Tax Laws: Jaiib/DBF Paper 3 (Module C) Unit-19

Tax Laws: Jaiib/DBF Paper 3 (Module C) Unit-19

Dear bankers,

As we all know that is Tax Laws for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are Tax Laws (Unit-19), Banking Related Laws (Module C), Legal & Regulatory Aspects of Banking -Paper 3.

♦Income Tax Act, 1961

The Income Tax Act, 1961 is an act to levy, administer, collect, and recover income tax in India. The act is effective from 1 April 1962. It consists of 298 sections and 14 schedules. The act helps determine a taxpayer’s taxable income, tax liability, appeals, penalties, and prosecution. The government has been making amendments to the act from time to time.

♦ Income Tax Rules, 1962

Income tax rules act as a supplement to the Income Tax Act, 1961. Income tax rules are effective from 1 April 1962. The Central Board of Direct Taxes (CBDT) has the power to amend the income tax rules. For example, Section 10 (13A) (1) of the Income Tax Act states that the house rent allowance can be exempted up to a certain limit. Rule 2A under income tax rules states how the limit can be calculated.

♦Income Tax

The Law relating to taxation of income is governed by Income Tax Act, 1961.

This Act envisage taxation of income of an assessee on the basis of his

  • Residence
  • Place of source of income

Assessee and Assessment year

  • The Income accruing, or arising to a person (called “Assessee) is taxed on the basis of ‘Assessment year’. The term Assessment year represents the period 12 months beginning from 1st April every year.

Income Tax Act, 1961 envisages taxation of income under following heads

  • Salaries
  • Income from house property
  • Profits and gains from business or profession
  • Capital gains
  • Income from other sources

Covered Under TDS Under The Income Tax Act, 1961

  • Salaries- Section 192
  • Interest in securities- Section 193
  • Payment of interest, other than interest of securities- Section 194A
  • Payment to contractors or sub- contractors- 194C
  • Payment of brokerage and commission- Section 194H
  • Payment by way of rent- Section 1941
  • Payment of professional and technical fees- Section 194J
  • Payment to non-resident- Section 195

Taxpayers and Income Tax Slabs
Taxpayers in India, for the purpose of income tax includes:

  • Individuals, Hindu Undivided Family (HUF), Association of Persons(AOP) and Body of Individuals (BOI)
  • Firms
  • Companies
Income Range Tax rate Tax to be paid
Up to Rs.2,50,000 0 No tax
Between Rs 2.5 lakhs and Rs 5 lakhs 5% 5% of your taxable income
Between Rs 5 lakhs and Rs 10 lakhs 20% Rs 12,500+ 20% of income above Rs 5 lakhs
Above 10 lakhs 30% Rs 1,12,500+ 30% of income above Rs 10 lakhs

♦Service Tax

Service tax in India is a type of indirect tax charged on the services provided by a service provider. The Central Government via the Finance Act, 1994 governs the taxability of services provided by an individual or a company under Section 66B. The tax is imposed on all the services provided or to be provided in the taxable territory of the country. Services covered through negative list are exempted, along with services listed under the Mega Exemption Notification 25/2012 as amended by Notification No. 40/2016. The Place of Provision Rules 2012 and the Point of Taxation Rules 2011 are considered while determining the tax liability. Service tax is charged at the rate of 15% currently. The taxability arises once the value of services exceeds Rs. 10 lakhs during the financial year.

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