Page 26 - DCOM301_INCOME_TAX_LAWS_I

Unit 1: Income Tax: Basic Framework

(5) India [Section 2(25A)]: The term ‘India’ means: Notes
(a) the territory of India as per article 1 of the Constitution,
(b) its territorial waters, seabed and subsoil underlying such waters,
(c) continental shelf,

(d) exclusive economic zone or
(e) any other specified maritime zone and the air space above its territory and territorial
waters.

Specified maritime zone means the maritime zone as referred to in the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and the Maritime Zones Act, 1976.
(6) Assessment Year: The term ‘Assessment Year’ has been defined under section 2(9). This
means a period of 12 months commencing on 1st April every year. The year in which tax
is paid is called the assessment year while the year in respect of the income of which the
tax is levied is called the previous year. Income of previous year of an assessee is taxed
during the next following assessment year at the rates prescribed by the relevant Finance
Act.

Example: For the assessment year 2013–14, the relevant previous year is 2012–13 (1.4.2012
to 31.3.2013).

(7) Previous Year [Section 3]: It means the financial year immediately preceding the assessment
year. The income earned during the previous year is taxed in the assessment year.
Business or profession newly set up during the financial year – In such a case, the previous
year shall be the period beginning on the date of setting up of the business or profession
and ending with 31st March of the said financial year. If a source of income comes into
existence in the said financial year, then the previous year will commence from the date
st
on which the source of income newly comes into existence and will end with 31 March of
the financial year.

Example: For the assessment year 2011–12, the immediately preceding financial year
(i.e., 2010–11) is the previous year. Income earned by an individual during the previous year
2010–11 is taxable in the immediately following assessment year 2011–12 at the rates applicable
for the assessment year 2011–12. Similarly, income earned during the previous year 2011–12 by
a company will be taxable in the assessment year 2012–13 at the rates applicable for the assessment
year 2012–13.

Task A chartered accountant sets up his practice on 1st July, 2012. Determine the previous
year for the assessment year 2013–14.

(8) Gross Total Income: ‘Gross Total Income’ may be defined as the aggregate of income
computed in accordance with the provisions of this act before making any deduction
under Chapter-VI A of Income Tax Act, 1961.

(9) Total Income: Any assessee has to pay income tax on different types of income derived on
the basis of residential status. As per section 45 of Income Tax Act, 1961 ‘Total Income’
means, Income shown in Section 5 of Income Tax Act, 1961:

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