The Direct Tax Manual provides comprehensive guidance on direct taxation systems, covering income tax, corporate tax, capital gains tax, and other direct levies imposed by governmental authorities. This manual serves as an essential reference for taxpayers, tax professionals, and financial advisors dealing with direct tax compliance, planning, and administration.
Direct taxes are levied directly on individuals and organizations based on their income, profits, or assets. Unlike indirect taxes, these cannot be shifted to another entity and are paid directly to the government by the person or organization on whom they are imposed.
| Tax Type | Description |
|---|---|
| Income Tax | Tax on individual and business income |
| Corporate Tax | Tax on company profits and earnings |
| Capital Gains Tax | Tax on profits from sale of assets |
| Wealth Tax | Tax on net wealth of individuals |
| Property Tax | Tax on real estate properties |
| Inheritance Tax | Tax on inherited assets and properties |
| Gift Tax | Tax on gifts above specified limits |
| Securities Tax | Tax on transactions involving securities |
| Minimum Alternate Tax | Minimum tax on corporate book profits |
| Dividend Tax | Tax on dividend income distributions |
Understanding taxpayer classification is crucial for proper tax compliance and benefit eligibility.
IMPORTANT! Correct taxpayer classification determines applicable tax rates, deductions, and compliance requirements.
Comprehensive coverage of income tax laws, rates, and calculation methods.
NOTE! Maintain proper documentation and records for all income sources and tax payments.
Taxation of profits arising from transfer of capital assets including real estate, securities, and other investments.
Classification: Short-term capital gains (assets held for less than specified period) and Long-term capital gains (assets held beyond specified period) with different tax treatments and exemptions.
Calculation: Consideration received minus cost of acquisition/indexed cost of acquisition minus transfer expenses. Exemptions: Section 54, 54F for residential property investments; tax-saving bonds under specified sections.
Various provisions allowing reduction of taxable income through specific investments and expenditures.
Tip: Plan investments early in the financial year to maximize tax benefits.
Step-by-step guidance for tax return preparation and submission.
WARNING! File returns before due dates to avoid penalties and interest charges.
Ongoing tax compliance obligations beyond annual return filing.
Legitimate methods to optimize tax liability through proper financial planning.
CAUTION! Ensure all planning strategies comply with legal provisions and avoid aggressive tax avoidance.
Income Tax Act, 1961 and subsequent amendments form the primary legal basis for direct taxation in India. Supporting rules include Income Tax Rules, 1962; various circulars and notifications issued by CBDT; and judicial precedents from Supreme Court and High Courts.
| Issue | Possible Cause | Corrective Action |
|---|---|---|
| TDS mismatch in 26AS | Incorrect PAN or non-filing by deductor | Verify PAN details; follow up with deductor for correction |
| Notice for non-filing | Missed return filing deadline | File belated return with applicable penalties |
| Refund delay | Processing issues or verification required | Check refund status online; respond to department queries |
| Assessment notice | Discrepancy in return information | Submit required documents and explanations |
| Demand notice | Additional tax determined by department | Pay demand or file appeal if justified |
Appeals: Procedure for filing appeals with Commissioner (Appeals) and higher appellate authorities
Support: Income Tax Helpline 1800-180-1961; https://www.incometax.gov.in