Comprehensive Guide to Income Tax Law and Accounts

1. INCOME TAX LAW AND ACCOUNTS - I SUNIL CHANDRAN.S Assistant Professor Department of Commerce NSS College Pandalam

2. INCOME TAX • Points to be covered under Income tax • Income tax • Brief history of income tax in India • Features of tax • Objectives of taxation • Direct and Indirect tax • Gross Total Income • Total Income

3. Points to be covered contd… • Person • Association of Persons • Body of Individuals • Assessee • Deemed assessee • Assessee in default • Assessment year • Previous year • Average rate of tax • Surchage and Education cess • Rates of tax

4. Residential status Residential status are divided into 3 types • Resident and Ordinarily resident • Not ordinarily resident • Non resident For determining the residential status there are two conditions • Basic conditions • Additional conditions Basic conditions: • The assessee is in India during the previous year for a period of 182 days or more • The assessee is in India during the previous year for a period of 60 days or more and has been in India for a period of 365 days or more during the 4 years preceding the previous year.

5. Additional conditions: • The assessee has been resident in India in atleast 2 out of 10 years preceding the P/yr and • The assessee has been in India for a period of 730 days or more during the 7 years preceding the previous year. Residential status Resident and Ordinarily resident : Assessee satisfying any one of the Basic condition and both the additional conditions. Not ordinarily resident: Assessee satisfying any one of the basic conditions but not satisfying both the additional conditions. Non Resident: Assessee satisfying none of the basic conditions.

6. Transferred balance: When URPF gets recognised, balance standing in the credit of the employee’s URPF will be transferred to his RPF called Transferred balance. Annual accretion: Employer’s contribution to employee’s PF in excess of 12% of employees salary and interest allowed by employer on the balance of employee’s PF above 9.5%

7. Incomes exempt from tax • Agricultural income • Receipt by a member from HUF • Gratuity: • Govt. employees- exempted • Employees covered under Payment of Gratuity Act 1972. • Employees not covered under Payment of Gratuity Act 1972. • Pension • Commutation of pension

8. Encashment of earned leave • Retrenchment Compensation • House rent allowance: Least is exempted to the following Amount of HRA received Rent paid over 10% of salary 50% or 40% of salary

9. Income from salary • Definition of salary • Perquisites -Tax free perquisites -Perquisites taxable in case of all employees -Perquisites taxable in the case of specified category of employees. Valuation of Perquisites: Residential accommodation • Govt. employees • Other employees a. Accommodation owned by the employer b. Accommodation taken on lease or rent by the employer

10. Sweeper, Gardener, Watchman and Personal assistant. • Gas, electricity and water • Education facility in the institution of the employer. • Interest free or Concessional loan • Use of Movable asset • Transfer of movable asset

11. Motor car: • Car owned by employer and running expenses met by employer. • Car owned by employer and running expenses met by employee. • Car owned by employee. • Recognized Provident Fund • Taxable allowances • Partially taxable allowances Fully exempted allowances • Deductions from Salary income • Entertainment allowance • Professional tax

12. Income from House Property • Definition of House property • Income from house property- exempt from tax • Computation of Annual value of let out property • Computation of Gross annual value • Terms : • Standard rent • Actual rent • Municipal value • Fair rental value • Vacancy allowance • Municipal tax

13. Profits and Gains from Business or Profession Meanings of : • Business • Profession Computation of Income from Business or Profession: Net profit as per P/L account Add - Disallowed expenses debited to P/L Less - Incomes credited to P/L but not chargeable under this head Depreciaiton Block of assets Rate of depreciation for each assets Special deductions from business income Practical problems

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