INCOME TAX

UNIT- I
1. What is meant by Previous Year?
Previous Year : In simple words, a previous year is that year in which the income is
earned and received. In other words, previous year means the financial year immediately
preceding the assessment year.
2. What is meant by Assessment Year ?
Ans. Assessment Year [Section 2(9)]: Assessment year means the period of 12 months
commencing on the first April of every year and ending on 31st of March of the coming
next year, for example, the assessment year 2019-20 will commence on 1-4-2019 and
will end on 31-3-2020. In short, this is a year in which the income of the previous year is
assessed for the purpose of imposing tax.
3. What is meant by Deemed Assessee ?
Ans. Deemed Assessee: A deemed assessee is liable to pay income-tax on income of
another person. For example, legal representative, who inherits the property on the
death of a person, is deemed assessee in respect of his assessment.
4. What is meant by Assessee in Default?
A person is said to be an assessee in default if he fails to comply with the duties imposed
upon him under the Income-tax Act.
5. What is meant by Casual Income?
Casual income means such income, the receipt of which is incidental and without any
stipulation. It is in nature of an unexpected wind fall. For example : lottery, crossword
puzzles, card games and other games, gambling or betting etc. In short, any income
which is casual and of non-recurring nature is known as casual income.
6. What is meant by Gross Total Income ?
Gross Total Income is the sum of computed income of all the five heads of income in
accordance with the section 14 of the Income Tax Act, 1961 before making any
deductions under Section 80C to 80U.
7. What is meant by Total Income?
Total Income (Section 2(45)] : In common parlance it is called as 'Taxable income' or
'Total Income'. This is the income on which income-tax liability is determined. The total
income of an assessee is computed by deducting from the gross total income.
8. What is meant by Agricultural Income?
Agricultural income includes any rent or revenue derived from agricultural land situated
in India and is used for agricultural purposes. In short, the essential elements of
agricultural income' are as follows:
(i) The income must have been received from land;
(ii) The land must have been situated in India, and
(iii) The land must have been used for agricultural purposes.
9. What are the types of Agricultural Income ?
The following are the five kinds of agricultural income :
I. Rent or revenue derived from land used for agricultural purposes.
II. Income derived from cultivation of land.
III. Income derived from such land, used for the performance of any activity,
ordinarily employed to make the produce fit for the market.
IV. Income derived from sale of produce by the cultivator or the receiver of rent in
kind.
V. Income derived from any building used for agricultural operations.

10. What is meant by 'Tax Planning' ?

The term Tax Planning' means to reduce tax burden by managing and planning of sources
related to the tax. Some definitions of tax planning are as under:
Prof. Coldar "Tax Planning is a moral way of tax saving, in it a tax payer reduces tax
liability honestly and it is a long term process.
Prof. Dalton "Tax Planning is a scientific way to pay minimum tax by taking advantage of
exemptions and incentives given under the government policy.
11. What do you mean by Tax Avoidance ?
Tax Avoidance : 'Tax-avoidance' is a technique by which an assessee brings reduction in
his tax liability by taking unfair advantage of the loopholes or lacunas in the tax
provisions. It excludes fraud, concealment or other illegal measures.
12. What do you mean by Tax Evasion ?
Ans. Tax Evasion : 'Tax-evasion' is a technique of reducing tax-liability or avoiding tax
liability by violating the tax provisions intentionally, knowingly and with the clear
intention of defrauding the exchequer. It is also called theft of tax. It is a completely
illegal way for escaping the tax. Thus, tax evasion is a punishable crime.

13. Explain the term 'Person' Under Income-tax Act.

Person : Under Section 2 (31) of Income tax Act following are included in the term
'person':
(i) An Individual : Natural persons are covered under 'Individual'. For example Ashish,
Ram and Richa etc.
(ii) A Hindu Undivided Family (HUF): According to Hindu Law, HUF means a family which
consists of all persons lineally descendend from a common ancestor and includes their
wives and unmarried daughters.
(iii) A Company;
(iv) A Firm;
(v) An Association of Persons (AOP) or a Body of Individuals (BOI), whether incorporated
or not; For example, a club, a co-operative society etc.
14. What do you mean by Assessee?
Assessee :- Assessee means a person by whom any tax or any other sum of money is
payable under this Act and includes the following:
(i) Every person in respect of whom any proceeding under the Income-tax Act has been
taken
(a) for the assessment of his income or assessment of fringe benefits or the income of
any other person in respect of which he is assessable.
(b) to determine the loss sustained by him or by such other person;
(c) to determine the amount of refund due to him or to such other person.
15. Write a short note on Casual Income.
Casual Income : Casual income means such income, the receipt of which is accidental
and without any stipulation. It is in nature of an unexpected wind fall. For example
lottery, crossword puzzles, card games and other games, gambling or betting etc. In
short, any income which is casual and of non-recurring nature is known as casual income.
Casual income does not include the following incomes
(i) Capital gains.
 (ii) Income from business or profession.
(iii) Bonus, perquisites, gratuity.
(iv) Personal gifts and professional gifts.
(v) Tips and bakshis given to taxi drivers, waiters in a hotel.

16. Difference between Tax Planning and Tax evasion

A. Fulfillment of law's requirement : Tax Planning fulfills all requirement regarding law
whereas tax evasion is a violating approach. In tax evasion a tax payer misuses the
loopholes regarding law. While in tax planning the assessee takes advantages of reliefs
and deductions provided by the law.
B. Nature : Tax Planning is a legal, moral and honest effort for the reduction of tax
liability while tax evasion is an immoral and corrupt approach. It is an economic crime.
C. Contribution in Economy : Tax planning helps in economic development of the
country by providing additional funds for investment in desired channels. But tax evasion
generates black money which is being proved harmful for economy.
D. Ways of tax saving : Tax Planning is about to take advantages of exemptions,
incentives and relief provided by law. But tax evasion is a fraudulent activity which evolves
manipulations.