FAQs on Basics of Income Tax Act 1961 - 1

Question 1

1. What is the basic structure of the Income Tax Act, 1961?

Accepted Answer

Ans.The Income Tax Act, 1961 is divided into various chapters and sections that cover different aspects of income tax. The main structure includes definitions, the scope of income, heads of income (like salary, house property, business, capital gains, and other sources), deductions, exemptions, assessment procedures, and penalties. Each section provides detailed guidelines on how income tax is to be calculated, assessed, and collected.

Question 2

2. Who is liable to pay income tax under the Income Tax Act, 1961?

Accepted Answer

Ans.Under the Income Tax Act, 1961, individuals, Hindu Undivided Families (HUFs), companies, firms, associations of persons, and body of individuals who earn an income above the exempt limit are liable to pay income tax. The liability also extends to non-residents who have income earned in India.

Question 3

3. What are the different heads of income as per the Income Tax Act, 1961?

Accepted Answer

Ans.The Income Tax Act, 1961 classifies income under five heads: 1. Income from Salary2. Income from House Property3. Income from Business or Profession4. Capital Gains5. Income from Other SourcesEach head has its own rules for computation and tax implications.

Question 4

4. What are the basic deductions available under the Income Tax Act, 1961?

Accepted Answer

Ans.Basic deductions available under the Income Tax Act, 1961 include deductions under Section 80C (such as investments in PPF, ELSS, and life insurance premiums), Section 80D (health insurance premiums), Section 80E (interest on education loans), and Section 24(b) (interest on home loans). These deductions help in reducing the taxable income of an individual.

Question 5

5. How is income tax calculated for individuals according to the Income Tax Act, 1961?

Accepted Answer

Ans.Income tax for individuals is calculated based on the total income earned during the financial year. The total income is computed by aggregating income from all heads, making applicable deductions, and then applying the relevant tax rates as per the income slabs provided in the Finance Act for that assessment year. Tax rates may vary for different categories of taxpayers, such as senior citizens or women.

Basics of Income Tax Act 1961 - 1 Video Lecture - Taxation for CA Intermediate

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