Meaning of Income tax and Levy of Income Tax

 (Sunil Patil)

Meaning of Income tax and Levy of Income Tax

Income tax is a tax on incorge Every person with an income in excess of a prescribed limit has to pay a tax Such tax charged on excess income is called Income tax Income tax is a direct tax It is contained in the income tax Act 1961 However every year the parliament passes a finance bill which can make amendments to Income tax Act. The rates of income tax for the year are specified in the finance bill (called the budget)

For levy of income tax all the taxable income of a person should be determined as per the provisions of the Act and Rules. The income arising from any of the following heads is chargeable to tax

() Income from Salary

ii) Income from House Property

i) Profits and Gains of Business or Profession.

iv) Capital Gains

v) Income from Other Sources

The income of a person should be computed under each head separately. The total of such net amount from each head of income is called the "Gross total Income There are other permissible deductions under the Act which are to be deducted from the gross total income. The balance is called the taxable income or "Total Income". The incomes which are exempt from tax are not included in the above income

Definitions under Income Tax Act

1.

Agricultural Income

There are three basic conditions to be fulfilled so that the income can be called agricultural income

a) The income should be related land

b) The land should be situated in India If the land is situated outside India the Income derived from such land is not agriculture income.

c) The land should be used for agricultural purposes. There should have been

some agricultural operations performed on that land.

Following incomes are treated as agricultural income

a) Any rent or revenue derived, Rent is a receipt in cash or yield or income from land b) Income by way of sale of agricultural produce, performance of any process,

which makes the produce fit for market

c) House property income of a building situated on or in immediate vicinity of the land (Such income from building will not be treated as agricultural income if the land or building is let out for residential purpose or for the purpose of a business or profession.)

The following are not considered as agricultural Income. a) Income from market, ferries and fisheries

b) Income from stone quarries

c) Income from mining royalties

d) Income arising from supply of water for irrigation purpose

Income from Dairy farming or poultry

Income from sale of earth or brick making g) Income from sale of wood of spontaneous forests

h) Remuneration received from a company engaged in agriculture

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If the land is located outside India, any income derived from such land

Agricultural income is exempt from income tax u's 10 (1). However it the agricultural income exceeds Rs. 5,000, it is taken into account for determining the rates of income x on other non agricultural income of an assessee