This presentation contain information regarding history of income tax, legal framework, tax collection bodies, types of tax, income tax, canons of taxation and definition for the term assesse, person, previous year, assessment year, income, total income and gross total income and agriculture income as per IT act 1961

1. Income Tax - I
Unit – I
INTRODUCTION

2. Tax
•The origin of the word
"Tax" is from "Taxation"
which means an
estimate.
•Tax is a mandatory
liability for every citizen
of the country.

3. BRIEF HISTORY OF INCOME TAX
.
According to Manu Smriti, the
king should arrange the collection
of taxes in such a manner that the
tax payer did not feel the pinch of
paying taxes.
 He laid down that traders and
artisans should pay 1/5th of their
profits in silver and gold, while
the agriculturists were to pay
1/6th, 1/8th and 1/10th of their
produce depending upon their
circumstances.
Manu Smriti
Arthasastra mentioned that each tax was
specific and there was no scope for
arbitrariness.
Tax collectors determined the schedule of
each payment, and its time, manner and
quantity being all pre-determined.
 The land revenue was fixed at 1/6 share of
the produce and import and export duties
were determined on ad-valorem basis.
 The import duties on foreign goods were
roughly 20% of their value. Similarly, tolls,
road cess, ferry charges and other levies
were all fixed.
Arthasastra
In India, this tax was introduced for
the first time in 1860, by Sir James
Wilson in order to meet the losses
sustained by the Government on
account of the Military Mutiny of
1857.
 In 1918, a new income tax was
passed and again it was replaced by
another new act which was passed
in 1922.
This Act remained in force up to
the assessment year 1961-62 with
numerous amendments
Sir James Wilson

4. Introduced By “Sir James Wilson” in the year 1860
To meet the heavy losses on account of military mutiny (1857)
In the year 1886 first income tax act passed
The organizational history of the Income-tax Department starts in the
year 1922
Appointment of law commission in 1956
The law commission submitted its report on 1958
Bill was prepared and introduced in the parliament in April 1961
History of
Income
Tax
Detailed History: https://www.incometaxindia.gov.in/Pages/about-us/history-of-direct-taxation.aspx
Video URL: https://www.youtube.com/watch?v=uOUEHPzpH8E

5. Income Tax act 1961
• 298 sections and XIV schedules
Income tax rule 1962
• CBDT
Finance Act
• Finance Minister
Case Laws
• Judgment given by supreme court
Circulars and notifications
• Issue orders and instructions
Legal Framework

6. Income tax, custom duties,
central excise duty.
Tax on agricultural income,
professional tax, value- added
tax, state excise duty, stamp
duty.
Property tax, water tax, other
taxes on drainage and small
services.
Tax Collection Bodies

7.  A tax is a compulsory charge or payment imposed by government on
individuals or corporations.
 The most important source of revenue of the government is taxes.
 The act of levying taxes is called taxation.
 The taxes may be imposed on the income and wealth of persons or
corporations and the rate of taxes may vary.
Taxation

8. Objectives of Taxes
 Raising Revenue
 Regulation of Consumption and Production
 Encouraging Domestic Industries
 Stimulating Investment
 Reducing Income Inequalities
 Promoting Economic Growth
 Development of Backward Regions
 Ensuring Price Stability

9. Direct Tax
• Direct tax is a type of tax where
the incidence and impact of taxation fall on
the same person.
Indirect Tax
• Indirect Tax is a type of tax where the incidence
will be on one person and impact of taxation
fall on the some other person
Types of tax

10. Types of tax
• Income Tax
• Securities
transaction
Tax
• Corporate tax
• Capital gains
• Gift Tax – 1958
- 1998
• Corporation
Tax
• Estate Duty –
1953 to 1985
• Wealth Tax –
1957 to 2015
• Goods &
Service Tax
• Custom Duty
• VAT
• Service Tax
• Excise Duty
• Property Tax
• Professional
Tax
• Registration
fees, stamp
duty, transfer
tax
• Road tax and
toll tax
• Entertainment
tax
Other
Taxes

11.  An income tax is a tax that governments impose on income generated
by businesses and individuals within their jurisdiction.
 By law, taxpayers must file an income tax return annually to determine
their tax obligations.
 Income taxes are a source of revenue for governments.
 They are used to fund public services, pay government obligations,
and provide goods for citizens.
Income Tax

12.  By canons of taxation we simply mean the characteristics or
qualities which a good tax system should possess.
 A good tax system is therefore based on some principles.
These principles which a good tax system should follow are
called canons of taxation.
Canons of Taxation

13. .
• convenience
• Canon of Convenience Taxes
should be levied and collected
in such a manner that it provides
the greatest convenience not
only to the taxpayer but also to
the government
• Canon of Economy the cost of
collecting a tax should be as
minimum as possible. Any tax
that involves high
administrative cost and unusual
delay in assessment and high
collection of taxes should be
avoided altogether.
• Canon of equality states that
the burden of taxation must be
distributed equally or equitably
among the taxpayers.
• Canon of Certainty the tax
which an individual has to pay
should be certain and not
arbitrary• certainty
• equity
• economy
• Adam Smith first devised the principles or canons of taxation
in 1776. canons of taxation are related to the administrative
part of a tax.
Canons of Taxation

14.  Canon
of
Produc
tivity
• Canon states that only those taxes should
be imposed that do not hamper productive
effort of the community. A tax is said to
be a productive one only when it acts as
an incentive to production
• Canon of Productivity
• Every tax must be simple and intelligible
to the people so that the taxpayer is able
to calculate it without taking the help of
tax consultants
• Canon of Simplicity
• This canon implies that a tax should be
flexible or elastic in yield.
• It should be levied in such a way that the
rate of taxes can be changed according to
exigencies of the situation
• Canon of Elasticity
• Taxation must be dynamic. This means
that a country’s tax structure ought to be
dynamic or diverse in nature rather than
having a single or two taxes.
• Diversification in a tax structure will
demand involvement of the majority of
the sectors of the population.
• Canon of Diversity
 Canon
of
Simplic
ity
 Canon
of
Elastici
ty
 Canon
of
Diversi
ty
Other canons of taxation:

15. Assessment Year Means the Period of 12 Months
Commencing on the First day of April every Year and ending
on 31st March of the next Year during which the assesse
previous year income is assessed and taxed. ( The Current
Assessment Year is 2020-2021)
Income earned in a year is assessed and taxed in the
Assessment year the year in which income is earned in
known as previous year i.e. Financial Year Immediately
Preceding the relevant Assessment Year is Known as
Pervious Year. It Is period of 12 Months or Less.
Assesse is any individual who is liable to pay taxes to the
government against any kind of income earned or any
losses incurred by him for a particular assessment year.
The term “person” includes an individual, A Hindu
undivided family, a company, a firm, an association of
persons or body of individuals, whether incorporated or
not, a local authority, every artificial judicial person not
falling within any of the preceding categories.
Assessm
ent Year
U/S 2 (9)
Previous
Year U/S
- 3
Persons
Sec-
2(31)
Important Terms
Assesse
Sec-2(7)

16. Income U/S – 2(24)
Sec. 2(24) of the Income Tax Act gives a statutory definition of income. It is an inclusive & enumerative definition
than an exclusive & precise one. Accordingly, income includes the following:
• Profits & gains.
• Dividends.
• Voluntary contributions.
• The value of any perquisite or profits in lieu of salary.
• Any allowances or benefit granted.
• Profits & gains of business or profession U/S 28.
• The value of any benefit or perquisite arising from business or the exercise of a profession.
• Any capital gains chargeable U/S 45.
• Insurance profit computed U/S 44.
• Any winning from lotteries, cross-word puzzles, races including horse races, card games & other games of any sort or betting of any
form.
• Any sum received by the assessee from his employer as contribution to any provident fund or superannuation fund or Employees
State Insurance Fund, or any other fund for the welfare of such employees.
• Any sum received under a Keyman Insurance Policy including bonus on such policy, etc.
• Any sum of money or value of property received without consideration or for inadequate consideration from an individual or H.U.F
from a person other than a relative.
• Value of any benefit or perquisite obtained from a company by a director or a person who has substantial
interest in the company or their relative.

17. Gross Total Income is the aggregate of all the income earned by an assesse during a
specified period.
Income from Salaries
Income from House Property
Profits and Gains of Business and Profession
Capital Gains
Income from Other Sources
According to Section 14 of the Income Tax Act 1961, Aggregate of incomes computed
under the above 5 heads, after applying clubbing provisions and making
adjustments of set off and carry forward of losses, is known as Gross Total Income
(GTI).
Gross Total Income (GTI)

18. G. T. I. = Salary Income + House Property
Income + Business or Profession Income +
Capital Gains + Other Sources Income +
Clubbing of Income - Set-off of Losses
Gross Total Income (GTI)

19. Total Income is income of assesse from all sources on which he has to pay
income Tax. In other words it is income under all the five head after making
deductions Under section 80C to 80U
Total Income (TI) = GTI - Deductions U/S 80C
to 80U
Total Income or Taxable Income

20. Agriculture Income
According to Article 270 on indian constitution central government cannot
levy any tax on agriculture income.
It is exempt from tax under section 10(1)
U/S 2(1A) Agriculture income means
 Any rent or revenue received from land which is used for agriculture
purpose and situated in india.
 Any income derived from such land by agriculture operations including
processing of agriculture produce or sale of such produce
 income attributable to a farm house subject to the condition that the
building is situated on or in the immediate vicinity of the land

21. Income from sale of replanted trees
Rent received from agriculture Land
Income received from sale of seeds
Income from growing flowers and creepers
Share of profit of a partner from a firm engaged in
agriculture operations
Interest on capital received by a partner from a firm
engaged in agriculture operations.
Income from poultry farming.
Income from bee hiving.
Dividend received from a company engaged in agricultural
purpose
Income from sale of spontaneously grown trees.
Income from dairy farming.
Purchase of standing crop.
Royalty income from mines.
Income from butter and cheese making.
Remuneration received as an employee of an agriculture
farm.
Agriculture
Income
Non
Agriculture
Income