1. History, Assessee, Person, Concept of Income , Its
features & Agricultural Income
- Dr.K.Chitra Chellam
Assistant Professor of Commerce
A.P.C. Mahalaxmi college for Women, Thoothukudi
2. Income tax is a direct tax payable to the Central Government
It is an important source of revenue to the Government.
Income tax helps the government to achieve balanced socio-economic growth.
Every person, whose taxable income for the Previous Year exceeds the maximum
taxable limit is liable to pay tax for the current financial year.
3. In 1860, Income tax was first introduced in India by Sir James Williams in order to meet the
losses incurred by the Government due to the “Military Mutiny” in 1857.
A separate Income Tax Act was passed in India during 1886.
This Act passed in 1886 was amended from time to time and remained in force till 1917.
In 1918, a new Income Tax Act was passed and this Act was replaced by another new Act
passed in 1922.
The Income Tax Act of 1922 was amended frequently and remained in force up to the
Assessment Year 1961-1962.
The Income Tax Act 1922 was too complicated because of numerous amendments.
4. Government referred this problem to the Law Commission in1956.
The Law Commission submitted its report in 1958.
The Government also appointed the Direct Taxes Administration Enquiry
Committee to suggest measures to minimize inconveniences and to prevent tax
evasion.
Direct Taxes Administration Enquiry Committee submitted its report in 1959 and in
consultation with the Ministry of Law, Income Tax Act, 1961 was passed by the
Govt.
The Income Tax Act, 1961 came into force with effect from 1st April, 1962 is
applicable to whole of India including Jammu & Kashmir.
5. In 1963, Central Board of Direct Taxes was created.
Voluntary Disclosure Scheme was implemented in 1975.
In 1990, Gift Tax bill was introduced
In 1997, the Govt. reduced the rates of income tax significantly.
Computerised processing of returns was introduced throughout India in 2002
6. Income tax is a Direct Tax. Direct tax means tax paid by a person who bears the tax burden.
Whereas in case of indirect tax, the tax payer passes the tax burden to others.
Income tax is imposed and collected by the Central Govt.
Income tax is calculated on total income also known as taxable income.
Income tax is levied if the taxable income exceeds the maximum taxable limit.
The rates of income tax increases with an increase in the Income
Surcharge is imposed on the amount of income tax – For individuals: 10% if the total income
exceeds 50 lakhs but does not exceed 1 crore & at 15% if the total income exceeds 1 crore.
Health & Education cess at 4% is charged on the total amount of income tax including
surcharge.
7. Tax is imposed and collected by the Income Tax Department which works under the
control of Central Board of Direct Taxes (CBDT).
The total amount of income tax collected by the Central Government is allocated
among the central govt. and state governments according to the recommendations
of Finance Commission.
The state governments will not be given any share from income tax recovered
from companies, surcharge and amount of health & education cess.
8. Assessment Year Section 2 (9):
Assessment Year refers to 12 months starting from the first day of every April of a
particular year and ends on 31st day of every March of the next year.
The current Assessment Year (A.Y) stars from 1st April 2020 and ends on 31st
March 2020 (01.04.2020 – 31.03.2021).
9. Previous Year Section (3):
Previous year refers to 12 months immediately preceding the particular
assessment year.
Previous Year (P.Y) : 01.04.2019 -31.03.2020
Assessee: Sec. 2(7):
Assessee refers to any one of the following persons as per Income Tax Act:
Every person who is liable to pay tax.
Every person who is liable to pay interest or penalty
Every person who is entitled to get refund of income tax. Ordinary
Assessee
.
10. Any person who is deemed to be an assessee.
Any person who is assessee in default.
Any person who has incurred loss and filed return of loss.
Any person on whom legal proceeding has been carried out.
Ordinary Assessee
11. Ordinary Assessee
Deemed Assessee (Or) Representative assessee (For a minor, father is the
deemed assessee.
Assessee-in-default-
12. Person Sec.2(31)
7 categories of Persons
• An individual
• Hindu Undivided Family(HUF)
• Company
• Firm
• AOP (Or) BOI
• A local authority.
• Every artificial juridical person
13. Income includes the following:
Profits & gains
Dividend
Voluntary contribution received by a trust.
Perquisite or profit in lieu of salary.
Allowances
Casual income
Capital gains
Gift of an amount exceeding Rs.50,000
14. Continued…..
• Any sum received under Keyman insurance policy
• Contribution received by any University, educational institutions, hospitals for charitable
or religious or research purpose.
• Any sum received by an employee as P.F or any fund created under ESI Act
15. Income must come from a definite source in order to get it taxable.
Legal & illegal incomes are taxable.
Both cash & in kind.
Temporary or permanent.
Lump sum or received in instalment
Same income cannot be taxed twice.
Reliefs or reimbursement of expenses (not an Income).
In case of dispute regarding the title of income, then the beneficiary will be taxed.
16. Continued……
• Diversion of income is not taxable.
• Application of income is taxable.
• PIN money received by wife is not taxable.
• Award received by a professional sports person in the nature of benit is taxable
• Income includes loss also.
17. Agricultural Income Sec.10(1).
Any sum received by an individual as a member of HUF. Sec.10(2)
Income from partnership firm Sec.10(2a):
Any remuneration received by an employee of a foreign government during his stay
in India is not taxable.
Gifts and awards received on occasion of birthdays, marriage and so on – not
taxable
Gifts received from unrelated persons is taxable if the value of gifts exceed
Rs.50,000
18. Any income received by a consultant in the form of remuneration or fees from an
international agency – Not taxable.
Compensation received at the time voluntary retirement from a public sector
company.
Compensation received by victims of Bhopal Gas tragedy.
Sum received including the bonus under Life Insurance Policy.
Daily allowance and constituency allowance received by the MP, MLA.
Pension received by Gallantry Award winners or members of their family.
Family pension received by a widow or nominate heirs of a member of armed
forces.
19. Income of professional institutes or associations approved by the central
government.
Income of an authority established in the State for the development of Khadi or
Village industries.
Income of the Prasar Barathi (Broadcasting Corporation of India.
Income of certain funds, income of educational institutions and income from
hospitals.
Payment received by an employee from a PF or PPF.
Payment received by an employee from a RPF.
Educational scholarships received from the government.
20. Dividend income from an Indian Company.
Income from tranfer of capital assets of UTI
Income of up to Rs.1,500 is exempt in case of a minor child
Any income of IRDA .
21. Section 10 (1) – Agricultural income is fully exempted from tax.
Kinds of agricultural income:
Any rent or revenue derived from agricultural land.
Any income from agricultural operations such as cultivation, tilling of the land,
watering the land, sowing the seeds, planting and so on.
Income derived from saplings or seedlings grown in a nursery shall be deemed to
be agricultural income.
Income from farm house.
Income from the sale agricultural produce.
22. The land must be situated in India
Land must be used only for agricultural purposes.
The direct income from agriculture is treated as agricultural income.
An indirect income from agriculture will not be treated as agricultural income.
Example: Salary received as a farm manager, dividend from a company
engaged in agricultural activities.
Capital gains arising from the transfer of an agricultural land is not treated as
agricultural income.
23. In case of Composite Inome, the total income is calculated first.
Then, the portion of income belonging to agricultural income must be deducted.
And the balance is treated as non-agricultural income which is taxable.
Separation of Agricultural and Non-Agricultural Income:
Income from growing & manufacturing tea in India: 60% - Agricultural
40% - Business income
Income from growing and manufacturing of centrifuged latex or cenex: 65% - Agri.
