Income Tax

Sub Code : 307 FIN

By Prof. Mrudula Risbud

M.com.,ACMA
 Tax

In simple words, tax is a charge levied by the

Government.

Tax is charge on the income earned, service

rendered, products sold or manufactured.
 Types of Tax
Direct Tax :
Income Tax : Income Earned
Wealth Tax : On the Wealth
Indirect Tax :
Excise Duty : Goods manufactured
Service Tax : Service rendered
Custom Duty : On Import of goods
VAT (Value Added Tax) : On sale within State
Central Sales Tax : On sale inter State
Misc. / Other Tax : Others
 Distinguish between Direct and Indirect taxes
Particulars Direct Tax
Meaning
Tax in which the incidence
and the impact falls on the
same person.
Nature of tax Progressive in nature
Levy and
collection Levied and collected from the
assesse.
Shifting of Burden Tax is directly borne by the
assesse. No shift of burden.
Tax collection Tax is collected after the
income for the year is
earned.
Indirect Tax
Tax in which the incidence
and the impact falls on two
different people.
Regressive in nature
Levied and collected from
consumer but deposited by
assesse or dealer.
Tax burden is shifted to the
subsequent or ultimate user.
At the time of sale or
purchase or rendering the
service.
 Sources Income under preview of
Income tax

Salary
Rent of let out property
Profit from Business
Interest on FD
Winning from games
Profit on the sale of asset
 5 Heads under Income tax
Income under Head Salary Salary
Income from House Property Rent earned
from let out property
Profits & Gains of business & profession
Profit from business
Capital Gain Gain from sale of asset
Income from Other sources Winning in
games, puzzles, interest income
 Definition - Person
Under Sec.2(31), person includes
An individual
HUF - Hindu undivided family
Company
Firm
AOI (Association of persons) or BOI (Body of
individuals
Local Authority
Any artificial judicial person not specified in the
above clauses
 Assessment Year
It is the period of 12 months commencing on
the first day of April every year and ends on 31st
March.
Previous Year
Previous year means the financial year
immediately preceding to the assessment year.
 Taxability of Income
Income tax is payable on the income earned
during the previous year and it is assessed on
the immediately succeeding year, which is called
Assessment year.

Income earned during the previous year

1.4.2013 to 31.03.2014 will be charged to tax
in the assessment year 2014 15.
 Tax rates Rate for senior citizen
Net income range Rate of income tax Education cess Secondary & Higher
Education cess

Upto Rs.2,50,000 NIL NIL NIL

Rs. 2,50,000 to @10% on total @2% of Income Tax @1% of Income Tax
Rs.5,00,00 income
minus Rs.2,50,000
Rs.5,00,001 to Rs. Rs.25,000 + @20% @2% of Income Tax @1% of Income Tax
10,00,000 on total income
minus Rs. 5,00,000

Rs. 10,00,000 Rs.1,25,000 + @30% @2% of Income Tax @1% of Income Tax
onwards on total income
minus
Rs. 10,00,000
 Assessee
Every person whose total income of the
previous year exceeds the maximum amount
which is not chargeable to income tax, is called
an assessee.
In simple words, assessee is the person who
pays the tax to Government on the taxable part
of the income
 Income under the head Salary
Condition / Chargeability
Employer Employee relationship :
Cases -
1. Salary paid to person working in the MNC
2. Salary paid to MLA and MPs
Year of chargeability :
Salary is chargeable to tax either on due basis or
receipt basis whichever is earlier.
Cases
1. Salary of March 2014 paid in April 2014
2. Advance salary
 Meaning of Salary
Wages
Any annuity or pension
Any fees, commission , perquisites or profits in
lieu of salary or wages
Advance salary
Leave encashment
Any annual accretion to recognised provident
fund
 Deductions u/s 16
Entertainment Allowance
Available to only Government employees
Condition :-
1. Rs.5,000 ; Or
2. 1/5 of basic salary ; Or
3. Actual entertainment allowance received for
the previous year
Whichever is lower.
 Deductions u/s 16
Professional Tax
Deduction is allowed in respect of any sum paid
by the assessee on account of tax on
employment.
If the professional tax is paid by the employer on
behalf of the employee the amount paid should
be added to the gross salary as perquisite and
then deduction is available under section 16.
Thank you