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  • The Income Tax Act 1961

    The Income Tax Act was enacted in the year 1961 and is the statute under which everything related to taxation is listed. This includes levy, collection, administration and recovery of income tax. The act basically aims to consolidate and amend the rules related to taxation in the country.

    The Income tax Act contains a long list of sections, each of which deal with different aspects of taxation in the country. Let us look into each of these chapters of the IT Act and their related sections and sub-sections.

    Chapter I: This is the first section and is hence for introducing the IT Act and to give a basic idea about the same.

    Chapter II: This chapter talks about the commencement and the extent of the Income Tax Act.

    Chapter III: The third chapter of the IT Act is basically about the charge of income tax, the scope of total income, dividend income, and income arising as a result of working abroad and so on.

    Chapter IV: This chapter deals with all forms of income that do not form part of the total income. These include income from property, trusts, institutions, incomes of political parties etc.

    Chapter V: The fifth chapter is about incomes of other individuals that form part of the assessee’s income. This includes income from capital gains, from businesses, from house property etc.

    Chapter VI: This deals with the transfer of income when there is no actual transfer of assets. This includes transfer as well as revocable transfer.

    Chapter VII: Chapter VII is basically about the deductions that are applicable on certain payments and certain incomes

    Chapter VIII: Chapter VIII deals with rebates and share of member in an association or body

    Chapter IX: This talks about double taxation relief that is rebate on income tax and relief in income tax

    Chapter X: This is about special provisions where payment of income tax is avoided. This includes agreements with foreign countries and also information about those countries with which there exists no agreement on tax payment

    Chapter XA: Lists down all general anti-avoidance rules for income tax

    Chapter XII: This section pertains to calculation of tax under certain special cases

    Chapter XIIA: This section deals with special provisions for incomes earned by Non-Resident Indians. This includes capital gains, short-term capital gains, provident fund etc. The chapter contains sections 110 to section 115BBE. These different sections list down different kinds of taxes applicable on incomes from various special cases like from royalty, dividends, foreign currency units etc. All the corresponding sections basically lists down taxation for income made my non-resident Indians.

    Chapter XIIB: This chapter lists down special taxation provisions applicable to certain companies. It has sections 115J to section 115JF.

    Chapter XIIBB: This lists down taxation process for conversion of a foreign company into an Indian subsidiary.

    Chapter XIID: Deals with the taxation process for profits made by domestic companies. Interest payable on non-payment of tax by these companies and cases when the company defaults.

    Chapter XIIDA: Lays down rules for tax on distributed income of a company

    Chapter XIIE: Deals with tax on distributed income of unit holders

    Chapter XIIF: Tax on income received from venture capital companies or venture capital funds

    Chapter XIIG: Special provisions with respect to taxation of shipping companies

    Chapter XIII: Lists down all information about Income Tax authorities such as their appointment and control, jurisdiction, their powers and disclosure of information

    Chapter XIV: Chapter XIV contains a long list of sections starting from section 139 to section 152. This chapter deals with the whole return filing formalities. From obtaining PAN to filing returns online to methods of accounting. This also includes other amendments, rectification of mistakes, intimation of loss and other related cases.

    Chapter XIVA: Lists down provision for avoiding repetitive appeals like those which are already pending in the High court or Supreme Court.

    Chapter XV: Lists down liabilities for each case, all general and special provisions, recovery of tax from non-resident Indians, private companies etc.

    Chapter XVI: This chapter is for firms and their assessment and taxation process. Also deals with changes in constitution, succession and their dissolution process

    Chapter XVII: This lists down the clauses for collection and recovery of tax. Also lists down the interest charged on late payment of taxes or in cases where recovery is made

    Chapter XVIII: Income tax relief to companies for the fact that they pay dividends to their shareholders. Relief in terms of tax to companies who are involved in charitable work via their foundation wings

    Chapter XIX: Deals with refunds pertaining to taxes in case more tax is paid to the IT department. Cases when an individual is eligible to get refund, correctness of assessment and interest on refund when there is no claim made. Sections 237 to 245 cover all aspects of this tax chapter

    Chapter XIXA: This deals specifically with settlement of cases. Sections 245A to 245L are included under this chapter. All aspects of settlement such as application, procedure, abatement f proceeding, recovery of sums are covered under this chapter

    Chapter XIXB: All advance rulings come under the purview of this chapter. Sections involved are section 245N to 245V. Includes application for advance ruling, powers of authority, procedure and other related topics.

    Chapter XX: Deals with appeals made to the deputy commissioner and commissioner. Also includes appeals to the high court, Supreme Court and general aspects of revision by commissioner.

    Chapter XXA: Includes sections 269A to 269S. Is basically related to acquisition of immovable properties in certain cases to counteract tax evasion. All aspects of acquisition including jurisdiction of the same is covered under this chapter and its various sections.

    Chapter XXB: Lists down modes of payment in cases where correction of tax evasion is required. Deals with taking and accepting of loans and deposits for the same and their corresponding modes.

    Chapter XXC: Deals with purchase of immovable properties made by the central government in cases of transfer. Restrictions on the property, appropriate authority, rectification of mistakes, vesting of property are the few of the many aspects covered under this chapter.

    Chapter XXI: Includes sections 271 to 275 and lists down all penalties that are applicable to various taxpayers in the event of various cases. This pertains to all kinds of penalties such as those for non-disclosure, for non-payment of taxes, for failure to comply with various provisions of the section and so on and so forth.

    Chapter XXII: Section 275A to section 280D is included under this chapter. The section deals with prosecution and offences with respect to compliance failure, and other details about how the prosecution process will be taken forward.

    Chapter XXIII: Sections 281 to 298 come under this chapter and it covers almost all miscellaneous topics that cannot be put under any of the specific tax chapters stated above. Contains generic as well as special cases that may arise with respect to the taxation process for various taxpaying entities.

    Schedules to the Act:

    Schedules to the Income Tax Act 1961 are various annexures that were added and amended to include topics and scenarios which were not previously covered. Various schedules have been added to the Income Tax Act at different points of time, to make the IT Act more inclusive and comprehensive

    News About Income Tax Act

    • 25% of unaccounted deposits will have 4 year lock-in period

      After the demonetization of the Rs.500 and Rs.1,000 currency notes on November 8th, the government stated that it will be scrutinizing any cash deposits above Rs.2.5 lakhs. In case the depositor was unable to account for the amount, there was originally a 200% tax to be levied on the unaccounted for amount. Many experts raised questions about the legality of this tax. The government proposes to impose a 50% tax on the declared, unaccounted for amount and the remaining 25% of the total amount deposited will have a lock-in period of four years, where the depositor will not be allowed to withdraw the amount for that period. The government plans to build a fund for rural infrastructure from the additional taxes collected via this scheme.

      29th November 2016

    • 200 percent Tax Penalty on Unaccounted Deposits over Rs. 10 lakhs

      People with deposits of over Rs 10 lakhs already in accounts at the bank and not matching their income tax returns will require to pay tax as well as 200% penalty on the amount based on the Income Tax Act, according to Revenue Secretary Hasmukh Adhia last week. This tweet created quite an uproar on top of all the commotion. The tweet read, ‘If cash amount of above Rs.10 lakh is deposited in a bank A/C, not matching with declared income, same will be treated as tax evasion’. The Ministry added, ‘In such case, tax amount plus a penalty of 200 per cent of the tax payable would be levied as per Section 270(A) of the Income Tax Act’.

      14th November 2016

    • PAN rules for sale of automobiles changed by I-T Department

      The Directorate of Income Tax organised a seminar last week for the need to reference PAN in transactions of sale or purchase of vehicles above Rs. 2 lakh. The meeting also referenced the need to furnish financial transaction statements when one is in receipt of cash payments that exceed Rs. 2 lakh. The seminar was attended by around 80 automobile dealers.

      Raman Chopra, Director of Income Tax (Intelligence and Criminal Investigation), updated the attendees of the change in the Income Tax Act from the financial year 2016-17. He also provided clarifications to the queries raised by participants.

      25th October 2016

    • High Court Quashes Perquisite Challenge Plea

      The Madras High Court today dismissed a plea challenging an Income Tax Law that gave power to executive authorities to decide the value of any perquisite and levy any tax on it, except those outlined as per the provisions given to the salaried class. The plea was quashed by Justices V Ramasubramanian and N Kirubakaran who rejected the contention that Parliament should not have been permitted to grant the executive authorities a free hand to with respect to determining prerequisite values. Despite Section 115WB of the Income Tax Act explicitly defining fringe benefits with no mention of empowerment of officials to make additions to this section, the judges of the high court stated that this cannot be extended to Section 17(2), which defined perquisites for the purpose of levying tax.

      13th June 2016

    • Assocham suggests Equalization levy as part of the IT Act

      Instead of listing equalization levy as a separate chapter under the Finance Act, the Industry Chamber Assocham is suggesting that the levy be put under the IT Act itself. The idea is to not let the cost of doing business increase for Indian companies. Assocham is of the view that placing equalization levy under the Finance Act will make foreign companies insist that it is a domestic levy and hence not payable by them.

      CBDT had earlier set up a committee to look into the issue and it had suggested an equalization levy of 6-8% to be imposed on funds transferred by a non-resident to a resident.

      31st March 2016

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