i. Every person in respect of whom any proceeding under the Income Tax Act has
been taken for the Assessment of his income or assessment of fringe benefits
or the income of any person in respect of which he is assessable or to
determine the loss sustained by him or by such other person, or the amount of
refund due to him or to such other person.
ii. A deemed Assessee i.e. a person who is treated as an assessee – this would
include the legal representative of a deceased person or the agent of a person
who is a non-resident or the trustee of a trust.
b) Dividend
d) Value of any perquisite or profit in lieu of salary taxable u/s 17 and special
allowance or benefit specially granted either to meet personal expenses or for
the performance of duties of an office or an employment of profit.
g) Export incentives
j) Winnings from lotteries, crossword puzzles, races including card games and
other games of any sort or from gambling or betting of any form or nature
whatsoever.
(ii) “Card game and other game of any sort” includes any game show
and entertainment programme on television or electronic mode, in
which people compete to win prizes or any other similar game.
k) Any sum received by the assessee from his employees towards welfare fund
contributions such as provident fund, superannuation fund, etc.
l) Any sum received under a keyman insurance policy including the sum allocated
by way of bonus on such policy.
m) The profits & gains of any business of insurance carried on by Mutual Insurance
Company or by a co – operative society.
n) Profits & gains of any business of banking (including providing credit facility)
carried on by cooperative society with its member.
o) Any sum whether received or receivable, in cash or kind, under an agreement for
not carrying out any activity in relation to any business or not to share any know
– how, patent, copyright, trade – mark, license franchise or any other business or
commercial right of similar nature.
p) Aggregate amount exceeding Rs. 50,000/- received from any person/persons
without consideration upto 30/09/2009, by an individual or HUF, subject to
certain exceptions.
Income Tax is payable on the income earned during the previous year and it is
assessed in the immediately succeeding financial year which is called an
assessment year.
Therefore, the income earned during the previous year – 1st of April, 2010 to
31st March, 2011, will be assessed or charged to tax in the assessment year
2011-2012.
W.e.f. assessment year 1989-90, all assessee are required to follow a uniform
previous i.e. the financial year (1st April to 31st March) as their previous year.
Previous year, for Income Tax purpose, will be financial year, which ends on
31st March although the assessee can close his books of account on any other
day. E.g.: - An assessee may maintain books of accounts on calendar year
basis but his previous year, for Income Tax purpose, will be financial year and
not calendar year.
Non Resident:
If an individual does not satisfy at least one of the basic conditions, he shall be
considered as Non Resident.
Basic Conditions:
An individual is said to be Non Resident in India in any previous year if he does not
fulfils any one of the following two basic conditions:
(a) He is in India in that year for a period or periods amounting in all to 182 days
or more.
Exception:
In the case of following special individuals, the basic condition (b) above is not
applicable:
(a) An Indian citizen who leaves India during the previous year for the purpose of
employment outside India or an Indian citizen who leaves India during the
previous year as a member of the crew of an Indian ship.
(b) An Indian citizen or a person of Indian origin, who comes on visit to India during
the previous year.
These special individuals shall not be treated as resident unless their stay in India is
at least 182 days during the previous year.
Important Points:
For others: -
Exemption in case of
Exemption in case of any other
Particulars employee covered by
employee
payment of Gratuity Act, 1972
What is the 1. 15 days salary X period of 1. ½ month salary X period of
amount of service service
exemption? 2. Actual gratuity received 2. Actual gratuity received
3. Maximum Rs.3,50,000 3. Maximum Rs.3,50,000
Whichever is less Whichever is less
How to Basic + D.A. (R) + D.A. (Ord.) Average Salary in 10 months
calculate salary last drawn preceding the month of
for the purpose retirement, taking only Basic +
of exemption? D.A. (R) and turnover
commission
How to Above Salary X 15 Above Salary X ½
calculate 15 26
days salary / ½
months salary?
How to Any part of a year more than Any part of a year more than,
calculate period 6 months shall be taken as less than or equal to 6 months
of service one year shall be totally ignored.
If a employee receives gratuity from more than one employer, in the same
previous year, the total exemption cannot exceed the limit notified by
government (i.e. Rs. 3,50,000)
Similarly, the notified ceiling applies to any gratuity received and exempted
in any earlier previous years by the employee. Any such gratuity exempted
earlier shall be reduced from the ceiling amount of Rs. 3, 50,000, and only the
balance amount can be claimed, subsequently.
In case of employees covered by Gratuity Act, the following points should be noted:
Eg: -
Q5) Distinguish between short term and long term capital asset.
iii. Units of the unit trust of India or units of a mutual fund specified u/s 10(23D)
(whether listed or unlisted).
Q6) State the various expenses & allowances that are deductable
under Income Tax Act, 1961 to compute Income from House
Property.
Municipal Taxes: - Provided that where the property is in the occupation
of a tenant, the taxes levied by any local authority in respect of the property
shall, to the extent such taxes are borne by the owner, be deducted (irrespective
of the previous year in which the liability to pay such taxes was incurred by the
owner according to the method of accounting regularly employed by him) in
determining the annual value of the property of that previous year in which such
taxes are actually paid by him.
Section 24 Deduction: -
b. Interest on loans:
i. Interest payable on moneys borrowed for the purpose of acquisition,
construction, renovation, repairing or reconstruction can be claimed as
deduction.
iii. Interest accrued during the construction period proceeding the year of
completion of construction can be accumulated and claimed as deduction
over a period of 5 years in equal installments commencing from the year of
completion of construction.
iv. If a fresh loan is raised to repay the original loan taken for purchase,
construction, etc., the interest payable in respect of second loan would also
be admissible if such fact is proved to the satisfaction of the assessing officer.
v. Where a person acquires a property and pays only part of the sale
consideration, interest payable on the unpaid purchase price qualifies for
deduction in the computation of income from such property.
Any Expenditure,
4. laid out or expended wholly or exclusively for the purpose of the business or
profession; and
5. not be for a purpose which is an offence or which is prohibited by law (e.g. bribes
paid).
7. For Business Carried On: - The expenditure must be for the purpose of a
business or a profession carried on by the assessee during the previous year.
Thus, the business should have commenced and be a running business.
Expenses before the commencement of business cannot be deducted.
Q8) Explain the provision for deduction available for federal milk
co – operative society.
ii. In respect of any sum collected from employees towards the welfare fund
contribution, deduction shall be allowed to the extent the amount is remitted within
the relevant due date.
iii. In respect of family pension, a sum equal to 33.33% of the pension or Rs.15, 000,
whichever is less, shall be allowed as deduction.
iv. In respect of income earned by way of lease rental on letting of machinery, plant
and furniture, with or without building, the following shall be deducted:
a. Repairs
b. Insurance
c. Depreciation
v. Any other expenditure incurred by the assessee not being capital expenditure but
laid out or expected wholly or exclusively for the purpose of making or earning any
income chargeable under this head of income can be claimed.