mbolise 'income'. The receipt arising from the sale of tree itself is, therefore, considered a capital receipt which is not income; but the receipts flowing from this source viz., fruits is income. On application of this analogy, it can be said that while the receipt arising from the sale of a house is not income, the receipt arising from the realisation of rent is income. In the same way, receipt from the sale of a machine is not income but from the sale of produce brought out from the machine is income. In these cases, however, if a person deals in purchase and sale of house properties or machines, these assets do not remain a source and the profit derived from activities of purchase and sale become income. The source need not necessarily be tangible as the return for human exertion is also income.

1.2.1 The above is a broad generalisation. While a distinction is generally made between the capital receipt and revenue receipts, as illustrated above, the Act has widened the scope of income by expressly including within the meaning of 'income' the receipts which do not fall under the broad concept explained above. For instance, the Act specifically makes the profit arising from the sale of certain capital assets also subject to tax under certain circumstance. The winnings from lotteries, cross-word puzzles, races, card games etc. which do not arise from any definite source and do not have the element of regularity have also been specifically clarified to be 'income' under the Act.

1.2.2 It is not the gross receipts but only the net receipts arrived at after deducting the related expenses incurred in connection with earning such receipts that are made the basis of taxation.

1.2.3 The tax is charged in respect of the income of the previous year and the same is chargeable in the assessment year. "Previous year" means the financial year i.e. the period beginning on 1st April and ending on 31st March. The return of income for this period is due in the next financial year called the Assessment Year in which the proceedings for assessment commence either by filing of return voluntarily by the income earner or by the Income Tax Department initiating action for calling the return. The income earned in the period beginning on 1st April 1995 and ending on 31st March 1996 will, for instance, be assessable earliest in the next financial year i.e. the year 1996-97.

1.2.4     The Act categorises the income of a person under different heads and provides for the manner of computation of taxable income of each head. These heads of income are:-

1. Salaries
   Income from house property,
   Profits and gains of business or profession,
   Capital gains, and
2. Income from other sources

1.2.6 The total of the income under each head as worked out in accordance with the provisions of the Act

is termed as 'gross total income. The act provides for certain deduction from such gross total income. These deductions which are discussed in Chapter V, are not referable to any particular head of income, but are allowed from the aggregate of income under all the heads and are in the nature of incentive provisions of different kinds. For example, deductions are allowed for promotion of charitable activities, promoting exports and other activities resulting in the inflow of foreign exchange, for development of industries and for other socio-economic objectives. Incentives for promotion of savings are provided in the form of deduction in tax liability by grant of rebate at certain percentage on certain savings made out of taxable income.

1.2.7 After reducing the 'gross total income' by the amount of incentives deductions mentioned in the preceding paragraph. What is left is the amount on which tax is to be calculated at the rates prescribed by the relevant Finance Act. This amount is termed as Total income and is the base for taxation. For certain categories of tax payers, a basic exemption limit is provided and tax is calculated only on that part of the total income which is in excess of such exemption limit. If such 'Total income' is below the basic exemption limit, no tax is chargeable. For instance, under the Finance Act, 2000, no tax is payable by an individual if his total income is below Rs. 50,000/-. The rates of taxation and the exemption limit applicable to different categories of Assessees are given in Chapter XIII.

.3 Clubbing of Income

The total income of an individual also includes certain income of other persons. These are:-

1. income of spouse from,
   1. remuneration derived from the concern in which the individual is substantially interested unless the remuneration is by virtue of the application of technical or professional skill possessed by him or her;
   2. assets transferred by the individual to the spouse or to any other person for the benefit of the spouse unless the transfer is for adequate consideration or in consideration of an agreement to live apart.
2. income of son's wife from assets transferred by the individual to her or to any other person for her benefit unless the transfer is for adequate consideration.
3. income of his minor child - other than the minor child suffering from disability specified in section 80-U, referred to in para 5.3.9 except when such income arises to the child on account of any manual work done by him or on account of any activity which involves application of any skill, talent or specialised knowledge and experience
    
    

1.3.1 The individual in whose income the income of other spouse as mentioned in (a) (i) above is to be included will be the husband or wife whose total income - before including such remuneration income - is greater. Similarly the income of minor child is to be included in the income of the parent having greater income. If the marriage of the parents does not subsist, it will be parent who maintains the child