Basic Concepts of Income Tax

Basic Concepts of Income Tax

1. Assessee[(Sec. 2(7)]

Assessee means a person by whom any tax or any other sum of money is payable under this Act. It includes every person in respect of whom any proceeding has been taken for the assessment of his income or assessment of fringe benefits.

2. Person[Sec.2 (31)]

The term ‘person’ includes the following

·           an individual,

·           a Hindu Undivided Family (HUF),

·           a company,

·           a firm,

·           an Association Of Persons or a Body Of Individual, whether incorporated or not,

·           a local authority, and

·           every artificial juridical person e.g., an idol or deity.

3. Assessment Year (A.Y)[Sec.2 (9)]

The term has been defined under section 2(9). The year in which tax is paid is called the assessment year. It normally consisting of a period of 12 months commencing on 1st April every year and ending on 31st March of the following year.

4. Previous Year (P.Y)[Sec.(3)]

The year in which income is earned is called previous year. It is also normally consisting of a period of 12 months commencing on 1st April every year and ending on 31st March of the following year. It is also called as financial year immediately following the assessment year.

5. Income [Sec.2 (24)]

Income includes the followings;

·           Profits and gains of business or profession.

·           Dividend

·           Voluntary contribution received by a charitable / religious trust or university/ education institution or hospital/ electoral trust[ w.e.f.01.04.2010]

·           Value of perquisite or  profit  in  lieu of salary taxable u/s 17 and social allowance or benefit specifically granted either to meet personal expenses or for performance of duties of an office or an employment of profit.

·           Export incentives, like duty drawback, cash compensatory support, sale of licenses, etc.,

·           Interest, salary, bonus, commission or remuneration earned by a partner of a firm from such firm.

·           Capital gain chargeable u/s 45.

·           Profits and gains from the business of banking carried on by a co- operative society with its members.

·           Winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

·           Deemed income u/s 41 or 59.

·           Sums received by an assessee  from his employees towards welfare fund contribution such as provident fund, superannuation fund, etc.

·           Amount received under key man insurance policy including bonus thereon.

·           Amount received under agreement for-

·           not carrying out activity in relation to any business, or (b) not sharing any know – how, patent, copyright etc.

·           Benefit or  perquisite  received  from  a company, by a director or a person holding substantial interest or a relative of the director or such person.

·           Gift as defined u/s 56 (2)(vi), and others.

6. Agricultural Income (Section 2(1A)

Any rent or revenue derived from land which is situated in India and is used for agriculture purposes. Agricultural income is fully exempted from tax u/s 10(1) and as such does not form part of total income.