Name: Musaib Mohammad Mir

Course: B.A.LL.B

Section: (A) , System ID:2020000445

Roll No: 200959061

Semester: IX

Subject: Taxation Law

Assigned By- Simmi Pal ma’am

TITLE:

QUESTION-ANSWERS
Que.1. Give some insights on tax?

Ans. India's tax system is multifaceted, reflecting the country’s diverse economy and varying income
levels. Here’s a broad overview of the key aspects:

1. Income Tax

 Individuals: Income tax in India is progressive, meaning the rate increases with
income. For the financial year 2023-24, the tax slabs for individuals below 60 years
are:

o Up to ₹3 lakh: Nil

o ₹3 lakh to ₹6 lakh: 5%

o ₹6 lakh to ₹12 lakh: 10%

o ₹12 lakh to ₹15 lakh: 15%

o ₹15 lakh and above: 30%

 Surcharge and Cess: High-income individuals may face additional surcharges and a
health and education cess of 4%.

 Deductions and Exemptions: There are various deductions available under sections
like 80C (investments in PPF, ELSS, etc.), 80D (insurance premiums), and others.
Exemptions may also apply for certain allowances and income.

2. Corporate Tax

 Domestic Companies: As of the financial year 2023-24, the corporate tax rate for
domestic companies is generally 25% if their turnover does not exceed ₹400 crore.
For larger companies, the rate is 30%. Additionally, there is a 10% tax on dividends
received from foreign companies.

 Minimum Alternate Tax (MAT): Companies that pay tax less than a prescribed
percentage of their book profits are subject to MAT.

3. Goods and Services Tax (GST)

  Structure: GST is a comprehensive indirect tax that replaced several other taxes like
VAT, service tax, etc. It is divided into:

o Central GST (CGST)

o State GST (SGST)

o Integrated GST (IGST) (for inter-state transactions)

 Rates: GST rates vary based on the nature of goods and services, with standard rates
typically ranging from 5% to 28%. Essential items are often taxed at lower rates or are
exempt.

4. Customs Duties

 Import Duties: India levies customs duties on imported goods, which can vary
depending on the type of product and its classification.

 Export Duties: Generally, India does not impose duties on exports, but there are
exceptions for certain products.

5. Wealth Tax

 Abolished: Wealth tax was abolished in India in 2015. However, similar aspects can
be covered under the Income Tax Act in the form of taxation on certain types of
assets.

6. Property Tax

 State-Level: Property tax is levied by state governments and varies by state and
municipality. It is typically based on the property's value or rental income.

7. Tax Administration and Compliance

 Income Tax Department: The primary authority responsible for the administration of
direct taxes.

 e-Filing: Most tax returns and compliance processes are handled online through the e-
filing portal, making it more efficient.

8. Recent Changes and Reforms

  Faceless Assessments: Efforts have been made to digitize and simplify tax
assessments and filings.

 New Tax Regime: Introduced in the 2020 Budget, offering lower tax rates with fewer
exemptions.

9. Tax Incentives

 For Startups: There are various incentives, including tax holidays and exemptions to
encourage startup growth.

 For Investments: Various schemes, like those under the Income Tax Act, offer
benefits for investments in certain sectors.

Que.2. What do you mean by income tax and how is it being calculated?

Ans. Income tax in India is a tax levied on an individual's or entity's income by the
government. The Income Tax Act, 1961, governs the taxation process, outlining how income
is classified, assessed, and taxed. Here's a breakdown of how income tax is calculated as per
the Income Tax Act, 1961:

Steps to Calculate Income Tax

Step 1: Determine Gross Income

Calculate the total income from all sources, which includes:

 Salary Income: Include basic salary, allowances, bonuses, etc.

 Income from House Property: Calculate rental income or notional rental income for
self-occupied property.

 Business/Professional Income: Compute profits or losses.

 Capital Gains: Determine gains from asset sales.

 Other Income: Include interest, dividends, etc.

Step 2: Deduct Allowable Deductions

The Income Tax Act provides various deductions to reduce taxable income:

 Section 80C: Investments in Provident Fund (PF), Equity Linked Savings Scheme
(ELSS), Life Insurance Premiums, etc.
  Section 80D: Premiums for health insurance.

 Section 24(b): Interest on housing loan.

 Section 10(14): Allowances like house rent allowance (HRA) under specific
conditions.

Step 3: Calculate Net Taxable Income

Subtract the deductions from the gross income to arrive at the net taxable income.

Step 4: Apply the Tax Rates

The income tax rates are progressive, meaning they increase with income. For the financial
year 2023-24, the tax slabs for individual taxpayers below 60 years are:

 Up to ₹3 lakh: Nil

 ₹3 lakh to ₹6 lakh: 5% of income exceeding ₹3 lakh

 ₹6 lakh to ₹12 lakh: 10% of income exceeding ₹6 lakh + ₹15,000

 ₹12 lakh to ₹15 lakh: 15% of income exceeding ₹12 lakh + ₹75,000

 Above ₹15 lakh: 30% of income exceeding ₹15 lakh + ₹1,87,500

Step 5: Add Surcharge and Cess

 Surcharge: Applied based on the income level (e.g., 10% for income above ₹50 lakh,
15% for income above ₹1 crore).

 Health and Education Cess: 4% of the total tax payable.

Step 6: Compute Total Tax Payable

Sum up the basic tax, surcharge, and cess to determine the total tax payable

Que.3. Explain Assessment year.

Ans. The term Assessment Year (AY) refers to the financial year following the year in which
income is earned and for which taxes are assessed. It is a crucial concept in the income tax
system in India, as it determines the period during which your income for a particular
financial year is evaluated and taxed.
This is the year immediately following the Financial Year. It is the period during which the
income of the Financial Year is assessed for tax purposes. For example, the Assessment Year
for the Financial Year 2023-24 would be 2024-25, which spans from April 1, 2024, to March
31, 2025.

Purpose of the Assessment Year

The Assessment Year is when taxpayers file their income tax returns and the income earned in
the previous Financial Year is assessed by the Income Tax Department. During this period,
the government determines the tax liability based on the income earned and deductions
claimed by the taxpayer.

Que. 4. Explain the financial year.

Ans. It defines the period during which income is earned and is used to determine the tax
liability for that income. Here’s a detailed explanation:

Definition and Duration

 Financial Year (FY): This is the year in which an individual or entity earns income
and incurs expenses. It runs from April 1 of one year to March 31 of the next year. For
example, the Financial Year 2023-24 refers to the period from April 1, 2023, to March
31, 2024.

Purpose and Usage

 Income Calculation: The income earned during the Financial Year is used to
calculate the total income and tax liability.

 Deductions and Exemptions: Any deductions or exemptions claimed by the taxpayer

are based on the income and expenses incurred during the Financial Year.

Que.5. Explain the term person.

Ans. The term "person" is defined under Section 2(31) of the Income Tax Act, 1961. It
includes the following categories:

1. Individual: A single human being. For income tax purposes, individuals are taxed
based on their income, with tax rates varying by income level and age (e.g., senior
citizens, super senior citizens).
 2. Hindu Undivided Family (HUF): A family consisting of a common ancestor and all
his lineal descendants. An HUF is a separate entity for tax purposes and can earn
income, claim deductions, and be taxed independently of its members.

3. Company: A legal entity incorporated under the Companies Act, 2013 (or its
predecessors). Companies are taxed separately from their owners, and there are
different tax rates and regulations applicable to them compared to individuals.

4. Firm: This includes partnerships and limited liability partnerships (LLPs). A

partnership firm is taxed on its income, and the partners are also taxed individually on
their share of the firm's income.

5. Association of Persons (AOP): A group of individuals or entities that come together

for a common purpose but do not form a partnership or company. The income of an
AOP is taxed in the hands of the association, with members taxed individually on
their share.

6. Body of Individuals (BOI): Similar to AOPs, BOIs consist of a group of individuals

who come together but do not form a formal partnership. The tax treatment is similar
to that of AOPs.

7. Artificial Juridical Person: Entities like societies, clubs, and other similar
organizations that are not covered by other specific definitions. They are treated as
separate legal entities for tax purposes.

8. Any Other Person: This is a residual category that includes any other entity or
individual that might not fit neatly into the aforementioned categories but is
nonetheless recognized under tax law.

Que. 6. Explain total income.

Ans. Total Income is defined as the sum of all types of income earned by an individual or
entity, which is subject to taxation after considering allowable exemptions and deductions.
According to Section 2(45) of the Income Tax Act, 1961, Total Income is essentially the
gross income minus exemptions and deductions.

Que. 7. Heads of total income.

Ans. Income from Salaries: Wages, bonuses, and other employment benefits.
 Income from House Property: Rent earned from property ownership.

Profits and Gains from Business or Profession: Earnings from business activities or
professional services.

Capital Gains: Profit from the sale of assets like property, stocks, or bonds.

Income from Other Sources: Interest, dividends, winnings from lotteries, etc.

Que. 8. What type of firms need to pay tax on their income?

Ans. Partnership firms, LLP, AOP, BOI, Trusts and co-operative societies etc.

Que. 9. How residential status can be calculated?

Ans. Determining the residential status of an individual or entity is crucial for assessing tax
liability under the Income Tax Act, 1961. Residential status impacts how income is taxed in
India. The calculation of residential status is based on certain criteria defined in the Act.

As per section 6, it is given for different entities.

Que, 10. Explain the term previous year.

Ans. Previous Year refers to the financial year (April 1 to March 31) immediately preceding
the Assessment Year (AY). It is the period in which the income is earned, and expenses are
incurred, which will be assessed in the following Assessment Year.

It is defined under section 3 of the Income tax Act, 1961.