V Income tax act 1961 came into force on the first day

of April 1962 ie from AY 1962-63 onwards. It

extends to whole of INDIA.

V It comprise of 298 Sections and XIV Schedules.

V In addition to the act by virtue of sec 295 the

CBDT has the power to frame rules .
V Previous Year a eans financial year or year in which income
is earned

V ÷ssessment Yeara eans year in which income earned in a

financial year is assessed to income tax

V ÷ssesseea eans a person whose income is assessed to

income tax and a person by whom any tax or any money is
payable under INCO
TAX ACT. The term shall also
include any person who is a defaulter under this Act. It
includes any person on whom any proceeding has been
initiated for assessment of income or loss or to whom any
refund is due.
V Person Sec 2(31) eans and includes
V a) individual
V b)huf
V c)company
V d)firm
V e)aop/boi
V f)local authority
V g)any artificial judicial person not falling under
any of the above class
V Tax planning may be defined as an arrangement of
oneǯs financial affairs in such a way that without
violating in any way the legal provisions of an Act, full
advantage is taken of all exemptions, deductions,
rebates and reliefs permitted under the Act, so that the
burden of the taxation on an assessee, as far as possible
, the least.
V r
pl nning reduces the t
li ility of oth the
employees nd employers without viol ting ny leg l
provisions.

V r
pl nning includes ll fin nci l rr ngements

which llow t
p yer to reduce to the minimum his
t
li ility without viol ting ny leg l provision nd
without resorting to ny colour le device.

V Any t
pl nning rr ngement which involves ny

overt to covert intention of defe ting the spirit
ehind the leg l fr mework will mount of colour le
device.
V Tax planning is legitimate only to the extent that it is
within the framework of law and conforms to the spirit
behind the legal framework.

V Any tax planning done with the intention to defraud

the revenue will amount to tax evasion even if all
transactions entered into by the assessee taken
individually could be legally correct.
V Tax planning
V Scientific and lawful practice of reducing tax
obligation

V It is a legal right and not a statutory obligation

V Helps in economic development

V It is done in the view of the future benefit arising out

of present actions

V
xemptions, deductions are claimed

V Jeduction in tax liability

V inimisation of litigation

V Productive investment

V Jeduction in cost

V Healthy growth of economy

V
mployment generation(Jefer page no.937-938-

income tax-mehrotra)
V Jefer page no. 942-950 -income tax-mehrotra & goyal
V
xpenses incurred as remuneration to staff
V Certain expenses are fully deductible, certain within
specified limit and certain are not deductible at all.
V 1. expenses relating to buildings owned by employer
V 2. expenses relating to buildings taken on rent.
V 3. expenses relating to machinery, plant and furniture
V 4. depreciation on buildings, plant, machinery and
furniture
V 5. insurance premium on the health of employees.
6. bonus/commission
7. Interest on loans
8. Contribution towards approved funds
9.
xpenses on family planning
10. expenses on entertainment
11. expenses on holiday homes and guest house
12.Any other expense.
V Heads of income

V Salaries
V Income from house property
V Income from business or profession
V Income from capital gains
V Income from other sources
V Total of above heads of income is called è

T
T÷ INC

V rom this gross total income we are entitled to
deduction under chapter VI A
V Jesulting balance is called N
T INCO
.
V Scope of income Ȃ sec 5
V TAXABILITY O INCO

V a) for resident and ordinary resident global income shall be
taxable in INDIA.
V b)income received or deemed to be received in INDIA is
taxable for all irrespective of residential status.

V c)income accruing or arising or deemed to accrue or arise in

INDIA is taxable for all.
V d)income accruing or arising outside INDIA from business
controlled in INDIA or profession set up in INDIA is NOT
TAXABL
for NON J
SID
NTS.

V e) Income Accruing Or Arising Outside INDIA rom Sources

Other Than In (D) Above Will Be TAXABL
Only or
J
SID
NT AND OJDINAJY J
SID
NTS.
V (Classification Of Jesidents Into Jesident And Ordinary
Jesident And Jesident But Not Ordinary Jesident Is
Applicable Only or Individuals And Huf. or Other Classes
Of Assessees Only Two Jesidential Status; Jesident And Non
Jesident )
V Jates of income tax is as under
V ) In case of individuals & huf
V  pto Js 160000 =nil
V 160001 Ȃ300000 = 10% of excess over 160000
V 300001- 500000= 20% of excess over 300000 +
14000
V above 500000= 30% of excess over 500000 +
54000

V ) In case of resident woman assessee below

65years of age
V upto 190000 =nil
V above 190000 Ȃ300000 =10% of excess over 190000
V above 300000- 500000 =20% of excess over 300000
+ 11000
V above 500000 = 30% of excess over 500000 + 51000
V c) IN CAS
O J
SID
NT S
NIOJ CITIZ
NS
V  pto 240000 =nil
V Above 240000 Ȃ 300000 =10% of excess over 240000
V Above 300000 Ȃ 500000 =20% of excess over 300000 +6000
V Above 500000 = 30% of excess over 500000 + 46000
V urther education cess of 2% and 1% higher education cess
is charged on total tax liability

V d) In the case of firms and domestic companies tax rate is

30% flat. Surcharge of 10% is applicable if taxable income of
companies exceeds Js100 Lacs. Also 3% education cess. But
in the case of foreign companies the rate of tax is 40%
+surcharge @ 2.5%+ edu cess @ 3%.