INCOME TAX

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BASIC CONCEPTS-I INTRODUCTION

STUDY NOTES

Assessment Year [Section 2 (9)] 1. Assessment Year means the period of twelve months commencing on the 1st day of April every year. 2. The year for which tax is paid is called Assessment Year. The present Assessment Year is 2011-12 relating to previous year 2010-11. Previous Year [Section 3] 1. Previous Year means Financial Year immediately preceding the Assessment Year. 2. The year in respect of the income of which tax is levied is called Previous Year. The present previous year 2010-11and its Assessment Year is 2011-12. Note: Previous Year for Newly established business From the date of setting up of the business to the end of the Financial year in which business was set up. PREVIOUS YEAR & ASSESSMENT YEAR WILL BE SAME in the following cases: 1. Shipping business of nonresident [Section 172] 2. Persons leaving India [Section 174] 3. AOP or BOI or Artificial Juridical Person formed for a particular event or purpose [Sec. 174A] 4. Persons likely to transfer property to avoid tax [Section 175] 5. Discontinued business [Section 176] RESIDENTIAL STATUS The scope of total income of an assessee is determined with reference to his residence in India in the previous year. (Sec 5) Note: The day on which he enters India as well as the day on which he leaves India shall be taken into account as the stay of the Individual in India.

Different Types of Residents (sec 6) There are separate rules for determining the residence of different kinds of assesses or persons. INDIVIDUALS Basic conditions a. He is in India in the previous year for a period of 182 days or more, or b. He has been in India for at least 365 days during the four years preceding the previous year and is in India for at least 60 days during the previous year.

Additional conditions i. He has been resident in India in at least 2 out of the 10 previous years preceding the relevant previous year, and ii. He has been in India for at least 730 days in all during the 7 previous years preceding the relevant previous year.

Resident

Non-Resident Not fulfils a or b and Dont apply test for i and ii

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Ordinarily Resident Fulfils a or b and Fulfils both i and ii

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Not Ordinarily Resident * * Fulfils a or b and Not fulfils both or any of i and ii

STUDY NOTES

Exceptions to the rule of 60 days; At least 182 days compulsory Citizen of India, leaving India For the purpose of employment or As a member of the crew of an Indian ship A citizen of India or a person of Indian origin who is residing out side India and comes to India on a visit in any previous year.

Hindu Undivided Family Basic Conditions If control and management of its affairs is wholly or partly situated in India Additional conditions i. He has been resident in India in at least 2 out of the 10 previous years preceding the relevant previous year, and ii. He has been in India for at least 730 days in all during the 7 previous years preceding the relevant previous year

Resident

Non-Resident i. ii. Not fulfils a and Dont apply test for i and ii

Ordinarily Resident Fulfils a and Fulfils both i and ii

Not Ordinarily Resident * Fulfils a and * Not fulfils both or any of i and ii

Firm or Association Of Persons Or Body Of Individuals

Resident If control and management of its affairs is wholly or Partly situated in India

Non-Resident If control and management of its affairs is wholly or partly Not situated in India

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Company and Every Other Person

STUDY NOTES

Resident If control and management of its affairs is wholly situated in India

Non-Resident If control and management of its affairs is not wholly situated in India

Incidence of Tax or Scope of Total Income

S.No 1 Particulars Resident Not-Ord Resident Taxable Non resident Taxable

Income received or deemed to be received Taxable in India whether earned in India or elsewhere. Income accrued or deemed to be accrued in Taxable India, whether received in India or elsewhere Income earned and received outside India Taxable from a business controlled from India Income earned and received outside India Taxable from any source expect the above (3) Income earned and received outside India Non-Taxable during the years preceding the previous years and remitted to India during the previous year.

Taxable

Taxable

Taxable

Non-Taxable

Non-Taxable

Non-Taxable

Non-Taxable

Non-Taxable

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EXEMPTED INCOMES (U/s 10)

STUDY NOTES

Exempted incomes for all assesses

1. Agricultural Income [Sec.10 (1)] 2. Sums received from H.U.F [Sec.10 (2)] 3. Share of Income of a partner from the firm [Sec. 10(2A)] 4. Payments under Bhopal Gas Leak Disaster Act, 1985[sec. 10(10BB)] 5. Compensation of disaster [Sec 10(10BC)] 6. Life Insurance Money. [Sec 10(10D)] 7. Interest etc of different types [Sec. 10(15)]*** 8. Educational Scholarships [Sec 10(16)] 9. Allowances of M.Ps, M.L.As and M.L.Cs [Sec 10 (17)] 10. Awards: Any payment made, whether in cash or in kind [Sec.10 (17A)] 11. Pension of gallantry awardees. [Sec 10(18)] 12. Family Pension of member of armed forces.[Sec. 10(19)] 13. Annual value of one place of rulers of Indian states [Sec 10(19a)] 14. Income of Scheduled Tribes. [Sec 10(26)] 15. Certain income of Sikkimese[Sec 10(26AAA)] 16. Any income of an agriculture produce market committee or board constituted under any law for the purpose of regulating the marketing of agriculture produce. [Sec 10(26AAB)] 17. Subsidy received by Tea boards [Sec 10(30)] 18. Subsidy received by planters [Sec 10(31)] 19. Income of a minor child [Sec 10(32)] 20. Income from units of Unit Scheme, 1964 [Sec 10(33)] 21. Dividend Income [Sec 10(34)] 22. Income from units [Sec 10(35)] 23. Income from Equity shares [Sec. 10(36)] 24. Capital gains on transfer of Agricultural land [Sec .10(37)] 25. Long-Term capital gains on transfer of an equity shares or a unit [Sec 10(38)] 26. Income from international sporting event [Sec 10(39). 27. Income of subsidiary company [Sec .10(40)] 28. Specified Income of Body or Authority [Sec .10(42)] 29. Any amount received by an individual as a loan either in lump sum or in instalment in a transaction of reserve mortgage shall be exempt. [Sec 10(43)] 30. Income from newly established industrial undertaking in free trade zone, etc [10A]
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(Refer book)

INCOME TAX

STUDY NOTES

31. Income from newly established Units in Special Economic zones, [10AA] 32. Income from newly established 100% export oriented undertaking ( Sec .10B) FOR EMPLOYEES 33. Leave Travel Concession to an Employee [Sec. 10(5)] 34. Allowances or Perquisites outside India [Sec. 10(7)] 35. Death-cum-retirement Gratuity [Sec. 10(10)] 36. Commutation of Pension [Sec. 10(10A)] 37. Leave Salary or Encashment of Earned Leave [Sec. 10(10AA)] 38. Compensation on Retrenchment [Sec.10 (10B)] 39. Compensation on Voluntary Retirement [Sec.10 (10C)] 40. Tax Paid by Employer on the Value of Perquisites [Sec. 10(10CC)] 41. Payment from Statutory Provident Fund {Sec.10 (11)] 42. Payment from Recognized Provident Fund [Sec.10 (12)] 43. Payment from Approved Superannuation Fund [Sec.10 (13)] 44. House Rent Allowance [Sec.10 (13A)] 45. Special Allowances for meeting certain expenditure [Sec.10 (14)] FOR INSTITUTIONS 46. Income of a Local Authority [Sec.10 (20)] 47. Income of Scientific Research Association [Sec.10 (21)] 48. Income of News Agency [Sec. 10(22B)] 49. Income of Professional Institutes [Sec.10 (23A)] 50. Income of Regimental Fund or Non-Public Fund [Sec.10 (23AA)] 51. Income of a Fund for Welfare of Employees or their Dependants [Sec.10 (23AAA)] 52. Income of Pension Fund set-up by L.I.C. of India or other Insurer [Sec.10 (23AAB)] 53. Income of Khadi and Village Industries [Sec.10 (23B)] 54. Income of Khadi and Village Industries Board [Sec.10 (23BB)] 55. Income of a statutory authority for the administration of Public Religious or Charitable Trusts [Sec.10 (23BBA)] 56. Income of European Economic Community [Sec.10 (23BBB)] 57. Income of SAARC Fund [Sec.10 (23BBC)] 58. Any income of the Insurance Regulatory and Development Authority shall be exempt. [Sec.10 (23BBE)] 59. Any income of the Electricity Regulatory commission shall be exempt. [Sec.10 (23BBG)] 60. Income of Specified Charitable Funds [Sec.10 (23C)]*** (Refer book)

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61. Income of Mutual Fund [Sec.10 (23D)]

STUDY NOTES

62. Income of Investor Protection Fund. [Sec10 (23EA)] 63. Income of Investor Protection commodity exchange [Sec.10 (23EC)] 64. Income of Venture Capital Fund or Venture Capital Company (w.e.f.A.Y.2001-02)[Sec.10 (23FB)] 65. Income of Registered Trade Unions [Sec.10 (24)] 66. Income of Provident Funds, etc. [Sec.10 (25)] 67. Income of the Employees State Insurance Fund is exempt [Sec.10 (25A)] 68. Income of a body for promoting interest of Scheduled Castes or Scheduled Tribes [Sec.10 (26B)] 69. Income of Corporation set-up for the benefit of Minority Community [Sec.10 (26BB)] 70. Income of a Corporation [Sec.10 (26BBB)] 71. Income of a Co-operative Society formed for Promoting the Interests of Scheduled Caste or Scheduled Tribes [Sec.10 (27)] 72. Income of Board, etc. [Sec.10 (29A)]*** (Refer book)

73. Income of new pension system trust [Sec.10 (44)] 74. Income of a body or authorityor boad or trust or commission[Sec.10 (46)] 75. Income of infrastructure debt fund [Sec.10 (47)] 76. Income of a Political Party (Sec.13A) 77. Income of electoral trust [Sec.13B] 78. Payment by an Indian Company [Sec.10 (15A)

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