Law of Income Tax in India
Income earned in India is not limited to income earned within the geographical limits or boundaries of the country. Certain incomes are also deemed to have been earned in India although they may have been earned outside the country.
The job of monitoring the Income-tax collection by the government is entrusted to a Income Tax Department. This department functions under the Department of Revenue, Ministry of Finance, Government of India.
Resident and Non-resident
If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a non-resident.
A company is considered as resident if it is incorporated under the Indian Companies Act. A foreign company can also become a resident if the control and management of its affairs is done entirely in India during the previous year.
In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.
A Permanent Account Number [PAN]
A PAN number has been made compulsory for every transaction with the Income Tax department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, availing institutional financial credits, purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of photo identification accepted by all government and non-government institutions in the country.
Tax Deduction and Collection Account Number [TAN]
All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. TAN is required to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued.
Tax Deduction at Source or TDS
Under Chapter XVII of the Income tax Act, while making payment of certain specified nature, tax needs to to be deducted and deposited in the Government Treasury. Some of the examples of nature of payment, while making there of Income Tax to be deducted at the source level ( i.e. Tax Deducted at Source or TDS) are: Salary, interest on securities, paymet to contractors, commission or brokerage, rent, fees for professional or technical services, payment to a non-resident of (i) any interest (including interest payment by Bank) or any other sum chargeable under Income Tax Act and (ii) any income in respect of units of a Mutual Fund , any income in respect of units or by way of long-term capital gains arising from the transfer of such units is payable to overseas financial organisation / an Offshore Fund, any income by way of interest or dividends in respect of bonds or Global Depository Receipts or by way of long-term capital gains arising from the transfer of such bonds or Global Depository Receipts is payable to a non-resident, etc.
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