Basic Concepts of Taxation for CFP – 1

Assessment Year:

• Assessment year is the period of 12 months starting from April 1 of every year and ending on March 31 of the next year
• The period of assessment year is fixed by statute
• Income of the previous year of an assessee is taxed during the following assessment year at the rates prescribed for such assessment year by the relevant Finance Act

Previous Year:

• The year in which income is earned is known as previous year
• And the next year in which income is taxable is known as assessment year

Hence, current assessment year is 2012-13 for the previous year 2011-12.

Exceptions: where the previous year is assessment year

1. Persons Leaving India

Example:

Mr. Michael, a foreign citizen, is residing in India since 2004. While completing his assessment for the AY 2009-10 on February 14, 2010, the AO comes to know that Michael will leave India on April 12, 2010 with no intension of returning.

2. Bodies formed for short duration

3. Person likely to transfer property to avoid tax

4. Discontinued business

The ‘Person’ is defined in the Act as:

1. Individual
2. HUF
3. Company
4. Firm
5. Association of persons
6. Local authority
7. Every artificial judicial person, not falling within any of the preceding category

 Assessee is defined in the Act as

• A person by whom any tax or any other sum of money (interest, penalty) is payable under the Act
• Every person in respect of whom any proceeding under this act has been taken for assessment of the following
  • His income/loss
  • Income/loss of any other person in respect of which he is assessable
• Every person who is a deemed assessee

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