GROUP 8 PRESENTATION.

LUKYAMUZI RASHID 121-053011-24609

NAMBAZIRA SHAKIRA 121-053011-25182
AKONGOI EMMANUEL 121-053011-25406
AMUJAL JUDITH NANKYA 121-053011-24943
KABALA PATIENCE 121-053011-23785
LEMI JOHN BOSCO FRANK 121-053011-26000
MUSIBIKHA RACHEAL 121-053011-25487
NYAPENDI MARY 121-053011-25761
SERWANGA DAUDA 121-053011-25278
YIGA YASIN 121-053011-25322
GIZAMBA TIFU. 121-053011-24026

QN: DISCUSS THE CONCEPT OF INCOME

Income may be defined as a gain derived from capital from labor both combined provided it be
understood to include profits gained through a sale or conversion of capital assets as per Pitney
.J in Eisner V Macomber 252 U.C 189( Supreme court of USA )1919.
The essential connotation of income is gain to someone during a specific period and measured
according to the objective standards.
Income tax is a tax levied on income thus referred to as taxable income.
Taxable income.
Taxable income is the value of what a taxpayer could have consumed during the year without
diminishing his/her capital wealth in the process.
Sources of income include, land, trade, profession securities and employment.
Section 2 of the Income Tax Act defines Taxable person to include an individual, a partnership,
a trust, a company, a retirement fund, government, a political sub division of government and a
listed institution.
Section 2 of the Income Tax Act defines year of income as a period of 12 months ending on 30th
June and it includes a substitute year of income and a traditional year of income.
The year of income is considered to end on 30th June unless one gets approval from the
commissioner to use a substitute year of income.
Section 39 of the Income Tax Act gives a tax payer a right to apply to the commissioner to use a
substituted year or transitional year.
PERSONAL TAXATION.
Income Tax is imposed by section 4 of the Income Tax Act which provides that subject to and in
accordance with this Act, a tax to be known as income Tax shall be charged for each year of
income and is hereby imposed on every person who has chargeable income for the year of
income.
Section 2 of the Income Tax Act defines Taxable person to include an individual, a partnership,
a trust, a company, a retirement fund, government, a political sub division of government and a
listed institution.
Section 2 of the Income Tax Act defines year of income as a period of 12 months ending on 30th
June and it includes a substitute year of income and a traditional year of income.
Section 15 of the Income Tax Act defines chargeable income as the gross income of the person
for the ear less total deductions allowed under the Act.
It should be noted that a chargeable income must have been received or been in possession of
the Tax payer before income tax is imposed on it.
In Brown V National Provident Institution 1921. 2 A.C 222. It was held that a source of Income
is chargeable to income tax for a particular year if a person possess that source in that year.
The sources of income include; business income, employment income property income and
other income derived by a person
BUSINESS INCOME.
Section 2 of the Income Tax Act provides that a business refers to any trade, profession,
occasion commerce or any adventure in the nature of trade, or a manufacture but does not
include an office of employment.
Section 18 of the Income Tax Act define business income to mean any income derived by a
person carrying on business, whether it is or a revenue or capital nature.
Section 18 of the Income Tax Act provides that business income includes;

(a) Gains or loss on disposal assets,

 (b) Any amount derived as consideration for a restriction on a person’s capacity to carry on
business.
(c) The gross proceeds from the disposal of trading stock,
(d) Any amount include in the business income of an individual under other sections,
(e) The value of any gifts,
(f) Interests,
(g) Rent.

Section 2 of the Income Tax Act defines business assets to mean any asset which is used or held for use
in a business and includes any assets held for sale in a business which is used or held for use in a
business.

Partnerships.

Section 66 (1) of the Income Tax Act provides that income and loses arising from partnership activities is
taxable.

Concession from arrangement with creditors.

Section 18(3) of the Income Tax Act states that where as a result of any concession of, granted by, or
compromise made with a tax payers creditors in the course of any insolvency, the tax payer derives a
gain on the cancelation of a business debt, such gain shall be deemed to be part of the business income
of the tax payer and that gain is taxed.

EMPLOYMENT INCOME.

Section 2 (x) of the Income Tax Act defines an employee to mean a person engaged in employment.

Section 2(y) ITA defines employer as a person who employs or remunerates an employee.

Section 2(2) ITA defines employment to mean;

(a) The position of an individual in the employment of another person or

(b) A directorship of a company or
(c) A position entailing the holder of a fixed or ascertainable remuneration or
(d) The holding or acting in the public office.

Section 19 of the Income Tax Act provides employment income to include;

(a) Any salary, wages, leave pay, payment in lieu of leave, overtime, fees, commission, gratuity,
bonus, or the amount of travelling, entertainment, the cost of living, housing, medical or any
other allowances.
(b) Any benefits bin kind,
(c) Compensation for termination of contract
(d) Premium for insurance.
(e) For changes in terms of employment
(f) Value of shares under the employment scheme.

Note; Private use of motor vehicles provided by the employer to the employee for private use is also
taxed. It is taxed in this way;
20% X Market value of the car X Number of days in the year of income during which the car was used /
Number of days in the year of income – Any payments by the employee for the benefit.

Section 21 of the Income Tax Act provides for exemption of some employment income which include;

(a) Employment income of a person working in the public service of the government of a foreign
country.
(b) Allowances payable outside Uganda to persons working in Uganda foreign mission.
(c) Employment income derived under a technical assistance agreement.
(d) Pension.
(e) Official employment income of persons employed in Uganda’s armed forces, police and prisons,
other than a person employed in these organizations in a civil capacity.
(f) Foreign sources employment income derived by a resident individual on which he/she paid
foreign income tax.
(g) Income of any person entitled to privileges under the Diplomatic Privileges Act
(h) A lump sum payment made by a resident retirement fund to a member of the fund or a
dependent member of the fund.

Emoluments/payments/ gains liable to income tax.

(i) Wages, salary, leave pay, payment in lieu of leave, fees, commission, bonus, gratuity, sick pay
etc are liable to be taxed as income tax.

The above are provided for under section 19(1) (a) of the Income tax act

Section 19(1) (a) of the Income Tax Act provides employment income to include; Any salary, wages,
leave pay, payment in lieu of leave, overtime, fees, commission, gratuity, bonus, or the amount of
travelling, entertainment, the cost of living, housing, medical or any other allowances.

(ii) Allowances.

Allowances such as; Travelling, lunch and entertainment, accommodation and provisions of an
official car for private use.

Section 17(1) (b) of the Income Tax Act provides for allowances to include, Travelling, entertainment, or
other allowances.

However such allowances are not taxable if it represents solely the reimbursement to the recipient of an
amount expended wholly and exclusively in the production of his income from the employment or
services rendered. Section 19(1) (c) of the income tax act states the above.

Benefits in Kind.

Section 17 (1) (b) of the Income Tax Act provides that such benefits include the value of any benefits
granted.

Section 19 (3) ITA provides that a payment in kind a benefit received in a form other than money may
be taxable but only if such benefit is convertible into cash.
Compensation for termination of contract of employment.

Section 19 (1) (c) of the Income Tax Act provides employment income to include; Compensation for
termination of contract

The compensation could be on or after the termination.

In Comptroller General of Inland Revenue V Knight 1973 AC, Lord Wilberforce observed that where a
sum of money is paid under a contract of employment, it is taxable even though it is received at or after
the termination of the employment. Where a sum of money is paid as consideration for a breach of
contract of employment as damages that sum is not taxable.

Premium for life insurance of employees.

Employment income also includes any amount paid by a tax- exempt employer as a premium for
insurance of the life of the employee or any of his/her dependents.

Section 19 (1) (d) of the Income Tax Act provides employment income to include Premium for
insurance.

The premium paid by a tax paying employer would not be regarded as part of the employee’s income.

Section 22(2) (j) of the Income Tax Act states that the tax paying employer would not be allowed to
deduct such payments from his income for purposes of taxation.

Payments upon variation of agreement by parties.

Employment income includes any amount derived as consideration for the employees’ agreement to
any conditions of employment or to any changes in his/her conditions of employment.

Section 19 (1) (f) of the Income Tax Act provides employment income to include changes in terms of
employment.

Hamblett V Godfrey, it was held that any amount derived as consideration for the employees’
agreement to any conditions of employment or to any changes in his/her conditions of employment is
taxable.

Housing.

The cost of housing provided by an employer to an employee is also taxable

(g) Section 19 (1) (a) of the Income Tax Act provides employment income to include; Any salary,
wages, leave pay, payment in lieu of leave, overtime, fees, commission, gratuity, bonus, or the
amount of travelling, entertainment, the cost of living, housing, medical or any other
allowances.

NON- TAXABLE BENEFITS

Some benefits are excluded from taxation Eg, expenditure by an employer on the passage to or from
Uganda in respect of the employee’s appointment or termination of the employment.
Section 19(2) (a) of the Income Tax Act states that expenditure by an employer on the passage to or
from Uganda in respect of the employee’s appointment or termination of the employment can’t be
taxable.

Section 19(2) (b) of the Income Tax states that any reimbursement or discharge of the employee’s
medical expenses are not taxable.

Section 19(2) (c) of the Income Tax states that any amount paid as premium for insurance of life of
the employee for benefits of the employee or his/her dependents is not taxable.

Section 19(2) (d) of the Income Tax states that allowances given by costs incurred or likely to be
incurred by the employee on accommodation and travel expenses or meals or refreshments while
undertaking travel in the course of performing duties of employment is not taxable.

Section 19(2) (e) of the Income Tax states that benefits granted by the employer in the month and
do not exceed 10,000 shillings are also not taxable.

Section 19(2) (f) of the Income Tax states that payments made to a retirement fund for the benefits
of the employee or his dependents are not taxable.

PROPERTY INCOME/INCOME FROM USE OF PROPERTY.

Income from use of property is also taxable.

Section 20(1) (a) of the Income Tax Act states that this income include; Rent, Premium, Dividends,
Interests, Annuity, or similar considerations received.

Rental income.

In Dhanji Govind V Commissioner of Income Tax. It was held that deposits under a lease were
payments of advance rent and were taxable.

Income derived from lease of tangible movable property is treated as royalty and therefore taxable.

Section 5(2) of the Income Tax Act provides for the computation of rental tax payable by an
individual.

The rental tax is currently 20% of the chargeable income in excess of 1,560,000 which is the
threshold.

Dividends/Interests.

Payments received as interests are taxable.

The act regards dividends/interests as property income.

Section 20(1) (a) of the Income Tax Act states that this income include; Rent, Premium, Dividends,
Interests, Annuity, or similar considerations received.

PENSION PAYMENTS INCOME.

These income are not taxed because of Article 254 (2) of the 1995 constitution.
Article 254 (2) of the 1995 constitution provides that the pensions payable to any person shall be
exempt from tax.

Section 22(2) (k) of the Income Tax Act provides also that pensions payable to a person shall not be
taxed.

INCOME FROM NON-RESIDENT PERSONS.

A non-resident person is only taxed on income derived from sources of income in Uganda.

Section 18(2) (b) of the Income Tax Act provides for the same.

In conclusion, income has highly contributed to the raising of revenue in Uganda by collecting
taxes from different sources of income