INCOME TAX LAW AND

ACCOUNTS - I

SUNIL CHANDRAN.S
Assistant Professor
Department of Commerce
NSS College Pandalam
 INCOME TAX
• Points to be covered under Income tax
– Income tax
– Brief history of income tax in India
– Features of tax
– Objectives of taxation
– Direct and Indirect tax
– Gross Total Income
– Total Income
 Points to be covered contd…
• Person
• Association of Persons
• Body of Individuals
• Assessee
• Deemed assessee
• Assessee in default
• Assessment year
• Previous year
• Average rate of tax
• Surchage and Education cess
• Rates of tax
 Residential status
Residential status are divided into 3 types
a) Resident and Ordinarily resident
b) Not ordinarily resident
c) Non resident
For determining the residential status there are two conditions
1) Basic conditions
2) Additional conditions
Basic conditions:
a) The assessee is in India during the previous year for a period of 182
days or more
b) The assessee is in India during the previous year for a period of 60
days or more and has been in India for a period of 365 days or more
during the 4 years preceding the previous year.
 Additional conditions:
a) The assessee has been resident in India in atleast 2 out of 10
years preceding the P/yr and
b) The assessee has been in India for a period of 730 days or
more during the 7 years preceding the previous year.
Residential status
Resident and Ordinarily resident : Assessee satisfying any one of
the Basic condition and both the additional conditions.
Not ordinarily resident: Assessee satisfying any one of the basic
conditions but not satisfying both the additional conditions.
Non Resident: Assessee satisfying none of the basic conditions.
Transferred balance:
When URPF gets recognised, balance standing in
the credit of the employee’s URPF will be
transferred to his RPF called Transferred balance.
Annual accretion:
Employer’s contribution to employee’s PF in excess
of 12% of employees salary and interest allowed
by employer on the balance of employee’s PF
above 9.5%
 Incomes exempt from tax
• Agricultural income
• Receipt by a member from HUF
• Gratuity:
– Govt. employees- exempted
– Employees covered under Payment of Gratuity Act
1972.
– Employees not covered under Payment of Gratuity Act
1972.
 Pension
 Commutation of pension
• Encashment of earned leave
• Retrenchment Compensation
• House rent allowance:
Least is exempted to the following
Amount of HRA received
Rent paid over 10% of salary
50% or 40% of salary
 Income from salary
• Definition of salary
• Perquisites
-Tax free perquisites
-Perquisites taxable in case of all employees
-Perquisites taxable in the case of specified category of
employees.
Valuation of Perquisites:
Residential accommodation
1. Govt. employees
2. Other employees
a. Accommodation owned by the employer
b. Accommodation taken on lease or rent by the employer
• Sweeper, Gardener, Watchman and Personal
assistant.
• Gas, electricity and water
• Education facility in the institution of the
employer.
• Interest free or Concessional loan
• Use of Movable asset
• Transfer of movable asset
• Motor car:
– Car owned by employer and running expenses met by employer.
– Car owned by employer and running expenses met by employee.
– Car owned by employee.
• Recognized Provident Fund
• Taxable allowances
• Partially taxable allowances
Fully exempted allowances
• Deductions from Salary income
– Entertainment allowance
– Professional tax
 Income from House Property
 Definition of House property
 Income from house property- exempt from tax
Computation of Annual value of let out property
Computation of Gross annual value
Terms :
- Standard rent
- Actual rent
- Municipal value
- Fair rental value
- Vacancy allowance
- Municipal tax
 Profits and Gains from Business or
Profession
Meanings of :
• Business
• Profession
Computation of Income from Business or Profession:
Net profit as per P/L account
Add - Disallowed expenses debited to P/L
Less - Incomes credited to P/L but not
chargeable under this head
Depreciaiton
Block of assets
Rate of depreciation for each assets
Special deductions from business income
Practical problems
THANK YOU