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Income Tax Laws – I

Notes Company: A voluntary association formed and organized to carry on a business.
Direct Tax: A tax that is paid directly by an individual or organization to the imposing entity.
Dividend: Dividends are payments made by a corporation to its shareholder members. It is the
portion of corporate profits paid out to stockholders.
Flat Tax: A flat tax (short for flat tax rate) is a tax system with a constant marginal rate, usually
applied to individual or corporate income.

Gross Total Income: It is an individual’s total personal income before taking taxes or deductions
into account.
Income Tax: An income tax is a tax levied on the income of individuals or businesses (corporations
or other legal entities).
Income: Income is the consumption and savings opportunity gained by an entity within a
specified timeframe that is generally expressed in monetary terms.
Indirect Tax: Indirect taxes are those paid by consumers when they buy goods and services.
Progressive Tax: A progressive tax is a tax in which the tax rate increases as the taxable base
amount increases.
Regressive Tax: A regressive tax is a tax imposed in such a manner that the tax rate decreases as
the amount subject to taxation increases.

Surcharge: A surcharge is an extra charge added to the price of something, or a standalone
charge that exists for using something.
Tax Net: It refers to the types of payment that are taxed, which included personal earnings
(wages), capital gains, and business income.

1.8 Review Questions

1. Discuss the historical background of Income-tax. What is its importance?
2. What is net tax?

3. What are the components of Income Tax Law?
4. ‘Every assessee is a person, but every person need not be an assessee’. Critically examine
the statement with reference to the relevant definitions under the provisions of the Income
Tax Act, 1951.
5. “Income tax is a tax on income and not a tax on every item of money received.” Explain
this statement with reference to capital and revenue receipts.
6. Write brief notes on the following:
(a) Assessment Year
(b) Income

(c) Gross Total Income
(d) Previous Year
(e) Assesse

7. “Every financial year is an assessment year”. Comment.
8. “Income of a previous year is chargeable tax in the immediately following assessment
year”. Discuss.

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