Income Tax And Corporate Tax - Study Mode

Explanation

Solution: 1. Assessment year is a period of 12 months: ✔️ Correct — The assessment year is always a 12-month period from April 1 to March 31, during which income earned in the previous year is assessed. 2. Income tax is distributed between State and Central Government: ❌ Incorrect — Income tax is levied and collected by the Central Government. States do not have power over income tax except for taxes on agricultural income. While a portion of tax revenue is shared with states, income tax itself is not directly distributed between both. 3. There are 6 heads of income under Income Tax Act: ✔️ Correct — This statement is correct . The Income Tax Act mentions 6 heads of income : 1) Salaries 2) Income from House Property 3) Profits and Gains from Business or Profession 4) Capital Gains 5) Income from Other Sources 6) Income of Other Persons included in Assessee’s Total Income (often considered a clubbing provision, but counted as a head in some academic classifications). 4. Income earned in a year is taxable in that year only: ❌ Incorrect — Generally, income earned in one financial year is taxed in the next assessment year , except under a few special cases like shipping businesses of non-residents, etc. 5. Total income of an assessee cannot be computed unless his residential status is known: ✔️ Correct — Residential status determines the scope of income taxable in India. Hence, it is essential for calculating total income. Therefore, Statements 1, 3, and 5 are correct, making Option C the most accurate answer.