Question

In: Accounting

Section 5 of the Income Tax Act 1967 describes the ascertainment of chargeable income. Describe the...

Section 5 of the Income Tax Act 1967 describes the ascertainment of chargeable income. Describe the steps that are used to ascertain the chargeable income of a taxpayer. (Please show the format of computing the chargeable income as well)

Solutions

Expert Solution

Manner in which chargeble income is to be ascertained

Section 5. (1) Subject to this Act,the chargeable income of a person upon which tax is chargeable for a year of assessment shall be ascertained in the following manner:

  • Firstly,the basis period for each of his sources for that year shall be ascertained in accordance with Chapter 2 of part III;
  • Next,his gross income from each source for the basis period for that year shall be ascertained in accordance with Chapter 3 of that part;
  • Next,his adjusted income from each source (or,in the case of a source consisting of a business,his adjusted income or adjusted loss from that source)for the basis period for that year shall be ascertained in accordance with Chapter 4 of that part;
  • Next,his statutory income from each source for that year shall be ascertained in accordance with Chapter 5 of that part;
  • Next,his aggregate income for that year and his total income for that year shall be ascertained in accordance with Chapter 6 of that Part;and
  • Next,his chargeable income for that year shall be ascertained in accordance with Chapter 7 of that Part:

Provided that in ascertaining the chargeable income of an individual resident there shall be excluded the income consisting of interest accruing in or derived from the country and received from a person referred to in subsection 109C(4) in respect of interest paid or credited to that individual.

(2)For the purposes of this Act,any income of a person from any sources,and any adjusted loss of a person from any source or sources consisting of a business,may be ascertained for any period (including a year of assessment) notwithstanding that---

  • The person in question may have ceased to possess that source or any of those sources prior to that period;or
  • In that period that source or any of those sources may have ceased to produce gross income or may not have produced any gross income.

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