BASIC CONCEPTS- PART 1

 INCOME TAX - BASIC CONCEPTS AND DEFINITIONS 

1	Give the Meaning of Tax
	A tax is a compulsory financial charge levied by a government on an individual, organization, or transaction. The revenue collected is used to fund public expenditures like infrastructure (roads, bridges), healthcare, defense, and education. It is not a voluntary payment or donation; it is a mandatory contribution.
2.	What are the different Types of Tax?
	Taxes are broadly classified based on what is being taxed. The main types include: ·         Income Tax: Tax on personal or corporate income/profits. ·         Goods and Services Tax (GST): Tax on the supply of goods and services. ·         Customs Duty: Tax on goods imported into or exported from the country. ·         Property Tax: Tax on real estate (land and buildings). Stamp Duty: Tax on legal documents and property transactions
3.	Direct and Indirect Tax
	This is the most fundamental classification, based on who bears the final burden of the tax. ·         Direct Tax: o    Levied directly on a person's or company's income or wealth. o    The burden cannot be shifted to someone else. The person who pays the tax is the one who bears its economic burden. o    Examples: Income Tax, Corporate Tax. ·         Indirect Tax: o    Levied on goods and services, not on a person. o    The burden can be shifted. The manufacturer or service provider pays the tax to the government but recovers it from the final consumer by including it in the price. o    Examples: Goods and Services Tax (GST), Customs Duty, Excise Duty.
4.	Define “Person as per Income Tax Act 1961.
	An Individual- A Hindu Undivided Family (HUF) A Company- Reliance Ltd. A Firm An Association of Persons (AOP) or a Body of Individuals (BOI) A Local Authority An Artificial Juridical Person
5.	What is Previous year?
	The year in which inome was eaning. Current previous year is 2024-25.It may have 12 months or may not have 12 months
6	Explain the circumstances under which a Previous Year may consist of a period of less than 12 months.
	1. In the Case of a Newly Set-up Business or Profession If a new business or profession is set up at any time during a financial year, its first Previous Year will commence on the date the business/profession is set up and will end on March 31st of that financial year. 2. In the Case of a New Source of Income Similarly, if a new source of income (other than business or profession) comes into existence during a financial year, the first Previous Year for that specific source will start on the date the income source is created and will end on March 31st of that financial year.
7	Who is an assesse?
	An assessee is any person who is liable to pay tax or any other sum of money (like a penalty or interest) under the Income Tax Act. However, the legal definition is much broader and includes the following four categories of persons: A Person Who Pays Tax: A Person Who has Suffered a Loss: A Person Entitled to a Refund: A Person Subject to Any Proceeding
8.	Types of Assessee
	a)      Normal Assessee b)      Representative Assessee c)      Assessee in default
9.	What is the meaning of Income?
	Under the Income Tax Act, 1961, "Income" refers to a monetary or non-monetary receipt that arises from a definite source.
10	Write down key features of Income
	Key Characteristics of Income: Form: It can be received in cash (like salary) or in kind (like a rent-free house). Source: It must come from a definite source (e.g., employment, business, property). Legality: Both legal (e.g., profits) and illegal (e.g., from smuggling) earnings are treated as taxable income. Nature: It can be a regular receipt (like monthly rent) or a one-time, casual receipt (like lottery winnings).