BASICS OF TAXATION

BY
CA. SANDEEP KAPOOR
B.Com(H), FCA, MBA(Finance)

COURSE COVERAGE
UNIT I
UNIT II
UNIT III
TAXATION
UNIT IV
ACT,1944
UNIT V
UNIT VI

INCOME TAX ACT,1961

WEALTH TAX ACT,1957
INTERNATIONAL
CENTRAL EXCISE
SERVICE TAX
CENTRAL SALES TAX
ACT,1956 &VAT ACT

UNIT I
INCOME TAX ACT,1961

WHAT IS
TAX?

 Taxes are financial levies (charge)

or burden imposed by
governments upon its citizens to
realize money for various purposes.

TYPE OF
TAXES

DIREC
T

INDIRE
CT

TYPE OF TAXES
Tax which is charged
and collected from the
same person.
Example: income tax,
wealth tax.
DIRECT

Burden: cant be
shifted.

INDIRECT

Tax which is charged

on one person and
collected from
another person.
Example: sales tax,
excise duty, service
tax, customs duty, VAT.
Burden: shifted from
producer, seller or
service provider to
customer.

SCHEME OF TAXATION
Income earned by every PERSON
Income exceeds the maximum exemption
limit.
Tax is charged on the TOTAL INCOME of the
PREVIOUS YEAR
But
is
taxable
in
the
next
following
ASSESSMENT YEAR at the rates applicable
to that assessment year
Total income is to be determined on the basis
of his RESIDENTIAL STATUS in India.

PERSON(Section
2(31)
Includes:
An Individual
A Hindu Undivided Family(HUF)
A Company
A Firm
An Association of Persons/Body of Individuals
A Local Authority
Every artificial judicial person not falling with
in any of the preceding sub clauses

ASSESSEE
In simple words
Any PERSON
Whose income is assessable
Under the Income Tax Act, 1961.

ASSESSMENT
YEAR(Section 2(9)
Means
The period of 12 months
Commencing on the First day of April
every year
i.e. period from 1st of April to 31st of
March

PREVIOUS
YEAR(Section 3)

Means

The financial year immediately

preceding the assessment year
Starts on 1st of April and ends on 31st
March

RESIDENTIAL STATUS and

tax incidence

RESIDENTIAL STATUS
V/s.
CITIZENSHIP
Tax incidence on an assessee depends on his
residential
status
rather
than
his/her
citizenship .
Determination of the residential status of a
person is very significant in order to find out
his/her tax liability.

HOW TO DETERMINE THE

RESIDENTIAL STATUS OF THE
INDIVIDUAL

RESIDENTIAL STATUS FOR INDIVIDUAL

Residential Status

Resident

Resident &
Ordinarily resident
(ROR)

Non-Resident (NR)

Resident but Not

Ordinarily resident
(NOR)

Residency in India is determined by

physical number of days stay
in India

BASIC CONDITIONS
(a) 182 days in the relevant previous year; OR
(b) 60 days in a financial year plus 365 days in four financial years
preceding the relevant financial year
Any one of
the two
conditions
satisfied

RESIDENT

None of the
conditions
satisfied

NR

In case an 1.Indian citizen leaving India as a member of a crew of an Indian ship or for the purpose of
employment outside India
2.Indian citizen or POI comes on visit to India.
To be termed as a Resident, the number of days stay in India should be 182 days in the relevant
previous year

ADDITIONAL
CONDITIONS
(a) Resident in India for at least 2 out of 10 previous years immediately
preceding the relevant financial year; AND
(b) He has been in India for 730 days or more, during seven previous years
immediately preceding the relevant financial year

Both the
conditions
satisfied

ROR

One or
both of the
conditions
not
satisfied

NOR

Important note
regarding Residential
Status
Excepting Individual
and HUF, all other
persons are classified
either as resident or non
resident

Place of Control
Wholly in India

Residential
Ordinarily
Status Of Family Resident Or Not
Resident

Wholly Out of India

Non-Resident

If Karta has been

resident in India of 2
out of 10 previous yrs
immediately
preceding the
previous year AND
730 days or more
during 7 years
preceding the
relevant previous yrs.

Partly in India and

partly
outside India

Resident

--If Karta has been

resident in India of 2
out of 10 previous yrs
immediately
preceding the
previous year AND
730 days or more
during 7 years

RESIDENTIAL STATUS OF FIRM AND

ASSOCIATION OF PERSON
PLACE OF CONTROL

RESIDENTIAL STATUS

WHOLLY IN INDIA

RESIDENT

WHOLLY OUT OF INDIA

NON- RESIDENT

PARTLY IN INDIA AND

PARTLY OUTSIDE INDIA

RESIDENT

RESIDENTIAL STATUS OF A
COMPANY

RESIDENTIAL STATUS OF
EVERY OTHER PERSON
Every other person is resident in India if
control and management of his affairs
is, wholly or partly, situated within India
during the relevant previous year.
On the other hand, every other person is
non-resident in India if control and
management of its affairs is wholly
situated outside India.