The following basic principle on the basis of charging income tax
- Income tax is an annual tax on income
- income of previous year is taxable in the following next assessment year at the rate or rates applicable to the assessment year. however there are certain exception to this rule
- tax rates are fixed by the annual finance act
- tax is charged on every person as defined in section 2(31)
- the tax is charged on the total income of every person computed in accordance with the provision of this act
- income tax is to be deducted at the source or paid in advance as provided under the provision of the act
the total income is computed on the basis of residential status of the assessee the sum is classified into the following five heads
- income from salaries
- income from house property
- profit of business or profession
- capital gain and
- income from other source
for computing the total income of an assessee and the tax payable by him following procedure is followed
- classify the income under each of the about five head and then deduct from the income under each head the deduction permissible under the act in respect of that head of income the balance of amount left under each head of income is its assessable income
- total upto the assessable income of each head and the aggregate of all these assessable income is called the gross total income
- from the gross total income, thus arrived at deduct the deduction permissible under the section 80c to 80u of the act for computing the total income. the balance left After subtracting the allowable deduction is called the total income
- the amount of Income Tax is payable is then calculated on the total income according to the rates prescribed by the finance act for the relevant assessment year and the rate prescribed under different section of the act
