Presented by

A.K.Tiwari
Assistant Professor-DSPSR

Tax is compulsory extraction made by Government from the hard earned income of the public for their purpose. The proceeds from Taxes constitute a major source revenue to government and large chunk of these tax is spent for common benefit of society. A Tax is not a voluntary payment or donation but an enforced contribution imposed by government.

A.K.Tiwari - Assistt. Professor

The Impact of a tax is on the person on whom the tax is imposed in the first instance and who deposit the tax in the Government treasury. The Incidence of the tax is on the person who ultimately bears the money burden of it. So, the person who deposits the initial amount of tax in the government treasury bears the impact of tax while the incidence of this tax is on the person on whom the money burden of this tax has been passed on and who ultimately bears it. The process in between is known as the shifting of a tax.

A.K.Tiwari - Assistt. Professor

Direct Taxes are those which are levied on one person and collected from same person. The levying of tax means impact of tax and collection of tax means incidence of tax. If both impact and incidence of tax on same person, such tax is called Direct Tax. For example, Income Tax and Wealth Tax. Indirect Tax are those which are levied on one person and collected from another person. If both impact and incidence of tax are on two different persons, such tax is called indirect tax. I.E. Sales Tax, CST, VAT, GST, Excise Duty and Custom Duty.

A.K.Tiwari - Assistt. Professor

Direct taxation in India is taken care by the Central Board of Direct Taxes (CBDT); it is a division of Department of revenue under Ministry of Finance. CBDT is governed by the revenue act 1963.CBDT is given the authority to create and control direct taxes in India. The most important function of CBDT is to manage direct tax law followed by Income Tax department. In India the tax structure is divided amongst the central government and state government. The central government levies taxes on income, custom duties, central excise and service tax. While the state government levies tax like state excise, stamp duty, VAT (Value Added Tax), land revenue and professional tax.Local civic bodies levy tax on properties, octroi etc. Capital gains tax, personal income tax, tax on corporate income and tax incentives all come under the purview of direct tax.

A.K.Tiwari - Assistt. Professor

Income tax is tax on income, gain or profit imposed on the person who earns income in India.Income earned in India is not limited to income earned within the geographical limits or boundaries of the country. Certain incomes are also deemed to have been earned in India although they may have been earned outside the country. In India, the system of income tax as it is known today, has been in force in one form or another even from ancient times. There are references both in Manu Smriti and Arthasastra to a variety of tax measures. Income tax was, first, introduced in India in 1860 by British Finance Minister Sir James Wilson to raise financial resources to suppress the mutiny of 1857 for independence. In 1918, another Act IT Act, 1918 was passed which subsequently replaced by IT Act, 1922. The organizational history of the Income-tax Department starts in the year 1922. The Income-tax Act, 1922, gave, for the first time, a specific nomenclature to various Income-tax authorities, It remain till 31st March, 1961 and replaced by Income tax Act, 1961 which became effective from 1st April, 1962.

A.K.Tiwari - Assistt. Professor

Income Tax Act, 1961was introduced in India in 1961 and came into force on 1st April, 1962 applicable whole of the country. The annual Finance Bill which is presented to the parliament each year along with budget makes amendments in this act and after passing Finance bill become Finance Act. The job of monitoring the Income-tax collection by the government is entrusted to a Department called Income-Tax. This department functions under the Department of Revenue, Ministry of Finance, Government of India. The Income Tax Act, 1961 is the charging Statute of Income Tax in India. It provides for levy, administration, collection and recovery of Income Tax. The Income Tax Act is the most complex statute in India. It is also subject to may criticism. This is because the Act has lost it original structure due to the infinite amendments made to it every year. But this is soon to change. Recently the Government of India has brought out a draft statue called the "Direct Taxes Code" intended to replace the Income Tax Act,1961 and the Wealth Tax Act, 1956. The new Act is purported to come into effect from 1 April 2011

A.K.Tiwari - Assistt. Professor

Non-debt Capital receipt, 3

Corporation Tax, 23 Borrowing , 29

Corporation Tax Income Tax Customs Duties Excise Duties Service Tax Non-Tax Revenue Borrowing Non-debt Capital receipt

Income Tax, 9

Non-Tax Revenue, 11

Customs Duties, 9

Service Excise Duties, 10 Tax, 6

A.K.Tiwari - Assistt. Professor

It is the twelve-month period 1st April to 31st March immediately following the previous year . In the Assessment year a person files his return for the income earned in the previous year. For example for FY:2006-07, the AY is 2007-08.

A.K.Tiwari - Assistt. Professor

Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year [FY]) is taken into account for purposes of calculating Income Tax. Under the income tax Act this period is called a Previous year. In case of newly set-up business/profession, first Previous Year may be less than 12 months.

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When income of P. Y. is not taxable in the immediately following A.Y.

` `

` ` `

Shipping Business of Non-Resident Persons leaving India and no present intention to return back Bodies formed for short duration Person likely to transfer property to avoid tax Discontinued Business.

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The IT Act recognizes the earners of income under seven [7] categories. Each category is called a Status. These are; Individuals Hindu Undivided Family [HUF] Association of Persons [AOP] / Body of individuals [BOI] Firms Companies Local authority Artificial juridical person. Contd..

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An individual means a natural person i.e. human being. It include male, female, minor and lunatic.

Association of Persons
AOPs means two or more persons ( firm, company, HUF & individual) who join for a common purpose with a view to earn an income but do not constitute a partnership.

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BOIs means a conglomeration of individuals who carry on some activity with the objective of earning some income. It would consist only of individuals. Company of firm can not be members of BOIs.

Local authority
It consist of Panchayat, Municipality, District Board, Municipal Corporation and Cantonment Board.

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They are entities which are not natural persons but are separate entities in the eyes of law. i.e. God, Idols, Deities, University and Bar Council. They may not be sued directly but sued through persons managing them.

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` `

Term 'Hindu Undivided Family' has not been defined under the Income Tax Act? It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters. This means your membership into a HUF does not come from a contract but from your status. Under the Income Tax Act, a HUF is treated as a separate entity for the purpose of assessment can be assessed as the income of a HUF Hindu only if the following two conditions are satisfied: There should be a coparcenary. There should be joint family ancestral property.

Note:Even though Jain and Sikh families are not governed by the Hindu law, they can still be treated as a HUF.

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A HUF consists of: ` Karta The karta has to be the oldest male in the family. If he passes away, his wife cannot become the karta. His eldest son will take his place. If he chooses not to, he can give up his right and the next son in line can take his place. ` Coparceners This is what all the male members are referred to as. A Hindu coparcenary includes the sons, grandsons and great-grandsons of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property. ` Members The female members are simply called members. Note: Two different school of Hindu Law Dayabaga & Mitakshra

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Contd..

According to Indian Partnership Act, 1932 as Relationship between persons who have agreed to share the profit of business carried on by all or any of them acting for all. Persons who entered into partnership with one other are called individualy partners and collectively a firm.

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Any Indian company formed and registered under Company Act, 1956.  Any body Corporate incorporated under the law of foreign company.  Any institution, association or body whether incorporated or not and whether Indian or non-Indian which is declared by special order of Central Board for Direct Tax to be company.


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Assessee can be divided into 4 Categories;

1. 2.

3.

4.

A person by whom any tax or any other sum of money is payable under the act. A person in respect of whom any proceeding under this act has been taken for the assessment of the amount of his income/loss or of the income/loss of any other person in respect of whom he is assessable or of the amount of refund due to him. Every person who is deemed to be an assessee. For example A legal representative of deceased is deemed to be an assessee or trusty of trust. Every person who is deemed to be an assessee in default. Any person who does not deduct tax at source or after deducting fail to pay such tax or do not pay advance tax is deemed to be an assessee in default.

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Under the Act, all incomes earned by persons are classified into 5 different heads, such as:  Income from Salary  Income from House property  Income from Business or Profession  Income from capital gains  Income from other sources The aggregate income under 5 heads is termed as Gross Total Income.

Total Income
Total Income of an assesses is Gross Total Income as reduced
by amount deductible under sections 80c to 80u.

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Gross Total Income Less: Deduction u/s (80c to 80u) Total Income ( Rounded Off) Less: Tax on Net Income Add:Surcharge+EducationCess+SHEC
Less: Prepaid Tax and Tax Deducted at Source

Tax Liability (Rounded Off)

xxxx xxxx xxxx xxxx xxxx xxxx xxxx

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Two types of Residential Status are;

1. 2.

Resident Non-Resident

Resident can be further divided into two type.

1) 2)

Resident and Ordinarily Resident Resident but Not-Ordinarily Resident

Note: Only individual & HUF be Ordinarily Resident and Not-Ordinarily Resident.

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Basic Conditions:
1. 2.

He is in India in the P.Y. for a period of 182 days or more. He is in India for a period of 60 days or more during P.Y. and 365 days or more during 4 years immediately preceding the P.Y. He has been resident in India in at least 2 years out of 10 years immediately preceding the relevant P.Y. He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant P.Y.
A.K.Tiwari - Assistt. Professor

Additional Conditions:
1) 2)

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An Indian Citizen leaves India during the previous year as a crew member of a ship or for the purpose of employment outside India. An Indian Citizen or a Person of Indian Origin visits India during the previous year Then he shall be a Resident of India only if he is in India for 182 days or more

# Stay in same place not necessary, stay in territorial waters will be taken as resident and presence for a part of days will be considered.
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1.

Resident and Ordinarily Resident

Must satisfy at least one of the basic conditions and the two additional conditions.

2.

Resident and Not-Ordinarily Resident

Must satisfy at least one of the basic conditions and one or none of the additional conditions

3.

Non-Resident
Must not satisfy any of the basic condition

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Tax Payers

Control and Management of the affairs of the taxpayers

Wholly in India Wholly outside India Non-Resident Non-Resident Non-Resident Resident Non-Resident Non-Resident Partly in India and partly outside India Resident Resident Resident Resident Non-Resident Resident

HUF# AOPs/ BOIs Firm Indian Company Not Indian Company Any Other

Resident Resident Resident Resident Resident Resident

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# HUF may be Ordinarily Resident or NotOrdinarily Resident

if Karta/Manager satisfy the two additional conditions, HUF is treated as Ordinarily Resident otherwise NotOrdinarily resident

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De facto control should be, not merely the right of control of manage, it is a place where the head, the seat and directing power are situated and vital decisions are taken and in case of company where meetings of Board of Director are held.

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Indian Income: Following three are Indian Income

1. 2.

3.

If income is received (deemed to be received) in India during the P.Y. and it the same time it accrues (deemed to be accrue) in India during the P.Y. If income is received (deemed to be received) in India during the P.Y. and income does not accrues( not deemed to be accrue) in India during the P.Y. If income is received outside India during the P.Y. but it accrues (deemed to be accrue) in India during the P.Y. Income is not received (not deemed to be received) in India during the P.Y. Income does not accrue (does not deemed to be accrue) in India during the P.Y.

Foreign Income: If Following two conditions are satisfied.

1. 2.

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Indian Income: Indian Income is always taxable in India irrespective of the residential status of the taxpayer Foreign Income: Foreign income is taxable in the hands of resident but not taxable in the hands of non-resident in India.

A.K.Tiwari - Assistt. Professor

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