Income Tax procedure 1961

Income Tax procedure 1961

Income Tax procedure is process that how to work Income Tax Act,1961.

Income tax procedure is very simple under Income Tax Act,1961

Income tax procedure is Income earned, return filed, assessment

Charge of income tax (Section-4)

Where any Central Act enacts that income tax shall be charges for any assessment year at any rate or rates, income tax at that rate or those rate shall be charged for that year in accordance with and in  respect of total income of the previous year.

Provided that where by virtue of any provision of this income tax Act is to be charged in respect of the income of a period other than the previous year income tax shall be charges accordingly

In respect of income chargeable under sub section (1) income tax shall be deducted at the source or paid in advance where it is so deductible or payable under any provision of the Act.

 Previous year (Section-3)

 For the purposes of this Act” previous year” means the financial year immediately preceding the assessment year.

Assessment Year

“Assessment year” means the period of twelve months commencing on the 1st day of April every year.

Resident

“Resident” mean a person who is a resident in India within the meaning of section 6

Assessee

“Assessee” mean a person by whom any tax or other sum of money is payable under this Act and including

(a).every person in respect of whom any proceeding under this Act has been taken for or of the income of any other person in respect of which is assessable, or of the loss sustained by him or, by such other person or the amount of refund due to him or to such other person.

(b) every person who is deemed to be an assessee under provision of this Act.

(c) every person who is deemed to be an assessee in default under any provision of this Act.

Assessing officer

“Assessing Officer means the Assistant commissioner or deputy commissioner or assistant Director or Deputy Director or the Income tax Officer who is vested with the relevant jurisdiction by virtue of direction or orders issued under sub section ( 1) or Sub Section ( 2) of section 120 or any other provision of this Act and the additional commissioner, joint commissioner or joint director who is directed under clause (b) of sub section (4) of that section to exercise or perform all or any of the powers and functions conferred on or assigned to an assessing officer under this Act.

Person

“Person” Includes

  • An individual,
  • A Hindu undivided family
  • A company
  • A firm,
  • An association of person or body of individuals whether incorporated or not,
  • A local authority and
  • Every artificial juridical person not falling within any of the preceding sub clauses

 Total Income

Scope of total income (Section-5)

Subject to the provision of this act, the total income of nay previous year of a person who is a resident includes all income from whatever source derived which

  1. Is received or is deemed to be received in India in such year by or on behalf of such person, or
  2.  Accrues or arises or is deemed to accrue or arise to him in India during such year; or
  3. Accrues or arises to him outside India during such year.

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub section ( 6) of section 6 the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which

(a) is received or is deemed to be received in India in such year by or on behalf of such person or,

(b) accrues or arises or is deemed to accrue or arise to him in India during such year.

 There are three type of Resident according to Income Tax Act 1961

1. Resident

2. Ordinarily Resident

3. Non Resident

What Income under Income Tax under Income Tax Act, 1961

Income

Income includes

  • Profits and gains
  • Dividend;
  • Voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes.

And more many items includes

Permanent account number (PAN)

Who need to take permanent account number?

Every person

  • If his total income or the total income of any other person in respect of which he is assessable under this Act during any previous year exceeded the maximum amount which is not chargeable to income tax; or
  • Carrying on any business or profession whose total sales turnover or gross receipts are or is likely to exceed ( Five lac rupees) in any previous year or
  •  Who is required to furnish a return of income under ( sub-section(4A0 of section 139; or
  • Being an employer who is required to furnish a return of fringe benefit under section 115WD
  •  Being a resident other than an individual which enters into a financial transaction of an amount aggregating to  two lakh fifty thousand rupees or more in a financial year
  • Who is the managing director, director, partner, trustee, author founder, karta, chief executive officer, principal officer or officer bearer of the person referred to in clause (v ) or any person competent to act on behalf of the person referred to in clause ( v)

And more many items includes

Whom need to file income tax return?

According to section 139 (1) every person

  • Being a( Company or a firm )
  • Being a person ( other than a company or a firm) if his total income or the total income of any other person in respect of which he is assessable under this Act during the  previous year exceeded the maximum amount which is not chargeable to income-tax

Total income

Heads of income (Section-14)

Save as otherwise provided by this Act, all income shall for the purposes of charge of income tax and computation of total income be classified under the following heads of income-

  1. Salaries
  2. Income from house property
  3. Profit and gains  from business or profession
  4. Capital gains
  5. Income from other source

Who is liable to pay Income Tax under Income Tax Act, 1961?

Total income of any person during the previous year exceeded the maximum amount which is not chargeable to income-tax is liable to pay tax at prescribed rate under Income Tax Act, 1961

Summary of Income Tax procedure

                      Income earned by person

                                          ↓

Calculate gross total income from five head of income

                                                

Less various deduction available under chapter VIA

                                                

Check

Total income of person during the previous year exceeded the maximum amount which is not chargeable to income-tax                          (01/04/2019 to 31/03/2020)

                                                      ↓

                                 Return filed by assesse

                                                ↓

        Income Assessed by assessing officer

                                          ↓

                                   Appeal to commissioner

( If assessee or commissioner not satisfied with assessment)

                                               ↓

Appeal to Income Tax Appellate Tribunal

(If assessee or commissioner not satisfied with assessment)

                                                         ↓

                               Appeal to High court

(If assessee or commissioner not satisfied with assessment)

                                                        ↓

                            Appeal to Supreme Court

(If assessee or commissioner not satisfied with assessment)

 Decision of Supreme Court is final decision and that decision is bind to all party

Conclusion: The Central Government has power to impose tax on citizen. The Central Government using the power passed Income Tax Act, 1961 in parliament.  The Income Tax Act 1961 is a direct tax impose on income earned by a person during the previous at a prescribed rate of tax in respective Budget.

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