Charge of Income Tax (Chargeable Section – Sce. 4) :
Income of previous year is taxed in following Assessment Year, at the rate fixed for that Financial Year. Tax is charged on every person.
Income (Sec. 2(24)) :
- Income may be received in Cash or in Kind, on receipt or accrual basis. It includes illegal income also.
- The tax on income cannot held up or postponed due to dispute regarding title of income. The person, who received it, is always taxed for such income.
- Reimbursement of expenses or relief of obligations cannot be treated as an income.
- Income cannot be from mutual activity, i.e. a person cannot make a taxable profit out of transaction with himself. It must come from outside.
- BOI raising contributions for common fund for mutual benefits of members. e.g. Society members are collecting contributions on a monthly basis to meet common benefits.
- It will not apply on interest income earned from deposit of surplus funds in bank.
- The income may be temporary or permanent.
- Lump sum receipts are also chargeable to tax.
- Personal gifts are not chargeable to tax. But if received in money or property exceeding of Rs. 50,000/- during the year is chargeable u/s 56 as income from other sources.
- If a person received tax free income, it will gross up for inclusion of Total Income. Eg. If Ram received Rs. 50,000 from Shyam. Shyam paid tax on it of Rs. 5,000 on this income. The income is assessed in Ram’s hand will be of Rs. 55,000 (50,000 + 5,000 <tax paid by Shyam>).
- Receipts on account of dharmada, goushala & pathshala is not an income & is not taxable.
- Income includes losses.
- Income from winnings from lotteries crossword puzzle, races (including horse races), card games or gambling or betting of any form/nature is also taxable.
- Same income cannot be taxed twice. i.e. if it is taxed at accrual basis, cannot be taxed on receipt basis.
- Income should be real. e.g.
- Cannot be earned by person from himself.
- Does not arise between Head office & branch office.
- Not necessary that source of income exist in Assessment Year.
- Revenue receipt is taxable, whereas capital receipt is not.
