ASSIGNMENT - 1

07/31/2018
SUBJECT: DIRECT TAX (06101304)

Answer the following Questions

1. Income of a previous year is chargeable tax in the immediately following assessment
year. Is there any exception to this rule? Discuss.
ANSWER
In general, the income of a previous year is chargeable to tax in the immediately
following assessment year.
The previous year is the financial year in which the income is earned, while the
assessment year is the year in which the income is assessed and taxed.
There are a few exceptions to this rule, where the income of the previous year may not
be chargeable to tax in the immediately following assessment year. Let's discuss some
common scenarios where exceptions apply:
1. Advance Tax: Under the advance tax provisions, taxpayers are required to pay their
taxes in advance, in installments, during the same financial year in which the income
is earned. This is applicable to individuals, self-employed professionals, and
businesses whose total tax liability for the year exceeds a specified threshold. So, in
these cases, a part of the tax on the income earned in the previous year is paid during
the previous year itself.
2. Income with Respect to Royalty or Fees for Technical Services (FTS): In the case of
income earned by non-residents in the form of royalty or FTS, there may be tax
withholding requirements. As per the tax laws of the country, the payer (a resident
of that country) is required to deduct tax at the source before making the payment to
the non-resident. The tax deducted at source is considered as the final tax liability of
the non-resident in many cases, and no further tax is levied on such income in the
assessment year.
3. Capital Gains: When an individual or entity earns capital gains from the sale of
assets like stocks, real estate, etc., the tax treatment might vary depending on the
holding period. For long-term capital gains, the tax rate is generally lower, and the
gains may be exempt or subject to concessional taxation. If the asset is held for a
certain period, the tax liability on capital gains may not arise in the immediate
assessment year but in subsequent years.
4. Losses Carried Forward: If a taxpayer incurs a loss in a particular year, they can
carry forward the losses to subsequent years and set them off against future profits.
In such cases, the losses of the previous year reduce the tax liability of the
subsequent years.

2. Define the term Person, Assessee, Assessment Year, Previous Year, Income, Gross
Income, Exemption and Deduction.
1. Person: In the context of income tax, the term "person" refers to an individual, a
Hindu Undivided Family (HUF), a company, a firm, an association of persons
ASSIGNMENT - 1
07/31/2018
SUBJECT: DIRECT TAX (06101304)

(AOP), a body of individuals (BOI), a local authority, or any other entity capable of
being taxed under the income tax laws of a country.
2. Assessee: An "assessee" is a person who is liable to pay income tax or is subject to
assessment under the income tax laws. It includes any person who earns income in a
particular financial year and is required to file an income tax return to report their
income and pay taxes, if applicable.
3. Assessment Year (AY): The "assessment year" is the year immediately following
the financial year in which the income is earned. It is the year in which the assessee's
income is assessed, and the taxes are computed and paid based on the income earned
during the previous year. For example, if the financial year is from April 1, 2023, to
March 31, 2024, the assessment year would be 2024-2025.
4. Previous Year (PY): The "previous year" is the financial year in which the income is
earned and on the basis of which the assessment for the subsequent assessment year
is made. It is also referred to as the "income year" or "financial year." Using the
example from the previous point, if the financial year is from April 1, 2023, to
March 31, 2024, then the previous year would be 2023-2024.
5. Income: "Income" refers to any money, profits, gains, or benefits received or
accrued by a person during a financial year. It can be earned from various sources
such as salary, business or profession, capital gains, house property, and other
sources. Income can be taxable or non-taxable, depending on the applicable tax laws
and exemptions.
6. Gross Income: "Gross income" is the total income earned by an individual or entity
before any deductions or exemptions are applied. It includes income from all
sources, such as salary, business profits, rent, interest, capital gains, etc.
7. Exemption: An "exemption" is a specific amount or portion of income that is
allowed to be excluded from the total taxable income of an individual or entity.
Certain incomes, investments, or expenses may be exempt from tax, meaning they
are not subject to tax, and the taxpayer does not have to pay tax on that portion of
income.
8. Deduction: A "deduction" is an allowable expense or investment that reduces the
total taxable income of an individual or entity. It is subtracted from the gross income
to arrive at the "taxable income," which is the amount on which taxes are calculated.
Deductions are provided for various expenses, investments, and contributions, which
incentivize certain behaviors, such as investments in specific savings schemes or
charitable donations.

3. How would you calculate income-tax for the assessment year 2021-22 in the case of
different assesses?
To calculate income tax for the assessment year 2021-22, the tax liability will depend on
the type of assesses, i.e., individuals, Hindu Undivided Families (HUFs), and
companies, as well as the income and applicable tax rates. Here's a general outline of
the income tax calculation process for different assesses consideting individal:
ASSIGNMENT - 1
07/31/2018
SUBJECT: DIRECT TAX (06101304)

Income Tax Slab are

Income Slabs Tax Rate FY 2022-23 (AY 2023-24)
₹0 - ₹2,50,000 –
₹2,50,000 - ₹5,00,000 5%
(tax rebate u/s 87A is available)
₹5,00,000 - ₹7,50,000 10%
₹7,50,000 - ₹10,00,000 15%
₹10,00,000 - ₹12,50,000 20%
₹12,50,000 - ₹15,00,000 25%
>₹15,00,000 30%

For Individuals (including Resident Individuals, Non-Resident Individuals, and Senior

Citizens):
Step 1: Determine the Gross Total Income (GTI):
Add all sources of income, such as salary, house property income, business or profession
income, capital gains, and income from other sources.

Step 2: Claim Deductions and Exemptions:

Deduct eligible deductions under Section 80C, 80D, 80G, etc., from the Gross Total
Income. Also, claim exemptions like HRA (House Rent Allowance), LTA (Leave
Travel Allowance), etc., if applicable.

Step 3: Compute Total Taxable Income:

Subtract the deductions and exemptions from the Gross Total Income to arrive at the Total
Taxable Income.

Step 4: Apply Income Tax Slabs:

Use the applicable income tax slabs for the assessment year 2021-22 to calculate the tax on
the Total Taxable Income.

Step 5: Include Health and Education Cess:

Add health and education cess at the rate of 4% on the calculated income tax amount.

Step 6: Compute the Final Tax Liability:

The sum of income tax and health and education cess is the individual's income tax liability
for the assessment year 2021-22.

4. Explain the principles of Income.

The Income Tax Act, 1961 is the primary legislation that governs income tax in India.
It sets out the principles and rules for the assessment and taxation of income in the
country. Some key principles of income under the Income Tax Act, 1961, are as
follows:

1. Residential Status: The Act defines different categories of taxpayers based on their
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07/31/2018
SUBJECT: DIRECT TAX (06101304)

residential status in India. It distinguishes between Resident Individuals, Non-

Resident Individuals, Resident and Ordinarily Resident (ROR), Resident but Not
Ordinarily Resident (RNOR), and Non-Resident Indians (NRIs). The residential
status determines the scope of taxable income and the applicable tax rates.
2. Scope of Income: The Act encompasses various types of income, including income
from salary, house property, business or profession, capital gains, and income from
other sources. The Act prescribes specific rules for computing income under each
head.
3. Previous Year and Assessment Year: The Act follows the concept of the "previous
year" and the "assessment year." The previous year is the financial year in which the
income is earned, and the assessment year is the year immediately following the
previous year, during which the income is assessed and taxed.
4. Accrual and Receipt: The Act generally follows the accrual basis of accounting,
which means income is taxed when it accrues or becomes due, irrespective of whether
it is received in cash or kind. However, certain specific incomes may be taxed on a
receipt basis.
5. Residence-based Taxation: For individuals, the Act follows a residence-based
taxation system. Residents are taxed on their global income, i.e., income earned both
in India and abroad. Non-residents are taxed only on income earned or received in
India, subject to certain provisions.
6. Computation of Income: The Act prescribes specific rules for computing income
under each head. It allows for various deductions, exemptions, and rebates to arrive at
the "total income" of the taxpayer.
7. Deductions and Exemptions: The Act provides for various deductions under
Section 80C to 80U, which allow taxpayers to reduce their taxable income by
investing in specified instruments, making contributions to specified funds, or
incurring certain expenses. It also grants exemptions for specific types of income,
such as agricultural income and certain income of charitable organizations.
8. Progressive Taxation: The Act follows a progressive tax rate structure for
individual taxpayers, wherein higher income levels are taxed at higher rates. The tax
rates vary based on the income slab and the residential status of the taxpayer.
9. Advance Tax and TDS: The Act requires certain taxpayers to pay tax in advance
(Advance Tax) based on estimated income during the financial year. It also mandates
Tax Deducted at Source (TDS) by deductors while making specified payments to
taxpayers.
10. Penalties and Interest: The Act includes provisions for penalties and interest for
non-compliance, late filing of returns, concealment of income, and other offenses.

These principles collectively form the foundation of income taxation under the
Income Tax Act, 1961, and they guide the assessment and taxation of income in
India. Taxpayers are advised to adhere to these principles and consult tax
professionals for accurate tax planning and compliance.
 ASSIGNMENT - 1
07/31/2018
SUBJECT: DIRECT TAX (06101304)

Do as directed:
Practical 1: Shane Warne, the Australian cricketer comes to India for 100 days every year.
Find out his residential status for the Assessment Year 2023-24
The information is not sufficient
But if consider for last 10 years
He is resident but Not Ordinary Resident
Reason: He is able to full fill the Basic Condition 2 and Additional Condition 1 but did not
able to match with Additional Conditions 2 for 730 days in last seven years

Practical 2: Mr. Mickle Jackson comes to India for the first time during the P.Y.2015-16.
During the financial years 2015-16, 2016-17, 2017-18, 218-19, 2019-20, he was in India.
for 155 days, 60 days, 90 days, 50 days and 70 days respectively. Determine his residential
status for the A.Y.2020-21.

Calculate Mr. Mickle Jackson's cumulative stay in India during the four preceding financial
years before the Assessment Year 2020-21:

Cumulative stay in India during the four preceding financial years:

2015-16: 155 days
2016-17: 60 days
2017-18: 90 days
2018-19: 50 days

Total days in India: 155 + 60 + 90 + 50 = 355 days

Now, we will determine his presence during the Previous Year 2019-20:

2019-20: 70 days

Total days in India during the Previous Year 2019-20: 70 days

Based on the cumulative stay in India during the four preceding financial years and the
actual presence in the Previous Year 2019-20, Mr. Mickle Jackson's residential status for
the Assessment Year 2020-21 will be as follows:

Since Mr. Mickle Jackson was present in India for 70 days during the Previous Year 2019-
20 and his cumulative stay in India during the four preceding financial years is 355 days
(which is more than 182 days), he will be considered a Resident and Ordinarily Resident
ASSIGNMENT - 1
07/31/2018
SUBJECT: DIRECT TAX (06101304)

(ROR) for the Assessment Year 2020-21. As an ROR, he will be taxed on his global
income in India.
Practical 3: Mr. Morimoto, a Japanese citizen left India after a stay of 10 years on
1.06.2007. During the financial year 2018-19, he comes to India for 46 days. Later, he
returns to India for 1 year on 10.10.2019. Determine his residential status for the A.Y.
2020-21.

Mr. Morimoto's cumulative stay in India during the four preceding financial years before
the Assessment Year 2020-21:

Cumulative stay in India during the four preceding financial years:

2015-16: 0 days
2016-17: 0 days
2017-18: 0 days
2018-19: 46 days
Total days in India: 0 + 0 + 0 + 46 = 46 days
Now, we will determine his presence during the Previous Year 2019-20:
2019-20: 365 days (as he returned to India for 1 year on 10.10.2019)
Here he is in Indian for more that 60 days but in last four he his stay is less than 365 days
so
He is NRI
Practical 4: Mr. Dayal, an Indian citizen, leaves India on 22.9.2019 for the first time, to
work as an officer of a company in Canada. Determine his residential status for the A.Y.
2020-21.
Total days in India during the Previous Year 2019-20: 182 days
And he was India for last years as Indian citizen.
So he was in India so He is ROR
(Completely full fill all conditions)
Practical 5: Mr. Amar, Indian citizen left India first time on November 25, 2011, for
meting his relatives outside India. During the calendar year 2012 he did not visit India. He
finally came to India as on 15th January 2013. Determine his residential status for the
financial year 2011-12 and 2012-13.
Financial Year 2011-12 starts on April 1, 2011, and ends on March 31, 2012.

Mr. Amar left India for the first time on November 25, 2011. Since he left India during the
 ASSIGNMENT - 1
07/31/2018
SUBJECT: DIRECT TAX (06101304)

financial year 2011-12, we need to check whether he qualifies as a Resident or Non-

Resident for this year.

As per the Indian Income Tax Act, an individual is considered a Resident if he/she is
present in India for at least 182 days or more during the financial year. For financial year
2011-12, Mr. Amar would have been in India from April 1, 2011, to November 24, 2011
(207 days).

Since Mr. Amar was present in India for more than 182 days during the financial year
2011-12, he will be considered a Resident for that year. As a Resident, he will be taxed on
his global income in India for financial year 2011-12.

In Conclusion: Mr. Amar's residential status for financial year 2011-12 is Resident.

Other way
First, we have to check whether any one of the basic
condition is satisfied by Mr. Amar

Particulars 2011-12 2012-13

Step – I
As Mr. Amar is Indian Citizen, as In this year he was in India
per basic condition In this year he was in for 76 days. So he is non-
he should stay in India for the India for 239 days. So he resident. (As he is Indian
period for 182 days during the is resident Citizen condition of 60 days
financial year. is become 182 days for him)
 

As he is leaving India
Step –II first time, it means he is
Let’s check whether both the satisfying both the both Not Applicable as he is non-
additional conditions additional conditions. So residential
are satisfied he is resident and
ordinary resident

Practical 6: Mr. John came to India first time on April 26th, 2013, He stayed in Delhi form
26th April to 25th August 2013. From 26th August 2013 to 20th July 2014, he stayed in
Mumbai. On 21st July 2014 he left India permanently. Find out his residential status for the
financial years 2013-2014 and 2014-2015.
Financial Year 2013-2014 (April 1, 2013, to March 31, 2014):
M r. John arrived in India on April 26th, 2013.
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SUBJECT: DIRECT TAX (06101304)

He stayed in Delhi from April 26th, 2013, to August 25th, 2013 (a total of 122 days).
He stayed in Mumbai from August 26th, 2013, to March 31st, 2014 (a total of 218 days).
Total days in India during FY 2013-2014: 122 + 218 = 340 days
Mr. John has stayed in India for 340 days during the financial year 2013-2014. As he has
not crossed the threshold of 182 days during this financial year, he would be considered a
Non-Resident (NR) for FY 2013-2014.
Financial Year 2014-2015 (April 1, 2014, to March 31, 2015):
Mr. John left India on July 21st, 2014.
He has not returned to India after leaving in July 2014.
Total days in India during FY 2014-2015: 0 days
Mr. John has stayed in India for 0 days during the financial year 2014-2015. As he has not
been present in India during this financial year, he would be considered a Non-Resident
(NR) for FY 2014-2015.
So, based on the provided information, Mr. John's residential status would be Non-Resident
(NR) for both financial years 2013-2014 and 2014-2015.
Practical 7: Mr. X is an Indian citizen went to Canada for employment. He leaves India for
first time on Sep 26, 2010. During the PY 2011-12 he comes to India for 175 days. Now,
we must determine his residential status for AY 2011-12 & AY 2012-13.
We do not have any information provided for the financial year 2011-12.

Assessment Year (AY) 2011-12 (Financial Year 2010-11):

Mr. X left India for the first time on September 26, 2010.
He comes to India for 175 days during the financial year 2010-11 (PY 2011-12).
Total days in India during FY 2010-11: 175 days
Since Mr. X stayed in India for 175 days during FY 2010-11 (PY 2011-12), he does not
meet the threshold of 182 days to be a Resident for AY 2011-12.
So He in NRI

Practical 8: X comes to India, for the first time on June 19, 2007. During his stay in India
up to November 15, 2010, he stays at Mumbai up to May 20, 2010, and thereafter remains
in Kerala till his departure from India. Determine his residential status for the assessment
year 2011-12.

Assessment Year (AY) 2011-12 (Financial Year 2010-11):

Mr. X came to India for the first time on June 19, 2007.
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SUBJECT: DIRECT TAX (06101304)
He stayed in India up to November 15, 2010.
During his stay in India:
He stayed in Mumbai up to May 20, 2010.
He then remained in Kerala until his departure from India.
Based on the provided information, we need to calculate the total number of days Mr. X stayed in India during the
financial year 2010-11 (PY 2010-11) to determine his residential status.

Total days in India during FY 2010-11 (PY 2010-11):

From June 19, 2007, to May 20, 2010 (Mumbai): 1073 days
From May 21, 2010, to November 15, 2010 (Kerala): 179 days

The meets the threshold of 182 days to be considered a Resident and Ordinary Resident (ROR) for AY 2011-12.

Therefore, Mr. X's residential status for the Assessment Year (AY) 2011-12 would be Resident and Ordinary
Resident (ROR) in India.