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NOTES 6 - Income Tax 601 - BBA-6 Sem

The document discusses income tax and covers topics such as residential status, income sources, deductions, set offs, assessment of individuals, and types of assessments including self-assessment, summary assessment, regular assessment, best judgement assessment, and income escaping assessment.

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231 views9 pages

NOTES 6 - Income Tax 601 - BBA-6 Sem

The document discusses income tax and covers topics such as residential status, income sources, deductions, set offs, assessment of individuals, and types of assessments including self-assessment, summary assessment, regular assessment, best judgement assessment, and income escaping assessment.

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INCOME TAX

PAPER CODE: BBA/GEN/601

UNIT-I
Basic concepts of income tax, residential status and tax incidence, income exempted from
tax.

UNIT-II
Income from salaries, income from house property and income from profits and gains of
business and profession.

UNIT-III
Income from capital gains, income from other sources, set off and carry forward of losses,
clubbing of income, deduction of tax at source.

UNIT-IV
Deductions from gross total income, assessment of individuals.

Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri


Deductions from Gross Total Income

Gross Total Income (GTI) means the aggregate of income computed under each
head as per provisions of the Act. GTI is computed after giving effect to the
provisions for clubbing of incomes and set off of losses, but before making any
deductions under Chapter VIA of the Act. In order to compute ‘Total Income or
Net Total Income’, deductions under Chapter VIA are considered and adjusted
from GTI. The aggregate amount of deductions under Chapter VIA cannot exceed
GTI of the assessee. For the purpose of calculating Income Tax Total Income will
be considered.

Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri


Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri
Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri
Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri
Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri
Assessment of individual’s income
1. Self-Assessment
The assessee himself determines the income tax payable. The tax department has made available
various forms for filing income tax return.
The assessee consolidates his income from various sources and adjusts the same against losses or
deductions or various exemptions if any, available to him during the year. The total income of the
assessee is then arrived at.
The assessee reduces the TDS and Advance Tax from that amount to determine the tax payable on such
income. Tax, if still payable by him, is called self-assessment tax and must be paid by him before he ?les
his return of income. This process is known as Self-Assessment.

2. Summary Assessment
It is a type of assessment without any human intervention. In this type of assessment, the information
submitted by the assessee in his return of income is cross-checked against the information that the
income tax department has access to. In the process, the reasonableness and correctness of the return
are verified by the department. The return gets processed online, and adjustment for arithmetical errors,
incorrect claims, disallowances etc are automatically done. Example, credit for TDS claimed by the
taxpayer is found to be higher than what is available against his PAN as per department records. Making
an adjustment in this regard can increase the tax liability of the taxpayer.
After making the aforementioned adjustments, if the assessee is required to pay tax, he will be sent an
intimation under Section 143(1). The assessee must respond to this intimation accordingly.

Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri


3. Regular Assessment
The income tax department authorizes the Assessing Officer or Income Tax authority, not below the rank of an
income tax officer, to conduct this assessment. The purpose is to ensure that the assessee has neither
understated his income or overstated any expense or loss or underpaid any tax.
The CBDT has set certain parameters based on which a taxpayer’s case gets picked for a scrutiny assessment.
1. If an assessee is subject to a scrutiny assessment, the Department will send a notice well in advance.
However, such notice cannot be served after the expiry of 6 months from the end of the financial year, in
which return is filed.
2. The assessee will be asked to produce the books of accounts, and other evidence to validate the income he
has stated in his return. After verifying all the details available, the assessing officer passes an order either
confirming the return of income filed or makes additions. This raises an income tax demand, which the
assessee must respond to
accordingly.

4. Best Judgement Assessment


This assessment gets invoked in the following scenarios:
1. If the assessee fails to respond to a notice issued by the department instructing him to produce certain
information or books of accounts
2. If he/she fails to comply with a Special Audit ordered by the Income tax authorities
3. The assessee fails to file the return within due date or such extended time limit as allowed by the CBDT
4. The assessee fails to comply with the terms as contained in the notice issued under Summary Assessment
After providing the assessee with an opportunity of being heard, the assessing officer passes an order based
on all the relevant materials and evidence available to him. This is known as Best Judgement Assessment.

Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri


5. Income Escaping Assessment
When the assessing officer has sufficient reasons to believe that any taxable income has escaped
assessment, he has the authority to assess or reassess the assessee’s income. The time limit for issuing
a notice to reopen an assessment is 4 years from the end of the relevant Assessment Year. Some
scenarios where reassessment gets triggered are given below.
1. The assessee has taxable income but has not yet filed his return.
2. The assessee, after filing the income tax return, is found to have either understated his income or
claimed excess allowances or deductions.
3. The assessee has failed to furnish reports on international transactions, where he is required to do so.

Assessment, in the case of some taxpayers, could close quickly while for some, it could prove to be quite
gruelling. In case you are not comfortable dealing with income tax officers, it is suggested that you take
the help of a Chartered Accountant to help you with your case.

Income Tax BBA/GEN/601 By Prof. (Dr.) Vishwajeet V. Jituri

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