INCOME TAX ASSESSMENT OF AN INDIVIDUAL
An individual means a simple person, a human being either male or female, living identity. In case of minor, assessment made on the parents, guardian or trustee. An individual is taxed not only on his total income but in some cases; he may be assessable on income of other person according to section 60 to 64. Computation of total income and the related provision relating to an individual are as under.
Computation of total income of an individual: - the following points should keep in mind while calculating the total income of an individual.
Income earned in individual capacity: - income earned by an individual will be shown in different heads of the assessment like income from salary, income from business, capital gains are shown differently.
Income from membership or others entities: - income of other entities will be added to the individual income and he needs to pay income tax for it. Some of the examples are as follows.
1- As a member of partnership firm assessed: - if a partnership firm is assessed as such, the profits to the partners share is exempt from tax. In other words if the firm pays all the taxes relating to it. The partners need not pay it again. But if in the partnership firm a partner receives salary, bonus, commission which is the expenses for the firm. Such remuneration is taxable in the head of business income for the partner who receives such income. Section 28(iv).
2- As a member of association of persons: - if an individual is a member of AOI, body of individuals share income from such association is includable in the individual total income only for rate purposes. (association or body is chargeable to tax at the normal rates on such income)
3- If total income of AOP is not chargeable to tax, no rebate of tax is allowed.
4- If the AOP is chargeable to tax at maximum marginal rates, the share profits from AOP is fully exempt.
5- As a member of company:- where is an individual is a shareholder of the domestic company, any dividend paid on or after 1 April 2003 is exempt in the hands of the shareholder under section 10(34) of income tax act. Domestic company is liable to dividend tax on such distribution under section 115. however any loan advanced by a company to a shareholder holding 10% equity shares is taxable as deemed dividend to the extent it is covered by the accumulated profits.
6- Dividends from foreign company are fully taxable in the hands of the shareholders.
7- Any income from importable estate of an H.U.F is taxable in the individual assessment of the Karta.
CAclubindia
