General Question Regarding Income-tax
1. What is Income Tax?
It is a tax imposed by the Government of India on any body who earns income in
2. What do you mean by ‘income earned in
‘Income earned in
The job of monitoring the Income-tax collection by the government is entrusted to a Department called ‘Income-Tax’. This department functions under the ‘Department of Revenue, Ministry of Finance, Government of India’.
4. What is the period for which a person’s income is taken into account for purpose of Income tax?
Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called ‘Financial Year’ [FY]) is taken into account for purposes of calculating Income Tax. Under the income tax Act this period is called a ‘Previous year’.
5. What is an ‘Assessment Year’?
It is the twelve-month period 1st April to 31st March immediately following the previous year [refer answer-4]. In the Assessment year a person files his return for the income earned in the previous year. For example for FY:2006-07 the AY is 2007-08.
6. Who is supposed to pay Income Tax?
Any Individual or group of Individual or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The IT Act recognizes the earners of income under seven  categories. Each category is called a ‘Status’. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority, Artificial juridical person.
When Companies pay taxes under the Income tax Act it is called ‘Corporate tax’.
8. Who is a resident?
If an individual stays in
9. How can I know whether a company is resident or non-resident?
A company is considered as ‘resident’ if it is incorporated under the Indian Companies Act. A foreign company can also become a ‘resident’ if the control and management of its affairs is done entirely in
10. How is resident/ non-resident status relevant for levy of income tax?
In case of resident individuals and companies, their global income is taxable in
11. I am an Indian scientist, who had gone abroad on a government project. Should my return of income include income earned/received abroad?
It depends on your residential status. If you are a resident all incomes earned globally are taxable. Therefore the same needs to be included in the return. However if any tax is paid on that income in the foreign country, you will get credit for the same.