Basic Concept
A word about Indian Taxation. The Income-tax Act, 1961 came into force with effect from 1/4/1962. It has XXIII chapters and 298 sections in all. The Indian taxation structure is a mix of number of provisions either governed by income tax law and at some stages by number of mercantile and corporate laws. A number of amendments in the structure have made the taxation structure very complex and difficult to handle, the subject is not that easy to digest. Taking into account needs of various users, we have tried our level best that the provisions are accurate and are able to create a clear understanding of the subject.
Meaning of India
India: Section 2(25A)
India means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other maritime Zones Act, 1976 and the air space above its territory and territorial waters.
What is Person ?
Person: Section 2(31) includes seven types of persons namely
An individual,
A Hindu undivided family (HUF),
A company,
A firm,
An association of persons (AOP) or a body of individuals (BOI),
A local authority,
Every artificial juridical person not falling within any of the preceding sub clauses.
AOP v/s BOI
The 2 basic differences between AOP and BOI are:
a) In BOI there are only individuals but in AOP there can be any type of persons.
b) BOI is creation of law whereas AOP can be created by different persons coming together for doing some income producing activity on the voluntary basis.
Who is an assesse?
Assessee, under Section 2(7) means any person by whom tax, interest or penalty is payable under any provision of this act and includes:
a) deemed assessee
b) assessee in default
c) Person against whom any income tax proceedings have been started for the assessment of his income or loss or the income of some other person or the loss for whom he is liable.
Concept and Assessment and Previous Year
- Assessment year: Section 2(9) means the period of 12 months starting from 1st April every year and ending on 31st march of the succeeding year.
- Previous year: Section 2(34) means the year immediately proceeding to assessment year. Income for the previous year is always taxed in the assessment year.
Income of one previous year taxable in same year.
The following are the exceptions to the general rule that income of every previous year is chargeable to tax in the relevant assessment year.
Section 172: Shipping business of a non-resident;
Section 174: Person leaving India;
Section 174A: An AOP formed for the purpose of a particular event.
Section 175: Persons likely to transfer property to avoid tax;
Section 176: Discontinued business or profession
What is Gross Total Income?
Section 14: Gross total income is the aggregate of income from all five heads of Income, namely :
Income under the head salary
Income under the head house property
Income under the head business and profession
Income under the head capital gains
Income under the head other sources
Taxability of gifts
Income includes the gifts received in excess of Rs.50,000. If anyone has received gift in cash exceeding Rs. 50,000 from a non-relative than whole of such amount received shall be considered his income.
However gifts received from relatives shall not be covered in the said 8) point above
Taxable Income
Section 2(45):
Total income is income after reducing the deduction under chapter VI-A from the gross total income. This income is also called taxable income on which tax has to be imposed.
Rounding off of total income
Section 288A:
The total income shall be rounded off in the multiples of Rs. 10.
Rounding off of Tax liability
Section 288B:
The amount payable by the assesse and the amount of refund due, under the provisions of the act shall be rounded off to the nearest ten rupees
Cess
Education cess for the AY 2016-17 is 2% for primary education and 1% for higher and secondary education.