1

INCOME TAX
INTRODUCTION AND IMPORTANT DEFINITIONS

INTRODUCTION
.
Income tax is a very i mport ant di rect tax. It 1s . . .
an importa nt and most e1gn1fic.·ant source of
revenue of th e govern ment The , 1-.,,

country· safe ard th ·. governm ent needs money to maintai n law and order 1n tu~
th '1 ~ e security of the country from foreign powers and promote the welfare of
8
d ~ pe~~:· ince our govem ~ent is wedded to socialistic pattern of society it is the foremost
u_ Y O
e govern ment to bring out such welfare and development program mes which will
bndge e gap betwee n the rich and the poor. An this require s mobilisation of funds from various
th
sources. Th~se sources may be direct or indirect. Income tax, being a direct tax, is an importa nt
~ool to achieve ba_lanced socio-economic growth by providing concessions and incentiv es in
mcome tax for vanous develop mental purposes.
Who is liable to pay Income tax
. . ~v~ry person, ~hose taxable income for the previous financial year exceeds the minimu m taxable
limit IS liable to pay mcome tax during the current financial year on the income ofthe previous financial
year at the rates in force during the current financial year.
BRIEF HISTORY OF INCOME TAX IN INDIA
(1) In India, this tax was introdµ ced for the first time in 1860, by Sir James Wilson in order
to meet the losses sustain ed by the Govern ment on accoun,t of the Military Mutiny of 1857.
(2) In 1886, a separat e Income Tax Act was passed. This Act remaine d in force upto 1917,
with various amendm ents from time to time.
(3) In 1918 a new Income T~ Act was passed and again it was replaced by another new
Act which was ~assed in 1922. This Act remaine d in force up to the assessm ent year 1961-62
with numero us amendm ents.
(4) The Income Tax Act of 1922 ~ad become very_ comp~icated on account ~ ~~ra ble
amendm ents. The Govern ment of India, th~refore, referr~d 1t to the Law Coll!~s 1on m ~956
with a view to simplif y and for the prevent ion ?ftax evasion. The Law Co~1ss 1on ~bmitt ed
·t rt · S tember 1958 ' but in the meantim e the Government oft India had appoint ed the
1 s repo 1n ep • t t · · · · ·
Direct Taxes Admin istratio n Enquir y Comm1tte~ .o suggee. measure~ o ~ m~vem en-
ces to assesse es and to preven t evasion oftax . Thh1s CommT1tteeActsub1m916tt1ed its reportd m 1959. In
. •th h Ministr y of Law fina11y t e 1ncome ax , was passe .
consult ation wi t ; Act 1961 has been brought into force with effect from 1st April, 1962.
(5! The Income ax India and Sikkim (including Jammu and Kashmir).
It applies to the whole of 1 mendm ents of far-reaching nature have been made in the Income
(6) Since 1962 severa a
Tax Act ~y the Fina~c e Act nd everyJ:a~av e also been made by various Amendment Acts, for
(7) Beside~ this, am~ m~men t Act, 1984,. Direct Taxes Amendment Act, 1987, Direct
instanc e, T~atio n Laws Amenf and 1989 Direct Tax Law (Second Amendment) Act, 1989
O 1988
Truces Law (Amend ment) Acts dment) Ad 199i. The amendm ents in the Finance Acts,
and at last The Taxatio n Law ~e~h e recomm~ndations of Chelliah Committee Report.
1992 and 1993, are mostly base on
 ~==----~~~~=--
2_
-- - - -- - -- -= == =J1N~c@
(8)
As a mat ter of fact
o~ME[!t~AxC.~~~~~- - - -. -----~ ---- --~
, t
h Income Tax Act, 1961, whi
e
£
ch came into force on ~.st April, 1962
d d widely. It has , there ore,
become very comphcated both~ '
d d re-a men e Ot
bas been ame n?e anthor itie s and the tax-payers.
the administenng au X
nACTERISTICS OF INCOM E TA . .
CHAIV"\ . .
. . a Direct True. Direct Tax me ans suc h tax wh ich 1s pai d by a perso
D' t 7bx Income is

;· =
l. ,rec ~ n
who bea rs ~ lb'lbx er~come Tax is imposed db Cen tral Go ver nm ent .
and rec ~ve r~o tal income. Tot al inc om e is also
7bta l.In com e. Income Tax is calcula~~ ~~ called
bi . the pro visi ons of Inc om e Ta~ ~t.
me Total income is calc ulat ed accord1 g 'b
taxa e,;:;~',,.,pted Lim it. If income
d lim it of inc om e, the n tax is imposed
4 excee~s .Pre ;~n ~e Tax-exempt lim it of
Tax is. not imposed upto the tax-exempte.d income for t~
hm1t o inco .
Assessment Year 2018-19, a_re a~ follows. 'd ~
(A) Sen.or Citizen : Seruor citizen (res t en int. Ind ia) who is of the age of 60 yea rs or more
'
bu.t less than 80 years f 3,00,000.
(B) Super Senior Citizen : Sup er sen . 't' n (res ide nt in Ind ia), who is of the age
of 80
ior c1 ize
years or more f 5,?0?000. HU F As . t'
(C) Oth er lndiVIduals, , soc1~ ion ofpe rso ns. Bod y of Ind ivid ual f 2,50,000.
(D) Firm, C?mpany, Local TBodY_ : N1tl.
'mp
5 Progressive 7bx Rat es. ax 1s no 1 ose d at the. sam e rate on the tota l inc_om
_, e of an
• •. HUF AOP or BOI. Tax rate s incr eas e wit h an
-dual· . • Min im t
~di vi .' ~cr e~s e 1n mco me. um ax rate
is 5% and max unu m tax te ·
ra 1s 30 -10. Firm s' and com pan ies' mco mes are tax ed at the rate of
ot.

3
0%.6 _Sur cha rge . Surcharge is imposed on the
am oun t of inc om e tax . Sur cha rge rate s are
follows fur the Assessment Year 2018-19. as
(i) For individuals, HUF, AO P or BO . .
I:@ 10% if tota l mco me exc eed s 50 lak h
does not exceed 1 crore rup ees .@ 15% if tota rup ees but
l inco me exc eed s 1 cro re rup ees .
(ii) For Firms :@12% if tota l income
exceeds 1
(iii) For Domestic Company :@7% if tota l inco cro re rup ees .
me exc eed s 1 cro re rup ees but doe s not exce
lO crore rupees. @ 12% if tota l income exceed ed
Note: In abov s 10 cro re rup ees .
e all three conditions, provision of mar gina
l relie f will
also be appl icab le.
7. &lu catw n Cess and Sec ond ary and Hig her
Edu cat ion Ces s. All ass ess ees are liable
pay education cess @ 2% and secondary and to
hig her edu cati on ~ss @ 1% on the tota l amo
income tax including surcharge. unt of
8. Tas- Bun kn. Tax is imposed at pro gre ssiv
therefore rich person bea r more tax bur den . e rate on the inc om e of ind ivid ual and HUF
9. Adm iniB trat ion. Tax is imposed and reco
vered by inco me tax dep artm ent . Income
Department works und er the control of Cen tral
Boa rd of Dir ect Tax es (CBDT).
Tax
lO. Aliot:ati.on of Amount of Inc ome Tax. The
government ~ allo ca~ d among Cen tral Gov tota l am oun t of inc om e tax recovered by
ern men t and Sta te Go ver nm ent acc ord ing
~ecommendatwn of Finance Commission. Sta to the
mco ~e tax revenue from the following amo unt te Gov ern men t wil l not be giv en any share of
s:
(~~ Income tax amo unt recovered from companies.
(~~ Amount of surcharge.
(m) Amount of education cese and SHEC.

BASIS OF CHARGE OF INCOME TAX

rr;e :llo win g b~i c principles are the bas is of (Sec. 4)
. come tax is an ann ual tax on income. cha rgin g inco me tax .
2. lnoo.me of previous year is taxabl . ..
applicable to th t e m the nex t following asse ssm ent yea r at the
3. Tax rate s are ~ asdsbessmhent year. H~wever rate or rateS
, the re are cert ain exceptions to this rule.
. h t 8 ann ual Fin anc e Act
4. Tax is c arged one eveYry .
· per son as defined in Sec.
tion 2(31).
 -~------- --- -

INCOME TAX (INTRODUCTION AND IMPORTANT DEFINITIONS 3

)
5. The tax is cha rge d on the tota l inc om e of eve ry ted in acc ord anc e wit h
per son com pu
the pro visi ons of this Act . ·
6. Inc om e tax is to be ded uct ed at the sou rce s •d d der
or pai d in adv anc e as pro vi e un
pro visi ons of the Act .
The tota l inc om e is com put ed on the bas is of the Th e
res ide ntia l sta tus of the ass ess ee.
inc om e is clas sifi ed into the foll owi ng five hea ds :
1. Inc om e fro m Sal arie s·
2. Inc om e from Ho use Pro ' per ty;
3. Pro fits of Bus ine ss or Pro fess ion ;
4. Cap ital Gai ns; and
5. Inc om e from oth er Sou rce s.
For com put ing the tota l inc om e of an ass ess ee and . .
pro ced ure is foll owe d : the tax pay abl e by b rn, foll ow ing
1

(1) Cla ssif y the inc om e und er eac h of the abo ve five ·
hea ds and the n ded uct fro m the inc om e
und er eac h hea d the ded uct ion s per mis sib le und er
the Act in res pec t of tha t hea d of inc om e. Th e
bal anc e of am oun t left und er eac h hea d of inc om e
is its ass ess abl e inc om e.
(2) Tot al of the ass ess abl e inc om e. of eac h hea d and
inc om es is call ed the Gro ss Tot al Inc om e. the agg reg ate of all the se ass ess abl e
(3) Fro m the Gro ss Tot al Inc om e, thu s arri ved at, ded
sec tion s BOC to BOU of the Act for com put ing the tota uct the ded uct ion s per mis sib le und er
l inc om e. The bal anc e left afte r sub tra ctin g
the allo wab le ded uct ion s is call ed the Tot al Inc om e.
(4) The am oun t of inc om e tax pay abl e is the n cal cul
the rat es pre scr ibe d by the Fin anc e Act for the rele van ate d on thi s tota l inc om e acc ord ing to
t ass ess nie nt yea r and the rat es pre scr ibe d
und er diff ere nt sec tion s of the Act .
 IMPORTANT DEFINITIONS
Under sections 2 and 3 of the Income Tax Act, 1961, definitions of important terms used in
the Act have been given, some of which are as under :
INCOME [Sec. 2(24)]
This is a very important term as income tax is charged on the income of a person. This term
has not been defined in the Income Tax Act, except that it states as to what is included in income.
Under this section income includes:
(i) profits and gains;
(ii) dividend;
(iii) voluntary contributions received by (a) a trust created for charitable or religious
purposes, or (b) by a scientific research association, or (c) by a games or sports
association or institution, or (d) any university or other educational institution, or
(e) any hospital or other institution, or (f) an electoral trust;
(iv) the value of any perquisite or profits in lieu of salary taxable under the head 'salaries';
(v) any special allowance or benefit specifically granted to the assessee to meet his
expenses wholly, necessarily and exclusively for the performance of his duties;
(vi) any allowance granted to the assessee either to meet his personal expenses at the place
where he performs his duties or compensate him for the increased cost of living, for
example, City Compensatory Allowance;
(vii) the value of any benefit or perquisite which is obtained by any representative assessee;
(viii) any sum chargeable to income tax under the head 'business' or 'profession';
(ix) any capital gains;
(x) the profits and gains of any business of insurance carried on by a mutual insurance
company or by co-operative society;
(xi) any winnings from lotteries, crossword puzzles, races including horse races, card-games
and other games of any sort or from gambling or betting of any form or nature whatsoever;
 E. l :.nation : . . . . -d-id to tui_v pl1l'Mtl l\ by Ul'llW of lolFi ''t' I
\:~ a . ' includes winnings ft·om prizes uw.:u o
(a) Lottery . 'Y
t·1 • mann er whntsoever:
chance or m any O J.l el .· . f ' ~ ,e' '1'\clt1des t\J\Y gofi\O 1-i lwwi
. '" ""t•1, if• I
lhl (!) 1,(11 ill lll l\t1 11t
(b) "Card game and oth~r.ga1ne o any s?t ·1od 'n whioh pooplo compt.,to ·to Witt 11rlv,o
e on televis ion or electro mc m · e,
1
programm . . . k
or any other similar grune, , . lo:vees us oontl'ibutions to nny [J1'tJVitlont
(xii) any sum receive d by ~ e ! ssd ess~e frof1!1 h~ss:~~~P ~tnder the Employoos' Stttto h\aln·u1tct1
fund or supera nnuati on ntn 01 any un ,
th ft d for the welfare of such employee s ,
Act or any o . er ind k . urance policy including the 1:mm C'Ocoivod by Why
(xiii) any sum received un er a ey111an ins
,
of bonus on such policy. . b r - tl
~ insuran ce policy means a life insw·nnce pobcy tu 1ten Y n P0 son on 1(l llfo
0
t~:.e r person who is or was (a) an employee of the fi rst pers<,n, or (b) connoc l;t,d
in any manne r with the busine ss. . , . .
The sum of keyma n insura nce policy is assess able as followi ng · ",. _
(a) When the sum is received by the organi sation, who has 1:8ken th e poll<.'Y, it 1a aaaeaanblo
under the head profits and gains of busine ss or p1"?fi:ss10n. ... .
(b) When the amoun t is received by the employ ee, 1t 1s assess able as profits
1n h8u of
(c) ~~-th e amoun t is received by a person , where employer-emp loyee relationshlp
does not subsis t (Chair man or Direct or etc. of a con1pany ), it is assessable under the
head income from other sources.
(xiv) The profits and gains of any busine ss of bankin g (includ ing provid
ing credit facilitie1:1)
carried on by a co-operative society with its membe rs;
(xv) Any consideration received for issuing shares as exceeds the fair marke t value of the
eh.area,
(xvi) Any sum of money received as an advanc e in the course of negoti
ations for transfer of
a capital asset and such negoti ation fails, the amoun t so forfeite d;
(xvii) If the assesse e receives (in cash or kind) the following from the
Centra l Government
or a State Govern ment or any author ity or body or agency it will be tr eat ed as income
:
Subsidy or grant or cash incenti ve or duty drawb ack, or waive r or conces sion or
reimbu rsemen t.
However, if such subsid y or grant or reimbu rsemen t is taken into accoun t for deter•
minati on of the actual cost of the asset, it will not be treated as income .
The subsidy or grant by the Centra l Gover nment for the purpos e of the corpus of
a
trust or institu tion establi shed by the Centra l Gover nment or a State Govern ment,
will not be treated as income.
. . The LPG subsid y and other welfar e subsid ies receive d by individ uals shall not be
m~~ - included
...
0
(Press Release, dated 5,5,2013 )
(xvm) Any ~um ~ money or value of proper ty receive d withou t consid eration or for inadeq
uate
consideration by any person from any person or person s on or after 1 4 2017 (For details
see chapte r 12). · ·
(xix) Compe nsation or other paym t d · d •
te • ti f . en , ue or receive by any person 1n • · h
connec tion with
rmmt
there o.a on ° his employ ment or modifi cation of the terms and
t e
condit ions relating
[(xx) The fair marke t value Of · t
treated as 'tal inven ory as on the date on which it is conver ted into, or
, a cap1 asset (w.e.f. A.Y. 2019-2 0) ]
CONCEPT OF INCOME .
The above definition of income is 0 t
are ordinarily treated as incom
1 ·
from definite sources with some :~: ;ctgul,
t
c?nc
1 · • . ·h
usive. It includ es some other receip ts also w~c
inco~e means a monet ary incom e which is denved
0
re arity or expect ed regula rity. These definite sources
 7
INCOME TAX (INTRODUCTION AND IMPORTANT DEFINITIONS)

of incoi_ne are : Salaries, Income from House Property, Profits and Gains of Business or
Profession, Capital Gains and Income from Other Sources. nnder :
Besides this, there are some other important rules regarding income, which are as
(1) There should be a definite source of income.
(2)An income earned, whether legally or illegally, is taxable under th~ Income Tax Act. The
Income_Tax ~ct does not make any distinction between legal and illegal income. H_owever, any
expenditw:e mcurred to earn an illegal income is allowed to be deducted out of sue~ m~ome only.
(3) It is not necessary that the income should be received regularly and penodically, s3:y,
":eekly, monthly or quarterly. Lump-sum received can also be income, provided it is income m
view of other factors and considerations.
(_4) Income should be received from outside. In an institution, if the ipcome from subscription
~om its members exceeds its expenditure on its members the excess cannot be treated as taxable
mcome, because the subscription was received from amongst the members themselves and the
excess !epresents the excess of income over expenditure incurred for their own benefit or
well-bemg, hence this excess is not received from outside, and will not be income.
Similarly, excess over expenditure, received by a club from facilities provided to members
as part of advantages attached to such membership, is not taxable income.
[CIT vs. Bankipur Club Ltd. (1997) 226 ITR 97 (SC)]
(5) It is not essential that the income must be received in the form of money. Receipts in
kind or service having money equivalent can also be income~
(6) Temporary or Permanent Income. Whether the income is temporary or permanent, it is
immaterial from the tax point of view.
(7) If an assessee has earned an income but has not actually received it, it will be treated
as the income of the assessee, because he is entitled to receive it.
(8) Reimbursemen t ofexpenses is not income. Reimbursemen t of actual travelling expenses
to an employee is not his income.
(9) Where under a legal obligation a charge is created on the income of a person, then to
the extent of such charge it will be deducted from his income.
(10) Receipt on account of dharmada, gaushala, etc. is not inc~me.
(11) Pin Money received by wife for her personal expenses and small savings made by a woman
out of money received from her husband for meeting household expenses is not her income.
(12) Disputed Income. Any dispute regarding the title of income will not postpone or held
up the assessment of such income. It will be taxed in the hands of the recipient of such income.
{13) Diversion of income vs. Application of income. Diversion of income means that the
income is diverted to some other person under some legal obligation. If after receiving the
income it is given to someone else it is application of income. Similarly, if an income is diverted
to some other person voluntarily it is application of income. Where by an obligation, income is
diverted before it reaches the assessee, it.is diversion of income and not taxable; but where the
income is required to be applied to discharge an obligation after such income reaches the
assessee the same is merely an application of income and tax liability cannot be avoided.
(14), Income may be in plus or minus. Minus income means loss, hence losses are also
included in the term 'Income'.
GROSS TOTAL INCOME [Sec. 80B(5)]
The aggregate of the income under the following heads is known as gross total income :
(i) Income from salaries;
(ii) Income from house property; .
(iii) Profit and gains of business or profession;
(iv) Capital gains; and
(v) Income from other sources. . . . .
Th · der each head is comput.ed after making deductions permissible under that head.
F~~~:i;:~ro ught forward losses shall be deducted (as provided in the Act) to arrive at
the assessable income.
 - - - ------
- - - - - ----
~~~ ,

AGRlCUUURAl INCOME
Se e ch ap te r on ~a ricultu
ral In co m e~.

CASUAL INCOME
Any re ce ip t wh ich is. . d
smtl inrome is th at in coof a ca su al 81:" n o n. -~·~an at ur ei sc as ua l m . ~ In -~ - - . :;,__
· ~
m e th e re ce ip t of which IS .de nt al an d w ith ou t an_.v supri!~ri.~
: :W nai tu re
· of an .un~=~::r- __
fro
nn m gs mloH, ,,.~ · p~ es1 ,~ us
--l
ace1
~.~~.
o'" ' and
o. .u .a .= other munes
c::. ft

gam m g or be tti, ng of,~an

hJ" _,.,
y fo rm or na tu re w ha ts --~ --1 of an_y sort 0t fr oo
habitual be tti ng ar e no n- · 15
oe ve r ar e ~U tt! . inc om .e "" ""D~ .;'."-ts e,ren ~
..
re cu ni ng re ce ip ts an d ~ . al · s. . u ~~
'!h e ca.suaJ io ro ro e do es no e as ca su mcome..
t in cl ud e :
(i) (a ) ca pi tal ga in s; or
(b) receipts ar isi ng fro m bu sin es s or th e ex er ci se •
(c) receipts, by way ofad di of a pr of es si on or oc cu pa tion_;
tio n to re m un er at io n of an or . _
perquisit.es, etc. em pl oy ee , su ch as bonus, grat ui ~
(ii) Voluntary paymen
t re ce iv ed in exercise of an ,I}
income, e.g., tips gi ve n in oc cu pa tio n ar e no t treat
th e or di na ry wa y to ta xi ed as tA\lS ~
income ar isi ng from the. ex -d riv er s in th e em pl oy of
er cis e of an occupation. Si taxi-owners 31'l
taxable. A receipt may be ta milarly~ gr at ui tie s to w ai
te rs
if th e amount is received as
xable as income ar is in g fro
m th e le ga l ex er ci se of th e in a h-0tel are
~
an d who were ';111der no o~ a gift from th ird pa rti es to w ho m th e le ga l se rv ic on tW~11
ligation to pa y anything at es ,v er e no t rendered
If an archit.ect su bn ut te d all.
won by him, is income from a pl an .
profession.in a competition for co ns tru ct io n of a bu ild in g, th
. (ii i) A_ gi ft _from a. relativ
e pnie
e is not_ income at all. Birth
mstances m point. A gi ft from .day an d w ed di ng gi fts ar
a relative does no t become e simplest
year ~ r year. A regular al income m er el y be ca us e it
~ lo ~a
a ~ d or _by a husband to h1 n~ given ye ar after ye ar pu re ly as a vo lu nt ar y gi ft
is repeated
another, is m er el y a fresh a parent
S wtfe, by one relation to by
t am ou nt to or
tim e 1_t IS pa id an d does no
in co m e. gill; everY
(iv) P~ym~nt by husba_nd to
allowance IS neither casual his wile un de r an
income no r a personal gi ft.ag re em en t to live ap ar t as maintenllllc:€
Hence, it is ta xa bl e.
 9
INCOME TAX (INTRODUCTION AND IMPORTANT DEFINITIONS)
OTHER PROVISIONS RELATING TO CASUAL INCOME
(i) Expenses are not deductible. If expenses are incurred to receive casual income, such
e?'Penses are not deductible from any income. For example, an individual purchases lottery
tickets, the cost of lottery tickets is not deductible from any income whatsoever. Similarly, if
P0stal ~harges have been paid for sending crossword puzzles, such charges (expenses) are not
deductible from any income.
(ii) Set-off of losses not permitted. If instead of casual income there is casual loss, such loss
cannot be set-off from any income. For example, if a person wins in a card game on the first day
and 1~~-es the next day, he cannot set-off the loss against any income.
(m) 7b.x deduction at source :
(a) If the winnings from horse race exceed f 10 000 tax will be deducted at source at
the prescribed rate. ' '
(b) If the winnings from any lottery, crossword puzzle, card game and other game of
. any sort exceed f 10,000, tax will be deducted at source at the prescribed rate .
. (iv) Rate of tax. On winning from lottery, crossword, puzzle, races, gambling, betting, etc.
tax 1s chargeable @ 30%.
Illustration 1
State whether the following receipts are casual incomes :
(i) Mr. X received f 5,000 for acting once as an arbitrator without any stipulation as to
remuneration.
(ii) Mr. Y received f 5,000 for acting as an arbitrator with a clear and definite stipulation
for the said remuneration.
(iii) Mr. X, a decree-holder, received interest off 500 under an order of court granting stay
of execution of the decree on judgment-debto r Mr. Y.
(iv) Mr. Xis in the service of Mr. Y. Mr. Y's son was lost and Mr. X. traced him out without
any stipulation of reward but Mr. Y gave him a reward oft 500.
Solution
(i) The receipt is of a casual and non-recurring nature as there was no stipulation for
remuneration.
(ii) Mr. Y was offered a definite remuneration for acting as an arbitrator and he accepted
the work of the remuneration, hence, the receipt is not of a casual nature.
(iii) Interest off 500 received by the decree-holder is not a casual income.
(iv) It is of casual and non-recurring nature as there was no stipulation for the reward.
PERSON [Sec. 2(31)]

'Person' includes the following :

(i) an individual;
(ii) a Hindu undivided family;
(iii) a company;
(iv) a firm;
(v) an association of persons or a body of individuals whether incorporated or not;
(vi) a local authority; and
•·) every art'fici'al J"uridical person , not falling within. any of the preceding sub-clauses.
.
(vn 1
An individual means a natural person or a human being, who may be male, female, mmor
child or ~ lunaUtic.di .d d Family means a Hindu family which consists of all persons lineally
A Hmdu n VI e ancestor including· t h e1r ·
· wives · d d aughters.
and unmarne
descended from a combmdonfin d as an artificial person created by law with perpetual succession,
A company may e es e
e ca...-rving · ·
bm1ted
1·1ab"l't
1 1 y.
a common sea1 and Shar .. .. J •
 INCO ME'rAX
10
. . 2'
l\~ pl'l' ~wd.ion , 17) oft..ho lncomc, 'J'nx A ot;, n c<Jll
, f-)011Y ll'\OUJ1H :
l .
.
') m. , Jndinn compnny, 01 ...
t, .\) bo~v corpo1•nt:o inl10t·pm·oted. undo,· tho . . f O (brolgn count1 Y, or
liD nny l' .. .
(iii) l r institut,ion, t\ssocintrnn o1· b ..i l thol
low o
' inco rpo ra
t d or not and wh ether Indian
o .
ony, 10 . . ..
~/:1011-Inditm, which is doul1:wod by w ,. l ord er of the Cent ra l Board of
f,TOl\(;)t'lll or Hp0cu1
Direct 1'uxos to be n compnny.
A:61~n'l moons tl purtnot'8hip firm; which is doflnod d , tJ O Par tne rsh ip Act.
An Associat.ion ofpel'sons mom11:3 two or mo,re
un e~ : \~ . for a com·mon pur pos e for the
rrpose of ear ning income. Tho A. 0. P. moy oon pers on,s Jo~~-in~ ivid ual s or any oth er persona,
r.:. an individual and a compnny or two or
· Body of individuals m eRn s. tl co~1.~lomerutum
a 1At two ot ~o1
m~ro co7r.~: 1
·
~:{ ls who com e tog eth er by cha
nce,
o n lVL u.a .
e.g., by birt h or testa1uentary d1~positions.
Loc al authoril)': An aut hor ity legally ent
. . . t t d by the Go ver nm ent w1th the
managemen t or control of a municipal or itle d to o1 en. hru.a ·~ h ·t 'ncludea Mu nici pali ty
local fun d sue au 0 ~ 1 · Y 1
Municipal Corporation, Distric~ Board, etc. '
Art ific ial juri dica l person includes a pub hc . . .. , h. ·h • atab lish ed und er special
co1 por atio n w 1c 18 e
Act of legislature, an idol or deity, university
, etc.
ASSESSEE [Sec. 2(7)1
An assessee mea ns a per son :
(i) who is liable to pay any tax; or
(ii) who is liable to pay any oth er sum
of money und er this Act (e.g., inte res t, pen
or alty , etc. );
(iii) in respect of whom any proceeding und er this
Act has bee n tak en for the ass ess me nt
of his income or ass ess men t of fringe benefit
s; or
(iv) in resp ect of whom any proceeding und er this
Act has bee n tak en for the ass ess me nt
of the income of any oth er per son in resp ect
of whi ch he is asse ssab le; or
(v) in respect of whom any proceeding und er
this Act has bee n tak en for the ass ess me nt
the loss sustained by him or by such oth er pers of
on; or
(vi) in resp ect of whom any proceeding und er this
Act has bee n tak en for the am oun t of
refu nd due to him or to suc h oth er person;
or
(vii ) who is deemed to be an asse ssee und er any
provision of this Act; or
(viii) who is deemed to be an assessee in default
und er any provision of this Act.
DEEMED ASSESSEE
A per son who is deemed to be an asse s see for
some oth er per son , is call ed 'De em ed Ass ess
For example, (i) afte r the dea th of a person, his ee'.
lega l rep rese nta tive will be trea ted as an ass
for tha t income of the deceased on which tax ess ee
has not bee n pai d by the dec eas ed bef ore his
(ii) a per son rep rese nta ting a fore ign
er or a min or or a lun atic is trea ted as an dea th;
income of suc h foreigner or min or or lun atic . ass ess ee for the
ASSESSEE IN DEFAULT
Wh en a per son is responsible for doing any
wor k und er the Act and he fail s to do it
called a~ '~s ess ee in Def~ult'. For exa mpl e, he
if a per son whi le ma kin g any pay me nt to ~o is
person, 1s liable to ded uct income tax the reo the r
n at source, does not ded uct inc om e tax the
or hav in~ ded ucte d it, does ?ot dep osit it in refr om
the Gov ern men t Tre asu ry, he wil l be trea
asse ssee 1n def ault for tha t income tax. ted as ~

ASSESSMENT YEAR [Sec. 2(9)]

Ass ess men t ye~r me ans th~ per iod of twe lve
~very yea r and en~ ng on 31s t ~ar ch of the mo nth s com men cin g on the firs t da of A ril
mcome of the pre vio us yea r dur ing the foll ne:l(:t yea r. An ass ess ee
owing fina nci al yea r (as s
is liab l t ty
te O pay ax on
1he
ess me n yea r).
 11
INCOME TAX (INTRODUCTION AND IMPORTANT DEFINITIONS).'..______ ____ _
- •···--•-----
(Sec. 3)
PREVIOUS YEAR
. !he ye~ in which_ income is earned is known as previous year and the next year ir>: which
this mcom~ 1s taxable 1s known as assessm ent year. Income tax is charged on the total income
of the previou s year at the rates prescrib ed by the relevan t Finance Act for the assessm ent year :
(l) Gen~ral ly,_prev ious year means the financia l year immedi ately preceding the Assess-
ment Year. F1nanc~al Year begins on 1st April and ends on 31st March.
(2) The financia l year (year ending on 31st March) will be the uniform previou s year for all
the assessee s and for all sources of income .
. (3) In the cas~ of a newly set-up busines s or professi on or any other new source of income
dunng the financia l year, the previous year will begin from the date of setting up of the new
business or professi on or from the date of coming into existenc e of the new source of income and
will end with the said financia l year. In this case, the first previous year may be of less than 12
months. .
In other words, a financia l year is both a previous year as well as an assessm ent year. It is
previous year for the income earned during that financial year and assessm ent year for the income
earned during the precedin g financia l year, e.g., Financia l Year 2018-19 is previous year for current
income and is assessm ent year for the income earned during the Financia l Year 2017-18.
Not:e : There is no compulsio n on any assessee to close his accounts on 31st March only. If for any reason personal,
7

religious or any other ground an assessee wants to continue to close his accounts on a date different from 31st
March, he can do so. However, he would be required to make up his accounts on 31st March also, for the purpose
of submittin g the Income tax Return.
The meaning of the term previous year can be better understood by the following illustrat ions :
 2
AGRICULTURAL INCOME
AGRICULTURAL INCOME 2
[Sec. (l~)]
The meaning of the term agricultural income can be exp l . d with the help of the following
a1ne
cha rt:
Agricultural Income
-1,

A B C
(i) Any rent or revenue derived (i) Any income derived from such land by Any inco me from a farm
from land, (ii) which is situated agricultural operations or (ii) any yro~ess house.
in India and (iii) is used for by cultivator or receiver of rent-m-kind,
agricultural purposes. which renders the produce fit for the
market or (iii) the sale of such produce.
Note : Capital Gains arising from the transfer of agricultur
al land shall not be treate~
as agric ultur al inco ~e.
If the following conditions are satisfied the income from
land 1s trea ted as agn cult ura l
income:
1. The land must be situated in India. If the land
is situ ated outside India, the income
from such land will not be treate<;l, as agricultural inco
2. Land must be used for agricultura} purposes. It mea me.
ns, tilli
sowing of the seeds, planting and similar operations on ng of the land, wat erin g it,
by the assessee. the land mus t be carr ied out
3. The receiver of income from the land mus t have inte
rest
tenant or usufructuary mortgagee of the land has inte in the land. The land lord or
rest in the land.
If a person purchases a standi:r:ig crop and after cutt
the profit is not agricultural incpme. ing it, sells it and mak es prof it
4. The direct income from agriculture, is trea ted as '
agricultural income. An indi rect
income from _a~culture, is not agricultural income.
For
mana~er or dividend from a company engaged in agricult example, sala ry of a farm
tural income. ural activities is not agricul-
'
KINDS OF ,AGRICULTURAL INCOME
(1) Rent or revenue deri ved from . When one person
his land for agricultural purposes the land
former receives fr
t t ·
or kind) in consideration of such ~ser. Such rent or reve gran s o ano ther a righ t to use
(2) Income from nom ~hte latttedr ren t o: reve nue (in cash
agri cult ural operations It means cul ue is rea e as agn cult al ·
. . . ur income.
watering it, sowing of the seeds, planting
Products which grow wild on the land or a
and
similar b~a bon of a field, tilli ng of the land,
r°perat1ons on the land .
human labour or skill upon the land are not re
therefrom is not agricult
ural income.
J
~pontaneous growth not involving any
pro uc 8 of agriculture. The income derived
(3) Income from mak ing prod uce '/it fi
~eld and the cultivator or receiver ofre nt-f ~-~ ~ke t. :th
ere
or ~arket, any income from such activity is al pe~ orm is no mar ket of the produce of the
s an:y activity to mak e the produce fit
cunng of coffee, flue curing of tobacco, ginning:~ ~:~ ultu
ral ;111come. The process employed in
n, etc., is such a process.
 AGRICULTURAL INCOME

(4) Income from sale of produce. Income derived by a cultivator or receiver or ren1rin-~d
from the sale of produce raised or received by him is treated as agricultural income, even if he
keeps a shop for the sale of such produce.
(5) Income from a farm howre . The income from a farm house is treated as agricultural
income if the following conditions are satisfied :
(i) the building is owned and occupied by the cultivator or receiver of the rent or revenue
of any such land~
(ii) it is situated on or in the immediate vicinity of the agricultural land;
(iii) the building is, by :reason of his connection with the land, used as dwelling house or a
. store-house or an out-house by the cultivator or receiver of rent-in-kind;
(iv) the land is situated in urban area and is either assessed to land revenue in India or
is subject to a local tax assessed and collected by the officers of the government.
l~the land if'evenue or local tax is not payable on such land :
(1) The land is situated. in 'non-urban' area·1 or
(ii ) The land is situated within municipality or cantonment board jurisdiction, has a
population of le.ss than 10 000· or
(iii) The farm building is not situated within the area specified below, the income derived
from such building shall be agricultural income:
The land is not situated in any area within the distance, measured aerially :.
(a ) not being more than two kilometres from the local limits and which has a population
more than ten thousand but not exceeding one lakh; or
(b ) not being more than six kilometres from the local limits and which has a population of
more than one lakh but not exceeding ten lakh; or
(c) not being more than eight kilometres from the local limits and which has a population
more than ten lakh.
(6) Income from saplings or seedlings. The income derived from saplings or seedlings grown
in a n ursery shall be deemed to be agricultural income.
IMPO,RTANT POINTS REGARDING COMPUTATION OF AGRICULlURAl INCOME
( 1) Agricultural Income by way of rent or revenue derived from land which is situated in
India and is used for agricultural purpose is computed as ifit were income chargeable to income
tax under the head 'Income from Other Sources'.
(2) Agricultural Income from Agricultural building is computed as if it were income
chargeable to income tax under the head 'Income from ·House Property'.
(3 ) Any other agricultural income is computed as ifit were income chargeable to income tax
under the head 'Profits and Gains of Business or Profession'.
Not,e : If payment exceeding t 10,000 has been made under (1) or (3) without account payee che'ltle Ol' account payee
bank draft or use of electronic clearing system through a bank account, even than the whole amount shall ~
allowed as a deduction.
(4) Any sum payable by the assessee on account of any tax levi.ed by the State Government
on the agricultural income shall be deducted in computing the agricultural income.
(5) Where in respect of any source of agricultural income there is a loss, such loss shall be
set-off against any other source of agricultural income.
(6) Where the assessee is a member of an as~oc~ation of per~ons or body of individuals and
his share in the agricultural income of the association or body 1s a loss, such loss shall not be
set-off against any other agricultural in.come of the ~ssessee. . .
(7) If there is loss from agriculture, 1~ can be earned foi:'Yard and set-offagamst agncultural
income in the following eight years provided the return of income has been filed and such loss
has been determined by the Assessing Officer. . . .
(8) Where the net result of the computatio':l made 1n: accord~nce with these r:iles 1s a loss,
the loss so computed is ignored and the net agricultural mcome 1s dee~ed to be ml.
(9) The net agricultural income is rounded-off to the nearest multiple of rupees ten.
 24 INCOME TAX
Non-Agricultural
In co m es fro m Land .
T he following incom fr om la nd us ed fo r
es, ar e no t de ri ve d ag ri cu lt ur al pu rp
ar e no n- ag ri cu lt ur os es , hf;;ntf! th.f:?
al in co m es :
(i) In co m e from m
(ii ) In co m e from
ar ke ts ; .
st on e qu ar ri e~ ;
(iii) In co m e from
m
(iv) In co m e from la in in g ro ya lt ie s ; . • ul tu ra l pr od uc e;
nd
(v) In co m e from su us ed for storu~g ~g n~ n
pp
for ir ri ga ti on from ly of w at er for im ga b~ Jurp ? os es (e.g ., in co m e
(vi) In co m e fr om se a tu be -w el l or w el l, as it oe s 0 t in vo lv e an y ag ri cu lt ur al op er at ion,
fr om supply o fw
~
lf -g ro w n gr as s, tr ee .
(v ii) In co m e from
(v ii i) In co m e fr
fi sh er ie s;
s or ba m bo os , '
om th e sa le of ea rt .
(i.~) Remune1·a
tion re ce iv ed as m h fo r b ri c k -m ~ g;
an ag al fa rm ·
(x ) D iv id en d fr
om a co m pa ny en ga er of an ag nc ul tu r ,
(x i) In co m e of ge d in ag ri cu lt ur e;
th e bu ye r of a ri pe
crop
da ir y fa rm , po ul tr ;
(x ii) In co m e fr om
(x iii ) In co m e fr
om in te re st on ar re y fa rm in g, etc.; an d
Illustration 1 ar s of re nt of ag ri
cu lt ur al la nd .
S ta te w he th er th e
following in co m e fr
no t: om la nd si tu at ed in .
In di a ar e ag ri cu lt
(i) In co m e fr om ur al m co m e or
in te re st on ar re ar
pu rp os es . s of re nt pa ya bl e in
re sp ec t of la nd us
(ii ) In co m e fr om ed fo r ag ri cu ltu ra
us e of la nd fo r gr az l
(ii i) In co m e fr om in g of ca tt le re qu ir
le as e of la nd for gr ed fo r ag ri cu lt ur al
(iv) In co m e fr om sa az in g of ca tt le re qu pu rs ui ts .
le of fo re st tr ee s ir ed fo r ag ri cu lt ur al pu rs ui ts .
th ei r pr es er va ti on
an d gr ow th w er e pe of sp on ta ne ou s gr ow th on w hi ch
(v) In co m e fr om in rf or m ed . so m e op er at io ns for
te re st on si m pl e m
(v i) N ot io na l in or tg ag e of la nd us
co m e fr om a ho us ed fo r ag ri cu lt ur al
oc cu pi ed by th e as e pu rp os es .
se ss ee for th e su pe si tu at ed ne ar th e ag ri cu lt ur al fa
vi lla ge 10 ki lo m et rv is io n of th e fa rm rm an d ow ne d an
re fr om th e city. N ac ti vi ti es . T he fa rm d
(v ii) In co m e fr om o la nd re ve nu e or is si tu at ed in a
ag ri cu lt ur al la nd si lo ca l ta x is le vi ed on th is fa
(v iii ) Pr iz e fr om tu at ed in P ak is ta n. rm .
th e G ov er nm en t on
(ix ) A m ou nt of co ac co un t of hi gh er
m pe ns at io n re ce iv yi el d.
du e to flood. ed fr om In su ra nc e
C om pa ny on ac co
Solution un t of lo ss of cr op
(i) It is ~ t ~g ri cu lt
pa y t~.e re1;lt 1n t~ ur al in co m e as it is
e. no t di re ct ly co nn ec
te d w it h la n d b u t
(n ) It 1s ag ri cu lt ur _[CIT vs. Raj~ B~ ha du r Ka m ak ha ya Na ra in w it h fa il ur e to
al in co m e as 1t 1s an Si ng h & Others (1
94
... . . ag ri cu lt ur al ac ti vi 8) 16 IT R 32 5 (PCD)
. . ty .
(1n) It 1s _a gn ~u [C IT vs. R.B. Ra ja Sh am
of ca tt le or gi ve s 1t ltu ra l in co m e. It is im m at er ia l w he
sh er ja ng Ba ha du r
(24 IT R = A IR 19 53
. on le as e fo r th e pu rp os e. th er th e as se ss ee All. 676))
•
(1v) It 1s no t ag ri. cu • us ed th e la n d fo r
lt ur al in co m e as ba [P Ch el l · h Pi ll azing
si c op er at io ns of cu · .
ai a ai vs . C IT (1 6 gr
. lt iv at io n h IT R 350)l
(v) It 1s no t ag ri.cu . . [~ ah ar aj a of Ka pu t b
av e no ee n pe rfi d
lt ur al in co m e as 1t rt la vs. C IT (13
IT R 7 4 = A IR 19 45 or m e •
1s no t de ri ve d frha om th l d b fr O ud h 35))
(vi) T he la nd is si tu .
at ed in no n [bC/T e an u t om th e m or tg ag or
no t on th e la nd . vs. SlmHKameshwar
Si ng h M ah ar aj a of .
, th e no ti on al in co -u r an ar ea . en ce D ar bh an ga
m e of ag ri cu lt ur al b w he IT
\d . th
(vii) A gr ic ul tu ra l er la n d (2 R 10711
la nd is no t si tu at ed . h b
(viii) It is no t ag ri in In di a h tu i~ g re ve nu e as ee n pa i'd 0 r
cu lt ur al in co m e du is ex :m pt .
(a) T he in co m e is e to th ri' en ~e m
no t fr om la nd ; or co m e 1s no t ag ri cu
e O11ow in g re as on lt ur al in co m e.
s:
 l.. • I

- - - - - - - - - - - - -AGRICULTURAL INCOME
- - - - -- -------------
(b) The income is not from use of land for agricultural purposes; or
(c) The income is not from sale of agricultural produce. . . l
(ix) It is agricultural income. The compensation is received on account ofloss of agncu tu,ra1
income. [CIT vs. B. Gupta. (1ea) Put. Ltd. (1969) 74 I.TR 337 (Cal.) I
Illustration 2
State with reasons whether the following are agricultural income:
(i) Income from the sale of the replanted trees where the denuded parts of the forest are
replanted and subsequent operations in forestry are carried out.
(ii) Income from the sale of trees of forest which are of spontaneous growth and in relation
to which forestry operations alone are performed.
Solution
(i) It is agricultural income as these trees are not of spontaneous growth but have been replanted
and subsequent operations in forestry were carried out. (CIT vs. Raja Benoy Kumar Sahas Roy)
(ii) It is not agricultural income as it is derived from the sale of trees of spontaneous growth.
Here there are no basic operations like tilling of soil, sowing and planting. The subsequent
operations for conservation and improvement of such trees do not constitute agriculture.
Illustration 3
A Sugar factory crushed 41,000 quintal of sugarcane during the previous year out of which
6,000 quintal of cane was produced on its own farm at a cost of~ 13,20,000. The remaining
sugarcane was purchased from the market at the following rates :
20,000 quintal@ ~ 279 per quintal
5,000 quintal@ ~ 282 per quintal
10,000 quintal@ ~ 288 per quintal
During the previous year the factory earned a total profit of~ 5,00,000. You are required to
determine separately the agricultural and non-agricultural income.
Solution
Cost of Sugarcane purchased from the market : Cost
~
20,000 quintal@ f 279 per quintal 55,80,000
5,000 quintal@t 282 per quintal 14,10,000
10,000 quintal@ f 288 per quintal 28,80,000
98,70,000
. ~
98 70 000
Average Market Pnce = = ~ 282
35 000
' farm :
Market value of cane produced on own f
(6,000 X 282) 16,92,000
Less : Cost of cane grown on own farm 13,20,000
Agricultural Income 3,72,000
Total Profit 5,00,000
Less : Agricultural Income 3,72,000
Non-Agricultural Income 1,28,000
Hence, Agricultural Income 3,72,000
and Non-Agricultural Income 1,28,000
PARTLY AGRICULTURAL INCOME
Sometimes there is composite income, which is partially agricultural and partially non-
agricultural. For determining the non-agricultural income chargeable to tax, the market value
of any agricultural produce which has been raised by the assessee and which has been utilized
as a raw material in such business, shall be deducted. No further deduction shall be made in
respect of cost of cultivation incurred by the assessee as a cultivator.
- - - - - - - - - -- -ININiocoiM~E]TA~X__
__ __ _ --- .
26
For this pur pos e, ma rke t va l ue s h a 11.be dee me d be :
di aril to. sol d in the ma rket, t l10 v a 1ue calculotecl
{:I
(a) wh ere the agr icu ltur al pro?-uce is h 1:1t ha~
according to the ave rag e pnc e at w c 1 . bee n so sol d, dur ing the rel eva nt previoufi
year; or .
(b) wh ere the agr 1cu ltur ~ pro duce is . t ord ina rily sol d in the ma rke t the aggreg
no . . ate of
the following sha ll be its ma rke t val ue •
(i) the exp ens es of cul tiva tion ; .
(ii) the lan d rev enu e or ren t pai d for the lan ,
1
hi h it wa s gro wn ; and
(iii) the pro fit wh ich in the opi nio n of the
d o~ w c . aso nab le
As ses sin g Off ice r 18 re ·
Examples
(1) Pro fits of suc h Sug ar Fa cto ries wh
ich pro duc e sug a~ fro m can e grow1;1 on th ·
far ms , are tre ate d as par tly agr icu ltu ral inc eir own
om e. Su gar can e 1s ge°:erally_ sol d in th e ma
Hence, in ord er to sep ara te the agr icu ltu ral rket.
inc om e fro m the bus ine ss inc om e, the av~
ma rke t pri ce of sug arc ane dur ing the rel eva nt rage
pre vio us yea r sha ll be cha rge d as an. exp end
and no not e wil l be tak en of the exp ens es iture
of cul tiv atin g the sug arc ane . Th e inc om e
det erm ine d will be the bus ine ss income. thus
(2) Income from gro win g and ma nuf act uri ng of
Tua. Six ty per cen t of the inc om e der ive d
the sale of tea grown and ma nuf act ure d by the sell from
er in Ind ia is dee me d to be agr icu ltu ral inc om e
the rem ain ing forty per cent is tak en as bus ine ss and
income.
( 3) Inc om e fro m gro win g and ma nu fac
tur ing of cen trif uge d lat ex or cen ex. Six ty five
per cen t of the incom e der ive d fro m the sal e of cen trif uge d lat ex
pro ces sed by him from rub ber gro wn by him or cen ex ma nuf act ure d or
in Ind ia is dee me d to be agr icu ltu ral inc om
the rem ain ing thir ty- fiv e per cen t is tak en as e and
bus ine ss inc om e.
- ( 4) Inc om e fro m gro win g and ma nu fac
tur ing of Cof fee :
(a) Seventy-five per cen t of the incomer der ive
d fro m the sal e of coffee gro wn and cur ed by
the se~ er in ~d ia is dee me d to be agr icu ltu ral
as bus me ss mcome. inc om e and twe nty -fiv e per cen t is tak en
Cb) Six ty per cen t of the income der ive d fro m the
sal e of coffee gro wn , cur ed roa ste d and
p- o~ ed by_ the sel ler in Ind ia, ~t h or ~th ou
t mix ing of chi cor y or oth ~r fla vou rin g
m~ edi ent s 1:' dee1!1ed to be agn cu: ltur al mc om
tak en as bus me ss mcome. e and the rem ain ing for ty per cen t is
 13
RESIDENCE AND TAX LIABILITY
BASIS OF CHARGE
An Hf4iwimoo trrny ourn hiu itJcmr1H in Jndht nr out-ffid~ India r,r at both the pla..res. Which
in como f~ HHH<JHfHlbJo iri Jndia depend~ on the r~uick~;tjaJ Hfatu~ of an a s ~ -
RESIDENCE OF ASSESSEES
. . 'rh~ Hcorw of i?laJ inwrrui of an a8He8s-ee along with hm residential status is determined
1
~ th r,-!iC"rcn.cc to h 11, rc01dcnoo in India in the prev-iotIB year. P ~ and c.,i tizen3hip are two
d1ffor(..,nt as pee ta. rrhc incid{,iftce of tax haH nothing to do with citizenship. <Sec. 5)
An lnd1an may be ncm-reffident and a for4,~goor may be resident fur income tax purposes.
The residL-ltlce of a per8on may change from year to year but citizenship cannot be changed
every year.
A person may be resi<l£"llt in more than one country fur the same previonB year.
Different Types of Residents (Sec. 6 ,)
On the basis of residence the a,gsessees are divided into three categories, uiz. :
(l) Persons who are resident in India, popularly known as ordinarily r esident.
(2) Persons who are not ordinarily resident in India.
(3) Persons who are non-residc"llt.
'rypes of residents can be illustrated with the help of the following chart :
Types of Residents
,i
i-
Resident Non-Resi.dent
.i
'V

Ordinarily Resident Not Ordinarily Resident

There are separat.e rules for determining the residence of different kinds of a-x essees.. The
different kinds of assessees are individuals, Hindu undivided families, finns, an association of
persons, companies, local authorities and artific.ial juridical persons.
INDIVIDUALS
'!'he residence of an individual is determined on the basis of the rules stated hereunder :
L RMtdenf (Ordlnar1fy Residen1)
An individual is Baid to be resident in India in any previous year ifhe satisfies any one of
the following bask conditions : [Sec. 6(1)]
(a) he is in India in the previous year for a period of 182 days or more~ or
(b ) he has been in India for at least 36~ days du~ the four years preceding the previous
year and is in India for at least 60 days dunng the previous year.
Explanation 1. Exceptions to the above rules of 60 days, stay in India :
(iJ An individual who is a citizen of India and leaves India in any previous year for the
purpose of employment or as a member of the crew of an Indian ship must have stayed
in India for at least 182 days during the previous year instead of 60 days;
 _ __ _ _ _ _ _ _ _ _ _ININC
(COiMfEE~~~x
36 --- - -
.
1of Ind ian origi·n ' wh o isdliv
. ing out sid e lndi
t'
(ii) If any 'tiz en of Ind ia or a foreign n~ ion a . Ind . fi a,
Cl Ind ' . the pre vio us yea r, h e rou st hav e sta ye lll ia or at least
comes on a visit to UL i'! . ste ad of 60 days.
182 days dur ing the previous yea r m . .
db th above two exc ept ion s onl y condition
In oth er words, in the case of in~ vid ~al
co~ :r:n d :on ~it ion (b) has no sig nif ica
(a) is to be satisfied to become a res ide nc~ at all.
nt in In t lik e bus ine ss or pro fes sio n taken
In exception (i) 'employment' includes
sel f ernployroeno Abdul Razak (2012) 198
up by assessee abroa d . (CIT vs. · Trueman 1 (Ker.)]
d ·t . h · d f
Note : For calculating num ber of days stay
India.
in Indi a, days of ~~?7;:th;~t/fohour Adv
ld be included m t e pen o o stay in
anc e Rul ing s 1995 ITR 223 p. 462)
dia n ori gin ' me ans tha t eith er he or th 0 f hi are nts or any of his gra nd parents
'In .
was bor n in undivided Ind ia. Fur the r, 'com ei er_ . ~Pd. in the pre vio us yea r' me ans that
es on a visi\~o n ite bus ine ss pur pos e
he may come to Ind ia for any purpos or personal
purpose of any nat ure or he ma y come e, whatshio~ver.l t· mayor he ma y com e for a ple asu re trip
to me et s re a ion s
only. . .. d
Exp lan atio n 2. An md
bound shi p leaving India, theivi ua1wh o 1s
. ·t·
a c1 1zen ofln di·a
.
and a me mb er of the cre w of a foreign
. .
period or periods of sta y m Ind ia sha ll, m res pec t of sueh voyage
be det erm ine d as ma y be prescribed. ,
(a) Sta y in Ind ia for 182 day s or
nw re ·
As per the firs t basic condition it is
nec ess ary tha t the in~ vid ual mu st
anywhere in Ind ia for at lea st 182 days hav e sta yed
dur ing the previous year. It 1s not at
he should sta y at a stre tch for 182 day all nec es~ ary tha t
s. His tot al sta y for at lea st 182 day s
It is also not necessary tha t the ent ire may_ be wi th gaps.
sta y sho uld be at one place. It ma y be
in Ind ia. at dif fer ent places
(b) Sta y in Ind ia for at least 365
day s dur ing the fou r yea rs pre ced
for at lea st 60 day s or 182 day s, as ing the pre vio us yea r and
the cas e ma y be, dur ing the pre vio
If an individual's tot al sta y in Ind ia us yea r
dur ing the four yea rs pre ced ing the pre
for at lea st 365 days and rat her he rem vio us yea r is
ain s in Ind ia for at lea st 60 day s or 182
ma y be, dur ing the previous yea r he wil day s, as the cas e
l become-re sid ent for tha t pre vio us yea
Here again, it is not necessary tha t he sho r.
uld sta y dur ing the previous yea r
for 60 days or 182 days, as the case
ma y be, or the ~ntire sta y nee d not be at in Ind ia at a str etc h
Ad diti ona l C-Onditions : In fact, in ord one pla ce only.
er tha t _an ind ivi dua l ma y become ord ina rily res ide nt
in Tn~ia, he is~ sa ~~ bot h the foll
owing coi:i9i~ions bes ide s sat isfy ing any
m en ti~ basu: conditions: one of the abo ve
-·~ [Sec. 6(6)(a)]
(i) he has bee n res i~e nt in Ind ia
in at le¥ t two out of the ten pre vio
the rele van t previous year, and us yea rs pre ced ing
(ii) he has_ bee n in Ind ia for a~
lea st 739 _days in all dur ing the sev
preceding the rel eva nt previous yea r. ; en pre vio us yea rs
In condition (i) residence of two _
tha t the a s ~ mu st hav e satisfied yea rs 011t of ten yea rs pre ced ing the
·
yea rs preceding the previous year. Inat lea st one of the bas ic con diti ons preVIo
condit~on (ii) the a us yea r me ans
Ind ia for at lea.st 730 days dur ing the sev for tw~ yea rs ou t of t~n
en pi evious ye ar: ~~ :::~ :u~ ~ be phy
II. Not Ordinarily Resident sic all y ~re sen t in
g e rel eva nt preVIous year.
If an ind ivid ual satisfies any one of the
the aforesaid two additional conditions above basic c d · ·
, he is sai d to be ,~~ t
It me ans tha t in ord er to be classified.as igo~s (a~ or (b) °?ut d?e s not satisfy
not ord in . ~ nar ily Re sid ent . [Sec. 6(6)(a)]
~~fn:;i \
to prove tha t eith er he has bee n res 1Y
ide nt in Ind i . ~si de nt an ind ivi dua l res ide nt has
p r ~ the rel eva nt previous yea r or
has bee n in an two out of ten pre vio us years
previous yea rs preceding the rel eva nt
previous year. r ess tha n 730 day s du rin g the seven
~ oth er words an individual is sai d to be "N
yea r if: ot Ord in . . "
' anl y Re sid ent in Ind ia in any previo
us
 37
RESIDENCE AND TAX LIABILITY
. · ears preceding that
(1) he has been a non-residen t in India in nine out of the ten pre':71-ousdiY_ fi riod of or
year, or (ii) he has during the seven years preceding that year been m In a or ape '
periods amounting in all to seven hundred and twenty-nine days or less. dt
Since the incidence of tax is lesser in the case of a not ordinarily re~ident as compar~ tho
an ordinarily resident it is for the assessee to prove that he does not satisfy at least one o e
additional conditions in order to be called Not Ordinarily Resident.
Ill. Non-resident
If an individual satisfies none of the aforesaid' basic conditions (a) and (b) state~ under the
head 'Resident' he is said to be Non-Resident. In this case additional conditions are irrelevant.
Illustration 1
(1) A German individual having remained in India for 15 years left for GeD?any in M~y
~015 8:lld came back to India in March 2018. During the Previous Year 2017-18 he did_not_remam
1n India for 182 days or more. Of course, he remained in India for a period amounting ID all to
~ore ~han 365 days during the four years preceding the Previous Year 2?17-1~, but he_ was not
1n India for 60 days or more during the said previous year; hence, he wtll be non-resident' for
the Previous Year 2017-18.
(2) A German individual having remained in India for 15 years left for Germany in March
2015 and came back to India on 30th September, 2017. He remained in India for more than 182
days during the previous year 2017-18; he was not non-residen t in India in nine out of the ten
previous years (2007-08 to 2016-17) preceding the previous year 2017-18. Further, he had been
in India for a period amounting in all to more than 729 days during the seven previous years
preceding the previous year 2017-18. Hence, he is 'ordinarily resident:.
(3) Mr. X, an Indian citizen, serving in a company in London, comes to India every year for
five months. He will be non-residen t for th.e1_previous year 2017-18 because he was not in India
for at least 182 days during the previous y~~r. [Exception to Condition (b)]
( 4) A Bengali gentleman has been doing 9µsiness in Dacca (Banglades h) for the last 15 years
and he comes to India every year for seven Nonths. He remained in India for at least 365 days
during the four -years preceding the releva~;_,t1previous year and remajned in India for at least
182 days during the previous year. Hence, ~e ~atisfied the second basic condition for becoming
a r~sident. He was resident in India in two out,1of ten years preceding the relevant previous year
and he also remained in India for 730 days during the seven years preceding the relevant
previous year. Hence, he is 'ordinarily resident'.
(5) A foreign individual came to India foithe first time in June 2013 and left India on 1st
July, 2016. He again came back to India in January 2018. He remained in India for a period
amounting in all to more than 365 days durirlg the four years preceding the previous year
2017.. 18 and has been in India for more than ~O days during the relevant previous year, he
satisfies the second basic condition. Further, hJ was in India for more than 729 days during
seven years preceding the previous year and he was not non-residen t in India in nine out often
years preceding the relevant previous year he will be 'ordinarily resident' for the previous year
2017-18.
I

HINDU UNDIVIDED FAMILY, FIRM 0~ ASSOCIATION OF PERSONS [Sec. 6(2)]

I. Resident
A Hindu undivided family, firm or association of persons are resident in India in any
previous year if the control and manageme nt of its affair~ is situated wholly or partly in India
during the relevant previous year, i.e., if e~en a part ofth_eir co~trol 8:lld man~geme nt is si~ated
in India during the previous year, they will b~ called resident 1n ~~dia. A res1_d~nt H.U.F. ~ ~e
ordinarily resident only when its Karta satisfies both the additional conditions of ordinarily
residence as an individual. , . .
In this context, the clause 'control and managen;1ent needs clarificati~n. The expression,
'control and manageme nt of affairs' mean de facto and not merely the right to control and
-- h head and sea an d'1recting
11'1\JVIVIL- , , "· t d
38 ment is the place where t e ement must be situated at
manage. The place of co~trol and m~:g~ hat the control a~d man;te place of busines s can be
power are situated . It is _not necess fission is being carried ont 1 and :manag ement of affairs
the place where the busines s or pro na ement. The con ro . t
different from the place ofits_contro~ a1;1d m~er fo make them non-res iden .
must be situated wholly outside India in or
11. Not Ordinarily Resident , dinarily residen t'.
Firm and Association of persons ca~ot b~ not
A Hindu Undivid ed Family is 'not ordina~i~y re~i en
?l
t' in India, if, its karta or manag er does
. . . .
not satisfy both the following a~ditio°:al conditi?ns · the rules applica ble to an individ ual) in
(i) He has been residen t in India (accordin~ to . he fulfilled at least one of the
two out of ten years, precedin~ that previou s ~et:~ i.e~;rs; and .
basic conditions to become residen t for at leas diy that previou s year, for a period
(ii) He has been in India, during the seven years prec~ ng
amount ing in all to at least 730 days_. ·t k rta satisfie s both the above
In other words, a H.U.F. is ordinari ly residen t only when i 8 above conditi ons the family
conditions. If the karta satisfies either only one or none of th e a [Sec. 6(6)(b)]
becomes not ordinari ly resident . · 'Karta , f H u F had been different
· h ·
Note : Where during the last ten years preceding t e preVIo~s year the manager s or s o • · ·
f th Famil should be aggregat ed to determin e
from one another, the total period of stay of successr~e Kartas o e y . h Pillai vs CIT 13 ITR 186)
the residential status of the Karta and consequently its H.U.F. (Marimut u ·
Ill. Non-resident · , . ,
All the three types of assessee s (i.e., H.U.F., Firm or A.O.P.) a~e non:res i~ent only when
the control and manage ment of their affairs is situated wholly outside India.
COMPAN~ES [Sec. 6(3)]
I. Resident
A company is said to be residen t in India in any previou s year, if :
(i) it is an Indian company; or i ·

(ii) Its place of effective manage ment, in that year, is in India.

Explana tion. 'Place of effective manage ment' means a place where key manag ement and
commercial decisions that are necessa ry for conduct of the busines s of an entity as a whole are, ·
in substan ce made.
II. Not Ordinarily Resident f
J~

A Company is never 'not ordinari ly residen t'.

Ill. Non-resident
, If a_ comran y does not satisfy ~oth the a.f9resaid ~onditions of residen ce, it is said to be a
non-~esident company: I~ mea~s neither the,c?m pany is an Indian compan y nor the place of its
effective manage ment is in India. -'
I: •:
EVERY OTHER PERSON
[Sec. 6(4)]
. Eve~y oth~r _person (loc_al autho~t y, airtificial juridica l person, e.g. Idols) • .
residen t 1n India in any previous year in eve.Ty case, except where durin 'th is said to be
and manage ment of its affairs is situated wholly outside India. g at year the control
It means the residence of 'every other ·person' is determi ned in th
firm or association of persons. e same manne r as of a
In brief, only an individu al and a ,H.U.F. can be residen t t . .
non-res ident in India. All other persons can be either residen t or ' no ~rdin~ly residen t or
. resi'dent . I d' . . s year
If a person is in n ia in a previou relevant to non-res ident in India.
of any source of income, he shall be deeme<;f, to be resident in Indiaa~ ~ssessm ~nt year in respect
to the assessment year in respect of each ~f his other sources of inc T'Y:, pre~iou s year relevant
status for different sources of income for the same assessm ent ye om~. us, differen t residen tial
ar is not possible. [Sec. 6(5)]
 SCOPE OF TOTAL INCOME ON THE BASIS OF RESIDENCE
Or INCIDENCE OF TAX
Rela,tionship between residential status and incidence of tax. Incidence of tax on a
tax-payer depends on his residential status and also on place and time of accrual or receipt of
income.
I. Incidence of tax in case of Resident (Ordinary). The total income of any previous year of a
person who is a resident includes all income from whatever source derived which: [Section 5(1)]
(a) is received or deemed to be received in India in such year by or on behalf of such person,
whether accrued or arisen anywhere; or
(b) accrues or arises or is deemed to accrue or arise to him in India during such year,
whether received anywhere; or
(c) accrues or arises to him outside India during such year.
II. Incidence of tax in case of Not Ordinarily Resident. The total income of any previous .
, year of a person who is 'Not Ordinarily Resident' includes all income from whatever source
derived which : 1

(a) is received or deemed to be received. in India in such year by or on behalf of such person,
whether accrued or arisen anywhere; or
(b) accrues or arises or is deemed to'. \accrue or arise to him in India during such year,
whether received anywhere; or · l '· ·.
(c) accrues or arises to him outside India from a business controlled in or a profession
set-up in India.
m. Incidence of tax in case of Non-Resident. The total income of any previous year of a
person who is non-resident includes all income:from whatever source derived which:
(a) is received or deemed to be received imlndia in such year by or on behalf of such person,
whether accrued or arisen anywhere1; nr
(b) accrues or arises or is deemed to acbrue or arise to him in India during such year,
whether received anywhere.
'Received' -explained : , 1
l

The term 'received' means the receipt of income on the first occasion. The place of its receipt
shall be the place where it is received for the' first time and not the place of its receipt on
1

subsequent remittance. Thus, the foreign income of a non-resident is not taxable even if it is
remitted to India unless it is received or deemed to be received in India.
'Deemed to be recelved'-exp /a/ned: ~' (Sec. 7 and Sec. 8)
'Deemed to be received' means that the income l'ias not been actually received, but it is deemed
to be received under the Income Tax Act. Its instance's ·are :
(i) The annual accretion to the account of any employee participating in a recognised
provident fund is not actually received by the employee but it is deemed to be received during
the previous year by him under the law.
(ii) Taxable portion of transferred balance of unrecognised provident fund is deemed to be
received during the previous year.
(iii) Dividend is deemed to be received in the year in which it is declared but the interim
dividend is deemed to be the income of that previous year in which it is w1conditionally made
available to the shareholder.
(iv) Tax deducted at source.
 ~=~---------~--='--
_ _ _ _ _ __ __ __ __
~
__ _ INCOM~TAX __
loy ed by the Ce:itra l Go
(v) Where an ind ivi dua l has bee n ern has con trib ute d 11.l t ,e
-ve
rt1"f J'.r/1J
· r,e ntr 1n or 0H.1~, J l // / ,';
h
1
·

tlf.l~ Yt:;'f:1,r ~ ",

vJ t,,r~-;.,
'-' ,~..,,.,,
,,, J; J;/i ~J
or any oth er employer an . d the em plo yer r
· t' 011 is deem.cu
: ,1 to be tbe i 1v;1 1m <; l'~: Jt,·1~ ; •
the employee und er a pens10 her ne suc h con trib ui
n sc '
the previous year.
'Accrue or Ari se '-e xp lai ne d: •pt
· . th •n,..l'\"1'Yl e as against recc-1 of inc or,ie ,
Accrue or ari se me ans ng ht t 0 rec eiv e e i l,VJ. J.•
, '~ -- , ,
r✓!//, ,;
· •
'De em ed to Ac cru e or Arise -e pla ine d·
x . ,.,,.~ U y niJ t @f.:£~n x -f'J ";1
Th e wo rds 'de em ed to acc rue or rise ' me an t h a t the incor.o
1...,.
e ud-5 CM/ 'l. • A- l ' .
a , _ ti.,. . In.c -
• ·n India un~1.1. J.w " o1":fle 1.az .t-;1;,i.,, A/
"f"
,'1,,:,~
ari sen in Ind ia bu t it is dee me d
• ( to acc drue ord ato ns: c~e or ari se in Ind ia : •
section 9 1 ), t h e fio11ow·mg inc om es are eem e l , - ..¥.: . ,,,...,--'
. . d' , df;ru>t- ~ or 1,,,uuri..;.,:;,,., l'I
or an se in 1n ia, ,.'fit ac cru eso ran ses 7
( 1) Inc om e is dee me d to acc rue
· rqe,r: ~Jr ( ,
r,.i ./ ,,., • 1/ , ,
(i) thr ou gh or from any bus ine ss
con ne~ ion in India; or
(ii) thr ou gh or from any pro per ty
in Ind ia; or . Ind ia; or
(iii) thr oug h or from any ass et or
_source of~ co me _m Ind ia-
~
(iv) thr oug h the tra nsf er of a cap
·Ex pla nat ion : If all the ope ra~ ons
ita l ~s et S1tuate
~fa bu sm ess are no hc
:U
'ed ou t in Ind ia its .in cr ~ u. z
m Ind ia sha ll be on ly SUC P a~ of the moome ~ is r€:a..YJE8J.,.::,
wil l be dee me d to acc rue or ari se
att rib uta ble to the ope rat ion s car
·
rie d ou~ in Ind ia: .
(2) Sal .ar y ear ned in Ind ia [Se c. 9f lli i_
an d rec eiv ed ou t~ ~ Ind ia.
(3) Sal .ar y pay abl e by the gov . . outKide In dia.
ern me nt to a cit ize n of In dia for ser me e
K'.'r ....-; nf"1
~ -- .7J>~ n~1
r-
(4) Div ide nd pa id by an Ind
ian Co mp an y ou tsi de Ind ia.
(5) Inc om e by wa y of int ere
st . Int ere st pay abl e by the Ind l)f~ : ~Sec. 9f
acc rue or ari se in Ind ia, wh eth er ian Go ve rnm en t IB ~ Ml
it is pai d on deb ts inc urr ed or on
out sid e Ind ia.
Int ere st pay abl e by a per son wh o ·
mone ys bo rro w~ m I:n?3~ t>:
{Se,c_ 911 , '""·-
of any deb t inc urr ed, or mo ney s bor is res ide nt in Ind ia or by a no n-r esi de nt pe rso n i n ~
row ed an d use d, for the pu rpo ses
car rie d on by suc h per son in Ind of a business or p.ro 1'~ -::.c=
ia is dee me d to acc rue or ari se iD
res pec t of any mo ney s bor row ed Ind ia Bu t if it is pa ya ble .in
or deb t inc urr ed for the pu rpo ses
car rie d on by suc h per son out sid of a bu sin ess or pn r~ ~~
e Ind ia or for -th e pu rpo ses of ma
from any sou rce out sid e Ind ia, it kin g or ea rni ng an y mcm:ru?
wil l no t be dee me d to acc rne or
(6) Inc om e by wa y of roy alt y. Inc ari se in Ind ia
om e fro m roy alt y sha ll be de em
Ind ia, ifi t is pay abl e by the Ind ian ed to ac cru e o-r ari se in
Go ver nm ent .
. Income fro m r~y alt y pay abl e by {& -_ 91:·l Mri. ~
m r~s pec t of any ~g ht, pr~ per ty or ~ per son ~h o-i s res ide nt in Ind ia or by a no n-r eside nt J)E['SOi!}
bus ine ss or pro fes sio n ear ne d on inf orm ati ~n ~e d. o:
ser vic es uti lis ed for the ~
fr
.omht any sou rce in. I d. · d by
d
suc h per son m Ind ia or for ma kin g or P~. .-ni na - - of a
infin ia, 1s . eem e to acc rue or ari ~~ an v Il1: CO mr
rig , ~roperty_ or orm ati on use d or ser vic es utise in Ind ia. If it is pa ya ble
lis in re:~, of anw
ed fro m
son ou tsi dei lnd ia or for the puthe
pro fes sio n ear ne d on by suc h per ~ ,.. of - _ ·
income fro m any sou rce out sid e rp os ep ~ a bu s,~ t~ err
Ind ia, it wil l'n ot be dee me d to a
( 7) Inc
om e by wa y of fee s for tec hn ica• s O ma _ D? or ~ an y
be dee me d to acc rue or ari se in Ind l ser vic es. Inc om e fro m ccrfi uefi or ari se m Ind ia
ia, if it is pay abl e by the ln d . - ~
Inc om e by ~a y of fee~ for ~c hn ic~ i~or tec hn ica l sem .ce s ~
by a per son who 1s no n-r esi den t m ser vic es pay abl e b a . .
Ind ia in res pe cto fse rvi y ~ 1: ~n ve ~~ t.. ~ - 91 1 i-l_UJ -
car rie d on by suc h per son in Ind
ia or for the pu rpo ses [e s ~
~h o is res ident m Tum a ar
any ~ource_ i~ In~ ia, shal_l be dee
ser vic es uti lis ed m a bu sin ess or
pur pos e of ma kin g or ear nin g any
me d to acc rue or
pro fes sio n car rie d b
aris: inn;:
ed m a bu sin ess or pro fe,- --ciro2
~g o r - ~ any inc om e ~
dia . If it is pa ya ble in res pe n of
inc om e fro m an y on Y suc h _pe
to acc rue . or ari se in Ind ia. rson ou tsi de Ind ia
sou rce 0 uts ide Ind ia, it will no t or for th:r
Th e mc om e fro m following sha ll
no t be dee me d to
be deemro
• MereIy pu rch ase of goo els m . In .
dia for exp ort . acc rue or ari se . Ind i
m a for no n-r esi ~:.: .
 EXEMPTIONS FROM TAX 73

SlJMMARy
_Fully Exemp ted Income s at a Glance
(Exclu ding exemp ted income s in relatio n to salarie s)
I terns WIw is .
. entit. led to relief 11.r
1VOtes . .
ICon d itzons
(a) For All Assesse es [not covered under (b) or (c)]:
1. Agricult ural Income. All Assessees. If the taxable income is more than the
minimum taxable limit and the agricul-
tural income is more than f 5,000,
agricultu ral income shall be included for
determin ing the amount of tax payable
on the taxable income.
2. Share of income from Hindu Undivided An individual who is
Family. member of the Hindu Un-
divided Family.
3. Share of income of a partner from his Partners . Share of income shall be compute d by
firm. dividing the taxable profits of the firm in
the agreed ratio of profits.
4. Paymen t under Bhopal Gas Leak Dis- An individual. Provided any deduction has not already
aster Act. been allowed in this connection.
5. Compen sation on disaster. Individual.
6. Life Insuranc e Policy Money. All assessees.
7. Paymen t from Sukanya Samridd hi Individu al
Account
8. Paymen t from Nationa l Pension System Individu al
Trust
9. Partial withdra wal from Nationa l Pen- Individu al
sion System Trust
10. Interest income u/s 10(15).
11. Educatio nal Scholars hips. An individual. Scholars hip should be for meeting educa-
tional expenses.
12. Allowan ces to M.Ps., M.L.As. :
(a) Daily Allowan ces Member s of Parliam ent
or Legislat ure.
(b) Other Allowan ces Member s ofParliame nt.
(c) Constitu ency Allowan ce Member s of Legislatu re.

13. Awards made by the Governm ent All assessee s.

in public interest .
14. Pension of gallantr y awardee Individu al
Widow or heirs of a Member of armed forces died in the
15. Family pension
member of armed forces course of operatio nal duties.
An individual. Ifany part of the palace is let out, its annual
16. Annual Value of one palace of Rulers value will not be exempt.
of Indian States.
An individu al. Provided that : (i) he resides in Tribal
17. Income of Schedul ed Tribes. area or Nagalan d, Manipur, Tripura,
Arunach al Pradesh or Mizoram or Silt-
kim or Laddakh region of J & K, (ii) the
income arises from any source in tribal
area or places stated above or by way of
dividend or interest on securities.
An individu al.
18. Income of Sikkime se
19. Income of Agricul tural Produce Market
Commit tee
All assessee s who are The company will have to submit the
20. Subsidy from 'Tua Board for replanta tion growing and manufac - certifica te received from the Tea Board
or replacem ent of tea bushes . or . for regardin g the amount of subsidy along
turing tea.
rejuvena tion of area under tea cultivati on. with its Return of Income.
 - - -- - - - - - - - - - INCOM1_1:E~
_ T=A~X~--=----=-----_-_-_- _
-_-_-_-_
- _-_-_- ~--=--_-_-_-_-~=~~~--_
7~4=====:__-----:-----:;-;---,:
~---------==== : -=-:;= :-r;:::~ ~;;=-AAll
Su_bsidyrece.ived by planters, for replro1ta-
n~ ees who nre
growing nnd man ufoc-
- Do--
21. tion or replacement of rubber, coffee, car- turing rubber, coffee,
damom. etc., or for rejuvenation_o_f area cardamom iu Indio.
under cultivation of such commodities. ~empt upto the a.ctunJ amount so_in-
22. Income of his minor child included in the Individual sssessee. cluded or 'f 1,500 in :respect of each mmor
income of the ass-essee. chHd .

23. Income from units of Unit Scheme, 1964.

24. Dividend from domestic company.
25. Income ofa shareholder on acrou n t of bny
back of shares
26. Income from units.
27. Income from transfer of eligible equity
shares.
Consideration received after 31.3.2004.
28. Income from transfer of agricultural Individual or HUF.
land.
29. Tax incentive for development of capital Individual or HUF.
,o f Andhra Pradesh
30. LTCG from transfer of shares or units of All assessees. Securities transaction ta~ paid on such
equity orient.eel fund or unit of a business transactions.
trust.
31. Income from int.emational sporting event. Event held in India.
32. Income of subsidiary company. Grant etc. received from Indian holding
company.
33. Specified income of a Body or Authority
34. Loan received under reverse mortgage Individual
35. Allowance or perquisit.e received by the
Chairman or Member of the UPSC
36. Income from newly established unit in Unit Exempt for fifteen consecutiv-e. years.
Special Economic Zone
(b} For employee-See chapter on Salaries.

(e} For Institutions :

1. Certain incomes of Local Authority. Local Authority. Income from House Property, Capital
Gains, Other Sources, income from supp-
ly of certain articles or services.
2. Income of Research Association. Scientific Research, Provided that (i) the Association used its
Research in Social entire income for the objects of the As-
Science, sociation; (ii) The Association invests its
Statistical Research. funds _only in investments described u/s
11(5) with certain exceptions.

3. Income of News Agency. News Agency. Provided that : (i) it applies its income
solely for collectiQll or distribution of
news; (ii) it does not distribute its income
to its members.
4. Income of Professional Institutes. Any institution having Provided that, it applies the whole of its
its object the control, su- income 01· accumulates it for application,
pervision, regulation or solely for its objects,
encouragement of the
profession of law,
· medicine, accountancy,
engineering or architec-
ture, etc.
5. Income of Regimental Fund or Non- Regimental Fund or
Public Fund established by the armed Non-Public Fund.
forces for the welfare of their past and
present members on their pependents.
 r,

6. lncom_c of a F und for w,?lf.0 ro r,f ;mpl fi)'f,t:R J?1rnd,

or thei r dcpend.an.1:43 .
7. In com e of Pension F und R4sirlJp by T,J ,C, P,msl,m, Fun1J nf I ,LC,
of India.
8. lncom.e ofKhad.i. a nd Villa.go lndu1'trl~H. P11b1fo rvhJJ,rlt,,,dJm t,rnlft
or reg1Hter~I ,w,~f.P,f,f
whlcli I-A 11,w;•w,A in th~
,1cvolnpm,mt nf.Kha,dt &.
VII 11,,gfl Ind JJ.8trl~.
9. Income of Khadi an d Village InduJftr.f.es Statut..ory Khadi ,wd
Board est:ablish,ed under a State Act. Vff!Jl.ge l n.du-Hf;.rfeH
Board.
10. Inco~: of 8 • statutory autho rity for the Stat ut;ory Bndy or
admrmstra tion of public religio\18 or Authority.
charitable trust.
11. Income of European Economic Com- In.oorn.e frora int.er~1 d i v ~ or eapi,-
munity. tal gaim from i r i v ~ -~ aut rA
it3 f'u:ndg,
12. Income of SAARC. SAARC
13. Income of Insurance Regulatory and
Developme nt Authority.
14. Income of the Central Electricity
Regulat.ory Commission.
15. Income of Prasar Bharati (Broadcast ing
Corporatio n of India)

16. Income of Specified Charitable Funds. Concerned Responsible Spedfied funds are : CiJ Following funds
Authority. ofthe Prime Minister: (a ) NationalB elief
Fund, (b) Fund for Promotion ofFolk.Art,
{c) Aid to Students Fund, (d)Natio:na l
Foundation for Corornuna) Hat:mony,
(ii) Fund established for charitable pur"-
pose and Specified Funds are : (a ) Fund
notified by the Central Govt..; (b) Public
Religious and/or Charitable Trust
notified by the Central Gffi'ernmen t.
Educationa l Institution. Its object should not be to earn profit.
Hospital. I ts object should not be to earn profit.
Mutual Fund estab- Should be notified by the Central Govern-
17. Income of Mutual Fund.
lished by any public sec-- ment.
tor bank, public financial
institutiont or authorised
by the Securities and
Exchange Board oflndia
or the RBI.

18. Income of securitisat ion trust Contributio n by Recognised Stock Ex-

19. Income of Investor Pro~on Fund from changes.
recognised stock exchanges . Contributio n by Commodit y Rxcbanges .
20. Income of Investor Protection Fu nd from
commodity exchanges .
21. Contribution received from a depository Venture Capital Fund or Income from investment in a venture
22. Income ofventure capital fund or venture Company. capital undertaking.
capital company Real Estat.e Investment Interest income from a special p ~ e
23. Income of Business Trust Trust and Infrastruc- vehicle.
ture Investment Trust
76 INCOME TAX
24. Income of Registe red Trade Unions and Registe red 'l'rade
Associa tion of Trade Unions from House Unions and Associa tion
Propert y and Other Sources . of Trade Unions .
25 . Income from interes t on securiti es and Trusts of funds for
profit on sale of securiti es held by the retirem ent benefit s.
trustee s of provide nt funds, approv ed
supera nnuatio n fund, gratuit y fund, etc.
26. Income of Employ ees' State Insuran ce ESI Co.
Fund
27 . Income ·o f body for promot ing interes t of Statuto ry Corpor ation or
Schedu led Castes/ Schedu led Tribes. any other body or in-
stitutio n wholly finance d
by the governm ent.
28. Income of Corpor ation for benefit of Corpor ation.
Minori ty Commu nity.
29_ Income of a Corpora tion.
30. Income 1of Co-ope rative Society formed Co-ope rative Society. Membe rs of the Society should be only
for promot ing interes t of Schedu led other Co-ope rative Societi es formed for
Castes/ Schedu led Tribes. similar purpos e and the Society should be
finance d by the govern ment.
31. Income of Certain Boards .
32. Income receive d from a securit isation
trust
33. Income of New Pension System Trust
34. Income of a body or authori ty or Board or
Trust or Commi ssion
35. Income of Infrast ructure Debt Fund
36. Income receive d in India in Indian cur-
rency by a foreign Compa ny
37. Income of foreign compan y from storage
of crude oil in India
38. Income of foreign compan y from sale of
left over s~k of crude oil.
39. Income of a Politica l Party from House Politica l Party.
Propert y, Capital Gains, Other Sources
and Volunt ary Contrib utions.
40. Income of Elector al Trust.