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TAX LAWS AND PRACTICE - Institute of Company …

ISTUDY MATERIALEXECUTIVE PROGRAMMETAX LAWSANDPRACTICEMODULE IPAPER 4 ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727email website THE Institute OF Company SECRETARIES OF INDIATIMING OF HEADQUARTERSM onday to FridayOffice Timings to Dealing TimingsWithout financial transactions to financial transactions to , Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at M P Printers/5000/March 2014iiiiiEXECUTIVE PROGRAMME TAX laws AND PRACTICEThis study material has been published to aid the students in preparing for the Tax laws and PRACTICE paper of theCS Executive Programme. It is part of the educational kit and takes the students step by step through each phaseof preparation stressing key concepts, pointers and procedures. Company Secretaryship being a professionalcourse, the examination standards are set very high, with emphasis on knowledge of concepts, applications,procedures and case laws , for which sole reliance on the contents of this study material may not be , as per the Company Secretaries Regulations, 1982, students are expected to be conversant with theamendments to the laws made upto six months preceding the date of examination.

vi LIST OF RECOMMENDED BOOKS PAPER 4: TAX LAWS AND PRACTICE READINGS I.Income Tax and Wealth Tax : 1. Dr. V. K. Singhania : Students Guide to Income-tax including Service Tax/VAT; Taxmann

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Transcription of TAX LAWS AND PRACTICE - Institute of Company …

1 ISTUDY MATERIALEXECUTIVE PROGRAMMETAX LAWSANDPRACTICEMODULE IPAPER 4 ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727email website THE Institute OF Company SECRETARIES OF INDIATIMING OF HEADQUARTERSM onday to FridayOffice Timings to Dealing TimingsWithout financial transactions to financial transactions to , Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at M P Printers/5000/March 2014iiiiiEXECUTIVE PROGRAMME TAX laws AND PRACTICEThis study material has been published to aid the students in preparing for the Tax laws and PRACTICE paper of theCS Executive Programme. It is part of the educational kit and takes the students step by step through each phaseof preparation stressing key concepts, pointers and procedures. Company Secretaryship being a professionalcourse, the examination standards are set very high, with emphasis on knowledge of concepts, applications,procedures and case laws , for which sole reliance on the contents of this study material may not be , as per the Company Secretaries Regulations, 1982, students are expected to be conversant with theamendments to the laws made upto six months preceding the date of examination.

2 The material may, therefore, beregarded as the basic material and must be read alongwith the original Bare Acts, Rules, Orders, Case laws ,Student Company Secretary bulletin published and supplied to the students by the Institute every month as well asrecommended readings given with each study subject of Tax laws is inherently complicated and is subjected to constant refinement through new primarylegislations, rules and regulations made thereunder and court decisions on specific legal issues. It therefore becomesnecessary for every student to constantly update himself with the various changes made as well as judicialpronouncements rendered from time to time by referring to the Institutes journal Chartered Secretary and bulletin Student Company Secretary as well as other law/professional journals on tax purpose of this study material is to impart conceptual understanding to the students of the provisions of theDirect Tax laws (Income Tax and wealth Tax) and Indirect Tax laws (Service Tax, Value Added Tax and CentralSales Tax) covered in the Syllabus.

3 The study material contains all relevant amendments made by Finance Act,2013 and is applicable for the Assessment Year 2014-15 relevant for June 2014 and December 2014 , it may so happen that some developments might have taken place during the printing of the study materialand its supply to the students. The students are therefore, advised to refer to the Student Company Secretarybulletin and other publications for updation of the study students may note that Assessment Year for June 2014 and December 2014 examination is 2014-15. Besidesall other changes made through Notifications etc. and made effective six months prior to the examination will alsobe the event of any doubt, students may write to the Directorate of Academics and Prospective Planning in theInstitute for care has been taken in publishing this study material yet the possibility of errors, omissions and/ordiscrepancies cannot be ruled out.

4 This publication is released with an understanding that the Institute should notbe responsible for any errors, omissions and/or discrepancies or any action taken in that there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged if thesame are brought to its notice for issue of corrigendum in the Student Company Secretary study material has been updated upto 31st December (I) PAPER 4: TAX laws AND PRACTICEL evel of Knowledge: Working KnowledgeObjective: To acquire expert knowledge of practical and procedural aspects relating to Direct Tax laws , ServiceTax and A: INCOME TAX AND wealth TAX (70 MARKS) and Definitions Income Tax Act , 1961 Background, Concept and Mechanism of Income Tax Definitions, Concept of Income, Previous Year, Assessment Year, Distinction between Capital and RevenueReceipts and Expenditure, Residential Status Basis of Charge and Scope of Total which do not form part of Total of Total Income under Various HeadsSalaries, Income from House Property, Profit and Gains of Business or Profession, Capital Gains, Incomefrom Other Of Income, Set-off and Carry-Forward of Losses and Deductions from Total IncomeIncome of Other Persons included in Assessee s Total Income; Aggregation of Income and Set Off or CarryForward of Losses; Various Deductions to be made in Computing Total Income, Rebates and Relief s.

5 ApplicableRates of Taxes and Tax of different kinds of personsTaxation of Individuals including Non-Residents, Hindu Undivided Family, Firms, LLP, Association of Persons,Cooperative Societies, Trusts, Charitable and Religious and Tax Incidence on CompaniesComputation of Taxable Income and Assessment of Tax Liability, Dividend Distribution Tax, Minimum AlternateTax and Other Special Provisions Relating to and Recovery of TaxTax Deduction at Source, Tax Collection at Source, Recovery and Refund of Tax; Provisions of Advance for Assessment, Appeals, Revisions, Settlement of Cases and Penalties & OffencesProvisions concerning Procedure for Filing Returns, Signatures, E-Filing, Assessment, Reassessmentand Settlement of Cases, Special Procedure for Assessment of Search Cases, E-Commerce Transactions,Liability in Special Cases, Refunds, Appeals and Revisions; Penalties Imposable, Offences and Planning & Tax ManagementConcept of Tax planning, Tax planning with reference to setting up a New Business; Location; Nature ofvBusiness; Tax Holiday, etc.

6 Tax Planning with regard to Specific Management Decisions such as Mergers andTakeovers; Employees Remuneration; Voluntary Retirement Tax Planning with reference to FinancialManagement Decisions such as Borrowing or Investment Decisions; Reorganization or Restructuring of Tax Act, 1956 Background, Concept and Charge of wealth Tax Assets, Deemed Assets and Assets Exempt from Tax Valuation of Assets, Computation of Net wealth Return of wealth Tax and Provisions concerning Concepts of International TaxationResidency Issues; Source of Income; Tax Havens; Withholding Tax, Unilateral Relief and Double TaxationAvoidance Agreements, Controlled Foreign Corporation, Advance Rulings and Tax Planning, Authority forAdvance Rulings, Pricing Concepts, Meaning of International Transactions Computation of Arm s Length Price & Methods Documentation and Procedural Anti Avoidance Rules (GAAR)PART B - SERVICE TAX & SALES TAX (30 Marks)

7 Overview of Service TaxBackground, Negative List Approach, Taxable Services, Administrative Mechanism, Registration and ProceduralAspects, Rate and Computation of Tax, Levy, Collection and Payment of Service Overview of Value Added TaxLegislative Background, Concept of VAT, Declared Goods, Administrative Mechanism, Registration andProcedural Aspects, Rate and Computation of Tax, Levy, Collection and Payment of Sales TaxTax on Inter- State Trade and Exports - Registration, Preparation and Filing of E-Returns, Rates of Tax,Assessment and OF RECOMMENDED BOOKSPAPER 4: TAX laws AND Tax and wealth Tax V. K. Singhania:Students Guide to Income-tax including Service Tax/VAT; TaxmannPublications Pvt. Ltd., 59/32, New Rohtak Road, New Delhi 110 005(Edition based on provisions applicable for AY 2013-14) Ahuja and:Systematic Approach to Income-tax, Service Tax and VAT; Bharat LawRavi GuptaHouse, T-1/95, Mangolpuri Industrial Area, Phase I, New Delhi-110 083.

8 (Edition based on provisions applicable for AY 2013-14) B. Lal and N. Vashist:Direct Taxes, Income Tax, wealth Tax and Tax Planning; DarlingKindersley (India) Pvt. Ltd., 482, FIE, Patparganj, (Editionbased on provisions applicable for AY 2013-14) H. C. Mehrotra and:Direct Taxes (with Tax Planning); Sahitya Bhawan, Agra. (Edition basedDr. Goyalon provisions applicable for AY 2013-14) Ahuja and:Professional Approach to Direct Taxes Law & PRACTICE ; Bharat PublicationsRavi Gupta(Edition based on provisions applicable for AY 2013-14) Tax and Value Added S. Datey:Service Tax Ready Reckoner; Taxmann Publications, 59/32, New RohtakRoad, New K. Mittal:Law, PRACTICE & Procedure of Service Tax; CCH India, (Walters Kluwer(India) Pvt. Ltd.), 501-A, Devika Tower, 6 Nehru Place, New Sangal and:All India VAT manual (4 Vols.); Commercial Law Publisheres (India) PvtJagdish Rai GoelLtd.

9 , 151, Rajindra Market, Opp. Tis Hazari Courts, Delhi 110 Act:Income Tax Act, 1961 & Income Tax Rules, Iyengars:Law of Income Tax, 11th Edition; Bharat Law House Pvt. Ltd., T-1/95,Mangolpuri Industrial Area, Phase I, New Delhi-110 :(i)Students are advised to read the relevant Bare Acts. Student Company Secretary and Chartered Secretary regularly for updating the knowledge.(ii)The latest editions of all the books relevant for the applicable assessment year referred to above should be OF STUDY LESSONSPART and Important of Charge, Scope of Total Income and Residential which do not Form Part of Total of Total Income under Various Heads :Part I Income under head SalariesPart II Income under head House PropertyPart III : Income From Business or ProfessionPart IV Income from Capital GainsPart V Income from Other of Other Persons Included in Assessee s Total Income and Set-Off or Carry Forward from Total of Tax Liability of Hindu Undivided Family/ Firm/Association of Persons/Co-operative of Tax Liability of of Tax Liability of Non-resident and Recovery of for , Revisions, Settlement of Cases and Penalties & Planning & Tax Tax Act, Concepts of International Ruling and GAARPART , Administration and Procedural Aspects of Service , Collection and Payment of Service Added Tax Introduction, Computation and Other Procedural provisions in India and VAT System in other Countries and Scope for Company SecretariesviiiCONTENTSPART A.

10 THE INCOME TAX AND wealth TAX ACTLESSON 1 INTRODUCTION AND IMPORTANT DEFINITIONSI ntroduction3 Basic Concepts of Income Tax Act3 Income4 Assessee11 Person [Section 2(31)]12 Assessment Year [Section 2(9)]13 Previous Year (Section 3)13 Computation of Taxable Income and Tax Liability of an Assessee14 Tax Rates15 LESSON ROUND UP16 SELF TEST QUESTIONS17 LESSON 2 BASIS OF CHARGE, SCOPE OF TOTAL INCOME AND RESIDENTIAL STATUSR esidential Status and Tax Liability (Section 6)22 Test for Residence of individuals22 Tests of Residence for Hindu Undivided Families, Firms and other Associations of Persons27 Tests of Residence for Companies29 Charge of Income-tax (Section 4)29 Meaning and Scope of total Income (Section 5)31 Apportionment of Income between Spouses Governed by Portuguese Civil Code (Section 5A)39 Tax incidence vis-a-vis Residential Status40 LESSON ROUND UP44 SELF TEST QUESTIONS45 LESSON 3 INCOMES WHICH DO NOT FORM PART OF TOTAL INCOMEG eneral Exemption50ixPageSpecific Exemption93 Special Provisions in respect of Newly Established Units in Special Economic Zone (Section 10AA)93 Tax Exemptions for Charitable Trusts and institutions95 Tax Exemptions to Political Parties (Section 13A)106 Voluntary Contributions received by an Electoral Trust (Section 13B)107 LESSON ROUND UP107 SELF TEST QUESTIONS107 LESSON 4 COMPUTATION OF TOTAL INCOME UNDER VARIOUS HEADSPART I INCOME UNDER THE HEAD SALARIESB asis of Charge112 Salary [Section 17(1)]116 Allowances117 Perquisites [Section 17(2)]118 Valuation of Perquisites126 Profits in Lieu of or in Addition to Salary131 Deductions Allowed from Salaries (Section 16)


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