Income Tax

FEMA/RBI Regulations


Ans: It is a tax imposed by the Government of India on any person who earns income in India. This tax is levied on the strength of an Act called Income tax Act which was passed by the Parliament of India.

Ans: Income earned in India is not limited to income earned within the geographical limits or boundaries of the country. Certain incomes are also deemed to have been earned in India although they may have been earned outside the country.

Ans: Any Individual or group of Individual or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The IT Act recognizes the earners of income under seven [7] categories. Each category is called a Status. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority, Artificial juridical person.

Ans: No, The Income tax Act applies to all persons who earn income in India. Whether they are resident or non-resident.

Ans: If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a non-resident.

Ans: In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.

Ans: The word Income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. Infect the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:

  • Income from Salary
  • Income from House property
  • Income from Business or Profession
  • Income from capital gains
  • Income from other sources

Ans: No. Receipts can be classified into two kinds. A) Revenue receipt B) Capital receipt.The general rule under the Income tax Act is that, all revenue receipt are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans etc are in the nature of capital receipts not attracting tax.

Ans: No. The dividend declared by Indian companies is not taxable in the hands of the shareholders because tax on distributed profits have already been borne by the company.

Ans: For every source of income you have to maintain proof of earning and the records specified under the IT Act. In case, no such records have been laid down, you should maintain reasonable level of records with which you can support the claim of income.

Ans: Generally the tax on income crystallizes only on completion of the previous year. However for ease of collection and regularity of flow of funds to the Government for its various activities, the Income tax Act has laid down payment of taxes in advance during the year of earning itself. Taxes may also be collected on your behalf during the previous year itself through TDS and TCS. If at the time of filing of return you find that you have some balance tax to be paid after taking into account your advance tax, TDS & TCS, the short fall is to be deposited as Self Assessment Tax.

Ans: You must first register your PAN by logging into the online service called view tax credit in the NSDL website []. Thereafter your PAN registration must be authorized by visiting the nearest TIN [Tax Information Network] facilitation center of NSDL or getting their representative to call upon you. These are paid services.

Ans: For payments deposited by you into the bank you will have to contact your bankers if the credit has not been given even after three days. In case of TDS or TCS you will have to contact the concerned deductor /collector after the due date for filing the quarterly TDS/TCS return by them is over.

Ans: The tax can be reduced by making investment in approved schemes and also by making donations to approved charitable institutions.

Ans: It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for filing of returns for different Status and Nature of income.

Ans: You can authorize any person by way of a Power of Attorney to file your return. A copy of the Power of Attorney should be enclosed with the return.

Ans: The due dates are as follows:

Companies & their Directors

30th September

Other business entities, other than companies, iftheir accounts are auditable & their working partners 30th September
In all other case 31st July

Ans: A PAN number has been made compulsory for every transaction with the Income Tax department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, availing institutional financial credits, purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of identification accepted by all government andnon-government institutions in the country.

Ans: With your PAN you can continue to transact with the Income Tax department. However, in respect of other agencies you may encounter constraints without a PAN card since it doubles as a photo identity card.

Ans: You may retain any one of the numbers and surrender the other through a letter addressed to your jurisdictional Assessing Officer.

Ans: Yes. It is illegal to have two PANs and the penalty for such offence is Rs.10,000/-

Ans: It is advisable to retain only one PAN, preferably the one used for Income Tax purpose and surrender the other number immediately. The institutions where the latter number has been quoted should be informed of the correct PAN.

Ans: No. Return is to be filed only if you have taxable income.

  • 1.) When and how one is treated as NRI under the Income-tax Act,1961?
  • 2.) In respect of Capital Gains under the Income-tax Act,1961 one is not liable to Income-tax if he reinvests in specified assets or if he has capital loss in other assets. Is there any procedure to ensure no deduction of tax from Capital Gains in such a situation.?