TaxationTaxationTaxationTaxationTax

ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationTaxationTaxationTaxati
onTaxationTaxationTaxationTaxation
TaxationTaxationTaxationTaxationTax
ationTaxationqweityuiopasufghjklzxc



Taxation Pioject

Name: Paias 0. Khushiiamani
8oll no 33
navrachana unlverslLy






Income Tax Act, 1961

Section 2 DEFINITIONS.

n this Act, unless the context otherwise requires, - (1) "Advance tax" means the
advance tax payable in accordance with the provisions of Chapter XV-C;

(1A) "Agricultural income" means - (a) any rent or revenue derived from land which is
situated in ndia and is used for agricultural purposes;

(b) Any income derived from such land by - (i) Agriculture; or

(ii) The performance by a cultivator or receiver of rent-in-kind of any process ordinarily
employed by a cultivator or receiver of rent-in-kind to render the produce raised or
received by him fit to be taken to market; or

(iii) The sale by a cultivator or receiver of rent-in-kind of the produce raised or received
by him, in respect of which no process has been performed other than a process of the
nature described in paragraph (ii) of this sub-clause;

(c) Any income derived from any building owned and occupied by the receiver of the
rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-
kind, of any land with respect to which, or the produce of which, any process mentioned
in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

Provided that - (i) The building is on or in the immediate vicinity of the land, and is a
building which the receiver of the rent or revenue or the cultivator, or the receiver of
rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or
as a store-house, or other out-building, and

(ii) The land is either assessed to land revenue in ndia or is subject to a local rate
assessed and collected by officers of the Government as such or where the land is not
so assessed to land revenue or subject to a local rate, it is not situated - (A) n any area
which is comprised within the jurisdiction of a municipality (whether known as a
municipality, municipal corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board and which has a population of
not less than ten thousand according to the last preceding census of which the relevant
figures have been published before the first day of the previous year; or

(B) n any area within such distance, not being more than eight kilometres, from the
local limits of any municipality or cantonment board referred to in item (A), as the
Central Government may, having regard to the extent of, and scope for, urbanisation of
that area and other relevant considerations, specify in this behalf by notification in the
Official Gazette.

xplanation : For the removal of doubts, it is hereby declared that revenue derived from
land shall not include and shall be deemed never to have included any income arising
from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of
clause (14) of this section;

(1B) "Amalgamation", in relation to companies, means the merger of one or more
companies with another company or the merger of two or more companies to form one
company (the company or companies which so merge being referred to as the
amalgamating company or companies and the company with which they merge or
which is formed as a result of the merger, as the amalgamated company) in such a
manner that - (i) all the property of the amalgamating company or companies
immediately before the amalgamation becomes the property of the amalgamated
company by virtue of the amalgamation;

(ii) All the liabilities of the amalgamating company or companies immediately before the
amalgamation become the liabilities of the amalgamated company by virtue of the
amalgamation;

(iii) Shareholders holding not less than nine-tenths in value of the shares in the
amalgamating company or companies (other than shares already held therein
immediately before the amalgamation by, or by a nominee for, the amalgamated
company or its subsidiary) become shareholders of the amalgamated company by
virtue of the amalgamation, otherwise than as a result of the acquisition of the property
of one company by another company pursuant to the purchase of such property by the
other company or as a result of the distribution of such property to the other company
after the winding up of the first mentioned company.


Section 3 "PREVIOUS YEAR" DEFINED.

(1) Save as otherwise provided in this section, "previous year" for the purposes of this
Act, means the financial year immediately preceding the assessment year :

Provided that, in the case of a business or profession newly set up, or a source of
income newly coming into existence, in the said financial year, the previous year shall
be the period beginning with the date of setting up of the business or profession or, as
the case may be, the date on which the source of income newly comes into existence
and ending with the said financial year.

(2)"Previous year", in relation to the assessment year, commencing on the 1st day of
April, 1989, means the period which begins with the date immediately following the last
day of the previous year relevant to the assessment year commencing on the 1st day of
April, 1988 and ends on the 31st day of March, 1989:

Provided that where the assessee has adopted more than one period as the "previous
year" in relation to the assessment year commencing on the 1st day of April, 1988 for
different sources of his income, the previous year in relation to the assessment year
commencing on the 1st day of April, 1989 shall be reckoned separately in the manner
aforesaid in respect of each such source of income, and the longer or the longest of the
periods so reckoned shall be the previous year for the said assessment year :

Provided further that in the case of a business or profession newly set up, or a source of
income newly coming into existence on or after the 1st day of April, 1987 but before the
1st day of April, 1988 and where the accounts in relation to such business or profession
or source of income have not been made up to the 31st day of March, 1988, the
"Previous year" in relation to the assessment year commencing on the 1st day of April,
1989, shall be the period beginning with the date of setting up of the business or
profession or, as the case may be, the date on which the source of income newly
comes into existence and ending on the 31st day of March, 1989 :
Provided also that where the assessee has adopted one or more periods as the
"previous year" in relation to the assessment year commencing on the 1st day of April,
1988, for any source or sources of his income, in addition to the business or profession
or source of income referred to in the second proviso, the previous year in relation to
the assessment year commencing on the 1st day of April, 1989, shall be reckoned
separately in the manner aforesaid in respect of each such source of income, and the
longer or the longest of the periods so reckoned shall be the previous year in relation to
the said assessment year. 123

(3) Where the previous year in relation to the assessment year commencing on the 1st
day of April, 1989, referred to in sub-section (2) exceeds a period of twelve months, the
provisions of this Act shall apply subject to the modifications specified in the rules in the
Tenth Schedule.

Section 3 "ASSESSMENT YEAR" DEFINED

According to ncome Tax Act, Assessment year is always a period of 12 months,
starting from 1
st
April of every year & 31
st
March of next year. During which tax is
changed on the income of previous year , according to relevant finance act.

For previous year 2010 11 Assessment year will be 2011 12


















":e. How to determine residentiaI stat:s of an individ:aI?
O Scope of total income or individual of Tax is based on residential status of a
person, according to which a person may be "resident in ndia OR "Non-resident
in ndia, which is based on basic conditions under section 6(1).\

Basic conditions :nder section 6(1):
(1) A person must be present in india for 182 days or @ more durig previous year.
Or
(2) A person must be present in ndia for 60 days or more during present year & 365
days or more durig 4 years immediately the present year.

f a person satisfies any 1 of two Basic Conditions then he will become " Resident
in ndia, but if he does not satisfies any 1 of the two Basic conditions then he will
become "Non-resident in ndia.

Further if a person is resident in ndia, he may be "Ordinarily Resident in ndia
Or "Non-ordinarily resident in ndia, which is based on Additional Condition
Under Section 6(6).
AdditionaI Conditions Under Section 6(6).

O f a person must be Resident in ndia for at least 2 year out of 10 years
immediately preceeding present year.
And
O A person must be present in ndia of 730 days more during 7 years immediately
preceeding the present year.

f a person satisfies, both the Additional Conditions , then he will become
Resident & Ordinarily Resident in ndia.
But f he does not satisfies he will become Resident , but Non-ordinarily resident
in ndia.




Section Eligible Assessee
Type of
Income Limits
Conditions for claiming
Exemption
10(1) Any assessee
Agricultural
Income
Entire
amount 1. Rent or Revenue
10(2)
Any individual,
being a member of
HUF
Amount
received as
share of
income from
the HUF
Entire
amount
nly Lhose members can clalm
exempLlon who are enLlLled Lo
demand share on parLlLlon or enLlLled
Lo malnLenance underPlndu Law
10(2A)
Any assessee,
being a partner of
a partnership firm.
Amount
received as
share of
profits from
the firm
Entire
amount
1. Exemption is allowable
only if the partnership firm of
which the assessee is a partner
is assessed as such.

2. Emoluments other than
share of profit received from
the firm such as remuneration,
interest, etc. remain taxable.
10(4)(i)
Any assessee,
being a non-
resident
Amount
received as
interest or
premium on
redemption
on specified
bonds or
securities
1. Bonds or securities must
be specified by the Central
Government by notification in
Official Gazette on
or before 1
st
June2002.
10(5) An individual
Amount
received as
leave travel
concession
from
employer or
former
employer
Entire
amount
received or
the amount
actually
spent for the
purpose of
travel
whichever is
less.
or CondlLlons ln deLall refer 'Leave
1ravel Concesslon' under Salarles
Pead
10(6B)
A non-resident (not
being
aforeign company)
and a foreign
company.
Tax paid on
income (does
not include
Salary,
Royalty, and
Technical
fees) by
Central govt.
or by an
Indian
Concern to
the Central
Entire
amount
1. Income is received from
Government or an Indian
Concern.

govt.
10(6C)
Foreign companies
notified by the
Central
Government.
Royalty or
fees for
technical
services.
Entire
amount
1. Income must be derived in
pursuance of an agreement
entered into with the Central
Government
10(10) An individual Gratuity.
As per
conditions
specified in
the section
or CondlLlons ln deLall
refer CraLulLyunder Salarles Pead
10(10A) An individual
Commuted
pension
As per
conditions
specified in
the section
or CondlLlons ln deLall
refer 'enslon'under Salarles Pead
10(10C)
An employee
individual
CompensaLlon
for volunLary
reLlremenL
(v8S)
aximum
of Rs.
5,00,000.
1 1he scheme of volunLary
reLlremenL should be framed as
per 8ule 28A of Lhe lncome 1ax 8ules
10(10CC)
An employee
individual
Tax on non-
monetary
perquisites
paid by the
employer
Entire
amount
1 1ax can be pald by Lhe employer
noL wlLhsLandlng SecLlon 200 of Lhe
Companles AcL
10(11) An individual
Payments
received from
a provident
fund
Entire
amounts
The provident fund should fall
within the purview of the
Provident Funds Act, 1925 or
should be set up and notified
by the Central Government.
10(12) An individual
Accumulated
balance in a
recognized
provident
fund
1o Lhe exLenL
provlded ln rule
8 of arL of Lhe
ourLh Schedule
of Lhe lncome
Lax AcL
10(14) An individual
Prescribed
allowances
As per rule
2BB
As per rule 288
(or ueLalled dlscusslon see Salarles
Module)
10(15) All assessee
Interest,
premium on As Specified.
or deLalled dlscusslon on exempLlons
avallable Lo varlous assesses
refer lncome from oLher sources
module














Section 7. INCOME DEEMED TO BE RECEIVED.

The following incomes shall be deemed to be received in the previous year :- (i) The
annual accretion in the previous year to the balance at the credit of an employee
participating in a recognised provident fund, to the extent provided in rule 6 of Part A of
the Fourth Schedule;

(ii) The transferred balance in a recognised provident fund, to the extent provided in
sub-rule (4) of rule 11 of Part A of the Fourth Schedule.




10(16) An individual Scholarships
Entire
amount
Scholarships should be
received to meet the cost of
education. Its not necessary
that the scholarship should be
financed by Govt. only.
Section 9 .INCOME DEEMED TO ACCRUE OR ARISE IN INDIA.

(1) The following incomes shall be deemed to accrue or arise in ndia :- (i) All income
accruing or arising, whether directly or indirectly, through or from any business
connection in ndia, or through or from any property in ndia, or through or from any
asset or source of income in ndia, or through the transfer of a capital asset situate in
ndia;

xplanation : For the purposes of this clause - (a) n the case of a business of which all
the operations are not carried out in ndia, the income of the business deemed under
this clause to accrue or arise in ndia shall be only such part of the income as is
reasonably attributable to the operations carried out in ndia;

(b) n the case of a non-resident, no income shall be deemed to accrue or arise in ndia
to him through or from operations which are confined to the purchase of goods in ndia
for the purpose of export;

(c) n the case of a non-resident, being a person engaged in the business of running a
news agency or of publishing newspapers, magazines or journals, no income shall be
deemed to accrue or arise in ndia to him through or from activities which are confined
to the collection of news and views in ndia for transmission out of ndia;

(d) n the case of a non-resident, being - (1) An individual who is not a citizen of ndia; or

(2) A firm which does not have any partner who is a citizen of ndia or who is resident in
ndia; or

(3) A company which does not have any shareholder who is a citizen of ndia or who is
resident in ndia, no income shall be deemed to accrue or arise in ndia to such
individual, firm or company through or from operations which are confined to the
shooting of any cinematograph film in ndia;

(ii) ncome which falls under the head "Salaries", if it is earned in ndia;
xplanation : For the removal of doubts, it is hereby declared that income of the nature
referred to in this clause payable for service rendered in ndia shall be regarded as
income earned in ndia.

(iii) ncome chargeable under the head "Salaries" payable by the Government to a
citizen of ndia for service outside ndia;

(iv) A dividend paid by an ndian company outside ndia;

(v) ncome by way of interest payable by - (a) The Government; or

(b) A person who is a resident, except where the interest is payable in respect of any
debt incurred or moneys borrowed and used, for the purposes of a business or
profession carried on by such person outside ndia or for the purposes of making or
earning any income from any source outside ndia; or

(c) A person who is a non-resident, where the interest is payable in respect of any debt
incurred, or moneys borrowed and used, for the purposes of a business or profession
carried on by such person in ndia;

(vi) ncome by way of royalty payable by - (a) The Government; or

(b) A person who is a resident, except where the royalty is payable in respect of any
right, property or information used or services utilised for the purposes of a business or
profession carried on by such person outside ndia or for the purposes of making or
earning any income from any source outside ndia; or

(c) A person who is a non-resident, where the royalty is payable in respect of any right,
property or information used or services utilised for the purposes of a business or
profession carried on by such person in ndia, or for the purposes of making or earning
any income from any source in ndia :

Provided that nothing contained in this clause shall apply in relation to so much of the
income by way of royalty as consists of lump sum consideration for the transfer outside
ndia of, or the imparting of information outside ndia in respect of, any data,
documentation, drawing or specification relating to any patent, invention, model, design,
secret formula or process or trade mark or similar property, if such income is payable in
pursuance of an agreement made before the 1st day of April, 1976, and the agreement
is approved by the Central Government :

Provided further that nothing contained in this clause shall apply in relation to so much
of the income by way of royalty as consists of lump sum payment made by a person,
who is a resident, for the transfer of all or any rights (including the granting of a licence)
in respect of computer software supplied by a non-resident manufacturer along with a
computer or computer-based equipment under any scheme approved under the Policy
on Computer Software xport, Software Development and Training, 1986 of the
Government of ndia.

xplanation 1 : For the purposes of the first proviso, an agreement made on or after the
1st day of April, 1976, shall be deemed to have been made before that date if the
agreement is made in accordance with proposals approved by the Central Government
before that date; so, however, that, where the recipient of the income by way of royalty
is a foreign company, the agreement shall not be deemed to have been made before
that date unless, before the expiry of the time allowed under sub-section (1) or sub-
section (2) of section 139 (whether fixed originally or on extension) for furnishing the
return of income for the assessment year commencing on the 1st day of April, 1977, or
the assessment year in respect of which such income first becomes chargeable to tax
under this Act, whichever assessment year is later, the company exercises an option by
furnishing a declaration in writing to the Assessing Officer (such option being final for
that assessment year and for every subsequent assessment year) that the agreement
may be regarded as an agreement made before the 1st day of April, 1976.

xplanation 2 : For the purposes of this clause, "royalty" means consideration (including
any lump sum consideration but excluding any consideration which would be the
income of the recipient chargeable under the head "Capital gains") for - (i) The transfer
of all or any rights (including the granting of a licence) in respect of a patent, invention,
model, design, secret formula or process or trade mark or similar property;

(ii) The imparting of any information concerning the working of or the use of, a patent,
invention, model, design, secret formula or process or trade mark or similar property;

(iii) The use of any patent, invention, model, design, secret formula or process or trade
mark or similar property;

(iv) The imparting of any information concerning technical, industrial, commercial or
scientific knowledge, experience or skill;

(v) The transfer of all or any rights (including the granting of a licence) in respect of any
copyright, literary, artistic or scientific work including films or video tapes for use in
connection with television or tapes for use in connection with radio broadcasting, but not
including consideration for the sale, distribution or exhibition of cinematographic films; or

(vi) The rendering of any services in connection with the activities referred to in sub-
clauses (i) to (v);

xplanation 3 : For the purposes of this clause, the expression "computer software"
shall have the meaning assigned to it in clause (b) of the xplanation to section 80HH;

(vii) ncome by way of fees for technical services payable by - (a) The Government; or

(b) A person who is a resident, except where the fees are payable in respect of services
utilised in a business or profession carried on by such person outside ndia or for the
purposes of making or earning any income from any source outside ndia; or

(c) A person who is a non-resident, where the fees are payable in respect of services
utilised in a business or profession carried on by such person in ndia or for thepurposes
of making or earning any income from any source in ndia :

Provided that nothing contained in this clause shall apply in relation to any income by
way of fees for technical services payable in pursuance of an agreement made before
the 1st day of April, 1976, and approved by the Central Government.

xplanation 1 : For the purposes of the foregoing proviso, an agreement made on or
after the 1st day of April, 1976, shall be deemed to have been made before that date if
the agreement is made in accordance with proposals approvedby the Central
Government before that date.

xplanation 2 : For the purposes of this clause, "fees for technical services" means any
consideration (including any lump sum consideration) for the rendering of any
managerial, technical or consultancy services (including the provision of services of
technical or other personnel) but does not include consideration for any construction,
assembly, mining or like project undertaken by the recipient or consideration which
would be income of the recipient chargeable under the head "Salaries".

(2) Notwithstanding anything contained in sub-section (1), any pension payable outside
ndia to a person residing permanently outside ndia shall not be deemed to accrue or
arise in ndia, if the pension is payable to a person referred to in article 314 of the
Constitution or to a person who, having been appointed before 15th day of August,
1947, to be a Judge of the Federal Court or of a High Court within the meaning of the
Government of ndia Act, 1935, continues to serve on or after the commencement of the
Constitution as a Judge in ndia.