Which among the following is / are generally taxable in India?
1. Capital Receipts
2. Revenue Receipts
3. Capital Gains
4. Dividends
5. Gifts
Select the correct option from the codes given below:

Answer: [B] 2, 3 & 4

The general rule under the Income tax Act is that, all revenue receipt are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans etc are in the nature of capital receipts not attracting tax.

This question also provides you an insight into Vodafone matter.

In 2008, Vodafone India issued equity shares at a premium to its holding company in return for infusion of funds for its telecom operations.

The company said it’s a capital account transaction and, hence, doesn’t affect its income. However, both the tax department and the dispute resolution panel held that the income tax law does not prohibit charging a tax on capital receipts.

The high court later made it clear that a capital receipt is not income, unless it is capital gains. This means only profits made from the sale of shares or assets can be charged to tax, not the issuance of shares. Other technicalities become redundant.

This question is a part of GKToday's Integrated IAS General Studies Module