An HUF is considered resident in India if the control and management of its affairs are situated wholly or partly in India. To be 'ordinarily resident', the Karta or manager must satisfy the additional conditions of being a resident in at least 2 out of the 10 preceding years and meeting specific stay requirements.

Section 90 of the Income Tax Act provides the legal framework for Double Taxation Avoidance Agreements (DTAA). These agreements are designed to provide relief to taxpayers who would otherwise be taxed twice on the same income—once in the country of source and once in the country of residence. This prevents the burden of double taxation and encourages international trade and investment.

Tax planning is the process of arranging financial affairs in full compliance with the law to minimize tax liability, making statement 1 incorrect. Tax avoidance involves exploiting legislative loopholes to reduce tax, which is legal, making statement 2 correct. Tax evasion is the illegal suppression of income or inflation of expenses to avoid tax, which is a criminal act, making statement 3 correct.

Second-generation reforms in India focused on structural changes to improve efficiency and competitiveness, such as labor market flexibility, legal reforms, and infrastructure development. Population control, while a significant national policy goal, is generally categorized under social welfare or demographic policy rather than the specific economic structural reforms associated with the second-generation liberalization phase.

Tax planning involves arranging financial affairs to minimize tax liability within the legal framework. Purchasing a house via a loan (1) allows for interest deductions under Section 24(b), and investing in agricultural land (4) often qualifies for tax exemptions. These actions are strategic uses of tax provisions to reduce overall tax burdens legally.

Purposive tax planning often involves structuring transactions in a way that technically complies with the letter of the law while circumventing its underlying purpose or intent. This approach is often scrutinized by tax authorities under anti-avoidance rules. It differs from permissive planning, which utilizes specific tax incentives provided by the government to encourage certain economic behaviors.

An indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. Sales tax is a classic example of an indirect tax because it is levied on the sale of goods and services. Income tax is a direct tax, and while toll tax is a levy, sales tax is the primary indirect tax listed.

Double Taxation Avoidance Agreements (DTAAs) are treaties between countries designed to prevent the same income from being taxed in two different jurisdictions. When such an agreement exists, it provides a legal framework for taxpayers to claim relief, such as tax credits or exemptions, ensuring that the tax burden is not duplicated. Therefore, the existence of a DTAA is the primary mechanism for ensuring relief is available to the taxpayer.

The previous year is the financial year immediately preceding the assessment year. For the assessment year 2013-14, the previous year covers the period from the start of the business's accounting cycle (Diwali 2012) up to the end of the financial year (March 31, 2013). This aligns the business's specific accounting period with the statutory requirements for tax reporting.

Compensation received by an individual or their legal heir from the government or local authority on account of any disaster is fully exempt from income tax. This provision is intended to provide financial relief to victims without imposing an additional tax burden on the compensation amount.