What is Direct Tax, concept, various sources, IT Returns, TDS etc..

2. INDEX
 Basic Concepts
 Income from Salaries
 Income from House Property
 Profits & Gains of Business or Profession
 Income from Capital Gains
 Income from Other Sources, Carry Forward & Set Off
 Deductions from Total Income, Advance Tax, Interest
 Computation of Taxable Income – Individual
 Computation of Taxable Income – Firm
 Income Tax Return
 TDS Concept

3. Basic Concepts
TAX
DIRECT
Paid directly to
Government- Income
Tax, Wealth Tax
INDIRECT
Not paid directly to
Government-
Service Tax, Sales
Tax

4. Basic Concepts
To understand the subject “Income Tax”, we have to be
familiar with the following terms:
 Assessee
 Previous Year
 Assessment Year
 Person
 Heads of Income
 Residential Status

5. Basic Concepts
• Assessee - Any person who is liable to pay tax or other some of money like
interest, penalty etc. is an assessee.
• Previous Year – It means the financial year in which the income is earned.
For e.g. if we are earning income in the year 2011-12, so 2011-12 will be previous
year. It starts from 1st April and ends on 31st March.
• Assessment Year – It is the year just after the previous year in which
the income of the previous year is assessed or computed. So for Previous Year
2011-12; Assessment Year would be 2012-13.
• Person– It includes the following:
 Individual
 Hindu Undivided Family
 Company
 Firm
 Association of Person (AOP)
 Local Authority
 Every Artificial Judicial Person (Not Falling Under any of the Preceding
Categories)

6. Basic Concepts
• Heads of Income:
1. Income from Salaries
2. Income from House Property
3. Profits & Gains of Business or Profession
4. Income from Capital Gains
5. Income from Other Sources
Note:
For computation of TOTAL INCOME, all income should fall under any of the five heads of
income as mentioned above. If any type of income does not become part of any of the
first four heads, it should be part of the fifth head, i.e. Income from Other Sources.

7. Basic Concepts
Residential
Status
Resident
Ordinary
Resident (OR)
Not Ordinary
Resident (NOR)
Non
Resident
(NR)

8. Basic Concepts
Residential Status of an Individual is determined on the
basis of the following conditions:
A. Primary Conditions:
1. Has stayed in India for 182 days or more in PY; OR
2. Has stayed in India for at least 60 days during PY, and 365 days
or more during the last 4 preceding PY.
B. Secondary Conditions:
1. He must be resident for 2 out of last 10 years preceding the
relevant PY, AND
2. Has stayed in India for at least 730 days in the last 7 years
immediately preceding the relevant PY
Contd…

9. Basic Concepts
An individual satisfying any ONE OR MORE of the
PRIMARY conditions and ALL the SECONDARY
conditions, will be considered to be RESIDENT.
However, an individual satisfying any ONE OR
MORE of the PRIMARY conditions but only ONE OR
NONE of the SECONDARY conditions will be
considered NOT ORDINARILY RESIDENT.
Lastly, any individual who is satisfying NONE of
the PRIMARY conditions will be considered
NOT RESIDENT.

10. Basic Concepts
• Residential Status of HUF:
If the control and management of the affairs of HUF is situated wholly or
partly in India the HUF is said to be RESIDENT in India. If the control &
management of the affairs of the HUF is situated wholly outside India,
then HUF is said to be NON RESIDENT in India.
A RESIDENT HUF is said to be ‘NOT ORDINARILY RESIDENT’ in
India if KARTA /Manager thereof satisfies anyone or both the following
additional conditions:
 He has been non-resident in India in 9 out of 10 years immediately
preceding the relevant PY, OR
 He has been present in India for 729 days or less during the 7 years
immediately preceding the PY.
• Residential Status of Company:
An Indian company is always resident in India. A foreign company
will be resident in India if control & management of its affairs is
wholly situated in India.

11. Basic Concepts
• Example
Mr. Singhal provides the detail of his stay in India for the following AYs’:
Determine his residential status for AY 2011-12.
Years Days
1997-98 365
1998-99 365
1999-00 336
2000-01 115
2001-02 80
2002-03 50
2003-04 150
2004-05 150
2005-06 67
2006-07 160
2007-08 59
2008-09 105
2009-10 120
2010-11 120

12. Basic Concepts
Solution:
a) Primary Conditions:
i. 182 days or more during relevant PY; OR -- No
ii. At least 60 days during PY, and 365 days or more during last 4 yrs preceding
relevant PY. – Y & Y
b) Secondary Conditions:
i. Resident for 2 out of last 10 years preceding relevant PY; AND -- Y
ii. At least 730 days in the last 7 yrs immediately preceding relevant PY. – Y
Mr. Singhal has been in India for more than 60 days during the PY and for 444 days
during 4 years just preceding PY. As such he is RESIDENT. However, as he is in India
for a total period of 811 days in 7 years just preceding the PY and was resident for 2 out
of 10 years just preceding the PY, so he is RESIDENT & ORDINARILY RESIDENT of
India.