MEANING of two words-
This query is : Resolved
06 February 2011
what is the meaning of diversion of income and application of income?
06 February 2011
Diversion of income which income not used for the purpose of receipt
Application means the using the income for any purpose
Application means the using the income for any purpose
06 February 2011
Diversion of Income:
Diversion of income means to divert income to other person(s) under a pre-existing title.
Suppose A & B are Co-owners of a house which is given on Rent to C for10000/ pm.
Now C issues a cheque for Rent payment for one month to A of10000/-, even though A is entitled for only5000/-. He has to give5000/- to B. So, in this case it can be said that A has to divert5000/ to B. The amount taxable in the hands of A will be only5000/-.
Application of Income:
----------------------
Now out of10000/ diversion of5000/ has been made to B. The amount left with A is his own income. He wants to give you a party and spends1000/- on it. This will be called application of income. As the income of Rs.5000/- has been once taxed so application of income will also not be taxable.
Diversion of income means to divert income to other person(s) under a pre-existing title.
Suppose A & B are Co-owners of a house which is given on Rent to C for10000/ pm.
Now C issues a cheque for Rent payment for one month to A of10000/-, even though A is entitled for only5000/-. He has to give5000/- to B. So, in this case it can be said that A has to divert5000/ to B. The amount taxable in the hands of A will be only5000/-.
Application of Income:
----------------------
Now out of10000/ diversion of5000/ has been made to B. The amount left with A is his own income. He wants to give you a party and spends1000/- on it. This will be called application of income. As the income of Rs.5000/- has been once taxed so application of income will also not be taxable.
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