Question

Pls do not handwrite the answer for easy reading

Explain the following terms in your own word:-

a) territorial basis of taxation

b) year of assessment

c) basis period

d) statutory income

e) assessable income

f ) chargeable income

Answer 1

a) Territorial basis of taxation : The Principle of taxation which any country adopt and according to which only those income which has source inside the country are taxed only.

b) Year of assessment : The year in which the income generated in the prior year is assessed.

c) Basis period : This is the time period for which a person or business entity pays tax, usually it is the accounting year.

d) Statutory Income : The statutory income is the total of all person’s income from all ends after allowing all appropriate deductions and all exemptions.

e) Assessable income : Assessable income is the total income of a person alongwith all salaries or wages, any dividends, any other income through interest and rent. This income is before any kind of deduction or any exemptions.

f) Chargeable income : Chargeable income, we can call it taxable income, is the net income after deduction of all exemptions or reliefs from the gross income.