Introduction to Income Tax | Basics of Income Tax

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What is Income Tax?

It is tax on income that anyone earn. Income can be of different types like Salary Income ( If you are doing job on payroll then it is salary income), Business income etc.

Types of Taxes

There are two types of taxes i.e. Direct taxes and Indirect taxes.

Direct Taxes: If tax is charged on directly on income or wealth of person is known as direct taxes. For e.g. Income Tax.

Indirect Taxes: If tax is charged on price of goods or services, then it is known as Indirect tax. For e.g. Goods & Service Tax (GST) or Custom Duty.

What is Financial Year?

It commence from 1st April and ends on 31st March. For e.g Current Financial Year starts from 1st April,2020 to 31st March, 2021.

What is Assessment Year?

Income earned in Financial Year 2020-2021 is taxable in Assessment Year 2021-2022. Means immediately following (next) year of Financial Year is Assessment year.

For e.g

Financial YearAssessment Year

Who is Assessee?

Assessee means a person by whom any tax or any other sum of money payable under this act. In addition, it also includes-

Every person in respect of whom any proceeding under this act has been taken for assessment of
➡ his income; or
➡ the income of any other person in respect of he is assessable; or
➡ the loss sustained by him or by such other person; or
➡ the amount of refund due to him or to such other person.

Every person who is deemed to be an assessee under any provision of this Act;
Every person who is deemed to be an assessee- in- default under any provision of this Act.

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