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Classification of Taxes
Direct and Indirect taxes Direct taxes directly levied on source of income and wealth E.g. Income tax and Wealth tax Indirect taxes indirectly levied on activity/transaction which generates income or wealth E.g. sales tax, service tax, etc.
KINDS OF TAXES
Income-tax Sales tax Wealth tax Service tax Custom duties Securities transaction tax Excise duties and many more
INCOME TAX ACT, 1961 (will be replaced by Direct tax codes from 1.4.2011)
Income tax
INCOME
TAX
WHO
WHEN
INCOME
U/s 2 (24): Meaning and Characteristics
PERIODICAL MONETARY
DEFINITE SOURCE
Characteristics of Income
Legal or Illegal incomes are taxable Moral or Immoral incomes are taxable. Cash or kind Real and not imaginary. E.g. sales supported by invoice documents Examples: profits, gains, donations, perquisites, allowances, compensation, export cash assistance, lottery prize, kaun banega crorepati ?, etc.
Tax
The outflow from income paid to the Government.
Assessee U/s 2 ( 7 )
a) every person in respect of whom any proceedings are taken under the act b) every person who is deemed to be an assesses under the act e.g. a trustee of a trust c) every person who is deemed to be as assessee in default. e.g. an employer who does not deduct TDS from employees salaries
Stay in India Stay in India for for at least 60* At least days in current 182 days OR PY. AND & in Current PY Stay in India 09-10 for at least 365 days in 4 PY preceding (A) current PY.
(B)
* exceptions: a) A citizen of India/crew of Indian Ship leaving India for Employment or self-employment OR b) A citizen of India or a persons of Indian origin comes to a visit in India REPLACE 60 by 182 days
Stay in India for 730 days in 7 PY preceding & the current PY 09-10
(C)
If {a or b}+ {c & d} satisfied: ROR If only a or b satisfied: RNOR If a or b NOT satisfied: Non-resident
Counting of days
a) the stay need be in the same place b) the stay need not be continuous c) the days of entry and exit are both counted d) a stay in a boat in territorial waters of India is treated as stay in India e) For February, where applicable 29 days are considered.
E.g. Mr. George Bush comes for the first time to India on 26.1.201009 and leaves India on 15.3.2010. Determine his residential status for AY 2010-11
Solution: PY 2009-10
Days in India in P.Y. 2009-10 Jan : 6 days Feb: 28 days Mar: 15 days Total: 49 days He does not satisfy any of the conditions. Therefore he is Non resident.
Stay in India Stay in India for for at least 60 days At least in current PY. 182 days OR AND & in Current PY Stay in India 05-06 for at least 365 days in 4 PY preceding (A) current PY.
(B)
Stay in India for 730 days in 7 PY preceding & the current PY 05-06
(C)
Class exercises
(1) Mr. Sanjay, an Indian citizen went to USA for the first time for the purpose of employment on 10th May, 2009. He came back to India on 19th November, 2009. Determine his residential status for Assessment year 2010-11. Ans: Non resident No. of days in India 173(30+10+12+31+31+28+31) Employment so replace 60 by 182
Class exercise 2:
Ishant sharma, an Indian cricketer submits the following information of stay outside India for the year ending 31.3.2010
Days 12.4.09 to 27.4.09 2.5.09 to 8.7.09 26.8.09 to 9.9.09 10.9.09 to 1.10.09 3.1.10 to 25.3.10 place Sharjah for Asia cup 2009 Summer tour to england triangular series in Sri lanka singapore on tour summer cricket tour to south africa
He made his debut in international cricket on 10th march, 2007. Then in a match against the West Indies, he suffered a major injury needing two years of hospitalization in USA. He recovered and returned back to India on 28.3.2009. Thereafter, he was employed by China Cricket board as Manager of the team. Determine his residential status For A.Y. 2010-11.
Solution
Total no. of days in PY 09-10 Less: stay out of India: 12.4 to 27.4 2.5 to 8.7 68 26.8 to 9.9 15 10.9 to 1.10 3.1 to 25.3 Therefore, stay in India = 365-203 = 365 16
22 82
203 162
He has not stayed in India for 182 days from employment condition, therefore he is Non-resident.
Class exercise
Mr. Bond an Indian citizen leaves India for honeymoon with his wife for the first time on 18.2.2010. Determine his residential status? Mr. Khiladi an Indian citizen leaves India for employment purposes for the first time on 18.2.2010. Determine his residential status?
ROR
RNOR
NR
Taxable Taxable
Foreign Income:
a) From business / profession controlled or set up IN India
Taxable Taxable
Not-Taxable
E.g.:
Items of Income Salary received in India Salary earned in India but received in Sri Lanka Foreign Income: Income from business in Nepal controlled form Delhi Income from business in Sri Lanka received there.
ROR T T
RNOR T T
NR T T
Foreign Income controlled from India Foreign Income NOT controlled from India
T- Taxable
NT
NT
NT
NT - Not Taxable
Mr. Tom, a British citizen had the following income during the year ended on 31st March,2010
1. Income from house property in India 15000 2. Income from property in Rome 10000 3. Interest from bank account in India 1200 4. Income from business in Bangladesh, being controlled from India 16000 5. Interest on Bank account in USA 11000 6. Salary earned and received in Tokyo 12000 7. Income earned and received in London 13000 8. Dividend from British company received in India 17000 Compute his total income for AY 2010-11 in 3 different cases: A) ROR, b) RNOR and C) NR.
Minors income upto Rs.1500 per child. See notes for other exemptions
Heads of Income
Income from Salaries Income from House property Income from profits and Gains of business or profession Income from capital gains Income from other sources
AY 10-11
Rs. XX XX XX XX XX X X XX - X YY GG MM Rs.
Net taxable income Rates of tax (10 % 20% 30%) or as relevant Net tax payable Add: Surcharge (tax on tax) Tax payable Add: {education cess 3%} FINAL tax payable Less: Tax already paid (T.D.S. / Advance tax) Assessed tax payable/refund [5-6] [1+2] [1 x 3 %]
YY ---------1 2 3 4 5 6 7
Income tax slab for ay 10-11 Income Tax Slabs for ay 10-11 for Resident Senior Citizens (FY 2009-10) S. No. Income Range Tax percentage 1 Up to Rs 2,40,000 No tax / exempt 2 2,40,001 to 3,00,000 10% 3 3,00,001 to 5,00,000 20% 4 Above 5,00,000 30% Income Tax Slabs for ay 10-11 for Resident Women (below 65 years) (FY 2009-10) 1 Up to Rs 1,90,000 No tax / exempt 2 1,90,001 to 3,00,000 10% 3 3,00,001 to 5,00,00 20% 4 Above 5,00,000 30% Income Tax Slabs for ay 10-11 Others & Men (FY 2009-10) 1 Up to Rs 1,60,000 No tax / exempt 2 1,60,001 to 3,00,000 10% 3 3,00,001 to 5,00,000 20% 4 Above 5,00,000 30%
Levy of surcharge has been withdrawn for personal income tax payers Education Cess on Income-tax and Secondary and Higher Education Cess on income-tax shall continue to be levied at the rate of two per cent and one per cent respectively of income-tax.