Taxation

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  • Topic: Tax, Capital gain, Capital asset
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  • Published : April 30, 2013
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CORPORATE TAXATION (A.Y. 2011-12)

-:INCOME TAX:-

1.Definition:

PERSONS: - According to Section 2(31) of the Income Tax Act, 1961, Person includes: a) An individual; (b) a Hindu Undivided family; (c) a Company; (d) a Firm; (e) an Association of persons or a body of individuals, whether incorporated or not; (f) a Local Authority; (g) every artificial juridical person not falling within any of the preceding categories.

ASSESSEE: - Assessee means a person by whom income tax or any other sum of money is payable under the Act. [Sec.- 2(7).]

INCOME: - Income is a periodically monetary return with some sort of regularity. It may be recurring in nature. It may be broadly defined as the true increase in the amount of wealth, which comes to a person during a fixed period of time. [Sec. - 2(24).]

ASSESSMENT YEAR: - Assessment Year means the period starting from April 1 of a year and ending on March 31 of the next year. [Sec. 2(9)]

PREVIOUS YEAR: - Income earned in a year is taxable in the next year. The year in which income is earned is known as previous year. [Sec.-3]

GROSS TOTAL INCOME: - As per sec.-14, the aggregate income under the five heads (Salaries, Income from House property, Income from Business or Profession, Income from Capital Gain, Income from other sources) is termed as “Gross Total Income”.

TOTAL INCOME: - Total income of an assessee is gross total income as reduced by the amount permissible as deduction under sec. 80C to 80U.

TAX EVASION: - It is the process by which the taxpayer attempts to reduce the burden of tax by resorting to downright false and dishonest means.

TAX AVOIDANCE: - Tax avoidance is such an exercise by the taxpayer to ease the burden of tax by taking the advantages of loopholes or lacuna in the laws of taxation.

TAX PLANNING: - It is a dignified and intelligent device adopted by the taxpayer to reduce his tax liability by availing of various incentives, allowances, concessions, rebates, reliefs, etc., as provided by the Act.

TAX EXEMPTION: - Some Incomes are exempt from tax either wholly or to the extent provided for under section 10 of the Income Tax Act, 1961 and the portion of income exempt from tax are not to be included in the total income of an assessee. Ex. – Agricultural Income, Share of profit of a partner, Passage money received by a non –citizen employee, Salary of a foreign trainee, etc.

DEDUCTION: - The total income of an assessee which forms the basis for determining his tax liability, deduction under chapter VIA (Sec. 80CCC to 80U) are to be made from his gross total income. Ex. – Deduction U/S. – 80C[deduction in respect of life insurance premium, deferred annuity, contribution to Provident fund, etc.], 80CCC[deduction in respect of pension fund], 80CCD [deduction in respect of contribution to pension scheme of Central Govt.], etc.

REBATE: - Before the assessment year 2005-06, there was a provision of giving rebate from the tax liability computed (Sec. 88) on certain investments (like, LIC, PF, NSC, Infra structure Bonds, Hous Building Loan Repayment etc). However this rebate has been abolished w.e.f. A.Y. 2005-06. Now same types of investment is qualified for deduction from Gross Total Income. The relevant section for this purpose is 80.

RELIEF: - Where by reason of any portion of an assessee’s income paid in arrears or in advance, is taxed at higher rate than it should have been assessed if it was taxed in the relevant year of earning the income, there is a provision of giving relief for such higher tax. It has to be applied in prescribed form for this purpose. Arrear salary is a common example of it.

2.Residential Status & Tax Incidence:

INDIVIDUAL:
Residential status of an assessee is three types. They are, (i) Resident and ordinarily Resident [sec. 6(1), 6(6)(a)]; (ii) Resident but not Ordinarily Resident [sec. 6(1), (6)(a)]; (iii) Non Resident. For this an assessee has to fulfill the some basic conditions...
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