Posts Selected From the Category "Tax Management"

Any profits and gains arising from the transfer of a capital assets effected in the previous year shall be chargeable to income tax under the head capital gain in the PY in which the transfer took place.

It should satisfy the following conditions

1. There should be a capital asset
2. The capital assets should be transferred.
3. Transfer should result in profit or gains

Capital Asset means any property of any kind held by an assessee whether or not connected with his business or profession.

                But the following assets are not capital assets.

1. Any stock in trade, consumable stores or raw materials held for the purpose of his business or profession.
2. All personal effects except jewellery
3. Agricultural land in India which is situated in rural area etc.

                For the purpose of computation the capital assets can be classified into two.

1. Short term capital assets
2. Long term capital assets

Short term capital assets means a capital asset held for not more than 36 months immediately preceding the date of its transfer.…

Meaning of Business and Profession

                Business simply means any economic activity carried on for earning profits. According to Sec 2(3) business is “any trade, commerce, manufacture or any adventure in the nature of trade commerce and manufacture”. Any transaction with a motive of selling at profits included under this concept. It is not necessary that there should be a series of transaction in a business and it should be carried on permanently.

                Profession is an occupation requiring purely intellectual skills or manual skills controlled by the intellectual skill of the operator. e.g. Lawyer, doctor, engineer etc.  So profession refers to those activities where the livelihood is earned by the persons through their intellectual or manual skill.

                The following income shall be chargeable to income-tax under the head Profits and gains of business or profession,

1)     The profits and gains of any business or profession which was carried on by the assessee at any time during the previous year

2)     Any compensation or other payment due to or received by any person in connection with a business or profession

3)     Income derived by a trade, professional or similar association from specific services  performed for its members

4)     Profits on sale of a license granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) ;]

5)     Cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ;]

6)     Any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971 ;]

7)     Value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;

8)     Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm:

9)     Any sum received under a Key man insurance policy including the sum allocated by way of bonus on such policy.…

The annual value of any property comprising of building or land attached to the vicinity of the building of which the assessee is the owner, is chargeable to tax under the head income from house property. But if the assessee occupies the building or land attached to the vicinity of the building for the purpose of business or profession carried on by him, then it is not chargeable to tax. For income to be taxed as income from house property the following points should be noted

1. Building or land attached thereto.

                Building means a permanent constructed structure. Building includes residential house , bungalows, docks, warehouse, any block of bricks or stone work covered by a roof etc.   The use of the building is immaterial. It may be let out for residential purpose, business purpose or for profession. The location of the building is also immaterial. It may be situated within India or abroad.

2. Annual value

                The meaning of the word annual value is important, because the annual value of the building or land appurtenant thereto is to be taxed and not the rent received.…

DEFINITION

According to [Sec 17 (1)] Salary includes

                (i)             wages;

                (ii)            any annuity or pension;

                (iii)           any gratuity;

                (iv)           any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;

                (v)            any advance of salary;

                (vi)           any payment received by an employee in respect of any period of leave not availed of by him;

                (vii)          the annual accretion to the balance at the credit of an employee participating in a recognised provident fund,

                                (viii)      the contribution made by the Central Government in the previous year, to the account of an employee under a pension scheme .

Features of salary                      

                     Income from salary is the first head of income. The following are the important features of salary income.

1.      Employer – employee relationship

There should be an employer employee relationship or master servant relationship between two persons.…

Under Sec10 of income tax act the following incomes are exempt from tax

1. Agricultural Income [Sec 10(1)]

                Income from agricultural land situated within India is exempted from tax.

2. Share income of HUF [Sec 10(2)]

                Any sum received by an individual as a member of a Hindu Undivided Family either out of income of the family or out of income of estate belonging to family is exempt from tax.

3. Share of profit from partnership firm [Sec10 (2A)]

                Share of profit received by partners from a firm in which they are partners is not taxable in the hands of partners.

4. Gratuity [Sec 10(10)]

                Gratuity received by an employee from employer is exempted from tax subject to the following conditions

a)      For Govt employee/ semi govt. employee – amount of gratuity received is fully exempt.

b)     For employees covered under Payment of Gratuity Act 1972

1. 15 days average wages for every one completed year of service or part thereof in excess of 6 months or
2. actual amount received or
3. Rs.3, 50,000.

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