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FAQ
Some of the questions frequently asked are:-
I. GENERAL
Q. What is a previous year?
A The financial year in which the income is earned is known as the previous year. Any financial year begins from 1st April and ends on subsequent 31st March. The financial year beginning on 1st of April 2019 and ending on 31st March 2020 is the previous year for the assessment year 2020-2021.
Q. What is an ‘assessment year’?
A The financial year following a previous year is known as the assessment year. For example for the previous year from 1st April 2019 to 31st March 2020, the assessment year shall be 2020-21 i.e. the next financial year.
Q. What is meant by an assessee?
A Assessee means a person by whom any tax or any other sum of money is payable under the Income Tax Act. The ‘person’ in Income-tax Act has been defined to include the following :-
1. An individual
2. A Hindu Undivided Family
3. A Company
4. A Firm etc.
Q Who is an Assessing Officer (AO)?
A AO is an abbreviation for Assessing Officer. Assessing Officer means the Income Tax Officer, or the Assistant Commissioner of Income Tax or the Dy.Commissioner of Income Tax, the Jt. Commissioner of Income Tax, or the Addl. Commissioner of Income-tax having jurisdiction over an assessee. You are required to file your return of income indicating the Assessing Officer having jurisdiction over your case. Now the return of income is to be filed online. The site of e-filing of return of income is www.incometaxindiaefiling.gov.in.
Q. What are ‘heads of income’?
A The law provides for taxing of income under different heads of income as under :-
1. Salaries
2. Income from house property
3. Business income
4. Capital gains
5. Income from other sources.
The incomes derived from the above sources are to be computed in different manners as prescribed under the law.
II. SALARIES
Q. What is salary?
A The salary received from an employer is taxed and includes all cash allowances received from the employers. The reimbursement of expenses actually incurred cannot be considered as salary.
Q. How the arrears of salary are taxed?
A The arrears of salaries are taxable in the year of receipt. However, relief u/s 89A is allowable to the extent of the tax which would have been payable if the arrears had been taxed in earlier years when it was received.
Q. Whether pension is salary?
A Pension is also treated as salary and is taxable under this head and even standard deduction is available.
III. INCOME FROM HOUSE PROPERTY
Q. What is income from house property?
A Once you are legal owner of a building, house or a flat, the income is taxable as income
from house property in the prescribed manner.
Q. What is annual letting value of a house property?
A The annual letting value is generally taken at the valuation made by municipal
authorities. In case the property is given on rent, the actual rent is taken as annual letting
value. When the property is being used for own occupation, the annual letting value is taken
at nil. This is avilable for only one house at your option. From AY 2020-21, this exemption is available for two hoses at your option.
IV. CAPITAL GAINS
Q. What are capital gains?
A Any profits or gains arising from transfer of a capital asset, in the previous year, subject to certain exception, are chargeable as capital gains. Such profits are deemed to be the income of the previous year in which the transfer takes place.
Q. What is a transfer?
A Transfer is normally by sale but even exchange constitutes a transfer. In a case where the asset is converted into stock in trade, such conversion is also treated as transfer. In case of multistoreyed buildings and members of group housing, transfer affected by transfer of shares or membership of society also attracts capital gain. attracts capital gain tax.
Q. How many types of capital assets are there?
A There are two types of capital assets i.e. short term capital asset and long term capital asset. Where capital asset is held for not more than 36 months immediately before the transfer, it is called short term capital asset. If it is held for more than 36 months, it is long term capital asset. From FY 2017-18,(i.e. AY2018-19) the criteria of 36 months is reduced to 24 months in respect of transfer of immovable property being land, building and house property,only. In case of shares of a company, units of UTI or other securities the period of holding is 12 months or less for short term capital asset.
Q. What are the rates at which short term and long term capital gains are charges to tax?
A Short term capital gain becomes part of the total income and is taxed at normal rates. Long term capital gains are taxable at a flat rate of 20%.
Q. What are the provisions of Section 54EA relating to investment in specified assets?
A A long term asset when transferred by an assessee during the previous year results into receipt of consideration. Within six months from the date of transfer, the assessee should invest the whole or any part of the net consideration in specified bonds, debentures, share of a public company or unit of mutual fund to be notified by the Board. Upon investment in such specified assets, of the entire sale proceeds, the whole of capital gains shall be exempt from tax.
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