Results 1 to 8 of 8

Thread: IPCC - Income Tax Notes.

  1. #1
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    SYALLABUS

    TAXATION FOR PCC

    Your syllabus for Taxation is divided in three parts. Let us have look at what is included in your course and the level of knowledge required from you for this subject. First of all please look at the three divisions of the syllabus:-


    1. Income Tax -75 Marks
    2. VAT and (3).Service Tax- 25 Marks


    The major portion is income Tax and a very minor part of VAT and Service Tax (Both are relatively new Taxation in our country) is added to your course to give some basic knowledge of VAT and service tax. Any way the major thrust will be on Income Tax.


    The level of knowledge expected from you for Income tax, VAT and service tax is only working knowledge and your syllabus is :-




    PART – I : INCOME TAX -75 MARKS
    1. Important definitions under the income tax Act, 1961
    2. Basis of charges; Rates of Taxes applicable for different types of assesses.
    3. Concept of previous year and assessment year.
    4. Residential status and scope of total income; income deemed to be received/ deemed to accrue or arise in India.
    5. Income which do not form part of the total income.
    6. Heads of Income and provisions governing computation of total income under different heads.
    7. Income of other persons included in the assessees total income
    8. Aggregation of income; set of or carry forward and set off of losses.
    9. Deduction from gross total income.
    10. Computation of total income and tax payable; rebate and reliefs.
    11. Provisions concerning advance tax and tax deducted at source.
    12. Provisions for filing of return of income.


    PART II- SERVICE TAX AND VAT
    1. Service Tax – Concept and General principals
    2. Charge of service tax and taxable services
    3. Valuation of Taxable service
    4. Payment of service tax and filing of returns
    5. VAT-Concept and General principles.


    By:- CA Sudhir Halakhandi – (M)- 98280 67256 E-mail Sudhir@halakhandi.com
    CA Ajay Sharma – (M) – 98280 67265 E-mail ajayajay_sharma1@rediffmail.com

  2. #2
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    IMPORTANT DEFINITIONS UNDER THE INCOME TAX ACT, 1961


    Assessee(Section 2(7):- Assessee means a person by whom any tax or any other sum of money is payable under this Act includes:-

    (a). Every person in respect of whom any proceedings under this Act has been taken for the assessment of his income of assessment of fringe benefits or the income of any other person in respect of which he is assessable, or the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person.

    (b). every person who is deemed to be an assessee under any other provision of this Act.

    (c). every person who is deemed to be an assessee in default under any provision of this Act.

    Assessee is the very important term under the income tax Act and whole the taxation Act is depend on the assessee because assessee is the person who is contributing the money to the Government in the form of Tax. See if there is no assessee then what is the need of formulating the income tax Act and what is the need for you and all of us to study this subject.

    Here the assessee means and includes the persons who are paying or liable to pay tax, interest or penalty to the Government. The other persons who are not liable to pay any sum to the government as such but against whom any proceeding under the income tax is taken or persons who are in default of following any provisions of income tax Act or the persons who is eligible for any refund from the department.

    Here see the person who has defaulted in deducting the Tax while making payment to other person then he will be an assessee in default though he has nothing to pay to the Government as income Tax.

    Person (Section 2(31):- “Person includes- (i). An Individual, (ii). A Hindu Undivided Family (iii). A Company (iv). A firm (v). An association of persons or a body of Individuals, whether incorporated or not, (vi). A local authority (vii). Every artificial juridical person, not falling within any of the preceding sub-clause.

    Explanation: - For the purpose of this clause, an association of persons or body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains.


    Let us have a look at who is included in which category of persons:-

    (i). An Individual- Mr. Anil kumar Sharma. Mrs. Savita Chouhan, Mr. Ajit goyal, Miss Gayatri sharma. – Individual means natural person i.e. human being. Mr. and Mrs. Sharma i.e. husband and wife are two separate persons in the eyes of IT Laws. In case of individual, relation does not have any meaning every body is a separate person.

    (ii). Hindu undivided Family: - HUF is also a separate entity and is governed by Hindu law. IT laws have not defined the HUF but it is the creation of Hindu law and is applicable only on the persons covered by the Hindu law. In the eye of IT laws HUF has the separate status, it can have separate income and it is assessed separately and have nothing to do with the individual income or status of it’s members. Let us have a look here- Mr. Anil Sharma is an Individual person. He is a Doctor. His wife Mrs. Anjali Sharma is a teacher and their son Rohit sharma is an engineer and their Daughter Miss Kavita sharma a medical student. Now in this family there are five separate persons in the eyes of IT laws. Individuals- Mr. Anil sharma, Mrs. Anjali Sharma and Mr. Rohit sharma and Miss Kavita sharma. These are four Natural persons i.e. human beings and these four have to pay tax on their individual income. Now this family i.e. Hindu undivided family comprising of Mr. Anil sharma, Mrs. Anjali Sharma and Mr. Rohit sharma and Miss Kavita sharma is a separate person by the fiction of law i.e. though it is not a natural person but since it has been provided in the law ,this family has the separate status as person.

    Here see what an HUF is in the eyes of Hindu laws- A family which consists of all males lineally descended from a common ancestor and includes their wives and unmarried daughters.

    Here see this status is available only to the families which are governed by the Hindu laws. One can not have a MUF i.e. Muslim undivided family and CUF i.e. Christian undivided family in the eyes of IT laws.

    (iii).Firm:- There may be a partnership firm or proprietorship firm but in the eyes of IT laws “Firm” means a Partnership firm. Here in income Tax Act, Partnership, Partner and partnership firm have the same meaning a assigned to them in the Indian Partnership Act. So here note that whenever a “Firm” is referred with reference to Income Tax then it is always a partnership firm.


    What is partnership:- A partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all.


    The persons who have entered into the partnership are called individually “Partners” and jointly “Firm”.

    (iv). Company:- Though in the common language the company is a company incorporated under the companies Act, but Section 2(17) of the income tax Act, has defined the companies in it’s own language and according to it Company means (a). An Indian Company (b). Any body corporate incorporated by or under the laws of a country outside India

    (c). Any institution or body which is or was assessable or was assessed as a company under the Income tax Act, 1922 or which is or was assessable or was assessed under this Act, as a company for any assessment year commencing on or before the 1st. Day of April 1970, or (d). Any institution or body (Indian or out side) which is declared by the Board to be a company.


    Example: - (i). Shree Ram Foods (Pvt.) Limited (ii). Reliance Industries Limited (iii). Dabur India Limited.

    - You might have heard a word corporate sector and this corporate sector is contributing most of the Tax to the Government of India. All the company assesses are called “Corporate assesses”.


    (v).An association of persons or a body of Individuals, whether incorporated or not:- When more than one persons engaged themselves in a activity without forming a partnership , they will be called “Association of persons or body of Individuals”.

    Example:- Five persons have formed a group of singers and performed in different cities .They earned Rs. 25 lakhs in a financial year. Since they have not formed a partnership hence they will be called “Association of persons”.
    Some years back the Cricket Board of India, Pakistan cricket Board and shri Lanka Cricket board jointly organized World cup cricket and in that case they were working as “Association of persons”.


    Here see there is a basic difference between these two terms – Association of persons means a association of persons and it may include artificial persons like companies also but in case of Body of individuals only Natural persons can form part of it.


    The tax treatment under the income tax Act, for both Association of persons and body of individuals is the same.

    (vi). Local Authority: - Krishi Upaj mandi Samiti, Municipal council, Urban improvement trust.

    (vii). Every artificial persons, not falling within any of the categories above- Example- Bar council of India, Chamber of commerce, an idol or deity.

    PROFIT MOTIVE NOT MANDATORY



    It may be noted here that the AOP/BOI/LA/AJP i.e. Association of persons, Body of Individuals/ Local authorities/Artificial Judicial person will be treated as persons irrespective the fact that they are formed for the purpose of earning profit or not.

    SOME MORE DIFINITIONS



    ASSESSMENT YEAR: - Section 2(9):- Assessment year means the period of twelve months commencing on 1st. day of April every year.

    PREVIOUS YEAR: - Section 2(34):- Previous year means the previous year as defined in Section 3.


    SECTION 3:- For the purpose of this Act, “previous year” means the financial year immediately preceding the assessment year.

    Let us see here the concept of assessment year and previous year as given in the Income Tax act and their importance while taxing an assessee. First of all see that the income of previous year is taxable in the assessment year and assessment year is period of 12 months commencing from 1st. Day of April.

    Example: - Assessment year 2008-09 is the period from 1-04-2008 to 31-03-2009. Now the Section 3 of the Act has defined “Previous year means Financial year immediately preceding the assessment year hence for the assessment year 2008-09 the previous year is the financial year 2007-08 i.e. the period 1-04-2007 to 31-03-2008. The income for the Financial year 2007-08 i.e. 1-04-2007 to 31-03-2008 which is called previous year also is taxed in the assessment year 2008-09.

    Here see financial year means a period from 1st April to 31st. March.


    INCOME OF PREVIOUS YEAR IS TAXED IN ASSESSMENT YEAR
    WHY?


    The income of a previous year is taxed in the assessment year. Why? This is very common question and let us tries to find out its answer in a very simple way. Suppose you have gone to a shopping mall and purchased 10 articles. How many times you to pay the bill? Only one time i.e. after completing your shopping. A bill can not be raised on your shopping of each article. This is system to billing you when you finished your shopping. This is universal law of billing a person. See when you take your meal to a restaurant; you will get your bill after finishing the meal. While billing somebody a finishing point is required. On the same footing Your income is taxed after a finishing point and here 31st. March is the finishing point hence your income up to 31st. March is taxed in a year commencing from the next following day i.e. from 1st. April and that is the assessment year for your previous year.


    EXCEPTIONS OF THE RULE

    Income of previous year is taxable in the assessment year. This is the general law and like any other General law it has some exceptions also and these exceptions are given to protect the interest of revenue and better tax collection:-
    (i). Income of shipping business of Non-resident:-
    If the assessee is (i) a non resident (ii). He owns a ship or ship is chartered by him. (iii). The ship carries passengers, livestock, mail or Goods shipped at a port in India and if all the three conditions are satisfied then the 7.5% of the gross receipts of the ship shall be treated as income of the assessee and he has to pay tax on it in the same year. In this case of income of assessment year is taxable in the assessment year itself. Section 172
    (ii). Income of persons who leaves India Permanently :-If the assessee in the opinion of the assessing officer may leave India during the current assessment year or shortly after end of the current assessment year with a intention of not returning India, the assessing officer may tax the income of the assessment year in the assessment year itself. This is mandatory provision. – Section 174
    (iii).Income of bodies formed for short duration:-If it appears to the assessing officer that the Association of persons or body of individual formed in the same assement year is dissolved in the same assessment year then he may proceed to tax the income of such BOI/AOP in the same assessment year. This is mandatory provision. – Section 174A

    (iv). Persons Likely to transfer property to avoid tax:- If it appears to the assessing officer that the assessee with a view to avoid tax , likely to dispose, transfer or otherwise part with the movable or immovable property then he may assess and tax the income of such assessee in the same assessment year, This is mandatory provision.- section 175.
    (iv).Income of a discontinued business:-If a business is discontinues in any assessment year then at the “discretion of the Assessing officer” the income of such business is taxable in the assessment year itself.- Section 176


    Financial Year 1-04-2007 to 31-03-2008 This is called previous year 2007-08 and the income earned in this year is taxable in the financial year next following it i.e. assessment year 2008-09.The income of previous year 2006-07 is taxable in this year i.e. in the assessment year 2007-08.
    One person has earned salary Rs. 24000.00 per month in the calendar year 2007 and 36000.00 in the calendar year 2008. Calculate his taxable income for the assessment year 2008-09. First of all calculate the Months covered in the assessment year 2008-09 Since the income of previous year 2007-08 is taxable in the assessment year 2008-09 the period is 1-04-2007 to 31-03-2008 and for first nine months the salary is 24000x9=216000.00 and for the rest of three months the salary is 36000x3= 108000.00 i.e. total Rs.324000.00 and this is the income of the previous year 2007-08(1-04-2007 to 31-03-2008) and it is taxable in the Assessment year 2008-09.




    HEADS OF INCOME

    Section -14




    HEADS SECTIONS AMOUNT
    1.Salary 15 to 17
    2.Income from House property 22 to 27
    3.Profits and gains from business and profession 28 to 44
    4.Capital Gain 45 to 55A
    5.Income from other sources 56 to 59
    GROSS TOTAL INCOME
    Less:- Deductions under Chapter VIA 80C to 80U
    TOTAL INCOME OR NET INCOME (Rounded off to nearest Rs.10* as per Section 288A.
    Tax on Total Income
    Less:- Rebate (Security transaction Tax- Not available for assessment year 2009-10 onwards) 88E
    Net Balance Tax payable
    Add:- Surcharge (Wherever applicable)
    Total Tax and Surcharge
    Add: - 3% EC (i.e. 2% Education Cess and 1 %( Secondary and higher education cess)
    Less:- Rebate from Tax-Section 86(Tax on income on share of AOP/BOI) Section 89 (Salary etc. received in arrears or advance), Section 91 (Tax paid in foreign countries on income accrued or aroused outside India, where no double taxation agreement is made) 86, 89, 90 and 91
    Net Tax Liability
    Less: - (i). TDS/TCS (ii). Advance Tax
    Balance payable on self Assesseement
    LESS: - Self Assessment tax paid
    Balance NIL



    ROUNDED OFF OF INCOME

    288A. The amount of total income computed in accordance with the foregoing provisions of this Act shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paisa shall be ignored and thereafter if such amount is not a multiple of ten, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and if the last figure is less than five, the amount shall be reduced to the next lower amount which is a multiple of ten; and the amount so rounded off shall be deemed to be the total income of the assessee for the purposes of this Act.

    EXAMPLE:- Total Income 230402.75= 230402.00= 203400.00

    Total Income 250508.65= 250508.00= 250510.00


    ROUNDED OFF OF TAX

    288B. Any amount payable, and the amount of refund due, under the provisions of this Act shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored and thereafter if such amount is not a multiple of ten, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and if the last figure is less than five, the amount shall be reduced to the next lower amount which is a multiple of ten.

    EXAMPLE:- Tax payable- 10703.40 =10703.00=10700.00

    Tax payable- 11717.80=11717.00= 11720.00


    CHARGE OF TAX

    SECTION -4


    1. Income tax is an annual Tax.

    2. Income of the previous year is assessed to tax in the assessment year at the rates applicable for that assessment year.


    3. Rate of Tax for an assessment year is fixed by the Finance Act every year and not by the income tax Act. If on a particular 1st. April of any assessment year the Finance Act has not got the assent of the president of India then for that assessment year the rates as proposed in the Finance Bill or the rates applicable to immediately preceding assessment year , whichever is beneficial to the assessee will apply until the new provision become effective.

    4. Tax is charged on a person and on his total income.

    5. Provisions which are applicable on 1st. April will apply for computing the and if any amendment is made on 2nd day of April onwards that will have no bearing on the “Computation of Income” of the assessee. This law is applicable only for the computation of total income and for other purposes the amendment will taken place from the date of its enactment.


    SCOPE OF TOTAL INCOME
    SECTION -5



    RESIDENTIAL STATUS OF THE ASSESSEE
    SECTION -6



    INDIVIDUAL AND HUF OTHER ASSESSEE- FIRM, COMPANY, AOP,BOI AND EVERY OTHER PERSON
    1.Resident and ordinary resident in India 1.Resident in India
    2. Resident but “not ordinary resident in India 2. Non resident in India
    3. Non- resident in India -




    INDIVIDUAL



    Resident in India
    BASIC CONDITIONS

    (One of the two conditions)

    If at least one of the two basic conditions are satisfied then the person can be said to be a Resident in India:-
    (i). He is in India for a period of 182 days or more in a previous year

    OR

    (ii). He is in India for a period of 60 days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year*.

    *
    The second condition is not applicable to the following persons:-

    (Exceptions for Second condition)


    1. Indian citizen who leaves India during the previous year for the purpose of employment outside India.
    2. India citizen who leaves India during the previous year as a member of crew of an Indian ship. 3. Indian citizen or a person of Indian origin who comes on a visit to India during the previous year.*



    • A person of Indian origin: - He, or either of his parents (Mother or Father) or any of his grand parents (Nana or Nani or Dada or Dadi) was born in undivided India.


    Resident but ordinary resident

    ADDITIONAL CONDITIONS



    (Both the conditions are mandatory)

    (i). He is resident in India for at least 2 out of the 10 Previous years(i.e. He must fulfill one of the two basic conditions in at least two previous years out of the 10 previous years immediately preceding the previous year under consideration)
    AND

    (ii).He has been in India for a period of 730 Days or more during the 7 years immediately preceding the relevant previous year.


    HOW TO BECOME A ORDINARY RESIDENT

    One Basic Condition+ Two Additional Conditions
    HOW TO BECOME A RESIDENT BUT NOT ORDINARY REDENT

    One basic condition and not fulfilling the both the Additional conditions

    A NON RESIDENT

    Not fulfilling any of the Basic conditions(If a person is not fulfilling any of the Basic conditions then the Additional conditions are immaterial for him)

    HOW TO CALCULATE THE DAYS OF STAY IN INDIA

    (i). Need not to be Continuous stay

    (ii). Need not to stay at a same place
    (iii). Where a person is in India for part of a day then calculation will be based on 24 hours a day basis.
    (iv). If data of stay on hourly basis is not available then the day he enters India and the day he leaves India both will be taken into account.

    (v). When a person stays in the Yatch in Indian territorial water then his stay will be counted in India.

    RESIDENTIAL STATUS FOR OTHER PERSONS
    (Including Individual – in Tabular form)


    PERSON ORDINARY RESIDENT NOT- ORDINARY RESIDENT NON-RESIDENT
    Individual If satisfied at least one basic condition (i.e. any one of the two basic conditions)
    +
    Both the additional conditions
    If he satisfied at least one basic condition(i.e. any one of the basic conditions)
    +
    Any one of the additional condition is not satisfied
    None of the basic conditions is satisfied
    HUF Control and management of its affairs is wholly or partly in India
    +
    Both the additional conditions are satisfied by the Karta of HUF
    Control and management of its affairs is wholly or partly in side India
    +
    Any one of the additional conditions is not satisfied by the Karta of HUF
    Control and management wholly outside India
    COMPANY (i). Indian company
    (ii). Other than Indian company- if the control and management is situated wholly in India
    N.A. Other than Indian Company: - If control and management is wholly or partly situated outside India.
    FIRM/AOP/BOI/LOCAL AUTORITY/ARTIFICILA JUDICIAL PERSON/ANY OTHER ASSESSEE If control and management is wholly or partly in India N.A. Control and management wholly outside India.


    You Can Also Download This From Word Format
    Last edited by sudhanshusaxena; 17-11-2011 at 05:11 PM.

  3. #3
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    TAXATION OF CHARITABLE TRUST
    WHAT IS TRUST

    Trust is not defined in the Indian Income Tax Act, 1961 and as per India Trust Act, the meaning of trust is as under:-

    A “Trust” is an obligation annexed to the ownership of property , and arising out of a confidence reposed in accepted by the owner , or declared and accepted by him , for the benefit of another or of another and the owner.

    Example: - Mr. Shishir Bose an old man having age of 85 years created a trust by giving his big house and Rs. 50 Lakhs to it for the purpose of giving educational benefits to the Poor and deserving students. For this purpose he gave the responsibility to 4 persons to look after the affairs of the trust.

    Now see here the essentials of a trust:-


    1.The Settler He can be said the author of the trust. Here the settler is Mr. Shishir Bose who created the trust.
    2.The instrument of Trust The trust deed i.e. the document by which all these things regarding the property of trust, name of trustees, the purpose of trust is written .
    3.The trust property The House and Rs. 50 Lakhs given by Mr. Shishir Khandelwal is the trust property.
    4. The Obligation Giving educational benefits to the poor and deserving students.
    5.The Trustees The 4 persons appointed by Mr. Shishir Bose are the trustees of the trust. The persons who have the responsibility to fulfill the obligation attached with the property of the trust are called the trustees.
    6. The beneficiaries The persons for whose benefit the trust is created are called trustees of the trust. Here the Poor and deserving students are the beneficiaries of the trust.


    The trust can be created for any purpose say for the benefit of a family, for benefit of minor children of a family, for benefit of married daughters of a family and here note that all the trust are not exempt from Income tax. Only those trust which satisfy the conditions lay down in section 11 are only eligible for exemption and these conditions are:-

    1. The property from which income is derived should be held under trust or other legal obligation. - Section 11(1) (a).

    2. The trust should be registered with the commissioner of Income Tax.

    3. The property should be held for charitable purpose and in case the trust is created on or after 1st. day of April 1962 the trust should fulfill the following conditions also:-


    (i). The trust should not be created for the benefit of a particular religious community or cast.
    (ii). No part of the Income should be used for the benefit of Settler or other specified person.-
    (iii). The property should be held wholly for charitable purpose. – Section 11(1)(a)
    (iv). The condition as mentioned above under (i) i.e. the trust should not be created for the benefit of a particular religion or cast is not applicable for religious trust but the other two conditions i.e. the trust should not use any part of it’s income for the benefit of settler or other specified person and the property should be held wholly for charitable purpose are applicable for the religious trusts established on or after 1st. day of April 1962.


    4. The exemption is limited to the income of the trust which is applied for charitable or religious purpose + the income which a trust can retain as specified in the law. The other income is Taxable. The law has permitted 15% of the income to be retained by a trust hence at least 85% of the income of the trust should be expended for religious and charitable purpose to get the exemption. - Section 11(1) (a) and (b).

    However in certain conditions where the application of Income is fall short of 85% can be expended in the coming years or years with certain conditions is explained below in details.


    5. The income of the trust is applied for charitable and religious purpose in India: - Here see only portion of Income is eligible for exemption which is applied for charity in India. Foreign charity is not allowed. But here is one exception and which is given is Section 11(1)(c) and according to it foreign charity is allowed for exemption if the following conditions are satisfied:-

    1. The trust is created on or after 1st. April 1952.
    2. The income of the trust is applied for a charitable purpose which tends to promote international welfare in which India is interested.
    3. The trust created before 1st. April 1952 can expand their income outside India for charitable or religious purpose.
    4. For 2 and 3 condition it should be noted that there should be a specific or general order has given exemption to these foreign charity.- Section 11(1)(c)

    6. Income from Voluntary contributions with a specific direction that they shall form part of the corpus of the trust will not form part of the income of the trust.-Section 11(1) (d).

    7. The trust funds should be invested in the securities and investments prescribed under section 11(5).


    What is charitable purpose
    Section 2(15)

    Section2 (15):-“charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.

    The following proviso has been added to section 2(15) by the Finance Act, 2008, w.e.f. 1-4-2009 :

    Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.


    The charitable purpose means a purpose of charity as understood in general terms and as per definition in Section 2(15) it includes the following also:-



    Relief to Poor
    Education
    Medical Relief
    any other object of general public utility


    Here note that the definition is “inclusive definition” hence besides having all the purposes which are covered under the General charity it includes the Relief to poor, Education, Medical relief and any other object of general public utility also.

    VOLUNTARY CONTRIBUTIONS VIS-À-VIS- CORPUS FUND


    Voluntary contribution with a specific direction that the same shall form part of the corpus fund will not be included in the total Income of the trust. Here the onus of proof is on the trust and it should have sufficient evidence to prove that the Voluntary donations are received with specific directions that they should form part of the corpus of the trust.


    REGISTRATION OF TRUST


    1. Each trust to be eligible for exemption under section 11 should be registered with the Commissioner of Income.
    2. The application of registration should be made within one year from the date of creation of the trust.

    3. The application should be in Form Number 10A.
    4. After receiving the application the commissioner shall call such information or documents as he considers necessary to verify the genuineness of the activities of the trust or institution.
    5. If he (the commissioner) is satisfied with the genuineness of the activities of the trust he shall pass an order in writing and register the trust.
    6. If he is not satisfied with the genuineness of the activities of the trust he will reject the application but before this he will have to give opportunity to the trust of being heard.
    7. The order of granting or refusing the registration to the trust should be passed within 6 months from the end of the month in which the application for registration is made to the commissioner.


    APPLICATION OF INCOME


    1. The term application of Income means disposal of Income for charitable and religious trust.

    2. Revenue and capital expenditure both are allowed. If the expenditure is out of the income of the trust and for the charitable or religious purpose they will form part of the Application of Income irrespective of their capital or revenue nature. Here see if the expenditure for a Building which will be used for shelter of the Pilgrims it will form part of application of Income though it is capital expenditure.

    3. Repayment of Loan: - If a trust has taken Loan from any source for its charitable or religious purpose then the repayment of such loan will also be taken into account while calculating the application of Income.
    4. If the purpose of charitable trust is to give Loan for education to needy students than giving loan to such students will also be considered for the purpose of application of Income and when the Loan is repaid by the students back will be considered as Income of the trust.

    5. Donations to the other trusts are also considered as Application of the Income.

    EXTENDED TIME FOR APPLICATION OF INCOME

    If 85% of the income is not expended during the previous year, the trust can use the extended time in the following two conditions:-

    Application of income fall short of 85% of income of the trust due to the reasons given below When income can be spent(Extended time for Expenditure)
    a. Income has not been received during the relevant previous year The income can be spent either in the year of receipt or next following year.
    b. Because of any other reason During the previous year immediately following the previous year in which income is derived.

    To avail the benefit of extended time, the trust should have applied to the Income tax officer before the due date of filling of return.

    WHAT HAPPENED IF INCOME IS NOT APPLIED IN EXTENDED TIME

    If the income is not applied in the extended time then it will be taxable as under:-

    1. If the option is taken due to the reason that income is not received during the previous year then it will have to be spent during the previous year in which it is received and in the next following year of receipt. The balance remained will form part of taxable income of the year immediately following the year of receipt.

    2. If option is taken due to any other reason then it can be spent in the previous year immediately following the year in which income is derived. The Balance of income not spent as such in the year immediately following the year of receipt shall form part of the taxable income of the year immediately following the year in which it is derived.
    Example: - During the previous year a charitable trust derived income of Rs. 7.70 Lakhs out of which Rs. 6.00 Lakhs received during the year. Further with respect to Rs. 1.50 Lakhs the trust has reason for not expending the same. The trust has not applied to ITO for its option. The trust actually spent 2, 75,000.00 during the year. Calculate the total income of the trust.

    What will be your answer if the trust has applied to the ITO for extended time.


    Answer: - (Amount in Rs.)
    Income of the trust from the property held for charitable purpose 7,70,000
    Less:- 15% set apart for future 1,15,500
    Balance 3,80,000
    Less:- Amount spent during the year 2,75,000
    Balance not utilised 1,05,000


    If the trust has not applied to the ITO for extended time then the whole unutilised amount of Rs.1, 05,000.00 will be taxable.

    If the trust has applied for extension of time then since it has Rs. 1.70 as amount not received and further Rs. 1.50 Lakhs as amount not spent for any other purpose then his taxable income is NIL.

    MODES OF INVESTMENT
    Section 11(5)

    1. Investment in Government savings certificates.
    2. Deposit with Post office saving Bank account.
    3. Deposit in any Scheduled bank or Co-operative Bank.
    4. Investment in Central Government or State Government securities.
    5. Investment in UTI Units.
    6. Investment in Government Guaranteed Debentures of a Company- Where Interest or the principal is Guaranteed by central Government or state Government.
    7. Investment or deposit in any public sector company.
    8. Immovable property.
    9. Debentures of a Financial corporation engaged in Long term Industrial Financing.
    10. Deposit with Industrial Development Bank of India.
    11. Other Investment as may be prescribed.


    FORFEITURE OF EXEMPTION

    Sec.13


    1. Income for private religious purpose: - Any part of income from property held for charitable purpose spent on private religious purpose which does not ensure benefit of the public.

    2. Income of the charitable trust established for the benefit of particular religious community: - Entire income of a trust which is established on or after 1st. April 1962 for the benefit of a particular religious community is taxable.


    You Can Also Download This From Word Format



    Attached Files Attached Files
    Last edited by sudhanshusaxena; 17-11-2011 at 05:14 PM.

  4. #4
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    INCOME WHICH DO NOT FORM PART OF TOTAL INCOME

    SECTION -10


    What is Total Income?

    Section 2(45) “Total income” means the total amount of income referred to in section 5, computed in the manner laid down in this Act.

    Tax is payable on total income and when it is specifically written in the opening portion of the Section 10 is under:-

    Section10 :- In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

    If these incomes which are mentioned in section 10 do not form part of the Total income, in the practical sense we can say these incomes are “Exempt” from tax hence these incomes are called exempted income under section 10 of the Income tax Act.


    S.NO. SECTION DESCRIPTION OF INCOME
    1. 10(1) Agricultural Income
    2. 10(2) Payments received from family income by the Members of the HUF
    3. 10(2A) -Share of profit from a firm.
    4. 10(4) -Interest received by a non resident on prescribed securities.
    -Interest received by a person who is resident outside India on amounts credited in the “Non resident (External) Account.
    5. 10(5) -Leave travel concessions provided by an employer to his Indian citizen employee.
    6. 10(6) -Remuneration received by foreign diplomats of all categories provided the same type of exemptions is available to their counterparts (i.e. Indian diplomats) in their countries and these foreign nationals should not have any other “Business or profession”- Section 10(6) (ii).
    - Salary received by foreign citizen (i). As an employee of foreign enterprises which is not engaged in any “trade or business” (ii). Such employee does not stay in India for more than 90 days and (iii).Such salary paid is not deductible as expenditure from the taxable income, if any, of such enterprises. - Section 10(6) (vi).
    - Salary received by a non resident foreign citizen as a member of ship’s crew if the total stay of that person in India does not exceed 90 days in the previous year.- Section 10(6)(vii).
    - Remuneration received by a Foreign Government’s employee during his stay in India for the purpose of his training in any (i) Government undertaking (ii) Government owned Company (iii). Subsidiary of Government Owned Company (iv). Government Corporation or (v). Co-operative society wholly financed by the Government. - Section 10(6) (xi).
    -Tax paid on behalf of the foreign companies- Section 10(6A).
    -Tax paid by Government or an Indian Concern in the case of a non-resident/ Foreign company.- Section 10(6B)
    -Income arising to notified foreign companies from services provided in or outside India in project connected with the security of India. - Section 10(6C).
    - Foreign allowances granted by the Government of India to its employees during their out side India postings-Section 10(7).
    -Remuneration received from foreign Government by an Individual who is in India in connection with any SCTAP (Sponsored co-operative technical assistance programme) with a foreign Government and income of the family members of such employee.-Section 10(8) and 10(9).
    -Remuneration received by non resident consultants and their foreign employees- Section 10(8A), (8B) and (9).
    7. -Death cum retirement Gratuity. - Section 10(10).
    - Commuted value of pension and any payment received by way of commutation of pension by an individual out of annuity plan of LIC or other insurer from a fund set up by such corporation or insurer.-Section 10(10A).
    - Leave salary- Section 10(10AA).
    -Retrenchment compensation – Section 10(10B).
    8. -Compensation received by victims of Bhopal Gas leak disaster. - Section 10(10BB).
    - Compensation from the Central Government or a State Government or Local Authority received by an Individual or his legal heir on account of any disaster.- Section 10(10BC).
    -Compensation received from a public sector company at the time of voluntary retirement or separation. - Section 10(10C).
    9. - Tax on perquisite paid by employer- Section 10(10CC).
    - Any sum (including bonus) on life insurance policy (not being a keyman Insurance policy. –Section 10(10D).
    10. -Any amount from provident fund paid to retiring employee. - Section 10(11).
    - Amount from an approved superannuation fund to legal heirs of the employee. - Section 10(13).
    -House rent allowance subject to certain Limits- Section 10(13A).
    - Special allowance granted to an employee- Section 10(14).
    11. -Income from certain exempted securities- Section 10(15).
    12. - Payment made by an Indian company, engaged in the business of operation of an aircraft, to acquire an aircraft on lease from a foreign government or foreign enterprises if certain conditions are satisfies- Section 10(15A).
    13. - Scholarship granted to meet the cost of education – Section 10(16).
    14. -Daily allowance of a member of Parliament or state legislature – Fully exempt.
    - Other allowances paid a member of Parliament or state legislature subject to certain conditions.
    - Section 10(17).
    15. - Rewards given by the Central Government or state Government for literary, scientific or artistic work or attainment or service for alleviating the distress of the poor , the weak and the ailing , or for proficiency in sports and games or gallantry awards approved by the Government .- Section 10(17A)
    16. Pension or family pension of gallantry awards winners- Section 10(18)
    Family pension received by family members of armed forces- Section 10(19)
    17. Notional property income of any one palace occupied by a former ruler-Section 10(19A)
    18. Income of local authorities – Section 10(20)
    19. Any income of housing Boards constituted in India for planning , development or improvement of cities , towns or villages- Section 10(20A)
    20. Any income of an approved scientific research association –Section 10(21).
    21. Income of specified news-agencies i.e. PTI, UNI (for the 1994-95 to 2008-09)-Section 10(22B).
    22. Any income (Other than interest on securities, income from property, income received for rendering any specific services and income by way of interest or dividends) of approved professional bodies- Section 10(23A).
    23. Any income received by any person on behalf of any regimental fund or non public fund established by the arm forces of the Union for the welfare of the past and present members of such forces or there dependents . –Section 10(23AA)
    24. Income of funds established for the welfare of the employees – Section 10(23AAA).
    25. Any income of the pension fund set up by LIC or any insurer approved by the controller of Insurance or insurance regulatory and development authority- Section 10(23AAB).
    26. Any income (other than Business Income) of a trust or society approved by Khadi and Villege Industry commission-Section 10(23B).
    27. Income of an authority whether known as Khadi and villege Industry board or by any other name for the development of Khadi and villege Industries-Section 10(23BB).
    28. Income arising to any body or authority established, constituted or appointed under any enactment for the administration of public, religious or charitable trusts or endowment or societies for religious or charitable purposes.-Section 10(23BBA)
    29. Income of the European economic community derived in India by way of interest , dividends or capital gains in certain cases under the European community International Institutional partners Scheme, 1993 – Section 10(23BBB)
    30. Income of SAARC Fund for regional projects.- Section 10 (23BBC)
    31. Any income of secretariat of Asian organisation of supreme audit institutions- Section 10(23BBD).
    32. Income of Insurance Regularity authority- Section 10(23BBE)
    33. Income of North eastern Dev. Finance Corporation to the extent of 60% for assessment year 2007-08 .- Section 10(23BBF)
    34. Income of the central Electricity regulatory commission (Applicable from the Assessment year 2008-09).Section 10 (23BBG)
    35. Income received by any person on behalf of specified national funds approved public charitable institutions, education Institute and Hospital – Section 10(23C).
    36. Income of a Mutual Fund set up by a Public sector Bank or Public Financial Institutions – Section 10(23D)
    37. Income of Investor protection Fund- Section 10(23EA).
    38. Income of credit guarantee funds, trusts for small Industries- Section 10(23EB)
    39. Income of Investor protection Fund by way of contributions form commodity exchange and members thereof (Applicable from the Assessment year 2008-09)- Section 10(23EC).
    40. Income by way of Dividend or long – term capital gain of venture capital fund/undertaking – Section 10(23FA).
    41. Income by way of interest on securities, property income and income from other sources of a registered trade union or an association of registered trade unions – Section 10(24).
    42. Any Income received by a person on behalf of statutory provident fund, recognized provident fund, Approved superannuation fund, approved gratuity fund and approved coal – Mines provident fund- Section 10(25).
    43. Income of employees state Insurance Fund- Section 25A.


    You Can Also Download This From Word Format

    Attached Files Attached Files
    Last edited by sudhanshusaxena; 17-11-2011 at 05:15 PM.

  5. #5
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    AGRICULTURAL INCOME

    What is agricultural Income

    Section 2(1A)


    (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;


    (b). any income derived from such land by agricultural or by the process employed to render the produce fit for market or by sale of such produce by a cultivator or receiver of rent-in-kind;

    (c). any income derived from a building provided following conditions are satisfied: -
    (i). The building is situated on or immediate vicinity (surrounding area) of the agricultural land.
    (ii). It is occupied by the cultivator or receiver of rent – in-kind.
    (iii). It is used as dwelling house, store house or out house and
    (iv). The land is assessed to land revenue or it is not situated in specified area.


    What is specified area

    (A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name)
    or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been
    published before the first day of the previous year ; or
    (B) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.

    Points to Note


    1. The Land must be an agricultural land and it should be situated in India. If agricultural Land is not situated in India then the income will be chargeable as business income and not agricultural Income.
    2. The agricultural income of the cultivator as well as the rent (both in money and in kind) received by the owner of the Agricultural land is exempt from tax.
    3. The agricultural income of the cultivator or the receiver of rent in kind to make the agricultural produce fit to market is also exempt from tax. See here the tobacco can not be sold without drying it hence the activities till drying of tobacco will be treated as agricultural activity but the Industrial activity like ginning and pressing of cotton can not be included because cotton can be sold in the market without separating it from the cotton seed.
    4. The agricultural activity involves the basic operation as well as subsequent operations also. The operation on land by the cultivator on the land like tilling (Plough, dig, cultivate), Sowing the seeds and similar operation of the land are called basic operations.

    See here that the Basic agricultural operations are made on the land itself and not on the growth of the land i.e. on the crop. The subsequent operation on the crop are weeding (removing the wild plants), digging the soil around the growth and operations to preserve the growth.


    The basic operations performed by the cultivator on the land are surely the part of agricultural activity for the purpose of this exemption but subsequent operations will only form part of the agricultural activity if these are performed in continuation of the basic operations by the cultivator or the receiver of rent in kind.


    If the standing crop is purchased by a person and subsequent operations are done by him then the income will not be treated as agricultural income.
    The principal for determination of basic and subsequent operations have been described in the case of CIT vs. Raja Benoy Kumar Sahas Roy by Hon. Supreme court of India .


    What is added by Finance Act. 2008


    The finance Act, 2008 has added the following two types of nursery activities in the definition of Agricultural income for which there was a controversy before this enactment:-


    1. Sapling:-Develop the small trees and sale them for further growth.
    2. Seedling: - Develop the seeds.

    Income which is partially agricultural and partially from business


    Rule 7 If agricultural produce cultivated is used as raw material in the business of cultivator, he can deduct the market price of such raw material from the income of his business.
    where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of—
    (i) the expenses of cultivation;
    (ii) the land revenue or rent paid for the area in which it was grown; and
    (iii) such amount as the Assessing Officer finds, having regard to all the circumstances in each case, to represent a reasonable profit



    Special treatment for Rubber, Coffee and Tea
    In respect of composite activity of Growing and manufacturing of certain products the ratio of Agricultural Income and the Business income is determined by the Income Tax Rules and these are as under:-
    Rule Produce Agricultural Income Business Income
    7A Rubber 65% 35%
    7B Coffee Grown and cured 75% 25%
    7B Coffee Grown, cured, roasted and grounded 60% 40%
    8 Tea 60% 40%


    Partial integration of Agricultural Income for Tax Purpose
    The Finance Act, 1973 introduced for the first time a scheme of partially integrated taxation of non-agricultural income with incomes derived from agriculture for the purposes of determining the rate of income-tax that will apply to certain non-corporate assessees. The scheme is since continued by the Annual Finance Acts. The provisions applicable for the assessment year 2008-09 are contained Part IV of the First Schedule to the Finance Act, 2008.


    How to calculate Tax


    (a). Tax on total Income + Agricultural Income
    (b). Tax Agricultural Income + Basic Exemption Limit.
    (c). Tax payable by assessee= (a) - (b).


    Points to Note


    1. If Total Income is below taxable limit then agricultural Income will not be included even for calculation of tax purpose.

    2. In case of Individual , HUF , AOP/BOI and Every other artificial person (except where taxability is on maximum marginal rate) the agricultural income is included to calculate the tax with total Income
    2. In case of Companies, firm and other assesses where taxability is on fixed rate there is no need to calculate the tax on Agricultural Income.


    Rate of Tax
    For Individual, HUF, AOP/BOI and other artificial person the rate of tax for assessment year 2008-09 is as under:-
    Up to 1.10 Lakhs (This is the Basic exemption Limit*) NIL
    Above 1.10 Lakhs to 1.50 lakhs 10%
    Above 1.50 Lakhs to 2.50 lakhs 20%
    Above 2.50 lakhs 30%
    The basic exemption Limit for Female(Lady ) assesses 1.45 lakhs
    The basic exemption Limit for senior citizens(having age of 65 years or more ) 1.95 Lakhs

    The net effect of calculation



    The net effect of calculation of tax when the agricultural income is also earned by the assessee along with the total income (in excess of Basic exemption Limit) is to tax the Total income at higher rate if the total income got the second or third slab due to inclusion of the Agricultural Income. Let us try to understand this with the help of an example.



    The total Income is 1.35 lakhs and Agricultural income is Rs. 50000.00. Now the Total income and Ag. Income is Rs. 1.85 lakhs and the Basic exemption limit and Ag. Income is Rs. 1.60 Lakhs. First we consider the Basic exemption Limit and Ag. Income and after that tax the Balance of Total Income which is Rs.25000.00 and Taxable now @ 20% hence the net tax is payable Rs. 5000.00 instead of Rs. 2500.00 which is payable on 1.35 lakhs of Income. This is alternate method of calculating and understanding the tax on agricultural Income.

    The tax can be calculated as under:-

    Tax on Ag. Income and Total Income i.e. on 1.85 lakhs= 11000.00
    Less:-Tax on Basic Ex. Limit + Ag. Income = 1.60 lakhs= 6000.00

    Tax payable= 5000.00

    This result can be tallied from the result mentioned in alternate method.


    Instances of Agricultural income


    1. Sale of Replanted trees.
    2. Fees for Grazing: - The fees colleted from the owners of cattle normally used for agricultural purpose for allowing them to graze on forest land covered by jungle and grass grown spontaneously.
    3. Rent for agricultural land received from sub-tenant by mortgagee in possession.
    4. Compensation received from Insurance companies for destruction of Crop.
    5. Income from growing Flowers and creepers (climbing plants).


    Examples


    Ex.1:-Mr. Kishan Singh has total Income of Rs. 1, 40,000.00 and his agricultural Income is Rs. 2.50 Lakhs. Calculate his tax Liability.
    Ans. Total Income + Agricultural Income= 1.40 Lakhs + 2.50 Lakhs= 3.90 Lakhs
    Basic Exemption Limit + Agricultural Income = 1.10 Lakhs + 2.50 Lakhs=3.60 Lakhs
    (a). Tax on Agricultural Income+ Total Income= 66000.00
    (b). Tax on Basic Exemption + Total Income= 57000.00
    (c) Tax payable = (a) – (b)= 6000.00
    Ans. – 9000.00
    Ex.2:- Mr. Ram singh has income from Business as Rs. 60000.00 and besides this he is working as a part timer with a company and getting 45000.00 annually from there. His agricultural Income is Rs. 1 lakh. Calculate his tax liability for the assessment year 2008-09.
    Ans. If the Total Income (Other than agricultural Income) is below taxable Limit then the agricultural income is not taken into account for calculation of Tax. Here the income of Mr. Ram Singh is below taxable limit because income from Business is Rs.60000.00 and Salary Income is Rs. 45000.00 hence is total income is Rs. 105000.00 which is below the taxable limit hence there is no need to calculate the tax on Ag. Income.
    Ans. NIL
    Ex.3:- Tata tea Ltd. is in the business of Growing and manufacturing of Tea.The Income of the Company is 50 Crores. Compute the taxable income of the Company. What will be the difference in your answer if the company is only involved Manufacturing of Tea.
    Ans. The income is to be calculated as per Rule 8 of the Income tax Rules 1962 and according to it 40% income of the company is Rs. Business income i.e. Rs. 20 Crores is Business income and rest of 60% is Agricultural Income i.e. Rs. 30 Crores is Agricultural Income.
    Since the profit of partial agricultural and business income is applicable for the assesses engaged in Growing or manufacturing of tea hence if the company is only involved in Manufacturing of Tea and growing it then the whole income of Rs. 50 Crores will be treated as business income .
    Ex. 4:- Hindustan Latex limited derived income of Rs.10 Crores from sale of centrifuged latex. Compute the taxable income.
    Ans: - The income in the case of Rubber growing and manufacturing companies is to be calculated 65% Agricultural Income and 35% Business income hence in this case 3.50 Crores as agricultural income and Rs.6.50 Crores as Business income- Rule 7A.






    Example
    Total Income= 4.50 Lakhs
    Agricultural Income = 2.00 Lakhs
    (a). Tax on 4.50 lakhs + 2.00 Lakhs(i.e. on Rs. 6.50 Lakhs)= 1.44 Lakhs
    (b). Tax on 2.00 Lakhs + 1.10 Lakhs= (i.e. on Rs. 3.10 Lakhs)= 0.42 Lakhs
    (c). Tax payable by the assessee= (a) – (b) = 1.44 Lakhs-0.42 Lakhs= 1.02 Lakhs
    Here see that the assessee has to pay Rs. 0.84 Lakhs as tax on his total income but due to aggregation of the Agricultural income the excess Tax required to be paid is Rs. 0.18 Lakhs i.e. Rs. 18000.00 and see this amount of 18000 is nothing but a amount of higher slab taxation on Rs. 40000.00 @ 20% (10% Tax on 1.50 lakhs – 1.10 Lakhs Basic Exemption Limit and 30% tax over income Rs. 2.50 Lakhs ) i.e. Rs. 8000.00 and 10% Rs. 1 Lakhs (Since the highest tax rate is on Income over 2.50 Lakhs hence on Rs. 1 lakh the tax is paid by 10% more rate).



    You Can Also Download This From PDF Format

    Attached Files Attached Files

  6. #6
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    CHARGE OF INCOME TAX AND SCOPE OF TOTAL INCOME

    Section Brief description
    Section 4 Charge of Income Tax
    Section 5 Scope of Total Income
    Charge of Income TaxSec.4


    CHARGE OF TAX
    SECTION 4



    1. Income tax is an annual Tax.
    2. Income of the previous year is assessed to tax in the assessment year at the rates applicable for that assessment year.
    3. Rate of Tax for an assessment year is fixed by the Finance Act every year and not by the income tax Act. If on a particular 1st. April of any assessment year the Finance Act has not got the assent of the president of India then for that assessment year the rates as proposed in the Finance Bill or the rates applicable to immediately preceding assessment year , whichever is beneficial to the assessee will apply until the new provision become effective.
    4. Tax is charged on a person and on his total income.
    5. Provisions which are applicable on 1st. April will apply for computing the and if any amendment is made on 2nd day of April onwards that will have no bearing on the “Computation of Income” of the assessee. This law is applicable only for the computation of total income and for other purposes the amendment will taken place from the date of its enactment.

    Scope of Total IncomeSection 5
    The scope of Taxation on total Income is dependent on the nature of Income and after ascertaining the nature of income, the taxability will depend on the Residential status of the assessee. For this purpose the income can be classified in two parts:-


    Indian Income
    (i). Income which is received in India or deemed to be received in India.
    (ii). Income which is accrues or arises or deemed to accrue or arise in India.


    Foreign Income
    Income which is accrues and arise outside India:- Income under this head should naturally be an Income which is not received in India also because if it is received in India then it will become Indian income by virtue of first condition of Indian Income i.e. Income which is received in India or deemed to be received in India.

    IMPORTANT TERMS AND FACTORS

    1. What is received? Receipt means “reaches to the assessee”.
    2. What is accrual or arisen? Accrual or arisen means “right to receive” and this right to receive must be unconditional i.e. absolute without any condition.
    Example:- if a Gardner has worked in your Garden for a Rs.500/= he got the right to receive when the work is completed and this is accrual of income for him but if the condition is that he will get his payment on the condition that the payment is made on the condition of Good flowers. This is conditional right and this is not the accrual of income.
    3. Receipt and Remittance- is there any difference? Receipt means first time received and if income is first time received outside India and then remitted to India, it will not be treated as received in India.
    Example: - Mr. X got his salary in England during his service there and thereafter sent a part of it to India. This is only remittance and not the receipt of Income in India.
    If income is first received in a bank in foreign country and then remitted to India is also not a receipt in India.
    4.Dispatch of Income by post If income is sent through cheque or any other mode from the foreign country “on the request” of the recipient in India then the post office in foreign country is working as an agent of the receiver and income is received by the post office in foreign country hence it is not a receipt in India.
    If income is sent through cheque or any other mode from the foreign country “without any request” of the recipient in India then the post office in foreign country is working as an agent of the payer and income is delivered by the post office in India as an agent of the foreign payer and received by the Indian person in India hence it is a receipt in India.
    INCOME DEEMED TO BE RECEIVED IN INDIA
    (SECTION 7)
    This is statutory fiction i.e. only as mentioned in law. Three types of Incomes have been mentioned in the Section 7 of Income Tax Act, 1961 which are deemed to be received in India:-


    (i).Interest credited in excess of 7.5% in a recognised provident fund.

    (ii).Employers contribution in excess of 12% of the salary of the employee in a recognised provident fund.


    (iii). Transfer balance of the unrecognized provident fund:- In a particular previous year if unrecognized provident fund is converted in the recognised provident fund then the part of the balance which represent the :-
    (a). Interest in excess of 7.5%.
    (b). Employers contribution in excess of 12% of the salary of the employee,
    From the date of establishment of the unrecognized provident fund to the date of its Recognisition.
    INCOME DEEMED TO ACCRUE OR ARISE IN INDIA(SECTION 9)

    1. Income accruing or arising through or from any business connection in India: - Here see that there should be a Business Connection and by virtue that business connection the Income accrues or arises outside India.
    If all the business operation are not carried in India , that the reasonable part of Income, the accrual of which is resultant from the India connection will only form part of income which is deemed to accrue in India.
    2. Income through or from any property, any assets or source of Income in India:-

    Ex.:- Mr. Sunil Gulati, living in UK has let out his property at Ahemdabad to a Company Called Jems and company and the rent is payable in UK.



    3. Income through the transfer of capital assets situated in India: -

    Ex.:- Mrs. Neelam Kothari, a resident of Hong Kong has transferred her property in Jaipur to a citizen of Japan.


    4. Salaries earned in India and the salary paid for rest period preceding or succeeding the period for which salary earned in India.
    5. Salary paid by Government to a citizen for services rendered outside India.

    6. Any Interest, Royalty and fees for Technical services :-
    (a). Paid by Any state or Central Government.
    (b). Paid by resident of India except in the condition when used for business or profession carried on outside India or for any source outside India.


    Ex.:- Exis-2 company a Singapore based company has been paid the following amount as technical services :-

    (a). Government of India – 10 Lakhs- Taxable
    (b). Chennai based company has paid Rs. 12 lakhs – (i). Rs. 6 lakhs for project in India- Taxable. (ii). Rs. 6 Lakhs for import of designs to be used for a project in UK- Non- Taxable.




    RATE OF TAX
    FOR ASSESSMENT YEAR 2008-09
    PREVIOUS YEAR- 2007-08
    (i)RESIDENT MALE (NOT A SENIOR CITIZEN)


    Up to 1,10,000.00 NIL
    Over Rs. 1,10,000.00 to 1,50,000.00 10%
    Over Rs. 150,000.00 to 2,50,000.00 20%
    Over Rs. 2,50,000.00 30%


    (ii)RESIDENT FEMALE (NOT A SENIOR CITIZEN)


    Up to 1,45,000.00 NIL
    Over Rs. 1,45,000.00 to 1,50,000.00 10%
    Over Rs. 150,000.00 to 2,50,000.00 20%
    Over Rs. 2,50,000.00 30%


    (iii)RESIDENT SENIOR CITIZEN


    Up to 1,95,000.00 NIL
    Over Rs. 1,95,000.00 to 2,50,000.00 20%
    Over Rs. 2,50,000.00 30%


    ATE OF TAX
    FOR ASSESSMENT YEAR 2009-10
    PREVIOUS YEAR- 2008-09
    (i)RESIDENT MALE (NOT A SENIOR CITIZEN)


    Up to 1,50,000.00 NIL
    Over Rs. 1,50,000.00 to 2,50,000.00 10%
    Over Rs. 2,50,000.00 to 5,00,000.00 20%
    Over Rs. 5,00,000.00 30%


    (ii)RESIDENT FEMALE (NOT A SENIOR CITIZEN)


    Up to 1,80,000.00.00 NIL
    Over Rs. 1,80,000.00 to 3,00,000.00 10%
    Over Rs. 3,00,000.00 to 5,00,000.00 20%
    Over Rs. 5,00,000.00 30%


    (iii)RESIDENT SENIOR CITIZEN


    Up to 2,25,000.00 NIL
    Over Rs. 2,25,000.00 to 5,00,000.00 20%
    Over Rs. 5,00,000.00 30%


    SURCHARGE


    10% SURCHARGE IS PAYABLE IF THE INCOME EXCEED RS. 10 LAKHS


    EDUCATION CESS


    EDUCATION CESS 2%
    SENIOR AND SECONDARY EDUCATION CESS 1%

    EXAMPLES

    Ex.1:- Calculate the Income tax for assessment year 2008-09 on a total income of Rs. 7.67 Lakhs for Mr. Ramesh Kumar a resident having age of 45 Years.


    Ans: - For first 1.10 Lakhs- NIL.
    For Next 40,000.00 = 4000.00
    For Next 1,00,000.00= 10,000.00
    For Balance of Rs. 5,17,000.00= 1,55,000.00

    Total – 1,69,000.00

    Surcharge-Nil
    Education cess- 3380.00
    Secondary and Higher education Cess- 1690.00


    Total – 174070.00





    Ex.2:- Calculate the Income tax for assessment year 2008-09 on a total income of Rs. 17.85 Lakhs for Mr. Ramesh Kumar a resident having age of 45 Years.


    Ans: - For first 1.10 Lakhs- NIL.
    For Next 40,000.00 = 4000.00
    For Next 1,00,000.00= 20,000.00
    For Balance of Rs.15,35,000.00= 4,60,500.00

    Total – 4,84,500.00

    Surcharge-48,450.00
    Total- 5,32,950.00
    Education cess- 10659.00
    Secondary and Higher education Cess- 5329.00


    Total – 548938.00



    Ex.3 :- Calculate the Tax payable by Mrs. Rani , a principal in Government College having salary of Rs. 5.45 Lakhs andInterest income of Rs. 78000.00 for the year ending
    on 31.3.2008


    Ans: - Total Income of Mrs. Rani is 6,23,000.00
    For first 1.35 Lakhs- NIL.
    For Next 15000.00 = 1500.00
    For Next 1,00,000.00= 20,000.00
    For Balance of Rs. 3,73,000.00=1,11,900.00

    Total – 1,33,400.00

    Surcharge-NIL
    Total- 1,33,400.00
    Education cess- 2668.00
    Secondary and Higher education Cess- 1334.00


    Total – 137402.00



    Ex.4:-Mr. RK chaterjee , a 69 years of age having Total Income of Rs. 7,00,000.00 for the assessment year 2008-09. Calculate the tax payable by him.


    Ans:-
    Mr. RK chaterjee is a senior citizen.

    Ans: -
    Total Income of Mr. RK chaterjee is 7,00,000.00

    For first 1.45 Lakhs- NIL.
    For Next 5000.00 = 500.00
    For Next 1,00,000.00= 20,000.00
    For Balance of Rs. 3,73,000.00=1,10,900.00

    Total – 1,31,400.00

    Surcharge-NIL


    Total- 1,31,400.00

    Education cess- 2628.00
    Secondary and Higher education Cess- 1314.00


    Total – 135342.00



    You Can Also Download This From Word Format

    Attached Files Attached Files

  7. #7
    sudhanshusaxena
    Guest

    Thumbs up IPCC - Income Tax Notes.

    RESIDENTIAL STATUS OF THE ASSESSEE

    SECTION -6


    INDIVIDUAL AND HUF OTHER ASSESSEE- FIRM, COMPANY, AOP,BOI AND EVERY OTHER PERSON
    1.Resident and ordinary resident in India 1.Resident in India
    2. Resident but “not ordinary resident in India 2. Non resident in India
    3. Non- resident in India -

    INDIVIDUAL



    Resident in India
    BASIC CONDITIONS(One of the two conditions)
    If at least one of the two basic conditions are satisfied then the person can be said to be a Resident in India:-
    (i). He is in India for a period of 182 days or more in a previous year
    OR

    (ii). He is in India for a period of 60 days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year*.


    Note
    * The second condition is not applicable to the following persons:-

    (Exceptions for Second condition)


    1. Indian citizen who leaves India during the previous year for the purpose of employment outside India.
    2. India citizen who leaves India during the previous year as a member of crew of an Indian ship.
    3. Indian citizen or a person of Indian origin who comes on a visit to India during the previous year.*


    * A person of Indian origin: - He, or either of his parents (Mother or Father) or any of his grand parents (Nana or Nani or Dada or Dadi) was born in undivided India.


    Resident but ordinary resident
    ADDITIONAL CONDITIONS
    (Both the conditions are mandatory)
    (i). He is resident in India for at least 2 out of the 10 Previous years(i.e. He must fulfill one of the two basic conditions in at least two previous years out of the 10 previous years immediately preceding the previous year under consideration)
    AND
    (ii).He has been in India for a period of 730 Days or more during the 7 years immediately preceding the relevant previous year.


    HOW TO BECOME A ORDINARY RESIDENT


    One Basic Condition+ Two Additional Conditions


    HOW TO BECOME A RESIDENT BUT NOT ORDINARY REDENT



    One basic condition and not fulfilling the both the Additional conditions


    A NON RESIDENT


    Not fulfilling any of the Basic conditions(If a person is not fulfilling any of the Basic conditions then the Additional conditions are immaterial for him)


    HOW TO CALCULATE THE DAYS OF STAY IN INDIA
    (i). Need not to be Continuous stay
    (ii). Need not to stay at a same place

    (iii). Where a person is in India for part of a day then calculation will be based on 24 hours a day basis.

    (iv). If data of stay on hourly basis is not available then the day he enters India and the day he leaves India both will be taken into account.
    (v). When a person stays in the Yatch in Indian territorial water then his stay will be counted in India.

    RESIDENTIAL STATUS FOR OTHER PERSONS
    (Including Individual – in Tabular form)


    PERSON
    ORDINARY RESIDENT NOT- ORDINARY RESIDENT NON-RESIDENT
    Individual
    If satisfied at least one basic condition (i.e. any one of the two basic conditions)
    +
    Both the additional conditions
    If he satisfied at least one basic condition(i.e. any one of the basic conditions)
    +
    Any one of the additional condition is not satisfied
    None of the basic conditions is satisfied
    HUF Control and management of its affairs is wholly or partly in India
    +
    Both the additional conditions are satisfied by the Karta of HUF
    Control and management of its affairs is wholly or partly in side India
    +
    Any one of the additional conditions is not satisfied by the Karta of HUF
    Control and management wholly outside India
    COMPANY (i). Indian company
    (ii). Other than Indian company- if the control and management is situated wholly in India
    N.A. Other than Indian Company: - If control and management is wholly or partly situated outside India.
    FIRM/AOP/BOI/LOCAL AUTORITY/ARTIFICILA JUDICIAL PERSON/ANY OTHER ASSESSEE If control and management is wholly or partly in India N.A. Control and management wholly outside India.



    Points to Note



    The residential status is to be considered for each source of income and if for any source of income a person is resident then he will be resident for all sources of income for that particular previous year.

    A person may have different residential status for different previous year say he may be resident for previous year 2006-07 and he may be non resident for previous year 2007-08 but for a single previous year he can have only one status.

    Examples

    Ex.1:- Mr. Robert, a British national, comes to India first time during the Financial Year 2003-04. During the financial year 2003-04, 2004-05, 2005-06 and 2007-08 his stay in India was for 55 Days, 60 Days, 80 Days, 160 Days and 70 Days. Determine his residential status for the assessment year 2008-09.

    Ans:- Mr. Robert does not stay in India for 182 days or more during the previous year 2007-08 hence he is not satisfying the first condition but since he was in India during the previous year for 60 days or more but his stay for immediately preceding 4 years is lesser than 360 days i.e. for 355 days only. Hence since he not satisfying any of the basic conditions to become a resident hence he is “NON- RESIDENT” in India during the previous year 2007-08. His status for the assessment year 2008-09 is “NON-RESIDENT”.




    Ex.2:-Mr. Tom a citizen of UK visits India for first time in previous year 2007-08 and his date of arrival in India was 15-4-2007 and thereafter he stays in India during the whole rest of the period. Determine his Residential status.


    Ans:- Mr. Tom stays India more than 182 days in previous year 2007-08 hence he satisfies the first basic condition for Resident but since he never came in India before 2007-08 hence he fails to comply any of the additional condition (both the additional conditions are mandatory) hence he become “Resident but not ordinary resident” during the previous year 2008-09.



    Ex.3:- Mr. Andy Roberts a British national after continuous stay in India for 10 Years of stay in India leaves India on 1st. Jan. 2007. Determine his residential status during the assessment year 2008-09.


    Ans:- Mr. Andy Roberts stays in India for more than 60 Days in previous year 2007-08 and also more than 365 days during the 4 years immediately preceding the previous year hence he satisfies the second basic condition to become the Resident . Further during the Last ten previous years he also satisfies the Residential Basic condition for more than 2 year and also his stay in India for immediately preceding 7 years was more than 730 days hence he is “Resident” in India during the previous year 2007-08 and further his status is resident and ordinary resident in India during the Assessment year 2008-09.




    Ex.4:- Mrs. Cinderella , a British citizen Born in Mumbai in 1962 visits India during the previous year 2007-08 and stays here for 102 days. Her parents were born in UK and grand parents were born in Japan and USA. Her stay during the four previous years immediately preceding previous year was more than 500 days.


    Ans: - Since Mr. Cinderella is neither an India Citizen nor a person of India origin because born in India after 1947 and in Undivided India. Further neither her parents nor any of the Grand parents were born in undivided India hence the condition of 60 days stay in Indiaduring the previous year alongwith stay of 365 or more during the immediately 4 preceding year is applicable to her. Hence she is a resident in India during the previous year 2007-08. Further she is a resident and ordinary resident will depend on her fulfilling the two additional conditions regarding this.




    Ex.5:- X comes to India for the first time on September 2007. On September 15, 2007 he got a job in a company and thereafter on Oct. 2007 he starts a business of his own also. Ascertain his residential status for the Assessment year 2008-09.


    Ans.:- The Number of stay for each source of income in case of X are as under:-


    Salary :-

    Previous year- September 15 to March 31st. 2008-Saty in India 199 Days


    Business income- October 9, 2007 to March 31,2008 175 Days

    For the first source of income he satisfies the first basic condition of resident but since he came to India first time in 2007 hence he is not able to satisfy both the additional conditions hence he is “Resident but not ordinary Resident”. Since he is “Resident but not ordinary resident” for one source of income he will have the same status for other source of Income also.


    Note: - The residential status is determined with the each source of Income and if a person is resident for one source of income he will have the same status for all the sources of income.





    Ex.6:- Ram Mohan and sons whose Karta is Ram Mohan sharma owns three business and these business are controlled as under:-


    Business-I :- From Hong Kong and china- Income 105000.00
    Business II:- From Japan – Income 1050000.00
    Business III:- Nepal and India- Income 13,50,000.00
    Business IV:- UK- Income 17,75,000.00
    Determined the status of M/S RAM MOHAN AND SONS HUF in the following two conditions:-


    (i). Ram Mohan Sharma is residing in Nepal since last 10 Years and never visited India.
    (ii). Ram Mohan sharma is residing in India since last 10 Years and not visited outside India during these last 10 Years.
    Ans:-

    Since One of the Business of M/S RAM MOHAN SHARMA HUF is partly controlled from India i.e. Business III hence the HUF is Resident in India for this source of Income and if it is resident for any source of income he will be resident for all the sources of Income.


    Since in the first situation the karta not satisfying both the additional conditions of becoming the ordinary resident hence the HUF is Resident but not ordinary resident and in the second case it is “Resident” since the karta is satisfying both the additional conditions.



    You Can Also Download This From Word Format

    Attached Files Attached Files

  8. #8
    milind_deoghare@rediffmail.com
    Guest

    Default

    please upload notes for ipcc income tax such as salary,hp,capital gains etc for may 2013 attempt

Tags for this Thread

Bookmarks

Posting Permissions

  • Register / Login to post new threads
  • Register / Login to post replies
  • Register / Login to post attachments
  • You may not edit your posts
  •