V semester B.Com-Income Tax-I

1. INCOME TAX-1
UNIT-1 INTRODUCTION TO TAX

2. History of Income Tax
 The Income Tax history in modern India
dates back to 1860. In this year first
Income Tax Act was introduced and
which remained in force for a period of 5
years. This Act lapsed in 1865.
Thereafter Act-II of 1886 was in force.
This Act of 1886 was the improved
version. It introduced the definition of
agricultural income and the exemption it
granted in respect of agricultural income
has continued to be a feature of all
subsequent legislations.

3. VIDEO ON HISTORY OF TAXATION IN INDIA
https://www.youtube.com/watch?v=Z4r0
BETSoF4

4. TAX-MEANING
A compulsory contribution to state
revenue, levied by the government on
workers' income and business profits,
or added to the cost of some goods,
services, and transactions.

5. Legal Frame Work

6. CANONS OF TAXATION-Principles
1. Canon Of Equality
2. Canon of certainty
3. Canon of convenience
4. Canon of economy
5. Canon of Productivity
6. Canon of elasticity
7. Canon of simplicity
8. Canon Of Diversity

7. Canon Of Equality
 This is the most important canon of
taxation. Equality or equity means that
every ax payer should contribute towards
the support of the government according
to his ability to pay. This does not mean
that all people rich or poor should pay
equal tax or at equal rate. Equality
means equality of sacrifice. The equality
of sacrifice can only be maintained when
the rich are required to pay tax at a
greater rate than the poor people

8. Canon of certainty
 This canon says that every thing about
a tax should be definite and certain.
According to this canon there must be
certainty about the time of payment,
the manner of payment and the
quantity to be paid. It will give greater
confidence to the government about
its estimates and that the tax payer
will also feel certain about his budget.
Uncertainty encourages corruption.

9. Canon of convenience
This canon implies that every tax ought
to be levied at the time or in the
manner in which it is likely to be most
convenient for the contributor to pay it.
If a tax is convenience, the payer
will pay it at the proper time without
reminder. For example a person
drawing a monthly salary likes to pay
at the time of receiving his salary
every month.

10. Canon of economy
This canon implies two things. Firstly,
the cost of collection of a tax should
be small in proportion to yield.
Secondly, the tax must not obstruct in
any manner the economic
development of the country. If a tax is
contrary to these two principles it is
regarded as costly and uneconomical

11. Canon of Productivity
 It means that taxes should yield
sufficient revenue to the government.
A few tax which are fairly productive
are much better than a large number
of taxes which not so productive.

12. Canon of elasticity
 This principles means that tax system
should be capable of expansion and
reduction according to the
requirements of the state. Taxes which
in case of need can be conveniently
increase in amount without any
additional cost of collection are
considered to be good taxes. Income
tax is a very good example of an
elastic tax.

13. Canon of simplicity
 The system of taxation should not be
complicated and difficult to be
understood by an average person.
The basis of tax and method of
calculation should be simple, plain and
intelligible.

14. Canon Of Diversity
 This principle says that a large variety
taxes is always preferable to a small
number. Every tax has some defects.
In a varied tax system, different taxes
tends to cancel to each other. Variety
is also desirable from the point of view
of yield, stability and justice.

15. Important Definitions
 Assessment Year
 Previous Year
 Assessee
 Person
 Income
 Casual Income
 Gross Total Income

16. Assessment U/S-143
 Assessment is the process of
collecting and reviewing the
information filed by assessees in
their income tax returns. At the end of
each financial year, all persons and
entities required to file an income tax
return by self-computing the amount
of income earned and pay
the tax due

17. Previous year U/S 3
 As the word ‘Previous’ means ‘coming
before’ , hence it can be simply said
that the Previous Year is the Financial
Year preceding the Assessment
Year e.g. for Assessment Year 2019-
2020 the Previous Year should be the
Financial Year ending 31st March
2019.

18. Assessment Year Sec. 2 (9)
 “ Assessment Year” means the period of 12
months commencing on the 1st day of April
every year.
 In India, the Govt. maintains its accounts for
a period of 12 months i.e. 1st April to 31st
March every year. As such it is known as
Financial Year. The Income Tax department
has also selected same year for its
Assessment procedure.
 The Assessment Year is the Financial Year
of the Govt. of India during which income a
person relating to the relevant previous year
is assessed to tax.

19. Assessee U/S 2(7) of IT act 1961
 As per Section 2(7) of Income Tax Act
1961 ‘assessee’ is a person by whom
any tax or any other sum of money is
payable under the Act, and includes the
following -
 Every person in respect of whom any
proceeding under this Act has been
taken a) for the assessment of his
income or of the income of any other
person in respect of which he is
assessable, or of the loss sustained by
him or by such other person, or the
amount of refund due to him or to such
other person;

20. Assessee U/S 2(7) of IT act 1961
 Every such person who is treated as an
assessee under any provision of this Act; it
may include the legal representative of
deceased;
 Every person who is deemed to be an
assessee in default under any provision of
this Act; such as, a person who is giving
taxable income and is liable to deduct tax and
deposit the same to central government, as
per the provisions of act. If the said person
fails to comply with such provisions of the act,
that person will be deemed to be an
assessee in default.

21. Person
 An individual, (a sole proprietor, salary class
or self employed)
 A Hindu Undivided Family (HUF),
 A Firm, (Partnership Firm formed as per the
provisions of Partnership act 1932.)
 A Company, (a body corporate registered
under companies act 1956, may be a pvt.ltd.
or a ltd. company or any body corporate
registered under any law outside of India)
 An association of Persons (AOP), Body of
Individuals (BOI),
 A Local Authority and Every Artificial
Judicial person.

22. Income u/s 2(24)
 Profits and gains of business
 Dividends
 Voluntary contributions received by
trust or institutions
 Perquisites or profits in lieu of salary
 Special allowances
 Fringe benefits
 Interest received
 Insurance profit

23. Income- continued..
 Income from other sources
 Provident fund
 Gratuity
 Cash assistant from government
 Salary, bonus, commission
 Remuneration
 Any other form of earning

24. Casual Income-U/S-56
 Casual income means
an income which is casual in nature,
i.e., which is unplanned, uncertain,
accidental, sudden income which
occurs just by chance and the person
cannot depend upon it to
produce income in future.

25. Gross total Income-U/S-24 (GTI)
Aggregate of incomes computed after
set off of losses according top
provisions of income tax act.
1. Income from salaries
2. Income from house property
3. Income from business or profession
4. Income from capital gain
5. Income from other source
Gross Total Income=1+2+3+4+5

26. Total Income -U/S 5
 Total Income of an assessee is the
gross total income(GTI) after making
all deductions under section 80C to
80U

27. Types of taxes

28. Agricultural Income- Sec-
2(1A)
 Agricultural income refers
to income earned or revenue derived
from sources that
include farming land, buildings on or
identified with an agricultural land
and commercial produce from a
horticultural land.

29. Calculation of Agriculture income

30. Agriculture income including-
scheme of Partial Integration

31. Scheme of Taxation for AY 2020-
21(where PY is 2019-20
 For Individual
 For firm
 For companies
 For local authority
 For cooperative soceity

32. Scheme of taxation- Individual
 A. Incase of Individual(Individual, HUF,AOP, BOI and
cooperatives)
Up to Rs 2,50,000 Nil
From 2.50,001 to 5,00,000 5%
From 5,00,001 to 10,00,000 20%
Above 10,00,001 30%
 B. Incase of Individual ( senior citizen aged 60)
Up to Rs 3,00,000 Nil
From 3,00,000 to 5,00,000 5%
From 5,00,001 to 10,00,000 20%
Above 10,00,001 30%
 C. Incase of Individual ( super senior citizen aged 80)
Up to Rs 5,00,000 Nil
From 5,00,001 to 10,00,000 20%
Above 10,00,001 30%

33. Scheme of taxation- Firms
 A flat rate of 30% for all types of firms

34. Scheme of Taxation-
Company
Type of company Turnover limit Tax rate
Domestic company Less than 50 Cr 25%
Domestic company Above 50 Cr 30%
Foreign company No limit 40%

35. Scheme of Taxation- Local
Authority
 A flat rate of 30% of total Income

36. Scheme of taxation- cooperative society
Total Income Tax rate
First 10000 10%
Next 10000 20%
Balance 30%

37. Additional Charges for all
persons
 Tax rebate
 Surcharge
 Education Cess

38. Meaning of capital and
revenue

39. Difference between capital and revenue receipts

40. Difference between capital and revenue
expenditure

41. Difference between capital and revenue
losses

42. Income tax authorities
 Central Board of Direct Taxes (CBDT)
 Director General or Director
 Commissioner of Income Tax
 Commissioner of Income
Tax(Appeals)
 Joint Commissioner and Assistant
Commissioner
 Income Tax officer(ITO)
 Tax Recovery Officer(TROs)
 Inspectors of Income Tax

43. Central Board of Direct Taxes
(CBDT)

44. Director General or Director

45. Commissioner of Income Tax

46. Commissioner of Income
Tax(Appeals)

47. Joint Commissioner and Assistant
Commissioner

48. Income Tax officer(ITO)

49. Tax Recovery Officer(TROs)

50. Inspectors of Income Tax