Vkk-tax Intro 1

8/8/2019 Vkk-tax Intro 1

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Basic Concepts ofIncome Tax

Dr Vijay Kumar Khurana

Professor, DPC-IM, Delhi

Ph D, MBA (FMS), UGCNET, M Sc,PGD Corp Laws & PGD Tax Laws

Ex-Chief Editor (Research Journal Evolution)

Ex-Editor (Research Journal Effulgence)



What is tax?

To tax (from the Latin taxo; "Iestimate", which in turn is fromtang; "I touch") is to impose afinancial charge or other levy upona taxpayer (an individual or legalentity) by a state or the functional

equivalent of a state such thatfailure to pay is punishable by law.



Whether Taxes are justified?



Whether Taxes are justified?

States are responsible for social welfare andneed money for same.

For ensuring equitable distribution of income &

wealthGeneration of funds for education, security,defence, health-care & social welfare

Funds for Modernization & Expansion of

InfrastructureHealthy growth of economy

Economic stability



Types of Taxes

Progressive, Regressive &Proportional Taxes

Direct Taxes or Indirect Taxes



What is Income Tax?

An income tax is a tax levied onthe income of individuals or businesses

(corporations or other legal entities).Sec 2(43) income tax chargeableunder the Act.

When the tax is levied on the income ofcompanies, it is often called a corporatetax, corporate income tax, or profit tax.



Financial Year (FY)

The financial information isreported on a yearly basis, and theyear for which this information isreported is called a Financial Yearor FY in short.

The actual start and end of a

financial year varies from countryto country.



Previous Year (PY)

& Assessment Year (AY)Income earned in a year is taxablein the next year. The year in which

income is earned is known asprevious year and the next year inwhich income is taxable is knownas assessment year. In other

words, previous year is thefinancial year immediatelypreceding the assessment year.



Person

The term person includes:

a. an individual;

b. a Hindu undivided family;

c. a company;

d. a firm;

e. an association of persons or a body ofindividuals, whether incorporated ornot;

f. a local authority; and

g. every artificial juridical person not

falling within any of the preceding



Assesee

Assessee means a person by whomincome tax or any other sum of money ispayable under the Act. It includes everyperson in respect of whom any

proceeding under the Act has been takenfor the assessment of his income or lossor the amount of refund due to him. Italso includes a person who is assessablein respect of income or loss of anotherperson or who is deemed to be anassessee, or an assessee in default underany provision of the Act.



How Income Tax is levied ???

Tax is levied through Income Tax Act, 1961and annual Finance Acts, which are applicableto a particular previous year.

Charging section must specify taxable person,taxable event and subject of taxation.

No income should be taxed presumptively.

No income should be taxed twice.

Statute must pass muster of Article 14 of theConstitution.



IncomeThe definition of the term incomein section 2(24) is inclusive andnot exhaustive. Therefore, the

term income not only includesthose things that are included insection 2(24) but also includesthose things that the term signifies

according to its general andnatural meaning.



Contd Income

As per the definition in section 2(24), theterm income means and includes:

profits and gains

dividendsvoluntary contributions received by atrust created wholly or partly forcharitable or religious purposes or by an

institution established wholly or partlyfor such purposes



Contd Incomethe value of any perquisite or profit in lieu of salarytaxable under clause (2) and (3) of section 17 of the actany special allowance or benefit, other than thoseincluded aboveany allowance granted to the assessee either to meet

his personal expenses at the place where the duties ofhis office or employment of profits are ordinarilyperformed by him or at a place where he ordinarilyresides or to compensate him for the increased cost oflivingcapital gainsany sum chargeable to income tax under section 28 ofthe income tax act



Contd Income

any winnings from lotteries, crosswordpuzzles, races, including horse races, cardgames and games of any sort or from gamblingor betting of any form or nature whatsoeverany received as contribution to the assessee'sprovident fund or superannuation fund or anyfund for the welfare of employees or any otherfund set up under the provisions of theemplyees state insurance actprofits on sale of a licence granted under the

imports (control) order, 1955 made under theimports and exports (control) act, 1947



GTI As per section 14, the income of a person iscomputed under the following five heads:1. Salaries.2. Income from house property.

3. Profits and gains of business or profession.4. Capital gains.5. Income from other sources.The aggregate income under these heads istermed as gross total income GTI. In other

words, gross total income means total incomecomputed in accordance with the provisions ofthe Act before making any deduction undersections 80C to 80U.

Vkk-tax Intro 1

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