The Standard (principles) of good taxation policy are:
 Economic (cost effective, meaning it should cost less to collect
the taxes than the tax revenue)
 Equality: This principle embodies that equity or justice should
prevail and results in progressive taxation. Higher the income,
higher the tax and vice versa. The amount of tax depends
upon the ability of the taxpayer to pay.
 Certainty (people should know how and when to pay)
 Convenience (simplicity or ease of payment for tax-payer)
 Simplicity (Procedures, rules, regulations are to be simple)
 Expediency (It should be convenient and should not give room
for criticism)
 Co-ordination (Co-ordination among different taxes and when
they are imposed by the tax authorities)
Direct Tax: These are the taxes which are not shifted.
The impact and incidence of which falls on the same
person who pay them to the government. E..g Income
Tax and Wealth Tax. It is imposed according to the
ability of person to pay.
Indirect Tax: These are the taxes in which burden of
paying tax is shifted to the people other than those
actually paying through a change in price. E..g Sales
Tax, Service tax, Customs Duty, and Excise duty.
 Assessment year: It refers to 12 months starting from 1st day of April of a
particular year and ending on 31st day of every March of the next year. The
current assessment year starts from 1st April 2024 and ends on 31st March 2025.
 Previous Year: Refers to twelve months immediately preceding the particular
assessment year. For assessment year 2017-18, the previous year will be 2016-17,
starting from 1st April 2023 and ends on 31st March 2024.
 Finance Act: Every year the Union Finance Minister presents the Finance bill
in the Parliament on 1st February. The bill once passed becomes the Finance
Act. The income tax slab rates will become applicable from the very first day of
the next financial year
Assessee
 An income tax assessee is a person who pays tax or any sum of money
under the provisions of the Income Tax Act, 1961.
 Furthermore, Section 2(7) of the act defines an income tax assessee as
anyone who is required to pay taxes on any earned income or incurred loss
in a single assessment year.
Normal Assessee
An individual who is liable to pay taxes for the income earned during a financial year is known as a
normal assessee. Every individual who has earned any income earned or losses incurred during the
previous financial years is liable to pay taxes to the government in the current financial year.
All individuals who pay interest/penalty or who are supposed to get a refund from the government are
categorised as normal assessees.
Representative Assessee
There may be a case in which a person is liable to pay taxes for the income or losses incurred by a third
party. Such a person is known as a representative assessee.
Representatives come into the picture when the person liable for taxes is a non-resident, minor, or
lunatic. Such people will not be able to file taxes by themselves. The people representing them can either
be an agent or guardian.
Deemed Assessee
An individual might be assigned the responsibility of paying taxes by the
legal authorities and such individuals are called deemed assessees. Deemed
assessees can be:
The eldest son or a legal heir of a deceased person who has expired without
writing a will.
The executor or a legal heir of the property of a deceased person who has
passed on his property to the executor in writing.
The guardian of a lunatic, an idiot, or a minor.
The agent of a non-resident Indian receiving income from India.
Assessee-in-default
Assessee-in-default is a person who has failed to fulfil his statutory
obligations as per the income tax act such as not paying taxes to the
government or not filing his income tax return. For example, an
employer is supposed to deduct taxes from the salary of his
employees before disbursing the salary. He is, then, required to pay
the deducted taxes to the government by the specified due date. If
the employer fails to deposit the tax deducted, he will be considered
as an assessee-in-default.
‘Person’ under the Income Tax Act
The 7 categories of “persons” mentioned under the Income Tax
Act:
• Individual
• Hindu Undivided Family
• Partnership Firm
• Company
• Association of Persons (AOP) or Body of Individuals (BOI)
• Local Authority
• Artificial Judicial Body (not covered under any of the abovementioned categories)
Person: Person includes the following
(i) An Individual: It refers to a natural human being
whether male or female, minor or major.
(ii) A Hindu undivided family: It is a relationship created
due to operation of Hindu Law. The manager of HUF is
called “Karta” and its members are called ‘Coparceners’.
(iii) A Company: It is an artificial person registered under
Indian Companies Act 1956 or any other law.
(iv) A Firm: It is an entity which comes into existence as a
result of partnership agreement between persons to share
profits of the business carried on by all or any one of
them.
Person (Contd)
(v) An association of persons or a body of individuals, whether
incorporated or not: Co-operative societies, MARKFED (Marketing
Federation) and NAFED (National Agricultural Cooperative Marketing
Federation of India Ltd) etc. are the examples of such persons. When
persons combine together to carry on a joint enterprise and they do not
constitute partnership under the ambit of law, they assemble as an
association of persons.
(vi) A local authority: Municipality, Panchayat, Cantonment Board, Port
Trust etc. are called local authorities.
(vii) Every artificial juridical person, not falling within any of the
preceding sub-clauses: A public corporation established under special Act
of legislature and a body having juristic personality of its own is known to be
Artificial Juridical Persons. Eg Universities, Reserve Bank of India.
Determine under which category of Person they fall into:
1. Dr.Muniraju , a lecturer in the Bangalore University
2. IBS Hyderabad University
3. Sri. Ganesh, Director in BHEL
4. SAIL
5. Mr. Ramesh, a sole proprietor of a Kirana Shop
6. GHMC
7. Mokila Gram Panchayat
8. Reliance Industries Ltd
9. Life Insurance Corporation of India
10.Co-operative society
11.Laxman & Sons Chartered Accoutants firm
12.A joint family of Sri Lakshmaiah, his wife and two sons
13.Axis Bank Ltd
14.Ram and Laxman, who are the legal heirs of Dasarath
1. Muniraju – Individual
2. IBS Hyderabad University – Artificial Juridical person
3. Sri Ganesh, Director – Individual
4. SAIL – Company
5. Mr. Ramesh, a sole proprietor of a Kirana Shop – Individual
6. GHMC – Local authority
7. Mokila Gram Panchayat - Local authority
8. Reliance Industries Ltd – Company
9. Life Insurance Corporation of India – Company
10.Co-operative society – Association of persons
11.Laxman & Sons Chartered Accountants firm – Partnership firm
12.A joint family of Sri Lakshmaiah, his wife and two sons – (HUF)
13.Axis Bank Ltd – Company
14.Ram and Laxman, who are the legal heirs of Dasarath carrying on handloom
business - HUF
Income: The Act does not define the term “Income”. It just specifies
certain things that can be included under the concept of Income.
 Profits and Gains
 Dividend
 Voluntary contribution to any trust created wholly or partly for
charitable purposes
 Value of any benefit or perquisites either in cash or kind
 Profit in lieu of salary
 Any allowances given to assessee
 Any special allowance or benefits
 Any sum paid as obligation by the company
 Any Capital gains chargeable u/s 45
 Any winnings from lotteries, crossword puzzles, races, card games and
other games of any sort
 Sum received by the employee as contribution to any provident fund or
superannuation fund or any fund set-up under the ESI Act.
 Any sum received under key main insurance policy.
Features of Income
 Income must be from a definite source
 Legal as well as illegal income is taxed
 It can be in the form of money as well as in kind
 Income earned may be temporary or permanent
 Money received by housewife is not considered as an
income
 Any amount received due to devaluation of currency is
taxable income
 Any loss is also included under the concept of income
 In case of dispute regarding title of income, the beneficiary
is taxed
 Income may be lump sum or in installment
 Revaluation of assets and excesses if any cannot be
considered as income.
GROSS TOTAL INCOME
 Income from Salary
xxx
 Income from House property
xxx
 Income from Business or Professionxxx
 Income from Capital gains
xxx
 Income from Other sources
xxx
_____________
GROSS TOTAL INCOME
xxx
_____________
Less: Deduction u/s 80
xxx
TOTAL/NET INCOME
____________
xxx
_____________
 Salary: Existence of employer-employee; salary must be real and
non-fictitious.
 Includes wages, annuity, pension, gratuity, fees, commission,
perks, profits, advance on salary & annual accretion.
 Income from House property:
 Property not used by the owner for purpose of his business or
profession, the profits of which are chargeable to tax.
 Profits or gains from Business or Profession: Any trade,
commerce or manufacture.
 Capital Gains
 Income from Other Sources:
 Dividends
 Winnings from lotteries
 Interest on securities
 Income from machinery, plant or furniture on hire
 Sum received under a keyman insurance policy, bonus