6


Taxes in India are of two types,

‡Direct Tax
‡Indirect Tax.
‡à
 
like income tax, wealth tax, etc. are
those whose burden falls directly on the
taxpayer.

‡

 
The burden of indirect taxes, like service tax,
VAT, etc. can be passed on to a third party.
According to income tax act 1961, every m

who is an  and whose  
exceeds the  m     shall be
chargeable to the income tax at the



prescribed in the finance act. Such income tax
shall be paid on the total income of the m
 

in the relevant  
.

The total income of an individual is determined on

the basis of his

   in India.

a
 M



The financial year in which the income is earned is

known as the previous year. Any financial year
begins from 1st of April and ends on subsequent
31st march. The financial year beginning on 1st of
April 2008 and ending on 31st march 2009 is the
previous year for the assessment year 2009-2010.
M




 





The financial year following a previous year

is known as the assessment year .For
example for the previous year from 1st
April 2008 to 31st March 2009, the
assessment year shall be the next financial
year i.e. 1st April 2009 to 31st March 2010.
 



Means a person by whom any tax or any other sum of money is
payable under this Act, and includes

(a) every person in respect of whom any proceeding under this Act has
been taken for the assessment of his income or of the income of
any other person in respect of which he is assessable, or of the loss
sustained by him or by such other person, or of the amount of
refund due to him or to such other person;

(b) every person who is deemded to be an assessee under any provision

of the Income Tax Act
.
(c) every person who is deemded to be an assessee in default under any
provision of the Income Tax Act
 ½ 


  
 

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‡A surcharge of 10% on income tax is levied where taxable income

exceeds Rs. 1 million which makes it effective 33% including surcharge
‡3% Education Cess of Income Tax
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‡A surcharge of 10% on income tax is levied where taxable income

exceeds Rs. 10 lakhs which makes it effective 33% including surcharge
‡3% Education Cess of Income Tax
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‡A surcharge of 10% on income tax is levied where taxable income

exceeds Rs. 10 lakhs which makes it effective 33% including surcharge
‡3% Education Cess of Income Tax
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6 

Section 2(31) of the Income Tax Act defines a person.

The definition includes
1. An individual
2. A Hindu Undivided Family
3. A Company
4. A Firm
5. An Association of Persons or a Body of Individuals
whether incorporated or not .
6. A Local Authority &
7. Every artificial juridical person not falling within any
of the preceding categories.
 ½6½

Income is broadly defined as true increase in the amount of

wealth which comes to a person.
Some of the features are-
‡ Regular and definite source
‡ May be received in cash or kind
‡Receipt vs. accrual basis
‡ Illegal income
‡ Disputed title
‡ Relief or reimbursement of expenses not treated as Income
 ½6½

‡Diversion of income by overriding title vs. application

of income.
‡Temporary and permanent income- both taxable.
‡Lump sum receipt taxable
‡Personal gifts tax-free income
‡Income includes loss
‡Composite Income
‡Pin Money
 ÿ
 

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For the purposes of this Act.
(1) An individual is said to be resident in India in any previous
year, if he-
(a) is in India in that year for a period or periods amounting in
all to one hundred and eighty-two days or more;or
(b) having within the four years preceding that year been in
India for a period or periods amounting in all to three hundred
and sixty-five days or more, is in India for a period or periods
amounting in all to sixty days or more in that year.
 

 
‡ being a citizen of India, who leaves India in any
previous year as a member of the crew of an Indian
ship or for the purposes of employment outside India,
the provisions of sub-clause (b) supra shall be read as
180 days instead of 60 days.

(b) being a citizen of India, or a person of Indian origin

who, being outside India, comes on a visit to India in
any previous year, the provisions of sub-clause (b)
supra shall be read as 180 days instead of 60 days.
2. AHindu undivided family, firm or other association of
persons is said to be resident in India in any previous
year in every case except where during that year the
control and management of its affairs is situated wholly
outside India.

3) A company is said to be resident in India in any

previous year, if-
(i) it is an Indian company; or
(ii) during that year, the control and management of its
affairs is situated wholly in India.
(4) Every other person is said to be resident in India in
any previous year in every case, except where during that
year the control and management of his affairs is situated
wholly outside India.

(5) If a person is resident in India in a previous year

relevant to an assessment year in respect of any source of
income, he shall be deemed to be resident in India in the
previous year relevant to the assessment year in respect
of each of his other sources of income.
(6) A person is said to be "not ordinarily resident" in India
in any previous year if such person is-

(a) an individual who has not been resident in India in two

out of the ten previous years preceding that year, or has
not during the seven previous years preceding that year
been in India for a period of, or periods amounting in all
to, 730 days or more; or
(b) a Hindu undivided family whose manager has not been
resident in India in two out of the ten previous years
preceding that year, or has not during the seven previous
years preceding that year been in India for a period of,
or periods amounting in all to, seven hundred and thirty
days or more.
 


 6
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6  M




6
  

Definition of Total Income

Total income means the following computed in the

manner laid down under the income tax Act.
 In case of ROI
(including ordinarily ROI i.e. for
individual & HUF)

a) Incomes reced in India or deemed to be

reced in India
b) Incomes accrued or arised in India or
deemed to accrue or arise in India
c) Incomes accrued or arised outside
  
0

a) Incomes reced in India or deemed to be reced in

India

b) Incomes accrued or arised in India or deemed to

accrue or arise in India
  




 

    


 

 

(i) Incomes reced in India or deemed to be reced in

India
(ii) Incomes accrued or arise in India or deemed to
accrue or arise in India
(iii) Incomes accrue or arise outside India from a
business or a profession which is set up in India or
controlled from India
Incomes Reced in India or Deemed
to Be Reced in India

Receipt means first receipt

Any remittance or transmission of the amt
to another place does not result in first
receipt
Incomes Deemed to Be Reced in India

Contribution made by employer to RPF in

excess of 12%
Interest credited on RPF in excess of 9.5%
TDS is deemed to be received in the hands
of payee
Unexplained cash or assets or cash credits
are treated as deemed to reced
Incomes accrued or arise in India or
deemed to accrue or arise in 
Income from a business conection in india
Income from any property, asset, or source
of income
Income from transfer of any capital asset
situated in india
Dividend paid by Indian company
 

 

 



Means the rate arrived at by dividing the amount of

income-tax calculated on the total income, by such total
income;
 
 

Means property of any kind held by an assessee, whether or

not connected with his business or profession, but does not
include-

(i) any stock-in-trade, consumable stores or raw materials held

for the purposes of his business or profession;

(ii) personal effects, that is to say, movable property (including

wearing apparel and furniture, but excluding jewellery)
held for personal use by the assessee or any member of his
family dependent on him.
Explanation.-
·


·   


(a) ornaments made of gold, silver, platinum or any other

precious metal or any alloy containing one or more of
such precious metals, whether or not containing any
precious or semi-precious stone, and whether or not
worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in

any furniture, utensil or other article or worked or sewn
into any wearing apparel;

(iii) agricultural land in India, not being land situated-

(a) in any area which is comprised within the jurisdiction of a
municipality or a cantonment board and which has a
population of not less than ten thousand

(b) in any area within such distance, not being more than eight
kilometres, from the local limits of any municipality or
cantonment board

(iv) 6 1/2 per cent. Gold Bonds, 1977, or 7 per cent. Gold
Bonds, 1980 or National Defence Gold Bonds, 1980 issued
by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central

Government.
  

 


Includes relief of the poor, education, medical relief, and

the advancement of any other object of general public
utility;
  
   


 
   
· 
 

(a) any rent or revenue derived from land which is situated in India
and is used for agricultural purposes;
(b) any income derived from such land by-

(i) agriculture

(ii) the performance by a cultivator or receiver of rent-in-kind of

any process ordinarily employed by a cultivator or receiver of
rent-in-kind to render the produce raised or received by him fit
to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the

produce raised or received by him, in respect of which no
process has been performed other than a process specified.