INCOME TAX

INTRODUCTION

Prof. K.M.V. Nambudiri

M.Com.; LL.B.; P.G.D.B.M

WHAT IS INCOME-TAX?
Tax on Income = Income + Tax Tax is charged at the rates applicable for assessment year on the Total Income earned during the previous year by an assessee , who is a person.

DIRECT TAX AND INDIRECT TAX

There are two types of tax Direct tax and Indirect tax. Direct tax are those where incidence and impact on the same person. In Indirect tax incidence is on one person where as the impact is on another. (Incidence means the legal responsibility to pay tax whereas impact is ultimate burden of tax.) Direct tax is used as reign of social economy. Indirect tax is for revenue for governance.

VARIOUS TYPES OF TAXES

Direct tax Income-tax, Wealth-tax, Fringe Benefit tax, (Gift tax, Surtax, Estate Duty, Expenditure tax, Interest tax etc.), Land Revenue, Stamp Duty, Registration Charges, Toll, etc. Indirect tax Central Excise Duty, Custom Duty, Service tax, Sales tax, State Excise Duty, Octoi, etc.

Diferent types of Income-tax

Personal Income-tax Corporate tax

HISTORY OF INCOME-TAX
The infamous Capital Fee and Holy cross war. Indian Income-tax Act of 1922 and Income-tax Act of 1961.

HEIRARCHY OF INCOME-TAX
Finance Minister Under FM, Minister of State for Revenue and Minister of State for Expenditure. Under MOS Revenue, Central Board of Direct taxes and Central Board of Excise and Customs. Under CBDT, various Chief Commissioners of Income-tax. Under each CCIT, 3 Commissioners of Income-tax each. Under each CIT, 3 Addl./Jt. Commissioner of Income-tax. Under each Addl.CIT/JCIT, one Dy. Commissioner of Incometax/ Asst. Commissioner of Income-tax, Four Income-tax Officers and one Tax Recovery Officer. Under each DCIT/ACIT, ITO, TRO, one Inspector and 2-3 staff members Tax Assistants.

CHARGE OF INCOME-TAX
Income-tax is levied annually. It is levied at the tax rates fixed by Finance Acts of every year for the respective Assessmet Year (Budget presented on 28th of February) on the Total Income earned in the previous year, on every person who is an assessee.

PREVIOUS YEAR AND ASSESSMENT YEAR

Assessment Year is a period is a period of twelve months starting from 1st April, every year. u/s.2(9). Previous Year is Financial Year immediately preceding Assessment Year. If a new business is started, the first previous year means from the date of start to the next 31st March. (Sec.3)

EXCEPTIONS TO ASSESSMENT YEAR

Income of Non-resident Shipping Companies Income of person leaving India Permanently or for a very long time. Income of a person who is trying to lienate his assets with a view to avoiding payment of tax. Income of a discontinued business.

PERSON
Person includes: i) an Individual; ii) a Hindu Undivided Family (HUF); iii) a Company; iv) a Firm; v) an Association of Persons (AOP) or Body of Individuals (BOI); vi) a Local Authority; and vii) every Artificial Juridical Person

ASSESSEE
A Person by whom Income-tax or any other sum of money is payable under the Act; Any Person against whom any proceedings under the Act has been initiated; or Any Representative Assessee.

INCOME
Either received or accrued during the year, i.e. Accrued and Received; Accrued but not received Received but not accrued

TOTAL INCOME
Gross Total Income which is the total of incomes under different Heads of Income Exclude the exempted Income Reduce Deductions (Allowables) The net result is the Total Income which means the taxable income, on which tax is worked out.

HEADS OF INCOME
Salaries; Income from House Property; Profits & Gains from Business or Profession; Capital Gains; and Income from Other Sources

TAX PAYABLE
Tax is worked out at the rates applicable for the relevant Assessment Year (AY), less rebates + Surcharge + Education Cess + Higher Seco Interest levied as per law; Penalty or fine levied for defaults; Commutation of Prosecutions launched.

MEHODS OF TAX PAYMENT

Tax Deducted at Source; (deducted at the source by the giver of the Income) Advance tax - (paid by every assessee who estimates taxable income during the year, at instalments on 15th Sept.; 15th Dec. and 15th March of the Previous Year Pay as you Earn tax) Self Assessment Tax (balance tax payable to be paid at the time of filing of Return of Income); Regular tax (Further tax levied by the Income-tax Officer at the time of assessment, if any)