Tamilnadu Samacheer Kalvi 11th Commerce Notes Chapter 32 Direct Taxes Notes
→ Tax is a compulsory contribution to state revenue by the Government.
→ Tax is the basic source of revenue to the Government.
→ If a tax levied on the income or wealth of a person and is paid by that person (or his office) directly to the Government, it is called direct tax.
→ If tax is levied on the goods or services of a person (seller). It is collected from the buyers and is paid by seller to the Government. It is called indirect tax.
→ Indian taxation system is one of the largest systems in the world.
→ The tax administration has clear demarcation between Central Government and State Governments and then between State Governments and Local Bodies.
→ Income tax is a direct tax under which tax is calculated on the income, gains or profits earned ‘by a person such as individuals and other artificial entities (a partnership. firm, company, etc.)
→ The Income tax Act has defined the term income and it includes salary income, house property income, business/profession income, capital gains and other sources income.
→ The year of earning income is called ‘Previous Year’ and the year in which assessment of income is done is called ‘Assessment Year’.
→ Income tax is administered by the Central Government (Ministry of Finance) with the help of ‘Income tax department’ with branches throughout the country.
→ Assessee means a person by whom any tax or any other sum of money is payable under this Act.
→ The year in which income is earned is called previous year.
→ Section 14 of Income Tax Act 1961 provides for the computation of total income of an assessee which is divided under five heads of income.
→ Income from all the above five heads of income shall be computed separately according to the provisions given in the Act. Income computed under these heads shall be aggregated after adjusting past and present losses and the total so arrived at is known as ‘Gross Total Income’.
→ Out of Gross Total Income, Income tax Act 1961 allows certain deductions under section 80. After allowing these deductions the figure which we arrive at is called ‘Total Income’.