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BASIC CONCEPTS OF INCOME TAX ACT, 1961

Income tax is
basically nothing
but tax on income

Income is earned in
previous year and
taxed in following
year called
assessment year
INCOME IS CHARGED TO TAX UNDER
DIFFERENT HEAD OF INCOME AS FOLLOWS

K Salary
K Income from House property

K Income from profit and gains of Business or

Profession
K Capital gain

K Income from other sources

BOOKS OF ACCOUNTS TO BE MAINTAINED
COMPULSORILY UNDER RULE 6F

K Cash Book
K Journal (if mercantile system is followed)

K Ledger

K Carbon copies of bill issued exceeding Rs. 25/-

K Original bills/receipts issued to you or payment

vouchers for amounts greater than Rs. 50/-
K Daily case register

K Inventory of drugs, medicines, other consumables

FINE POINTS
K Books of accounts to be preserved for 6 years
from the end of relevant assessment year
K Failure to maintain daily case register or retain
it for prescribed period entails penalty of Rs.
25,000/-
K Following is the prescribed format of daily case
register
m  " #  m#
 ! $# % $
%

HOW TAXABLE INCOME FROM PROFESSION
IS COMPUTED ?

K Expenses incurred for earning income is deductible

from gross professional receipts. Following is the
suggestive list.
 Deduction in respect of rent, rates, taxes, repairs and
insurance of building
 Deduction regarding current repairs and insurance of
machinery.
 Depreciation allowance on Assets
 Insurance Premium for stocks and stores
 Deduction of salary, bonus to employees
 Interest on borrowed Capital
 Employers contribution to Recognized Provident Fund
 Other general expenses ² Travelling, Legal Exp, Staff-
Welfare Expense, consumables, materials etc
WHAT IS NOT DEDUCTIBLE?
K Capital expenditure.
K Payments of expenditure exceeding Rs. 20,000/-
at a time by cash
K Restriction on deduction of expense or payment
to relative to the extent it is excessive and
unreasonable.
K Personal expenditure of any kind.
DEDUCTIONS UNDER CHAPTER VI LIKE
80C, 80D
K [  &
K Subscription to long term infrastructure bonds as notified
by Central Government is eligible for deduction under this
section to the extent of Rs. 20,000/-
K [ &

K Payment for Life Insurance Premium

K Payment for Deferred Annuity Plan

K Contribution to Public Provident Fund, accrued interest on

PPF provided overall investment does not exceed Rs. 70000.

K Tuition fees of children

K Subscription to NSCs

K Subscription to units of notified mutual funds.

K Repayment of Principal component of housing loan

K Payment of stamp duty while purchasing self occupied

house property
DEDUCTION UNDER CHAPTER VI
CONTINUE«.
K 80 D- Medical insurance premium-
 A deduction upto Rs. 15,000/- in respect of medical insurance
premium for the health of assessee, spouse or dependant
parents/children is allowed.
 For senior citizen deduction is upto Rs. 20,000/-.
 Additional deduction for parents 15000/- or 20,000/-.

K 80E ² Repayment of Educational Loan for Higher Studies-

 Interest on education loan taken for graduation and post
graduation courses will be allowed for a maximum period of 8
years.

K 80G ² Donation to certain funds, charitable institutions -

 For government funds like P.M.·s National relief fund ² 100%
of donation.
 For other funds 50% of qualifying amount of donations.
DUE DATES AND OBLIGATIONS
K Advance Tax for individual ² Threshold limit Rs.
10000/-
 Advance tax installments:

h$'
#% )*)+,

($)* $!*
Up to 60% of advance tax Pay by 15th
payable December
Up to 100 % of advance Pay by 15th
tax payable March
DUE DATES & OBLIGATIONS«..
K DUE DATE OF FILING THE RETURN
K Where the assessee is subject to tax audit u/s 44AB by 30th
September
st
K In any other case by 31 July

K Return of income can be filed last date of

assessment year without paying penalty,
thereafter penalty of Rs. 5000/- may be levied.
K Return filed only within due date can be revised.

K Failure to get accounts audited can attract

penalty of ½ % of turnover.
BASIC PROVISIONS OF SURVEY, SEARCH
AND SEIZURE
K All of above terms are used in common parlance
having common meaning. However, they have
different meaning and impact
K %): Income tax authority can carry out survey of
business whereby inspection of books of accounts of
the taxpayer is carried out, verification of stock, cash
on hand or any valuable is carried out and
information for the purpose of income tax is gathered.
K Statement of person is recorded . However no cash,
valuable can be seized.
K It is absolutely not required to make disclosure
during the course of survey . If disclosure of any
income in course of business is made for current year
then it will be taxed as a part of normal business
income.
BASIC PROVISIONS OF SEARCH«..
K -: Income tax authority has
got wide powers during the search operation and
rarely carried out unless they have reason to
believe that the person is in possession of
valuable, cash or gold acquired out of undisclosed
money or has not complied with any notice
calling for information.
K If taxpayer does not co-operate during the survey
proceedings, it can be converted into search with
permission from higher authority.
DIRECT TAX CODE AND ITS IMPACT