Income Tax1

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Introduction to Tax and Basic Concepts)


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Contents

IntroductionIntroduction

Formation of Finance ActFormation of Finance Act

Basics of Income TaxBasics of Income Tax

DefinitionsDefinitions

Residence of AssesseResidence of Assesse

Slab RatesSlab Rates

Computation of IncomeComputation of Income

Benefits of Filling Income tax ReturnBenefits of Filling Income tax Return


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Introduction

Income tax is governed by income tax Act,1961

This Act was passed in September 1961

The Act came into operations w.e.f 01.04.1962

It is applicable to whole of India

Rates of Income tax are given in the Finance

Act" passed by parliament every year


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Formation of Finance Act

Budget for every year presented on last day of

February

Contains Finance Bill

Finance Bill contains amendments in Income tax

Act and Wealth Tax Act

Bill when passed by Lok Sabha and Rajyabecomes Finance Act


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Basics of Income Tax

As per Section(4) of Income tax Act 1961

income tax is payable by every person on his

total income earned in the previous year atthe rates applicable for the revelant

assessment year


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Definitions

a. Person Sec2(31)

It includes:

1.An individual

2.A HUF3.A Company

4.A Firm

5.A.O.P. or B.O.I

6.Local Authority7.Every other artificial juridical person ,not included in abovecategories

The status of the person needs to determine first ,as the tax rates to be applied depends upon

status of the person.


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Definitions

b.Income [sec 2(24)]

It is inclusive in nature and not exhaustive, whichmeans income includes not only those items which are

enumerated in the section but it may also include whichsatisfies the basic condition of being income

Income broadly includes:

1.Profit and gains from business and profession

2. Dividend

3. Salary


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Income

4.Winning from lottries,races, games, gambling etc

5.Capital Gains6.Gifts

7.Benefits or perquisite from employer

8.Allowances and so on


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Definitions

3.Assesse

Assesse means a person by whom any tax or any other sumsome of money is payable under the Act.

4.Previous Year

The year in which income is earned is known as previous yearand is taxed in the next year called Assessment year . For e.g.Mr. A started its business on 10thApril2011 then previousyear will be 10-04-2011 to 31-03-2012 for the assessment year2012-2013


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Definitions

5. Assessment Year

Assessment year means the period of twelve monthscommencing on the 1stday of April every year

6.Total Incomeincome from salaries

income from house property

Profit or gains from business or proff.

Capital gainsIncome from other Sources

The Agg. Of above is G.T.I from which deduction underchap.VIA are deducted


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Residence of Assesse

Scope of total income and tax incidence of an

assesse depends on his residential status.

Residental status of an individual:

There are 3 Categories

1.Resident and Ordinarily Resident (R &OR)

2.Resident but Not Ordinarily Resident(RNOR)

3.Non Resident(NR)


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R &OR RNOR NR

Must satisfy atleast one basic

conditions and both additional

conditions

Must satisfy atleast one of

basic conditions &satisfy one or

none of the additionalconditions

Not satisfying any of the basic

conditions

RESIDENTIAL STATUS OF INDIVIDUAL

S1


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Slide 12

S1 SONY, 8/18/2011


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BASIC CONDITIONS AT GLANCEIndi an Citizen leaves India

during the p.y for the purpose ofemployment or an Indian

citizen leaves india as a member

of the crew of an Indian Ship

Indian Citizen or a person of

indian origin (who isabroad)who come to india on a

visit during the previous year

Others

a. Present of atleast 182 days in

india during P.Y

a. Present of atleast 182 days

in india during P.Y

a. Present of atleast 182 days

in india during P.YOR

b. i )60 days during the P.Y

ANDii)365 days in agg. during 4

yrs preceding the p.y


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Additional conditionsPerson should be resident in at least 2years,out of the10 years immediately preceding the previous year

ANDPerson should have a minimum aggregate stay of 730days or more in the 7 years preceding the P.Y.

Note: When a person enters india as well as the day onwhich he leaves india shall be taken into account as stayof india


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Scope of IncomePARTICULARS R& OR RNOR NR

Accrued in india or outside, but recd. in india Yes Yes Yes

Income arising in india ,whether recd in india or outside Yes Yes Yes

Accured and reced. outside india from a bus. controlled

from india

Yes Yes No

Accured and reced outside india from a bus. controlled

from outside india

Yes No No


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Slab rates for A.Y. 2012-13I. For Men

income range %upto 1,80,000 NIL1,80,000 to 5,00,000 10%5,00,000 to 8,00,000 20%above 8,00,000 30%

II. For women

Basic exemption limit is 190000/-


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Slab rate For A.y. 2012-2013

For Senior citizen (above 65yrs of age)

Income range %

upto 2,50,000 NIL2,50,000 to 5,00,000 10%5,00,000 to 8,00,000 20%above 8,00,000 30%

For higher senior citizen (above 80yrs of age)

the basic exemption limit is Rs500000/

Add education cess to above tax 3%


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Computation of Income

1.) Income from Salary XX

2.) Income from House Property XX

3.) Income from Business/Profession XX

4.) Income from Capital Gains XX

5.) Income from Other Sources XX

GROSS TOTAL INCOME (Sec. 14) XX

Less: Deductions u/chap-VI-A XX

TOTAL INCOME [Sec.2(45) XX

Tax PAYABLE XX


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Benefit of filling Income tax return

Contribution to

national incomeHousing loan

Financial Worth

Visa Purposes. Regn. Of Property


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Documents

Income Tax1