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Tax can be imposes on the occurrence of a taxable event. For the purpose of income tax, the
taxable event is the earning of income. Similarly, for the purpose of Service tax, it could be the
provision of service.
The 'Charging section' of the statute specifies the link between the taxable event and the tax that
can be charged.
Charging section is interpreted strictly.
I. R. v. Countess of Longford, 13 T.C. 573 (HL): If a person is not in the ambit of all the
each other.
No tax shall be levied or collected without the authority of law. Hence, there should be some law
which allows / authorizes a Government to collect a specific tax. Hence, it is normal for Governments
to apply taxes on broad subjects instead of clearly distinguishable specific subjects. In general, the
nature of the Government is to tax broadly and exempt narrowly.
Article 265 of Constitution of India says 'Taxes not to be imposed save by authority of
law'.
Ghulam Hussain v State of Rajasthan, AIR 1963 SC 379: Here, 'law' means a law
enacted by a legislature.
An Executive Order or a Rule that goes beyond the power of the statute or custom
cannot be treated as Law.
Article 246 of Constitution of India deals with 'Subject-matter of laws made by Parliament and by
the Legislatures of States'. The article provides the necessary Constitutional provisions related to
distribution of legislative powers including the tax laws between the Centre and State.
Union List: Taxes on income other than agriculture income, inter-stateTRADE
and
Concurrent List: Union List: Taxes related to sale or purchase of goods other than
newspapers
Concurrent List: State List: Taxes on lands and buildings
New India Industries vs Union of India (AIR 1990 Bom 239): Doctrine of Unjust Enrichment says
UK Tax Laws
Uttarakhand (The Uttaranchal Value Added Tax) (Third Amendment) Act, 2009
Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 (Also popular as
CESAT Rules, 1982)
Advance Ruling
ITAT Rules
Courier Imports and Exports (Electronic Declaration and Processing) Amendment Regulations,
2011
Customs, Central Excise Duties and Service Tax Drawback (Amendment) Rules, 2011
Customs, Central Excise Duties and Service Tax Drawback (Second Amendment) Rules, 2011
Taxation of Services (Provided from Outside India and Received in India) (Third Amendment)
Rules, 2011
Taxation of Services (Provided from Outside India and Received in India) Amendment Rules,
2011
Taxation of Services (Provided from Outside India and Received in India) Second Amendment
Rules, 2011
Uttarakhand (The Uttaranchal Value Added Tax) (Second Amendment) Rules, 2009
Works Contract (Composition Scheme for Payment of Service Tax) Amendment Rules, 2011
Related Indian Taxation News
July 10, 2014: Legislative and Administrative Changes Proposed to Reduce Litigation in Direct
Taxes
Malaysian Tax Laws
Commissioner,TRADE
COURT, 16 May 2011]
Bansal Wire Industries Limited and another vs State of Uttar Pradesh and others [SUPREME
COURT OF INDIA, 26 Apr 2011]
State of Tamil Nadu and another vs India Cements Limited and another [SUPREME COURT OF
INDIA, 21 Apr 2011]
State of Uttar Pradesh and others vs Mahindra and Mahindra Limited [SUPREME COURT OF
INDIA, 20 Apr 2011]
Abhishek Industries Limited vs State of Punjab and another [PUNJAB AND HARYANA HIGH
COURT, 20 Apr 2011]
(1) M. L. Rice Mills Dabwali Road; (2) Bhalley Ram Rice and General Mills; (3) Jai Bharat Rice
Mills vs State of Haryana and others [PUNJAB AND HARYANA HIGH COURT, 19 Apr 2011]
Gas Authority of India Limited vs State of Uttar Pradesh and others [ALLAHABAD HIGH COURT,
18 Apr 2011]
Chirag Agency, Muzaffarpur, Through its Proprietor Sunil Kumar Hisaria S/o Late Satya Narayan
Prasad Hisaria vs (1) State of Bihar, Through the Commissioner-cum-Principal Secretary of
Commercial Taxes Department, Government of Bihar; (2) Joint Commissioner of Commercial Taxes
(Appeals), Tirhut Division, Muzaffarpur; (3) Commercial Taxes Officer, Muzaffarpur Circle, Muzaffarpur
[PATNA HIGH COURT, 13 Apr 2011]
Commissioner ofTRADE
Mafatlal Industries Limited, Ghaziabad vs Commissioner of Trade Tax, Uttar Pradesh, Lucknow
[ALLAHABAD HIGH COURT, 08 Apr 2011]
Commissioner of Trade Tax, Uttar Pradesh vs Kartos International Etc. [SUPREME COURT OF
INDIA, 06 Apr 2011]
Sterlite Industries (I) Limited, Represented by its Company Secretary and Associate Vice
President, S. Varadharajan vs Deputy Commercial Tax Officer III [MADRAS HIGH COURT, 05 Apr
2011]
Pepsico India Holdings Limited vs Commissioner of Trade Tax, Lucknow, Uttar Pradesh
[SUPREME COURT OF INDIA, 05 Apr 2011]
Sandan Vikas (India) Limited, Faridabad vs State of Haryana and others [PUNJAB AND
HARYANA HIGH COURT, 04 Apr 2011]
Rotomac Pens Private Limited vs State Level Committee, Lucknow, Through Convener, Director
of Industries, Uttar Pradesh, Kanpur and another [ALLAHABAD HIGH COURT, 31 Mar 2011]
ACTO vs Amit Stone Crusher and others [RAJASTHAN HIGH COURT, 31 Mar 2011]
J. K. Industries Limited and another vs State of Assam and others [GAUHATI HIGH COURT, 31
Mar 2011]
Sanjeev Bhaskar vs Assistant Collector, Recovery and another [DELHI HIGH COURT, 31 Mar
2011]
Commercial Taxes Officer, A.E.O Rajasthan-I vs Godrej G.E. Appliances, Jaipur [RAJASTHAN
HIGH COURT, 30 Mar 2011]
Prince Stone Company vs CTO, Anti Evasion I Commercial Taxes, Kota [RAJASTHAN HIGH
COURT, 30 Mar 2011]
Durga Industries vs Sales Tax Officer [DELHI HIGH COURT, 30 Mar 2011]
9. 9. CBDT issues circulars on certain matters for the guidance of the Tax Officers and the
general public Circulars are binding only on the Income Tax Officers Circulars cannot
change the provisions of law; they can merely clarify the law or relax certain provisions in
favour of the taxpayers In event of a dispute, the Courts are not bound by the circulars 9
10. 10. Case Laws are the decisions of the various Income-tax Appellate Tribunals (ITAT) and
the High Courts (HC) and the Supreme Court (SC) Decisions of the SC are binding on all
lower Courts and tax authorities in India HC decisions are binding only in the states which
are within the jurisdiction of that particular High Court Decisions of one HC has persuasive
powers over other HCs when deciding similar issues ITAT can be a single member bench
(SMC) or a two member bench or a Special Bench or a Third Member Bench 10
11. 11. Section 2 gives definitions of various terms referred to in the Act Definitions can be
inclusive definitions or exclusive definitions Definition of one term may lead to the definition
of another term 11
12. 12. Some of the important definitions contained in the Act are of: Person Assessee
Assessment Year Previous Year Assessment Income Dividend 12
13. 13. Assessee Assessment Year (A.Y. 2014-15) Previous Year (F.Y. 2013-14)
Residential Status Gross Total Income Deductions Total Income 13
14. 14. Means a person by whom any tax or any other sum ofMONEY is payable under this
Act, and includes Person in respect of whom any proceedings under this Act has been
taken for assessment of his income Deemed assessee under provisions of this Act Any
person deemed to be an assessee in default under any provisions of this Act 14
15. 15. Assessment year means the period starting from April 1 and ending on March 31 of the
next year. E.g. - Assessment year 2014-15 which commenced on April 1, 2014 and will end
on March 31, 2015. 15
16. 16. TheFINANCIAL year immediately preceding the assessment year E.g.: For the
assessment year 201415, the previous year is F.Y. 2013-14 In case of a business or
source of income, the previous year commences from the date of set up of business or the
date on which the source of income comes into existence 16
17. 17. Residential status of an assessee is important in determining the scope of income on
which income tax has to be paid in India. The different types of Residential Status are:
Resident (R) An individual or HUF assessee who is resident in India may be further
classified into resident and ordinarily resident (ROR) and resident but not ordinarily
resident (NOR). Non Resident (NR) To be determined in each previous year (1 April to
31 March next) 17
18. 18. Importance of Residential Status: Resident World income is taxable in India Non
Resident Only income arising or accruing in India is taxable in India Resident but Not
Ordinarily Resident Income accruing or arising outside India may also be taxable in India
18
19. 19. An individual is said to be resident in India in any previous year, if he satisfies any of the
2 basic conditions a. Physical presence in India for 182 days or more in a previous year OR
a. Physical presence in India for 60* days or more in the previous year and 365 days or more
during the 4 years preceding the previous year * See next slide 19
20. 20. Section 6 - Resident * the above is subject to the following i. Citizen leaves for
employment or as member of crew of an Indian ship instead of 60 days, it is 182 days ii.
Citizen or Person of Indian Origin already abroad comes on a visit - instead of 60 days, it is
182 days 20
21. 21. Individual - Resident but Not Ordinarily Resident Satisfies any one Basic condition and
two Additional conditions a. Such person has been a non resident in India in at least 9 out
of 10 previous years preceding the relevant previous year; or b. The person has been in India
for a period of 729 days or less during 7 years preceding the relevant previous year 21
22. 22. Assessee Basic Condition Resident and He must satisfy at least one of Ordinarily
Resident the basic conditions. Additional Condition Must NOT satisfy both the additional
conditions Not Ordinarily Resident Must satisfy at least one of the basic conditions. Must
satisfy either of the additional conditions Non-Resident Should not satisfy any of the basic
conditions. Not applicable 22
23. 23. Hindu Undivided Family Resident unless Control and Management of affairs wholly
outside India R-NOR if Manager (Karta) is a non resident in India in 9 out of 10 preceding
previous years or is in India for 729 days or less in 7 preceding previous years Company
Resident in India If an Indian Company Section 2(26) If Control and Management of its
affairs is situated wholly in India 23
24. 24. Firm, Association of Persons and Any other person Resident unless control and
management of its affairs is situated wholly outside India 24
25. 25. Basic principles of Income-tax What is income? Distinction between Taxable Income
and Taxfree Income Heads of Income Sources of Income Gross Total Income
Deductions Total Income Tax on Total Income 25
26. 26. The scope of Total Income depends on the Residential Status of the tax payer. The
incidence of tax under different circumstances is given in the following table 26
27. 27. Scope of Total Income ROR RNOR NR Income received in India Yes Yes Yes Income
deemed to be received in India Yes Yes Yes Income accruing or arising in India Yes Yes Yes
Income deemed to accrue or arise in India Yes Yes Yes Income received/ accrued outside
India from a business in India Yes Yes No No No Income received/ accrued outside India Yes
from a business controlled outside India 27
28. 28. Definition of Income: Income is defined to include several items It is not an
exhaustive definition Any income which is not specifically exempt is taxable 28
29. 29. Agricultural income Receipts by a member from a HUF Gratuity received
on retirement, termination or death Commuted Pension Exemption of amount received by
way of encashment of unutilized earned leave on retirement. Dividend Income Any allowance
to the extent not taxable Amount received from insurance policies on maturity of LIC
policies (subject to conditions prescribed) Income from providentFUNDS 29
30. 30. Voluntary Retirement Receipts to the Maximum limit of Rs. 5,00,000 (subject to
conditions) Payments from Superannuation Fund House Rent Allowance (subject to
conditions) Educational Scholarships Exemption in respect of clubbed income of minor Long
Term Capital Gains on Transfer of listed Equity Shares and Units of Equity Oriented
MutualFUNDS 30
31. 31. Five main Heads of Income: Salaries Income from House Property Profits and
Gains of Business or Profession Capital Gains Income from Other Sources 31 31
32. 32. Under each Head of Income, there could be multiple Sources of Income For
example, a person could be employed with more than one employer. In such a case, each
employment is a different Source of Income under the Head of Salaries 32 32
33. 33. Income is taxable under head Salaries, only if there exists Employer - Employee
Relationship between the payer and the payee. The following incomes shall be chargeable to
income-tax under the head Salaries:1.Salary Due 2.Advance Salary [u/s 17(1)(v)] 3.Arrears
of Salary Note: (i)Salary is chargeable on due basis or receipt basis, whichever is earlier.
(ii)Advance salary and Arrears of salary are chargeable to tax on receipt basis only. 33
34. 34. Properties can be broadly classified into: Let out property Self occupied property
Deemed to be let out 34
35. 35. The annual value of property consisting of any buildings or lands appurtenant thereto
of which the assessee is the owner other than such portions of such property as he may
occupy for the purposes of any business or profession carried on by him 35
36. 36. Determination of Annual Value This involves three steps: Step 1 Determination of Gross
Annual Value (GAV) Step 2 GAV minus municipal tax paid by the owner during the previous
year Step 3 Balance = Net Annual Value (NAV) Step 4 Reduce 30% of NAV as an ad-hoc
Standard Deduction Step 5 Reduce Interest, if any, paid on a loan taken to buy/construct
the property 36
37. 37. Business : Business simply means any economic activity carried on for earning profits.
Sec. 2(3) has defined the term as anyTRADE , commerce, manufacturing activity or any
adventure or concern in the nature of trade, commerce and manufacture. Profession :
Profession may be defined as a vocation, or a job requiring some thought, skill and special
knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc. So profession refers to
those activities where the livelihood is earned by the persons through their intellectual or
manual skill. 37
38. 38. Capital Gains tax liability arises only when the following conditions are satisfied: There
should be a capital asset. The capital asset is transferred by the assessee Such transfer
takes place during the previous year. Any profit or gains arises as a result of transfer. Such
profit or gains is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA
and 54GB 38
39. 39. Income of every kind, which is not to be excluded from the total income and not
chargeable to tax under any other head, shall be chargeable under the head Income from
Other Sources. List of items chargeable under this head:Dividends from Co-op.
Banks/Foreign companies Winning from lotteries, crossword puzzles, races, gambling,
betting of any form Interest on securities Income from plant, machinery or furniture on hire
39
40. 40. Any sum received under a Keyman insurance policy Any gift exceeding Rs. 50,000
received from non relatives Interest on foreign government securities Agriculture income
received outside India Directors Sitting Fees 40
41. 41. Any Individual whose total income exceeds the threshold limit is chargeable to tax in
India and has to file return of income All corporate tax payers and all partnership firms
have to file the return irrespective of the level of income Different forms and due dates
prescribed for the returns 41 41
42. 42. The total income of an assessee is to be computed after making deductions
permissible u/s 80C to 80U. However, the aggregate amount of deductions cannot exceed
the Gross Total Income. Deductions are allowed under chapter VI-A of Income Tax Act. 42
43. 43. Section 80C of the Income Tax Act allows certainINVESTMENTS and expenditure to be
deducted from total income up to the maximum of 1lac. The total limit under this section is
Rs. 100,000 (Rupees One lac) which can be any combination of the below: Contribution to
Provident Fund or Public Provident fund Payment of Life Insurance Premium INVESTMENT
in Pension Plans INVESTMENT in Equity Linked Savings Scheme of Mutual Funds.
Investment in NSC 43
44. 44. Tax Saving Deposits provided by Banks Payment towards principal repayment of
housing loans Payment of Tuition fees of Children Post Office Term Deposit This investment
can be from any source and not necessarily from income chargeable to tax. 44
45. 45. Deduction is available in respect of the amount paid to effect or to keep in force
health insurance under a scheme made by General Insurance Corporation of India (GIC)
and approved by Central Government; or made by any other insurer and approved by
IRDA Deduction shall be to the extent of lower of Actual Health insurance premium paid
by any mode other than cash, or Rs. 15,000 (Rs. 20,000 if the insured is a senior citizen).
Deduction on account of expenditure on preventive health check-up (for self, spouse,
dependent children and parents) shall not exceed in the aggregate Rs.5,000. This payment
can be made in cash. The deduction for preventive health-checkup is included in the overall
limit of Rs. 15,000 / Rs. 20,000 as the case may be 45
46. 46. This section has been inserted into the Income-tax Act with effect from Assessment Year
2013-14 i.e. F.Y. 201213. This section provides deduction to an individual or a Hindu
undivided family in respect of interest received on deposits (not being time deposits) in a
savings account held with banks, cooperative banks and post office. The deduction is
restricted to Rs.10,000 or actual interest whichever is lower. 46
47. 47. Basic difference between Exemptions and Deductions Exemptions Incomes which are
exempt u/s 10 will not be included while computing total income Deductions Incomes from
which deductions are allowable under Chapter VI-A will first be included in the gross total
income and then the deductions will be allowed 47
48. 48. Scrutiny assessments Appeals to CIT(A) Appeals to ITAT Appeals to HC
Appeals to SC Departmental appeals 48 48
49. 49. In simple terms, TDS is the tax getting deducted from the person (Employee/
Deductee) by the person paying such amount (Employer/Deductor) Different sections and
rates of tax for different type of payments. A tax deductor is require to pay to the Central
Government the amount so deducted and issue TDS certificate to the deductee within
specified time and in a specific format. 49 49
50. 50. 192 Salaries 194A Interest 194C Contracts 194H Commission 194I
Rent 194IA Purchase of Certain Immovable Property 194J Professional Fees 195
Payment to Non-Residents (other than salaries) 50 50
51. 51. Total Income Tax Payable 0 2,00,000 NIL 2,00,001 5,00,000 10% of income in
excess of Rs. 2.00 lakh Less : Tax credit of upto Rs. 2,000/-. 5,00,001 10,00,000 30,000 +
20% of income in excess of Rs. 5,00,000 Above 10,00,000 130,000 + 30% of income in
excess of Rs. 10,00,000 51
52. 52. Total Income Tax Payable 0 2,50,000 NIL 2,50,001 5,00,000 10% of income in
excess of Rs. 2,50,000 Less : Tax credit of upto Rs. 2,000/-. 5,00,001 10,00,000 25,000 +
20% of income in excess of Rs. 5,00,000 Above 10,00,000 125,000 + 30% of income in
excess of Rs. 10,00,000 52
53. 53. Total Income Tax Payable 0 5,00,000 NIL 5,00,001 10,00,000 20% of income in
excess of Rs. 5,00,000 Above 10,00,000 100,000 + 30% of income in excess of Rs.
10,00,000 53
54. 54. If you need any clarifications, write to: patelameet@hotmail.com 54
Value Added Tax (VAT): This is tax on sale of goods. While intra-state sale
of goods are covered by the VAT Law of that state, inter-state sale of goods is
covered by the Central Sales Tax Act. Even the revenue collected under Central
Sales Tax Act is done so by the State Governments themselves and actually the
Central Government has no role to play so.
Stamp duties and Land Revenue: Since land is a matter on which only
State Governments can govern, thus the Stamp duties on transfer of immovable
properties are levied by State Governments.
State Excise on Liquor and certain agricultural goods.
Apart from the above, certain powers of taxation have been devolved in the
hands of local bodies. These local governing bodies can levy taxes on water,
property, shop and establishment charges etc.
Direct Taxes
They are called so as the burden of taxation falls directly on the tax payer.
Under the Income Tax Act, 1961 The Central Government levies direct taxes
on the income of individuals and business entities as well as Non business
entities also. The taxation level depends on the residential status of
individuals. The thumb rule of residential status is that an individual becomes
resident in India if he has remained in India for more than 182 days in a
particular residential year. If he becomes resident in India, then his global
income i.e. income earned even outside India is taxable in India. This has to
be noted very carefully by Expatriates on deputation to India. They need to
plan their stay in such a manner as to avoid becoming a resident in India.
The following para explains this in a slightly more detailed manner:
Tax Resident
An individual is treated as resident in a year if present in India:
1.
2.
For 60 days during the year and 365 days during the preceding four years.
So an expatriate has to time his stay in India by taking into account the
above.
Income Slabs
Tax Rates
NIL
Rs.5,00,000/-
Rs. 25,000/- + 20% of the amount by which the taxable income exceeds
Rs. 5,00,000/-.
Rs.10,00,000/-.
Where the taxable income exceeds
Rs.10,00,000/-.
2. Individual resident who is of the age of 60 years or more but below the
age of 80 years at any time during the previous year
1.
Income Slabs
Tax Rates
NIL
3.
exceedsRs. 10,00,000/-
1.
Income Slabs
Tax Rates
NIL
5,00,000/-.
3.
exceedsRs. 10,00,000/-
Corporate Taxation:
The rate at which Corporates are taxed in India is 30% plus a 3% cess. Thus
the total comes to 30.9%. Further if the taxable income is more than Rs. 10
million, then there is an additional surcharge of 12% on the base tax rate.
overcome this issue, and in order to bring such companies under the income
tax act net, the concept of Minimum Alternate Tax (MAT) has been
introduced. The present rate of MAT is 19.05%.
Another aspect which must be looked into is the concept of
Witholding Taxes; also called as Tax Deduction at Source (TDS).
Salaries
The salaried employees of the drawing beyond the minimum taxable salary
would be covered under the tax withholding requirements and annual tax
withholding returns are to be submitted with the Revenue authorities.
Contractors
Payments made to a contractor for carrying out any work would require
withholding of tax at source from such payments, ifcertain threshold limits
are crossed. Typical examples of such payments will include:
Advertising payments
Catering payments.
Job Work
Courier
Professional Services
Payments made for professional and technical fees to Doctors, Chartered
Accountants, Lawyers, Management Consultants, Engineers, Architects and
other professionals would fall under this section and tax would be required to
be withheld from their payments. Such withheld tax shall be deposited with
the Government.
Rentals
Payments for rentals would attract tax deduction at source.
Indirect Taxes
In India, indirect taxes is a vast ocean as there are number of taxes to be
paid on manufacture, import, sale and even purchase in certain cases.
Further the law is governed less by the Acts and more by day to day
notifications, circulars and orders by the Governing bodies. So an explicit
Nature of
Applicable Law
Governed By
Provision of
As Governed by the
services
other subsequent
circulars.Service tax is
Government.
Activity
1
Year.
Manufacture of
Excisable Goods
prescribed and
Circulars/ Notifications
Customs.It is payable
to the Central
Government.
Excise duty rates are different for each product and based
on harmonized system of classification.
http://www.cbec.gov.in/excise/cxt2013-14/cxt-1314idx.htm
Apart from the basic excise duty, the other types of Excise
duties are as follows but they are not of much relevance
to the vast majority of goods as they are very specifically
levied.
3.
Import of Goods
Tariff Act,
1975.Collected by
Central Government
Apart from the basic Custom duties, there are some other
custom duties levied in certain circumstances like:
Sale of Goods
specific Act.Central
CST is actually
collected only by
states.
Please note that the above are not mutually exclusive. For example, if
the goods are manufactured and sold by manufacturer , then both Central
Excise and MVAT are applicable.
Further there are some local indirect taxes levied like Local Body Taxes
(LBT) or Octroi. These are expected to be abolished some time in future
after introduction of Goods and Service Taxes (GST).
Going forward, to avoid the cascading effect of different types of duties and
also to avoid the specific problem of non-availability of input credit for one
type of tax against another, the Government intends to create one single tax
everywhere which shall be called as the Goods and Service Taxes (GST). This
is major tax reform intending to create one majorMARKET . It is expected to
come by April 2016.