What is Income?
The word Income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. In fact the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:
Income from Salary
Income from House property
Income from Business or Profession
Income from capital gains
Income from other sources
As per Sec.-24 of Income Tax Act, the income includes -
(i) Profits and Gains
(iia) Voluntary contributions recieved by a trust
(iii) The value of perquisite or proft in lieu of salary
All receipts are not income. Receipts can be classified into two kinds.
A) Revenue receipt
B) Capital receipt.
The general rule under the Income tax Act is that, all revenue receipt are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans etc are in the nature of capital receipts not attracting tax.
All that one derives from a source is called revenue receipt. For example: Salary from employment, Rent from property, Interest or Divided from Investments, Profits from business. When an income is earned on account of transacting the source itself, it is called Capital receipt. For example: Sale of land and building, business, investment etc.
What is Income Tax?
Income Tax is charged on the Income. It is a tax imposed by the Government of India on any body who earns income in India. This tax is levied on the strength of an Act called Income tax Act which was passed by the Parliament of India in 1961
The job of monitoring the Income-tax collection by the government is entrusted to a Department called ncome-Tax. This department functions under the Department of Revenue, Ministry of Finance, Government of India.
What is the period for whitch a person's income is taken into account for purpose of Income Tax?
Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year (FY) is taken into account for purposes of calculating Income Tax. Under the income tax Act this period is called a Previous year. The period of twelve-month from 1st April to 31st March immediately following the previous year is called Assessment year. A person files his return for the income earned in the previous year and his income tax liability is assessed in Assessment Year. For example for FY:2013-14 (the year in which the income is earned) the AY is 2014-15.
Who is supposed to pay Income Tax?
Any Individual or group of Individual or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The IT Act recognizes the earners of income under seven  categories. Each category is called a Status. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority, Artificial juridical person.
When Companies pay taxes under the Income tax Act it is called Corporate tax.
Who have to file Income Tax Retrun?
Every person having income more than income which is tax free has to file an Income Tax Retrun