Incidence of tax liability

(determination of tax liability)

Incidence of tax is nothing but the determination of tax liability of a person on whom the final tax is
levied. In other words it is the determination of the person who pays the ultimate tax. The person on
whom the tax is levied may shift the burden of tax on to the shoulder of some other person. When
this happens the person on whom the tax has been levied when he or she transfers the burden of
tax, the ultimate burden of tax liability is shifted on to somebody else. The finding out of this called
the determination of tax liability.

Determination of tax liability depends on:

 Residential status of persons

 Place from where the income is received or accrued
 At what period the income is received or accrued

Indian income:

To consider any income as an Indian income any one of the following two things should be the
feature of such income:

 The income should have been accrued and received and deemed to have been accrued or
deemed to have been received in India in the previous year or
 The income should have been received or deemed to have been received in India but it
might have been accrued in any other country in the previous year or
 The income should have been accrued or deemed to have been accrued in India but it might
have been received in any other country in the previous year

Foreign income:

To consider any income as foreign income any one of the following two things should be the feature
of such income:

 Incomes that are not received or deemed incomes that are not received in India
 Income that are not accrued or deemed to have been accrued not in India

Receipts vs. Remittances:

Receipts are nothing but the incomes which are actually/physically received. The ‘yet to actually
receive’ concept will not arise. On the other hand remittance is nothing but the transfer of income
from one place to another. The remittance generally takes place only after the receipt of income. For
instance, salary received by Mr.X at Delhi Rs.100000 out of which he transfers Rs. 45000 to his native
place Udupi. When this happens the income of Mr.X is Rs.100000 only and not Rs.145000 as
Rs.45000 is just a transfer.
Actual Receipts Vs. Deemed to be received

Actual receipts are nothing but the income which is actually received or physically received. On the
other hand deemed to be received means income not actually received but it is considered to be
received. It is an income not actually received but it is earned and will be received in the future.

For example: 1. Interest credited to RPF in excess of 9.5%

2. Excess contribution of employer to RPF in excess of 12%

Income accrued

Income accrued means a situation wherein a right to receive an income has arisen. A right to receive
an income is said have been accrued when the right to receive the income arises.

Deemed to accrue

Income deemed to accrue in India even though it may actually accrue or arise outside India

EX.: 1. Income from salary for the services rendered in India

2. Income from any property or source located in India

Computation of incidence of tax

Particulars of income Ordinarily Not Non Resident

Resident Ordinarily
Resident

 Any income accrued and received in India XXX XXX XXX

 Any income received in India but may be XXX XXX XXX

accrued in any other country

 Any income accrued in India but may be XXX XXX XXX

received in any other country

 Any income accrued and received outside but XXX XXX Not Taxable
managed and controlled from India

 Any income accrued and received outside XXX Not Taxable Not Taxable

 Exempted or Tax Free Incomes Exempted Exempted Exempted

Total tax liability XXX XXX XXX