BASICS OF

INCOME TAX
BY LET IT SIMPLE
In this video,
Income tax
Law
Previous
Income tax
year

Income Assessment

Person Assessee
 1. INCOME TAX
Income tax is a tax on Income under Income Tax Law.

The tax which is levied on person’s income exceeding

certain specified limit is called “INCOME TAX”.

This is the type of Direct Tax.

 2. INCOME TAX LAW
Income tax law includes,
Income Tax Act, 1961,

Income Tax Rules, 1962,

Notices and Circulars issued by Central Board of

Direct Taxes (CBDT).
3. ASSESSEE – sec. 2(80) - A person who has
tax liability to pay tax is called “ASSESSEE”.

4.ASSESSMENT–sec.2(7) – The Computation

of tax liability on Total Income of an Assessee
during the previous year is called
“ASSESSMENT”.
 5. PERSON – Sec. 2(31):
Person Includes,
Individuals
Hindu Undivided Family (HUF)
Firms
Companies (Indian Company & Foreign Company)
Association of persons (Trust / Co-operatives)
Body of Individuals
Local Authorities (Including Port Trust)
 Concept of income:
Definite source of Income,
It must be received from the outside parties by rendering
services,
Gift from relatives were also taxable if it’s value exceeds
Rs.50,000,
It must be measured in terms of money or money’s worth,
Legal and Illegal Income.
 7.Previous year – sec. 3 :
 It is the period of twelve months starts from 1st
April to 31st March, which is considered to
compute tax on the “income earned”.
 Income of Previous year is taxable in the
assessment year (year succeeding the previous
year.)
 8. Assessment year – sec. 2 (9)
 Assessment Year is the period of twelve months begins on 1st April and
ends on 31st March, succeeding the previous year.

 In short, Assessment Year starts when accounting year ends.

 Example: M/s Kannan Ltd., earns income of Rs. xxx in 2019 – 2020. The
Income will be subject to assessment and the tax will be payable in
the year 2020-2021.
 So, Previous Year (PY) – 2019-2020

 Assessment Year (AY)– 2020 -2021

EXCEPTIONS TO THE ASSESSMENT YEAR
I. INCOME OF A NON-RESIDENT FROM SHIPPING BUSINESS – Sec. 172.

II. INCOME OF AN INDIVIDUAL WHO LEAVING INDIA TO ABROAD – Sec. 274.

III. TRANSFER OF AN ASSET / INCOME TO AVOID TAX (Sec. 175) WHICH IS SO

CALLED “BINAMI TRANSACTIONS”.

IV. INCOME OF A DISCONTINUED BUSINESS – Sec. 176.

9.Gross total income and total income
Aggregate Income of an assessee computed under the five
head of income, after applying the clubbing of income
provisions and making adjustments of set-off and carry
forward of losses is called “GROSS TOTAL INCOME
(GTI – Sec.80B)”.
 10. TOTAL INCOME:

TOTAL INCOME refers to the amount of

Income after deductions (under Chapter VI A of the
IT Act) i.e., deductions u/s 80C to 80U from the
Gross Total Income.
Computation of gross total income and total income:
PARTICULARS Rs.

Salary xxx

Income from House Property xxx

Profits and Gains from Business or Profession xxx

Capital Gains xxx

Income from Other Sources xxx

Less: Adjustments of losses and Carry Forward of Losses.

xx

Less: Deductions u/s 80C to 80U xx

Thank You!