it unit-1.pptx

8/14/2019 IT unit-1.pptx

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UNIT-1

BASIC

CONCEPTS


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Besides the items listed under this section someother receipts and benefits are also treated asincome under income tax act

In fact, the word income covers receipts in shape ofmoney or moneys worth which arise with certainregularity or expected regularity from a definitesource, for eg. salaries, income from houseproperty, capital gains, profit and gains of businessand profession.


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AGRICULTURAL INCOME Under section 10(1) of the act agriculural

income is exempt from income tax act. The

constitution of india does not empower thecentral govt. to impose income tax on agr.income yet state govt. can impose tax on itbut no state in india has imposed tax till now.

Section2(1A) defines as-

a) Any rent or revenue derived from land whichis situated in india and is used for agriculturalpurpose.


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b) Any income derived from such land by agriculturalor by the process employed to render the produce fitfor the market or by sale

of such produce by a cultivator or reciever of rent inkind.

c) Any income derived from any building owned andoccupied by the rent reciever, satisfying followingconditions-

The building is in the immediate vicnity of theagricultural land.


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It is occupied by the cultivator or recieverof rent or revenue.

It is used as storage house or out house.

The land is assessed to land revenueor alocal rate. If it is not like that then it shouldbe situated outside the urban area.


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Essential Elements

1. Income must be derived from land

2. Land must be situated in India

3. Land must be used for agriculturalpurpose


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TYPES OF AGR. INCOME

1) Rent or revenue derived from land

2) Income from agricultural

3) Income from operations to render theproduce fit for market

4) Income from sale of the produce

5) Income from farm house used foragricultural purpose

6) Income from saplings seedlings


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PARTLY AGRICULTURALINCOME

a) Profits of sugar mills and other industries

b) Income from the manufacturer of rubber

c) Income from manufacturer of coffee

d) Income from manufacturer of tea


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CASUAL INCOME

It means such income, the receipt ofwhich is accidental and without any

stipulation. It is in the nature of anunexpected wind fall. For eg- Lottery,crossword puzzles, card games,gambeling or betting etc.


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ASSESSMENT YEAR

Acc. to section 2(9) of the income tax actassessment year means the period of 12

months commencing on the 1stday of aprilevery year and ending to 31si march next iscalled an assessment year. This is also calledthe financial year of government. This is the

year in which the income of the previousyear is assessed for the purpose of imposingtax.


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PREVIOS YEAR

As per sec2(34) previous year is defined insection 3.

It is the income of year which is chargedin income tax during the current financialyear.

Previous year means the financial year

immediately preceding the assessmentyear.


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Provisions Regarding PreviousYear

Preceding financial year

Previous year for newly setup business

Previous year for a new source of income

Previous year for old business or profession

Previous year for life insurance business

Previous year for share in firms profit


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GROSS TOTAL INCOME

Section 14 says that all types of income shallbe classified in the following 5 heads-

i. Salaries

ii. Income from house property

iii. Profits and gains of business andprofession

iv. Capital gains

v. Income from other provisions


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GROSS TOTAL INCOME

Taxable income of each head iscomputed by aggregating the incomes

under each head as per the act and thendeducting their deductions. Taxableincome of each head is called as the nettaxable income of heads now all taxable

incomes are aggregated.So, this final amount is called Gross totalincome.


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TOTAL INCOMEAs per section 2(45) the total income of

an assesse is computed by deducting alldeductions from the gross total income,

under sec 80c.Total income= Total of taxable incomes

from all heads of incomeDeduction under sec 80c


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PERSON

Acc to sec 2(31) person includes-o An individual

o A hindu undivided family

o A company

o A firm

o An assosiation of persons wheather incorporatedor not eg. A club, a co operative society

o A local authority such as Municipality,cantonment board, District board etc.

o Every artificial juridical person, not falling withinany of the above for eg. A Hindu idol


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TAX PLANNING

It means to reduce tax burden bymanaging and planning of sources

related to the tax. By Prof Dalton-

Tax planning is a scientific way topay minimum tax by taking advantage of

exemptions and incentives given under thegovernment poliy.


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Objectives

To reduce tax liability

Elimination of tax liability

Legal and moral process

Financial security of future

Beneficial for government also


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TAX EVASION

When a person reduces his total incomeby not disclosing the information

regarding his real income by making falseclaim, so that his tax liability is reduced, isknown as tax evasion.

It is not only illegal but also immoral, antisocial and anti national practice.

There are many provisions in law toimpose high penalties on tax evaders.


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Ways to reduce Taxableincome

By not showing his total taxable income

To reduce income by showing fake expenditure

To treat family and personal expenses as businessexpenses and show less profit

By showing unrealistic bad debts

To hide profit earned on the sale of shares

To sell property at higher price and showing them

at less price To enjoy unreasonable exemptions, eg- receive

fake reciepts from trust without making actualdonation


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TAX AVOIDANCE Tax avoidance is an art of reducing tax

without actually breaking the law.

It is a way in which people take advantage ofshort comings or drawbacks in the taxprovisions.

For eg. Land is assumed as capital asset andprofit acquired on the sale or transfer of theland is taxable as capital gain. Some

people convert their land as stock in tradeand showed profit as profit relating to businessbcoz many expenses are allowed here.

it unit-1.pptx

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