Taxation – Direct & Indirect Taxes

Semester 4

What is Tax ??

• ‘Tax’ is a charge levied by the government on its subject (i.e. individual, company and firm) for the purpose of meeting its expenses.

• Expenses such as1.Defence2.Salaries of Staff3.Maintaining and Developing Infrastructure4.Maintenance of Roads, Sanitation and Health

Types of Tax

• Direct Tax - Tax which is directly levied on the income of

the individual/ person. Direct Tax is in following form1.Income Tax2.Corporation Tax3.Gift Tax

Types of Tax

• Indirect Tax- Tax where the burden is passed from one person

to another.- Indirect Tax is in following form1. Custom Duty2. Excise Duty3. Service Tax4. VAT/CST5. Octroi Duty

Some More Concepts

• Income Profit & Gains from Business & Profession.DividendVoluntary Contribution received by a trustPerquisite or Profit in Lieu of SalaryAny special allowance or benefit granted to meet

expenses in performance of dutyExport Incentives.Value of any Benefit or Perquisite to businessman

or professional. contd…….

Interest, Salary, Bonus, Commission or Remuneration received by partner or partnership firm

Capital GainsProfits of Insurance Business.Winning of Lottery, Crossword puzzles, horse

races and card games.Sum received under Keyman Insurance PolicySum received under an agreement for not

carrying out an activityGifts exceeding Rs. 50,000 received by Individual

Previous Year - 2(34)• Previous Year means the previous year as defined in

Section 3

• Section 3 states: Previous Year is the financial year immediately

preceding the assessment year.

For E.g. For A.Y. 2011-12, previous year starts from 1st April 2010 and ends on 31st March 2011.

Exception:• Previous year for a Newly set up Business:-

In the case of a newly set up business or profession or a new source of income during the financial year, the previous year will begin from the date of setting up or coming into existence of the new business, profession or new source of income and will end on immediately following 31st March.

• For e.g. Business starts on 01/02/11 Previous Year 01/02/11 to 31/03/11

Assessee: 2(7):- Assessee means a person by whom any tax or any other

sum of money is payable under the Act. The term Assessee includes:

• Every person in respect of whom any proceeding under this act has been taken for the assessment of his income or loss or the amount of refund due to him

• Every person who is deemed to be an assessee under any provisions of this Act.

• Every person who is deemed to be an Assessee in default under the provisions of this Act.

Assessment Year u/s 2 (9)

• Assessment year means the period of twelve months commencing on the 1st day of April every year

• For Previous Year 2010-11, corresponding Assessment Year is 2011-2012

Person u/s 2(31)

Person includes:• Individual• HUF• Company• Firm• Association of Person or Body of Individuals• Local Authority• Artificial Juridical person (not falling within

any of the above category)

Company• any Indian company, or• any body corporate incorporated by or under the laws of a

country outside India, or• any institution, association or body which is or was assessable or

was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

• any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :

Thank You