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What is an assessment year[Sec.2(9)]
- Assessment year means the period starting from April1 and ending on March 31 of the next year.For instance ,the assessment year 2012-13 which commenced on April 1, 2012 will end on March 31,2013.
- Income of previous year of an assessee is taxed during the next following assessment year at the rates prescribed by the relevant Finance Act
What is previous year [Sec.3]
Income earned in a year is taxable in the next year.The year in which income is earned is known as previous year and the next year in which income is taxable is known as assessment year.
When income of previous year is not taxable in the immediately following assessment year?
- 1.Income of non-resident from shipping business
- 2.Income of persons leaving India either permanently or for a long period of time
- 3.Income of bodies formed for short duration
- 4.Income of a person trying to alienate his assets with a view to avoiding payment of Tax
- 5.Income of a discontinued business.
Who are included in PERSON [Sec.2(31)]
- The term Person includes:
- 1.An Individual
- 2.A Hindu undivided family
- 3.A Company
- 4.A Firm
- 5.An Association of persons or a body of individuals,whether incorporated or not
- 6.A Local Authority and
- 7.Every artificial juridical person not falling within any of the preceding categories.
Who is regarded as Assessee [Sec.2(7)]
- Assessee means a person by whom income tax or any other sum of money is payable under the Act.It includes-
- 1.every person in respect of whom any proceeding under the Act has been taken for the assessment of his income or loss or the amount of refund due to him.
- 2.a person who is assessable in respect of income or loss of another person.
- 3.a person who is deemed to be an assessee,or an assessee in default under any provision of the Act.
To know the procedure for charging tax on income,one should be familiar with the following:
- 1.Income Tax is an ANNUAL TAX on income
- 2.Tax rate of assessment year
- 3.Rates fixed by Finance Act
- 4.Tax on Person
- 5.Tax on Total Income
- Total Income is calculated in accordance with the provisions of the Income Tax Act,as they stand on the first day of April of the Assessment year.
Under Section 2(24),the term Income specifically includes the following:
- 1.Profits and Gains
- 3.Voluntary Contributions received by a TRUST
- 4.Perquisites in the hands of Employee
- 5.Any Special Allowance or Benefit
- 6.City Compensatory Allowance/Dearness Allowance
- 7.Any Benefit or Perquisite to a Director
- 8.Any Benefit or Perquisite to a Representative Assessee
- 9.Any Sum Chargeable under Sections 28,41 and 59
- 10.Capital Gains
- 11.Insurance Profit
- 12.Banking Income of a Cooperative Society
- 13.Winnings from Lottery
- 14.Employees'Contribution towards Provident Fund
- 15.Amount received under Keyman Insurance Policy
- 16.Amount exceeding Rs.50,000 by way of Gift.
- 17.Consideration for Issue of Shares
What is gross total income
- As per Section 14,Income of a person is computed under the following five heads:
- 2.Income from House Property.
- 3.Profits and Gains of Business or Profession.
- 4.Capital Gains.
- 5.Income from Other Sources.
- The aggregate income under these heads is termed as GROSS TOTAL INCOME.
- In other words,gross total income means total income computed in accordance with the provisions of the Act before making any deduction under Sections 80C to 80U
What is Total Income
Total Income of an assessee is gross total income as reduced by the amount permissible as deduction under Sections 80C to 80U.
Expenditure in respect of Income not chargeable to tax-
Section 14A provides that no deduction shall be made in respect of expenditure incurred by an assessee in relation to income which does not form part of the Total Income under the Act.
What is difference between exemption and deduction
If an income is exempt from Tax ,it is not included in the Computation of Income.Exemption can never exceed the amount of income.Deduction is generally given from income chargeable to tax.Deduction can be less than or equal to or more than the amount of income.If the amount deductible is more than the amount of income,the resulting amount will be taken as loss.
Assessment under Section 144-
- In the following cases,the Assessing Officer may make an assessment in the manner provided under Section 144:
- Case-1)Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee.
- Case-2)Where the method of accounting mentioned in para 13.2 supra has not been regularly followed by the taxpayer.
- Case-3)Where the accounting standards,as notified by the Govt,have not been regularly followed by the taxpayer.
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