Basic Framework of Tax Law in India

8/7/2019 Basic Framework of Tax Law in India

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Compiled By: Vishal Chopra


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Person:The term person includes:

a: an individual

b: a Hindu undivided family

c: a company

d: a firm

e: an association of persons or a body of individuals, whether incorporated or

not;

f: a local authorityg: every artificial juridical person, not falling within any of the preceding

categories.


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Assessee:

Assessee means a person by whom any tax or any other sum of

money( i.e., penalty or interest) is payable under the Act.

Charge of Income-tax:

Annual tax- Income tax is an annual tax on income.

Tax rate of assessment year- Income of previous year is chargeable in the

next following assessment year at the tax rates applicable for theassessment year.

Rates fixed by FinanceAct-


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Income:Income means that which comes in as the periodical product of ones

work, business, lands, or investment( commonly expressed in terms of

money); an annual or periodical receipts accruing to a person or a

corporation.

Income connotes a periodical monetary return coming in with some sort of

regularity, or expected regularity from definite sources.

For the purpose of taxation, income is broadly defined as the true increase

in the amount of wealth which comes to a person during a stated period oftime.


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Lump Sum Receipt

Temporary and Permanent Income

Personal Gifts

Tax free Income

Income includes loss

Prize on winning a motor rally

Capital Gain

Insurance profit


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Gross Total Income:

1. Salaries

2. Income from house property

3. Profits and gains of business or profession

4. Capital gains5. Income from other sources

In other words gross total income means total income computed in

accordance with the provisions of theA

ct before making any deductionunder sections 80C to 80U.


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Total Income and Tax Liability:

Total income of an assessee is gross total income as reduced by amount

deductible under sections 80C to 80 U.

Capital Receipts Vs. Revenue Receipts:

Receipts are of two types

i) Capital : exempt from tax unless they are expressly taxable

ii) Revenue : are taxable unless they are expressly exempt from tax.


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Different taxable entities:

a: an individual

b: a Hindu undivided family

c: a companyd: a firm or an association of persons or a body of individuals;

e: every other person

Person of Indian Origin:

Aperson is deemed to be of Indian origin if he, or either of his parents orany of his grand-parents, was born in undivided India. It may be noted that

grand parents include both maternal and paternal grand parents.


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An Individual may be:

a) Resident and ordinary resident

b) resident but not ordinary resident

c) non-resident


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Resident and ordinary

resident

Resident but not

ordinarily resident

Non-resident

In case of an Indian citizenwho leaves India during the

previous year for the

purpose of employment or

who leaves India as a

member of the crew of an

Indian ship.

In the case of an Indiancitizen or a person of Indian

origin (who is abroad) who

comes to India on a visit

during the previous year

In the case of an individual(other than that mentioned

in column (1) and (2)

a. Presence for at least

182 days in India during

the previous year.

b. Not functional



the previous year.

b. Not functional



the previous year.

b. Presence in India for at

least 60 days during the

previous year and 365

days during 4 yearsimmediately preceding

the previous year


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Additional Condition at a glance:

i) Resident in India in at least 2 out of 10 years immediately

preceding the previous year.

ii) Presence in India for at least 730 days during 7 yearsimmediately preceding the previous year


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A Hindu undivided family is either resident in India or non-resident in India.

A resident Hindu undivided family is either ordinarily resident or not

ordinarily resident.

A Hindu undivided family is resident or non-resident:

Place ofControl Residential status offamily

Ordinarily resident ornot

Control and

management of the

affairs of a Hindu

undivided family is-

1. Wholly in India

2. Wholly out of India

3. Partly in India and

partly outside India.

Resident

Non-resident

Resident

see condition

see condition


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When a resident Hindu undivided family is ordinarily resident in

India:

If Karta does not satisfy the two additional conditions, the family is treated as

resident but not ordinarily resident in India.

Condition (i) Karta has been resident in India in at

least 2 out of 10 previous years

immediately preceding the relevantprevious year.

Condition (ii) Karta has been present in India for a

period of 730 days or more during 7 years

immediately preceding the previous year.


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Place ofControl Residential Status

1. Wholly in India

2. Wholly outside India

3. Partly in India and partly outsideIndia

Resident

Non-Resident

Resident


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Every other person is resident in India if control and management of

his affairs is wholly or partly situated within India during the relevant

previous year.

On the other hand, every other person is non-resident in India ifcontrol and management of his affairs is wholly situated outside

India.


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Q. 1

X, a foreign national, came to India for the first time from USA onJuly 11,2000. He stayed here for a stretch of 3 years and left forJapan on July 11,2003. He returned to India on April 10,2004 and

remained here till August 17,2004, when he went back to USA. He

again came back to India on Jan. 30,2007 at 11:59 p.m. and

continued to stay in India thereafter. Determine his residential status

for the assessment year 2007-08.

Documents

Basic Framework of Tax Law in India