II. Very Short Answer Questions

 1. What is Income Tax? 

Answer: Income tax is a direct tax under which tax is calculated on the income, gains or profits earned by a person such as individuals and other artificial entities (a partnership firm, company, etc.)

 2. What is meant by Previous year? 

The year in which income is earned is called previous year. It is also normally consisting of a period of 12 months commencing on 1st April every year and ending on 31st March of the following year. It is also called as financial year immediately following the assessment year.

 3. What is an assessment year?

 The term has been defined under section 2(9). The year in which tax is paid is called the assessment year. It normally consisting of a period of 12 months commencing on 1st April every year and ending on 31st March of the following year.  

SHORT ANSWER QUESTIONS

1.  List out the five heads of income.

These five heads are; 

(i) Income from ‘Salaries’ [Sections 15 17]; 

 (ii) Income from ‘House Property’ [Sections 22-27]; 

 (iii) Income from ‘Profits and Gains of Business or Profession’ [Sections 28 44]; 

 (iv) Income from ‘Capital Gains’ [Sections 45-55]; and 

 (v) Income from ‘Other Sources’ [Sections 56-59].

2. Write short notes on:

  1. Direct Tax
  2. Indirect Tax

Answer:
1. Direct Tax:
If a tax levied on the income or wealth of a person and is paid by that person (or his office) directly to the Government, , it is called direct tax, example Income – Tax, Wealth Tax, Capital Gains Tax, Securities Transaction Tax, Fringe Benefits Tax (from 2005), Banking Cash Transaction Tax (for Rs,50,000 and above – from 2005), etc. In India all direct taxes are levied and administered by Central Board of Direct Taxes.

2. Indirect Tax:
If tax is levied on the goods or services of a person (seller). It is collected from, the buyers and is paid by seller to the Government. It is called indirect tax example GST.

 3. Who are all included in the term person? 

The term ‘person’ includes the following 

 (i) an individual, 

 (ii) a Hindu Undivided Family (HUF), 

 (iii) a company, 

 (iv) a firm, 

 (v) an Association Of Persons or a Body Of Individual, whether incorporated or not, 

 (vi) a local authority, and 

 (vii) every artificial juridical person e.g., an idol or deity.

 IV. Long Answer Questions 

 1. What are the items included in an income?

  1. Profits and gains of business or profession.
  2. Dividend
  3. Voluntary contribution received by a charitable / religious trust or university/education institution or hospital/electoral trust[ w.e.f. 01.04.2010]
  4. Value of perquisite or profit in lieu of salary taxable u/s 17 and social allowance or benefit specifically granted either to meet personal expenses or for performance Of duties of an office or employment of profit.
  5. Export incentives, like duty drawback, cash compensatory support, sale of licenses, etc.
  6. Interest, salary, bonus, commission, or remuneration earned by a partner of a firm from such firm.
  7. Capital gains chargeable u/s 45.
  8. Profits and gains from the business of banking carried on by a cooperative society with its members.
  9. Winnings from lotteries, crossword puzzles, races including horse races, card games, and other games of any sort or from gambling or betting of any form or nature whatsoever.
  10. Deemed income u/s 41 or 59.