why govt. charges tax
 Govt. of India provides many kind of services to its resident people
or to the non-residents such as infrastructure facility, security etc.
and moreover a place where people can earn and live.
 In providing these facilities govt. incurs a huge amount of
expenditure and to meet those expenditures, Govt. needs funds and
there is no specific source from which govt. can generate revenue.
 Therefore, we can say tax is a fees charged by the govt. against the
services provided.
 Govt. major source of revenue is tax (Direct tax and Indirect tax)
Source to Read Income Tax
Income Tax
Act 1961
(Income tax act
covers basic
provisions of
income tax,
Assessment
procedures,
Penalties &
prosecutions i.e.
computation of
income,
computation of
tax liability etc.)
Annual
Finance Act
(Finance Act tells
about the rates of
tax in advance
i.e. rates of tax
for the year in
which assessee
would earn the
income. For
e.g..Finance act
2015 tells about
the rates of tax
for assessment
year 2015-15 i.e.
for the previous
year 2015-14
Income Tax
Rules 1962
(Rules are made
to carry out basic
provisions of
income tax
effectively and
efficiently.
However in any
case rules cannot
override the basic
provisions to
income tax i.e.
rules are subordinate to the
act.)
Circulars &
Notification
(Circulars are
issued for
internal
department
workings i.e.
circulars cannot
bind assessee and
notifications are
issued for general
public.)
Legal
Decision Of
High &
Supreme
Courts
(Decisions of
High
court/Supreme
Court are final
decisions i.e.
neither the
assessee nor the
department can
challenge the
decision of
Supreme Court.
Note- High court
decision can be
challenged in
Supreme Court.)
Tax
Direct Tax
Income Tax
Indirect Tax
Tax On
Goods
Wealth Tax
Excise Duty
Custom Duty
(Imort
/Export Duty)
Sales Tax
Service Tax
Vat
Terms
Income Tax
• Tax on income of a person
Wealth Tax
• Tax on Wealth of a person
Excise Duty
• Tax on manufacturing of goods
Sales Tax
Vat
• Tax on sale of goods from one state to
another state
• Tax on sale of goods with in a state
Service Tax
• Tax on services
Import Duty
• Tax on purchase of goods from
outside India
Export Duty
• Tax on sale of goods outside India.
CONSTITUTION
 Constitution of India is the supreme law i.e. all other law in
India has to be consistent with the constitution and if it is not
constitutionally valid, it can’t be said a legal law.
 Article 246 and 248 and schedule vii of the constitution
distributes the power to impose and collect taxes between the
central govt. and state govt.
 15th August 1948 Independence Day on day India Achive
Independence.
 26th January 1950 Republic Day on day Constitution of india
comes into force as governing document india.
Constitution of India
Central Structure
State Structure
Parliament
State Legislative Assembly
Parliament can make laws for the
whole or any part of the territory of
India
Legislature of State may make laws for
the whole or any part of the States.
FRAMEWORK OF CONSTITUTION
IN REGARD TO TAXES
Concurrent
List
(Power Lies
With Both
Govt.)
(Presently No
Tax Covered
in List)
Union List
(Power lies with Power lies with Power lies with
the central govt)
Income Tax
Service Tax
Wealth Tax
Custom Duty
Excise Duty
State List
(Power lies
with Power
lies with
Power lies
with
the State
govt
Vat
ADMINISTRATIVE SET UP
Ministry of Finance
Department of Revenue
The Central Board Of Direct Tax (CBDT)
Chief CIT ( Commissioner Of Income Tax)
CIT (APPEALS)
Assessing Officers
JCIT (Join CIT)
ITO (Income Tax Officer)
Additional or Deputy CIT
INCOME TAX SLAB (For A.Y. 2016-17)
(A) Tax Slab
Tax
(Individual/HUF/AOP/BOI/AJP) rate+
(Below 60 Year)
3%Educ
ation
Cess
(B) Tax Slab
(Individual/HUF/AOP/BOI/AJP)
(60 year and above i.e. Senior
Citizens)
Tax
rate+
3%Educ
ation
Cess
Up to 2.5 Lakhs
0%
Up to 3.0 Lakhs
0%
2,50,001 to 5 Lakhs
10%
3,00,001 to 5 Lakhs
10%
5,00,000 to 10 Lakhs
20%
5,00,001 to 10 Lakhs
20%
Above 10 Lakhs
30%
Above 10 Lakhs
30%
(C) Tax Slab
(Individual/HUF/AOP/BOI/A
JP)
(80 year and above i.e.
Very Senior Citizens)
Tax
rate+
3%Educ
ation
Cess
Up to 5 Lakhs
0%
5,00,001 to 10 Lakhs
20%
Above 10 Lakhs
(D) Tax Slab
Partnership/Local
Authority)
Tax
rate+
3%Educ
ation
Cess
On the whole of total income
30%
(Firm/Limited Liability
(E) Tax Slab
Co-operative Society
Tax
rate+
3%Educ
ation
Cess
Up to 10000
10%
10,001 to 20,000
20%
Above 20,000
30%
30%
(F) Tax Slab
(Company)
Tax rate+ 3%Ed. Surchage
Cess
Domestic Company
30%
5 % if total income
exceeds to Rs. 1 crore
Foreign Company (other than Domestic
Company)
40%
2 % if total income
exceeds to Rs. 1 crore
Concept Of Income
 All revenue receipts are taxable unless specifically exempted and All capital
receipts are exempt unless specifically taxable.
 Income tax act gives inclusive definition of Income and includes
(i) Profits and gains
(ii) Capital gains
(iii) Dividend income
(iv) Capital gains
(v) Winning from lotteries etc.
(vi) Allowances and perquisites etc.
 Generally, Income from transfer of the revenue generating asset (i.e. the
right which generates income) will be capital receipt and income from the
product arises out of that asset will be revenue receipt.
for Eg.
1. Income from sale of shares will be capital income and
dividend income arises out of it will be revenue income.
2. Income from transfer of house property will be capital income and rental
income arises out of it will be revenue income.
3. Income from transfer of machine will be capital income and sale of
product arises out of machine will be revenue income.
4. Compensation on voluntary retirement compensation is capital income
and salary income is revenue income.
 As per golden rule of income tax we can conclude that all receipts are not
assessable to tax. All receipts by an assessee can not necessarily be deemed
to be the income of the assessee for the purpose of the income tax and the
question whether any particular receipt is income or not depends on the
nature of the receipt and scope read with residential status of person.
1. Income may be in cash or in kind.
2. Illegal incomes are also subject to tax.
3. Income must come from outside
4. Contingent income will not form part of income.
5. Method of accounting is only applicable for PGBP and IOS income. For
other heads of income act provides specific charging section.
COMPUTATION OF TOTAL INCOME
A. Detrmination of Residential Statuts
B. Heads of Income
1.) Income from Salary
2.) Income from House Property
3.) Income from Business/Profession
4.) Income from Capital Gains
5.) Income from Other Sources
C. GROSS TOTAL INCOME (Sec. 14)
Less:Deductions u/s chap-VI-A (Sec.80C to 80U)
D. TOTAL INCOME [Sec.2(45)]
E.Tax Due (As Per Slab)
Less:Rebates and Reliefs u/s Chap-VIII
F. Tax Payable
XXX
XXX
XXX
XXX
XXX
XXX
(XXX)
XXX
XXX
(XXX)
XXX
Definitions
India : includes(i) The territory of India (it means the land mass of India and
Territorial waters/EEZ means the sea area.)
(ii) Its territorial waters and an area of exclusive economic zone.
Income tax : The direct tax paid by the person whose income is
more than maximum exemption limit prescribed
Income Tax Return : Annual statement of income received and
taxes paid in Previous F.Y.
Assessee : person by whom tax, penalty, interest etc. payable
under Income Tax Act 1961.
Financial Year : 1st April to 31st March
 Asssessment year : Year following F.Y. in which assessment of
Income & tax is made
 Previous year : the financial year immediately preceding the
assessment year.
 Person : includes seven kinds of persons as below:1. Individual (Individual means a natural person i.e. a male,
female, minor, idiot or lunatic)
Analysis- However the income of a minor is generally included in
the income of parent. Assessment of Lunatic or idiot is done
through representative assessee.
2. Hindu undivided family (HUF) - HUF has not been defined
under the act however it means a family which consist of all
persons lineally descended from a common ancestor. (for ex- joint
family business)
3. Company - Company includes both Indian company as well as
foreign company.
4. Firm - Firm means partnership firm (including limited liability partnership
firm) but there must be a partnership deed to assess the income in the name of a
firm.
5. Association of persons(AOP) : If a group of person’s Works together
voluntarily without any partnership deed then it will be called As AOP.
6.Body of individuals(BOI) : If a group of individuals works together By
operation of law without partner
7. Local authority - Local authority means a authority which is responsible for
the local maintenance of a place falls under his jurisdiction For eg.- Municipal
committee of Delhi (MCD), Panchayat, and cantonment board etc.
8. Artificial juridical person (AJP) -Artificial juridical person means a person
which is not natural but is a legal person in the eyes of law (ICSI, Delhi
University etc.)
PAN CARD : it is issued by the Indian Income Tax department for the purpose of
financial identification and Permanent Account Number (PAN), as the name suggests,
is a permanent number and does not change during lifetime of PAN holder.
Form 16 : This form carries details of Salary Income and Income tax deducted by
employer.
Form 16A : The certificate that mentions TDS on income from sources other than
salary.
Form 26AS : Annual Tax statement on Tax information network of Income tax
department.
Form 15G : Declaration under section 197A(1) and section 197A (1A) of the
Income‐tax Act, 1961 to be made by an individual or Person (not being a company or
firm) claiming certain receipts without deduction of tax.
Form 15H : Declaration under section 197A(1C) of the Income‐tax Act, 1961 to be
made by an individual who is of the age of sixty years or more claiming certain
receipts without deduction of tax.
FORM- 1,2A,2,3,4,4S
For Individuals, HUF
Select appropriate
Income Tax Return
(ITR) Preparation
Software
ITR-1
ITR-2A
ITR-2
ITR-3
ITR-4
ITR-4S
Individ
ual
Individual
& HUF
Individual
& HUF
Individual
& HUF
Individual
& HUF
Individual
& HUF
(Who is a
partner in
firm)
1
Income from
Salary/Pension
▪
▪
▪
▪
▪
▪
2
Income from Other
Sources (only
Interest income or
Family Pension)
▪
▪
▪
▪
▪
▪
3
Income/Loss from
Other Sources
▪
▪
▪
▪
▪
4
Income/Loss from
House Property
▪
▪
▪
▪
▪
5
Capital Gains/Loss
on sale of
▪
▪
▪
▪
FORM- 5,6,7
For Association of Persons (AoP), Body of Individuals (BoI), Local Authority, Companies, Trusts,
Fringe Benefit Tax (FBT) Return
Select appropriate Income Tax Return
(ITR) Preparation Software
1.
Any Income
ITR-5
ITR-6
ITR-7
Firms, AoP,
BoI, LA,AJP,
Co operative
Bank &
society.
Companies (Except u/s
25Companies).
Trusts
▪
▪
▪
E-ffilling process
Advance tax
Tax is Paid in Advance when Tax Liability is More than 10,000.
Advance Tax is Paid in the Previous Year Itself, Thus the Tax is Paid in the year
of Earning Income Itself
The Tax is Paid as income is earned
This Scheme of Advance Payment of Tax is also Called as Pay as you earn
income
PAYMENT OF ADVANCE TAX
Advance tax amount to be paid till date
Due Date for Payment
(Other than Company)
(Company)
15/06/2015.
NIL
15% of assessed tax
15/09/2015.
30% of assessed tax
45% of assessed tax
15/12/2015.
60% of assessed tax
75% of assessed tax
15/03/2016.
100% of assessed tax
100% of assessed tax
INTEREST ON TAX LIABILITY
Receivable
by Assesse
Payably by Assesse
Section
234A
Section
234B
Section
234C
Section
234D
Section
220(2)
Section
244A
Tax deduct at Sources (tds)
TDS is one of the modes of collection of taxes, by which a certain percentage of amounts
are deducted by a person at the time of making/crediting certain specific nature of payment to
the other person and deducted amount is remitted to the Government account.
The concept of TDS envisages the principle of "pay as you earn".
It facilitates sharing of responsibility of tax collection between the deductor and the tax
administration.
Every person responsible for making payment of nature covered by TDS provisions of
Income Tax Act shall be responsible to deduct tax.
Every deductor is required to obtain a unique identification number called TAN (Tax
Deduction Account Number) which is a ten digit alpha numeric number e.g.DELH90468K.
Use correct form to file TDS/TCS Returns They are:
Form 24Q :- For salaries
Form 26Q :- For non salaries
Form 27EQ :- For TCS
Form 27A/27B :- Control sheet for electronic TDS/TCS
Use challan no. 281 for depositing TDS amount.
The process of filing of e-TDS /e-TCS returns is available in detail at
following websites www.incometaxindia.gov.in or http://tin-nsdl.com.
TAX DEDUCTED AT SOURCE (TDS)
Period
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Due Date for
Payment
07/05/2015.
07/06/2015.
07/07/2015.
07/08/2015.
07/09/2015.
07/10/2015.
07/11/2015.
07/12/2015.
07/01/2016.
07/02/2016.
07/03/2016.
07/04/2016.
Due Date for
Return
Interest Rate
Interest calculated from
Penalty for Late Filing
1.5% p.m.
Date of Deduction
OR
Date of Payment
Whichever is earlier.
Rs.. 200 per day till the
return is filed
or
maximum upto TDS
amount
15/07/2015.
15/10/2015.
15/01/2016.
15/05/2016.
service tax
Service Tax is a tax imposed by Government of India on services provided in India.
The service provider collects the tax and pays the same to the government.
It is charged on all services except the services in the negative list of services.
The current rate is 14.36% on gross value of the service.
SERVICE TAX (ST)
Period
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Due Date for Payment
(Other than Company)
05/07/2015.
05/10/2015.
05/01/2016.
31/03/2016.
Due Date for Payment
(Company)
05/05/2015.
05/06/2015.
05/07/2015.
05/08/2015.
05/09/2015.
05/10/2015.
05/11/2015.
05/12/2015.
05/01/2016.
05/02/2016.
05/03/2016.
31/03/2016.
Due Date for
Return
25/10/2015.
25/04/2016.
Interest Rate
Interest
calculated from
18%p.a. who is
liable for Audit
&
From the Due
15%p.a. who is
Date of payment
not liable for
Audit
(Daywise Interest)
Penalty for Late
Filing
Upto 15 days
Rs..500/-Upto
30 days
Rs.1000/&
thereafter
Rs..100/- per
day,
Maximum of
Rs..20,000/-
Value added tax (vat)
A value added tax (VAT) is a form of consumption tax.
 It is to be levied as a proportion of the value added (i.e. sales minus purchase).
VAT will have four broad type of rates.
a) 0% (Exempted) for unprocessed agricultural goods, and goods of social importance.
b) 1% for precious and semiprecious metals.
c) 4% for inputs used for manufacturing goods, capital goods and other essential items.
d) 20% for demerit/luxury goods.
e) The rest of the commodities are taxed at a revenue neutral rate of 12.5%.
VAT & CST
Period
Due Date (Monthly)
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
21/05/2013.
21/06/2013.
21/07/2013.
21/08/2013.
21/09/2013.
21/10/2013.
21/11/2013.
21/12/2013.
21/01/2015.
21/02/2015.
21/03/2015.
21/04/2015.
Due Date (Quarterly)
Due Date
(Half-Yearly)
Interest Rate
Interest
calculated from
Penalty for Late
Filing
15% p.a.
(Day-wise
Interest)
From the Due
Date of Payment
Rs..5000/- Per
Return (i.e. Vat &
CST Separately)
21/07/2013.
30/10/2013.
21/10/2013.
21/01/2015.
30/04/2015.
21/04/2015.
TAX STRUCTURE IN INDIA
(understand with some daily routine questions/answers)
1)Qus. : What are you doing?
Ans. : Business. Tax : PAY PROFESSIONAL TAX!
2) Qus. : What are you doing in Business?
Ans. : Selling the Goods. Tax : PAY SALES TAX!!
3) Qus. : From where are you getting Goods?
Ans. : From other State/Abroad Tax : PAY CENTRAL SALES TAX, CUSTOM DUTY
& OCTROI!
4) Qus. : What are you getting in Selling Goods?
Ans. : Profit. Tax : PAY INCOME TAX!
5) Qus. : How do you distribute profit ?
Ans : By way of dividend Tax : Pay dividend distribution Tax
6) Qus. : Where you Manufacturing the Goods?
Ans. : Factory. Tax : PAY EXCISE DUTY!
7) Qus.. : Do you have Office / Warehouse/ Factory?
Ans. : Yes Tax : PAY MUNICIPAL & FIRE TAX!
8) Qus. : Do you have Staff?
Ans. : Yes Tax : PAY STAFF PROFESSIONAL TAX!
9) Qus. : Doing business in Millions?
Ans. : Yes Tax : PAY TURNOVER TAX! Ans : No Tax : Then pay Minimum Alternate Tax
10) Qus. : Are you taking out over 25,000 Cash from Bank?
Ans. : Yes, for Salary. Tax : PAY CASH HANDLING TAX!
11) Qus.: Where are you taking your client for Lunch & Dinner?
Ans. : Hotel Tax : PAY FOOD & ENTERTAINMENT TAX!
12) Qus.: Are you going Out of Station for Business?
Ans. : Yes Tax : PAY FRINGE BENEFIT TAX!
13) Qus.: Have you taken or given any Service/s?
Ans. : Yes Tax : PAY SERVICE TAX!
14) Qus.: How come you got such a Big Amount?
Ans.. : Gift on birthday. Tax : PAY GIFT TAX! 15) Qus.: Do you have any Wealth? Ans. :
Yes Tax : PAY WEALTH TAX!
16) Qus.: To reduce Tension, for entertainment, where are you going?
Ans. : Cinema or Resort. Tax : PAY ENTERTAINMENT TAX!
17) Qus.: Have you purchased House?
Ans. : Yes Tax : PAY STAMP DUTY & REGISTRATION FEE !
18) Qus.: How you Travel?
Ans. : Bus Tax : PAY SURCHARGE!
19) Qus.: Any Additional Tax?
Ans. : Yes Tax : PAY EDUCATIONAL, ADDITIONAL EDUCATIONAL &
SURCHARGE ON ALL THE CENTRAL GOVT.'s TAX !!!
20) Qus.: Delayed any time Paying Any Tax?
Ans. : Yes Tax : PAY INTEREST & PENALTY!
21) Qus.: Indian : Can I Die Now ?
Ans. : Wait, we are about to launch the funeral tax!!!