1. DEATH TAXES ARE UNAVOIDABLE
&
TAXES
ARE UNAVOIDABLE

2. Classification of Taxes
Direct and Indirect taxes
Direct taxes – directly levied on source of income and wealth
E.g. Income tax and Wealth tax
Indirect taxes – indirectly levied on activity/transaction which generates income or wealth
E.g. sales tax, service tax, etc.

3. KINDS OF TAXES Income-tax Sales tax Wealth tax Service tax
Custom duties
Securities transaction tax
Excise duties…… and many more

4. INCOME TAX ACT, 1961 (will be replaced by Direct tax codes from 1. 4

6. INCOME U/s 2 (24): Meaning and Characteristics
PERIODICAL
MONETARY
RETURN
COMING IN WITH
REGULARITY
OR SOME SORT OF
REGULARITY
FROM A
DEFINITE SOURCE

7. Characteristics of Income
Legal or Illegal incomes are taxable
Moral or Immoral incomes are taxable.
Cash or kind
Real and not imaginary. E.g. sales supported by invoice documents
Examples: profits, gains, donations, perquisites, allowances, compensation, export cash assistance, lottery prize, kaun banega crorepati ?, etc…….

8. The outflow from income paid to the Government.
Tax
The outflow
from income
paid to the Government.

9. Who is liable to pay TAX?

10. What is the status of the following person
Ms. Katrina
Mr. Salman – a minor
Ms. Ruby – a person of unsound mind
Ram, his wife Sita and two sons
M/s Chip and Dale – 2 CAs in partnership
Tata limited
Mumbai Municipal corporation
Roha Gram Panchayat
Joint venture between X ltd and Y ltd
Joint venture between Mr. A and Mr. B
Mumbai University
Tirupathi Devasthanam

11. Assessee U/s 2 ( 7 ) a) every person in respect of whom any
proceedings are taken under the act
b) every person who is deemed to be an
assesses under the act
e.g. a trustee of a trust
c) every person who is deemed to be as assessee in default.
e.g. an employer who does not deduct TDS from employees salaries

12. When to pay tax ?
PREVIOUS YEAR - U/S 3
ASSESSMENT YEAR U/S 2 ( 9 )

13. Previous year u/s 3 Year in which the income is received
Always ends on 31st march
E.g. P.Y begins on and ends on
P.Y begins on and ends on

14. ASSESSMENT YEAR u/s 2(9) Year in which final tax is payable relating
to the previous year.
Always for 12 months.
Example:
PY AY
PY AY (this is relevant or exam)

15. Assessment U/s 2(8) Assessment 2 (8): Process of determining and
computing the amount
of income and tax dues
of a person.

16. Charge of Income tax u/s 4:
Income tax shall be charged,
At the rates laid down by the finance act,
For that assessment year,
In respect of the total income,
Of the previous year,
Of every person.

17. Residential status u/s 6
Tax liability is based on the residential status of a person.
Citizenship is NOT the main criteria for tax purposes and is different from residential status
Residential status may change from year to year depending upon the stay in India.

18. Kinds of Residential status:

19. Stay in India for at least 60* days in current PY.
Conditions for determining residential status for an individual sec 6(1)
BASIC
ADDITIONAL
Stay in India for
At least
182 days
in Current PY 09-10
Stay in India for at least 60* days in current PY.
Stay in India for 730 days in 7 PY preceding the current PY 09-10
Resident in India for 2# out of 10 PY preceding current PY OR
&
AND
&
Stay in India for at least 365 days in 4 PY preceding current PY.
( D )
( C )
( A )
( B )
If {a or b}+ {c & d} satisfied: ROR If only a or b satisfied: RNOR If a or b NOT satisfied: Non-resident
* exceptions:
A citizen of India/crew of Indian Ship leaving India for
Employment or self-employment OR b) A citizen of
India or a persons of Indian origin comes to a visit in India
REPLACE 60 by 182 days

20. Counting of days a) the stay need be in the same place
b) the stay need not be continuous
c) the days of entry and exit are both counted
d) a stay in a boat in territorial waters of India is treated as stay in India
e) For February, where applicable 29 days are considered.

21. Solution: Mr. George Bush Foreign Citizen PY 2009-10 AY 2010-11
E.g. Mr. George Bush comes for the first time to India on and leaves India on Determine his residential status for AY
Solution: Mr. George Bush
Foreign Citizen
PY AY
Days in India in P.Y
Jan : 6 days
Feb: days
Mar: days
Total: 49 days
He does not satisfy any of the conditions.
Therefore he is Non resident.

22. Conditions for determining residential status
BASIC
ADDITIONAL
Stay in India for
At least
182 days
in Current PY 05-06
Stay in India for at least 60 days in current PY.
Stay in India for 730 days in 7 PY preceding the current PY 05-06
Resident in India for 9 out of 10 PY preceding current PY OR
&
AND
&
Stay in India for at least 365 days in 4 PY preceding current PY.
( D )
( C )
( A )
If {a or b}+ {c & d} satisfied: ROR If only a or b satisfied: RNOR
( B )
If a or b NOT satisfied: Non-resident

23. Class exercises
(1) Mr. Sanjay, an Indian citizen went to USA for the first time for the purpose of employment on 10th May, He came back to India on 19th November, Determine his residential status for Assessment year
Ans: Non resident
No. of days in India – 173( )
Employment so replace 60 by 182

24. Class exercise 2:
Ishant sharma, an Indian cricketer submits the following information of stay outside India for the year ending
He made his debut in international cricket on 10th march, Then in
a match against the West Indies, he suffered a major injury needing two years
of hospitalization in USA. He recovered and returned back to India on
Thereafter, he was employed by China Cricket board as Manager of the team.
Determine his residential status For A.Y

25. Solution Total no. of days in PY 09-10 365 Less: stay out of India:
Therefore, stay in India = =
He has not stayed in India for 182 days from employment condition, therefore he is Non-resident.

26. Class exercise
Mr. Bond an Indian citizen leaves India for honeymoon with his wife for the first time on Determine his residential status?
Mr. Khiladi an Indian citizen leaves India for employment purposes for the first time on Determine his residential status?

27. Residential Status for a Company
Depends on the management and control of affaires, i.e. where is the majority decision making taking place. Irrespective of the type of company.
For HUF – the residential status of Karta is considered as residential status of HUF.

28. Assignment sums:
Please see hand out.

29. Scope of total income: Section 5
Nature of Income
ROR
RNOR
N R
Income received in India
Taxable
Income accruing in India
Foreign Income:
From business / profession controlled or set up IN India
Not-Taxable
b) From business/profession
controlled or set up
OUTSIDE in India
Not Taxable

30. Salary received in India Received in India T
E.g.:
Items of Income
Nature
ROR
RNOR
N R
Salary received in India
Received in India T
Salary earned in India but received in Sri Lanka
Accruing in India
Foreign Income:
Income from business in Nepal controlled form Delhi
Foreign Income controlled from India NT
Income from business in Sri Lanka received there.
Foreign Income NOT controlled from India
T- Taxable NT - Not Taxable

31. Mr. Tom, a British citizen had the following income during the year ended on 31st March,2010
1. Income from house property in India
2. Income from property in Rome
3. Interest from bank account in India
4. Income from business in Bangladesh, being controlled from
India
5. Interest on Bank account in USA
6. Salary earned and received in Tokyo
7. Income earned and received in London
8. Dividend from British company received in India
Compute his total income for AY in 3 different cases:
A) ROR, b) RNOR and C) NR.

32. NON- TAXABLE INCOMES: (EXEMPTIONS) - Section 10
Section 10 (1) Agricultural Incomes from land
situated in India
Section 10 (2) - Sums received by a member of the
HUF from a Family income
Section 10 (2A) - Share of partner in profits out of the
partnership firm
Section 10 (16) - Scholarships granted to meet the
cost of education – like tuition fees.
Section 10 (32) - Minors income upto Rs.1500 per
child.
See notes for other exemptions

33. Heads of Income Income from Salaries Income from House property
Income from profits and Gains
of business or profession
Income from capital gains
Income from other sources

34. Computation of Total Income PY 09-10 AY 10-11
Particulars
Rs.
Income from Salaries XX
Income from House property
Income from P & G of Business or profession
Income from capital gains (short term)
Income from Other sources X
Add: Clubbed incomes
GROSS total Income
Less: deductions u/s 80
- X
Net taxable income YY
Add: Long term capital gains GG MM

35. Rates of tax (10 % 20% 30%) or as relevant ---------- Net tax payable
Computation of Final tax payable :
Net taxable income YY
Rates of tax (10 % 20% 30%) or as relevant
Net tax payable 1
Add: Surcharge (tax on tax) 2
Tax payable [ ] 3
Add: {education cess 3%} [1 x 3 %] 4
FINAL tax payable 5
Less: Tax already paid (T.D.S. / Advance tax) [5-6] 6
Assessed tax payable/refund 7

36. Income tax slab for ay 10-11
Income Tax Slabs for ay for Resident Senior Citizens
(FY )
S. No. Income Range Tax percentage
1 Up to Rs 2,40, No tax / exempt
2 2,40,001 to 3,00, %
3 3,00,001 to 5,00, %
4 Above 5,00, %
Income Tax Slabs for ay for Resident Women (below 65 years) (FY )
1 Up to Rs 1,90,000 No tax / exempt
2 1,90,001 to 3,00, %
3 3,00,001 to 5,00, %
Income Tax Slabs for ay Others & Men (FY )
1 Up to Rs 1,60, No tax / exempt
2 1,60,001 to 3,00, %

37. Levy of surcharge has been withdrawn for personal income tax payers
“Education Cess on Income-tax” and “Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two per cent and one per cent respectively of income-tax.

38. For the next class….
Assignment 1 to be submitted – Residential status and Scope of total income
Presentation:
A) Group formation
B) List of topics next slide

39. Session no. Group no. Topic

40. Income tax is the price one pays for Civilization……..
To do….
Income tax is the price
one pays for
Civilization……..