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Income Tax Laws – I

Notes Salary Income
Income from House property
Income from Business and Profession
Capital gains and

Income from other sources.
These five are also called as ‘Heads of Income’. The Income is determined under different
sections. But some of the Incomes which are exempted are not included in Total Income.

Self Assessment

State whether the following statements are true or false:

16. ‘Assessee’ means a person by whom any tax or any other sources of money is payable
under the Income Tax Act.
17. The definition of ‘assessee’ leads us to the definition of ‘person’.

18. Under the Income-tax Act, a Hindu Undivided Family (HUF) is not treated as a separate
entity for the purpose of assessment.
19. For all purposes of the Act the term ‘Company’, has a much wider connotation than that
under the Companies Act.
20. AOP denotes the status of persons like executors or trustees who merely receive the
income jointly and who may be assessable in like manner and to the same extent as the
beneficiaries individually.

1.5 Income Tax Systems in India

The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT)
and is part of the Department of Revenue under the Ministry of Finance.
The government of India imposes an income tax on taxable income of individuals, Hindu
Undivided Families (HUFs), companies, firms, co-operative societies and trusts (Identified as
body of Individuals and Association of Persons) and any other artificial person. Levy of tax is
separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961.

1. Charge to Income-tax: Income tax is a tax payable, at the rate enacted by the Union Budget
(Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year
by every Person. The chargeability is based on the nature of income, i.e., whether it is
revenue or capital.
Section 4 of the Income-tax Act, 1961 is the charging section which provides that:
(a) Tax shall be charged at the rates prescribed for the year by the annual Finance Act.
(b) The charge is on every person specified under section 2(31).

(c) Tax is chargeable on the total income earned during the previous year and not the
assessment year. (There are certain exceptions provided by sections 172, 174, 174A,
175 and 176).
(d) Tax shall be levied in accordance with and subject to the various provisions contained
in the Act.

This section is the back bone of the law of income-tax in so far as it serves as the most
operative provision of the Act. The tax liability of a person springs from this section.

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