Income Tax-Basic Concept 1
Tax is nothing but a compulsory levy enforced by government as it constitutes the basic source of
revenue to the government to meet various expenditure of state.
There are two types of Taxes
Direct Tax-
1. Tax levied on the income or welfare of the person.
2. It is a kind of tax where incidence and impact is on same person.
3. Ex-Income Tax ,Professional Tax
Note:
Incidence-means liability to pay tax to government
Impact-Burden of paying tax
Indirect Tax
Tax levied on price of goods and services.
In this case person paying taxes passes incidence to another person
Ex-GST and Custom Duty.
Important Definition
Financial Year(FY)- is defined as a period of twelve months starting from 1st Apr and ending on 31st
Mar of every year.
Previous year (PY)-A financial year immediately preceeding the assessment year.
Assessment Year (AY) -The Income of financial year is assessed to tax in the assessment year.
For instance 1 st Apr 2025 – 31st Mar 2026 – Financial year- period of 12 months from apr 1st to 31-
mar.
1 st Apr 2024 – 31st Mar 2025 – Previous year – where books of accounts would be
assessed in FY 25-26 so AY for 1 st Apr 2024 – 31st Mar 2025 - 2025 – 2026.
The income earned by person in one financial year is taxed in the next financial person.The year in
which income earned is called previous year.The next year in which income taxed is called Assessment
Year.Thus , the total income of person during the FY(Previous Year) will be taxes in next financial year
(Assessment Year).
Tax is nothing but a compulsory levy enforced by government as it constitutes the basic source of
revenue to the government to meet various expenditure of state.
There are two types of Taxes
Direct Tax-
1. Tax levied on the income or welfare of the person.
2. It is a kind of tax where incidence and impact is on same person.
3. Ex-Income Tax ,Professional Tax
Note:
Incidence-means liability to pay tax to government
Impact-Burden of paying tax
Indirect Tax
Tax levied on price of goods and services.
In this case person paying taxes passes incidence to another person
Ex-GST and Custom Duty.
Important Definition
Financial Year(FY)- is defined as a period of twelve months starting from 1st Apr and ending on 31st
Mar of every year.
Previous year (PY)-A financial year immediately preceeding the assessment year.
Assessment Year (AY) -The Income of financial year is assessed to tax in the assessment year.
For instance 1 st Apr 2025 – 31st Mar 2026 – Financial year- period of 12 months from apr 1st to 31-
mar.
1 st Apr 2024 – 31st Mar 2025 – Previous year – where books of accounts would be
assessed in FY 25-26 so AY for 1 st Apr 2024 – 31st Mar 2025 - 2025 – 2026.
The income earned by person in one financial year is taxed in the next financial person.The year in
which income earned is called previous year.The next year in which income taxed is called Assessment
Year.Thus , the total income of person during the FY(Previous Year) will be taxes in next financial year
(Assessment Year).
