Basics

Question 1

Tax

Answer 1

• cost of living in a society
• levied by govt. To meet common welfare expenditure of the society
• basic source of revenue to govt.
• govt expenses such as defence, provision of education health care & infrastructure facilities

“No tax shall be levied or collected except by authority of law”

Question 2

Components of income tax law

Answer 2

1. Income tax act, 1961
2. Annual finance act
3. Income tax rules, 1962
4. Circulars / notifications
5. Legal decisions of courts (case laws)

Question 3

Steps in computation Of total income & tax payable

Answer 3

1. Determination of residential status
2. Classification of income under different heads
3. Computation Of Income Under Each Head
4. Clubbing of income of spouse, minor child etc.
5. Set-off or carry forward & set off of losses
6. Computation Of gross total Income
7. Deductions from gross total income
8. Total Income
9. Application of rates of tax on the total income
10. Surcharge/ rebate u/s 87A
11. Health & educational cess on income tax
12. Advance tax & tax deducted at source
13. Tax payable/ tax refundable