Section A

Note: Attempt all questions. Each question carries 4 marks

What is Gross Total Income?:

Under Indian tax law, gross total income is the aggregate of all income received by an
individual from various sources before any deductions. This includes income from salaries,
house property, business or profession, capital gains, and other sources like interest and
dividends. The total is calculated as per the provisions of the Income Tax Act, 1961, before
applying deductions under Section 80C to 80U, which then determines the taxable income.

What is ‘belated return’?:

A belated return is a tax return filed after the due date specified under Section 139(1) of the
Income Tax Act, 1961. Initially, taxpayers could file belated returns within one year from the
end of the relevant assessment year. Recent amendments now allow filing a belated return
before the end of the relevant assessment year or before the completion of assessment,
whichever is earlier, under Section 139(4). Filing a belated return may attract penalties and
interest on tax due.

Classify assesses according to status and residence:

Assessees in India are classified based on status and residence. Status categories include
individual, Hindu Undivided Family (HUF), company, firm, association of persons (AOP),
body of individuals (BOI), and artificial juridical person. Based on residence, they are
categorized as resident or non-resident. Residents are further classified as resident and
ordinarily resident (ROR) or resident but not ordinarily resident (RNOR). These classifications
determine the scope of taxable income and applicable tax rates under the Income Tax Act,
1961.

Define ‘perquisites’:
Under Indian tax law, perquisites, commonly known as “perks,” are non-cash benefits or
amenities provided by an employer to an employee in addition to salary. These include rent-
free accommodation, company vehicles, concessional loans, and other non-cash benefits.
The value of these perquisites is added to the employee's income and taxed accordingly.
The Income Tax Act, 1961, specifies the valuation and taxability of various perquisites,
ensuring they are included in the taxable income of the employee. Certain perquisites may
be exempt or subject to specific valuation rules.

Define ‘Agricultural Income’:

'Agricultural Income' includes any revenue derived from land situated in India and used for
agricultural purposes. This encompasses income from the sale of produce, rent or revenue
from agricultural land, and income from buildings essential to or used for agriculture.
Agricultural income is exempt from central income tax but may be considered for
determining tax rates on other income. The definition is specified under Section 2(1A) of the
Income Tax Act, 1961.

Define ‘Assessment Year’:

The 'Assessment Year' is the period of twelve months starting from April 1st and ending on
March 31st of the following year. During this period, the income earned by an individual or
entity in the preceding financial year, termed as the 'Previous Year', is assessed and taxed.
For instance, if the Previous Year is 2022-2023, the Assessment Year would be 2023-2024. It
is during the Assessment Year that tax returns are filed and taxes are paid on the income of
the Previous Year.

What is tax evasion:

Tax evasion is the illegal practice of deliberately avoiding paying taxes owed to the
government. It involves dishonest tactics such as underreporting income, inflating
deductions, hiding money in offshore accounts, or failing to file tax returns altogether. Tax
evasion is a criminal offense punishable by fines, penalties, and imprisonment. Tax evasion
breaches tax laws and regulations, undermining the fairness and integrity of the tax system
and is distinct from tax avoidance, which involves legally minimizing tax liabilities through
permissible means.

What is gross salary:

Gross salary refers to the total earnings of an employee before any deductions such as
taxes, provident fund, or professional tax. It includes basic salary, allowances, bonuses,
commissions, and any other financial benefits provided by the employer. Gross salary forms
the basis for calculating taxable income and determining the applicable income tax. It is
distinct from net salary, which is the amount received by the employee after all deductions.

Write down the powers of Commissioner of Income Tax:

The Commissioner of Income Tax has several key powers, including:

1. Assessment and Reassessment: Authority to assess or reassess the income of

taxpayers.
2. Search and Seizure: Power to authorize searches of premises and seize undisclosed
income or assets.
3. Appeals and Revisions: Authority to hear appeals against orders of lower tax
authorities and revise assessments.
4. Rectification: Power to correct errors in assessment orders.
5. Survey Operations: Conduct surveys to collect information on tax evasion and
compliance.

These powers are intended to ensure compliance with tax laws and the proper collection of
taxes.

Meaning of Return of Income:

A 'Return of Income' is a prescribed form through which a taxpayer declares their income,
deductions, and tax payable for a specific financial year. Filed annually with the Income Tax
Department, it details total income from various sources, tax liabilities, and taxes paid
through advance tax or TDS. Filing the return is mandatory for individuals and entities
meeting certain income thresholds and ensures compliance with tax regulations, allowing
the government to assess and collect the correct amount of tax.
Importance of Tax Planning:
Tax planning is crucial as it enables individuals and businesses to manage their finances
efficiently while minimizing tax liability. By utilizing deductions, exemptions, and incentives
provided by the Income Tax Act, taxpayers can legally reduce their tax burden. Effective tax
planning not only ensures compliance with tax regulations but also optimizes savings and
investment opportunities. It facilitates economic growth by encouraging responsible financial
management and strategic allocation of resources. Overall, tax planning plays a significant
role in achieving financial stability and meeting long-term financial goals.

What is self- assessment?:

Self-assessment, refers to the process where taxpayers assess their own tax liability and file
their tax returns accordingly. It requires taxpayers to calculate their income, claim
deductions, and compute the tax payable as per the provisions of the Income Tax Act. After
completing the assessment, taxpayers file their returns online or offline, depending on their
eligibility, and pay any taxes due. Self-assessment ensures transparency and compliance
with tax regulations, allowing individuals and entities to fulfill their tax obligations
independently.

When a company is resident?:

A company is considered a resident if it satisfies any of the following conditions during the
previous year:

1. It is incorporated in India.
2. Its place of effective management (POEM) is in India during the relevant financial
year. Additionally, a company may be deemed a resident if it is an Indian company
under the Companies Act, 2013. Resident companies are subject to tax on their global
income in India, while non-resident companies are taxed only on income sourced
from India.

What is gratuity?:
Gratuity, refers to a lump sum payment made by an employer to an employee as a token of
gratitude for the employee's long and meritorious service. It is governed by the Payment of
Gratuity Act, 1972. To qualify for gratuity, an employee must have completed at least five
years of continuous service with the employer. The amount of gratuity payable is calculated
based on a formula specified in the Act and is typically tax-exempt up to a certain limit,
depending on the type of employer.

Define 'Person':
The term 'Person' refers to any individual, Hindu Undivided Family (HUF), company, firm,
association of persons (AOP) or body of individuals (BOI), local authority, artificial juridical
person, and any other entities recognized by law. Each category of 'Person' is distinct in
terms of tax liability and compliance requirements based on their legal status and nature of
income or transactions under the Income Tax Act, 1961.

Define 'Previous Year':

'Previous Year' refers to the financial year immediately preceding the assessment year for
which income is assessed and taxed. It is the period during which income is earned and
accrued to the taxpayer, regardless of when it is received. For most taxpayers, the previous
year aligns with the financial year from April 1st to March 31st. Income earned during this
period forms the basis for tax calculation in the subsequent assessment year, following the
rules and provisions of the Income Tax Act, 1961.

Direct Tax:
Direct Tax refers to taxes levied directly on individuals and entities based on their income,
profits, or wealth. The primary direct taxes in India include Income Tax, Corporate Tax, and
Capital Gains Tax. These taxes are imposed by the Central Government and collected by the
Income Tax Department. Direct taxes are progressive in nature, meaning rates increase as
income or profits rise. They play a crucial role in revenue generation for the government
and are essential for funding public services and infrastructure development.

Fee:
'Fee' refers to a payment made to the government for services rendered or privileges
provided. Unlike taxes, which are compulsory contributions to government revenue, fees
are payments made voluntarily or upon request for specific government services, licenses,
permits, or registrations. Fees are typically fixed by law and vary depending on the nature
and extent of the service or benefit received. They contribute to funding administrative
costs and infrastructure while facilitating regulatory compliance and public service delivery.
payment made to the government for specific services or privileges provided by public
authorities.

Assessee:
An 'Assessee' refers to any individual, Hindu Undivided Family (HUF), company, firm,
association of persons (AOP), body of individuals (BOI), or any other entity who is liable to
pay tax or is subject to tax assessment. The term covers both residents and non-residents
who earn income or engage in economic activities within India. Assessing officers evaluate
the income, deductions, exemptions, and tax liability of assesses based on the provisions of
the Income Tax Act, ensuring compliance with tax laws and regulations.

Capital assets:
‘Capital assets' refer to property of any kind held by a taxpayer, including immovable
property like land and buildings, and movable property such as vehicles, machinery, jewelry,
and investments like stocks and bonds. When these assets are sold, the resulting gains or
losses are categorized as capital gains, which are subject to taxation. Capital assets are
distinguished from assets held for business or professional purposes and are taxed based on
their classification as short-term or long-term assets, depending on the holding period.

Income:
Income' refers to the earnings or monetary gains received by an individual, Hindu Undivided
Family (HUF), company, or any other entity within a specified period. It includes salaries,
wages, profits from business or profession, rental income, interest, dividends, capital gains
from the sale of assets, and any other benefits or perks received. Income is categorized into
various heads such as salary income, house property income, business income, capital gains,
and other sources, each subject to specific tax treatment and exemptions under the Income
Tax Act, 1961.
Unabsorbed depreciation:
'Unabsorbed depreciation' refers to depreciation expenses that remain unadjusted against
income in a given tax year due to insufficient profits or income. This occurs when a business
or entity's depreciation allowance exceeds its taxable profits. The unabsorbed depreciation
can be carried forward to future years indefinitely under the Income Tax Act. It allows
businesses to offset these losses against future profits, thereby reducing taxable income and
potentially lowering tax liability in subsequent assessment years.

What do you mean by Annual Charge?:

'Annual Charge' generally refers to the tax levied on income earned by individuals,
businesses, or entities within a financial year. It encompasses various types of income such
as salaries, profits from business or profession, rental income, capital gains, and other
sources. Taxes are calculated based on applicable rates and deductions as per the Income
Tax Act, ensuring compliance and revenue generation for the government. Efficient tax
planning helps in minimizing tax liability while adhering to legal provisions.

What do you mean by Casual Income?:

'Casual Income' refers to income earned unexpectedly irregularly or sporadically, not arising
from regular employment or business activities. It includes windfalls like lottery prizes,
gambling wins, gifts, or sporadic earnings from occasional activities. This type of income is
subject to taxation under specific provisions of the Income Tax Act, with tax liability
calculated based on the nature and amount of the income earned during the financial year.
Proper disclosure and compliance ensure accurate assessment and payment of taxes on
casual income.

Sporadic earnings: Sporadic earnings refer to income that is irregular or occurring at

irregular intervals. It is not received consistently or predictably but rather in occasional or
infrequent instances.

Distinguish between Tax & Cess:

A tax is a compulsory financial charge imposed by the government on income, goods,
services, or transactions to generate revenue for public purposes. A cess, on the other hand, is
an additional levy on top of the existing taxes, earmarked for specific purposes such as
education or infrastructure development. While taxes fund the general budget, cess proceeds
are dedicated to particular projects or social welfare schemes.

Define Tax Management:

Tax management involves the strategic planning and administration of an individual's or
business's tax obligations to ensure compliance with legal requirements while minimizing tax
liability. This includes accurate tax calculation, timely filing of returns, maintaining proper
records, utilizing tax exemptions and deductions, and implementing effective tax-saving
strategies. Proper tax management ensures adherence to the law, avoids penalties, and
optimizes financial efficiency.
What do you mean by Net Wealth:
Net Wealth refers to the aggregate value of an individual's or entity's assets minus liabilities.
Assets include properties, investments, cash, jewelry, and other valuable possessions, while
liabilities encompass debts and financial obligations. Net wealth is calculated to determine
the wealth tax liability, although wealth tax has been abolished in India since 2015. Accurate
assessment of net wealth is crucial for financial planning and compliance with tax
regulations.

What is Belated Return: A belated return is a tax return filed after the prescribed due date.
Taxpayers can file a belated return before the end of the relevant assessment year or before
the completion of the assessment, whichever is earlier. Filing a belated return may incur
penalties and interest on any due taxes, and certain deductions or carry-forward losses might
be disallowed. However, it ensures compliance and avoids more severe legal consequences.