Income Tax - Taxable Heads of Income

Remuneration for work done in India is taxable irrespective of the place of receipt.

Remuneration includes:

• Tax upon salaries and wages
• Tax upon pension
• Tax upon bonus, fees & commissions
• Tax upon Gratuity
• Tax upon Annuity
• Tax upon profits in lieu of or in addition to salary
• Tax upon advance salary and perquisites

Others:

• Tax upon Allowances
• Tax upon Deferred compensation
• Tax equalisation

Besides remuneration for work, individuals may be taxed on the following income:

Tax upon Income from house property

The annual value of property, consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, shall be chargeable to income tax under the head "Income from House Property".


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Tax upon Income from business or professions

For charging the income under the head "Profits and Gains of business," the following conditions should be satisfied:

• There should be a business or profession
• The business or profession should be carried on by the assessee.
• The business or profession should have been carried on by the assessee at any time during the previous year.
  
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Tax upon Income from capital gains

Capital asset means property of any kind held by an assessee whether or not connected with his business or profession.

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Tax upon Income from other sources

Income of every kind, which is not chargeable to income tax under the heads

• salary
• income from house property,
• profits and gains of business and profession,
• capital gains can be taxed under the head "income from other sources".

However such income should also not fall under income not forming part of total income under the IT Act.

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Tax upon Clubbing of Income

The total income of an individual also includes certain income of other persons. These are:-

1. income of spouse from,
   • remuneration derived from the concern in which the individual is substantially interested unless the remuneration is by virtue of the application of technical or professional skill possessed by him or her;
   • assets transferred by the individual to the spouse or to any other person for the benefit of the spouse unless the transfer is for adequate consideration or in consideration of an agreement to live apart.
2. income of son's wife from assets transferred by the individual to her or to any other person for her benefit unless the transfer is for adequate consideration.
3. income of his minor child - other than the minor child suffering from disability specified in section 80-U, referred to in para 5.3.9 except when such income arises to the child on account of any manual work done by him or on account of any activity which involves application of any skill, talent or specialised knowledge and experience.

The individual in whose income the income of other spouse as mentioned in (a) (i) above is to be included will be the husband or wife whose total income - before including such remuneration income - is greater. Similarly the income of minor child is to be included in the income of the parent having greater income. If the marriage of the parents does not subsist, it will be parent who maintains the child.


Avoidation of double taxation

Since a 'resident' is liable to pay tax in India on his 'total world income', it is possible that he may have to pay tax on his foreign income in that country also, where it is earned. Such situation leads to double taxation of the same income -in India and again in the country where it is earned. To avoid such a situation, the Government of India has entered into agreements for avoidance of double taxation with different countries, a discussion about which is made in Chapter XII.

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Filing of Return - compulsory

Earlier the one-by-six scheme that prescribed the return was to be filed compulsorily, if any of the following six items were present and whether the person had taxable income or not:

• Occupation of a House
• Ownership of a motor car
• Expenditure on foreign travel
• Holder of credit card
• Electricity payments in excess of Rs 50,000/annum.
• Member of a club - where the entrance fee is more than Rs 25,000/-.
  
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