JK SHAH CLASSES Direct Tax – CA Inter May’2025
CHAPTER 1: INTRODUCTION
I] Basic Concepts :
1. Meaning of “Tax” :
Tax is a “Fee” which is charged by the Government on any ‘Income’, ‘Product’ or ‘Activity’.
2. Purpose for levying Tax :
❖ It forms major source of Revenue for Government
❖ Government needs revenue for providing below services to people :
o Health Care
o Defence
o Infrastructure & Other Public Services
3. Types of Taxes :
Types
Direct Tax Indirect Tax
Charged and collected “Directly” from Charged and collected “Indirectly” in a
the person bearing the ultimate burden chain from the person bearing the ultimate
E.g., Income Tax, Tax on Undisclosed burden
Foreign Incomes & Assets etc. E.g., Goods & Service Tax, Custom Duty Etc.
P a g e 1 | 31 Prof. Chirag Goyal
,JK SHAH CLASSES Direct Tax – CA Inter May’2025
II] Income Tax Components :
Components
Income Tax Income Tax Annual Circulars / Case
Act Rules Finance Act Notifications Laws
1. Income Tax Act, 1961
❖ Act which gives authority to the Government to levy Tax
❖ Applicable to whole of India
❖ Started from 01st April 1962 onwards (A.Y. 1962-63)
❖ Consists of 298 Sections (written under 23 Chapters) & 14 Schedules
Note:
A Section may have Sub-sections, Clauses, Provisos and Explanations
Sub-sections are related parts of a Section. In order to understand the meaning of the complete Section,
reading all the sub-sections together is required;
P a g e 2 | 31 Prof. Chirag Goyal
,JK SHAH CLASSES Direct Tax – CA Inter May’2025
Whereas, Clauses are unrelated parts of a Section. Each clause is independent of what is mentioned in the
other clause;
Provisos carve out exceptions / conditions, whereas explanations give clarifications related to a provision
contained in a Section/Sub-section/Clause;
2. Income Tax Rules, 1962
❖ Framed by Central Board of Direct Taxes (CBDT) for proper administration of Act
❖ Law says ‘What is to be followed?’, Rules guide with ‘How it is to be followed?’
❖ Rules are to be read along with Law, they cannot override Law
❖ There are 134 Rules, out of which significant ones covered in CA Inter are Rule 3, Rule 3B, Rule
126, Rule 7, Rule 7A, Rule 7B and Rule 8 (will be discussed in respective chapters)
P a g e 3 | 31 Prof. Chirag Goyal
, JK SHAH CLASSES Direct Tax – CA Inter May’2025
3. Annual Finance Act
❖ Issued every year after the Budget
❖ Brings Amendments (Updates) in the existing Taxation Law
❖ Finance Act 2024 (2) is applicable for May 2025 attempt
4. Circulars / Notifications
❖ Circulars are issued for clarifications or dealing with specific issues
❖ Circulars are optional for Assessee but binding on Department
[Assessee – Tax Payer, Department – Income Tax Department]
❖ Notifications are issued for giving effect to the provisions of Law
❖ Notifications are binding on everyone
5. Case Laws
❖ They are Judgements issued by various Courts
❖ Judgements of Supreme Court are Law of Land, they are applicable everywhere
❖ Judgements of High Courts / Tribunals are applicable only in respective Jurisdiction
❖ Case Laws are covered in detail in CA Final
P a g e 4 | 31 Prof. Chirag Goyal
CHAPTER 1: INTRODUCTION
I] Basic Concepts :
1. Meaning of “Tax” :
Tax is a “Fee” which is charged by the Government on any ‘Income’, ‘Product’ or ‘Activity’.
2. Purpose for levying Tax :
❖ It forms major source of Revenue for Government
❖ Government needs revenue for providing below services to people :
o Health Care
o Defence
o Infrastructure & Other Public Services
3. Types of Taxes :
Types
Direct Tax Indirect Tax
Charged and collected “Directly” from Charged and collected “Indirectly” in a
the person bearing the ultimate burden chain from the person bearing the ultimate
E.g., Income Tax, Tax on Undisclosed burden
Foreign Incomes & Assets etc. E.g., Goods & Service Tax, Custom Duty Etc.
P a g e 1 | 31 Prof. Chirag Goyal
,JK SHAH CLASSES Direct Tax – CA Inter May’2025
II] Income Tax Components :
Components
Income Tax Income Tax Annual Circulars / Case
Act Rules Finance Act Notifications Laws
1. Income Tax Act, 1961
❖ Act which gives authority to the Government to levy Tax
❖ Applicable to whole of India
❖ Started from 01st April 1962 onwards (A.Y. 1962-63)
❖ Consists of 298 Sections (written under 23 Chapters) & 14 Schedules
Note:
A Section may have Sub-sections, Clauses, Provisos and Explanations
Sub-sections are related parts of a Section. In order to understand the meaning of the complete Section,
reading all the sub-sections together is required;
P a g e 2 | 31 Prof. Chirag Goyal
,JK SHAH CLASSES Direct Tax – CA Inter May’2025
Whereas, Clauses are unrelated parts of a Section. Each clause is independent of what is mentioned in the
other clause;
Provisos carve out exceptions / conditions, whereas explanations give clarifications related to a provision
contained in a Section/Sub-section/Clause;
2. Income Tax Rules, 1962
❖ Framed by Central Board of Direct Taxes (CBDT) for proper administration of Act
❖ Law says ‘What is to be followed?’, Rules guide with ‘How it is to be followed?’
❖ Rules are to be read along with Law, they cannot override Law
❖ There are 134 Rules, out of which significant ones covered in CA Inter are Rule 3, Rule 3B, Rule
126, Rule 7, Rule 7A, Rule 7B and Rule 8 (will be discussed in respective chapters)
P a g e 3 | 31 Prof. Chirag Goyal
, JK SHAH CLASSES Direct Tax – CA Inter May’2025
3. Annual Finance Act
❖ Issued every year after the Budget
❖ Brings Amendments (Updates) in the existing Taxation Law
❖ Finance Act 2024 (2) is applicable for May 2025 attempt
4. Circulars / Notifications
❖ Circulars are issued for clarifications or dealing with specific issues
❖ Circulars are optional for Assessee but binding on Department
[Assessee – Tax Payer, Department – Income Tax Department]
❖ Notifications are issued for giving effect to the provisions of Law
❖ Notifications are binding on everyone
5. Case Laws
❖ They are Judgements issued by various Courts
❖ Judgements of Supreme Court are Law of Land, they are applicable everywhere
❖ Judgements of High Courts / Tribunals are applicable only in respective Jurisdiction
❖ Case Laws are covered in detail in CA Final
P a g e 4 | 31 Prof. Chirag Goyal
