Previous year: has been defined under section 3. It means the financial year immediately
preceding the assessment year. As mentioned earlier, the income earned during the
previous year is taxable in the assessment year.

Assessee: As per section 2(7), assessee means a person by whom tax or any other sum of
money is payable under the Income-tax Act, 1961.
In addition, the term includes –
Every person in respect of whom any proceeding under the Act has been taken
for the assessment of –
his income; or
the income of any other person in respect of which 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;

Income : The definition of income as per the Income-tax Act, 1961 begins with the words
“Income includes”. Therefore, it is an inclusive definition and not an exhaustive one.
Such a definition does not confine the scope of income but leaves room for more
inclusions within the ambit of the term.
Section 2(24) of the Act gives a statutory definition of income.
At present, the following items of receipts are specifically included in income:

(1) Profits and gains.
(2) Dividends.
(3) Voluntary contributions received by a trust/institution created wholly or partly
for charitable or religious purposes or by certain research association or
universities and other educational institutions or hospitals and other medical
institutions or an electoral trust.
(4) The value of any perquisite or profit in lieu of salary taxable under section 17.
(5) Any special allowance or benefit, other than the perquisite included above,
specifically granted to the assessee to meet expenses wholly, necessarily and
exclusively for the performance of the duties of an office or employment of
profit.
(6) Any allowance granted to the assessee to meet his personal expenses at the
place where the duties of his office or employment of profit are ordinarily
performed by him or at a place where he ordinarily resides or to compensate
him for the increased cost of living.
(7) The value of any benefit or perquisite whether convertible into money or not,
obtained from a company either by a director or by a person who has a
substantial interest in the company or by a relative of the director or such person
and any sum paid by any such company in respect of any obligation which, but for
such payment would have been payable by the director or other person aforesaid.
(8) The value of any benefit or perquisite, whether convertible into money or not,
which is obtained by any representative assessee3 or by any beneficiary or any
amount paid by the representative assessee for the benefit of the beneficiary
which the beneficiary would have ordinarily been required to pay.
(9) Deemed profits chargeable to tax under section 41 or section 59.
(10) Profits and gains of business or profession chargeable to tax under section 28.
(11) Any capital gains chargeable under section 45.
(12) The profits and gains of any insurance business carried on by Mutual Insurance
Company or by a cooperative society4 or any surplus taken to be such profits
and gains by virtue of the provisions contained in the first Schedule to the Act.
(13) The profits and gains of any banking business (including providing credit
facilities) carried on by a co-operative society with its members.
(14) Any winnings from lotteries, cross-word puzzles, races including horse races,
card games and other games of any sort or from gambling, or betting of any
form or nature whatsoever. For this purpose,
(i) “Lottery” includes winnings from prizes awarded to any person by draw of
lots or by chance or in any other manner whatsoever, under any scheme or
arrangement by whatever name called;
(ii) “Card game and other game of any sort” includes any game show, an
entertainment programme on television or electronic mode, in which people
compete to win prizes or any other similar game.
(15) Any sum received by the assessee from his employees as contributions to any
provident fund (PF) or superannuation fund or Employees State Insurance Fund
(ESI) or any other fund for the welfare of such employees.
(16) Any sum received under a Keyman insurance policy including the sum allocated
by way of bonus on such policy will constitute income.
“Keyman insurance policy” means a life insurance policy taken by a person on
the life of another person where the latter is or was an employee or is or was
connected in any manner whatsoever with the former’s business. It also includes
such policy which has been assigned to a person with or without any
consideration, at any time during the term of the policy.
(17) Any sum referred to in section 28(va). Thus, any sum, whether received or
receivable in cash or kind, under an agreement for not carrying out any activity
in relation to any business or profession; or not sharing any know-how, patent,
copy right, trade-mark, licence, franchise, or any other business or commercial
right of a similar nature, or information or technique likely to assist in the
manufacture or processing of goods or provision of services, shall be chargeable
to income tax under the head “profits and gains of business or profession”.
(18) Fair market value of inventory which is converted into, or treated as a
capital asset [Section 28(iva)].
(19) Any consideration received for issue of shares as exceeds the fair market value of
the shares [Section 56(2)(viib)].
(20) Any sum of money received as advance, if such sum is forfeited consequent to
failure of negotiation for transfer of a capital asset [Section 56(2)(ix)].
(21) Any sum of money or value of property received without consideration or for
inadequate consideration by any person [Section 56(2)(x)].
(22) Any compensation or other payment, due to or received by any person, in
connection with termination of his employment or the modification of the
term and conditions relating thereto [Section 56(2)(xi)].
(23) Assistance in the form of a subsidy or grant or cash incentive or duty drawback
or waiver or concession or reimbursement, by whatever name called, by the
Central Government or a State Government or any authority or body or agency
in cash or kind to the assessee is included in the definition of income.
However, subsidy or grant or reimbursement which has been taken into account
for determination of the actual cost of the depreciable asset in accordance with
Explanation 10 to section 43(1) shall not be included in the definition of income.



Casual income: As per section [Section 56(2)(ib)]
Casual income means income in the nature of winnings from lotteries, cross-
word puzzles, races including horse races, card games and other games of
any sort, gambling, betting etc. Such winnings are chargeable to tax at a flat
rate of 30% under section 115BB.