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[Rebbeca Schulke]

Income Tax Law And Practice: A Comprehensive Guide for Students and Professionals

Income tax is a complex and dynamic subject that affects individuals, businesses, and governments. It is also a topic that requires a thorough understanding of the legal principles, rules, and practices that govern its application. This article provides an overview of the income tax law and practice in India, based on the latest edition of the book "Income Tax Law & Practice A.Y 2020-21" by Dr. H.C. Mehrotra and Dr. S.P. Goyal[^1^]. The article covers the following aspects:

• The basic concepts and definitions of income tax

• The sources and classification of income

• The computation of taxable income and tax liability

• The deductions, exemptions, and rebates available to taxpayers

• The procedure for filing returns and paying taxes

• The assessment, appeals, and penalties under the income tax law

• The recent amendments and developments in the income tax law

The article is intended for students and professionals who want to learn or refresh their knowledge of the income tax law and practice in India. It is also useful for taxpayers who want to understand their rights and obligations under the income tax law.

Basic Concepts and Definitions of Income Tax

Income tax is a direct tax levied by the central government on the income earned by a person in a previous year. The income tax law in India is governed by the Income Tax Act, 1961 and the rules made thereunder. The income tax law also incorporates the provisions of the Finance Acts, which are enacted every year to amend or introduce new provisions in the Income Tax Act.

The Income Tax Act defines various terms that are essential for understanding the income tax law and practice. Some of these terms are:

• Person: It includes an individual, a Hindu undivided family (HUF), a company, a firm, an association of persons (AOP), a body of individuals (BOI), a local authority, and any other artificial juridical person.

• Assessee: It means a person who is liable to pay tax or any other sum of money under the Income Tax Act. It includes every person who is deemed to be an assessee or an assessee in default under any provision of the Act.

• Previous year: It means the financial year immediately preceding the assessment year. For example, for the assessment year 2020-21, the previous year is 2019-20.

• Assessment year: It means the period of 12 months commencing on April 1 every year and ending on March 31 of the next year. For example, for the previous year 2019-20, the assessment year is 2020-21.

• Income: It means the total amount of money or its equivalent received or receivable by a person in a previous year from any source or sources. It includes profits, gains, dividends, interest, rent, royalty, fees, commission, salary, pension, winnings from lottery or crossword puzzles, etc.

• Agricultural income: It means any income derived from land situated in India that is used for agricultural purposes. It includes rent or revenue from such land, income from agricultural operations, income from processing of agricultural produce, etc.

• Residential status: It determines the scope of taxable income of a person in India. A person can be either a resident or a non-resident in India for income tax purposes. A resident can be further classified as a resident and ordinarily resident (ROR) or a resident but not ordinarily resident (RNOR).

Sources and Classification of Income

The Income Tax Act classifies income under five heads for the purpose of computation of taxable income and tax liability. These heads are:

• Income from salaries: It includes any remuneration received by an employee from an employer in cash or in kind for services rendered. It also includes allowances, perquisites, gratuity, pension, leave encashment, etc.

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