The rule that the income of the previous year is taxable as the income of the immediately following assessment year has certain exceptions. These are:

1. Income of non-residents from shipping business [ Section 172] ;

In case a Non-Resident Shipping Company, which has no representative in India, earns income by carrying passengers, livestock, mail or goods loaded from any Indian Port, such Ship will have to pay Tax on such Income, otherwise the Ship will not be allowed to leave the Port till the tax on such income has been paid or alternative arrangements to pay tax are made. Such income will be assessed to paid tax at current year’s rates.

2. Income of persons leaving India either permanently or for a long period of time [ Section 174] ;

In case I.T.O. has the reasons to believe that an individual will leave India with having no intention of retuning to India during the current assessment year, the total income of such individual will be taxable in the current assessment year for the period between the expiry of last previous year and till the date of his departure.

3. Income of a person trying to transfer his assets with a view to avoiding payment of tax. [ Section 175]

4. Income of a discontinued business [ Section 176]

In these cases, income will be taxed in the same year it is earned.

These exceptions have been incorporated in order to ensure smooth collection of income tax from the aforesaid taxpayers who may not be traceable if tax assessment procedure is postponed till the commencement of the normal assessment.

On the basis of the aforesaid discussion, it can be said that a financial year plays a double role—it is a Previous Year as well as an Assessment Year.

There are 5 different Income heads. The Income under each head will be charged to Income Tax. Thus the tax will be computed on the basis of total income.

1. Salaries including Allowances, value of Perquisites, Profits in lieu of salary and Pensions.
2. Income from House Property whether residential, commercial or let out.
3. Profits & Gains of Business / Profession.
4. Capital Gains - Short & Long Term.
5. Income from other Sources including Bank Interest, Interest on Securities, Lotteries, Cross word Puzzles, Races, Games, Gift received on or after 1-9-2004 in excess of Rs. 50,000 in cash etc. from unrelated persons.

1. Individual including Non-resident, Hindu Undivided Families (HUF), Bodies of Individuals (BOI), Association of Persons (AOP) & Artificial Juridical Persons ( such as Deities of Temples) having taxable income exceeding Rs. 1.5 lakh (Rs. 1,80,000 for Resident Women assesses below 65 Years and Rs. 2,25,000 for Resident Senior Citizens.)
2. Societies & Charitable / Religious Trusts having taxable income exceeding Rs.1.5 lakh.
3. All Partnership Firms irrespective of their Income.
4. Co-Op. Societies irrespective of their Income.
5. All Companies irrespective of Income.
6. Local Authorities like, Panchayats, Municipal Corporation etc.