Income Tax Basics

Basic Concepts of Income Tax

• Income refers to the money or value earned by an individual or organization from various sources.
• Agricultural income is exempt from income tax, except for certain exceptions such as revenue from marketing of agricultural products or processing of agricultural products.
• Casual income is irregular or non-recurring income, such as prizes, gifts, or winnings from lotteries.

Time Periods in Income Tax

• Assessment year is the year in which the income tax is calculated and assessed.
• Previous year is the year in which the income is earned, which is used to calculate the income tax.

Income Tax Calculations

• Gross total income is the total income earned from all sources, before deducting any exemptions or deductions.
• Total income is the gross total income minus deductions and exemptions.
• Person refers to an individual, Hindu Undivided Family (HUF), firm, local authority, company, or any other entity that is liable to pay income tax.

Tax Practices

• Tax evasion is the intentional and illegal non-payment of income tax, which can lead to penalties and prosecution.
• Tax avoidance is the legal minimization of income tax liability, using loopholes and exceptions in the tax laws.
• Tax planning is the process of minimizing income tax liability, using legal and ethical means, such as investing in tax-saving instruments.

Scope of Total Income

• Total income includes all income earned from various sources, except for certain exemptions and deductions.
• Residence and tax liability refer to the tax liability of an individual or entity based on their residence status in India.
• Certain income does not form part of total income, such as agricultural income, gifts, and income from exempted sources.

Deductions from Gross Total Income

• Deductions are allowed from gross total income to reduce the tax liability, such as deductions under Section 80C, 80D, and 80G.

Test your knowledge of income tax fundamentals, including types of income, assessment years, and tax liability. Learn about tax evasion, avoidance, and planning, and understand the basics of charge and scope of total income.