basic concepts and defintions of

8/7/2019 BASIC CONCEPTS and DEFINTIONS OF

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Assessment year means the period of 12 monthsstarting from 1st April and ending on 31st march ofthe next year

When a Financial Year ends, Assessment year

begins

E.g.:- If Financial year is 2005-06 (Previous year),Assessment Year is 2006-07. Starting from 1-4-2006,

ending on 31-3-2007

Income of the previous year is assessed inAssessment Year.


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Previous year means the financial yearimmediately preceding Assessment year.

It is a period of 12 months starting from 1

st

Apriland ending on 31st March of the next year.

E.g.:- If Assessment Year is 2008-09, its Previousyear is 2007-08 starting from 1-4-2007 and endingon 31-3-08.

It is always immediately preceding Assessment

Year


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It starts from the day on which business is startedand will end on the 31st March of the followingYear.


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The Term Person includes :-

1) An Individual

2) An Undivided Hindu family

3) A Company

4) A Firm

5) An Association of Persons (AOP) or body of individuals

whether incorporated or not

6) A Local Authority7) Every Artificial Juridical Person not falling within any

of the preceding categories

All of the above 7 categories are Liable to Tax


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Assesse means a person by whom Income tax or any

other sum of money is payable under the Act. Itincludes,

Every person in a respect of whom any proceedingunder the Act has been taken for the Assessment of

his income or loss or the amount of refund due tohim

A person who is assessable in a respect of incomeor loss of another person

A person who is deemed to be an assesse indefault under any provisory of the Act


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Business includes any Trade, Commerce,manufacture or any adventure or

concern in the nature of Trade,Commerce or Manufacture


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Points to be noted

Significance of Profit motive

Business also includes rendering of services toothers

Business cannot be carried on with oneself.

It also includes vocation & profession

Even a single transaction with an intention toearn profit is also considered as a business

Income from illegal business or profession istaxable as business.


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PersonPerson

ResidentResident

Resident &Ordinarilyresident

Resident &Ordinarilyresident

Resident butnot ordinarily

resident

Resident butnot ordinarily

resident

Non- residentNon- resident


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To know the residential status of the

person, first identify whether he is a

resident.


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If a person satisfy any one of the following twoconditions, he becomes a resident in India

a) He is in India in the previous year for the periodof 182 days or more.

b) He is in India for the period of 60 days or more,during the previous year and 365 days or moreduring 4 years immediately preceding the

previous year.If a person does not satisfy any of the above

conditions he becomes Non-Resident


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The period of 60 days referred in above conditions(b) is extended to 182 days in case of following

i. An Indian Citizen who leaves India during theprevious Year for the purpose of employment

outside India

ii. An Indian citizen who leaves India during theprevious year as a member of the crew of an

Indian ship An Indian citizen or a person of Indian origin who

comes on a visit to India during the previous year


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Once a person becomes Resident it becomes necessaryto find out whether he is R & OR orR but notOr.

If a Resident satisfies both of the following additionalconditions Under section 6(6) HE BECOMES R & OR

He has been Resident in India in at least 2 out of 10previous years immediately preceding the relevantprevious year.

He has been in India for a period of 730 days or moreduring 7 years immediately preceding the relevantprevious year.

It means to become R & Or a Resident has to Satisfy boththe above conditions. But if a resident satisfy only oneor none of the additional conditions, he becomes R butnotOR.


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R & OR satisfy:-

ANY ONE of the basic conditions a) or b) and also bothconditions in i) & ii)

R but not OR satisfy:-

ANY ONE of the conditions a) & b) and only one or noneof the conditions i) & ii)

Note:- To calculate the days Total stay on India during theprevious year is to be considered. It can be in differentcities or in different months

Residential status is to be calculated every year (Every A.Y.)


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Residential Status of HUF

Residential Status of Firm/AOP/BOI

Residential Status of Company


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Provisions are same like Individual

HUF is said to be Resident in India if control &

management of its affairs is wholly or partly situated in

India

HUF is Non Resident in India, if control & management

of its affairs is wholly situated outside India.

HUF is considered R & OR, if karta satisfies both the

additional conditions under sec 6(6) HUF is considered R but not OR, if karta does not satisfy

both the additional conditions


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Said to be Resident of India if control andmanagement of their affairs are wholly or partlysituated within India.

If control and management is outside India, then it

is treated as Non-Resident.

There is no question of determining ordinarily or

not ordinarily status


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An Indian company is always a Resident in India

A Foreign Company is treated as Resident in India,if control and management is situated in India in

Previous year

If control and management of its affairs is situatedout of India in Previous Year the it is treated as Non-Resident

Ordinarily and Not Ordinarily status are out ofquestion


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Income in India is taxable only if,

It is received in India

Accrues or Arises or is deemed to accrue or arise inIndia

In case of R & Or, the scope of income is maximum.All Incomes whether received, Accrues or Arisesoutside India are also taxable

In case of R but not OR and NR , the income istaxable only if it is Received, Arises or Accrued inIndia i.e. Income outside India is not taxable.


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