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    Chapter 1 - Basic Concepts

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    Chapter 1 - Basic Concepts

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    Chapter 1_Basic concepts (1)

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    Chapter 1 - Basic Concepts

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    Introduction to Taxation - Basic Concepts Learning ey Objective \ 7 + Understand the terminology associated with taxation. Case Miss Nita, a famous singer from America, came to India for the first time in her life in July 2023. She gave several performances for which she received 5,00,000. She was to board the plane on 3rd August 2023 when a notice was served on her by the I7.0. asking her to pay tax immediately. Her reply was: "My previous year is to end on 31st March 2024, and | am liable to pay tax in the assessment year 2024-25." What is your view? Will Olympics gold medal winner Neeraj Chopra, other medalists have to pay tax on prize money? rf Neeraj Chopra created history by becoming the first-ever Indian to win a gold medal in athletics and itis raining praises and prizes for hie. Discussion TQKYO 2020 Sa Soon? ate WENT BEYOND MEDALS THUS DESERVE #THEGOLDSTANDARD co eet Is it exempted from tax? Answer This! Haryana Government announced prize of Rs. 50 lakhs to the 9 players of Indian women’s hockey team. Is this prize - A.Tax-free B.Taxable INCOME TAX ACT 1961 Types of Taxes 3 *Direct tax Indirect tax Direct tax is progressive in nature, whereas Indirect tax is regressive in nature. f TYPES OF TAXES C DIRECT TAX q Imposed on Persons ¢ Paid directly to \ a J © INDIRECT TAX => ¢ Imposed on Goods and Services J mi G Paid to Govt. via third person Major difference Burden of tax borne by the person himself ei of tax shifted to another person Goods and Services Tax Customs Duty mo] a ro aa 3 rh d= ee ce = Meaning of Direct Tax Tax which is levied on Income earned by a Person during Previous Year at prescribed Tax Slab Rates by the Central Govt. as per 7** Schedule to the Article 246 of the Constitution of India. OLX Autos crosses $1 billion-sales milestone Answer This! © OLX is required to pay taxes on the revenue earned Rs. 7,420 crores. What is the type of tax? A) Direct Tax B) Indirect Tax Basic concepts * Agricultural income [Sec. 2(1A)] * Assessee [Sec. 2(7)]- Ordinary, Representative, Assessee in default * Block of assets [Sec. 2(11)] Case: Chhattisgarh boy received a car worth Rs. 23 lakh and many other rewards for his viral video News Income Tax raids underway at the properties of film director Anurag Kashyap and actor Taapsee Pannu in Mumbai: Income Tax Department 12:50 PM - Mar 3, 2021 @© © 256K OD 11K WB Share this Tweet C ‘Tweet your reply s) MCQ Income Tax Act came into force on A. 01.04.1961 B. 01.04.1962 C. 01.04.1956 D. 01.04.1965 MCQ Income by way of rent of agricultural land is . A. Business income B. Speculative Income C. Agricultural income D. Casual income Cont... Person [Sec. 2(31)] &,- > -- “semas) me) Different - Assessee Individual Partnership Firm ‘AHindu Undivided Family Company ‘An AOP (Association Of Persons) or BO! (Body Of Individuals) ‘ALocal Authority Artificial Juridical Persons Piyush ‘Aakash ‘M/s ABC and Company M/s ABC and associates Mr. A (HUF) or (Mr. B (HUF) Winiin Taxscope Private Ltd. Winiin Taxscope Ltd. ABC Sangh XYZ Dal Pune Municipal Corporation PCMC Municipal Corporation Everyone not falling within any of the above categories. Determine the category of following Persons: * Reliance Industries Limited * Madras University * Calcutta Municipal Corporation * A Partnership Firm with A, B and C partners. * A Brahmin Parivar consisting of Mr. A, his brother B, Mrs. A and B. Determine the status of following Persons: *Kalyani Publishers Ltd. «Reserve Bank of India. *X, a lecturer in Delhi University. *A Village Panchayat * Assessment year [Sec. 2(9)] * Previous year [Sec. 2(34)] ie °e ' e e , 2022-23° *o2,e° Previous year Assessment year Case Mr. Vivek passed his MBA examination in June 2020 and joined his job on 1% July 2022 ona 19 salary of Rs. 20,000 p.m. He resigned from his 2O job on 15 November 2022 and got relieved on = 30' November and started his own business on 15" December 2022 and earned a profit of Rs. 60,000 up to 31 March 2023. Determine 5 2 the previous year and Income of PY, How 7 a5 many months PY is? Capital vs Revenue Expenditure Pee eee Routine Paes Coie as Poon Capital vs Revenue Pe Te ea Expenditure peopel year *Nature of the assets Test to or aalic Nature of liability Pps. *Nature of transaction Capital vs ; *Purpose of transaction Revenue *Purpose of transaction Capital Expenditure 1. Cost of reconstructing, refurnishing, etc. of a business building. 2. Payment made by the assessee with a view to keeping his competitor out of his field of business. 3. Expenditure incurred in converting business premises when switching over from manufacture of one product to another. 4, Expenditure on litigation in connection with acquiring or curing a defect in assessee' s title to the assets of the business 5, Compensation paid for cancellation of contract for the purchase of machinery. 6. Price paid for the purchase of partner's share in the firm. 7. Expenditure incurred on the maintenance of business reputation. Revenue Expenditure iB eayment made for use of quota rights, or for use of patents and trade marks. 2.Payment made for technical assistance and access to the fruits of continuing research [C.I. T. v. Ciba of India Ltd. (1968) 69 1. T.R. 692 (S. C.)]. 3.Expenditure incurred by professionals on study tour abroad to acquire the latest knowledge [Dr. Vadamalayan v. C.I. T. (1960) 40 |. T.R. 50]. 4.Any expenditure necessary at the time of purchase to render the asset so purchased, serviceable, will be added to the initial cost as capital expenditure. But any expenditure on the replacement of part of a plant which does not bring any additional advantage to the business of assessee is revenue expenditure [C.I. T. v. Shri Rama Sugar Mills Ltd. (1952) 91 1. T.R. 191]. Revenue Expenditure cont.. 5. Expenditure incurred to send employees abroad for practical training in the field of the business of the assessee. 6. Expenditure incurred by way of fee paid to valuer for assessing the business premises, 7. Expenditure incurred in raising loans, eg., stamp duty, registration and legal fees, brokerage etc. 8. Expenditure to oppose threatened nationalization of the industry. 9. Expenditure incurred to secure overdraft facilities from a bank. 10. Payment to the government to obtain monopoly to run buses on a route. 11. Compensation or other payment made to get rid of a servant or a managing agent in the interest of the business. 12. Any such expenditure incurred wholly, totally, necessarily for the business. So the difference between Capital expenditure vs Revenue expenditure Supreme Court of India PETITIONER: M/s. SITALPUR SUGAR WORKS LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA Read the case from the web link : https://indiankanoon.org/doc/30601/ Classify the following into capital or revenue expenditure : (a) Overhaul expenses of % 10,000 spent on second hand machinery purchased. (b) Carriage of = 1,000 spent on machinery purchased. (c) Legal fees of 8 5,000 paid to acquire property. (d) = 1,500 paid for servicing the company’s car including % 500 paid for change of oil. (e) % 1,000 paid for replacement of a worn out part of a machine. (f) % 18,000 spent for construction of temporary huts, which were necessary for construction of the cinema house and were demolished when the cinema house was ready. Classify the following into capital or revenue expenditure : (a) 5,000 spent as lawyer’s fee to defend a suit claiming that the firm’s factory site belonged to the plaintiff’s land. (b) = 1,50,000 spent on the repairs and white-washing for the first time on purchase of an old building. (c) 8 15,000 spent in connection with obtaining a licence for starting a factory. (d) = 6,000 paid as compensation to two employees who were retrenched. (e) = 8,000 custom duty paid on import of machinery for modernisation of factory production. State with reasons whether the following are capital or revenue expenditure : (a) Freight and cartage on the new machine 2 150, and erection charges % 500. (b) Fixtures of the book value of % 2,500 sold off at = 1,600 and new fixtures of the value of = 4,000 were acquired, cartage on purchase 35. (c) A sum of = 400 was spent on painting the factory. (d) = 8,200 spent on repairs before using a second hand car purchased recently, to put it in usable condition. Classify the following into capital or revenue or deferred revenue expenditure : (a) Heavy advertising cost of = 10,00,000 spent on the launching of a company’s new product. (b) Advertisement expense = 50,000 incurred during peak festive season on regular basis. (c) 8 2,000 paid for hiring of computer time for the preparation of the accounts of the business. (d) Interest paid = 40,000 on loan taken for construction of building and purchase of plant and machinery before the asset is ready for intended use. Basic concepts Cont... * Heads of Income *Gross Total Income [Sec. 80B(5)] * Total income [Sec. 2(45)] News - Question Tata Consultancy Services CEO and MD Rajesh Gopinathan drew a whopping Rs 20.36 crore pay package in 2020-21, company's annual report has revealed. The annual report (2020-21) highlighted that Gopinathan received Rs 1.27 crore in salary, Rs 2.09 crore in benefits, perquisites and allowances, and Rs 17 crore in commission. What is the amount of his Gross Salary? A) Rs. 20.36 crore B) Rs. 3.36 crore C) Rs. 17 crore D) Rs. 1.27 crore Rates of taxes Assessment Year 2023-24 Slabs Same slab for all age groups. For Individual (resident or non- New Tax Regime u/s 115BAC © resident) less than 60 years of age | ome Tax slab Income Tax Rate anytime during the previous year:| ~ = ==—=——S=C=<“‘“‘;7; ESRSSS”*~

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