I N C O M E TA X

Basic Concepts

Basic Definitions and Concepts

 BASIC CONCEPTS

ASSESSMENT YEAR ………… Sec. 2(9)

12 month period from April 1 every year to March 31 next year
e.g.: AY 2016-17: April 1, 2016 – March 31, 2017
Income of Previous year is taxed in the following AY

PREVIOUS YEAR ………… Sec. 3

Year in which income is earned
Precedes the AY
All assesses have to follow financial year as previous year

Income Earned: Apr. 1, A2016

m r i t–hMar.
a m t31,
u V2017:
i d y a Previous Year

Tax Assessed: Apr. 1, 2017 – Mar. 31, 2018: Assessment Year

 BASIC CONCEPTS

Accelerated Assessment
Exemption to normal rule of AY and PY
Assessment happens in the year of earning income
AY and PY are the same

Shipping business of non-residents (carrying passengers, goods etc.)

Persons leaving India (no intention of return to India)
Bodies formed for short duration (formed & dissolved in same year)
Persons likely to transfer property (intention to avoid tax)
Discontinued business 1
Amritham tu Vidya
1 at the discretion of Assessing Officer
 BASIC CONCEPTS

Person Sec. 2(31)

Person is charged to tax for income
Includes :
Individual: natural person
HUF: descendents of an ancestor + wife, unmarried daughter
Company: Indian , foreign
Firm: partnership
AoP, BoI: group of people with common objectives
Local Authority: authority legally entrusted by the Government
Artificial juridical person: deities, bar council etc.
Amritham tu Vidya

The list is not exhaustive

 BASIC CONCEPTS

Assessee Sec. 2(7)

Person by whom tax or any other money is payable under the Act
Includes :

1. Person by whom tax or any other money (interest, penalty) is

payable under the Act

2. Person against whom any proceeding under the Act is taken

(for assessing own income/loss, for assessing others’ income/loss, refund)

3. Person deemed to beA an

m r Assessee
i t h a m t u(eg.
V i drepresentative
ya assessee)

4. Person deemed to be an assessee in default under the Act

 BASIC CONCEPTS

Income Sec. 2(24)

Includes the following:
1. Profits from business/profession
2. Dividend
3. Contribution received by charitable trust
4. Allowance to meet personal expense or to perform office duty
5. Interest/salary of partner of firm
6. Capital gains
7. Winnings from lotteries, puzzles, races, gambling
8. Amount from Keyman insurance policy
9. Gifts (specified) A m r i t h a m t u V i d y a
 BASIC CONCEPTS

Av e r a g e R a t e o f Ta x
Average Rate = (Tax payable/Total income ) x 100

M a x i m u m M a r g i n a l R a t e o f Ta x
Tax applicable to highest slab of income

G r o s s To t a l I n c o m e
Total income computed under five heads

To t a l I n c o m e ( Ta x a b l e i n c o m e )
Amritham t u VChapter
idya
Gross total income – deductions under VI A
 R AT ES O F TA X
Ta x R a t e s a p p l i c a b l e f o r AY 2 0 1 9 - 2 0

Income divided into various slabs

Amount payable includes:

Tax
Surcharge
Education Cess
Secondary and HigherAm r i t h a m t uCess
Education Vidya
Rebate u/s 87A: Up to Rs. 2500, if total income < = Rs. 3,50,000 (for
resident individuals only)
 R AT E S O F TA X AY 2 0 1 9 - 2 0

Applies to Individual, HUF, BoI, Artificial Juridical Person

Individual (less than 60 years) Individual (60 years and more)
Total Income Tax Total Income Tax
Up to Rs. 2,50,000 Nil Up to Rs. 3,00,000 Nil
Rs. 2,50,001 – Rs. 5,00,000 5% Rs. 3,00,001 – Rs. 5,00,000 5%
Rs. 5,00,001 – Rs. 10,00,000 20 % Rs. 5,00,001 – Rs. 10,00,000 20 %
Above Rs. 10,00,000 30 % Above Rs. 10,00,000 30 %

Individual (80 years and more)

Total Income Tax Add: 4 % of tax as Health &
Up to Rs. 5,00,000 Nil Education Cess in all cases
Rs. 5,00,001 – Rs. 10,00,000
A m r i20
t h%
am tu Vidya
Above Rs. 10,00,000 30 %

Total income means Taxable Income (Gross TI – Deductions)

 R AT E S O F TA X

Rates applied to other assessees

Other Assessees Tax Rate
Partnership firm 30 %
Turnover up to Rs. 50 cr. 25 %
Domestic company
Turnover above Rs. 50 cr. 30 %
Foreign company 40 %
Co-operative societies
i) Income Up to Rs. 10,000 10 %
ii) Income between Rs. 10,000 –Rs. 20,000 20 %
iii) Above Rs. 20,000 30 %
Local Authority 30 %
Add: 4 % of tax as Health & Education Cess in all cases
Amritham tu Vidya

Special Cases of Incomes:

1. Winnings from lottery, card games, races are taxed at 30 %
2. Long term Capital Gains are taxed at 20 %
 R AT E S O F TA X : S U R C H A R G E

SURCHARGE
Levied as additional to tax. It is a tax on tax
Assessees Surcharge Rate
Individual, HUF, Total Income > Rs. 50 lkh 10 %
AOP, BOI, Artificial
Juridical Person Total Income > Rs. 1 crore 15 %
Society, Partnership firm, Local Authority
(Total Income exceeds Rs. 1 crore) 12 %
Domestic Total Income: Rs. 1 cr – Rs. 10 cr 7%
company Total Income above Rs. 10 cr 12 %
Foreign Total Income: Rs. 1 cr – Rs.10 cr 2%
company Total Income > Rs. 10 cr 5%
Amritham tu Vidya
 R E S I D E N T I A L S TAT U S
and
TA X I N C I D E N C E

Types of Residential Status for Categories of Assessee

Rules for Determining Status
 T Y P E S O F R E S I D E N T I A L S TAT U S
XI
XI

Resident
Resident and
and Ordinarily
Ordinarily
Resident
Resident Resident
Resident

Individuals/HUFs
Individuals/HUFs Resident
Resident But
But Not
Not
Ordinarily
Ordinarily Resident
Resident
Non
Non -- Resident
Resident

Assessee

Resident
Resident
Partnership/AOP/BOI
Partnership/AOP/BOI Amritham tu Vidya
// Company,
Company, Others
Others
Non
Non -- Resident
Resident
 R U L E S F O R R E S I D N E T I A L S TAT U S : I n d i v i d u a l

BASIC CONDITIONS
B 1 : Present in India for at least 182 days in the PY
or
B 2 : Present in India for at least 60 days in the PY + at least 365
days during 4 years preceding PY
ADDITIONAL CONDITIONS
A 1 : Resident in India for at least 2 out of 10 years preceding PY
and
A 2 : Present in India for at least 730 days during 7 years preceding
the PY
Basic Conditions Additional Conditions Status
Amritham tu Vidya
At least one satisfied Both Satisfied Resident and Ordinarily Resident
Only One Satisfied, or
At least one satisfied Resident But Not Ordinarily Resident
Both Not Satisfied
None Satisfied -- Non-Resident
 R U L E S F O R R E S I D N E T I A L S TAT U S : O t h e r A s s e s s e e s

Assessee Control and Management of Affairs of Assessee is

Partly inside and
Wholly in India Wholly Outside India
outside India
HUF * Resident Non-Resident Resident
Partnership Resident Non-Resident Resident
AOP, BOI Resident Non-Resident Resident
Indian Company Resident Resident Resident
Foreign Company Resident Non-Resident Non-Resident
Any Other Resident Non-Resident Resident

Note:
* HUF can be RAOR or RBNOR depending on whether its KARTA or
Amritham tu Vidya
MANAGER satisfies the Additional Conditions A1 and A2
 CONCEPT OF INCOME

INCOME RECEIVED
First occasion where recipient gets money under control
INCOME DEEMED TO BE RECEIVED
Not actually received, but Law considers them as received
eg.TDS, Income from transferred asset
I N C O M E A C C R U E D /A R I S E D
Right to receive income vested with assessee
Contrasted with receipt
I N C O M E D E E M E D T O A C C R U E /A R I S E
Right to receive income vested with assessee in some other place
Considered as accruing orAarising
m r i t h ain
m another
t u V i d yplace
a

eg. Business connections, foreign service of govt employees

 R E S I D E N T I A L S TAT U S , N AT U R E O F I N C O M E , a n d TA X I N C I D E N C E

I
Residential Status
Nature of Income
RAOR RBNOR NR
Received/Deemed to be received in India
Arising/Accruing in India (place of receipt not relevant)
Taxable Taxable Taxable
Deemed to Arise/Accrue in India
(place of receipt not relevant)
Arising/accruing outside India,
Not
Business controlled in India/ Taxable Taxable Taxable
Business/ Profession set-up in India
Profession
Income Arising/accruing outside India,
Business controlled outside India/ Not Not
Taxable Taxable Taxable
Profession set-up outside India **
Any Other Foreign Income (other than ** above) Not Not
Taxable
eg. salary, rent, interest etc. Taxable Taxable
Income earned Outside Earlier, Not Not Not
but remitted into India in the PY A m r i t h a m t u V i d y aTaxable Taxable Taxable
 I N C O M E S E X E M P T F R O M TA X

Following incomes are exempt:

Agricultural income
Family income to member from HUF
Share of profit of partnership firm
Retrenchment compensation
Amount from PF on retirement
HRA (with limits)
Dividend from Domestic companies…………..

Amritham tu Vidya
 A G R I C U LT U R A L I N C O M E

Agricultural income is a state subject

Central government cannot levy tax on it

Amritham tu Vidya