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Questions and Answers
What is the full form of TDS?
What is the full form of TDS?
- Tax Deduction System
- Tax Deducted at Source (correct)
- Total Deducted Source
- Total Deduction System
Under the Income Tax Act, who is responsible for deducting tax for certain payments?
Under the Income Tax Act, who is responsible for deducting tax for certain payments?
- The beneficiary of the payment
- The tax authority
- The person making the payment (correct)
- The recipient of the payment
What is the purpose of TDS in relation to income tax return computation?
What is the purpose of TDS in relation to income tax return computation?
- It increases the final tax payable
- It replaces the final tax payable
- It reduces the final tax payable (correct)
- It has no impact on the final tax payable
Who is required to collect TDS according to the Income Tax Act?
Who is required to collect TDS according to the Income Tax Act?
Which entity is exempt from TDS according to the provided information?
Which entity is exempt from TDS according to the provided information?
In terms of residential status for taxpayers, where is Indian income taxable?
In terms of residential status for taxpayers, where is Indian income taxable?
What is considered as agricultural income as per section 2(1A) of the Income-tax Act?
What is considered as agricultural income as per section 2(1A) of the Income-tax Act?
What defines exempt incomes according to the Income Tax law?
What defines exempt incomes according to the Income Tax law?
Which section of the Income Tax Act specifies the nature of agricultural income received?
Which section of the Income Tax Act specifies the nature of agricultural income received?
What is one example of an exempt income?
What is one example of an exempt income?
Under what conditions is income considered exempt according to the Income Tax law?
Under what conditions is income considered exempt according to the Income Tax law?
Which type of income is included in the total income for tax calculation purposes?
Which type of income is included in the total income for tax calculation purposes?
Which type of income includes annuity, gratuity, and retirement benefits?
Which type of income includes annuity, gratuity, and retirement benefits?
Under which head of income is tax levied on the difference between income received and expenses incurred?
Under which head of income is tax levied on the difference between income received and expenses incurred?
Which type of income is taxed if it does not fall under the other heads of income categories?
Which type of income is taxed if it does not fall under the other heads of income categories?
What type of gains can be charged to tax under the head capital gains?
What type of gains can be charged to tax under the head capital gains?
Which type of income includes the interest part of home loans as negative income for tax purposes?
Which type of income includes the interest part of home loans as negative income for tax purposes?
What relationship is necessary for income to be charged under the head 'Income from Salary'?
What relationship is necessary for income to be charged under the head 'Income from Salary'?
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Study Notes
Heads of Income
- Income from Salary is charged only if there is an employer-employee relationship.
- Salary includes wages, basic, dearness allowance, annuity, gratuity, advance of salary, allowances, commission, and retirement benefits.
- Gross Salary is the aggregate of the above income after exemptions, and is charged under the head income from salary.
Income from House Property
- Any residential or commercial property owned will be taxed as per the Income Tax Law.
- Home loan interest is considered as negative income from House property, providing tax benefit.
Income from Business or Profession
- Income earned through profession or business is charged under the head ‘profits and gains of business or profession’.
- The income chargeable to tax is the difference between income received and expenses incurred.
Income from Capital Gains
- Any profit or gain arising from transfer of capital assets held as investments (such as house, jewelry) are chargeable to tax under the head capital gains.
- The gain can be on account of short- and long-term gains.
Income from Other Sources
- Any income that does not fall under the above four heads of income is taxed under the head income from other sources.
- Examples include dividend income, interest received from bank deposits, etc.
Agricultural Income
- Agricultural income is defined under section 2(1A) of the Income-tax Act.
- It includes rent or revenue derived from land used for agricultural purposes, income derived from such land by agriculture operations, and income attributable to a farm house.
Exempt Incomes
- Exempt Incomes are not chargeable to tax as per Income Tax law.
- Examples of exempt incomes include dividend income, agricultural income, and receipts from Hindu Undivided Family (HUF) if you are a member of such HUF.
Tax Deducted at Source (TDS)
- TDS is Tax Deducted at Source, and it is finally adjusted with the final tax payable at the time of computation of income tax return.
- TDS is applicable to certain payments including salary, interest, etc.
- The amount payable to Government/RBI/certain corporations is not subject to TDS.
Residential Status
- There are two types of taxpayers—resident in India and non-resident in India.
- Indian income is taxable in India whether the person earning income is resident or non-resident.
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