TAXES IN INDIA

Taxes in India are of two types,
•Direct Tax •Indirect Tax. •Direct Tax like income tax, wealth tax, etc. are those whose burden falls directly on the taxpayer.

•Indirect Tax The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.

According to income tax act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. The total income of an individual is determined on the basis of his residential status in India. .

Previous Year
The financial year in which the income is earned is known as the previous year. Any financial year begins from 1st of April and ends on subsequent 31st march. The financial year beginning on 1st of April 2009 and ending on 31st march 2010 is the previous year for the assessment year 2010-2011.
PY- 09-10, AY- 10-11

Assessment Year
The financial year following a previous year is known as the assessment year .For example for the previous year from 1st April 2009 to 31st March 2010, the assessment year shall be the next financial year i.e. 1st April 2010 to 31st March 2011.

Person
as defined under the Income Tax Act

Section 2(31) of the Income Tax Act defines a person. The definition includes 1. An individual 2. A Hindu Undivided Family 3. A Company 4. A Firm 5. An Association of Persons or a Body of Individuals whether incorporated or not . 6. A Local Authority & 7. Every artificial juridical person not falling within any of the preceding categories.

Assessee
Means a person by whom any tax or any other sum of money is payable under this Act, and includes

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;
(b) every person who is deemded to be an assessee under any provision of the Income Tax Act . (c) every person who is deemded to be an assessee in default under any provision of the Income Tax Act

For the year AY 2009-10 For resident women below the age of 65
Taxable income slab (Rs.) Up to Rs 1,90,000 1,90,000- 3,00,000 3,00,000 -5,00,000 5,00,000- 10,00,000 Rate (%) NIL 10% 20% 30%

•3% Education Cess of Income Tax

For the year AY 2009-10 For resident senior citizens (age:65 years or more)
Taxable income slab (Rs.) Up to Rs 2,40,000 2,40,000- 3,00,000 Rate (%) NIL 10%

3,00,000 -5,00,000 5,00,000- above

20% 30%

•3% Education Cess of Income Tax

For the year AY 2009-10 For any other Individual, every HUF/AOP, BOI/ Artificial juridical person
Taxable income slab (Rs.) Up to Rs 1,50,000 1,50,000- 3,00,000 3,00,000 -5,00,000 5,00,000- above Rate (%) NIL 10% 20% 30%

•3% Education Cess of Income Tax

For the year AY 2010-11 For resident women below the age of 65
Taxable income slab (Rs.) Up to Rs 1,90,000 1,90,000- 5,00,000 5,00,000 -8,00,000 8,00,000-above Rate (%) NIL 10% 20% 30%

•3% Education Cess of Income Tax

For the year AY 2010-11 For resident senior citizens (age:65 years or more)
Taxable income slab (Rs.) Up to Rs 2,40,000 2,40,000- 5,00,000 Rate (%) NIL 10%

5,00,000 -8,00,000 8,00,000- above

20% 30%

•3% Education Cess of Income Tax

For the year AY 2010-11 For any other Individual, every HUF/AOP, BOI/ Artificial juridical person
Taxable income slab (Rs.) Up to Rs 1,60,000 1,60,000- 5,00,000 5,00,000 -8,00,000 8,00,000- above Rate (%) NIL 10% 20% 30%

•3% Education Cess of Income Tax

For the year AY 2010-11

FIRMS
Firm is taxable at the rate of 30% Surcharge Nil EC & SEC 3% of Income Tax

For the year AY 2010-11

Companies

In case of a Domestic Company- 30% Surcharge – 10% if income exceeds Rs 1 crore In Case of a foreign company – 50%/40% Surcharge – 2.5% if income exceeds Rs 1 crore

DEFINITION OF INCOME

Income is broadly defined as true increase in the amount of wealth which comes to a person.
Some of the features are-

• Regular and definite source
• May be received in cash or kind •Receipt vs. accrual basis • Illegal income • Disputed title • Relief or reimbursement of expenses not treated as Income

DEFINITION OF INCOME

•Dividends, Winning from Lotteries
•Temporary and permanent income- both taxable. •Lump sum receipt taxable •Personal gifts tax-free income •Income includes loss

•Composite Income
•Pin Money

Heads of income -Gross Total Income
All income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income.
•Salaries. •Income from house property. •Profits and gains of business or profession •Capital gains. •Income from other sources

The aggregate income under these heads is termed as Gross Total Income. Further deductions U/S 80C – 80U are given to arrive at NET TAXABLE INCOME

RESIDENTIAL STATUS

Residential Status
Individuals/ HUF Others

Resident of India

NRI

Resident of India

NRI

Ordinary Resident

Not Ordinary Resident

Residence in India
For the purposes of this Act. (1) An individual is said to be resident in India in any previous year, if he(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more;or (b) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

Exceptions
• being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship or for the purposes of employment outside India, the provisions of sub-clause (b) supra shall be read as 180 days instead of 60 days. (b) being a citizen of India, or a person of Indian origin who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (b) supra shall be read as 180 days instead of 60 days.

2. A

Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India. 3) A company is said to be resident in India in any previous year, if(i) it is an Indian company; or (ii) during that year, the control and management of its affairs is situated wholly in India.

(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India. (5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.

(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is(a) an individual who has not been resident in India in two out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, 730 days or more; or (b) a Hindu undivided family whose manager has not been resident in India in two out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more.

Need Of Deciding The RS. Or Incidence Of Tax On A Person Or
Define Total Income

Definition of Total Income
Total income means the following computed in the manner laid down under the income tax Act.

In case of ROI (including ordinarily ROI i.e. for individual & HUF)

a) Incomes reced in India or deemed to be reced in India b) Incomes accrued or arised in India or deemed to accrue or arise in India c) Incomes accrued or arised outside

In case of NRI
a) Incomes reced in India or deemed to be reced in India b) Incomes accrued or arised in India or deemed to accrue or arise in India

In case of resident but not ordinarily resident of India, it will be
(i) Incomes reced in India or deemed to be reced in
India (ii) Incomes accrued or arise in India or deemed to accrue or arise in India (iii) Incomes accrue or arise outside India from a business or a profession which is set up in India or controlled from India

Incomes Reced in India or Deemed to Be Reced in India
Receipt means first receipt Any remittance or transmission of the amt to another place does not result in first receipt

Incomes Deemed to Be Reced in India
Contribution made by employer to RPF in excess of 12% Interest credited on RPF in excess of 9.5% TDS is deemed to be received in the hands of payee Unexplained cash or assets or cash credits are treated as deemed to reced

Incomes accrued or arise in India or deemed to accrue or arise in India
Income from a business conection in india Income from any property, asset, or source of income Income from transfer of any capital asset situated in india Dividend paid by Indian company

Average rate of Income-tax

Means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income;

Capital asset Means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

Explanation." jewellery " includes(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; (iii) agricultural land in India, not being land situated-

(a) in any area which is comprised within the jurisdiction of a municipality or a cantonment board and which has a population of not less than ten thousand

(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board
(iv) 6 1/2 per cent. Gold Bonds, 1977, or 7 per cent. Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued by the Central Government; (v) Special Bearer Bonds, 1991, issued by the Central Government.

Charitable purpose

Includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;

Agricultural Income
agricultural income" means(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b) any income derived from such land by(i) agriculture (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process specified.

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