Indian Income Tax Provisions: PY, Deductions, and Incidence
1. Definition of the Term ‘Previous Year’
The concept of ‘Previous Year’ (PY) is fundamental to the system of income taxation in India and is defined under Section 3 of the Income Tax Act, 1961. The core principle of income tax is that income earned in one year is taxed in the next year.
- Definition: The Previous Year (PY) is the financial year immediately preceding the Assessment Year (AY). It is the year in which the income is earned or accrued.
- Duration: A financial year starts on April 1st and ends
Prospectus, Share Types and Share Capital Regulations
Prospectus
A prospectus is a legal document issued by a public company inviting public subscriptions for shares or debentures, containing detailed disclosures on company objectives, financials, risks, management, and capital structure per SEBI (ICDR) Regulations and Companies Act, Section 26 [from previous]. It ensures investor protection through mandatory information such as material contracts, litigation, and promoter details; shelf/deemed prospectuses apply for follow-on offers [from previous]
Financial Analysis: Comparative and Common Size Statements
Comparative Financial Statements
A comparative statement in accounting is a financial report that presents the same financial information for two or more reporting periods (e.g., this year vs. last year) side-by-side. This presentation format allows stakeholders like investors and managers to easily:
- Identify trends and patterns in financial performance or position.
- Track a company’s progress or regression over time.
- Calculate the absolute change (difference in currency amount) and percentage change
Corporate Accounting and Statutory Compliance Standards
Introduction to Corporate Accounting
Companies maintain books of accounts to record financial transactions accurately, ensuring transparency and compliance with laws like the Companies Act 2013. These records provide a true and fair view of business operations for stakeholders, auditors, and regulators. They form the essential basis for preparing financial statements, tax filings, and strategic decision-making, with a mandatory retention period of at least eight years from the relevant financial
Read MoreKey Concepts and Definitions in Indian Income Tax Law
Difference Between Gross Total Income (GTI) & Total Income (TI)
The main difference between Gross Total Income (GTI) and Total Income (TI) lies in the deductions allowed under Chapter VI-A (Sections 80C to 80U) of the Income Tax Act, 1961.
Gross Total Income (GTI)
GTI is the aggregate income calculated by summing up the income computed under the five heads of income, after allowing for certain set-offs and carry-forwards of losses.
- Heads of Income: Salary, House Property, Profits and Gains of Business
Tax Accounting Principles: Corporate and Partnership Transactions
Exam 1:
(Extensions → 6 months for everyone)
Chapter 2: Statute of Limitations–
1. Normal → 3 years from later of original due date or date filled 2. Omission of > 25% of gross income → 6 years 3. Fraud and/or failure to file → indefinite Trial courts and where appeals go–
1. Must go through the process (Revenue Agent’s Report (RAR), 30-day letter, informal appeal, and 90-day letter) before going to court 2. The tax deficiency must be paid prior to filing in the Court of Federal Claims