Understanding Income Tax Basics
Explore the basic concepts of income tax, including types of taxes such as direct and indirect taxes, components of income tax, and steps for computing total income and tax liability. Learn about the importance of taxes as the cost of living in society and how they fund common welfare expenditures.
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Presentation Transcript
INCOME TAX (Basic Concepts) H.Anis Fathima Assistant Professor Department of B.Com Banking Hajee Karutha Rowther Howdia College, Uthamapalayam
What is Tax? Let us begin by understanding the meaning of tax. Taxes are considered to be the cost of living in a society . Taxes are levied by the Governments to meet the common welfare expenditure of the society. 2
Types of Tax? There are two types of taxes - 1. Direct taxes. 2. Indirect taxes. 3
Direct Taxes: If tax is levied directly on the income or wealth of a person, then, it is a direct tax. The person who pays the tax to the Government cannot recover it from somebody else i.e. the burden of a direct tax cannot be shifted. e.g. Income- tax. 4
Indirect Taxes: If tax is levied on the price of a goods or service, then, it is an indirect tax e.g. Goods and Services Tax (GST) or Custom Duty. In the case of indirect taxes, the person paying the tax passes on the incidence to another person.. 5
Types of Taxes Types of Taxes Types of Taxes Direct Tax Indirect Tax Tax on undisclosed Foreign Income & Assets Income Tax GST Costoms Duty 6
Basic Concepts Basic Concepts Basic Concepts Steps for computation of Total Income (TI) & Tax liability Icomponents of Income Tax Basis of Charges & rates of tax Important Difinitions 7
Basic Concepts Basic Concepts Steps for computation of Total Income (TI) & Tax liability Icomponents of Income Tax Basis of Charges & rates of tax Important Difinitions 8
Components of Income Tax Components of Income Tax Components of Income Tax Income-tax Act, 1961 Annual Finance Act Income-tax Rules Circulars and Notifications Legal decisions 9
Steps for computation of total Income (TI) and tax liability Steps for computation of total Income (TI) and tax liability Classification of Income under different heads Determinatio n of Residential Status Computation of Income under each head Clubbing of Income of spouse, minor child etc Set off or Carry forward & set off loss Computation of Gross Total Income Computation of Taxable Income Deductions from GTI Computation of Tax Liability 10
Important Definitions Important Definitions Person Income India Assessee Assessment Assessment Year Previous Year Maximum Marginal Rate & Average Rate 11
Basis of charge & rates of tax Changes of Income Tax Rate of Income Tax 12
Why was Tax levied? The reason for levy of taxes is that they constitute the basic source of revenue to the Government. Revenue so raised is utilized for meeting the expenses of Government like defence, provision of education, health-care, infrastructure facilities like roads, dams etc. 13
Thanks! Any questions? 14
