1.

Assessment Year and Previous Year

The previous year is the financial year in which income is earned, starting from 1st April to
31st March of the following year. The assessment year is the year immediately following the
previous year, in which the income earned is assessed and taxed. For example, income
earned in the previous year 2023–24 will be assessed in the assessment year 2024–25. This
system ensures time for the government to evaluate income and compute tax liability.

2. Assessee

An assessee is any person (individual, HUF, company, firm, AOP/BOI, local authority, or
artificial juridical person) who is liable to pay tax, or against whom proceedings under the
Income Tax Act have been initiated. The term also includes a person deemed to be an
assessee, for instance, a legal heir of a deceased taxpayer or a representative assessee
under Section 160.

3. Residential Status

Residential status determines the taxability of income. An individual may be Resident and
Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), or Non-Resident
(NR). For an individual to be considered resident, they must stay in India for 182 days or
more in a financial year, or 60 days in that year and 365 days in the preceding four years.
Global income is taxable for RORs, but only Indian income is taxable for NRs.

4. Definition of Salary

Salary includes wages, annuity, pension, gratuity, advance salary, leave encashment,
commission, perquisites, and retirement benefits received from an employer. It is taxable
under Section 15 to 17 of the Income Tax Act. For example, if an employee receives ₹50,000
as monthly salary plus ₹5,000 in house rent allowance (HRA), both form part of taxable
salary, unless exempted.

5. Perquisites

Perquisites are benefits or amenities provided by an employer to an employee in addition

Capital receipts are non-recurring and arise from non-operational activities, like sale of fixed
assets, loan receipts, or capital contribution. These are generally not taxable unless
specifically covered. Revenue receipts are recurring and arise from the normal course of
business, such as sales, interest, or rent income, and are taxable. For instance, sale of
machinery is a capital receipt, while income from rent is a revenue receipt.

7. Articles 265 & 268 of the Indian Constitution

Article 265 provides that “no tax shall be levied or collected except by the authority of law,”
ensuring protection against arbitrary taxation. Article 268 empowers the Union to levy
duties like stamp duties and excise on medicinal and toilet preparations but mandates that
such proceeds be assigned to the States. These provisions uphold federal principles and
fiscal discipline.

8. Slab Rates and Basic Exemption Limit

Under the old regime, individuals below 60 years have a basic exemption limit of ₹2.5 lakh.
Income between ₹2.5–₹5 lakh is taxed at 5%, ₹5–₹10 lakh at 20%, and above ₹10 lakh at
30%. Senior citizens (60–80 years) get an exemption of ₹3 lakh, and super senior citizens
(above 80 years) get ₹5 lakh. Under the new regime (Section 115BAC), concessional rates
apply but with no exemptions or deductions.
15 Probable MCQs for Taxation Internals

1. What is the duration of a previous year under the Income Tax Act?

A. Calendar Year

B. 1st April to 31st March

C. Financial Year as decided by assessee

D. Assessment Year

Correct Answer: B

2. Who is a deemed assessee?

A. Individual who earns salary

B. Legal heir of a deceased taxpayer

C. Non-resident

D. Foreign company

Correct Answer: B

3. Which Section defines ‘salary’ under the Income Tax Act?

A. Section 14

B. Section 15 to 17

C. Section 24

D. Section 10

Correct Answer: B

4. Residential status is determined based on the number of days an individual stays in India.
What is the primary condition?
A. 120 days

B. 90 days

C. 182 days

D. 200 days

Correct Answer: C
5. Which of the following is a capital receipt?

A. Sale of goods

B. Commission income

C. Rent from property

D. Amount received from sale of land

Correct Answer: D

6. Under which Article is the imposition of tax without authority of law prohibited?

A. Article 267

B. Article 265

C. Article 300

D. Article 266

Correct Answer: B

7. What is the basic exemption limit for a senior citizen (age between 60 to 80 years)?

A. ₹2.5 lakh

B. ₹3 lakh

C. ₹5 lakh

D. ₹4 lakh

Correct Answer: B

8. Which of the following is a perquisite?

A. House Rent Allowance

B. Bonus C. Interest on savings

D. Rent-free accommodation

Correct Answer: D
9. What is the slab rate for income between ₹5 lakh and ₹10 lakh under the old regime?

A. 10%

B. 5%

C. 20%

D. 30%

Correct Answer: C

10. Who is a non-resident?

A. One who resides in India for more than 182 days

B. One who resides in India for less than 182 days

C. One who earns foreign income

D. One who is a foreign citizen only

Correct Answer: B

11. Stamp duty under Article 268 is levied by the Union but collected by whom?

A. Local Authority

B. Parliament

C. State Government

D. Judiciary Correct

Answer: C

12. Which of the following income is not taxed under the head 'Salaries'?

A. Bonus

B. Pension

C. House Rent Allowance

D. Dividend from shares

Correct Answer: D
13. Which income is taxable for a Non-Resident Indian?

A. Global Income

B. Indian-sourced income only

C. Agricultural income

D. Gift received abroad

Correct Answer: B

14. What type of receipt is an insurance claim for damage to machinery?

A. Revenue Receipt

B. Capital Receipt

C. Business Income

D. Exempt Income

Correct Answer: B

15. Advance salary received in a financial year is taxable in which year?

A. Previous year only

B. Assessment year

C. Year of receipt

D. Next financial year

Correct Answer: C