Introduction
As we know that taxation law in India are very
complex especially Income tax law and As a person from non finance background it is not easy to
understand entire income tax word by word. So FinTax Literacy try to understand
the easy understanding of income tax laws for an individual. So lets start
In india Taxation laws are divided into two
section:
o
Direct
Tax (i.e Income Tax & Tax on undisclosed foreign income and assets)
o
Indirect
Tax (i.e GST, Custom Duty, etc)
Sources of Income Tax Laws
o
Income Tax Act, 1961:- The levy of income-tax in India is governed by the Income-tax Act, 1961. In the entire blog, we shall briefly refer
to this as the Act.
o
Income Tax Rule, 1962:- The Central Board of Direct Tax(CBDT) has empowered to make rules for
carrying out the purposes of the above Act. So it is very important that these
rules should also be study along with Act
o
Finance Act:- Every year, the Finance Minister of the
Government of India introduces the Finance Bill in the Parliament’s Budget
Session. When the Finance Bill is passed by both the houses of the Parliament
and gets the assent of the President, it becomes the Finance Act. Amendments
are made every year to the Income-tax Act, 1961 and other tax laws by the
Finance Act
The First Schedule to the Finance Act contains four parts which
specify the rates of tax -
o
Part I of
the First Schedule to the Finance Act specifies the rates of tax applicable for
the current Assessment Year. Accordingly, Part I of the First Schedule to the
Finance (No. 2) Act, 2024 specifies the rates of tax for F.Y. 2023-24.
o
Part II specifies
the rates at which tax is deductible at source for the current Financial Year.
Accordingly, Part II of the First Schedule to the Finance Act, 2024 specifies the rates at which tax is deductible at source for F.Y. 2024-25
o
Part III gives
the rates for calculating income-tax for deducting tax from income chargeable under the head “Salaries” and computation of advance
tax for F.Y. 2024-25 where
the assessee exercises the option to shift out of
the default tax regime provided under section 115BAC(1A).
o
Part IV gives the rules for computing net agricultural income.
o
Circulars &
Notifications
Circulars
o
Circulars are issued by the CBDT from time to
time to deal with certain specific problems and to clarify doubts regarding the
scope and meaning of certain provisions of the Act.
o
Circulars are issued
for the guidance of the officers
and/or assessees.
o The
department is bound by the circulars. While such circulars are not binding on the assessees, they can take advantage of beneficial circulars.
Notifications
Notifications are
issued by the Central Government to give effect to the provisions of the Act. The
CBDT is also empowered to make and amend
rules for the purposes of the Act by
issue of notifications which are building on both department and assessees
o
Legal Decisions of Courts
o
Case Laws refer to decision
given by courts. The study of case laws is an important and unavoidable part of the study of Income-tax law. It is not possible
for Parliament to conceive and provide for all possible issues that may
arise in the implementation of any Act. Hence the judiciary will hear the
disputes between the assessees and the department and give decisions
on various issues.
o
The Supreme Court is the Apex
Court of the Country and the law laid down by the Supreme Court
is the law of the land. The decisions given
by various High Courts
will apply in the respective states in which such High Courts have jurisdiction.
Assessment year v/s Previous Year
o Assessment
Year(AY):- AY is the year (From 1st April to 31st
March) in which persons are required to pay tax and file ITR(Income Tax Return).
o Previous
Year(PY):- PY is the year (From 1st April to 31st
March) in which persons earn or received income from various sources or in
which TDS has on such income.
For Example, Mr A a salaried
individual received monthly salary of Rs. 1,00,000/- in April 2024 to Mar 2025.
So Mr A earned income in
Financial year 2024-25 so it is called Previous Year and requied to file ITR
and pay Tax in Financial Year 2025-26 so it is called Assessment Year.
General Rule:
o
Income of Previous year (PY) is Taxable in
Assessment Year(AY)
o Exception
to General Rule: Cases where income of PY is Taxable in PY itself
o Income
of Non-Resident shipping business
o Income
of Person leaves India permanently or for long duration.
o Income
of discontinued business.
o Income
of person trying to transfer his assets for avoiding tax.
o AOP/BOI/AJP
formed for particular purpose
Person v/s Assessee
Person:-
Person include the following
o Individual:
such as Man Women
o Hindu
Undivided Family(HUF)
o Firm:
Such as Partnership Firm or Limited Liability Partnership
o Company
o AOP/BOI
(Association of Person or Body of Individual)
o Local
Authority: Nagar Nigim, Muncipal Corporation
o Artificial
Juridical Person: Courts, Temples, University etc
Assessee:
Assessee means a person by whom any tax or any other sum of money is
payable under this Act.
In
other Word, Person included every person whether he is required to pay tax or
not under this act but Assessee included only those person who required to pay
tax under this act.
For
Example There are two person, Mr A whose Annual Income of Rs. 12,00,000/- and
Mr. B whose Annual Income of Rs. 2,40,000/- and As per Income Tax Act , Every
person required to pay tax if his total Income exceed Basic Exemption Limit(i.e
above of Rs. 2,50,000)
Therefore
Mr A and Mr. B both comes under the definition of person but only Mr A comes
under the definition of Assessee.
We hope you understand all the above concept if
you have any doubt any of the above topic then you can asked from us on the info@fintaxliteracy.com email id. In the next chapter we will going to understand Computaion of
total Income & Tax Liablity and Tax rates applicable of various Assessee
under the Income Tax Act, 1961.
Happy Learning!!!
Disclaimer:
The contents of this document
are for information purposes only. This aims to enable public to have a quick
and an easy access to information and do not purport to be legal documents.
Viewers are advised to
verify the content from Government Acts/Rules/Notifications etc.
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