Classify income on the basis of assessment and briefly explain each of them
Assessable incomes are income for those which include total income ascertaining total income. Generally assesses means a taxpayer that is a person who is to pay tax. He is a person or group that is being assessed (judged), principally in order to fix on how much tax they must pay. There are three types of assessable income –
(a) Tax-free income: There are some items of income included in total income but tax rebate is granted on these items at an average rate of tax. These sources of income are called tax free income. These items increase total income and determine the tax rate. But they reduce the net tax liability.
(b) Tax credit income/investment allowance: Some items of expenses or investment by the assessee under the sixth schedule are called investment allowances. They are accumulated for calculating tax rebate allowances allowable to the assessee to determine met tax liability. Such tax rebate is different from that cm tax-free income both in terms of items and rate.
(c) Chargeable income: Chargeable income is an income which taxpayer is originally payable on income.
Chargeable income = Taxable income – Tax free income.
Classify income on the basis of assessment and briefly explain each of them
Assessable incomes are income for those which include total income ascertaining total income. Generally assesses means a taxpayer that is a person who is to pay tax. He is a person or group that is being assessed (judged), principally in order to fix on how much tax they must pay. There are three types of assessable income –
(a) Tax-free income: There are some items of income included in total income but tax rebate is granted on these items at an average rate of tax. These sources of income are called tax free income. These items increase total income and determine the tax rate. But they reduce the net tax liability.
(b) Tax credit income/investment allowance: Some items of expenses or investment by the assessee under the sixth schedule are called investment allowances. They are accumulated for calculating tax rebate allowances allowable to the assessee to determine met tax liability. Such tax rebate is different from that cm tax-free income both in terms of items and rate.
(c) Chargeable income: Chargeable income is an income which taxpayer is originally payable on income.
Chargeable income = Taxable income – Tax free income.
