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Taxes in India are of two types,Direct Tax
Indirect Tax.
Direct Tax
like income tax, wealth tax, etc. are
those whose burden falls directly on the
taxpayer.
Indirect Tax
The burden of indirect taxes, like service tax,
VAT, etc. can be passed on to a third party.
TAXES IN INDIA
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According to income tax act 1961, everyperson,
who is anassesseeand whosetotal incomeexceeds themaximum exemption limit, shall be
chargeable to the income tax at therate or rates
prescribed in the finance act. Such income tax
shall be paid on the total income of thepreviousyear in the relevantassessment year.
The total income of an individual is determined on
the basis of hisresidential status in India.
.
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Previous Year
The financial year in which the income is earned is
known as the previous year. Any financial yearbegins from 1st of April and ends on subsequent
31st march. The financial year beginning on 1st of
April 2009 and ending on 31st march 2010 is the
previous year for the assessment year 2010-2011.
PY- 09-10, AY- 10-11
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Assessment Year
The financial year following a previous year
is known as the assessment year .Forexample for the previous year from 1st
April 2009 to 31st March 2010, the
assessment year shall be the next financialyear i.e. 1st April 2010 to 31st March 2011.
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Personas defined under the Income Tax Act
Section 2(31) of the Income Tax Act defines a person.
The definition includes
1. An individual2. A Hindu Undivided Family
3. A Company
4. A Firm
5. An Association of Persons or a Body of Individualswhether incorporated or not .
6. A Local Authority &
7. Every artificial juridical person not falling within any
of the preceding categories.
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Assessee
Means a person by whom any tax or any other sum of money is
payable under this Act, and includes
(a) every person in respect of whom any proceeding under this Act has
been taken for the assessment of his income or of the income of
any other person in respect of which he is assessable, or of the loss
sustained by him or by such other person, or of the amount ofrefund due to him or to such other person;
(b) every person who is deemded to be an assessee under any provision
of the Income Tax Act.
(c) every person who is deemded to be an assessee in default under any
provision of the Income Tax Act
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For the year AY 2009-10
For resident women below the age of 65
Taxable income slab (Rs.) Rate (%)
Up to Rs 1,90,000 NIL
1,90,000- 3,00,000 10%
3,00,000 -5,00,000 20%
5,00,000- 10,00,000 30%
3% Education Cess of Income Tax
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For the year AY 2009-10
For resident senior citizens (age:65 years or more)
Taxable income slab (Rs.) Rate (%)
Up to Rs 2,40,000 NIL
2,40,000- 3,00,000 10%
3,00,000 -5,00,000 20%
5,00,000- above 30%
3% Education Cess of Income Tax
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For the year AY 2009-10
For any other Individual, every HUF/AOP, BOI/
Artificial juridical person
Taxable income slab (Rs.) Rate (%)
Up to Rs 1,50,000 NIL
1,50,000- 3,00,000 10%
3,00,000 -5,00,000 20%
5,00,000- above 30%
3% Education Cess of Income Tax
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For the year AY 2010-11
For resident women below the age of 65
Taxable income slab (Rs.) Rate (%)
Up to Rs 1,90,000 NIL
1,90,000- 5,00,000 10%
5,00,000 -8,00,000 20%
8,00,000-above 30%
3% Education Cess of Income Tax
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For the year AY 2010-11
For resident senior citizens (age:65 years or more)
Taxable income slab (Rs.) Rate (%)
Up to Rs 2,40,000 NIL
2,40,000- 5,00,000 10%
5,00,000 -8,00,000 20%
8,00,000- above 30%
3% Education Cess of Income Tax
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For the year AY 2010-11
For any other Individual, every HUF/AOP, BOI/
Artificial juridical person
Taxable income slab (Rs.) Rate (%)
Up to Rs 1,60,000 NIL
1,60,000- 5,00,000 10%
5,00,000 -8,00,000 20%
8,00,000- above 30%
3% Education Cess of Income Tax
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For the year AY 2010-11
FIRMS
Firm is taxable at the rate of 30%Surcharge Nil
EC & SEC 3% of Income Tax
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For the year AY 2010-11
CompaniesIn case of a Domestic Company- 30%
Surcharge 10% if income exceeds Rs 1crore
In Case of a foreign company 50%/40%
Surcharge
2.5% if income exceeds Rs 1crore
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DEFINITION OF INCOME
Income is broadly defined as true increase in the amount of
wealth which comes to a person.
Some of the features are-
Regular and definite source
May be received in cash or kind
Receipt vs. accrual basis
Illegal income
Disputed title
Relief or reimbursement of expenses not treated as Income
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DEFINITION OF INCOME
Dividends, Winning from Lotteries
Temporary and permanent income- both taxable.
Lump sum receipt taxable
Personal gifts tax-free income
Income includes lossComposite Income
Pin Money
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Heads of income
-Gross Total Income
All income shall, for the purposes of charge ofincome-tax and computation of total income,be classified under the following heads of
income.
Salaries.
Income from house property.Profits and gains of business or professionCapital gains.Income from other sources
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The aggregate income under these heads istermed as Gross Total Income. Furtherdeductions U/S 80C 80U are given to arrive
at NET TAXABLE INCOME
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RESIDENTIAL
STATUS
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Residential Status
Others
Resident ofIndia NRI
Individuals/HUF
Resident ofIndia NRI
OrdinaryResident
Not OrdinaryResident
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Residence in IndiaFor the purposes of this Act.
(1) An individual is said to be resident in India in any previous
year, if he-
(a) is in India in that year for a period or periods amounting in
all to one hundred and eighty-two days or more;or(b) having within the four years preceding that year been in
India for a period or periods amounting in all to three hundred
and sixty-five days or more, is in India for a period or periods
amounting in all to sixty days or more in that year.
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Exceptions being a citizen of India, who leaves India in any
previous year as a member of the crew of an Indian
ship or for the purposes of employment outside India,
the provisions of sub-clause (b) supra shall be read as
180 days instead of 60 days.
(b) being a citizen of India, or a person of Indian origin
who, being outside India, comes on a visit to India in
any previous year, the provisions of sub-clause (b)supra shall be read as 180 days instead of 60 days.
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2. A Hindu undivided family, firm or other association of
persons is said to be resident in India in any previous
year in every case except where during that year thecontrol and management of its affairs is situated wholly
outside India.
3) A company is said to be resident in India in any
previous year, if-
(i) it is an Indian company; or
(ii) during that year, the control and management of its
affairs is situated wholly in India.
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(4) Every other person is said to be resident in India in
any previous year in every case, except where during thatyear the control and management of his affairs is situated
wholly outside India.
(5) If a person is resident in India in a previous yearrelevant to an assessment year in respect of any source of
income, he shall be deemed to be resident in India in the
previous year relevant to the assessment year in respect
of each of his other sources of income.
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(6) A person is said to be "not ordinarily resident" in India
in any previous year if such person is-
(a) an individual who has not been resident in India in two
out of the ten previous years preceding that year, or has
not during the seven previous years preceding that year
been in India for a period of, or periods amounting in allto, 730 days or more; or
(b) a Hindu undivided family whose manager has not been
resident in India in two out of the ten previous years
preceding that year, or has not during the seven previousyears preceding that year been in India for a period of,
or periods amounting in all to, seven hundred and thirty
days or more.
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Need Of Deciding The RS.
Or
Incidence Of Tax On A PersonOr
Define Total Income
Definition of Total Income
Total income means the following computed in the
manner laid down under the income tax Act.
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In case of ROI
(including ordinarily ROI i.e. for
individual & HUF)
a) Incomes reced in India or deemed to be
reced in India
b) Incomes accrued or arised in India or
deemed to accrue or arise in Indiac) Incomes accrued or arised outside
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a) Incomes reced in India or deemed to be reced in
India
b) Incomes accrued or arised in India or deemed to
accrue or arise in India
In case of NRI
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(i) Incomes reced in India or deemed to be reced in
India
(ii) Incomes accrued or arise in India or deemed to
accrue or arise in India
(iii) Incomes accrue or arise outside India from abusiness or a profession which is set up in India or
controlled from India
In case of resident but not
ordinarily resident of India,
it will be
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Incomes Reced in India or Deemed
to Be Reced in India
Receipt means first receiptAny remittance or transmission of the amt
to another place does not result in first
receipt
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Contribution made by employer to RPF inexcess of 12%
Interest credited on RPF in excess of 9.5%
TDS is deemed to be received in the handsof payee
Unexplained cash or assets or cash creditsare treated as deemed to reced
Incomes Deemed to Be Reced in India
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Incomes accrued or arise in India or
deemed to accrue or arise in India
Income from a business conection in india
Income from any property, asset, or source
of incomeIncome from transfer of any capital asset
situated in india
Dividend paid by Indian company
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Average rate of Income-tax
Means the rate arrived at by dividing the amount of
income-tax calculated on the total income, by such total
income;
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Capital asset
Means property of any kind held by an assessee, whether ornot connected with his business or profession, but does not
include-
(i) any stock-in-trade, consumable stores or raw materials heldfor the purposes of his business or profession;
(ii) personal effects, that is to say, movable property (including
wearing apparel and furniture, but excluding jewellery)held for personal use by the assessee or any member of his
family dependent on him.
Explanation.-
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Explanation.
" jewellery " includes-
(a) ornaments made of gold, silver, platinum or any other
precious metal or any alloy containing one or more of
such precious metals, whether or not containing any
precious or semi-precious stone, and whether or not
worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in
any furniture, utensil or other article or worked or sewn
into any wearing apparel;
(iii) agricultural land in India, not being land situated-
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(a) in any area which is comprised within the jurisdiction of a
municipality or a cantonment board and which has a
population of not less than ten thousand
(b) in any area within such distance, not being more than eight
kilometres, from the local limits of any municipality or
cantonment board
(iv) 6 1/2 per cent. Gold Bonds, 1977, or 7 per cent. Gold
Bonds, 1980 or National Defence Gold Bonds, 1980 issued
by the Central Government;
(v) Special Bearer Bonds, 1991, issued by the Central
Government.
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Charitable purpose
Includes relief of the poor, education, medical relief, and
the advancement of any other object of general publicutility;
A i lt l I
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Agricultural Income
agricultural income" means-
(a) any rent or revenue derived from land which is situated in India
and is used for agricultural purposes;
(b) any income derived from such land by-
(i) agriculture
(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 fitto 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 specified.
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