1. income tax act
TRANSCRIPT
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INCOME TAX ACT- 1961
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` According to the Income Tax Act 1961:
The Indian constitution has empowered only the central
govt to levy and collect the income tax.
` The act come into force from 1st April 1962 & extends to whole
of India
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` It consists of 298 sections and 14 schedules
` This act determines which persons are liable to pay tax & in
respect of which income.
` These rates are prescribed by every year by the finance act
known as budget .
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` Tax is charged at the rates applicable for assessment year, on
the Total Income earned during the previous year by an
assessee , who is a person.
` Similarly every person who is an assessee has to pay any other
sum levied on him as per Income tax act.
` Eg. Surcharge, cess, Interest, Penalty, Prosecution
Commutations etc.
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` Income-tax is levied annually.
` It is levied at the tax rates fixed by Finance Acts of every year
for the respective Assessmet Year (Budget presented on 28th of
February, 2010) on the Total Income earned in the previous
year, on every person who is an assessee.
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` ASSESSEE: A person by whom any tax or any other sum of
money(for eg. Interest, penalty, fine) is payable under the
Income tax act.
` ASSESSMENT: the process of determining the income of an
assessee earned during any previous year and finding out the
income tax, interest or the other sum payable under the Act.
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` ASSESSMENT YEAR(AY): the period of 12 months
commencing on the 1st day of April each year.
` PREVIOUS YEAR(PY): The financial year immediately
preceding the assessment year.
In case of business or profession which is newly started, the
previous year commence from the date of commencement of
the new business or profession upto the next 31 day of march,
unless the person is an existing assessee.
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INCOME SLABS TAX RATES
Individual & HUF
below age of 65
yrs.
Women below
age of 65 yrs.
Individual above
age of 65 yrs.
Income up to Rs.
1,60,000
Income up to
Rs.1,90,000
Income up to
Rs.2,40,000
NIL
Rs. 1,60,000 -
5,00,000
Rs. 1,90,000
5,00,000
Rs. 2,40,000
5,00,000
10%
Rs. 5,00,000 -8,00,000
Rs. 5,00,000 8,00,000
Rs. 5,00,000 8,00,000
20%
Above Rs. 8,00,001 Above Rs. 8,00,001 Above Rs.
8,00,001
30%
INCOME TAX RATES FOR ASSESSMENT YEAR 2011-2012(FINANCIAL YEAR 2010-2011)
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` The incomes specifically mentioned as exempt under the
Income-tax Act, 1961 are not subjected to tax.
1. Agriculture income [Sec.10(1)]
2. Sum received by a member from HUF [Sec.10(2)]3. Share of partner in the profit of firms [Sec.10(2A)]
4. Scholarships [Sec.10(16)]
5. Minors income included in parents income [Sec.10(32)]
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It includes:
1. Rent or revenue derived from land situated in india
2. Agricultural operations/ process/ porduce
3. Farm house
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For e.g:-
1. Income from lease of agricultural land
2. Income from land used for agriculture purpose
3. Compensation received from insurance company againstdamage for crop
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` Any sum received by an individual as a member of a Hinduundivided family, where such sum has been paid out of the:-
income of the family, or, in the case of any impartibleestate, where such sum has been paid out of the income ofthe estate belonging to the family.
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` The share of a partner in the income of a firm which is
separately assessed as a firm is exempt from tax.
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` Scholarship granted to meet the cost of education are exempt.
` The entire amount of Scholarship would be exempt,
irrespective of the actual expenditure on education.
` The Scholarship may be for a course not leading to a degree.
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` Cost of Education includes tuition fees and also other
incidental expenses related to education.
` It granted to the children of employees by a company would
be exempt u/s 10(16).
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` S. 64(1A) of the act provides that the income of a minor is to
be included in the income of his parent. Thus, a minors parent
is liable to pay tax on the minors income.
` Such parent can, however, claim Rs. 1,500 or the minors
income whichever is less, in respect of each minor child.
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` An Individual
` Hindu Undivided Family- HUF
` Firm
` Company
` Association Of Person(AOP) Or Body of Individuals(BOI)
` Local Authority
` Artificial Juridical Person
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Salary includes:` Wages
` Pension
` Gratuity
` Fees & commission
` Perquisite
` Profits in lieu of or in addition to salary or wages
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` Advance salary
` Leave Encashment
`
Contribution by employer to pension scheme; etc.
` Any salary due during the previous year, whether paid or not
` Arrears of salary, paid or allowed.
` Leave salary
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` C) Where Gratuity Act is not applicable:-a) Half months salary for every completed year ofservice any fraction of the year to be ignored
(b) Rs.3,50,000/- or the(c) gratuity actually received, whichever is lower;
` In the case of B & C, the maximum of Rs.3,50,000/- is fromgratuity received from all the employers put together, during
the life.
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The following amounts of Commuted Pension is exempt.Anything other than the following is taxable:
` Commuted Pension of Government Employees, employees of
local authority or statutory corporation are exempt from tax.
` In the case of others, if gratuity is received/receivable, 1/3 ofpension is exempt.
` If gratuity is not receivable, of pension is exempt
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` House Rent Allowance is generally taxable, the least of the
following is exempt:-
- 50% of Salary in Mumbai, Calcutta, Delhi or Chennai
and 40% elsewhere in India; or
- HRA actually received by the employee; or
- The amount of rent actually paid in excess of 10% of
annual salary.
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` Exemption is not available if the employee resides at his own
residence or house to which he need not pay rent.
` Salary means basic salary + Dearness Allowance and fixed %
commission.
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` Perquisite is a benefit offered by an employer in addition to salary
and allowances, which otherwise would have been an expenditure
of the employee.
` The perquisite value is calculated at specific rates as prescribed in
the Income-tax Rules.
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` Rent free accommodation;
` Concessional accommodation
` Certain benefits or amenities provided to a specifiedemployee;
` Any sum paid by the employer in respect of any obligationwhich but for such payment, would have been payable by theemployee.
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I come from alar :alar ***
Allowa ces ***e sion ***
ratuit ***er uisites ***ross a a le alar ****ess : eductionu/s
ntertainment allow. **
rofessional ta ** ***Net axable alary ***
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The annual value of the property is taxed as House property
income;
Property means building or land appurtenant thereto,
It should be owned by the assessee;
It should not be occupied by him for the purpose of business
or profession
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Net Annual value less the following is the income from house
property.
Standard deduction u/s.24(a) which is fixed 30% of the NetAnnual alue, to meet the expenses of maintenance of the
property.
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Please note, no further deduction is available for insurance,
ground rent, land revenue, repairs, collection charges,
electricity & water charges, salary of liftman,watchman etc.
Interest on borrowed capital u/s.24(b) Interest on capital
borrowed for purchase, construction, repairs, renewal or
reconstruction of house property, allowable on accrual basis.
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House Property income is taxed in the hands of the owner ordeemed owner;
Owner is the person who has the legal title of the property.
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` Deemed Owner:-
a) a person who has transferred the property withoutadequate consideration to the spouse (but not if it is on
agreement to live apart) or to a minor child;
b) a holder of an impartible estate;
c) a member of coop.Society
d) a person who has taken a property on a long lease,say 12 years or more.
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Gross Annual alue
(Reasonable rent/Expected Rent)
Less: Municipal tax
Net Annual value Less: Deduction u/s.24
Interest on borrowed capital
Income from House Property *******
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` Under the Income Tax Act, 'Profits and Gains of Business or
Profession' are also subjected to taxation.
` The term "business" includes any :-
(a) trade,
(b)commerce,
(c)manufacture, or
(d) any adventure or concern.
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Profits and Gains of any business or profession;
Compensation received by management or other agencies;
Income of trade;
Profit on sale of import licenses;
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Cash assistance for exports received from Govt./and Cent.
Excise duty paybacks;
Benefits from exercise of business or profession;
Interest, salary, bonus commission etc. by partner;
Any sum received under Keyman insurance policy including
bonus
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Commission Paid;
Professional tax paid;
Damages paid;
Expenses on special advertisement campaign to launch a newproduct or at the time of opening
Deposit paid on OYT (Own Your Telephone);
Annual Listing fee of Stock Exchange;
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Every assessee whose turnover of business exceeds
Rs.40,00,000/- or turnover of profession exceeds
Rs.10,00,000/- or persons claiming a lower profits
u/s.44AD.44AE, 44AF, 44BB, 44BBB, should get their
books of accounts by a qualified accountant, i.e. a CharteredAccountant and the Audit Report in the prescribed form has
to be furnished by 31st October of AY.
Failure to maintain books of accounts, or get it auditedattracts penalty.
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` Professional Reciept
Less: Payments
Net Income From Proffession
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Net Profit
Add: Unreleated items dr. to P&La/c
Capital exp.
Personal exp.
Add: Expenses separately allowable
Deprc dr. to P&L a/c
Add: Expenses disallowed
Provision for gratuity
Interest paid to partner
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` Capital Gain is a part of the taxable income. Capital Gain is
the profit earned on sale of capital asset or an investment.
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` Thus to invoke the provisions of capital gains there should be:-
1. Existence of capital asset
2. Transfer of such asset
3. Profits and gains from transfer of such asset.
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It can be movable or immovable, tangible or intangible.
For instance: land, buildings, goodwill, machinary.
Following assets are excluded : any stock in trade, consumables or raw materials for the
purpose of business or profession
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7% Gold bonds ,National defense gold bonds 1980 issued
by the central government
Special bearer bonds, 1991
Gold deposit bonds under Gold deposit scheme, 1999
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` There re twotypes ofc pital assets:-
1) Longterm capital gains [sec.2(29B)]:-
Asset held by an assessee for mare than 36 months ; but
the Shares/ Securities/Units of UTI , Mutual fund held for
12 months are called as long term assets.
Any losses arising from transfer of a long term capital
asset is called as long term capital loss.
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2)Shortterm capital gains [sec.2(42B)]:
Assets held by an assessee for less than 36 months; but the
Shares/ Securities/Units of UTI , Mutual fund held for not
more than12 months are treated as long term assets.
Any loss arising from transfer of a short term capital asset
is a called short capital loss.
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Full alue of consideration
Less: Transfer expenses ( )
Less: Cost of acquisition ( )
Less: Cost of improvement ( )
Short Term Capital Gain
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Full alue of consideration
Less: Transfer expenses ( )
Less: Index Cost of acquisition ( )
Less: Index Cost of improvement ( )
Long Term Capital Gain
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` Indexation means the increase in the cost or improvement, on
account of inflation.
`
Indexation is not applicable to shares, debentures, bonds andUnits.
` Cost of acquisition Index for the year of transfer
` /improvement x
Index on date of acquisition/improvement
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YEAR INDEXRATE YEAR INDEXRATE YEAR INDEXRATE
1981-82 100 1991-92 199 2001-02 426
1982-83 109 1992-93 223 2002-03 447
1983-84 116 1993-94 244 2003-04 4631984-85 125 1994-95 259 2004-05 480
1985-86 133 1995-96 281 2005-06 497
1986-87 140 1996-97 305 2006-07 519
1987-88 150 1997-98 331 2007-08 5561988-89 161 1998-99 351 2008-09 582
1989-90 172 1999-00 389 2009-10 632
1990-91 182 2000-01 406 2010-11 711
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Full alue of consideration
Less: Transfer expenses ( )
Less: Opening Written Down alue ( )
Less: Cost of additions ( )
Short Term Capital Gain ****
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` All residual income, which do not fall in any other heads.
` Some of the examples are-
` Dividends u/s.2(22),
` Interest on securities, interest on bank deposits and loans
` Winning from lotteries, crossword puzzles, horse races, cardgames etc,
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`
Income from hire of machinery, plant or furniture.
` Gifts,
`
Income from royalty, directors fees, examination feereceived, rent of a plot of land, insurance
commission, mining rent and royalties, interest on
foreign Govt. Securities, KVP, casual income,
annuity under will, etc.
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` Tax charged at flat rate of 30%
` Conditions in case of Gifts-
1. The recipient is an Individual or HUF.
2. Any sum of money or property is received without consideration on orafter Oct. 1 2009.
3. An Individual or HUF receives gift (any amount withoutconsideration) during financial year over Rs.50,000/- (aggregate)entire amount is taxable.
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` Exceptions to sec.56(2):
` Money received
(i) from a relative,
(ii) on the occasion of marriage,
(iii) on will or inheritance
(iv) in contemplation of the death of the payer,
(v) from a local authority,
(vi) from any fund, foundation, university, hospital, etc.
(vii) registered charitable institute.
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Mr. X receives the following gifts:1. 01.04.07 Rs.25,000/- from a friend;
2. 01.05.07 Rs.500/- from another friend;
3. 01.06.07 Rs.26,000/- from a cousin of father;
4. 18.07.07 Rs.5000/- from brother of grandfather;
5. 20.07.07 Rs.41,000/- from grandmother;
6. 31.07.07 Rs.1,39,000/- on marriage out of which Rs.1,00,000/-are from relatives of Mr.X & Mrs.X
7. 01.05.07 A computer worth Rs.40,000/- from employer;
8. 01.10.07 Rs.80,000/- from a registered Public CharitableTrust;
9.01.10.07 Rs.5,40,000/- under a will from a distant relative
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Sr.No. Taxable
Rs.
Exempt
Rs.
Reason
1 25,000 Gift from friend is not exempt
2 500 Gift from friend is not exempt
3 26,000 Cousin of father is not a relative.
4 5,000 Brother of grandfather is not relative
5 41,000 Grandmother is relative
6 1,90,000 Gifts on marriage is exempt
7 40,000 Gifts in kind is not taxable
8 80,000 Gifts from Recognized Charitable
Institution is exempt.
9 5,40,000 Gift on will not taxable
Total 56,500 Since the total taxable gift is more than
Rs.50,000/- , Rs.56,500/- taxable
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Deductionallowed from the Gross Total Income laid down in
Section 80A to 80U falling under Chapter I A deduction.
This are allowed on certain payment.
E emptionlaid down u/s10 of the Act are the items of income
specifically excluded from taxable income. Exempt income
are to be totally ignored while computing income. This are
allowed on certain income.
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` Investment in pension Plans
` Investment in Equity Linked Savings schemes (ELSS) of
mutual funds
` Investment in National Savings Certificates (interest of past
NSCs is reinvested every year and can be added to the Section
80 limit)
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` Pa ments towards principal repa ment of ousing loans.Alsoany registration fee or stampdutypaid.
` Payments towards tuition fees forchildren to any school or
college oruni ersityor similar institution. ( nly for
children) or towards coaching fee of arious competiti e
e ams.
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Contribution ToPension Funds:-Conditions:-
Deduction is
1. Available to an Individual
2. Who has in th P.Y3. Paid or deposited any amount
4. Out of his taxable income
5. For receving pension from a fund referred u/s 10(23AAB)
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Maximum Claim u/s 80 CCC is Rs. 100,000/- Actual paymentor 1,00,000 whichever is lower.
However , the total deduction u/s 80C + 80CCC cannot
e ceed Rs. 1,00,000/-
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From April, 1 2010, a maximum of Rs. 20,000 is deductible if
that amount is invested in infrastructure bonds.
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DEDUCTION
INDIVIDUAL HUF
Self,Spouse,Depen
dent Children
Parents Member
General Rs.15,000 Rs. 15,000 Rs. 15,000
Additional, on health
of resident in India
aged 65 years ormore.
Rs. 5,000 Rs. 5,000 Rs. 5,000
Total Rs.20,000 Rs.20,000 Rs.20,000
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Condition to be satisfied :-
1. Loan should be from the financial institution or an
approved charitable institution
2. The purpose should be to pursue higher education
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3. It should be taken by an assessee or spouse or a child for
whom individual is a legal guide
4. Amt. is paid by individual during the P.Y. by way of
payment of interest on such loan.
5. Such amt is paid out of his income chargeable totax
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AMOUNTDEDUCTION :-
The amount deductible is the amount paid during the year
by way of interest thereon (without any limit)
PERIOD :
The deduction is available for a maximum period of 8 years
or till the loan is paid in full, whichever is earlier
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It allow the deduction in respect of donation made for
charitable purpose to specific fund or association etc. This
deduction is allowable to all the assessee (who pays the tax).
Based on limits, we can broadly divide all eligible donations
under section 80G into four categories:
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`
a) 100% deduction without any qualifyinglimit (e.g., Prime
Ministers National Relief Fund).
b) 50% deduction without any qualifying
limit (e.g., Indira
Gandhi Memorial Trust).
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Eligible Persons :-1. Individual
2. Resident in India
3. With Disability (person suffering from
not less than 40% of the prescribeddisability)
D d i
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Deducti :
ixeddeducti of s.5 , /- is
a aila le.Ahigherdeductionof s.
, , /- is allowed in respect of a
personwithserve
disability (i:e 8 %)
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` A] INCOME FROM SALARY :XXX
` B] INCOME FROM HOUSE PROPERTY :XXX
` C] INCOME FROM BUSINESS PROFFESION :
XXX` D] INCOME FROM CAPITAL GAIN :
XXX
` E] INCOME FROM OTHER SOURCES :XXX
` F] GROSS TOTAL INCOME (A+B+C+D+E)XXX
` G] LESS : DEDUCTION u/s 80 XX
` Chapter VI A
` H] NET TOTAL INCOME (F-G) ____XXX
`
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