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Unit 1: Income Tax: Basic Framework

revamp its taxations norms with significant changes at the regulatory level. The proposed Notes
Direct Tax Code contains key provisions, which will have a major impact on investments
in India. India has improved its rankings in the WB ‘Doing Business’ Report on the number
of regulatory changes taken in the existing year. This shows that the country is set to make
a global footprint by branding itself as a ‘Must Invest’ destination.
The Vodafone tax case has given India the opportunity to create a model for other countries,
which follow source-based taxation principles. It is an opportune time to bask in the glory
of India, which is said to have had one third share of the world market in ancient times, as
pointed out by economist Amartya Sen in his book ‘The Argumentative Indian’.
Questions

1. Study and analyse the case.
2. Write down the case facts.
3. What do you infer from it?
Source: http://www.mindtext.org/view/89/Vodafone_Tax_case_A_Case_Study_for_Investments_
in_India/

1.6 Summary

Every country generates income from ‘Income-Tax’ in the form of direct tax levied by
government. Income-tax plays a vital role in the economy of every country in the world.
Income-tax act was enacted in the year 1961.

Income, in general, means a periodic monetary return which accrues or is expected to
accrue regularly from definite sources.
The “tax net” refers to the types of payment that are taxed, which included personal
earnings (wages), capital gains, and business income. The rates for different types of
income may vary and some may not be taxed at all.
Tax rates may be progressive, regressive, or flat. A progressive tax taxes differentially
based on how much has been earned.
A tax system may use different taxation methods for different types of income.
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.
Income-tax is to be charged at the rates fixed for the year by the annual Finance Act.
Income from agricultural sources will be included in ‘total income’, to determine
tax-liability.
The levy is governed by the Indian Income Tax Act, 1961.

1.7 Keywords

Assessee: He/she is a person by whom any tax or any other sources of money is payable.
Body of Individuals (BOI): It 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.

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