Basic concepts under income tax act 1961

The students who are preparing for Income tax studies
is required to understand the basic concepts of the income tax act 1961. Some
of definitions under income tax act are explained below in the simple language so
student can understand it easily.

Person – Section 2 (31)

Term “person” is wide term in Income Tax act. The
term person includes:

  •          Individual – It means to a natural human being whether male or Female, Minor or Major 
  •          Hindu Undivided Family
    (HUF) – It is a relationship created due to operation of Hindu Law. The Manager
    of HUF is called “Karta”, Karta is generally the senior most person
    in the family and the
    members of HUF are called ‘Coparceners’.
  •          Company- It is an artificial
    person registered under Indian Companies Act 1956 or Companies Act 2013 or any
    other laws
  •          Firm- The entity which comes into existence as
    result of partnership agreement is called as firm. Partnership is defined as a relation between two
    or more persons who have agreed to share the profits of a business carried on
    by all of them or any of them acting for all. The owners of a partnership
    business are individually known as the “partners” and collectively as
    a “firm”.
  •          Association of Persons (AOP) – When persons combine
    together to carry on a joint activities and they do not constitute partnership firm,
    they are assessable as an Association of Persons. Example – Co-operative
    housing society 
  •          Body of Individuals (BOI) – The body of individuals
    has the same meaning of association of person only the difference between these
    two is that AOP may have members who are non-individual where as BOI have all
    individual members. Example – Club 
  •          Local
    Authority (LA) – Municipality, Panchayat, Cantonment Board, etc.
    are called Local Authority
  •          Artificial
    Judicial Person (AJP) – Statutory Corporations like university is
    called as artificial judicial person 

These are eight categories of person chargeable
to tax under the Act. The aforesaid
definition is inclusive and not exhaustive. Therefore, any person,
not falling in the above-mentioned eight categories, may still fall in the four
corners of the term “Person” and accordingly may be liable to tax.

Assessee: Section 2 (7)

‘Assessee’ means a Person by
whom any Tax or any other sum of money is payable
under this Act. Assessee is divided into two basic categories.

         Ordinary Assessee : It includes …

  •   Any person against whom some proceedings under this act are going
    on. It is immaterial whether any tax or
    other amount is payable by him or not ;
  •   Any person who has suffered loss and has filed return of Loss u/s
    139(3).
  •   Any person by whom some amount of Interest , Tax or
    Penalty is payable under this Act ; or
  •   Any person who entitled to refund of Tax under
    this Act.         

        DeemedAssessee:

A person may not be liable only for his own income or loss but
also on the income or loss of other persons e.g. Guardian of Minor, Agent of a
Non-Resident or legal heir of the deceased person, etc. in such case the
persons responsible for the assessment of income of such persons are called Representative
Assessee. Such person is deemed to be an Assessee.

Assessment Year: Section 2(9)

 “AssessmentYear” means the period of 12 months commencing on the 1st day of
April and ending on 31st March of every year, for example assessment
year 2014-2015 will commence on 1st April 2014 and end on 31st
March 2015. Income earn in the previous year is taxed in the assessment year.

Previous Year: Section 3

Previous year is the financial year for period of 12
months commencing on the 1st day of April and ending on 31st March
of every year. Previous Year is the preceding financial year of the Assessment
Year. For example, for assessment year 2014-2015 previous year is 2013-2014. The
year in which income earn is called as previous year and the year in which
income is taxable is known as assessment year. 

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