Taxation interview questions and answers
1. What is income tax? How is it calculated?
Income tax is an annual tax charged on income of a person by the government. It is charged for the corresponding assessment year at the rates laid down by the Finance Act for the assessment year in respect of the previous year.
Income of the person is categorized under the following five heads:
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources.
Income is calculated under these heads separately and accordingly tax is calculated using the income tax slab issued by the government every financial year.
2. Define Assessment Year.
Assessment year is the period that starts from 1 April and ends on 31 march. It is the year immediately succeeding the financial year wherein the income of the previous financial year is assessed. Government use assessment year for calculating tax on the previous year.
For example- If the current assessment year is 2015-16, which starts from I April 2015 and ends on 31 March 2016. To this assessment year financial year is 2014-15, starting from I April 2014 and ends on 31 March 2015. You will be calculating income tax for financial year in the assessment year.
3. Define Previous Year.
Previous Year is the year in which the income earned becomes taxable in the following assessment year. It can be stated as the Financial year preceding the Assessment year. For example- If the present assessment year is 2015-16 then the previous year will be 2014-2015.
4. Define financial year?
A twelve month period starting from 1 April and ending at 31 March which is used for calculating various annual financial statements in businesses and organization is known as financial year.
5. Differentiate between Financial Year, Assessment Year and Previous Year?
Assessment year and previous year are the types of financial year which consists of twelve months starting from 1 April to 31 March. Previous financial year is the preceding year of assessment financial year.
6. Define the term person?
A “person” means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. The term "person" under the Income Tax Act includes an individual, a Hindu Undivided Family, a Company, a Firm, an Association of Persons, a Local Authority and Artificial Juridical persons
7. Who is an assessee?
An "Assessee" is a person who is liable to pay tax or any other sum of money under the Act. It includes:
Every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of whom he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;
Every person who is deemed to be an assessee under any provision of this Act;
Every person who is deemed to be an assessee in default under any provision of this Act.
8. What do you understand by total income?
Total Income is the amount on which the Income Tax is paid. Total income include all income that accrue, arise, earned or received in India (except those income which accrues or arises outside India). Total Income is the total amount earned by an individual or organization, including income from employment or providing services, revenue from sales, payments from pension plans, income from dividends, or other sources. Total income is generally calculated for the assessment of taxes, evaluating the net worth of a company, or determining an individual or organization's ability to make payments on a debt.
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