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7/31/2019 Basic Concepts in Tax
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BASICCONCEPTS
DR.N.K.GUPTA
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Incometax Act of 1961:
On the basis of the
recommendations made bythe various committees, anew Act of Income-tax hadbeen passed during theyear 1961 termed as theIncome - Tax Act, 1961..
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This Act came into force from 1st April, 1962.
This Act contains more than 400 sections and a
number of sub-sections and 10 schedules. The
IncomeTax department framed 121 rules for
the effective application of this Act. These
rules are termed as Income - Tax Rules of
1962. It also includes a number of sub - rules
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INCOME SECTION 2(24)
ANY AMOUNT RECEIVED OR DEEMED
TO BE RECEIVED OR EARNED OR
DEEMED TO BE EARNED DURINGTHE PREVIOUS YEAR.
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SALARY
RENT
BUSINESS PROFITS
CAPITAL PROFITS
INTEREST
ANY OTHER SOURCE
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IN GENERAL INCOME SHOULD BE OF
REVENUE NATURE
HOWEVER CAPITAL GAINS ARE ALSO
TREATED AS INCOME
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DEFINITE SOURCE
LEGAL /ILLEGAL BOTH
RECEIPT OR ACCRUE WHICH EVER IS
EARLIER
MEASURABLE IN TERMS OF MONEY
FROM OUTSIDE
INCLUDES GIFTS
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GIFTS UP TO RS. 50,000 IN ALL IN A
YEAR EXEMPT BEYOND WHICH IT IS
TREATED AS INCOME
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FROM A RELATIVE
SP0USE OF INDIVIDUAL
BROTHER OR SISTER OF THE INDIVIDUAL
BROTHER OR SISTER OF THE SPOUSE OFTHE INDIVIDUAL
BROTHER OR SISTER OF EITHER OF THEPARENTS OF THE INDIVIDUAL
ANY LINEAL ASCENDANT OR DESCENDANTOF THE INDIVIDUAL OR SPOUSE OFTHEINDIVIDUAL
SPOUSE OR THE PERSONS REFERREDABOVE
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UNDER A WILL OR BY WAY OFINHERETANCE
ON THE OCCASIONOF THE MARRIAGE
OF THE INDIVIDUAL IN CONTEMPLATIONOF DEATH OF THE
PAYERLOCAL AUTHORITYANY OTHE FUND, TRUST OR
INSTITUTION MENTIONED INSEC.10(23C) OR 12 AA
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REGULAR INCOME
CASUAL INCOME
CAPITAL GAINS
ILLEGAL INCOME
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Assessment
The Act provides a mechanism for
computing the tax relating to the income of
an assessee pertaining to an assessment year.
Such computation is made after allowingvarious deductions, exemptions, and rebates
to the assessee, and is called assessment.
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Assessment year
Assessment year is the year in which the income
of the previous year is to be assessed to tax. Gotmore confused? An illustration will clarify the
matter. Income of the Financial Year 2010-11
will be assessed to tax in the assessment year
2011-12, that is to say , the rates of Assessment
year 2011-12, will be applied to income of the
Financial year 2010-11. Incidentally, Financial
Year is referred to as the Previous Year in theAct.
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Previous year
Defined.
For the purposes of this Act, previous year meansthe financial year immediately preceding the
assessment year :
Provided that, in the case of a business or profession
newly set up, or a source of income newly coming
into existence, in the said financial year, the previous
year shall be the period beginning with the date of
setting up of the business or profession or, as the casemay be, the date on which the source of income
newly comes into existence and ending with the said
financial year.
http://images.google.com/imgres?imgurl=http://www.thinkpatti.com/images/tax_jpeg_onuf.jpg&imgrefurl=http://www.thinkpatti.com/Services.html&usg=__0dYlJQm7lw_8_bdmVFrecfFqxcs=&h=318&w=479&sz=34&hl=en&start=26&sig2=rJtru8LOwLNCuk4ip5keUw&um=1&tbnid=JeGrQuJqUeo8IM:&tbnh=86&tbnw=129&prev=/images%3Fq%3Dincome%2Btax%26ndsp%3D18%26hl%3Den%26rls%3Dcom.microsoft:en-US%26sa%3DN%26start%3D18%26um%3D1&ei=EyKgSv_CI5TC6AO7hZHrCw7/31/2019 Basic Concepts in Tax
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N.R.SHIPPING COMPANIES (172)
PERSON LEAVING INDIA ( 174)
BODY FORMED FOR SPECIFIC EVENT
(174A)
PERSON TRANSFERING THE ASSETS TO
SAVE TAX (175)
DISCONTINUED BUSINESS (176)
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Assessee
Assesseeis a person by whom any tax or any other
sum of money is payable under the Act.
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AN ASSESSEE IS A PERSON WHO IS
LIABLE TO PAY TAX
LIABLE TO FILE RETURN OF INCOME
OR LOSS
LIABLE TO APPEAR BEFORE THE TAX
AUTHORITIES EWITHER ON HIS OWN
BEHALF OR ON BEHALF OT OTHERSASSESSEE IN DEFAULT
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Person
Its include
An individualA Hindu undivided family
A company
A firm
An association of persons or a body of
individuals whether
incorporated or not
A local authority, and Every artificial juridical person, not falling
within any of the
preceding sub-clauses
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INCOME FROM SALARIES+
INCOME FROM HOUSE PROPERTIES+
PROFITS FROM BUSINESS AND
PROFESSION+
CAPITAL GAINS+
INCOME FROM OTHER SOURCES
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GROSS TOTAL INCOME
LESS: DEDUCTION FROM
SECTION
80 C TO 80 U
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ANY RENT OR REVENUE DERIVED
FROM AGRICULTURAL LAND USED
FOR
AGRICULTURAL PURPOSE
AGRICULTURAL PROCESS AND
SALE OF AGRICULTURAL PRODUCT ON
WHICH ABOVE PROCESS IS DONE
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INCOME FROM HOUSE PROPERTY
WHICH IS SITUATED ON THE
AGRICULTURAL LAND OR IN THE
IMMEDIATE VICINITY OFAGRICULTURAL LAND AND USED FOR
STORE HOUSE OR
OUT HOUSE
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SUGAR FACTORY
TOTAL INCOME LESS MARKET PRICE OF
SUGAR CANE
TEA ESTATES60 % AGRICULTURAL INCOME
LATEX
65% AGRICULTURAL INCOME
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COFEE
IF COFEE IS GROWN ,CURED AND
SOLD THEN 75% AGRICULTURAL
IF COFEE GROWN, CURED,ROASTED,GROUNDED AND SOLD
THEN 60% IS AGRICULTURAL
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STEP 1- ADD AGRICULTURAL INCOME
AND NON AGRICULTURAL INCOME
THEN CALCULATE TAX
STEP 2- ADD AGRICULTURAL INCOMEAND TAX FREE INCOME THEN
CALCULATE TAX
STEP 3- TAX= STEP1-STEP 2
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Total Income of an assessee is calculated as
under:
Income of the assessee is computed under the
following heads:
Income from Salaries
Income from House Property
Profits or gains of Business or Profession
Capital gains
Income from other sources
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