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General:

As stated earlier the Income Tax Act 1922 was

repealed with effect from 01-04-1962 and a New Act

called INCOME TAX ACT 1961 was introducedfrom the Assessment Year 1962-63. Since the

introduction, the New Act has undergone

innumerable changes by way of Amendments,

Substitutions, deletions and insertions of various

provisions. Hence to keep track of the frequentchanges and the years from which these have

become operative is to be kept in mind.

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Assessment:

The Income Tax Act is machinery for computing the

Total Income of the previous year from various

sources as classified in Section 14 of the Act.Such Computation or Assessment is made after

allowing various exclusions, exemptions and

deductions as provided under the Act. However the

IT Act does not prescribe the rate at which Tax has

to be charged. Section 4 of the IT Act lays downthat IT shall be charged for any Assessment Year in

respect of the Total Income of the previous year

computed under the Act at the rates prescribed by

the Finance Act which is passed every year by the

Parliament.

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Thus while the Total Income is computed under the

IT Act which is permanent enactment, the Tax

payable on such income has to be worked out at the

rates laid down in finance Act, which is an annual

enactment.

Thus the Assessment comprises two stages.

Computation of Total Income and

Determination of Tax Payable.

When both these stages are completed an assessmentis said to have been made.

The Finance Bill is usually passed by the Parliament

and receives the assent of the President, long after

1stApril.

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Then a question arises as to what would be the

effective rates at which Tax has to be charged during

the pendency of the bill.

The Answer to this question is provided in section

294 of the Act, According to which the effective rates

would be the rates in force in the preceding year or

the rates proposed in the finance bill, whichever ismore favorable to the Assessee.

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Assessment Year:

The Assessment year comprises a period of 12

months commencing from 1stApril and ending on 31st

March.

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Previous Year:

There will be only one previous year for all theAssessee i.e., ending on 31stof March for all sources

of Income.

Ex: For the Assessment Year 2014-15 the previous

year would be from 1stApril 2013 to 31stMarch 2014.

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The Next Question arises as to whether full 12

months have to be completed for determining

Assessment Year.

In other words, if the Assessee starts his Business on

01-08-2013 the previous year for the Assessment

Year 2014-15 would be 01-08-2013 to 31-03-2014.

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Assessee:

The Assessee is a person by whom any tax or other

sum such as Interest, Penalty etc is payable under

the Act. It also includes any person deemed to be

an Assessee.

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U/s 2(31) of the Act, persons are divided into

following categories:

1. Individual.

2. HUF (Hindu Undivided Family).3. Company.

4. Firm.

5. AOP (Association of persons)/ BOI (Body of

Individuals).

6. Local Authority

7. Every Artificial Juridical Person not falling in any

of the preceding categories.

and

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Company:

Company is defined in Sec 2(17) of the IT Act (suchas any Indian Company).

Firm:

A Partnership of Two or more persons (But not

exceeding 20 persons) carrying on a business orprofession constituted under the Indian

Partnership Act 1932.

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AOP/BOI:

AOP or BOI i.e., combination of persons formed for

promotion of a Joint Venture or a Joint Enterprises,Executors of an Estate, Trustees of a Trust.

Local Authority:

Ex: Municipality local boards etc.

Artificial Juridical Person:

Ex: Lord Venkateshwara a Hindu Deity.

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Status: (Section 6)

The Income liable to Tax in the hands of an

Assessee is determined on the basis of Residential

Status.For this purpose the Assessee are divided into two

categories:

Resident in India.

Non Resident to India.

Individuals and Hindu Undivided Families who areresidents in India are again classified as

Ordinary Resident.

Not Ordinary Resident.

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Ordinary Resident:

An Individual would be treated as Resident in India

if he fulfils any of the following two conditions

1) He is in India for a Period of 182 days or more.

2) Having within 4 years preceding that year been

in India for Period/s amounting in all 365 daysor more and has been in India for 60 days or

more in that year.

OR

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Note:

The Residential status of an Individual who is

rendering service outside India and who visits India

during leave or vacation in any previous year or anIndividual who is outside India in any previous year

will be determined as under.

An Indian citizen who leaves India in any previous

year for the purposes of employment outside India

or a crew member of an Indian Ship would betreated as Resident in India if the period of stay in

India in that year Amounts to 182 days or more

(Instead of 60 days as stated above).

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A. An Indian citizen who leaves India in any

previous year for the purposes of employment

outside India or a crew member of an Indian

Ship would be treated as Resident in India if theperiod of stay in India in that year Amounts to

182 days or more (Instead of 60 days as stated

above).

Conversely if the period of his stay in India isless than 182 days he will be treated as Non-

Resident for that year and consequently his

foreign income would not attract Tax Liability.

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B. An Indian citizen or a person of Indian origin

who resides outside India and who comes on a

visit to India in any previous year will be treated

as Resident in India. If his stay in India in thatyear amounts to 182 days or more ( Instead of

60 days as stated above).

Conversely he will be treated as Non Resident

if the period of his stay in India in that year isless than 182days

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Who is an Indian origin?

A person shall be deemed to be of Indian Origin if

he, or his Parents or if any of his Grand Parents

was born in un-divided India.

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In respect of HUF/Firm/Other Association of

persons it is said to be resident in India exceptwhere during that year the control and

management of its affairs is situated wholly outside

India (Section 6(2)).

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A company is said to be a resident in India in any

previous year if it satisfies any of the following two

conditions

1. It is an Indian Company.

2. During that year the control and management of

its affairs is situated wholly in India

(Section 6(3)).

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