TAXATION LAW

SYLLABUS
MODULE I: General Principles of Taxation Laws
 General Principles of Taxation Laws
 History and Development of Tax Laws in India
 Fundamental Principles relating to Tax Laws Theory
 Taxing power and constitutional limitations
 Distinction between: Tax, Fee and Cess; Tax avoidance and Tax evasion.
MODULE II: Basic concepts of Income Tax
 Income
 Previous Year
 Assessment Year,
 Person
 Assesse and Total Income
 Income not included in the Total Income.
 Residential status
 Clubbing of Income
 Tax planning
 Rate of Income Tax
 Heads of Income
 Salaries
 Income from House Property
 Income from Business or Profession
 Capital Gains
 Income from Other sources
 Deductions under the Income Tax Act, 1961
 Income Tax Authorities: Power and Functions
 Filing of returns and procedure for assessment,
 Offences and Penal Sanctions.
MODULE III: Goods and Service Tax
 Introduction
 Impact of GST
 Advantages and Disadvantages of GST
MODULE IV: Customs Act
 Levy of Custom Duty and exemption from Custom Duty
 Types of Duty and Valuation of Duty
 Offences and Prosecution
 Confiscation and Penalties
 Appeals and Revision
 MODULE I
General Principles of Taxation Laws
A tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal
entity), collected by a state or the functional equivalent of the same, such that failure to pay,
or evasion of or resistance to collection of tax, is punishable by law. The principle reason for
taxation was to pay for government expenditures.
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an
individual or legal entity) by a governmental organization in order to fund government
spending and various public expenditures (regional, local, or national), and tax compliance
refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying
the right amount of tax at the right time and securing the correct tax allowances and tax
reliefs.
The taxes collected have been used by the government to carry out many functions. Some of
these include:
 Expenditures on war,
 The enforcement of law and public order,
 Protection of property,
 Economic infrastructure (such as roads, legal tender, enforcement of contracts, etc.),
 Public works,
 Social Engineering,
 The operation of Government itself, and
 To fund welfare and public services such as education systems, health care systems,
pensions for the elderly, unemployment benefits, and public transportation, energy,
water and waste management systems, common public utilities, etc.
1. Tax is Compulsory and not Voluntary – A tax is imposed by law. So tax is compulsory
payment to the Governments from its citizens. Tax is duty of every citizen to bear his
share for supporting the government. The tax is compulsory payment, refusal or
objection for paying tax due leads to punishment or is an offence of the Court of law.
2. Tax is Contribution – Contribution means in order to help or provide something. Tax
is contribution from members of community to the Government. A tax is the duty of
every citizen to bear their due share for support to government to help it to face its
expenditures. Some wants are common to everybody in the society like defence and
security, so these wants cannot be satisfied by individuals. These social wants are
satisfied by Governments, hence it is the duty of the people to support government for
these social wants.
3. Tax is for Public Benefit – Tax is levied for the common welfare of society without
regard to benefit to any special individual. Government proceeds are spent to extend
common benefits to all the people.
4. Tax is paid out of Income of the tax payer – Income means money received,
especially on regular basis, for work or through investment. Tax is paid out of income
 as long as the income becomes realized, here the tax is imposed. Income owner has
profit from any business, so he should pay his share to support the Government.
5. Government has the power to levy Tax – Governments are practicing sovereign
authority upon the citizens through levying of taxes. Only government can collect tax
from the people.
6. Tax is not the cost of the benefit – Tax is not the cost of benefit conferred by the
government on the public. Benefit and taxpayer are independent of each other, and
payment of taxation is of course designed for conferring of benefits on general public.
7. Tax is for the economic growth and public welfare – Major objective of the
government is to maximize economic growth and social welfare. Developmental
activities of the nations generally involve two operations, the raising of revenue and
the spending of revenue, so the government spends taxes for economic benefit, for
entire community and for aggregate welfare of the society.

History and Development of Tax Laws in India

The taxation system in India has its roots in ancient times. References in the Manu
Smriti and Arthasastra indicate that rulers were empowered to levy taxes in a fair and
proportionate manner. Manu emphasized that taxation should be based on the income
and expenditure of the subjects, avoiding both extremes of no taxation and excessive
taxation. Traders and artisans were required to pay one-fifth of their profits, while
agriculturists contributed between one-sixth and one-tenth of their produce. Taxes
were paid in the form of coins, cattle, grains, raw materials, or personal service. The
system incorporated both direct and indirect taxes, making it broad-based and
productive.

In modern India, the Income Tax Act of 1860 was the first attempt to introduce a
statutory framework for taxation, enacted by the British after the Revolt of 1857. It
was temporary and was replaced by other forms of taxation. The Income Tax Act of
1886 introduced a permanent structure, exempted agricultural income, and recognized
the Hindu Undivided Family as a taxable entity. The Act of 1918 broadened the scope
of taxable income by including casual receipts and allowing business deductions but
was soon replaced. The Income Tax Act of 1922 marked a significant development by
 establishing tax authorities and providing that tax rates would be fixed annually
through Finance Acts, thereby introducing flexibility and administrative stability.

The present system is governed by the Income Tax Act, 1961, which came into effect
on 1 April 1962. It replaced the 1922 Act and continues to regulate income tax in
India with the support of the Income Tax Rules, 1962. The Act provides an elaborate
framework for the computation of total income, determination of tax liability, and
assessment, collection, and recovery of taxes. It defines the heads of income,
prescribes methods of accounting, provides exemptions, deductions, and rebates, and
lays down special provisions for different classes of assessees such as individuals,
Hindu Undivided Families, firms, companies, and non-residents. The Act also
specifies the administrative structure of income tax authorities, their powers and
functions, and detailed procedures for appeals, revisions, penalties, and prosecutions.
The Income Tax Act, 1961 is dynamic in nature, being amended each year through the
Finance Acts to accommodate changes in economic policy, fiscal needs, and social
welfare objectives, thereby ensuring its continued relevance and adaptability.

Fundamental Principles relating to Tax Laws Theory

Taxing power and constitutional limitations
The roots of every law in India lies in the Constitution, therefore understanding the
provisions of Constitution is foremost to have clear understanding of any law. Let us first
understand what it talks about tax:
Article 265: no tax shall be levied or collected except by the Authority of Law.
Article 246: distributes legislative powers including taxation, between the parliament of
India and the State Legislature.
Schedule VII- enumerates powers under three lists
Union List: Powers of Central Government
Legislative List: Powers of State Government
Concurrent List: Both Central and State Government have powers, in case of conflict; law
made by Union Government prevails
Distinction between: Tax, Fee and Cess; Tax avoidance and Tax evasion.
MODULE II: Basic concepts of Income Tax
Income
Previous Year
Assessment Year,
Person
Assesse and Total Income
Income not included in the Total Income.
Residential status
Clubbing of Income
Tax planning
Rate of Income Tax
Heads of Income
Salaries
Income from House Property
Income from Business or Profession
Capital Gains
Income from Other sources
Deductions under the Income Tax Act, 1961
Income Tax Authorities: Power and Functions
Filing of returns and procedure for assessment,
Offences and Penal Sanctions.