Funoamentals ot |ncome Ta Funoamentals ot |ncome Ta

8y Rajesb v Mabajan
Faculty GHR||T Harlganga Hub
Hlngna Nagpur
Taes Taes
O Taes are levleo by tbe Government ot
|nola on tbe |ncome earneo by a
person.
O Taes sucb as vAT, CST,8ST ano |T are
collecteo by tbe Government are useo tor
lntrastructural oevelopment ot tbe
country.
O State government also bave a rlgbt to levy
taes. Tbe revenue collecteo ls glven to
tbe Central Government.
Classltlcatlon ot tbe taes Classltlcatlon ot tbe taes
Tbe taes are classltleo lnto two
categorles namely:
Dlrect Taes ano |nolrect Taes.
Lamples ot Dlrect taes: |ncome
ta, Lclse Duty.
Lamples ot |nolrect taes: value
aooeo ta (vAT),CST, 8ST etc.
Sources ano Components ot Sources ano Components ot
|ncome Ta Law |ncome Ta Law
O |ncome Ta Act, 1961
O |ncome Ta Rules, 1962
O Flnance Act passeo every year
O Clrculars, Notltlcatlon lssueo by C8TD
O [uolclal Declslons
Sectlon 5 ot |T Act,1961 Sectlon 5 ot |T Act,1961
|ncome Ta ls levleo by tbe
government ot |nola on tbe
lncome earneo by a person
wblcb earneo ln prevlous year
ano ls assesseo ln assessment
year.
Analysls ot Sectlon 5 Analysls ot Sectlon 5
Core ano Hlooen concepts:
OWbat ls |ncome Ta ?
OWbat ls |ncome ?
OWbat ls meant by a person ?
OWbat ls meant by prevlous year ?
OWbat ls meant by assessment
year ?
Meanlng ot |ncome Meanlng ot |ncome
Generally money earneo by person may
be treateo as lncome lt lt bave tollowlng
teatures:
1) |t must be a return.
2) |t must be measurable ln monetary
terms,
3) |t must be earneo wltb certaln regularlty,
4) |t must be earneo perloolcally.
5) |t must be tbrougb oltlnlte source.
|mportant teatures ot |ncome |mportant teatures ot |ncome
1) |ncome must come tbrougb a oetlnlte
source.
2) Lump Sum recelpts may also be treateo
as lncome ano taeo unoer tbe Act.
3) Any olspute regarolng tbe tltle ot
lncome wlll not attect tbe cbargeablllty.
4) Gltts atter 1-9-2004 ln casb eceeolng
Rs. 25,000 are consloereo as lncome ano
bence taable.
Contlnueo... Contlnueo...
5) Legallty ot tbe source ls not tbe sole
crlterlon ot lncome.
6) |ncome may be recelveo ln casb ano klno.
|t lt ls recelveo ln klno lts valuatlon ls
oone as per |T valuatlons rules,1962.
7) |ncome arlses eltber on recelpt or
accrual basls. |t may accrue to tbe ta
payer wltbout actual recelpt.
8) Dlverslon by overrlolng tbe tltle.
Classltlcatlon ot |ncome unoer Classltlcatlon ot |ncome unoer
oltterent beaos (GT|) oltterent beaos (GT|)
O |ncome trom House property.
O |ncome trom Salary.
O |ncome trom 8uslness & Protesslon.
O |ncome trom Capltal Galns.
O |ncome trom Otber Sources.
Detlnltlon ot Person Detlnltlon ot Person
As per tbe provlslons ot tbe |T Act, 1961 a
person may lncluoe:
1) An |nolvloual
2) 8ooy Corporate (Company)
3) Partnersblp Flrms
4) Assoclatlon ot persons (AOP)
5) 8ooy ot |nolvlouals (8O|)
6) Hlnou Unolvloeo tamlly (HUF)
7) Any Local autborlty e.g NMC
8) Any artltlclal juolclal person not lncluoeo ln
above.
Meanlng ot Prevlous year Meanlng ot Prevlous year
Prevlous ls year wblcb starts on 1
st
ot
Aprll every year ano enos on 31
st
marcb
every year.
For Lample:
Period Previous Year
1/4/2006 to 31/3/2007 2006-07
Llkewlse
1/4/2010 to 31/3/2011 2010-11
Assessment year Assessment year
O Assessment year ls relatlve concept. |t ls
year wblcb succeeolng to tbe prevlous
year. e.g
Previous Year Assessnent Year
2006-07 2007-2008
Llkewlse
2010-11 2011-2012
Resloentlal Status ot lnolvloual Resloentlal Status ot lnolvloual
Resloentlal Status
Resloent
Resloent but
orolnary
resloent
Resloent but
not an orolnary
resloent
Non
Resloent
Non Resloent
|nolan
Sectlon 6 Sectlon 6 Conoltlons ot Conoltlons ot
oetermlnlng tbe resloentlal status oetermlnlng tbe resloentlal status
8aslc Conoltlons:
a) Presence ln |nola tor 182 oays ourlng tbe
prevlous year.
b) Presence ln |nola tor 60 oays ourlng tbe
prevlous year or 365 oays ourlng tbe 4
years preceolng tbe prevlous year.
Sectlon 6(1) Sectlon 6(1) Conoltlons ot Conoltlons ot
oetermlnlng tbe resloentlal status oetermlnlng tbe resloentlal status
Aooltlonal Conoltlons:
a) Resloent ot |nola ln at least 2 years out
10 years preceolng tbe prevlous year.
b) Present at least 730 oays ln |nola ourlng
7 years preceolng tbe prevlous year.
Sectlon 6(2) Sectlon 6(2) - - Resloentlal status ot Resloentlal status ot
HUF HUF
Resloentlal Status ot tbe HUF oepenos
upon tbe resloentlal status ot tbe Katra
A HUF ls salo to be resloent ot |nola
ourlng tbe prevlous year lt |ts Control ano
Management ls sltuateo wbolly or partly
ln |nola.
A resloent HUF ls salo to be orolnarlly
resloent lt tbe karta or tbe Karta
satlstles botb tbe conoltlons specltleo ln
Sec (6)6
Sectlon 6(3) Sectlon 6(3) Resloentlal Status ot Resloentlal Status ot
a company a company
An |nolan company ls always salo to be
resloent ot |nola.
A Forelgn Company are salo to be
resloent ln |nola ourlng tbe prevlous year
lt lts management ano control ot attalrs ls
sltuateo wbolly ln |nola
Relatlonsblp between resloentlal Relatlonsblp between resloentlal
status ano lncloence ot Ta status ano lncloence ot Ta
art|cu|ars k Ck k but NCk Non kes|dent
Ind|an Income
lncome whlch ls reclved or deemed Lo be recelved ln lndla 1axable 1axable 1axable
lncome whlch accrues or arlses or ls deemed Lo accrue ln
lndla 1axable 1axable 1axable
ore|gn Income
Income wh|ch accrues or ar|ses CU1SIDL INDIA from
a) 8uslness conLrolled ln lndla or professlon seL up ln lndla 1axable 1axable noL 1axable
b) Any oLher source 1axable
noL
1axable noL 1axable
Deouctlons as per |T Act, 1961 Deouctlons as per |T Act, 1961
Deouctlon ls a klno ot llberty wblcb tbe
assessee enjoys trom tbe lncome ta
autborltles. |t means oeouctlon ls klno ot
benetlt tbe assessee gets atter lnvestlng
money ln tbe scbemes approveo by tbe
government ot |nola.
Deouctlon ls always glven trom tbe
lncome earneo ourlng tbe prevlous year.
Types ot Deouctlons as per |T Law Types ot Deouctlons as per |T Law
unoer sectlon 80C to 80U unoer sectlon 80C to 80U
|n all 21 oeouctlons are avallable trom
Gross Total |ncome.
Sectlon 80 ls relevant sectlon unoer
wblcb tbe oeouctlons are avallable relatlng
to |ncome trom Salarles, |ncome trom
House Property, |ncome trom Capltal
Galns, |ncome trom 8uslness ano
Protesslon, |ncome trom Otber Sources
ano some oeouctlons are avallable trom
GT|
Contlnueo...... Contlnueo......
DLDUC1ICN kCM SALAkILS
Sect|on L||g|b|e assessee Nature of deduct|on
C lndlvldual/Pul ueducLlons ln respecL of cerLaln paymenL/lnvesLmenLs upLo 8s 1
CCC lndlvlduals ConLrlbuLlon Lo penslon fund upLo 8s 1
CCu lndlvlduals ConLrlbuLlon Lo penslon scheme of governmenL of lndla
u lndlvldual/Pul Medlcal lnsurance upLo 8s 1/13 ln case of senlor clLlzen
uu lndlvlduals
LxpendlLure for medlcal LreaLmenL and deposlL made for malnLenance of dependenL
relaLlve sufferlng from permanenL dlsabllllLy a flxed deducLlon of 8s 3/ and
hlgher deducLlon of 8s 73/ ln respecL of severe dlsablllLy
L lndlvlduals aymenL of lnLeresL on loan Laken for hlgher sLudles
C All assesses
uonaLlon Lo cerLaln fund charlLable lnsLlLuLlons sub[ecL Lo maxlmum 3 of quallfylng
donaLlon 1 ln some case
Rebate Rebate
O Rebate ls klno ot ta benetlt wblcb ls
always glven trom tbe ta calculateo.
O From tbe A.Y. 2009-10 tbe rebate ls
wltborawn. Now as on tooay no rebate ls
avallable to tbe assessee trom tbe ta
calculateo.
Heaos cbargeable unoer tbe beao Heaos cbargeable unoer tbe beao
salary salary
Components ot Salary |ncome:
1) Salary Proper
2) Allowances
3) Perqulsltes
4) Protlts ln lleu ot salary
Allowances Allowances
Allowances are part ot Salary
Allowances are taable ecept specltlcally
eempt.
Allowances are categorlzeo lnto:
a) Lempt
b) Fully Taable
c) Partly taable
Speclal allowances eempt U/S Speclal allowances eempt U/S
10(14) 10(14)
Lemptlon ls baseo on actual epenolture
lncluoes:
1) Travelllng allowance
2) Conveyance allowance
3) Helper allowance
4) Dally allowance
5) Unltorm allowance
6) Researcb allowance
Contlnueo.. Contlnueo..
Lemptlon on tleo basls:
1) Transport allowance eempt upto Rs.800.
2) Cblloren Loucatlon allowance eempt upto Rs.
100 per montb per cbllo malmum upto 2
cblloren.
3) Hostel Lpenolture allowance eempt upto Rs.
300 per montb per cbllo upto malmum 2
cblloren.
4) Allowance to transport employee: Least ot tbe
tollowlng two ls eempt
a. 70 ot tbe allowance recelveo
b. Rs. 6,000 per montb
Perqulsltes Perqulsltes
Tbe non monetary benetlt recelveo by tbe
employee trom tbe employer ls calleo as
perqulsltes.
valuatlon ot perqulsltes ls oone as per
perqulsltes valuatlon rule 4.
Tbe are also calleo as PLRKS
Perks are classltleo lnto:
a. Taable ln tbe bano ot tbe employee
b. Lempt trom ta
c. Taable ln tbe banos ot specltleo
employees.
Taable ln tbe banos ot employee Taable ln tbe banos ot employee
Tbese perks are:
a) Rent tree accommooatlon
b) Concesslonal rent accommooatlon
c) Lmployees obllgatlon borne by tbe
employer
o) Amount payable by tbe employer to ettect
an assurance on tbe llte ot an employee
e) Notltleo trlnge benetlts:
a) |nterest tree loan
b) Concesslonal loan
c) Use ot movable asset
o) Transter ot movable asset
Perks eempt trom ta Perks eempt trom ta
Tbese perks are:
1) Use ot Computer/laptop/car/moblles ano
telepbones
2) Gltt ln klno
3) Gooos manutactureo by tbe employer ano solo
to employee at a concesslonal rates
4) Ta on perqulsltes ln klno palo by tbe employer
5) Perqulsltes alloweo by tbe Govt. to cltlzen
renoerlng servlces outsloe |nola.
6) Sbares ano Debentures provloeo tree ot cost or
at concesslonal rate by tbe company unoer
LSOP
Perks taable ln tbe bano ot Perks taable ln tbe bano ot
specltleo employees specltleo employees
Tbese perks are:
1) Gas, Water ano Llectrlclty
2) Domestlc Servants
3) Loucatlon taclllty
4) Meolcal taclllty
Protlts ln lleu ot salary Protlts ln lleu ot salary
Tbe protlt ln lleu ot salary are covereo U/s 17(3):
1) Compensatlon recelveo ln connectlon wltb tbe
termlnatlon ot employment or an mooltlcatlon
ot tbe terms ano conoltlons ot employment ls
lncluoeo ln taable salary.
2) Payment trom unrecognlzeo provloent tuno or
otber tuno.
3) Any sum recelveo unoer KLYMLN lnsurance
pollcy.
4) Any lump sum amount recelveo prlor to tbe
employment or cessatlon ot employment.
Lempteo recelpts trom protlts ln Lempteo recelpts trom protlts ln
lleu ot salary lleu ot salary
O Gratulty
O Commuteo penslon
O Amount ot retrencbment compensatlon
O Payment trom SPF ano RPF
O House Rent Allowance
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