Act contains the provisions for determination of
taxable income, determination of tax liability, procedure for
assessment, appeal, penalties and prosecutions. It also lays down the
powers and duties of various income tax authorities.
• The Income Tax Law comprises The Income Tax Act 1961, Income
Tax Rules 1962, Notifications and Circulars issued by Central Board
of Direct Taxes (CBDT), Annual Finance Acts and Judicial
pronouncements by Supreme Court and High Courts

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What are Direct Taxes?

• Direct taxes are one type of taxes an individual pays that are paid
straight or directly to the government, such as income tax, poll tax,
land tax, and personal property tax. Such direct taxes are computed
based on the ability of the taxpayer to pay, which means that the
higher their capability of paying is, the higher their taxes are.
• For example, in the case of income taxation, an individual who earns
more pays higher taxes. It is computed as a percentage of the total
income. Additionally, direct taxes are the responsibility of the
individual and should be fulfilled by no one else but him.

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Types of Direct Taxes

• 1. Income tax
It is based on one’s income. A certain percentage is taken from a worker’s salary,
depending on how much he or she earns. The good thing is that the government is
also keen on listing credits and deductions that help lower one’s tax liabilities.
 
• 2. Transfer taxes
The most common form of transfer taxes is the estate tax. Such a tax is levied on
the taxable portion of the property of a deceased individual, including trusts and
financial accounts. A gift tax is also another form wherein a certain amount is
collected from people who are transferring properties to another individual.
 
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Cont……….
3. Entitlement tax
• This type of direct tax is the reason why people enjoy social programs
like Medicare, Medicaid, and Social Security. The entitlement tax is
collected through payroll deductions and is collectively grouped as the
Federal Insurance Contributions Act.
 4. Property tax
• Property tax is charged on properties such as land and buildings and is
used for maintaining public services such as the police and fire
departments, schools and libraries, as well as roads.

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Cont………….
• 5. Capital gains tax
• This tax is charged when an individual sells assets such as stocks, real
estate, or a business. The tax is computed by determining the
difference between the acquisition amount and the selling amount.
 

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Advantages of Direct Taxes

• Though it is strictly implemented on every individual who does not

qualify for an exemption, there are actually numerous advantages of
paying taxes directly. They include: 
• 1. Promotes equality
Since direct taxes are based on the ability of a person to pay, it
promotes equality among payers and citizens. Every person is charged
a different amount, depending on how much they make.

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Cont………..
• 2. Promotes certainty
• The good thing about direct taxes is that they are determined and made
final before they are even paid. In the case of income tax, the annual
tax is the same every year as long as the salary does not change.
 
• 3. Promotes elasticity
• Taxes are the earnings of the government, and when they fluctuate, the
earnings also change. They can go higher or lower.

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Cont…………
• 4. Saves time and money
• The government does not need to spend on the collection of taxes
because they are already taken right at the source of the income. Some
companies use automatic payroll deduction systems, which help save
time and money.

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Direct Taxes vs. Indirect Taxes

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Direct Taxes vs. Indirect Taxes

• There are basically two types of taxes – direct and indirect taxes. The
following are the differences between the two:
• Direct taxes refer to taxes that are filed and paid by an individual
directly to the government. Indirect taxes, on the other hand, are taxes
that can be transferred to another entity. Therefore, the burden of
paying them can be put on another person’s shoulders.
• Direct taxes can be evaded in the absence of proper collection
administration. Indirect taxes cannot be escaped from because these
are charged automatically on goods and services.

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Cont…………….
• Direct taxes can help address inflation while indirect taxes can lead to
inflation.
• Direct taxes lessen the savings of earners, but indirect taxes encourage
the opposite because they make products and services more expensive
and unaffordable.
• Direct taxes are imposed only on people that belong to various income
brackets. Indirect taxes, on the other, can be felt by everyone who buys
goods and avails services.
 

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 summary
• Introduction of Income tax,
• Type of Taxes
• Types of Direct Taxes
• Advantages of Direct Taxes
• Direct Taxes vs. Indirect Taxes

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Assessment Pattern

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 References
Suggestive Readings
• Buy at Amazon.B. B. Lal and N. Vashist : Direct Taxes, Income Tax, Wealth Tax and Tax Planning; Darling
Kindersley (India) Pvt. Ltd., 482, FIE, Patparganj, Delhi.-110092 (Edition based on provisions applicable for AY
2014-15)
• 1.Buy at amazon Dr. V. K. Singhania : Students Guide to Income-tax including Service Tax/VAT; Taxmann
Publications Pvt. Ltd., 59/32, New Rohtak Road, New Delhi – 110 005 (Edition based on provisions applicable
for AY 2014-15 
• 2. Buy at Amazon GirishAhujaand : Systematic Approach to Income-tax, Service Tax and VAT; Bharat Law Ravi
Gupta House, T-1/95, Mangolpuri Industrial Area, Phase I, New Delhi-110 083. (Edition based on provisions
applicable for AY 2014-15) 
• 3Buy at Amazon. B. B. Lal and N. Vashist : Direct Taxes, Income Tax, Wealth Tax and Tax Planning; Darling
Kindersley (India) Pvt. Ltd., 482, FIE, Patparganj, Delhi.-110092 (Edition based on provisions applicable for AY
2014-15)
 
4.BUY at Amazon Income Tax Law and Accounts , Mehrotra H.C, Sahitya Bhawan Publications.
• 5.BUY AT FLIPKART MaheshChandra, D.C Shukla; Income Tax Law and Practice: Pragati Publications.

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 APPLICATION
• Application of Direct Tax can be as follows:

1. In understanding the income tax act ,1961

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THANK YOU

For queries
Email: pooja.usb@cumail.in