Description

Fundamentals of Taxation
April 2024 Examination
Q1. The Income Tax Act 1961 defines and describes various terms. While reading and
making interpretations it’s important that these definitions to be adhered. In general,
Assessee and persons are used interchangeably but the Income Tax Act differentiate
between the two. Discuss, in the light of provisions of the Income Tax Act, 1961, how these
differs. (10 Marks)
Ans 1.
Introduction
The Income Tax Act of 1961 in India serves as a cornerstone in the realm of taxation, outlining
the legal framework and definitions pivotal for the appropriate levy and collection of income tax.
Central to this framework is the precise interpretation of terms defined within the Act, which is
crucial for ensuring compliance and legal accuracy. Among the myriad terms, the distinction
between ‘Assessee’ and ‘Person’ holds significant importance. While often used interchangeably
in common parlance, the Act provides distinct definitions for each, reflecting the nuanced
approach required in tax law. Understanding this distinction is not merely an academic exercise;
it forms the foundation for determining tax liability and the scope of taxation. This essay delves
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Q2. Ms. Elizabeth Miller is an American citizen. She always dreamt of visiting India. She
came to India on 5 August 2022 and visited four states. She finally left for America on 25
December 2022. What will be her residential status for the subsequent assessment year?
Identify the assessment year and previous year as per the Income Tax Act, Discuss the
relevant provision mentioning the categories of residential status of individuals, application
and conclusion in the given case. (10 Marks)
Ans 2.
Introduction
The concept of residential status under tax laws is pivotal in determining a person’s tax liability
in a given country. In the context of Ms. Elizabeth Miller, an American citizen who spent a
significant amount of time in India during the year 2022, the determination of her residential
status is essential to understand her tax obligations under the Indian Income Tax Act. The
assessment of an individual’s residential status involves a careful examination of their physical
presence in the country during the relevant financial year and is governed by specific rules
outlined in the Act. This analysis is crucial as it dictates the scope of taxable income in India. In
Q3. In September 2021, in the context of India, an individual taxpayer has the option to
choose between the old tax regime and the new tax regime introduced by the government.
Eligible taxpayers, including salaried individuals and pensioners, can choose between these
two regimes every financial year based on their preference and tax-saving requirements.
Once a taxpayer selects a specific regime for a particular financial year, it remains
applicable for that year and can be changed in subsequent years.
When deciding between the old and new tax regimes, individuals must carefully evaluate
their financial situation, investment plans, and potential tax-saving opportunities. Those
with substantial deductions under the old regime or specific financial goals to be achieved
through investments may find it more beneficial to stick with the old regime. Conversely,
taxpayers seeking simplicity and lower tax rates may opt for the new tax regime.
An individual can choose the new tax regime against the old tax regime.
a) List down at least 10 such exemptions/ deductions. (5 Marks)
Ans 3a.
Introduction
The introduction of the new tax regime in India in 2021 brought with it significant changes to the
tax landscape. Under this regime, taxpayers, including salaried individuals and pensioners, are
presented with an option to choose between the old and new tax structures each financial year.
This decision is crucial as it impacts their overall tax liability. The old tax regime offers various
exemptions and deductions, which can significantly reduce taxable income. It’s essential for
b) Discuss any five such exemptions/deductions that the tax payer will have to give up
while choosing the new tax regime. (5 Marks)
Ans 3b.
Introduction
Choosing the new tax regime under India’s tax laws involves relinquishing several exemptions
and deductions available under the old regime. This decision can have significant implications on
a taxpayer’s overall tax liability. The new regime offers simplified tax calculations with lower tax
rates, but at the cost of giving up certain tax-saving benefits. It is crucial for taxpayers to
understand which exemptions and deductions they will forego and assess whether the trade-off is