- Who is an Assessing Officer?
He/She is an officer of the Income-tax Department who has been given jurisdiction over a particular geographical area in a city/town or over a class of persons. You can find out from the PRO or from the Departmental website http://www.incometaxindia.gov.inabout the officer administering the law which could be based on your geographical jurisdiction or the nature of income earned by you.
- Income-tax is levied on the income of every person. As per Income-tax Law what constitutes income?
Under the Income-tax Law, the word income has a very broad and inclusive meaning. In case of a salaried person all that is received from an employer in cash, kind or as a facility is considered as an income. For a businessman his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on account of sale of capital assets like building, gold, etc.
Income shall be computed as per relevant provision of Income-tax Act, 1961 which lays down detail condition for computation of income chargeable to tax under various heads of income
- What is exempt income and taxable income?
An exempt income is not charged to tax, i.e., Income-tax Law specifically grants exemption from tax to such income. Incomes which are chargeable to tax are called as taxable incomes.
E.g., Dividend income from an Indian company is granted specific exemption and, hence, the same is not liable to tax in the hands of the shareholders. However, dividend from a foreign company is taxable.
- What is revenue receipt and capital receipt?
Receipts can be classified into two kinds: A) Revenue receipt, B) Capital receipt.
Revenue receipts are recurring in nature like salary, profit from business, interest income, etc.
Capital receipts are generally of isolated nature like receipt on account of sale of residential building, personal jewellery, etc.
- Are all receipts, i.e., capital and revenue receipts, charged to tax?
The general rule under the Income-tax Law is that all revenue receipts are taxable, unless they are specifically granted exemption from tax and all capital receipts are exempt from tax, unless there is a specific provision for taxing them.
- Do I need to maintain any records or proof of earnings?
For every source of income you have to maintain proof of earning and the records specified under the Income-tax Act. In case no such records are prescribed, you should maintain reasonable records with which you can support the claim of income.
- If I win a lottery or prize money in a competition, am I required to pay Income-tax on it?
Yes, such winnings are liable to flat rate of tax at 30% without any basic exemption limit. In such a case the payer of prize money will generally deduct tax at source (i.e., TDS) from the winnings and will pay you only the balance amount.
- If my income is taxed in India as well as abroad, can I claim any sort of relief on account of double taxation?
Yes, you can claim relief in respect of income which is charged to tax both in India as well as abroad. Relief is either granted as per the provisions of double taxation avoidance agreement entered into with that country (if any) by the Government of India or by allowing relief as per section 91 of the Act in respect of tax paid in the foreign country.
- What books of account have been prescribed to be maintained by a person carrying on business/profession under the Income-tax Act?
The Income-tax Act does not prescribe any specific books of account for a person engaged in business or in non-specified profession. However, such a person is expected to keep and maintain such book of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of the Act.
For companies the books of account are prescribed under the Companies Act. Further, the Institute of Chartered Accountants of India has prescribed various Accounting Standards and Guidelines that are required to be followed by the business entities As regards the maintenance of books of account by a professional, who is engaged in specified profession has to maintain certain prescribed books of account, if the annual receipts from the profession exceed Rs. 1,50,000 in all the three years immediately preceding the previous year (in case of newly set up profession, his annual receipts in the profession for that year are likely to exceed Rs. 1,50,000).
Specified profession covers profession of legal, medical, engineering, architectural, accountancy, company secretary, technical consultancy, interior decoration, authorised representative, film artist or information technology.
For more details on the provisions relating to maintenance of books of account you may refer provisions of section 44AA read with Rule 6F of the Income-tax Rules, 1962.
- Where should the books of account of business be kept and for how long?
All the books of account and related documents should be kept at the main place of business, i.e., where the business or profession is generally carried on. These documents should be preserved for a minimum of six years. Where, however, the assessment has been reopened, all books of account and other documents which were kept and maintained at the time of reopening of assessment should continue to be so kept and maintained till the assessment so reopened has been completed.