Concept of income tax pdf

Concept of beneficial ownership kpmg united states. As the name suggests,salary received by employee is taxable under income from salariesexamplesuppose a person gets flat salary of rs 20000 p. Mill and some other classical economists have suggested the principle of proportionate in taxation. Taxes are the basic source of revenue for the government, which are utilized for the welfare of the people of the country through government policies, provisions and practices. Hicks idea of encompassing expectations about the future in his income concept literally destroys its usefulness for measurement in the national accounts. Salary is taxable under this head only if there isproper employer employee relationshipi. Includes both taxable and nontaxable income from whatever sources exclusions. Although the tax base can be defined in a great variety of ways, corporate income tax cit generally relies on a broad tax base, formulated to encompass all. Constitutional aspects of federal income taxation, by t. Taxation, imposition of compulsory levies on individuals or entities by governments. Clarification of the income concept in the sna broadly, this group of issues deals with the snas exclusion of holding gains and losses from income, in contrast with business accounting standards and economic theory.

Income which do not form part of total income section 10, 11 to a section b. Discrepancies between the ways that net receipts and economic gains from selected economic events are included in or excluded from taxable income. Nov 24, 2009 savvy income tax chartered accountancy, income tax for ipcc, income tax for pcc, income tax law for ca, students 15 comments taxation, on of the most interesting and tricky subjects in the syllabus of chartered accountancy is actually more about the concepts than the learning. In addition to replacing the ordinary corporate income tax with a cashflow tax, it also proposed to introduce border tax. The concept of income a resource book primarily for policy makers and academic tax, accounting and economics researchers, who require an indepth analysis of the concept of income and its development for tax purposes. Chapter 2 income tax concepts 47 the federal income tax is based on a system of rules and regulations that determine the treatment of various items of income and expense. Logically, for a resident assessee income means total of all income of a. The legal force and effect of treasury interpretation, by f. Should holding gains and losses be included in sna income. Robert murray haig the concept of income economic legal. This concept states that the tax levied on a taxpayer should be based on the amount that the taxpayer can afford to pay. For example, taxable income reflects the requirements of a tax system which must temper equity with administrative feasibility. Taxation of income from business and investment international.

In order to satisfy the idea of justice in taxation, j. Definitions and concepts of tax definition of tax the tax is a kind of tribute usually pecuniary obligations in favour of the tax creditor governed by public law. That is why in the modern tax system of the countries of the world, income has been accepted as the best test for measuring the ability to pay of a person. The definition of income as per the incometax act, 1961 begins with the words. Looking for the practical application of a concept of income that improves the existing notion of taxable income. Apr 26, 2020 the income tax act, 1961 the income tax act, 1961 constitutes the substantive legislation containing the law of income tax.

Article 4 concept of residence in tax treaties arinjay. The year in which whole of this process is undertaken is called assessment year. The topic has gained in prominence in the public domain given its impact on public finances, on the. In its wider sense it includes all the incomes or receipts which a. Residential status and incidence of tax excluding section 9a 2. How to understand the concept of income tax returns in india. Sep 09, 2009 concepts of taxation chapter 16 economics. Income tax is charge on total income earned by every person during the relevant previous year. In the past decades several methods have been developed by national tax administrations and international institutions to estimate revenue loss. Basic concepts of income tax new recording youtube. Conversely, longrange tax planning alludes to such practices undertaken by the.

Entity includes company, trust, partnership, foreign permanent establishments, retirement funds etc. The income tax act contains the provisions for determination of taxable income, determination of tax liability, procedure for assessment, appeal, penalties and prosecutions. Clubbing provisions, set off and carry forward of losses, deductions 5. Department individual of the treasury income tax internal. This note seeks the guidance of the advisory expert group aeg on how to approach one of the most central and interpenetrating topics in the research agenda of the system of national accounts 2008 2008 sna. Additional unpublished information from individual income tax returns is available on a reimbursable basis. Conceptoftax inheritance tax income tax free 30day. Personal income taxes are an important means of raising revenue. In income tax act the meaning of previous year is year in which income is earned previous year is represented by py. Concept of tax income tax history united states in 1861 revenue act 1861 income tax was imposed on the income of citizens for the first time by the u.

Pdf personal income taxation in a context of a tax structure. The tax planning which is made every year to arrive at specific or limited objectives, is called shortrange tax planning. Meaning, tax revenue, non tax revenue with classification of public revenue. This chapter compared the operation of the income tax system with the operation of other systems we have devised to govern our everyday lives. Interest on public provident fund account is not taxable. Introduction and basic concepts of income tax act 1961. A different concept disposablepersonal income is used in studies of consumer behavior. Jan 16, 20 a tax consists of the following elements. Tax is calculated and compared with the amount paid and assessment order is issued. Another concept money income has been used in most studies of the size distribution of income. The income of the government through all sources is called public income or public revenue. Basic concepts of income tax income tax income free. There are lots of sites, you tube videos which explain it. More resources are devoted to measuring income than any other economic statistic.

This should be contrasted with vat, which is not an income tax for the purposes of ias 12, as the amount of vat is. Download basic concept of income tax file in pdf format. Change in income tax slab rate for individuals amendment. Maximum amount of medical insurance premium is allowed rs.

Eam uy slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Basic concepts of income tax components of income tax laws income tax act, 1961 1st. Indirect tax on the other hand is a tax that causes rise in the price of goods and is ultimately borne by the customer. Under this income returned by the assessee is checked and verified. In the absence of a definition in the income tax law, the term business will have its ordinary meaning. As per this concept, a person deductor who is liable to make payment of specified nature to any other person deductee shall deduct tax at source. Apr, 2020 income tax return itr changes in finance act. Heads of income and computation of total income and tax liability 70% 3. The key point to be made is that federal income taxation is based on a system.

Aug 28, 2018 allocate taxing rights between treaty partners india and usa in respect of taxation of various income, i. Income tax act contain 298 sections and xiv schedules. Income tax chart book by ca pranav chandak videos available on youtube pca telegram. It means the rate of income tax including surcharge on income tax, if any applicable in relation to the highest slab of income in the case of an individual, association of persons or, as the case may be, body of individuals as specified in the finance act of the relevant year. According to dalton, however, the term public income has two senses wide and narrow. Concept of beneficial ownership under russian tax law, any income distributed by a russian company to a foreign company is subject to russian withholding tax at a rate of 15% for dividends and a 20% rate for royalties, interest, and other income unless reduced by applicable provisions of an income tax treaty. The income tax act, 1961 the income tax act, 1961 constitutes the substantive legislation containing the law of income tax. The second section highlights some of the more substantial changes to the internal revenue tax code, particularly those affecting individual income tax liabilities. The course will introduce the concept of income tax, tax law, and how it is formatted.

As per this concept, a person deductor who is liable to make payment of specified nature to any other person deductee shall deduct tax at source and remit the same into the account of the central government. It extends to the whole of india and come into force on 1 st april, 1962. The definition, measurement, and evaluation of tax. The income tax law comprises the income tax act 1961. Choose an example of a system you deal with in your everyday life, and explain part of its operation in terms of concepts. Conduit companies set up as intermediaries receiving income on behalf of other persons who in fact receive the benefit of the income concerned, should also be denied tax treaty relief for not being the beneficial owner of the income concept based on the principle of substance over form. Therefore, it is an inclusive definition and not an exhaustive one. Whereas the pre tax income of the richer household was 10 times greater than that of the poorer household, its after tax income is 8. It also lays down the powers and duties of various income tax authorities. Taxable income tax rate or rates tax table or schedule gross tax credits and prepayments see table 25 net tax payable or refund due 4 formula for individual income tax definitions 5 income.

An assesses may get income from different sources, eg. Heads of income and computation of total income under various heads 4. Chapter 2 fundamental principles of taxation oecd ilibrary. Tax is a compulsory contribution to state revenue, levied by the government on workers income and business profits, or added to the cost of some goods, services, and transactions. Income tax act, 1961 amended up to date the provisions of income tax extend to the whole of india and became effective from 141962 sec. The second section highlights some of the more substan tial changes to the internal revenue tax.

Chapter 6 direct and indirect taxes a tax may be defined as a pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. A fundamental concept underlying the income tax structure is the abilitytopay concept. Classifications are by tax status, size of adjusted gross income, marital status, type of tax computation and age. Introduction and basic concept of income tax law times. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. What income is, is determined by capital, and what capital is, by income. In order to pool knowledge and share experience in existing tax gap estimations, the tax gap. The relationship between income characterization and timing rules is an important factor in the design of the income tax rules applicable to business income. Basic concepts of income tax income tax income free 30. Therefore the objectives do not in any way contradict the concept of tax laws. New income tax calculation 2020 new income tax rates new income tax slabs old vs new tax slabs duration. The concept of total income has been defined in section 245 of the income tax act.

The third section examines and analyzes aggregate time series data on individual income and taxes based on income tax. By law, businesses and individuals must file an income tax. Budget difference between exemptions and deductions change in income tax slab rate for companies amendment. The concept of tax gaps report on vat gap estimations. Nov 27, 2017 income tax basic concepts short notes a. Overview of the federal tax system in 2019 congressional research service 2 income tax rates. The term income is defined in section 224 of the income tax act. Therefore, her income tax exemption limit for financial year 201415 is rs. Introduction the concept of tds was introduced with an aim to collect tax from the very source of income.

Basic concepts of income tax i charteredguidance a. Assessment year sec 29 it means the period of twelve months commencing from 1st april to 31st of march the next year. When examining personal income taxation, it is necessary to point out differences in defined terms and used data. Tax preparation and law 2019 2020 income tax udemy. The first result of this concept is that the income tax base is a net income number i. The income tax is ultimately a tax on individuals, and income is. Income tax is a direct tax and we all try to save it to the best possible limit. Various examples of calculation of income tax learn.

Tax is the compulsory financial charge levy by the government on income, commodity, services, activities or transaction. The act comprises of 298 sections along with their respective sub sections arranged in 23 chapters and 12 schedules. Tax gap estimations are rough indicators of revenue loss. A comparative study of income tax ation of working wives and mothers, 21 buff. He is characterized by not requiring a direct or specific consideration by the administration reform tax creditor. For example, while in many developing countries an income tax that relies on selfreporting cannot be administered at all, in a developed country the question is to what extent optimal tax design should reflect the reality of evasion, the necessity of enforcement, and the costs of collection. An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction.