An article about "ASSESSMENT YEAR, PREVIOUS YEAR, PERSON, TYPES OF INCOME"

ASSESSMENTYEAR, PREVIOUS YEAR, PERSON, TYPES OF INCOME

Section 2(9) of the Income Tax Act 1961 refers to the assessment year.

ASSESSMENT YEAR:

This is a period of 12 months commencing from 1 st April and ending on 31 st March 2003. Thus it is spread over to calendar years. The assessment year 2003-2004 means and covers the period from 1 st April 2003 to 31 st March 2004. The importance of the assessment year is that which law is to be applied for computation of Income; allied procedural matters and therates to be applied will be as per laws in force as on first day of therelevant assessment year. During the assessment year the income returns filed for the previous year will be assessed by the department.

PREVIOUS YEAR:

Section 2(34) of the Income tax act 1961 defines the previous year. It is a financial year immediately preceding the assessmentyear. This covers 12 months spread over two calendar years commencing from 1 st April and ending on 31 st March.

The previous year for the assessment year 2003-2004 is 2002- 2003, starting from 1 st April 2002 and ending on 31 st March 2003. But it need not necessarily cover 12 months in case income earned for the first time from any source; but always ends as on 31 st March. If one get a salaried job from 1 st Oct 2002, the previous year for salary income starts from 1 st October 2002 and ends on 31st March 2003.

Often, the assessment year and previous years are confusing. Simply note that your income of this financial year (2003-04) will be assessed and taxed by the department during next financial year (2004-2005), which is called assessment year.

PERSON:

The word person has a wide meaning under income tax act which is defined under section 2(31) it includes:

1.       An individual

2.       A Hindu undivided family

3.       A company

4.       A firm

5.       An association of person or a body of individuals

6.       A local authority

7.       Every other artificial judicial person (Trust, deity)

RESIDENTIAL STATUS:

Residential Status determines the scope of taxable income. The status has to be determined as per the procedure prescribed in section 6 of the income tax act. Residential Status are broadly of three types:

1.       Resident and Ordinarily resident

2.       Resident but not Ordinarily Resident

3.       Non-resident.

HEADS OF INCOME:

Income of any kind will be included under anyone of following categories;

1.       Salaries

2.       Income from House Property

3.       Profits and gains from business or profession.

4.       Capital gains

5.       Income from other sources.

This classification is very important, since an income to be included under a particular head cannot be included under another head. Rents received from house should be included under income from house propertybut not under income from other sources.

Income from house and capital gains are relevant in case of house property. Section 22-27 deal with income house property andsection 45-55A deal with capital gains.