The scope of total income is determined on the basis of residential status of the assessee. For the purposes of Income Tax Act, there can be three residential status. Residential status is determined on the basis Basic conditions and Additional conditions Resident and ordinarily resident Resident but not ordinarily resident Non resident. RESIDENTIAL STATUS OF AN INDIVIDUAL Resident and Ordinarily Resident [ROR] An individual is said to be resident in India if he satisfies anyone of the basic conditions and both of the additional conditions. Resident but Not Ordinarily Resident [RNR] An individual is said to be resident but not ordinarily resident in India if he satisfies anyone of the basic conditions but does not satisfies both of the additional conditions. Non Resident [NR] If an individual does not satisfies any of the basic conditions he is said to be non resident in India Basic conditions Additional conditions A stay Continue reading
Tax Management
Income exempt from Income Tax
Under Sec10 of income tax act the following incomes are exempt from tax 1. Agricultural Income [Sec 10(1)] Income from agricultural land situated within India is exempted from tax. 2. Share income of HUF [Sec 10(2)] Any sum received by an individual as a member of a Hindu Undivided Family either out of income of the family or out of income of estate belonging to family is exempt from tax. 3. Share of profit from partnership firm [Sec10 (2A)] Share of profit received by partners from a firm in which they are partners is not taxable in the hands of partners. 4. Gratuity [Sec 10(10)] Continue reading
Clubbing of Income Under Income Tax
An assessee may reduce his tax liability by transferring his assets in favor of a person who is related to him. As per [Sec 60] to [Sec 64], income belonging to some other person will be taxed in the hands of the assessee in certain situation for the purpose of avoiding tax evasion. This is called clubbing of income. Transfer of income without the transfer of assets: Income arising to nay person by virtue of any transfer of any income, without transferring the assets is deemed to be the income of the transferor and is taxable in his hands. The transfer may be revocable or not. There is no exception to this rule. Revocable transfer of assets: Any income arising to any person from an asset as a result of revocable transfer of asset shall be deemed to be the income of transferor. As per [Sec62] the income revocable Continue reading