Introduction, Scheme And Definitions

INCOME TAX is the major source of revenue for the government, entry 82 of the union list of the Seventh Schedule read with Article 246(i) of THE CONSTITUTION OF INDIA empowers the parliament to make law with respect to taxes on income other than agriculture income Although administration and collection of taxes rest with the central government but net proceeds of the taxes are shared by state government on the basis of recommendation of the Finance Commission appointed by the president of India every five years.           
1.    Income Tax Law :
    Proper understanding of the Income – Tax law requires a study of the following.
(A)    The Income-Tax Act, 1961
(B)    The Finance Act (Annual)
(C)    The Income-Tax Rules, 1962
(D)    Circulars and Clarification by CBDT
(E)    Judicial decisions
(A)    The Income - Tax Act, 1961 :
    The provisions of income tax are contained in the Income-Tax Act, 1961 which extends to the whole of India and became effective from  1.4.1962. The Income-Tax Act contains provisions for determination of total income, determination of tax on total income procedure for return and assessment, appeals, penalties and prosecutions, powers and duties of various income-tax authorities. It is important to note that since Income-Tax Act, 1961 is a revenue law, there are bound to be amendments from time to time by the Annual Finance Act. Various provisions made at a glance under Income Tax Act, 1961 chapter wise and section wise are given at the beginning of this book for the benefit of reader.

(B)    The Finance Act (Annual) :
    Basically Finance Act contains two important functions :
(i)    Amendments which are required to be made in the area of direct and indirect taxes by the Central Government.

(ii)    Rates of Income-tax and other taxes
    It is important to note that Finance bill is presented before the parliament by the Finance Minster and after approval, it becomes Finance Act.

Income-Tax
    Individuals, Hindu undivided families, AOPs, BOIs - The rax rates applicable to individuals are also applicable to a Hindu undivided Family, an association of persons, body of individuals or an artificial juridical person. The rates applicable for the assessment year 2010-11 are as follows:

    •    For resident woman (who is below 65 years at any time during the previous year) -

    Net Income Range                       Income Tax Rates
    Up to Rs. 1,90,000                       Nil
    Rs. 1,90,000 - Rs. 3,00,000        10%
    Rs. 3,00,000 - Rs. 5,00,000        20%
    Above Rs. 5,00,000                     30%

•    For resident Senior Citizen (who is 65 years or more at any time during the previous year) -

    Net Income Range                           Income Tax Rates
    Up to Rs. 2,40,000                          Nil
    Rs. 2,40,000     - Rs. 3,00,000        10%
    Rs. 3,00,000 - Rs. 5,00,000            20%
    Above Rs. 5,00,000                        30%
•    For any other individual, HUF/AOP/BOI/Artificial Juridical person-

    Net Income Range                           Income Tax Rates
    Up to Rs. 1,60,000                          Nil
    Rs. 1,60,000     - Rs. 3,00,000        10%
    Rs. 3,00,000 - Rs. 5,00,000            20%
    Above Rs. 5,00,000                        30%

Notes:
1.     Surcharge - NIL
2.    Education Cess - 2%
3.    Secondary & Higher Education Cess - 1%
Firms
    A firm is taxable at the rate of 30%.
Notes:
1.     Surcharge - NIL
2.    Education Cess - 2%
3.    Secondary & Higher Education Cess - 1%
Company
    For the assessment year 2010-11 the following rates of income tax are applicable.

Company    Rate of Income Tax
In the case of a domestic company    30%
In the case of a foreign company
• Royalty received from government or an Indian Concern in pursuance of an
agreement made by it with the Indian Concern after March 31, 1961,but before
April 1st, 1976, or fees for rendering technical services in pursuance of an
agreement made by it after Feb. 29, 1964 but before April 1st, 1976 and where
such agreement has,in either case, been approved by the central Govt.    50%
• Other Income                        40%
Surcharge :
                If net income does        If net income does   
                not exceed Rs.1Crore        exceed Rs.1Crore
Domestic Company        Nil                10%
Foreign Company        Nil                2.5%
It is 2.5% or 10% of income tax. Marginal relief is available which is given below:
Marginal Relief :
In the case of a company having a net income of exceeding Rs. 1 crore, the net amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs. 1 Crore by more than the amount of income that exceeds Rs. 1 crore.
Education Cess - 2%
Secondary Higher Education Cess - 1%
Cooperative Society
Net Income Range                Rate of Income Tax   
Upto Rs. 10,000                     10%
Rs. 10,000 - Rs. 20,000                 20%   
Rs. 20,000 and above                30%   
Surcharge - Nill
Local Authorities     It is taxable at the rate of 30%.
Surcharge - Nill
(C)    Income-tax Rules, 1962 (amended upto date):
    Every Act normally gives power to an authority, responsible for implementation of the Act, to make rules for carrying out purposes of the Act. Section 295 of the Income-tax Act has given power to the Central Board of Direct Taxes (CBDT) to make such rules, subject to the control of Central Government, for the whole or any part of India. These rules are made applicable by notification in the Gazette of India. These rules were first made in 1962 and are known as Income-tax Rules, 1962. Since then, many new rules have been framed or existing rules have been amended from time to time and the same have been incorporated in the aforesaid rules. If a conflict is detected between any rule and provision of the Act, the provision of the Act shall prevail.
(D)    Circulars and Clarifications by CBDT :
    The CBDT in exercise of the powers conferred on it under section 119 has been issuing certain circulars and clarifications from time to time, which have to be followed and applied by the Income-tax Authorities. Such circulars or clarifications are binding upon the Income-tax Authorities, but the same are not binding on the assessee, although the assessee can claim benefit under such circulars. [UCO Bank v CIT (1999) 237 ITR 889 (SC)].
(E)    Judicial Decisions :
    Any decision given by the Supreme Court becomes a law which will be applicable on all the assessees. Decisions given by a High Court, Income-Tax Appellate Tribunal, etc. are binding on all the assessees as well as the Income-Tax Authorities which fall under their jurisdiction, unless it is over-ruled by a higher authority. The decision of a High Court is binding on the Tribunal and the Income-Tax Authorities situated in the area.
2.    Definitions :
    General definitions are given in section 2 of the Income Tax Act and some definitions that are related with specific heads or chapters are given in that heads or chapters. When definition uses the words “means” the definition is self explanatory & exhaustive in nature. But some time legislature wants to widen the scope of a term, so it uses the word “includes” in definition. Hence the inclusive definition provides an illustrative meaning. Hence we conclude, the definition could include what is not specifically mentioned in the definition. When legislature intends to define a term to mean something and also intend to specify certain items to be included, both the words “means” as well as “includes” are used. Such definition is not only exhaustive in nature but also illustrative. ..........

More Detail:-http://www.gurukpo.com