INTRODUCTION TO INCOME TAX ACT, 1961.

BASIC CONCEPTS BY S.RAJA. M.com. `MBA BL, PGDPM. DD-RADT.

Categories of Assessess Category-1. Any person-individual, Hindu undivided family (HUF), a company, a firm, an association of persons (AOP) or body of individuals (BOI) whether incorporated or not, a local authority and even artificial person.

Category-2. A person who is deemed to be an assessee under the provisions of the Income Tax Act; 1961.

Category-3. A person who is deemed to be an assessee in default.

a) ASSESSMENT YEAR

The year in which income of the previous year is to be assessed. b) Previous Year. Income of the previous year is taxed in the immediately, following assessment year is known as previous year.
It means the income earned during the previous year i.e. for example year 2011-12 will be taxed in the immediately following year of.2012-13.

Assessment years will be followed uniformly from 1989-1990 onwards. a. All the assessess are required to follow the uniform financial year i.e.1st April to 31st March. b.For all sources of Income also, the same procedure to be followed.

RESIDENTIAL STATUS Why residential status is important? It is important to determine the tax liability which arise or accrue due to change of residence from India to foreign countries & from foreign countries to India.

Kinds of Residential status. a) Resident in India. b) Non-Resident India. Resident Individual & HUF are further divided in to: i) Resident and Ordinarily resident.
Ii) Resident but not ordinarily resident.

Others. i) a firm ii) a Company, iii) an association of persons. Iv) any person.

Different residential status in respect of different previous Year of the same assessment year is not possible,Sec.6 (5). If a person is a resident in a PY relevant to an AY in respect of any source of income, he shall be deemed to be a resident in India.

Who will be a resident in India? Sec.6(1). i) He should be in India in the PY for the period of 182 days or more. ii) Should be in India for a period of 60 days or more during the PY and 365 days or more during 4 years immediately preceding the PY. A) Exception from the 60 days to 182 days in case an Indian citizen leaves India in the PY for employment purpose. B) Member of a crew in a Ship.

Not ordinarily resident in India. a) If he has not been a resident in nine out of ten PY or b) if he has not been in India for 730 days or more during the preceding 7 years.

Income Chargeable i.r.o.NRI. i) Income received in India or deemed to have

been so received. ii) Income accruing or arising or deemed to have so arisen or occurred. iii) Income accruing or arose out side India, if derived from a business controlled in or a profession set up in India (Resident but not ordinarily resident)

Charge of Income Tax-Sec.4 *Income tax is an annual tax on income. *Tax will be levied on the total income and the rates are fixed by Annual Finance Act. *Tax is charged on every person *The Finance (No.2) Act.2009 prescribes (in Sch.I,Part.I), the rates at which IT and Surcharge are to be levied.

Deduction of Tax. 1) Advance Tax

2)Tax deducted at SourceTDS/TCS

3)Interest on belated payment of tax. (Sec.234A).

Scope of Total Income. The total income of any PY of any person who is a resident includes all income from whatever source derived.

The source of Income is: i) received or is deemed to be received in India. ii) accrues or arises or is deemed to accrue or arise in India.
Provided a person is not ordinarily residing in India unless income derived for a business controlled in or a profession set up in India.

Subject to the provisions of the IT Act, the total income of any PY of a person who is a nonresident includes all income from whatever sources..

i) received or is deemed to be received in India in such year on behalf of such person. ii) accrues or arises or is deemed to accrue or arise in India during such year.
Income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have occurred or arisen to him shall not again be included in India.

Income deemed to be received.

i. PY balance at credit of an employee of a recg.PF.(R.6). ii) Transferred bal. in a recg.PF (R.4). iii) Pension contribution u/s.80CCD.(Employer/Govt.)

Dividend Income Any dividend or interim dividend declared by a company or paid shall be deemed to be the income of the PY whether declared or paid.(Sec,22.2(a to e).

Income deemed to accrue or arise in India.

All income accruing or arising whether directly or indirectly, through or from any business connection in India, or from any property, assets or source of income in India or through transfer of capital assets situated in India.

HEADS OF INCOME

1.Income from Salaries. 2.Income from House Properties 3. Profits and gains of business or Profession. 4.Capital Gains. 5. Income from other sources.

SCRUTINY

ASSESSMENT

(143(3)

After started the processing of the Assessment, the assessing officer will by an order in writing, make an assessment of the total income or loss and determine the sum payable or to be refunded. It should be completed within 21 months.

ASSESSMENT u/s.144
Sec.144-BEST JUDGMENT ASSESSMENT. When a person fails to file the return u/s.139(1) or revised return u/s.139(4) (5) or fails to comply the notices issued u/s.142 (1), 142 (2A) or 143(2), he can after taking into account all relevant material which the AO has gathered shall make the assessment of the total income or loss to the best of his judgments and determine the sum payable.

ASSESSMENT u/s.147.
Income escaping Assessment. The A.O can assess the total income or loss and determine the sum payable or refund to be made when the assessee failed to furnish the return or necessary documents. It can be made on best judge assessment on exparte. After issuing notice u/s.148, it should be completed within 9 months from the end of the FY.

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