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INCOME -TAX
HISTORY - System of Direct Taxation was in
existence even during Hindu period, then
during British period 1860 Act, amendments
made in 1863,1867, 1871,1873 and 1878
continued till 1918. In 1920 it became a
central subject, was overhauled in 1961 and
amended from time to time, became
effective from 1-4-1962; called Income-Tax
Act 1961
Area/Scope – Whole of India. It determines:
a. Taxable Income
b. Tax Liability
c. Procedure of Assessment
d. Appeals, Penalties and Prosecution
e. Powers & Duties of various I.T. authorities
Pr. Yr. in case of newly set up business or profession orfor a new source of
income shall begin from the date of setting up or coming into existence of
new business or profession or new source of income and will end in the
same financial year, thereby resulting uniform Pr. Yr. for all assessees and
for all source of income
• Cases where Income of Pr. Yr. is assessed in the same year –
These exceptions have been provided to safeguard the
collection of taxes, so that assessees, who may not be
traceable later on, are not allowed to escape the payment of
the taxes, such as:
• 1. Income of Non-Resident from shipping business (172)
• 2. Income of persons leaving India (174)
• 3. Income of an AOP or BOI or Artificial Juridical persons
• formed for a particular event or purpose, if likely to be
• dissolved (174A)
• 4. Income of persons likely to transfer, sell or dispose of
• the property to avoid tax (175)
• 5. Income of discontinued business or profession (176)
MARGINAL RELIEF – It is provided to ensure that the additional
income tax payable, including surcharge, on the excess of
taxable income over Rs. 10,00,000 is limited to the amount by
which the income is more than Rs. 10,00,000
DIFFERENT HEADS OF INCOME (14):
1. Salary (15-17)
2. Income from House Property (22-27)
3. Profits and Gains of Business and Profession (28-44)
4. Capital Gain (45-55)
5. Income from Other Sources (56-59)
INCIDENCE OF TAX (5) – For computing income tax, first of all
residential status of a person is to be decided which is defined
as under. Remember only income of Pr. Yr. is taxable in the
hands of an assessee
• TAX INCIDENCE AT A GLANCE RESIDENTS
Particulars of income derived from sources Ord- Not Non