BUSINESS AND TAX LAWS

Classification of Taxes

Direct Tax Indirect Tax

Income Wealth Excise custom duty VAT

tax Tax Duty service tax

Income tax Governed by Income Tax Act 1961 Income tax will be charged as per the

rates given in Schedule I of the finance act

The Act is administered By CBDT Income Tax levied on both Individual and

Business ( Corporate income tax )

Important Terms in Income Tax Assessee : An Assessee is person by whom any tax

or any other sum of money is payable under the act Assessee is person who files income tax return Previous year : Income earned in the year is taxable

in next year. It is financials year. Assessment year : Means period of 12 Months

starting from 1st April of every year ending on 31st March of next year.

Income Sec 2(24) – Inclusive definition not exclusive

Salary , interest , Perquisites in the hands of Employee, Capital gain , Rent, winning from lottery

Assessment : It is process of calculation of taxable income , tax on taxable income and collecting of tax due there on

It can be from assessee and also from Income tax Department

TDS : Tax collection at Source Resident and Non resident Source and Receipt of Income Global income is taxed in the hands of

resident Only Indian Income is taxed in the hands

of Non Resident

Revenue and Capital Receipt

Revenue receipt taxable as income unless expressly exempt

Capital Receipt is generally exempt from tax unless expressly taxable under Sec 45

Capital – Lump sum, Not regular Revenue – Regular, fixed Amount

Gross Total Income As per sec 14 following are broad heads of

income1. Salary2. Income from House property3. Profits and Gains of Business or profession4. Capital Gain5. Income from Other Sources

Aggregate of all this income is termed as Gross Total Income

Income from Salary When is it taxable : Employer and Employee

relationship is must Employee may be fulltime or parttime Salary Includes wages Any gratuity Any fee, commission, perquisites Advance salary Leave salary HRA Allowance

Income from House property

Annual value of property consisting of any building or lands appurtenant thereto , where is assessee is owner and building not used for Business by the assessee

Sec 22 chargeability Property with land and building Assessee should be owner of such

property Property should not be used for Business

or profession

Income from PGBP Sec 2(13) Business includes trade,

commerce, manufacture and adventure in the nature in the nature of trade, commerce or manufacture

Profits and gains of business or profession are taxed

Capital Gain Chargeability Sec 45 (1) Capital asset transferred during the year is taxed as capital gain

Sec 2 (14 ) Defines capital Asset Any kind of property held by assesseeFollowing are excluded from capital assets definition1.Stock in trade, raw materials held for business2. Personal effects car and furniture ( movable property for personal

use ) Does not include jewelry , painting, drawing and archaeological collection

3. Agricultural Land4. 6.5% Gold bonds and Gold deposit bonds

Wealth Tax Act 1957 Wealth tax Is Direct Tax 1% chargeable on excess of Rs 30 lakh

Net wealth Chargeable On Individual , HUF, Company Exemption – Sec 25 Company, Co-

operative society, social club, Political party

Net Wealth The term ‘net-wealth’’ – means taxable wealth. It means excess of assets over debt Assets Include deemed assets do not include

exempted assets Assets Includes Building or land appurtenant thereto called

‘’house’’ Motor car- Other than used by assessee in

business Jewellary , Bullion , furniture , Utensils any article

made wholly or partly of gold , silver, platinum

Yachts, Boats and aircraft Urban Land Cash in excess of 50,000

Exempted Assets Agricultural land Any building owned or occupied by a

cultivator Animals A right to any annuity

Central Excise Tax on manufacture Central Excise Act 1944 Power to levy the C/E lies with central

Govt C/E is levied uniformly throughout the

country Duty and rates are Governed by Tariff

rate / Budget notifications.

Classification of goods Not defined in Central Excise Act 1944 Sale of goods Act “ Goods include

materials, commodities and articles” All kinds of movable property Marketability of goods

Unless the marketability test is satisfied duty can’t be levied

Kinds of Duty Special Excise duty Additional duties of exciseCenvat credit in excise

Custom duty Indirect Tax Duty on export and imports from India Duty is governed by Customs Act 1962 This is levied on percentage of assessed value Custom duty is applicable on transporting of

goods by land, air, water, Indian waters Water spread 12 nautical miles from the sea. Customs Tariff Act 1975 Schedule I – Goods classification and Import Duty Schedule II – Classification of Goods and Export

duty

Different types of customs duty

Basic duty CVD ( Countervailing duty ) Anti- Dumping duty Protective duty Export duty Import duty

VAT Form of sales tax State Government Revenue Tax on sale of goods VAT object is to remove cascading effect Input tax credit is allowed Sales definition Transfer of property in goods.

Service tax Introduced through Finance Act 1994 Indirect Tax. Central Govt Revenue Service provider has to collect the same At present rate is 12.36%