cma intermediate - vipulshah

CMA INTERMEDIATE

DIRECT TAX INDEX

S N CHAPTER NAME PAGE NO

1 Introduction To Income Tax Act 1

2 Resident Status 16

3 Income Exempt From Tax 28

4 Income From Salary 56

5 House Property 72

6 Profit & Gains Of Business Or Profession 81

7 Capital Gain 100

8 Income From Other Source 125

9 Clubbing of Income 130

10 Set Off and Carry Forward of Losses 133

11 Permissible Deduction From Total Income 138

12 TDS and TCS 150

13 Advance tax 166

14 Assessment Procedure 169

15 Computation of Total Income 182

16 Appeal, Revision, Penalty & Prosecution 189

17 Collection Recovery Of Tax 201

18 Refund Of Tax 202

CMA VIPUL SHAH CMA INTERMEDIATE – JUNE/ DEC 21 DIRECT TAX REVISION

www.vipulshah.org 75591 73787 Page 1

Sr Particulars Explanation 1

Component of Income Tax law

1) Income tax Act, 1961, 2) Finance Act, 3) Income Tax Rules, 1961, 4) Circulars / Notification from CBDT, 5) Supreme Court and High Court Decisions.

2 Classification of Tax 1) Direct Tax: Tax on Income 2) Indirect Tax : Tax on goods and services

3 Canon of Taxation 1) Canon of Equity 2) Canon of Certainty 3) Canon of Convenience 4) Canon of Economy

4 Constitutional Background

1) List - I (Union List) – Entailing the areas on which only the Central Government is competent to make laws. Entry no 82 Tax on income other than Agri. income

2) List - II (State List) – Entailing the areas on which only the State Legislature can make laws.

3) List - III (Concurrent List) – Listing the areas on which both the Parliament and the State Legislature can make laws upon concurrently.

5 India 1) The territory of India as per Article 1 of the constitution, 2) Its territorial waters, seabed and subsoil underlying such waters, 3) Continental Shelf, 4) Exclusive Economic Zone, or 5) Any other specified Maritime Zone, and 6) The air space above its Territory and Territorial waters.

6 Income Tax Rules CBDT is empowered to frame rules from time to time to carry out the purpose and proper administration of the Act.

7 Circulars/Notifications CBDT issues Circulars and Notifications from time to time 8 Types of Amendments Prospective / Immediate/Retrospective effect 9 Types of definitions 1) Inclusive Definition

CHAPTER 1: BASIC CONCEPTS

http://www.vipulshah.org/



2) Exclusive Definition 3) Exhaustive Definitions

10 Person Sec 2(31) Individual, HUF, Firm, Company, AOP, BOI, Local Authority, AJP. 11 Assessee Sec 2(7) 1) Assesse means any person who is liable to pay any tax or any

other sum under the Income Tax Act, 1961. 2) Every person in respect of whom any proceedings has been taken

for the assessment of income, loss and refund. 3) Deemed Assessee: Legal representative 4) Assessee in default: Fail to deduct TDs

12 Assessment year [Sec.2(9)]

12 months commencing 1st April of every day

13 Previous Year [Sec. 3] Financial year prior to Assessment Year. In case of newly established business or profession from the date of set up to the end of Financial year,

14 Exceptions to the general rule that income of a previous year is taxed in its assessment year

Details Assessment Shipping Business of Non-Resident Mandatory Persons leaving India Mandatory AOP / BOI / AJP formed for a particular event or purpose

Mandatory

Persons likely to transfer property to avoid tax Mandatory Discontinued Business Assessment is

discretionary

15 Cash Credits [Sec. 68] Taxable in the FY in which it is found credited in books of accounts if Assessee offers unsatisfactory explanation about its nature and source.

16 Unexplained Investments [Sec. 69]

Investments made by Assessee which are not recorded in books and he offers no explanation or offers unsatisfactory explanation about its nature and source, then the value of investment is deemed to be Income of the Assessee of such FY.

17 Unexplained money, Bullion, Jewel or valuable article etc [Sec. 69A]

Where in any FY the assessee is found to be the owner of Money, Bullion, jewellery, or any valuable article and those are not recorded in books and he offers no explanations of offers unsatisfactory explanation about its nature and source, then the value of those assets is deemed to be Income of the Assessee of such FY.




18 Investments, etc. not fully disclosed in books of account [Sec. 69B]

Where in any FY the assessee has made investments or is found to be the owner of money, Bullion, Jewellery, etc the AO finds that amount expended exceeds the amount recorded in books and assessee offers no explanation or offers unsatisfactory explanation about excess amount, then such excess amount is deemed to be Income of the assessee of such FY.

19 Unexplained Expenditure, etc. [Sec. 69C]

Where assessee incurred any expenditure and he offers no or unsatisfactory explanation about source of expenditure or part thereof, then such amount may be deemed to be income of the assessee of such FY. Such expenditure shall not be allowed as deduction under any head of income.

20 Amount borrowed / repaid on Hundi expected by A/c Payee Cheque [Sec. 69D]

Where any amount borrowed on Hundi or repaid the same otherwise than through and Account Payee Cheque drawn on Bank, then such amount shall be treated as income of the person for the PY in which the amount borrowed or repaid. If the amount is taxed at the time of borrowing the same cannot be taxed at the time of repayment. Amount repaid includes interest on borrowed amount.

21 Sec. 68, 69, 69A, 69B, 69C, 69D

Income is chargeable under the head “Other Sources” at 60%. No deduction in respect of any expenditure/ allowance or any set-off of any loss shall be allowed. (Sec. 115BBE).

22 Income [Sec. 2(24)] Includes – 1) Income chargeable under various heads, 2) Voluntary contributions received, 3) Employees’ contribution to Welfare Funds, 4) Amount received under Keyman Insurance Policy including Bonus, 5) Gift in kind, 6) Any sum of money or value of property as defined u/s 56(2)(vii)/

(viia), 7) Value of shares of a company (closely held company) received in

any Previous Year, by a Firm or a Company (closed held company), from any person(s),

8) Any consideration received for issued of shares as exceeds the Fair market Value referred u/s 56(2)(viib),




9) Advance forfeited on failed negotiations for transfer of Capital Asset,

10) Subsidy, Duty Drawback, Grant (Whatever name called) received by the assessee from central Govt/ State Govt/ any Authority, other than the grants which considered as cost of Asset u/s.43(1).

23 Method of accounting Relevant only for Profits and Gains from business or and Income from other sources. Based on cash or mercantile system of accounting used regularly by Assessee, subject to specified exceptions.

24 Exemption Section 10 deals with income exempt from tax. 25 Deductions Sec 80C to 80U deals with deductions. Assessee need to claim. 26 Relief Exemptions & Deductions reduces income where as relief reduces

income tax liability. 27 Heads of income &

Source of Income 1) Salaries, 2) Income from house property, 3) profits and gains of business or profession, 4) capital gains, and 5) Income from other sources Source is part of head of income.

28 Tax , Surcharge & Cess 1) Tax and surcharge is general purpose revenue. 2) Tax is applied on income. 3) Surcharge is applied on income tax. 4) Cess is specific purpose revenue. It is to be applied on tax plus

surcharge. 29 Rounding off of Total

Income & Tax [Sec. 288A & 288B]

Rounded off to nearest Ten Rupees.

30 Application of Income An obligation to apply income, which has accrued or has arisen or has been received amounts to merely the apportionment of Income. Essential are – 1) Income accrues to the assessee, 2) Income reaches the assessee, and




3) Income is applied to discharge an obligation, whether self-imposed or gratuitous.

31 Diversion of Income An obligation to apply the income in a particular way before it is received by the assessee or before it has arisen or accrued to the assessee results in diversion of income. The source in charged with an overriding title, which diverts the income Essentials of “Diversion of Income” are – 1) Income is diverted as source, 2) there is an overriding charge or title for such diversion, and 3) Charge / Obligation is on the source of Income & not on the

receives. CHARGING SECTION 4

1 Charging

section Sec. 4 of the Income Tax Act provides that the shall be charged – (a) For any assessment year (AY), at the rate(s) specified in the annual Finance

Act for that year, and (b) In respect of the total income of the previous year of every person. It lays down the rates for charging income – tax in certain cases, rates for deducting income tax from income chargeable under the head ‘Salaries’ and the rates for computing advance – tax for the financial year 2012 – 21 i.e. AY 2021 – 22.

First Schedule to Annual Finance Act: It contains four parts, which, as applicable for the Finance Act, 2020 are as follows: 2 Part I It specifies the rates at which income tax is to be levied on income chargeable to

tax for the PY 2020 – 21. 3 Part II It lays down the rate at which tax is to be deducted at source during the financial

year 2020 – 21 i.e. AY 2021 – 22. 4 Part III It lays down the rates for charging income – tax in certain cases, rates for

deducting income tax from income chargeable under the head ‘Salaries’ and the rates for computing advance – tax for the financial year 2020 – 21 i.e. AY 2021 – 22.

5 Part IV It lays down the rules for computation of net agricultural income.




TAX RATES FOR AY 21-22

Tax rate Resident Individual age < 60

(Male & Female), HUF, AOP, BOI & AJP

Resident Individual

(Age >= 60 during PY)

Senior citizen( Male& Female)

Resident Individual (Age >=80 during PY)

Super senior citizen( Male & Female)

NIL 2,50,000 3,00,000 5,00,000

5% 2,50,001 to 5,00,000 3,00,001 to 5,00,000 NA

20% 5,00,001 to 10,00,000 5,00,001 to 10,00,000 5,00,001 to 10,00,000

30% Above 10,00,000 Above 10,00,000 Above 10,00,000

Add: Surcharge Income Rate 50,00,000 to 1,00,00,000 10% 1,00,00,000 to 2,00,00,000 15% 200,00,000 to 5,00,00,000 25% Above 5,00,00,000 37%

Health & Education Cess

4% on Tax plus Surcharge

Surcharge for the assessment year 2021 – 2022

Amendment finance act 2020

Different situations

Nature and quantum of income of the assesse (i.e. individual, HUF, AOP, BOI or

an artificial juridical person)

Surcharge on amount of income tax computed on dividend income

and income which is taxable under section 111A and

112A

Surcharge an

amount of income

tax computed on other incomes

Situation 1 Total income (including dividend income and income

Nil Nil




under section 111A and 112A) does not exceed Rs.50 lakh

Situation 2 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.50 lakh but does not exceed Rs.1 crore

10% 10%

Situation 3 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.1 crore but does not exceed Rs.2 crore

15% 15%

Situation 4 Total income (excluding dividend income and income under sections 111A and 112A) exceeds Rs.2 crore but does not exceed Rs.5 crore

15% 25%

Situation 5 Total income (excluding dividend income and income under sections 111A and 112A) exceeds Rs.5 crore

15% 37%

Situation 6 Total income (including dividend income and income under section 111A and 112A) exceeds Rs.2 crore (but it is not covered by Situation 4 and Situation 5)

15% 15%

Amendment finance act 2020

Alternative tax regime for individual / HUF – From the assessment year 2021 – 2022, an individual / HUF can opt for the alternative tax regime within the parameters of section 115BAC. (To be discuss later on)




FOR DOMESTIC COMPANIES

Surcharge

Particulars AY 21-22 Income between 1 cr to 10 cr

Above 10 cr cess

If turnover of or gross receipt during PY 16-17 dose not exceeds 250 cr

25% 7% 12% 4%

If turnover of or gross receipt during PY 17-18 dose not exceeds 400 cr

25% 7% 12% 4%

Otherwise 30% 7% 12% 4%

Key Note A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB.

INCOME RANGE WHEN MARGINAL RELIEF IS APPLICABLE – MARGINAL RELIEF

WILL BE APPLICABLE IN CASE NET INCOME FALLS IN THE FOLLOWING RANGE –

Particulars Income Range

Resident senior citizen Rs.50 lakh – Rs.51.9552 lakh

Rs.100 lakh – Rs.102.145 lakh



Resident super senior citizen Rs.50 lakh – Rs.51.9402 lakh







Any other resident individual, any non – resident individual, any HUF or AOP / BOI





MAXIMUM MARGINAL TAX RATES: MAXIMUM MARGINAL (TAX RATES (AT

HIGHEST LEVEL) FOR THE ASSESSMENT YEARS 2020 – 2021 AND 2021 – 2022

ARE GIVEN IN THE TABLE BELOW:

Individual / HUF / BOI / AOP / artificial juridical person 42.744%

Firm (including limited liability partnership) 34.944%

Co – operative society 34944%

Domestic com 29.12%, 34.944%

Foreign company 43.68%

Amendment finance act 2020 ALTERNATIVE TAX REGIME FOR INDIVIDUALS / HUFS UNDER SECTION 115BAC

Income of individuals and Hindu Undivided Family

Currently, individuals / HUFs are taxable as per progressive tax slabs and the highest tax slab rate is 30 per cent which is applicable if income exceeds Rs.10 lakh. Section 115BAC has been inserted with effect from the assessment year 2021 – 2022 to provide new optional tax regime to individuals / HUFs.

Rate of income tax under the alternative tax regime (Section 115BAC(1))

under the alternative tax regime income tax shall be computed at the option of the assesse as per the rate given in the following table:

Total income Rate of tax Up to Rs.2,50,000 Nil From Rs.2,50,001 to Rs.5,00,000 5 per cent From Rs.5,00,001 to Rs.7,50,000 10 per cent From Rs.7,50,001 to Rs.10,00,000 15 per cent From 10,00,001 to Rs.12,50,000 20 per cent From Rs.12,50,001 to Rs.15,00,000 25 per cent




Above Rs.15,00,000 30 per cent

Exemption limit

Exemption limit is Rs.2,50,000. It is applicable even in the case of senior citizen and super citizen. To put it differently, under normal provisions exemption limit for senior citizen is Rs.3,00,000 and for super senior it is Rs.5,00,000. But in the case of alternative tax regime, it is Rs.2,50,000 for any individual

Rebate under section 87A

Rebate under section 87A is available.

Tax on other incomes

If an individual / HUF (who has opted for the alternative tax regime) has other incomes which are taxable under other provisions of Chapter XII (i.e. sections 110 to 115BBG but other than section 115BAC), then tax on such other incomes will be calculated as per the rate(s) specified by these sections and balance amount of income will be taxable under section 115BAC as per the rate given in above table.

Restrictions on deductions/ exemptions (Section 115BAC(2))

The following conditions should be satisfied in order to avail the benefit of lower rate under the alternative tax regime of section 115BAC: It is optional Individual / HUF may be resident or non resident. Individual may be a salaried / retired employee (having salary income) or a self employed person (having business income) or any other person (having any other income). House rent allowance (section 10(13A))

Special allowance(s) (other than those as may be prescribed) (Section 10(14))

Allowance to MPs / MLAs (Section 10(17))

Exemption up to Rs.1,500 available in the case of clubbed income of a minor child (section 10(32))

Special economic zone (section 10AA) Standard deduction (section 16(ia)) Entertainment allowance deduction (section 16(ii)) Professional tax deduction (section 16(iii))

Interest on housing loan in the case of one or two self – occupied properties (section 24(b))

Additional depreciation (section 32(1)(iia)) Investment allowance in the case of backward area (section 32AD) Tea / coffee / rubber development account (section 33AB) Site restoration fund (section 33ABA)




Deduction for scientific research (section 35(1)(iia)/(iii), 35(2AA)) Capital expenditure pertaining to specified business (section 35AD) Agriculture extension project (section 35CCC) Standard deduction in the case of family pension (section 57(iia))

Deduction under sections 80C to 80U (except employer’s contribution towards NPS under section 80CCD(2), deduction under section 80JJAA and deduction under section 80LA(1A))

Interest on public provident fund (as well as final payment at the time of maturity) will remain exempt under section 10(11) even if a person opts for the alternative tax regime under section 115BAC. Likewise, interest on Sukanya Samriddhi Account (as well as withdrawal or final payment from such account) will enjoy exemption under section 10(11A) even of the concerned person has opted for the lower tax regime of section 115BAC). Moreover, the following exemptions will be available even under the alternative tax regime of section 115BAC:

Exemption under section 10(10) pertaining to gratuity Exemption under section 10(10A) pertaining to commutation of pension Exemption under section 10(10AA) pertaining to leave encashment Exemption under section 10(10B) pertaining to retrenchment compensation

Exemption under section 10(10C) pertaining to compensation on voluntary retirement separation

Exemption under section 10(10CC) pertaining to tax on non monetary perquisites paid by employer

Exemption under section 10(D) pertaining to sum received under a life insurance policy

Exemption under section 10(12) pertaining to interest and withdrawal from recognized provident fund

Exemption under section 10(12A) / (12B) pertaining to payment (including withdrawal) from NPS

Exemption under section 10(13) pertaining to payment from approved superannuation fund.

Adjustment of losses

The total income of the individual / HUF is calculated without adjusting brought forward loss (and / or additional depreciation) from any earlier year (if such loss / additional depreciation pertains to any deduction under the aforesaid sections).




Moreover, any loss under the head “Income from house property” cannot be set off with any other income under any other head of income.

Adjustment of depreciated value of block of assets

Brought forward loss / depreciation as mentioned above, shall be deemed to have been given full effect to and no further deduction for such loss / depreciation shall be allowed for any subsequent year. However, where unadjusted depreciation in respect of a block of assets has not been given full effect to prior to the assessment year 2021 – 2022 corresponding adjustment shall be made to the written down value of such block as on April 1, 2020 in the prescribed manner (if option is exercised for the lower tax regime under section 115BAC for the assessment year 2021 – 22).

Depreciation on prescribed mode

Total income of the individual / HUF is calculated after claiming depreciation (other than additional depreciation) in such manner as may be prescribed.

Alternative minimum tax not applicable

Alternate minimum tax (AMT) under section 115JC is not applicable if the assesse opts for the alternative tax regime under section 115BAC. Consequently, AMT tax credit of earlier years cannot be adjusted against the tax liability which is computed under section 115BAC.

Option (section 115BAC(5))

An individual / HUF (who wants to avail the benefit of lower rate under the alternative tax regime of section 115BAC) is required to upload an option in prescribed mode on or before the due date of submission of return of income as follows:

1

Assesse does not have business / profession income

If the assesse does not have business / profession income, the option must be exercised along with the return of income for every previous year. Provisions illustrated: X is an individual and does not have any business / profession income for the assessment year 2021 – 2022. He exercises the option for the alternative tax regime for the assessment year 2021 – 2022. In this case, option is valid only for the assessment year 2021 – 2022. For the next assessment year, he may (or may not) avail of the alternative tax regime under section 115BAC. If he wants to avail the benefit of lower tax taxation for the assessment year 2022 – 2023, he will have to exercise a fresh option by uploading the relevant form




on or before the due date of submission of return of income for the assessment year 2022 – 2023.

2

Assesse has business / profession income

If the assesse has business / profession income, this option can be exercised for any previous year relevant to the assessment year 2021 – 2022 (or any subsequent year). Once the individual / HUF has exercised the option of lower tax regime under section 115BAC for any previous year, it remains valid for subsequent years (the assesse is not required to upload a fresh option in the next year or subsequent years). However, the option cannot be withdrawn (except when he ceases to have business / profession income in which case, option under (1) will be available). If an individual / HUF (after opting for the alternative tax regime of section 115BAC), fails to satisfy the above conditions in a subsequent year, the option becomes invalid in respect of the year in which default is committed and subsequent years. Consequently, in such a case, it will be assumed that the assesse has not exercised the option of lower tax regime under section 115BAC in the year in which default is committed and subsequent years.

3

Option by an employee under section 115BAC for lower tax regime

CBDT vide Circular no. C1/2020, dated April 13, 2020 has clarified that an employee (not having income from business / profession) can opt for the lower tax regime under section 115BAC by intimating the same to the employer (i.e. deductor) of such intention for each previous year. Upon such intimation, the deductor shall compute the amount of tax deductible (under section




192) according to the provisions of section 115BAC. The following points should be noted: a

The above intimation to the employer shall be only for the purpose of the TDS and cannot be modified during that year.

b

Such intimation to the employer does not amount to exercise of option by the concerned employee under section 115BAC(5). The concerned employee is required to exercise the option under section 115BAC(5) at the time of submission of his return of income (such option could be different from the intimation made to the employer).

c

If the above intimation is not made by the employee, the employer (or deductor) shall deduct tax at source ignoring the provisions of section 115BAC.

Illustration X (37 years) is a businessman. His income for the previous year 2020 – 2021 from business is Rs.14,00,000. Besides, he has interest on savings bank account of Rs.21,000. He annually contributes Rs.1,50,000 towards public provident fund. X wants to know whether he should opt for alternative tax regime from the assessment year 2021 – 2022. Solution Computation of income of X

Existing tax regime

Rs.

Alternative tax regime

Rs. Business income 14,00,000 14,00,000 Income from other sources (interest on saving bank account) 21,000 21,000 Gross total income 14,21,000 14,21,000 Less: Deductions




Under section 80C (PPF contribution) 1,50,000 Blocked Under section 80TTA (interest on saving bank account) 10,000 Blocked Net income 12,61,000 14,21,000 Tax on net income Income tax 1,90,800 1,67,750 Less: Rebate under section 87A (not available, net income is more than Rs.5,00,000)

Nil Nil

Tax after rebate under section 87A 1,90,800 1,67,750 Add: Surcharge Nil Nil Income tax and surcharge 1,90,800 1,67,750 Add: Health and education cess 7,632 6,710 Tax liability 1,98,432 1,74,460

REBATE U/ 87A

1 Conditions

1 A resident individual whose net income does not exceed Rs. 5,00,000 can avail rebate u/s. 87A.

2 The amount of rebate is 100% of income tax or Rs. 12,500 whichever is less.

2 Key notes

a Net income = GTI – Deduction u/s 80C to 80U

b It is to be deducted before H & EC.

NON RESIDENT ASSESSEE

a For Non-Resident individual exempted income shall be upto Rs. 2, 50,000 irrespective of Age

b Surcharge : as per table given above

c Health & Education Cess @ 4% on Tax + SC

d Rebate u/s 87A is not available.




Sr Particulars Explanation 1 Why Residential status? To decide where to pay tax in India or Outside India. 2 Criteria to decide

Residential status Person Criteria Individual Period of stay in India HUF Place of control and Management Company Place of effective management Other assessee Place of control and Management

3 Hints for determination of Residential status

1) Citizenship of a country and residential status of that country are different concepts.

2) If person is resident in India in the P.Y. relevant to an A.Y. in respect of any source of income, he shall be deemed to be resident in India for his other source of income.

3) If an individual stays on a ship, which is in the territorial waters of India, then it shall be treated as his presence in India.

4) 24 hrs. Shall be treated as one day. 5) It is not essential that stay should be at same place. 6) Continuous stay is not required. Counting of number of days: If nothing is mentioned about the time of arrival and departure than the day of arrival and the day of departure both shall be include for determining residential status of an Individual

CHAPTER 2: RESIDENTIAL STATUS




RESIDENTIAL STATUS AT A GLANCE

1 An individual is said to be resident in India if he satisfies any one of the following two

conditions. If he does not satisfy any conditions he becomes Non-resident in India.

Condition Particulars 1 He is in India for a period of 182 days or more in the relevant previous year.

Sec. 6 (1)(a) 2 He is in India for 60 days or more during the relevant previous year and has been

in India for 365 days or more during four previous years immediately preceding the relevant previous year. Sec. 6(1) (C).

2 Exceptions to Condition 2 above

The period of 60 days replace by 182 days for a and for b a An Indian citizen who leaves India during the previous year for the

purpose of employment outside India. OR An Indian citizen who leaves India during the previous year as a member of the crew of an Indian ship.

b Indian citizen or a person of Indian origin who comes on a visit to India during the previous year. Amendment Finance Act 2020 Explanation 1 And in case of the citizen or person of Indian origin having total income other than income from foreign sources exceeding fifteen lakhs rupees during previous year the period of 182 days shall be replaced by 120 days.

KEY

NOTE

Person of Indian origin A person is said to be of Indian origin if he or either of his parents or any of his grandparents (maternal & paternal) were born in undivided India. Income from foreign source It means income which accrues or arise outside India( except income derived from a business controlled in or a professional set up in India)

3 Determination of Residential Status of

In the case of an Individual, being an Indian Citizen and a member of the Crew of a Foreign-bound Ship leaving India, the period(s) of stay in India shall, in respect of such voyage, be determined in the manner and subject to such




Crew Member of a Ship

prescribed conditions. For determining the period of Stay in India, the following period shall not be included

Period beginning from Period ending to Date entered into the Continuous Discharge Certificate in respect of joining the ship by the said individual for the eligible voyage

Date entered into Continuous Discharge Certificate in respect of the signing off by that individual from the ship in respect of such voyage.

Amendment Finance Act 2020) DEEMED RESIDENT 6(1A)]

(1A) notwithstanding anything contained in clause (1) An individual shall be deemed to be Resident in India if he/she fulfills following 3 conditions

A The assesse is an Indian citizen B His total income (other than the income from foreign sources) exceeds Rs.15,00,000 during the

relevant previous year, and C He is not liable to tax in any other country or territory by reason of his domicile or residence or

any other criteria of similar nature. If these 3 conditions are satisfied, the individual would be resident but not ordinarily resident in India. ADDITIONAL CONDITIONS TO TEST AS TO WHEN A RESIDENT INDIVIDUAL IS

ROR & RNOR [SEC. 6(6)]

Condition Particulars

A He has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year.

B He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.

C Amendment Finance Act 2020 a citizen of India, or a person of India origin, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, as referred to in clause (b) of Explanation 1 to clause (1), who has been in India for a




period or periods amounting in all to one hundred and twenty days or more but less than one hundred and eighty – two days; or

D Amendment Finance Act 2020 a citizen of India who is deemed to be resident in India under clause (1A).

KEY

N

OTE

If assessee fulfils both of the above conditions (a and b) then he becomes ROR otherwise RNOR.

RULES FOR DETERMINING THE RESIDENTIAL STATUS OF HUF [SECTION 6[2]]

Place of Control & Management Residential status

Fully In India Resident Partly in India Resident Fully outside India Non-Resident

ADDITIONAL CONDITIONS TO TEST AS TO WHEN A HUF IS ROR & RNOR

Condition Particulars 1 Karta has been resident in India in at least 2 out of 10 previous years immediately

preceding the relevant previous year. 2 Karta has been in India for a period of 730 days or more during 7 years immediately

preceding the relevant previous year.

INCIDENCE OF TAX [SEC. 5]

For individual and HUF Nature of income Ordinarily

resident Not ordinarily

resident Non-

resident Income received in India (no matter where it is earned) Taxable Taxable Taxable Income earned in India (no matter where it is received) Taxable Taxable Taxable Income earned and received outside India from a source controlled from India

Taxable Taxable Not Taxable




Income earned and received outside India from a source not controlled from India

Taxable Not Taxable Not Taxable

RESIDENTIAL STATUS OF A COMPANY [Sec.6 (3)]

Section Company Residential status

6(3)(i) Indian company Always resident in India

6(3)(ii) A foreign company (whose turnover/ gross receipt in the previous year is more than Rs. 50 crore)

It will be resident in India if its place of effective management (POEM), during the relevant previous year, is in India

6(3)(ii) A foreign company (whose turnover/gross receipt in the previous year is Rs. 50 crore or less)

Always non-resident in India

Sr Place of Control Indian Company Foreign Company Place of Effective Management (POEM) 1 Wholly in India Resident Resident 2 Wholly outside India Resident Non-resident 3 Partly in India and partly outside India Resident Resident

PLACE OF EFFECTIVE MANAGEMENT

1 Meaning A "Place Of effective management" (POEM) is an internationally

recognised test for determination of residence of a company incorporated in a foreign jurisdiction. Any determination of the POEM will depend upon the facts and circumstances of a given case

B The POEM concept is one of substance over form. An entity may have more than one place of management, but it can have only one Place Of effective management at any point of time. Since "residence" is to be determined for each year, POEM will also be required to be determined on year to year basis.

2 Criteria The process of determination of would be primarily based on the fact as to whether or not the company is engaged in active business outside India




A A company shall be engaged in active business outside India if 1 The passive income is not more than 50 per cent of its total income 2 Less than 50 per cent of its total assets are situated in India 3 Less than 50 per cent of total number of employees are situated in

India or are resident in India and 4 The payroll expenses incurred on such employees is less than 50 per

cent of its total payroll expenditure Meaning of Passive Income A Income from the transactions where both the purchase and sale of

goods is from/ to its associated enterprises; and B Income by way of royalty, dividend, capital gains, interest or rental

income Exception However, any income by way of interest shall not be considered to be

passive income in case of a company which is engaged in the business of banking or is a public financial institution, and its activities are regulated as such under the applicable laws of the country of incorporation

B Management power exercised in India If on the basis of facts and circumstances it is established that the board of directors of the company are standing aside and not exercising the powers of management and such powers are being exercised by either the holding company or a other person(s) resident in India, then the place of effective management shall be considered to in India.

C In case of companies not engaged in active business in India First Stage

would be identification or ascertaining the person or persons who actually make the key management and commercial decision for conduct of the company's business as a whole.

Second Stage

would be determination of place where these decisions are in fact being made.

3 Guiding Principle A The location where a company's Board regularly meets and makes decisions may

be the company's place of effective management provided, the Board- 1 Retains and exercises its authority to govern the company; and




2 Does, in substance, make the key management and commercial decisions necessary for the conduct of the company's business as a whole.

FOR DETERMINING THE RESIDENTIAL STATUS OF FIRM, AOP & BOI [SECTION

6(4)]

Place of Control and Management situated Status Fully in India Resident in India Partly in India Resident in India Fully outside India Non-Resident

RESIDENTIAL STATUS & INCIDENCE OF TAX

Nature of income Resident Non –

resident Income received in India (no matter where it is earned) Taxable Taxable Income earned in India (no matter where it is received) Taxable Taxable Income earned and received outside India from a source controlled from India

Taxable Not Taxable

Income earned and received outside India from a source not controlled from India

Taxable Not Taxable

Note: Past year untaxed income brought in India shall not be taxable in the current year; however, past year file shall be reassessed.

KE

Y NO

TES

Remittance v/s Receipt: Receipt is different from remittance. The receipt of income refers to the first occasion when the recipient gets the money under his control. Once amount is received as income any subsequent remittance of amount to India dose not result income in India.

If income is accrued and received outside India in any year preceeding the previous year and later on remitted to India in current financial year is not taxable.




SECTION 7 AND 9

Sec. 9

What is received in India?

Received In India

Accrued In India

Received In

India

Deemed to be

received in India

Sec. 7

Deemed to

accrued in

India

Accrue in

India

a) Contribution made by the employer to the recognised provident fund in excess of 12% of the salary of the employee.

b) Interest credited to the RPF of the employee which is in excess of 9.5% p.a.

c) Transfer balance from the unrecognised fund to a Recognised Provident fund (It has been discussed in the Chapter on Income from salaries).

d) The contribution made, by the Central Government or any other employer in the previous year, to the account of an employee under a notified contributory pension scheme referred to in section 80CCD.

a) Income from connection in India b) Salary earned in India c) Salary from Govt., by an Indian

citizen for services rendered outside India

d) Income from dividend paid by an Indian Company

e) Income from interest payable by specified person

f) Income from royalty g) Income from technical services h) Income from any property/assets

or source of income in India i) Income on transfer of a capital

asset situated in India.

Any income

received in

India during

PY, by any

assessee

chargeable

to tax




Meaning of business connection:

Includes It includes a profession connection. It includes a person acting on behalf of a non-resident and who performs any one or more the following – 1. He exercises in India an authority to conclude contracts on behalf of the non-resident

(it does not cover the activity of only the purchase of goods or merchandise for the non-resident)

2. He has no such authority but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident.

3. He habitually secures order in India (mainly or wholly) for the non resident or for non residents under the same management.

4. He habitually plays the principal role leading to conclusion of contracts by the non-resident and the contracts are

a) In the name of the non-resident; or b) For the transfer of the ownership of (or for the granting of the right to use) property

owned (or the non-resident has right to use) by the non-resident; or For the provisions of services by the non-resident.

Economic Presence Of NR

Moreover from the AY 19-20, significant economic presence of a non-resident in India shall constitute “business connection” in India. It means

a Transaction in respect of any goods, services or property carry out by a non-resident in India (including provisions of download of data or software in India) if the aggregate of payments arising from such transactions during the previous year exceeds such amount as may be prescribed; or

b Systematic and continuous soliciting of business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means

Does not include

In the case of a business, in respect of which all the operations are not carried out in India [Explanation 1(a) to section 9(1) (i)]: In the case of a business of which all the operations are not carried out in India, the income of the business deemed to accrue or arise in India shall be only such part of income as is reasonably attributable to the operations carried out in India. Therefore, it follows that such part of income which cannot be reasonably attributed to the operations in India, is not deemed to accrue or arise in India.




Purchase of goods in India for export [Explanation 1(b) to section 9(1)(i)]: In the case of non – resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export. Collection of news and views in India for transmission out of India [Explanation 1(c) to section 9(1) (i)]: in the case of a non – resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India from transmission out of India. Shooting of cinematograph films in India [Explanation 1(d) to section 9(1)(i)]: In the case of a non-resident, no income shall be deemed to accrue or arise in India through or from operations which are confined to the shooting of any cinematograph film in India, if such non-resident is: a. An individual, who is not a citizen of India or b. A which does not have any partner who is a citizen of India or who is resident in India;

or c. A company which does not have any shareholder who is a citizen of India or who is

resident in India. Activities confined to display of rough diamonds in SNZs [Explanation 1(e) to section 9(1)(i): In order to facilitate the FMCs to undertake activity of display of uncut diamond (without any sorting or sale) in a Special Notified Zone (SNZ), clause (e) has been inserted in Explanation 1 to section 9(1)(i) to provide that in the case of a foreign company engaged in the business of mining of diamonds, no income shall be deemed to accrue or arise in India to it through or from the activities which are confined to display of uncut an unsorted diamonds in any special zone notified by the Central Government in the Official Gazette in this behalf. [Amendment Fin Act 2016]




INCOME FROM PROPERTY IN INDIA 9(1) (i)

Income arising through or from any property or any asset or source of income in India Ex: Mr. Anil residing in Dubai leases out a building situated in Pune and receives rent in UAE. Such rental income shall be deemed to accrue or arise in India as the building (i.e. source of income) is situated in India.

INCOME FROM TRANSFER OF PROPERTY IN INDIA

Income arising through or from the transfer of a capital asset situated in India

Ex: If Anil sells the building situated in Pune to a person Outside India and receives consideration outside India, such income shall also be deemed to accrue or arise in India as the property transferred is situated in India.

SALARY INCOME [SEC 9(1) (ii)]

Salary income shall be deemed to be earned in India if services are rendered in India.

Exception to the above rule

If salary is payable to-

1) Government employee b) who is a citizen of India; c) for services rendered outside India -then such salary (even service rendered outside India) shall be deemed to be earned in India.

Key Note: Any allowances or perquisites paid to above employee shall be exempted u/s 10(7).

Pension received in India by abroad: If an assessee, residing in India, receives pension from abroad from past services rendered in foreign country, then such income shall be treated as income accruing abroad, and shall not be liable to tax in India.

DIVIDEND INCOME [SEC 9(1) (iii)]

Any dividend Paid by an Indian company outside India shall be deemed to accrue to arise in India. Dividend income paid to a non- resident by Indian company is deemed to accrue or arise in India only on payment and not on declaration.




INTEREST, ROYALTY & FEES FOR TECH. SERVICE-WHEN DEEMED TO ACCRUE OR

ARISE IN INDIA

1. Accrual of Interest 9(1)(v) in India: Payer Purpose of Payment Is the payment

deemed to accrue or arise in India

Taxability in the hands of receiver

Government Any purpose Yes All Assessee Resident

For carrying on Business or profession outside India or earning income outside India

No ROR – Taxable NOR – Not Taxable NR – Not Taxable [For NOR or NR – assumed first receipt not in India]

Resident For any other purpose Yes All Assessee Non-Resident For carrying on business or

profession in India Yes All Assessee

Non-Resident

For any other Purpose

No

ROR – Taxable NOR –Not Taxable NR – Not Taxable [for NOR or NR – assumed first receipt not in India]

2. Accrual of Royalty 9(1)(vi), and Fees for Technical Service 9(1)(vii) in India: Payer Purpose of payment Is the payment

deemed to accrue or arise in India

Taxability in the hands of receiver

Government Any purpose Yes All Assessee Resident

For carrying on business or profession outside India or earning Income outside India

No ROR – Taxable NOR – Not taxable NR – Not taxable

[For NOR or NR – assumed first receipt not in India]

Resident For any other purpose Yes All Assessee Non-resident

For carrying on business or profession in India or any other source in India

Yes All Assessee




Non-resident

For any other purpose

No ROR – Taxable NOR – Not taxable NR – Not taxable

[For NOR or NR – assumed first receipt not in India]




AGRICULTURAL INCOME

INTRODUCTION

Conditions to treat Income as agricultural income

a) Land must be situated in India. (Urban or Rural)

b) Used for Agri purpose. (Basic & subsequent operations)

Note: Income from only subsequent operations shall not be treated as Agricultural income. Agricultural Income Sec 2(1A) 1) Any rent or revenue derived from a land, which is situated in India & is used for agricultural

purposes. Rent may be in cash or in kind. Assessee may be the owner or tenant of such land. 2) Any income derived from such land on sale made by a) The cultivator of the agricultural produce raised; b) The receiver of rent in kind of the agricultural produce received. Without carrying on any process,

other than the process required to render it fit for the market. 3) Any income derived from a building subject to fulfilment of the following conditions a) The building should be occupied by the cultivator or receiver of rent in kind. b) The building should be on or in the immediate vicinity of the land, being situated in India and used

for agricultural purposes. c) The building should be used as dwelling house or store-house or other out building. d) The land is assessed to land revenue or situated in rural area. Note: Profit on transfer of agricultural land: Profit on transfer of agricultural land shall not be treated as agricultural income. Examples of Agri incomes Income from sale of Jute, cotton, flowers plants sold in pots. Remuneration & interest on loan / capital to partner. Saplings or seedlings grown in a nursery shall be deemed to be agricultural income. Examples of Non Agri Incomes Salary to employees, poultry, dairy, fisheries, Rearing of live stock

CHAPTER 3: INCOMES EXEMPT FROM TAX

/AGRICULTURE INCOME




Interest to moneylender Salary to Director of company Dividend received from company engaged in agri activity. Agri income earned outside India. Sale of trees and grasses grown spontaneously (without any human effort). Is non-agro income. APPORTIONMENT OF AGRICULTURAL INCOME

Rule Particulars Business Income Agricultural Income 7. Manufacturing of product other than

tea, coffee and rubber. (Income is partially agricultural)

Market value of agricultural produce will be deducted.

Net agricultural income will be exempt.

7A. Income from growing and manufacturing of rubber

35% of profit 65% of profit

7B(a) Coffee grown and cured 25% of profit 75% of profit 7B(b) Coffee grown, cured, roasted and

grounded. 40% of profit 60% of profit.

8 Tea 40% of the profit 60% of profit LOSS FROM AGRICULTURAL INCOME

1) Where the result of the computation for the previous year in respect of any source of agricultural income is loss, such loss shall be set off against the income of the assessee, if any, for that previous year from any other source of agricultural income.

2) If such loss could not be set off in that previous year, it shall be carried forward and set off in the following Assessment Years for not more than 8 A.Ys only against Agricultural Income.

CONDITIONS FOR INCLUDING AGRICULTURAL INCOME IN THE TOTAL INCOME

OF THE ASSESSEE

Conditions Treatment 1) The assessee is an individual, HUF, BOI,

an association of person or an artificial juridical person.

2) The assessee has non-agricultural income exceeding the maximum amount of exemption

3) The agricultural income of the assessee exceeds Rs.5000

Step 1: Compute income tax on total income of assessee including Agro-income. Step 2: Compute income tax on (Agro-income + Maximum exempted limit Step 3: Tax liability before cess = (Tax as per step 1) - (Tax as per step 2) Note: Consider rebate u/s87A or surcharge if applicable and cess also.




Illustration 1 Assesse Agri Income Non-Agri Income Total Income

Mr. Sunami 12,000 2,90,000 3,02,000 Mr. Tumeri 4,000 2,90,000 2,90,000 Mr. Humeri 12,000 2,40,000 2,40,000 X Ltd 12,000 2,90,000 2,90,000

Illustration 2 Mr. Sourav Dadely age 42 years has non-agro income of Rs. 3,50000 and agro income of Rs. 1,80,000. Compute his tax liability for the A.Y. 2021-22. Solution

Particular Rs. Rs. Step 1: Tax on Agri + non Agri ( 3,50,000 + 1,80,000) 530000 Upto 2,50,000 Nil 2, 50,000 to 5, 00,000 (5 %) 12500 5, 00,000 to 5, 30,000 (20%) 6000 18500 Step 2: Tax on Agri + max. exemption limit (2,50,000 + 1,80,000)

430000

Upto 2,50,000 Nil 2,50,000 to 4,30,000 9000 9000 Step 3: Tax as per step 1 – step 2 9500 Less: Rebate u/s 87 A 9500 = Tax (+) 4% H & EC Tax Liability 0000




OTHER INCOMES EXEMPT FROM TAX

SR NO SECTION EXPLAINATION

1 10(1) Agricultural Income: Refer chapter Agricultural Income. 2 10(2) Member’s share in income of HUF [Sec. 10(2)]

Any sum received by an individual as a member of a Hindu Undivided Family: 1) Where such sum has been received out of the income of the family; or 2) Where such sum has been received out of the income of an

impartible estate belonging to the family. 3 10(2A) Share in Profit of firm Exempt in the hands of partner. 4 10(6) Remuneration of foreign citizens

1) Remuneration received by an official of an embassy, high commission, legation commission, consulate, trade representation of a Foreign State, or as a member of the staff of any of these officials, of services in such capacity, subject to the following conditions: Remuneration of the corresponding officials or member of staff of the Indian government resident for similar purposes in that country shall be exempt in that country. Members of such staff are not engaged in any business or profession or employment in Indian otherwise than as members of such staff.

2) Remuneration received by him as an employee of a foreign enterprises (which doesn’t carry any business in India) for services rendered by him during his stay in India = < 90 days.

3) In case he is a non-resident, any remuneration due to his employment on a foreign ship provided his total stay in India = < 90 days in the PY.

4) Any remuneration received by an employee of the foreign government in connection with his training in any specified establishment or office, to the extent of his stay in India.

5 10(7) Allowance or perquisite paid outside India Any allowance or perquisite paid outside India by the Government to a citizen of India for rendering services outside India.

6 10(10BC) Compensation on account of any DISASTER




Any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster. However, of the individual or his legal heir has been allowed any deduction under this act on account of any loss or damage by such disaster, then compensation received will be taxable to the extent of such deduction and excess, if any, will be exempt.

7 10(10CC) Tax paid by employer on behalf of employee on non-monetary perquisites u/s. 17(2): Refer chapter Salaries.

8 10(10D) Any sum received under the life insurance policy, including bonus on such policy. However the following sums are not exempt: 1) Sum received from a policy u/s 80DD (Handicap policy); or 2) Sum received under a Keyman insurance policy; or “Keyman Insurance Policy” means a life insurance policy taken by a person of the life of another person who is or was the employee or is or was connected or is any manner whatsoever with the business of such person and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration. 3) Any sum received under an insurance policy issued between 1-4-2003 and

31-03-2012 in respect of which the premium payable for any year > 20% of the actual capital sum assured; or

Exception: any sum received on the death of a person is not taxable 4) Any sum received under an insurance policy issued on or after 01/04/2012

in respect of which the premium payable for any of the years > 10% of the actual capital sum assured:

5) In case of policy issued on or after 1/4/2013, on life of following persons, 10% shall be taken as 15%

(a) A person with disability or severe disability as referred to u/s 80U; or (b) Suffering from disease or ailment as specified in the rules made u/s 80DDB Exception: Any sum received on the death of a person is not taxable

9 10 (11A) The following are the tax benefits envisaged in the Sukanya Samriddhi Account Scheme: - a. The investments made in the scheme will be eligible for deduction under section

80C.




b. The interest accruing on deposits in such account will be exempt from income tax.

c. The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.

10 10(12A) Payment from NPS Trust to an employee on closure of his account or on his opting out of the pension scheme exempt Any payment from National Pension System Trust to an employee on account of closure or his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 60% [Amendment FA 2019] of the total amount payable to him at the time of closure or his opting out of the scheme, shall be exempt from tax. FA Act 2018 Under section 10(12A) an employee is allowed an exemption in respect of 60% of the total amount payable to him on closure of his NPS account or on his opting out. This exemption is not available to non-employee subscribers. To extend the same benefit to non-employee subscriber section 10(12A) has been amended with effect from AY 19-20.

11 10(12B) Payment to employee on partial withdrawal from NPS. Any payment from the National Pension System Trust to an employee under the pension scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 and the regulations made thereunder, to the extent it does not exceed 25% of the amount of contributions made by him

12 10(15) Income Exempt u/s 10(15) 1. Post office savings bank account to an extent of interest of Rs. 3,500 for an

individual account & Rs. 7,000 for a joint account 2. Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or

w.e.f. AY 2017-18 Interest on Deposit Certificate issued under the Gold Monetization Scheme, 2015

3. Interest pertains to money borrowed by it on or after September 1, 2019.If the aforesaid conditions are satisfied, interest‘s income will be exempt under section 10 (15) (ix). [FA 2019]




13 10(16) Scholarships granted to meet the cost of education. 14 10(17) Daily Allowance, etc. to MP and MLA [Sec. 10(17):

Any income by way of:- 1) Daily allowance received by any person by reason of his membership of

parliament or of any State Legislature or of any Committee thereof. 2) Any allowance received by any person by reason of his membership of

Parliament. 3) Constituency Allowance received by any person by reason of his membership

of State legislature. 15 10(17A) Awards and rewards [Sec. 10(17A)] :

Any payment made, whether in cash or in kind : 1) In pursuance of any award instituted in the public interest by the Central

Government or any State Government or by any other approved body; or 2) As a reward by the Central Government or any State Government for approved

purposes.

16 10(18) Pensions to gallantry award winners Any pension received by an individual who has been awarded “Paramvir Chakra” or “Mahavir Chakra” or “Vir Chakra” or such other gallantry award as notified by the government. It includes family pension.

17 10(19) Family pension to widow or children of armed force: Family pension received by the widow or children or nominated heirs, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed.

18 10(19A) Palace of ex-ruler The annual value in respect of any one palace, which is in the occupation of an ex-rule.

19 10(20) Income of local authority: Following income of a local authority is exempt :- 1) Income chargeable under the head income from House Property. Capital Gains

or Income from other Sources.




2) Income from the supply of commodities (other than water or electricity) or services, within its own jurisdiction.

3) Income from the supply of water services or electricity within or outside its jurisdiction.

20 10(23A) Income of professional institutions Any income (other than ‘Income from House Property’ or any income received for rendering any specific services or income by way of interest from its investments) shall be exempt from tax provided the following conditions are satisfied: 1. It is established in India with the object of control, supervision, regulation or

encouragement of the profession of law, medicine, accountancy, engineering, architecture, or any other notified profession;

2. It applies its income, or accumulates it for application, wholly and exclusively for the objects for which it was established

21 10(23C) Any Income received from by any person on behalf of: 1) PMNRF 2) PMF 3) National foundation for Communal Harmony 4) Any trust wholly for public religious purpose and charitable purpose. 5) Any university or other education institutions (wholly or substantially financed

by state government or having annual receipt up to 1 crore) existing only for Education purpose and not for profit.

6) Any hospital (wholly or substantially financed by state government or having annual receipt up to 1 crore) for specified treatment.

7) The Swachh Bharat Kosh set up by central government 8) The clean ganga Fund set up by central government Amendment Finance Act 2020 The scheme of section 10(23C) has been modified with effect from October 1, 2020. All funds or trusts or institutions or universities or other educational institutions or hospitals or other medical institutions which are currently approved for the purpose of section 10(23C)(iv) / (v) / (vi) / (via), are required to apply for a fresh approval under the amended scheme of section 10(23C). likewise, all new entities which want exemption under section 10(23C) are required to apply for approval under the amended provisions. The process of approval for the new




and existing entities will be completely electronic under which a unique approval number shall be issued to all new and existing entities. Moreover, new entities (which are yet to start their activities) will get provisional approval for 3 years. The table given below summaries these amendments:

Different entities

Time limit for uploading

approval application

(First proviso to sec.

10(23C))

Time limit for grant of

approval (Ninth

proviso to sec. 10(23C)

For which date / year approval will be available

(Eighth proviso to

sec. 10(23C))

Validity of approval (Second proviso to

sec. 10(23C))

Existing entities (which have approval for section 10(23C) on or before September 30, 2020)

On or before December 31, 2020

Within 3 months from the end of the month in which approval application is uploaded

From the assessment year from which such trust or institution was earlier granted approval

5 years

Entity which has approval (given after September 30, 2020) for section 10(23C)

At least 6 months prior to expiry of approval under section 10(23C)

Within 6 months from the end of the month in which approval application is received

From the assessment year immediately following the financial year in which approval application is received

5 years (to be granted after satisfying about the object of the trust and genuineness of its activities)

New entities (which do not

At least 1 month prior to

Within 1 month from

From the assessment

Provisional approval for a




have approval for section 10(23C) up to September 30, 2020) or any other entity not covered by this table

the commencement of the previous year relevant to the assessment year from which approval is sought

the end of the month in which approval application is uploaded

year immediately following the financial year in which approval application is uploaded

period of 3 years from the assessment year from which approval is sought

Entity which is provisionally approved for section 10(23C)

At least 6 months prior to expiry of provisional approval or within 6 months of commencement of its activities, whichever is earlier

Within 6 months from the end of the month in which approval application is uploaded

From the first of the assessment years for which it was provisionally approved

5 years (to be granted after satisfying about the object of the trust and genuiness of its activities) (5 years time – limit to be counted from the first year of provisional approval)

22 10(23D) Income of Mutual fund Registered under SEBI. Set by Public sector Bank or Public financial institution or authorized by RBI.

23 Sec 10(26AAA)

1. The following income, which accrues or arises to a Sikkim’s individual, would be exempt from income tax –

(a) Income from any source in the State of Sikkim; or (b) Income by way of dividend or interest on securities 2. However, this exemption will not be available to a Sikkim’s woman who, on or

after 1st April, 2008, marries a non-Sikkim’s individual.

24 10(32) Income of Minor




Income upto Rs. 1500 is exempt in respect of each minor child whose income is clubbed u/s. 64(1A)

25 10(33) Income on transfer of units of US 64 Any on transfer of a capital asset, being a unit of the Unit Scheme. 1964 where such transfer takes place on or after the 1st day of April, 2002.

26 10(34) Amendment Finance Act 2020) Dividend Income Section 10(34) exempts income by way of dividends referred to in section 115 – O except the income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA. As a consequence of removal of dividend distribution tax under section 115 – O (with effect from April 1, 2020), section 10(34) has been amended so as to provide that the exemption of section 10(34) shall not apply to dividend received on or after April 1, 2020. However, the exemption shall apply in respect of dividend on which tax under section 115 – O and section 115BBDA (wherever applicable) has been paid.

10(34A) Income of a shareholder on account of buy back of shares Different shares Exemptions to

shareholders u/s 10(34A) Tax distributed income u/s 115QA payable by a company which buy-backs its own shares

Buy-back on unutilized shares (on or after June 1, 2013)

Exemption available Tax payable by company u/s 115QA

Buy-back of listed shares (on or after June 1, 2013 but excluding the buy-back of shares where public announcement pertaining to buy-back is made after july 5, 2019)

Exemption not available u/s 10(34A)

Tax on distributed income under section 115QA, not applicable

Buy-back of listed shares (where public

Exemption available Tax payable by company under section 115QA




announcement pertaining to buy-back is made after July, 5 2019)

27 10(35) (Amendment Finance Act 2020) Income from units Section 10(35) exempts income received in respect of the units of a mutual fund, units from the Administrator of the specified undertaking and units from the specified company. As a consequence of the removal of distribution tax under section 115R (with effect from April 1, 2020), section 10(35) has been amended to provide that the provisions of the said clause shall not apply to any income, in respect of units, received on or after April 1, 2020.

28 10(37) If an urban land is compulsory acquired by the government then capital gain shall be exempted. (Refer capital gain)

29 10(37A) Capital Gain on transfer of land or building under the Andhra Pradesh Capital City Land Pooling Scheme [Inserted by FA 2017 with retrospective effect from 01/04/2015] Any “Capital Gains” in respect of transfer of a specified capital asset arising to an An individual or A Hindu undivided family, Who was the owner of such specified capital asset as on the 2nd day of June, 2014 and transfers that specified capital asset under the Land Pooling Scheme (herein referred to as “the scheme”) covered under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 made under the provisions of the Andhra Pradesh Capital Region Development Authority Act, 2014 and the rules, regulations and Schemes made under the said Act. Explanation. – For the purpose of this clause, “Specified Capital Asset” means,- The land or building or both owned by the assessee as on the 2nd June, 2014 and which has been transferred under the scheme; or The Land Pooling Ownership certificate issued under the scheme to the assessee in respect of land or building or both referred to in clause (a); or




The reconstituted plot or land, received by the assessee in lieu of land or building or both referred to in clause (a) in accordance with the scheme, if such plot or land, so received is transferred within 2 years from the end of the financial year in which the possession of such plot or land was handed over to him;

30 10(38) Long-Term capital Gain on transfer of Securities: 1 Income should be from transfer of a Long-term Capital Asset being –

a A Equity share in a company, or b A Unit of an equity oriented Fund, or c A Unit of Business trust

Note Exemption shall also apply in respect of any Income arising from transfer of units of a Business Trust which were acquired in consideration of a transfer referred to in Sec. 47(xvii).

2 The sale transaction should be entered into on or after 1/10/2004. 3 Transaction should be chargeable to securities transaction tax under

Chapter VII. this condition is not applicable for a transaction undertaken on a Recognised Stock Exchange (RSE) located in any International Financial Services Centre (IFSC) and where the consideration for such transaction is paid or payable in Foreign Currency.

4 Provided also that nothing contained in this clause shall apply to any income arising from the transfer of a long term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after the 1st October, 2004 and such transaction is not chargeable to STT [Inserted by FA 2017 w-e-f PY 18 – 19].

5 Provisions applicable from the AY 19-20: Exemption u/s 10(38) is not applicable from the AY 2019 – 20. Long term capital gain (which arises on transfer of equity shares/ units of equity oriented mutual fund on or after April, 1, 2018) is taxable within the parameters of section 112A. [Capital Gain]

6 Equity Oriented Fund means a Fund




a Where the investible funds are invested by way of Equity Shares in Domestic Companies to the extent of more than 65% of the total Proceeds of such Fund, and

b Which has been set up under a Scheme of Mutual Fund specified u/s 10(23D).

31 10(45) Allowance or perquisite Any allowance or perquisite, as may be notified by the central government in the official gazette in this behalf, paid to the chairman or a retired chairman or any other member or retired member of the Union Public Service Commission. [omitted w.e.f 1-4-20 Amendment Finance act 20]

32 10(48) Sale of Crude oil, Any income received in India Currency by a Foreign Company on account of sale of Crude Oil, or any other goods or rendering of services, as notified by Central Government in this behalf, to any person is exempt, based on following conditions – 1. Such income is received in India by the Foreign Company, pursuant to an

agreement or agreement entered into by Central Government or approved by Central Government.

2. Having regard to the national interest, the Foreign Company and the agreement or notified by the central Government. [Note: Some Notified Companies are – M/s temad – Iran, National Iranian Oil Company.)

3. The foreign company is not engaged in any activity in India, other than the receipt of such income.

33 10(48A) Storage of Crude Oil Any income accruing or arising to a Foreign Company, on account of storage of crude oil in a facility in India and sale of Crude Oil there from, to any person resident in India, is exempt. Conditions: 1. the storage and sale by the Foreign Company is pursuant to an agreement or

an arrangement entered into by the Central Govt or approved by the central govt, and

2. Having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf.

34 10(48B) Sale of leftover stock of crude oil




Any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from the facility in India after the expiry of the agreement or the arrangement referred to in clause (48A) subject to such conditions as may be notified by the Central Government in this behalf. The above provisions of section 10(48B) have been amended (With effect from the AY 19-20) to provide that any income accruing or arising to such foreign company on account of sale of leftover stock of crude oil, if any, from such facility in India on the termination of the agreement/ arrangement [as referred to in clause (48A)], shall also be exempt (subject to the conditions as may be notified).

35 10(48C) Newly inserted finance act 20 Exemption in respect of certain income of Indian Strategic Petroleum Reserves Ltd. (Section 10(48C)) Section 10(48C) has been inserted with effect from the assessment year 2020 – 2021. It provides exemption to any income accruing or arising to Indian Strategic Petroleum Reserves Ltd. (ISPRL), being a wholly owned subsidiary of Oil Industry Development Board, as a result of an arrangement for replenishment of crude oil stored in its storage facility in pursuance of the directions of the Central Government in this behalf. This exemption shall be subject to the condition that the crude oil is replenished in the storage facility within 3 years from the end of the financial year in which the crude oil was removed from the storage facility for the first time.




Eligible Assessee Units located in SEZ Nature of Business The unit in SEZ begins to mfg. or produces articles or things or provide

services on or after 1/4/2005 but before 31/3/2020 Conditions 1) The unit in SEZ begins to mfg. or produces articles or things or

provide services on or after 1/4/2005 but before 31/3/2020 2) It is not formed by splitting up or reconstruction of a business

already in existence. But if new undertaking is set up in an old building deduction is allowed.

3) Such new undertaking should not be formed by machinery or plant previously used for any purpose subject to following exception.

a Machinery or plant used outside India but not by the assesses is allowed Provided.

b Such machinery was not previously in India

c Such machinery or plant is imported into India

d No deduction on account of depreciation has been allowed to any assesses before the installation of the machinery or plant by the assesses

e Total value of plant or machinery transferred to new business does not exceed 20% of the total value of the machinery or plant used in that business.

4) The assesses has exported goods or provided services out of India from the SEZ.

Audit Compulsory for no 56F Amount of Deduction Profits of the business x Export turnover of Undertaking

Total turnover of the business carried on by the undertaking.

Export Turnover” means the consideration received in, or brought into India by the assessee in convertible foreign exchange within 6 months from the end of the PY or such time as may be extended by the RBI, but does not

SPECIAL EXCONMIC ZONE




include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India”.

Allowable deduction Years 1 to 5 Years 6 to 10

100% of Export profits 50% of Export Profits

Years 11 to 15 Least of: (a) 50% of Export profits, or (b) Credit to Special reserve. Note: no Double Deduction allowable u/s 10AA and Sec. 35AD for the same or any other A.Y Note: amount transfer to reverse can be used for business purpose except dividend & buying asset outside India.

Withdrawal of deduction

a Has been mis utilized, the amount so utilized shall be deemed to be the profits in the year in which it was so utilized, or

b Has not been utilized before the expiry of 3 years, the amount not so utilized, shall be deemed to be the profits in the year immediately following the period of 3 years.

Carry forward of loss Available Explanation For the removal of doubts, it is hereby declared that the amount of

deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provision of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee




ASSESSMENT OF TRUST

SR NO

PARTICULARS EXPLANATIONS

1 What is a trust A trust is an obligation annexed to the ownership of property and arising out of confidence reposed in and accepted by the owner or declared and accepted by him, for the benefit of another and the owner.

2 Charitable trust It is defined to include: 1) Relief of the poor, 2) Education, 3) Medical relief 4) Yoga Development 5) The advancement of any other object of general public utility (not a

business) 6) Preservation of environment (including watersheds, forests and

wildlife) and preservation of monuments or places or objects of artistic or historic interest.

Trust carrying General Public utility but charging fee [Amended w.e.f. A.Y. 2017-18] Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and The aggregate receipt from such activity or activities during the previous year, do not exceed 20% of the total receipt, of the trust or institution.

3 Voluntary contribution

Corpus donations

Received with a specific direction from the donor that the donation shall form part of corpus of the trust.

Anonymous donations

No record of the identity indicating the name and address of the person making such contribution is maintained.

Other donation

Treated as income but exemption can be claimed subject to fulfillment of the conditions.

4 Religious trust Religious purpose is not defined under the Act. The expression should be taken to include the advancement, support or propagation of a religion and




its tenets (principles or beliefs). It may be noted that charitable trust may always be public, while a religious trust may be private or public

5 Registration 1) The trust has to make an application for registration of the trust or institution in the prescribed form and manner to the Commissioner and obtain registration u/s 12AA. The exemption u/s 11 and 12 shall be available from the previous year in which such application is made

2) Registration to be granted in 6 months from the end of the month in which application for registration is received.

3) The finance bill proposed to insert the following additional conditions in section 12 AA [FA 2019] At the time of granting of registration to a trust or in situation, the Pr. CIT or CIT shall satisfy himself about the compliance to requirements to any other law which is material for the purpose of achieving its objects; Pr. CIT or CIT may cancel the registration, if is it noticed that the trust or institution has violated requirements of any other law which was material for the purpose of achieving its objects

6 Essential conditions/s 11

1) In the case of a charitable trust created on or after 1/4/1962, no part of its income should ensure directly for the benefit of any particular community or caste. (Exception are scheduled castes, Scheduled tribes, women and children).

2) In the case of a charitable / religious trust created on or after 1/4/1962, no part of the income should ensure or utilized directly or indirectly for the benefit of the settlor or other specified persons.

3) 85% of the income shall be applied for charitable or religious purpose or accumulated or set apart should be invested or deposited in the forms or modes specified in sub-section (5).

4) The income is to be applied to charitable or religious purposes within India. Exception is provided in certain circumstances u/s 11(1)(c). (i) Where trust is created on or after 1/4/1952, income can be applied

for charitable purposes outside India which tends to promote international welfare in which India is interested, or




(ii) Where trust is created before the 1/4./1952, the income can be applied for such charitable purposes outside India as provided in the trust deed.

5) Where the income exceeds the basic exemption limit for an accounting year, its accounts shall be audited by a CA

6) The trust has to make an application or registration of the trust or institution in the prescribed form and manner to the Commissioner and obtain registration u/s 12AA. The exemption u/s 11 and 12 shall be available from the previous year in which such application is made.

7) Voluntary contributions shall be deemed to be income derived from

property held under trust unless they are made with a specific direction that they shall from part of the corpus of the trust.

8) Where any income is required to be applied or accumulated or set apart for application, then, deduction or depreciation will not be allowed in respect of any asset which has been claimed as application of income under this section in PY.

9) Where a trust or an institution has been granted registration for the

purpose of availing exemption and the registration is in force in the relevant PY, the such a trust or institution cannot claim any exemption under any provision of section 10 [Except exemption of agriculture income u/s 10(1) and exemption available u/s 10(23C)]

New Section inserted Amendment Finance act 20 Section 12AB has been inserted by the Finance Act, 2020 with effect from October 1, 2020. All charitable institutions which are currently registered under section 12A / 12AA are required to apply for a fresh registration under section 12AB. Likewise, all new entities which want exemption under sections 11 and 12, are required to apply for registration under section 12AB. The process of registration for the new and existing charitable institutions




will be completely electronic under which a unique registration number (URN) shall be issued to all new and existing charitable institutions. Moreover, new institutions (which are yet to start their charitable activities) will get provisional registration for 3 years. The table given below summarizes other provisions of section 12AB:

Different entities

Time limit for uploading registration application (Section 12A(1)(ac))

Time limit for grant of registration (Section 12AB(3))

For which date / year exemption will be available under section 11 and 12 (Second proviso to section 12A(2))

Validity of registration (section 12AB(1))

Existing trusts (which are registered under section 12A / 12AA on or before September 30, 2020)

On or before December 31, 2020

Within 3 months from the end of the month in which registration application is uploaded

From the assessment year from which such trust or institution was earlier granted registration.

5 years

New trusts (which are not registerted under section 12A

At least 1 month prior to the commencement of the previous year relevant

Within 1 month from the end of the month in which registration

From the assessment year immediately following the

Provisional registration for a period fo 3 years from the assessment




/ 12AA up to September 30, 2020) or any other trust not covered by this table.

to the assessment year from which registration is sought.

application is uploaded.

financial year in which registration application is uploaded.

year from which registration is sought.

Trust which is provisionally registered under section 12AB

Alteast 6 months prior to expiry of provisional registration or within 6 months of commencement of its activities, whichever is earlier

Within 6 months from the end of the month in which registration application is uploaded.

From the first of the assessment years for which it was provisionally registered.

5 years (to be granted after satisfying about the object of the trust and genuineness of its activities) (5 year time – limit to be counted from the first year of provisional registration)

Trust which is registered under section 12AB

At least 6 months prior to expiry of registration

Within 6 months from the end of the month in

From the assessment year immediately following

5 years (to be granted after satisfying about the




under section 12AB

which registration application is received

the financial year in which registration application is received.

object of the trust and genuineness of its activities)

Trust registration of which has become in – operative due to section 11(7)

At least 6 months prior to the commencement of the assessment year from which the said registration is sought to be made operative.

Within 6 months from the end of the month in which registration application is received.

From the assessment year immediately following the financial year in which registration application is received.


A trust which has adopted modification of objects which do not confirm to conditions of registration.

Within 30 days from the date of the said adoption or modification

Within 6 months the end of the month in which registration application is received.

From the assessment year immediately following the financial year in which registration application is received.


7 How to find out exemption u/s 11

Step 1: Find out taxable income of the trust




Step 2: 15% of the income from property held for charitable or religious purposes is exempt for tax. This income can be accumulated for future without any specific time frame.

Step 3: Remaining 85% of the income from property held for charitable or religious purposes is exempt if it is applied for charitable or religious purpose in India during the previous year.

In following cases exemption available even if amount is not spent Amount received at the end of the year

To be spent in the next FY

Amount not received To be spent in the year of receipt or next year after receipt

Accumulate for specific purpose To be spent within 5 yrs.

8 When during the extended period, income is not utilised

Such income is taxable as follows: When option is exercised to apply the income in the year of receipt, then

so much receipt which is not spent during the year of receipt and immediately following year, shall be taxable as the income of the immediately following year.

When option is exercised to apply the income in the next year, then the amount not spent in the next year shall be taxable as income of the next year.

9 How to determine application of income

What is considered as application of income: The following important points should be noted for application of income: Whenever any loan, taken to fulfil one of the objects of the trust, is

repaid then it shall be taken as application of income. In the case of society or charitable trust, with the object of providing

free or concessional education to students, advances of any loan to the students for higher studies, it amounts to application of income. On return of such loan, such amount will be taken as income of the trust.

Application of the amount can be for revenue or capital purpose. Any tax paid out of the current year’s income shall be taken as

application for charitable purpose. Donation given by the trust is an application of income. However it

should not be given with a specific direction that is shall form part of corpus of the other trust.




[Amendment Finance Act 18] For calculating “application” of income if payment exceeding Rs. 10,000 is made in cash or by bearer cheque, such payment will be disallowed from the AY 19 – 20. Likewise, if tax is deductible but not deducted and payment is made to a resident, 30 per cent of such payment will be disallowed while calculating “application” of income for the AY 19 – 20 (or any subsequent year).

10 Forfeiture of exemption

Income for private religious purposes Income for the benefit of particular religious community Income for the benefit of interested persons Funds not invested in section 11(5) securities Education & medical facilities to specified persons

11 Transfer of capital assets

Exemption of Capital Gain arising on transfer of Capital Asset: Where a capital asset, held wholly for charitable or religious purposes, is transferred

Amount invested for acquiring another capital asset to be so

held

Amount of exemption

Whole of the net sale consideration Whole capital gain Part of the net sale consideration Amount invested in new asset –

cost of the transferred asset Ex: if an asset costing 1, 00,000 is transferred for 4, 00,000: Capital Gain is Rs. 3, 00,000. Now if new asset is acquired at cost of Rs. 4, 00,000 or more, the whole capital gain shall be exempt. However if new asset is acquired at cost of Rs. 3,20,000/- only then exemption will be Rs. 2,20,000/- (i.e. Rs. 3,20,000 – Rs. 1,00,000).




POLITICAL PARTY

CONDITIONS TO CLAIM EXEMPTION BY A POLITICAL PARTY

1) The political party keeps and maintains such books of accounts and other documents, as it would enable the Assessing Officer to property deduce its income there from.

2) The political party keeps and maintains a record of each voluntary contribution in excess of Rs. 20,000 and of the names and address of persons who have made such contributions/

3) The accounts of the political party are audited by a chartered Accountant. 4) No donation > Rs. 2,000/- is received by such political party otherwise than by an account payee

cheque drawn on a bank an account payee bank draft or use of electronic clearing system through a bank account or through electoral bond. (FA 2017)

5) In order to promote to digital transactions, the receipt through other notified electronics modes, (i.e. e-wallets, etc.) have been proposed to be included in the list of acceptable mode of payment. [Amendment FA 2019].

INCOME OF POLITICAL PARTY: SEC. 13A

Incomes exempt from tax: 1) Income from house property 2) Capital Gains 3) Income from Other Sources 4) Income by way of Voluntary Contributions.

INCOME OF ELECTORAL TRUST SEC. 13B

Entire income of an electoral trust is exempt if: The trust distributes to political parties at least 95% of aggregate donations received by it during the said previous year along with brought forward surplus. It follows the rules as may be prescribed by the Central Government.




SR NO PARTICULARS EXPLANATION 1 Salary Means any payment by the employer to employee. 2 Basis of charge Salary is chargeable to tax either on 'due' basis or on 'receipt' basis, whichever

is earlier. Advance Salary: Taxable on Receipt basis. Arrears of salary: Taxable on Receipt basis. Advance Against salary: Treated as loan hence not table. Illustration 1 Mr. Kadappa is getting salary of Rs. 12,000 pm since 01/06/16 & got increment of Rs. 1,000 on 01/04/20. Calculate his annual salary if: a) Salary becomes due on the last day of month b) Salary becomes due on the 1st day of next month Solution Salary due on last day of the month

Particular Rs. 13,000 × 12=

Salary becomes due on 1st of the next month

Particular Rs. Mar 20 – 12,000 × 1 April 20 to Feb 21 13,000 × 11 Total

3 Basic Salary Fully taxable in all cases. 4 Fees Fully taxable in all cases. 5 Commission Fully Taxable. 6 Bonus Contractual bonus is taxable as bonus whereas voluntary bonus is taxable

as perquisite.

CHAPTER 4 INCOME FROM SALARY




7 Pay scale It is a system of payment where increment scale is pre-known to employee, e.g. Basic salary is given Rs. 6000-2000-12000. This is called as increment schedule. As per this initial payment is Rs. 6000 which increases by Rs. 2000 per year till salary reaches Rs. 12,000. Illustration 2 Mr Badlapur joins Tony Ltd. on 1/10/2016 Salary scale = 16,000 – 2,000 – 30,000 Compute salary of Badlapur for PY 2020 – 21 Solution Working note

Computation of Salary for PY 2020 – 21

8 Salary received in lieu of notice period

Fully taxable.

9 Profits in lieu of salary [Sec. 17(3)]

Fully taxable.




ALLOWANCES

SR NO PARTICULARS EXPLANATIONS 1 a) City compensatory

Allowance b) Dearness allowance c) Tiffin Allowance d) Medical Allow. e) Servant Allow. f) Deputation Allow g) Warden Allow h) Non-practice allows

Fully Taxable. Note: When nothing is given regarding DA it is assumed to be applicable.

2 a) Traveling Allowance, Transfer Allowance

b) Conveyance Allowance c) Daily allowance d) Helper Allowance e) Research Allowance f) Professional

development allowance

g) Uniform Allowance.

Fully exempt to the extent of amount spent.

3 a) Allowance to Govt Employee outside India

b) Allowance received from UNO

c) Allowance to high court and supreme court judge

d) Compensatory allowance under article 222(2) of the constitution

Fully exempt irrespective of amount spent




4 House rent allowance (HRA)

Minimum of the following is exempt from tax. 1) Actual HRA received 2) 50% / 40% of salary 3) Rent Paid - 10% of Salary. Notes: Salary = Basic + DA(app) + comm. ( TO) Advance salary to be ignored for the calculation of HRA. Basis of deduction is place of accommodation. 50% for Mumbai, Delhi, Kolkata and Madras and other cities

40% 5 Children Education

Allowance Minimum of the following is exempted – 1) Rs.100 per month per child (to the maximum of two

children) 2) Actual amount received. Deduction is available even if amount in not spent. Child includes adopted child, step child.

6 Children Hostel Allowance Minimum of the following is exempted 1) Rs. 300 per month per child (to the maximum of two

children) 2) Actual amount received. Deduction is available even if amount in not spent. Child includes adopted child, step child.

7 Truck Driver’s Allowance / daily allowance

Minimum of the following shall be exempted (1) 70% of allowance (2) Rs. 10,000 p.m. whichever is less

8 Transport Allowance

Minimum of the following shall be exempted 1) Actual amount received; or 2) Rs. 1600 p.m. (in case of blind and orthopedically

handicapped employee Rs. 3200 p.m.). 9 Hill Compensatory

Allowance Amount exempt from Rs. 300 per month to Rs. 7,000 per month for the specified areas.

10 Border Area Allowance Amount exempt from Rs. 200 per month to Rs. 1,300 per month for the specified areas.




11 Tribal Area Allowance Rs. 200 per month for the tribal areas of Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Karnataka, Tripura, Assam, West Bengal, Bihar and Orissa.

12 Any other Allowance Any other allowance for which there is no specific provision shall be fully taxable.

PERQUISITES [SEC 17(2)]

Sr. Particulars Explanation

1 Meaning Benefits given in cash or Kind. 2 Specified

Employee [Sec. 17 (2) (iii)]

The following categories are treated as specified employees. 1) A director employee in a company. 2) An employee who has substantial interest in the employer company (i.e.

holding beneficial interest in voting power of 20% or more at any time during the previous year).

3) An employee (not covered above) whose income chargeable under the head ‘Salaries’ (excluding all amenities and benefits), by way of monetary – payments exceeds Rs. 50,000. For the purpose of calculating monetary payment of Rs. 50,000, the following are to be excluded/ deducted. All non-monetary benefits. Monetary benefits which are not taxable under Section 10, Deductions

under Section 16 i.e. (i) Standard deduction, (ii) Entertainment allowance and (iii) Tax on employment (professional tax).

Note: Where salary is received from more than one employer during the relevant previous year, the aggregate of salaries received from these employees will have to be considered for determining the status.

3 Non-Specified treated

Any employee other than specified employee is employee as non-specifies employee.

4 Members of household includes

1) Spouse (whether dependent or not). 2) Children and their Spouse (whether dependent or not) 3) Parents (whether dependent or not) 4) Servants and Dependents.




5 How to find Out value of Perquisite?

Step 1: Find out cost to the Employer Step 2: (Less) Amount recovered from employee if any. Step 3: (Less) Amount exempt if any = Value of Taxable Perquisite (if positive)

TAX FREE PERQUISITES

SR TAX FREE PERQUISITES 1 Medical facility in employer's hospital

Medical facility in Government's hospital Treatment taken in private hospital& expenditure incurred / reimbursed by employer is exempt

up to Rs 15,000. 2 Refreshment provided by an employer to all employees during working hours in office premises. 3 Subsidised lunch or dinner provided by employer to his employee. 4 Recreational facilities. 5 Amount spent on training of employees. 6 Accommodation provided in remote area & 15days in hotel 7 Computer or laptop provided whether to use at office or at home. 8 Any perquisite allowed outside India by Govt. to a citizen of India for rendering services outside

India. 9 Employer's contribution to staff group insurance scheme 10 Loan given to employee at concessional rate or nil rate of interest provided the aggregate amount

of loan does not exceed Rs 20,000 & interest free loan for medical treatment of diseases specified in rule 3A

11 Sale or gift of movable asset other than car and electronic items to employee after being used for 10 or more yrs.

12 Periodicals and Journals required for performing official duties 13 Telephone, Mobile phones: Expenses for telephone, mobile phones actually incurred on behalf of

employee by the employer whether by way of direct payment or reimbursement

14 Rent free accommodation

1) Rent free official residence provided to a judge of a High Court or the Supreme Court 2) Rent free furnished residence (including maintenance thereof) to Official of Parliament, a

Union Minister or a Leader of opposition in Parliament.




TAXABLE PERQUISITE

SR NO PARTICULARS EXPLANATIONS 1 Rent-free accommodation In hands of Government employee is taxable tithe extent of

licence fee. [Central/ State] Other Employee Rent-free accommodation in hands of other employees is

taxable as under: 1) Where accommodation is hired by the employer: 15% of

salary or hire charges, whichever is lower. 2) Where accommodation is owned by the employer: 15% /

10% / 7.5% of salary, depending on population of city in which accommodation is provided. [ population exceeding 25 lakhs/15 lakhs/ 10 lakhs]

Valuation of rent-free furnished accommodation

Value of accommodation + Value of furniture being (10% of original cost (if owned by employer) or Hire charge paid by employer)].

Valuation of accommodation provided at concessional rent.

Value of Rent free accommodation as usual (-) Rent payable by employee to employer for the above facility.

Valuation of accommodation in case of employees on transfer

1) For the first 90 days of transfer: Where accommodation is provided both at existing place of work and in new place, the accommodation, which has lower value, shall be taxable.

2) After 90 days: Both accommodations shall be taxable. Meaning of salary for valuation of accommodation facilities

Salary includes Salary excludes

Basic Salary Other D.A. D.A., if considered for retirement benefits Employer’s Contribution to PF All Taxable Allowances Exempted Allowances Bonus or Commission or Ex – gratia Value of perquisites




Any other Monetary Payment value of perquisites specifically excludes

2 Obligation of Employee paid by Employer

Fully taxable in the hands of employee

3 Sweat equity shares The difference between fair market value of the specified securities or sweat equity shares and amount paid by the employee shall be considered as taxable perquisite.

4. Motor-car facility:

Owned Maintain by Used for Taxable value Employer Employer Personal purpose Maintenance +Depreciation Both purpose Rs.1800/2400 p.m. Employer Employee Personal purpose Depreciation Both purpose Rs. 600/ Rs. 900 p.m. Employee Employer Personal purpose Maintenance Both purpose Actual expenditure by employer less

Rs.1800/2400 p.m. or higher deduction if log book is maintained.

Maintenance cost includes repairs, petrol, driver salary Depreciation @ 10% of actual cost of the car. However, if the car is not owned by employer then actual hire charge incurred by employer shall be considered. Driver, add salary of driver (used for personal purpose) or Rs. 900 p.m. (partly used for personal purpose) When car is used for both purpose amount recovered from employee shall not be deducted. The word month denotes completed month. Any part of the month shall be ignored. Further reminded, conveyance facility to the judges of High Court or Supreme Court is not taxable. Above 1600 CC higher capacity car and up to 1600 CC lower capacity car




SR NO PARTICULARS EXPLANATIONS 5 Credit Card Expenditure incurred by employer in respect of credit card

facility to employee shall be taxable unless the card is wholly used for office purpose.

6 Gift, voucher or token given by employer.

Cash gift is fully taxable. However, non-cash gift in excess of Rs. 5000 fully taxable.

7 Club expenditure 1) Expenditure incurred by employer in respect of club facility to employee shall be taxable.

2) Where such expenses are incurred wholly and exclusively for office purpose and specified conditions are satisfied then nothing shall be taxable.

3) Health club, sports and similar facilities are not taxable. 4) Entrance fee of corporate membership is not taxable.

8 Manufacturing cost or hire charge of gas, electricity or water

a) Fully taxable. b) If facility is in the name of employee then taxable in the

hands of all employee. c) If facility is in the name of employer then taxable in the

hands of specified employee only. 9 Free education to family of employee

Case Taxable Value Employee Fully Exempt Family member other than child

Fully Taxable

Child a) Provided in an institution owned by employer /Provided by virtue of employment in an institution not owned by employer is exempt up to Rs 1000 per child per month irrespective of number of children.

b) Reimbursement: Fully Taxable.

Child includes adopted child, stepchild of the assessee, but does not include grandchild or illegitimate child




10 Domestic Servants: Fully Taxable. If RFA owned by employer is provided then Gardner salary is fully exempt otherwise taxable

Servant Appointed by

Value of Perquisite

Taxable in the hands of

Employer Cost to the employer

Specified employee

Employee Cost to the employer

All employee

11 Interest free loan 1) Interest charged by employer > SBI Rates: NOT Taxable. 2) Interest charged is lower than SBI rates:

Interest at SBI rates on maximum outstanding balance Less: Interest paid by the Employee on that loan.

Exceptions: a. Medical Loan for treatment of diseases specified in Rule

3A except Loan reimbursed by Medical Insurance b. Loan not exceeding Rs. 20,000 in aggregate.

12 Use of movable asset: other than motor car, laptop and computers)

Valuation of perquisite in respect of use of movable assets shall be 10% of the original cost of such asset (if asset is owned by the employer) or charges paid or payable by the employer (if asset is hired).

13 Valuation of the perquisite in respect of movable assets sold

By an employer to its employee shall be 'the written down value - sale price". The written down value shall be calculated considering the rate of depreciation for Electronic items 50% (WDV. Motor-car 20% (WDV) and for other items 10 %(SLM) for the completed years. 1) Electronic gadgets include Computer, Digital Diaries and

Printers, but exclude washing machines, Microwave ovens, Mixers, Hot Plates, Ovens etc.

2) Sale or gift of movable asset other than car and electronic items to employee after being used for 10 or more years.




3) Completed year means actual completed year from the date of acquisition of asset to the date of transfer of such asset to Employees.

14 Medical facility in India 1) Medical facility in a Government hospital or hospital maintained by the employer is exempted.

2) Reimbursement of medical expenses in hospital, which is approved by the CCIT, for the prescribed diseases is fully exempted.

3) Group medical insurance obtained by the employer for his employees is fully exempted.

4) Reimbursement of any insurance premium paid by the employee is fully exempted.

5) Reimbursement of medical bill whether for employee or for his family is exempted up to Rs.15000.

Medical facility provided outside India

1) Medical expenditure, cost of stay abroad (for patient + one caretaker) is exempted to the extent permitted by the RBI.

2) Cost of travel (for patient + one care taker) is exempted only when GTI of the employee does not exceed Rs. 200000 p.a.

15 Leave Travel Concession If an employee goes on travel in India (on leave) with his family and traveling cost is reimbursed by the employer, then such reimbursement is fully exempted for 2 journeys in a block of 4 years. a) Carry-forward facility: Where concession is not availed

during the preceding block (whether on one occasion or both), then any one journeys performed in the first calendar year of the immediately succeeding block will be additionally exempted (i.e. not counted in two journey limit)

b) Restriction on number of children: Exemption can be claimed for any number of children born on or before 30/9/98. In addition, exemption is available only for 2 surviving children born on or after 1/10/98.




However, children born out of multiple birth, after the first child, will be treated as one child only. Leave travel allowance is fully taxable.

RETIREMENT BENEFITS

1 Gratuity 1) Gratuity received during continuation of service is fully taxable in the

hands of all employees. 2) Gratuity received at the time of termination of service by Government

employee is fully exempted. [ Central / State / Local] 3) Gratuity received at the time of termination of service by non-

government employee, covered by the Payment of Gratuity Act shall be exempted to the minimum of the following: (a) Actual Gratuity received

(b) Rs. 2000000, and

(c) 15/26 *Completed year of service * Salary p.m.

Notes

Completed year of service consider any fraction in excess of 6 months. Salary = Basic + DA 4) Gratuity received at the time of termination of service by non-

government employee not covered under the Payment of Gratuity Act shall be exempted to the minimum of the following (a)Actual Gratuity received;

(b) Rs. 2000000, and

(c) ½ * Completed year of service * Average salary p.m. at the time of retirement

Notes

Completed year of service ignores any fraction of the year. Salary = Basic + DA (if app) + comm. (T.O)




Salary drawn during last 10 months immediately preceding the month of retirement shall be considered.

5) Gratuity received after death of employee is exempt. 2 Leave Salary

Encashment

1) Leave Salary during continuation of service is fully taxable in hands of all employees.

2) Leave salary received by Government employees fully exempted. [central /state]

3) Leave salary received by non-Government employee shall be exempted to the minimum of the following Actual amount received as leave salary. Rs. 300000 10 * Average salary p.m. Average monthly salary X period of leave unveiled (in months)

Notes

Salary = Basic + DA (if app) + comm. (T.O) Completed year of service ignores any fraction of the year. Salary drawn during last 10 months immediately preceding the

retirement shall be considered. Leave salary paid to the legal heir of deceased employee is not taxable

as salary. How to find out period of leave earned: Step 1: Find out duration of service without any fraction.

Step 2: Step 1 X leaves allowed by employer or 30 days whichever is less

Step 3: Step 2 minus leaves taken plus leaves encased

Step 4: Leaves Unavailed = Step 3 / 30 days

3 Pension [Sec. 17(1)(ii)]

1) Uncommuted pension is fully taxable in the hands of all employees. 2) Commuted pension received by a Government employee is fully exempt

from tax. [ Central /State/ Local Authority/Statutory Corporation] 3) Commuted pension received by an employee who also received gratuity:

1/3 of total pension shall be exempted. 4) Commuted pension received by an employee who does not receive

gratuity: ½ of total pension shall be exempted.




Total Pension = Amount Received on Commutation

Ratio or Percentage of Commutation

Notes

Uncommuted Pension received by employee of UNO is exempt. Refer Sec 10 (18) & (19) for further exemptions.

4 Voluntary Retirement Compensation

Compensation received at the time of voluntary retirement shall be exempted to the minimum of the following

(a) Actual amount received as per guidelines; or

(b) Rs. 500000.

5 Annuity [Sec. 17(1) (ii)]

Fully taxable.

6 Retrenchment compensation

Minimum of the following is exempt

1) Actual amount received. 2) Rs. 5,00,000 3) Amount calculated as per provisions of Industrial dispute Act 1947 =

15/30 X Average salary for last 3 months X completed years of service Notes

Salary = Basic + DA

Number of completed years in excess of 6 moths shall be taken as full month.

7 Approved superannuation fund

1) The employer’s contribution: It is exempt from tax. However, contribution exceeding Rs. 1.5 lakh will be taxable as perquisite

2) The employee’s contribution: It qualifies for deduction u/s 80C. 3) Interest on accumulated balance: It is exempt from tax 4) Payment from the tax: Section 10(13) grants exemption in respect of

payment from the fund




8. Provident Fund

Particulars SPF RPF URPF PPF Employer's contribution

Not taxable Exempted up to 12% of Salary

Not taxable NA

Employee's contribution

Eligible for deduction u/s.80C

Eligible for deduction u/s 80C

Not eligible for deduction u/s 80C

Eligible for Deduction/s 80C

Interest Not Taxable Exempted @ 9.5% p.a.

Not Taxable Not Taxable

Lump sum Not Taxable Not Taxable if employee retires after 5 years of service or due to inability to work. Otherwise it shall be taxable as URPF

Employer's Contribution or interest thereon is taxable as salary. Interest on employee's Contribution taxable as income from other sources.

Not Taxable.

Salary = Basic plus DA (if applicable) plus commission based on turnover

EMPLOYERS CONTRIBUTION TO RECOGNISED PROVIDENT FUND,

SUPERANNUATION FUND AND NPS [SEC. 17(2)(VII)]

Sub-clause (vii) of section 17(2) has been substituted with effect from the assessment year 2021 – 22. New sub-clause (vii) provides that the aggregate amount of contribution made by the employer to the following retirement schemes, in excess of Rs. 7,50,000 per year, is taxable as perquisite – a. Recognised provident fund b. Scheme of NPS, and c. Approved superannuation fund Further, a new clause (viia) of section 17(2) has been inserted to provided that annual accretion by

way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred to above shall be treat as perquisite to the extent it relates to the contribution referred to above (i.e., in excess of Rs. 7,50,000). Such interest/ dividend/




similar amount shall be included in total income and shall be computed in the prescribed manner with effect from the assessment year 2021-22.

DEDUCTION U/S 16

SR NO PARTICULARS EXPLANATION

1 Sec 16(i) Gross Salary or Rs 50,000 whichever is less [FA ACT 2019] 2 Entertainment

allowance Sec 16(ii) Is allowed as deduction u/s 16(ii) in hands of Government employee to the minimum of following - a) Actual entertainment allowance b) Rs. 5000 c) 20% of Basic Salary.

3 Tax on employment or professional Sec 16(iiii)

Tax shall be allowed as deduction u/s 16(iii) on cash basis, whether paid by employee or by employer (on behalf of employee) from gross taxable salary.




SR NO PARTICULARS EXPLANATIONS 1 Annual value of a

property Annual value of a property shall be taxable under the head "Income from house property" subject to fulfillment of the following conditions: 1) There must be a property consisting of any building or land

appurtenant thereto. 2) Assessee is the owner (including deemed owner). 3) Such property is not used in any assessable business or profession

carried on by the assessee. 2 Annual value of a

property Annual value of a property is assessed to tax only in the hands of the owner. Sub-letting is taxable as business income or as income from other sources. Owner includes legal owner, beneficial owner and deemed owner.

3 Deemed owner [Sec. 27]

1) Transfer of property to spouse or minor child (not being a married daughter)without adequate consideration;

2) The holder of an impartible estate; 3) Property held by a member of a housing co-operative society;

company, etc. 4) A person who acquired a property u/s 53A of the Transfer of Property

Act against part performance of contract; 5) Lessee of a building for more than 12 years u/s 269UA (f).

4 Co-owners Co-owners are not taxable as an AOP provided their respective share is definite and ascertainable share of each co-owner shall be taxable in his hands.

5 Other Points 1. Income from vacate plot treated as income from other source 2. When HP is provided by employer to his employees in the interest of

his business then rent received from such HP is treated as business income & not HP income.

3. Even if HP is located outside Indian such income is taxable in India on the basis of Residential status of Assessee.

6 Exempted properties

Any one palace or part thereof of an ex-ruler (provided the same is not let out) a farm house, house property of a local authority, of an approved

CHAPTER 5: INCOME FROM HOUSE PROPERTY




scientific research association, of an educational institution, of a hospital of a person being resident of Latah, of a political party, of a trade union, house property held for charitable purpose.

7 Composite rent Composite Rent = Rent for building for assets (+) Charges for various services.

Composite Rent

When rent is separable When rent is not separable Case Property is acceptable

by tenant without amenities

Property is not acceptable by tenant without amenities.

Property is acceptable by tenant without Amenities.

Property is not acceptable by tenant without amenities.

Income shall be taxable under

Rent for property 'Income from the head house property'

'Profits & gains of business or profession' or income from other sources'.

'Profits &gains of business or profession' or ‘Income from other sources'.

SR NO PARTICULARS EXPLANATIONS

7 Self-occupied property

The annual value of TWO house or part of the house shall be nil. If an assessee occupies more than TWO house property as self-occupied, he is allowed to treat only TWO house as self-occupied at his option. The remaining self-occupied properties shall be treated as 'Deemed to be let out'. Interest on loan u/s 24(b) shall be allowed as under. Note: Even after amendment interest limit of 2 lakhs has not changed.

8 Property not occupied by the owner / Unoccupied property

Where an assessee has a residential house (kept for self-occupation) and it cannot actually be occupied by him owing to his employment, business or profession and he has to reside at a place not belonging to him, then such house shall be termed as unoccupied property. It shall be treated at par with self-occupied property. (Limit is 2 now)

9 Deemed to be let-out house property

Where the assessee occupies more than two house property as self-occupied or has more than two unoccupied property, then for any two of them, benefit u/s 23(2) can be claimed (at the choice of the assessee) and remaining property or properties shall be treated as




'deemed to be let out' and shall be treated same as let out house property.

10 Property held as stock in trade Sec23(5)

Where the building or land appurtenant thereto is held as stock in trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to TWO year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be NIL.

11. Let-Out House Property: Gross Annual Value (GAV)

Steps Particulars Amount 1st FIND OUT EXPECTED RENT [RER] Gross Municipal Value (a) xxx Fair Rent (b) Xxx Higher of the [(a) and (b)] [A] Xxx Standard Rent as per Rent Control Act [B] Xxx Reasonable Expected Rent [Lower of [(A) and (B)] Xxx

2nd ACTUAL RENT RECEIVED / RECEIVABLE [ARR] Rent received /Receivable – unrealised Rent Xxx

3rd GAV = HIGHER OF 1 OR 2 Xxx 4th IF GAV IS LOWER DUE TO VACANCY ALLOWANCE THEN GAV SHALL BE ARR

Conditions to claim deduction on account of unrealized rent

Condition 1 The tenancy is bona fide. Condition 2 The defaulting tenant has vacated or steps have been taken to compel him to vacate

the property. Condition 3 The defaulting tenant is not in occupation of any other property of the assessee. Condition 4 The assessee has taken all reasonable steps to institute legal proceedings for the

recovery of the unpaid rent.




Illustration 1 Find out the gross annual value in case of the following properties for the AY 21-22 (Rs. in thousand)

Particulars H1 H2 H3 H4 H5 H6 Gross Municipal Value p.a. 200 300 400 500 300 300 Fair rent p.a. 300 600 750 180 200 400 Standard rent under the Rent Control Act p.a. 300 180 280 225 250 240 Actual rent p.a. 600 900 300 240 216 240 Property remains vacant (in number of month) 1 3 2 1 2 1

Solution Computation of gross Annual Value (Rs. in ‘000)

Step Particulars Working H1 H2 H3 H4 H5 H6 1 Calculation of

RER Higher of GMV and FR (RER cannot exceed SR)

300 180 280 225 250 240

2 ARR For the period actually let out

550 675 250 220 180 220

3 Higher of above Higher of step 1& step 2 550 675 280 225 250 240 4 Gross Annual

Value 5501 6751 2501 2201 2501 2201

Key Notes 1. In H1 and H2 Actual rent receivable is already higher than RER therefore vacancy period is not

making any impact (i.e. step 4 of computation discussed in theory) on GAV. 2. In H3 and H4, ARR is less than RER due to vacancy (otherwise ARR would have been Rs. 3,00,000

& Rs. 2,40,000 respectively). Therefore, GAV will be the ARR computed in step 2. 3. In H5, ARR is less than RER not only due to vacancy but also due to other factors. In such case,

value of RER shall be taken as GAV. 4. In H6, ARR is less than RER due to vacancy period otherwise ARR would have been equal to RER




SR NO PARTICULARS EXPLANATIONS

12 Partly self-occupied and partly let-out

Case 1) Area wise Division: In this case, a house property consists of two or more independent units and one or more of which are self-occupied and remaining units are let out. Treatment: Self-occupied portion & let out portion shall be treated as two separate houses (i.e. Unit A & Unit B). Income of both units shall be computed accordingly. Case 2) Time wise division: In such case, the house property is self-occupied by the assessee for a part of the year and let out for remaining part of the year. Treatment: In such case assessee will not get deduction for the self-occupied period and income will be computed as if the property is let out throughout the year. Reasonable expected rent (RER) shall be taken for the full year but the actual rent receivable (ARR) shall be taken only for the let-out period.

13 Municipal Taxes

1) Allowed as deduction to Landlord on paid basis including Advance M. Tax. 2) Interest, penalty and fine is not allowed as deduction.

14 Standard deduction

30% of net annual value are allowed irrespective of the actual expenditure incurred.

15. Interest on Loan (u/s 24 (b)

Type of Property Loan taken before 1.04.1999

Loan taken on or after 01.04.1999

Self-Occupied Amount of deduction is minimum of the following: 1) Interest paid 2) Rs. 30,000

If construction completed within 5 yrs from the of financial year in which loan is taken Amount of deduction is minimum of the following 1) Interest paid 2) Rs 2,00,000

Let out Amount of interest paid Amount of interest paid Above deduction of interest for SO house property shall be for 2 house properties.




PRE-CONSTRUCTION PERIOD

It is a period commencing on The date of commencement of construction or the day of borrowing whichever is later and ending on (a) 31st March immediately prior to the date of completion of construction or (b) date of repayment of loan whichever is earlier.

PRE CONSTRUCTION INTEREST

Pre-construction interest is deductible in 5 equal instalment commencing from the previous year in which the house is acquired or constructed.

Illustration 2 Compute period of five years.

Completion of

construction

1st year 2 nd year 3rd year 4th year 5th year Is deduction available in PY 20-21

16-17 16-17 17-18 18-19 19-20 20-21 Yes

20-21 20-21 21-22 22-23 23-24 24-25 Yes

13-14 13-14 14-15 15-16 16-17 17-18 No




Analysis of Deduction u/s 24b

Nature of property

When loan was taken

Purpose of Loan Allowable Maximum (limit)2

Self-occupied On or after 1/4/99 Construction or purchase of house property2

Rs. 2,00,000

Self-occupied On or before 1/4/99 For Repairs of house property Rs. 30,000 Self-occupied Before 1/4/99 Construction or purchase of house property Rs. 30,000 Self-occupied Before 1/4/99 For Repairs of house property Rs. 30,000 Let-out Any time Construction or purchase of house property No Maximum limit

Interest on Housing Loan

Loan for Construction Purchases

(Pre-Construction / Post

Loan for Reconstruction Purchases

(Renewal / Repairs)

Self-Occupied Let Out

Interest paid

Loan taken before 1.4.99

Loan taken on or after 1.4.99

Amount of deduction Interest paid OR Rs.30, 000 Whichever is less

Amount of deduction Interest paid OR Rs.2,00,000 Whichever is less subject to condition

Self-Occupied Let Occupied

Maximum Rs.30,000

Interest paid




KEY

NOTE

S

KEY

NOTE

S

Interest is allowed as deduction on accrual basis. Interest on unpaid interest is not deductible. No deduction is allowed for any brokerage for arranging loan. Interest on afresh loan, taken to pay the original loan is allowed a deduction. Interest payable out of India is allowed as deduction if tax is deducted at source If loan is taken by mortgaging one house property for the construction for another house

property, then the interest on such loan shall be eligible for deduction from the income of the second house, since the purpose for which the loan amount is used is taken into consideration.

Illustration 3 Calculate pre-construction period from the following information

Date of loan taken Constructed completion Date of repayment Pre-construction period 01/06/2011 14/10/2014 10/01/2021

01/06/2011 27/01/2014 20/04/2022

01/06/2014 31/03/2016 10/12/2014

01/04/2020 28/03/2021 28/02/2021

RECOVERY OF UNREALISED RENTAND RECOVERY OF ARREARS OF RENT [SEC.

25A] [W.E.F AY 17-18]

Meaning Where any Unrealised rent is subsequently realized, and then such recovery shall be taxable under the head ‘income from house property’. Where the rent is increased by landlord (either suo-motu or due to the court instruction) retrospectively, then the increased rent shall be treated as Arrear rent.

Tax treatment

Recovery shall be taxable after a standard deduction of 30%

Features 1. It shall be taxable on cash basis 2. It shall be taxable under the head ‘Income from house property’ whether assessee

owns such house in the year of recovery or not.




CO-OWNERSHIP [SEC. 26] RECOVERY

Meaning If a house is owned by more than one owner than they are known as co-owners. Tax treatment

Each co-owner shall be taxable separately for his share of income from house property. Where the house property is used for self-occupation by co-owners then all of them can claim benefit u/s 23(2) and interest on loan u/s 24(b) shall be to all the co-owner to the extent of Rs. 30000/ Rs. 2, 00,000 Separately.

KEY

NOTE

S

It is mandatory for the co-owners to apply the provisions of sec. 26. Normally co-owners are taxed as an Association of persons or body of Individual but for the

purpose of this section co-owners of a house are taxed separately as an individual (not as AOP)for their respective share of income. This is another exceptional feature of this chapter.

PROPERTY ALLOTTED BY ASSESSEE TO HIS FIRM

If an assessee allots his property to his firm then treatment shall be as under: Property has been allotted without rent but as his share of contribution

Such property shall be taxable under the head “Profit & gains of business or profession”. CIT vs Narain & Rabindranath bhol

Property has been let out to the firm for a rent

Annual value of a property shall be taxable under the head “Income from house property”. Ram Narain & Bros vs CIT

Note: If a firm owns a property it shall be taxable in the hands of the firm and not in hands of partner.

PROPERTY SITUATED OUTSIDE INDIA

Status of Individual Taxability Resident Ordinarily Resident Taxable in India Not Ordinarily Resident / Non – Resident

If the Rent is first received in India, then Income shall be taxable in India

Income accruing or received in Foreign Currency should be converted into India Rupees in TT Buying Rate on the last day of the previous year. (Rule 115)

Any tax or expenditure incurred towards earning such income shall be allowed as a deduction




a

SR NO Section Particulars

1 28 Income chargeable under the head Profits & gains of business or profession. 1) Profits & gains of any business or profession 2) Compensation to Management agency 3) Income of trade or professional associations 4) Export incentive, 5) Perquisite from business or profession 6) Remuneration to partner, 7) Amount received or receivable for certain agreement 8) Key man Insurance Policy, 9) Recovery against any capital asset being covered by sec. 35AD. 10) Amount received or receivable for certain agreement

Not carrying out any activity in relation to any business; or profession

Income not taxable under the head "Profits and gains of business or profession are 1) Rent of house property 2) Dividend on shares even though the assessee deals in shares 3) Winning from lotteries, races etc. 4) Exempted income, 5) Sum taxable under the head ‘Capital gains'.

2 Speculative Transaction It means a transaction in a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip: [Sec. 43(5)]

3 Profit or loss on sale of asset Shall not be taxable under the head Profit & Gains of business or Profession, but shall be taxable under the head “Capital Gains”. However, in case of sale of assets under the following section the gains shall be taxable under the head “Profit & Gains of business or Profession”.

1) Sale of an asset of a power sector Undertaking[Sec. 41 (2)] 2) Sale of an asset used for scientific Research [Sec. 41 (3)]

CHAPTER 6: INCOME FROM BUSINESS OR PROFESSION




3) Sale of an asset in respect of which deduction has been claimed u/s 35 AD

4 30 Rent, rates, taxes, current repairs & insurance for premises used for the purpose of business or profession shall be allowed.

5 31 Current repairs & insurance of plant, machinery & furniture are allowed as deduction.

6 32 Depreciation:

7 32 Assessee must be the owner of the asset. Hire purchase, Co-owner, beneficial owner Meaning of Use Asset should be ready to use actual use not necessary. Significance of date of purchase: Where an asset is acquired by the assessee during the previous year and is put to use in the same previous year for less than 180 days, the depreciation in respect of such asset is restricted to 50% of the normal depreciation Method of Depreciation 1) Depreciation shall be allowed on written down value method at the rates

prescribed. 2) However, in certain cases depreciation is allowed on Strength Line method on

an application made by the assessee e.g., in case of Power Sector Undertaking if the assessee applies to the department then depreciation is allowed on Strength line method.

STRAIGHT LINE METHOD Terminal Depreciation and Balancing Charge: Applicable to assessee engaged in generation or generation and distribution of power and following straight-line method of depreciation. Terminal depreciation = +ve value of [WDV of assets - (Sale value or Scrap value)] Balancing Charge = -ve value of [WDV of assets - (Sale value + Scrap value)] to the extent of accumulated depreciation. Section 50A :capital gain on SLM asset For purpose of calculation of Capital Gain on SLM assets, the Cost of acquisition of such asset shall be the WDV as adjusted by terminal depreciation or balancing charge, as the case may be.




The gain can be either long term or short term depending upon the period of holding of the asset. REDUCING BALANCE METHOD Block of asset sec 2(11) Block of assets means group of asset falling within a class of asset Determination of Written Down Value (WDV) [Sec. 43(6)]

Situation WDV Asset acquired during the Previous Year

Actual cost to the assessee

Asset acquired in earlier Previous Year(s)

Actual cost to the Assessee Less All depreciation allowed under IT Act.

In case of Succession, Amalgamation or Demerger

WDV of the Predecessor Company or Transferor Company or Demerged Company

Actual cost of asset Sec 43 (1) 1) All expenses directly related to acquisition of such asset including travelling

expenditure incurred for acquiring asset. 2) Expenses necessary to bring the asset to site, installation, and to make it

ready to use, e.g. carriage inward, loading and unloading charges, installation cost, trial run cost, etc.

3) Expenses incurred to increase the capacity of the asset or to make it fit prior to its use

4) Loss on exchange rate Provided further that where the assessee incurs any expenditure for acquisition of any asset or part thereof in respect of which a payment or aggregate of payment bank or an account payee bank draft or use of electronic clearing system through a bank account, > Rs. 10,000/-, such expenditure shall be ignored for the purposes of determination of such cost

In order to promote digital transactions, the payments or receipts through other notified electronic modes. Have been proposed to be included in the list of acceptable mode of payment.

8 Calculation of depreciation (at a glance)




Particulars Amount Rs. W.D.V. of the block at the beginning of the previous year Add: Purchase during the previous year Less: Net Sale consideration of assets sold during the previous year

Value of block before depreciation Less: Depreciation WDV of the block at the end of the year When depreciation is not charged: 1) When WDV is reduced to zero. The negative value is to be treated as short

term capital gain. 2) When entire block is empty. In such case, the positive value shall be treated

as short term capital loss & negative value is treated as STCG.

9 Sec 32(1)(iia)

Additional depreciation Conditions Rate of Depreciation

Applicable to Assessee engaged in the business of manufacture / production of any article / thing or in the business of Generation or Transmission or distribution of power.

Asset is put to use for more than 180 days

Asset is put to use for less

than 180 days

20% 10%

50% can be claimed in succeeding PY Extra Additional Depreciation New undertaking in backward area (given below) started on or after 01-04-15 the rate of additional shall be 35% (more than 180 days) and 17.5% (less than 180 days). [ state: WB/B/T/AP] Unabsorbed depreciation: Depreciation remaining unabsorbed can be carried forward for indefinite period and can be set off against any income of the assessee.(Except salary and casual income)

10 32AD Investment allowance for under takings in backward areas for Acquisition & Installation of New Assets.




2. Applicability: All assessee engaged in business of manufacture or production of any article or thing

3. Condition: 1) Commencement: Assessee should set up an undertaking or Enterprise on or

after 01/04/2015. 2) Location: In any notified Backward Area in the State of Andhra Pradesh or

Bihar or Telangana or West Bengal; 4. Deduction: 15% of actual cost of such new assets for that AY. 5. Time: Deduction available up to AY 2020 – 2021 Note: Not available from 1-4-20 Amendment Finance Act 2020 Investment allowance under section 32AD is not available, if the option is exercised for the alternative tax regime by an individual / HUF (sec. 115BAC), a domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society. (section 115BAD).

11 33AB Special deduction for assessee engaged in growing & manufacturing Tea, Coffee or Rubber Applicable to all assessee carrying on business of growing and manufacturing Tea; Coffee; or Rubber in India. Assessee must deposit an amount in an account with NABARD or in any other account in accordance with and for the purpose specified in a scheme approved by Tea Board or Coffee Board or Rubber Board within 6 months from the end of the previous year or before the due date of furnishing the return of income. Accounts of assessee must be audited. Deduction: Minimum of - Amount so deposited or 40% of the profit. Withdrawal of Deduction: Any amount released during any PY is not utilized. Such amount shall be treated as business income of the PY Any amount released during any PY or withdrawn by the assessee and utilized for the purchase of buying specific asset. Period of holding of new asset: 8 yrs from the date acquisition. Amendment Finance Act 2020 With effect from the assessment year 2020 – 2021 audit report in Form no. 3AC is required to be uploaded one month prior to the due date of submission of return of income (if the due date of submission of return of income is October 31 of the assessment year, audit report should be report should be uploaded on or before




September 30 of the assessment year. 12 33ABA Site Restoration Fund: Applicable to all assessee engaged in the business of a)

Prospecting for petroleum of natural gas in India; or b) Extraction or production of petroleum or natural gas in India; or c) Both. The Central Government has entered into an agreement with the assessee for such business. Assessee must deposit an amount with the State Bank of India or in an account maintained in accordance with and for the purposes specified in a scheme approved by the Government of India in the Ministry of Petroleum & Natural Gas. Such amount must be deposited before the end of the previous year. Accounts must be audited. Deduction: Minimum of - Amount so deposited or 20% of the profit. Amendment Finance Act 2020 Deduction under section 33ABA is not available, if option is exercised for the alternative tax regime by an individual / HUF (section 115BAC), domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society (section 115BAD).

13 35 Scientific research 1) In-house scientific research expenditure whether revenue (salary to research

staff & material) or capital (except land) shall be allowed if the research is related to business.

2) Above expenditures incurred 3 years prior to date of commencement of business shall be allowed in the year of commencement of business.

3) All revenue expenditure incurred during the year shall be fully allowed 14 35(2AB) 1) Assessee: company only engaged in Bio-technology or any business of

manufacture or production of any article or thing. 2) Expenditure: Capital or revenue expenditure excluding cost of any land and

building. 3) Deduction: 100% of revenue and capital expenditure except cost of land &

building. Cost of building is not entitled for weighted deduction but eligible for 100%

deduction u/s 35(1)(iv). Cost of any land shall not be allowed any deduction




Note: pre-commencement expenses and cost of building is not allowed under section 35(2AB). Hence they shall be entitled for 100% deduction u/s 35(1) and 35(2) Amendment Finance Act 2020 Deduction under section 35(2AB) is not available, if the option is exercised for the alternative tax regime by an individual / HUF (section 115BAC), a domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society (section 115BAD).

Research through outside agency ( even if not related to business) Payment made to Deduction %

Any Research Association (or) University/ College, etc. for Scientific Research

100% F.Act 20

Company approved by Prescribed Authority for Scientific R&D

100%

Any Research Association (or) University/ College, etc. for social science or statistical research

100%

National Laboratory/ University/ IIT/ Specified Person 100% F.Act 20

Amendments applicable from October 1, 2020: The following amendments have been made with effect from October, 1 2020: Existing research association / company – An entity which has taken

approval for the purpose of section 35(1)(iia) / (iii) before October 1, 2020, is required to apply afresh (approval granted up to September 30, 2020 shall be deemed to have been withdrawn). Such entity will have to make an online intimation in prescribed form to the prescribed income tax authority on or before December 31, 2020. Subject to this intimation, the notification shall be valid for a period of 5 assessment years beginning with the assessment year 2021 – 2022.

New entities – Any notification issued by the Central Government under section 35(1)(ii) / (iia) / (iii) (after March 26, 2020) shall be applicable only for 5 assessment years (or less).

15 41(3) Sale of asset used for scientific research: Without having been used for other purpose, sale consideration to the extent of cost of such asset shall be taxable as




business income in the year of sale. The excess of sale consideration over original cost (or indexed cost of acquisition) is taxable as capital gain u/s 45.

16 35ABA Amendment Fin Act 2016 – Capital Expenditure for obtaining right to use Spectrum for Telecommunication Services – Conditions for allow ability:

a. Expenditure should be capital in nature b. It should be incurred for the purpose of acquiring any right to use spectrum

for Telecommunication Services. c. It may be incurred may be before the commencement of the business or

thereafter at any time during any previous year. Payment has actually been made to obtain a Right to use Spectrum.

Deduction: A deduction equal to the appropriate fraction of the amount of such expenditure. Period of Deduction: Deduction shall be allowed for each of the relevant PYs

17 35ABB Amortization of telecom-licence fee: If any assessee has incurred capital expenditure for acquiring any right to operate telecommunication services and has actually made the payment, then actual expenditure incurred and paid shall be allowed as deduction in equal installments over the period for which the license remains in force. Deduction = Amount paid / no of years left

18 35AC Deduction for promoting social and economic welfare or upliftment of the public: If any assessee incurs any expenditure by way of payment of a sum to a public sector company, local authority, an association or institution approved by the National Committee for carrying out any eligible project or scheme, [directly in respect of eligible project (applicable in case of company assessee only)] then such expenditure shall be fully allowed as deduction.

19 35AD Deduction in respect of capital expenditure on specified business:

Deduction = 100% of capital expenditure

Ineligible Expenditure:

1. Any Capital expenditure in respect of which the payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, > Rs. 10,000, or




2. Any expenditure incurred on the acquisition of any (i) Land, or (ii) Goodwill, or Financial Instrument

In order to promote digital transactions, the payment through other notified electronic modes (i.e. e-wallets, etc) has been proposed to be included in the list of acceptable modes of payments. [Amendment FA 2019]

Nature of business

1. setting up and operating a cold chain facility or 2. setting up and operating a warehousing facility for storage of agricultural

produce or, 3. laying and operating a cross-country natural gas or crude or petroleum oil

pipeline or 4. building and operating, anywhere in India, a hospital with at least 100 beds

for patients or 5. building and operating, anywhere in India, a hotel of two-star or above

Category or 6. developing and building a housing project under a scheme for slum

redevelopment or rehabilitation or 7. developing and building a housing project under a scheme for affordable

Housing 8. Production of fertilizer in India shall be allowed as deduction. The deduction

is subject to certain conditions. 9. setting up and operating an inland container depot or a container freight

station notified or approved under the Customs Act, 1962; 10. bee keeping and production of honey and beeswax; 11. Setting up and operating a warehousing facility for storage of sugar in India

shall be allowed as deduction. 12. Laying and operating a Slurry Pipeline for the transportation of Iron Ore. 13. Setting up and operating semi-conductor Wafer Fabrication Manufacturing

Unit notified by CBDT. 14. w.e.f 1/4/2018 Business of developing or maintaining or operating or developing,

maintaining and operating a New Infrastructure Facility Amendment Finance Act 2020




Deduction under section 35AD is not available, if the option is exercised for the alternative tax regime by an individual / HUF (section 115BAC), a domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society (section 115BAD).

20 35CCA Payment to associations and institutions for carrying out rural development programmes shall be fully allowed as deduction.

21 35CCC Expenditure incurred on notified agricultural extension project is eligible for deduction @ 150% of such expenditure. Conditions to claim deduction Investment > 25 lakhs except land and building Approved by Ministry of Agriculture Amendment Finance Act 2020 Deduction under section 35CCC is not available, if the option is exercised for the alternative tax regime by an individual / HUF (section 115BAC), a domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society (section 115BAD). Moreover, deduction under section 35CCD is not available, if the option is exercised for the alternative tax regime by a domestic company (section 115BA / 115BAA / 115BAB).

22 35CCD Any expenditure incurred by company on notified skill development project is eligible for deduction @ 150% of such expenditure. Amendment Finance Act 2020 Deduction under section 35CCD is not available, if the option is exercised for the alternative tax regime by an individual / HUF (section 115BAC), a domestic company (section 115BA / 115BAA / 115BAB) or a resident co – operative society (section 115BAD). Moreover, deduction under section 35CCD is not available, if the option is exercised for the alternative tax regime by a domestic company (section 115BA / 115BAA / 115BAB).

23 35D An Indian company or a resident non-corporate assessee, who has incurred certain amount as preliminary expenditure, can claim the total Eligible preliminary expenditure as deduction in 5 equal installments. The total eligible preliminary expenditure cannot exceed 5% of cost of project (in case of company, 5% of cost of project or capital employed, whichever is higher). In the first year, audit report must be submitted along with the return.




24 35DD If an Indian company has incurred certain expenditure wholly & exclusively for the purpose of amalgamation or demerger, 1/5th of expenses so incurred shall be allowed for a period of 5 years commencing from the year in which amalgamation or demerger takes places.

25 35DDA Voluntary retirement compensation shall be allowed to all assessee in 5 equal installments commencing from the year in which such expenditure was paid.

26 36(1)(b) Insurance premium for health of employees is allowed as deduction if the payment has been made by any mode other than cash.

27 36(1)(ii) Bonus or commission to employees is allowed as deduction subject to sec. 43B. 28 36(1)(iii) Amount of interest paid in respect of capital borrowed for the purposes of business

or profession shall be allowed as deduction. 29 36(1)(iiia

) Discount on Zero Coupon Bonds Application for infrastructure Capital Co. / Fund, Public Sector Co & Scheduled

Bank. Written of over the period of the Bond.

30 36(1)(iv) Subject to sec. 43B, contribution towards RPF & approved superannuation fund is allowed as deduction.

31 36(1)(iva)

Contribution (subject to max, of 10% of salary of an employee) by an employer towards notified pension scheme u/s 80CCD is allowed as deduction.

32 36(1)(v) Employer’s Contribution to an Approved Gratuity Fund allowed when paid before due date of filling return [Sec. 43B]

33 36(1)(vi) Allowance in any respect of dead or permanently unless animals Cost of Animal Less Insurance Claim or any other receipt. no amortization of cost is allowed.

34

36(1)(vii) Bad Debts Any debt or part thereof, which becomes bad shall be allowed as deduction subject to following conditions – 1) Debt must be incidental to the business or profession 2) The debt has been considered as income of the assessee 3) It must have been written off in the accounts of the assessee 4) Business must be carried on during the previous year or any part of the previous

year 5) It must be of a revenue nature.




35 36(1)(viia)

Provisions for Bad and Doubtful Debts 1) For Scheduled Banks, Non-Scheduled Banks, Co-operative Bank other than

Primary Agricultural Credit Society or Primary Co – operative Agricultural & Rural Development Bank: 8.5% of GTI + 10% of Average Rural Advances.

2) Banks incorporated outside India, Public Financial Institutions, SFCs, SIICs: 5% of GTI.

36 36(1)(viii)

Special reserve created by specific entity carrying on Eligible Business 1) 20% of profit of Business or reserve created, whichever is less. Reserve should

not exceed twice the Paid Up Capital including general reserve. 2) Withdrawal treated as PGBP in year of withdrawal [Sec. 41(4A)]

37 41(4) Bad debt recovery: Taxable amount shall be [Amount recovered (Bad debt claimed - Bad debt earlier allowed as deduction)]

38 36(1)(ix) Any expenditure incurred by a company for promotion of family planning among its employees shall be allowed as deduction as under. Revenue Expenditure: Full amount Capital Expenditure. In 5 equal installments.

39 36(1)(xii)

Revenue expenditure incurred by a Corporation, etc. established by a central, State or provincial Act 1) Expenditure incurred towards its subject and purposes authorised by Governing

Act, fully allowed 2) No deduction for Capital Expenditure

40 36(1)(iii) Banking Cash Transaction Tax paid Allowed as a deduction 41 36(1)(xiv

) Contribution to credit guarantee fund trust for small industries 1) Applicable only for Public Financial Institutions 2) The trust must be notified by the Central Government

42 36(1)(xv) Securities Transaction Tax Paid Fully allowed as deduction only when paid if Income from such transaction is included as PGBP.

43 36(1)(xvi)

Commodities Transaction Tax paid 1) Taxable Commodities Transactions should be entered into in the course of the

Assessees business during the previous year. 2) Income arising from such transactions is included as PGBP.

44 36(1)(xvii)

Expenditure incurred for purchase of Sugarcane [W.e.f. 01/04/2016] 1) Government is allowable as a deduction.

45 37(1) General Deductions /Disallowances:




1) Interest on loan paid to proprietor is disallowed. 2) Salary paid to proprietor is disallowed. 3) Anticipated future expenditure or loss (e.g. incurred in the previous provision

for bad debt) is disallowed. 4) Professional tax is allowed expenditure 5) Litigation expenditure incurred in order to expenditure. Defend or maintain

an existing title to the assets is allowed. Taxpoint: Litigation expenditure incurred for curing any defect in the title of asset shall not be allowed (as because it is of capital nature).

6) Legal expenditure incurred to alter the Articles of Association of the company, in conformity with the amendments in the law is allowed. Taxpoint : Fee paid to ROC (Registrar of Companies) for alteration of MOA is disallowed (being a capital expenditure)

7) Expenses on registration of trademark are allowed. 8) Compensation paid to a worker in order to dismiss him is allowed. 9) Annual listing fees paid to stock exchanges is allowed. 10) Fees paid for increase of authorized capital is disallowed. 11) Expenditure on raising equity and preference share capital is disallowed. 12) Penalty and damages paid in connection with infringement of law is

disallowed. 46 37(2B) Expenditure incurred by an assessee on advertisement in any souvenir, brochure,

tract, pamphlet or like, published by a political party is disallowed. 47 40 Disallowed Expenditure 40(a)(i) Interest royalty, fees for technical services payable to non-resident or outside India

or in India to a non-resident or to a foreign company on which tax is deductible but not deducted or after deduction not deposited before the time limit shall be 100 % disallowed. FA 2019 AMENDMENT Relief shall be given only in case of non-deduction if recipient has declared such income in ROI and paid tax on it

40(a)(ia) Any payment made to a Resident, on which Tax is deductible/ after deduction, tax has not been paid before the due date of furnishing Return u/s 139(1). 1. 30% of the Expense will not be allowed. 2. Allowable in the year of remittance of TDS.




Note: if Payer fails to deduct TDS, but is not deemed to be an assessee in default u/s 201(1), it is deemed that TDS is deducted and paid on the date of furnishing Return of Income by the Resident Payee. FA 2019 AMENDMENT Relief shall be given only in case of non-deduction if recipient has declared such income in ROI and paid tax on it

40(a)(ib)

Payment to non-resident without equalization levy Allowed as a deduction while computing income of the previous year in the year in which such levy has been paid.

40(a)(iia)

Wealth Tax Fully disallowed

40(a)(iib)

Royalty, License Fee, other fee or charged levied on, or appropriated either directly or indirectly from, State Government Undertakings by the State Govt Fully Disallowed

40(a)(iii) Salary paid outside India or to Non-resident Payment without TDS not allowed 40(a)(iv) Contribution to Welfare Fund of Employees if no arrangements for TDS not allowed 40(a)(v) Tax on perquisites paid by Employer not allowed

48 40(b) partnership of firm Interest on Capital or Loan Conditions 1) Authorised by the partnership deed 2) Not pertaining to period prior to partner Deduction Actual interest paid to partner or 12% max whichever is less. Remuneration to partner Conditions 1) Paid only to a working partner 2) Authorised by the partnership deed 3) Not pertaining to period prior to partner Deduction Actual paid or max the permissible limit whichever is less

Book profit Maximum amount deductible in respect of remuneration to

partners




1) Book profit is negative Rs. 1,50,000 2) Book profit is positive — - On first Rs. 3 lakh of book profit - On the balance of the book profit

Rs. 1,50,000 or 90 per cent of book profit – whichever is more 60 per cent of book profit

49 40A(2) Any excess payment made to relative and person having substantial interest is disallowed. Relatives 1) Relative u/s 2(41) means the spouse, brother, sister or any lineal ascendant

or descendant or descendant of that Individual. 2) Voting power 20% ( in case of company) 3) Profit share more than 20% ( other than company)

50 40A(3) Applicable to expenses covered by sec 30 to 37

Where an assessee incurs any expenditure, for, which payment or aggregate of payment is made to a person in a day is in excess of Rs. 10,000 ( Rs. 35,000 in case of payment made for plying, hiring or leasing goods carriages), Otherwise than by an Account Payee Cheque drawn on a Bank or an Account Payee Bank Draft, the whole of such expenditure shall not be allowed as a deduction.

Exceptions Government taxes; Payment financial institutes; Payment to cultivator

51 40A(7) In general provision or reserve is not allowed. However, provision for Gratuity is allowed provided the amount has become due for payment.

52 43B Following expenses are allowed as deduction in PY if paid before the date of filing return (31July or 30th Oct) 1) Any sum payable by way of duty, tax ,cess 2) Bonus, commission 3) Interest on loan from public financial institutions 4) Interest on loan from NBFC [FA ACT 2109] 5) Leave encashment 6) Employers contribution to SPR, RPF, gratuity fund etc 7) any sum payable by Assessee to the Indian Railways for use of Railway Assets.




53 43CA Full value of consideration for sale of land or building or both shall be higher of 110% [F.Act 20] of value adopted by authority or actual value whichever is higher. Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in above para may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. However, this benefit is available only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the asset In order to promote digital transactions, the payments or receipts through other notified electronic modes. Have been proposed to be included in the list of acceptable mode of payment.

54 44AA Maintenance of Accounts Person carrying on specified business 1) Gross receipts >Rs 150000 in all 3 yrs immediately preceding the previous year:

maintain accounts as per rule 6F 2) In any other case : Such records which will enable the AO to compute income Person carrying on non- specified business 3) Profit > Rs 120000 (Rs 250000 in case of Individual or HUf) or total sales >Rs

1000000 (Rs 2500000 in case of Individual or HUf in any of the 3 yrs immediately preceding the previous year: Such records which will enable the AO to compute income

4) In any other case: Not required to maintain any books of accounts. Period of maintenance: 6 years from the end of relevant AY Penalty for Non-maintenance : Rs 25,000

55 44AB Audit is compulsory if turnover exceeds Rs 1CR and in case of profession gross receipts exceeds Rs 50L. Amendment Finance Act 2020 Amendment – In order to reduce compliance burden on small and medium enterprises, the threshold limit has been revised to increase it for a person carrying on business from Rs.1 crore to Rs.5 crore if the following two conditions are satisfied:




Condition 1 – His aggregate of all receipts in cash during the previous year does not exceed 5 per cent of such receipt. Condition 2 – His aggregate of all payments in cash during the previous year does not exceed 5 per cent of such payment.

PRESUMPTIVE TAXATION SCHEME FOR ASSESSEES ENGAGED IN ELIGIBLE PROFESSION

SPECIAL PROVISIONS FOR COMPUTING INCOME ON ESTIMATED BASIS 44AD 44ADA 44AE

Nature of Business

Any business except the business referred to in section 44AE.

Specified Professions u/s 44AA

Plying, Leasing or Hiring goods carriages. (Goods carriages may be owned by the assessee or taken on hire purchase or installment scheme

Assessee Resident Individual, HUF or a partnership firm, but not a LLP firm;

Resident Assessee Any Assessee

Restriction Where an eligible assessee declares profit for any PY in accordance with this section and he declares profit for any of the next 5 AY’s not in accordance with this section, he shall not be eligible to claim the benefit of this section for next 5 AY’s [44AD(4)]

Restriction on applicability

Gross receipts =< Rs. 200 Lakhs.

Gross receipts =< Rs. 50 Lakhs.

Own not more than 10 goods carriages, anytime during the PY.

Estimated Income

8% of Gross Receipts received or receivable

50% of Gross Receipts received or receivable during the PY, or higher sum

Other than Heavy Vehicle 1. Rs. 7,500 pm or part

during which the carriage is owned, or




during the PY, or higher sum claimed to have been earned by the assessee 6% of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date u/s 139(1). Payment through digital wallets is also allowed

claimed to have been earned by the assessee

2. Actual income earned whichever is more

[Vehicles owned includes vehicles purchased on Hire purchase or Installment] In case of Heavy Vehicle Rs 1000 per month per ton. Heavy vehicle Heavy vehicle means Gross weight > 12000kg

Deductions u/s 30 to 38

All deductions u/s 30 to 38 including depreciation are deemed to have been allowed.

Depreciation Is deemed to have been claimed and allowed. WDV shall be calculated Accordingly

Set of other losses

The income from these businesses will be aggregated with other incomes of the assessee, and loss from any other activity can be set off against the estimated income in accordance with section 70, 71 or 72.

Chapter VI-A deductions

Deductions under chapter VI-A will be available to the assessee, from the estimated incomes under these sections.

Advance Tax 100% payable by 15th March 100% payable by 15th March

Required to be paid on relevant dates

Books of Accounts and Audit thereof

The assessee, who files the return, estimating income at prescribed rate or a higher income, will not be required to maintain books of account u/s 44AA, nor required to get them audited u/s 44AB, in respect of such businesses.

Can lesser income be shown?

If 44AD(4) applies then he shall have to maintain books of accounts u/s 44AA and get them audited by a CA u/s 44AB for that PY + next 5 PY’s

Assessee may declare an income lower than the specified amount. In such case he shall have to maintain books of accounts u/s 44AA and get them audited by a CA u/s 44AB, irrespective of the turnover -




If his TI > basic exemption limit If his TI > basic exemption limit

Even if TI < = basic exemption limit




SR NO PARTICULARS EXPLANATION

1 Capital gain Profits or gains arising on transfer of a capital asset shall be treated as capital gain.

2 Capital asset Capital asset means any kind of property held by an assessee except 1. Stock in trade, 2. Personal effect but excludes. a) Jewellery b) Archaeological Collection c) Drawings. d) Paintings e) Sculptures f) Any work of art. Note: Any immovable property is not personal effects hence are capital assets. 3. Agricultural land in rural area, 4. 6.5% Gold Bond, 1977, 5. 7% Gold Bonds, 1980, 6. National Defense Gold Bond, 1980, 7. Special Bearer Bond, 1991 and

3 Short-term Capital Asset

Nature of asset STCA LTCA 1 A security (other than unit)

listed in a recognized stock exchange in India,

POH <= 12 months

POH > 12 months

2 Units of UTI or Equity oriented Mutual Fund specified u/s 10(23D),

3 Zero coupon bond 4 Unlisted shares 5 Immovable property being

land or building or both( Finance Act 2017)

POH <= 24 months

POH > 24 months

4 Long-term Capital Asset

CHAPTER 7: CAPITAL GAIN




6 Any other Asset POH <= 36 months

POH > 36 months

Period of holding It means the period for which the asset is held by the assessee. It starts from the day following the date of acquisition and ends on the date of transfer

5 Transfer Transfer in relation to a capital asset includes: 1) Sale 2) Exchange 3) Relinquishment of the asset 4) Extinguishment of any right in an asset 5) Compulsory acquisition of an asset under any law 6) Conversion of asset into stock-in-trade by the owner 7) Any transaction of immovable property u/s 53A of the Transfer of Property

Act, 1882 8) Any transaction, which has the effect of transferring or enabling the

enjoyment of any immovable property) Maturity or redemption of zero coupon bond.

6 Full value of consideration

1. It is a full value of consideration received or receivable by the transferor. 2. If consideration received in kind them fair market value of asset is

considered as full value of consideration. 3. Even if a consideration received in installments in different years full value

of consideration is important. 7 Expenses on

Transfer Shall be allowed as deduction.

8 Cost of Acquisition

1. Purchase Price of Asset + Expenditure incurred to purchase 2. Deemed cost of Acquisition: Cost to Previsions owner 3. Indexed cost of Acquisition: Inflation adjusted cost Note: Cost of acquisition includes expenses incurred in acquiring the assets or completing the title.

Cost Inflation Index for different financial years is as follows Financial year Index Financial year index

2001 – 02 100 2011 – 12 184 2002 – 03 105 2012 – 13 200




2003 – 04 109 2013 – 14 220 2004 – 05 113 2014 – 15 240 2005 – 06 117 2015 – 16 254 2006 – 07 122 2016 – 17 264 2007 – 08 129 2017 - 18 272 2008 – 09 137 2018 – 19 280 2009 – 10 148 2019-20 289 2010 – 11 167 2020-21 301

Indexation benefit not available 1) Transfer of bonds and debentures other than capital indexed bonds issued

by the Government. Exception: Indexation benefit shall be available in case of LTCG arising of transfer of Sovereign Gold Bond and capital indexed cost

2) Transfer of an undertaking or division in a slump sale. 3) Certain transaction by non-resident.

4) Transfer of global deposit receipts 9 Computational

Notes 1) If an asset is acquired before 1/4/2001 then its cost of acquisition will

be higher of a) Actual cost of acquisition; or b) Fair market value of the asset as on

1/4/01. In such case, indexation benefit shall be available from the year 2001-02.

[Finance Act 2020] he above provision has been modified with effect from the Assessment Year 2021 – 22. The modified version provides that in case of a capital asset (being land or building or both), the fair market value of such an asset on April 1, 2001 shall not exceed the stamp duty value of such asset as on April 1, 2001 where such stamp duty value is available. 2) Where an-asset is acquired through any mode specified in sec. 49(1), then

indexation benefit shall be available from the year when the previous owner first held the property.

3) The cost of acquisition in relation to the long-term capital assets being - Equity shares in a company on which STT is paid both at the time of

purchase and transfer or




- Unit of equity-oriented fund or unit of business trust on which STT is paid at the time of transfer.

Acquired before 1st February, 2018 shall be the higher of i) Cost of acquisition of such asset; and ii) Lower of a) The fair market value of such asset; and b) The full value of consideration received or accruing as a result of the

transfer of the capital asset. 10 How to

Compute FMV ?

In a case where the capital asset is listed on any recognized stock exchange as on 31/01/2018

If there is trading in such asset on such exchange on 31/01/2018 The highest price of the capital asset quoted on such exchange on the said date If there is no trading in such asset on such exchange on 31/01/2018 The highest price of such asset on such exchange on a date immediately preceding 31/01/2018 when such asset was traded on such exchange

In a case where the capital asset is an equity share in a company which is - Not listed on a recognized stock

exchange as on 31/01/2018 but listed on such exchange on the date of transfer

- Listed on a recognized stock exchange on the date of transfer and which became the property of the assesse in consideration of share which is not listed on such exchange as on 31/01/2018

An amount which bears to the cost of acquisition the same proportion as CII for the financial year 2017 – 18 bears to the CII for the first year in which the asset was held by the assesse or on 01/04/2001, whichever is later.




by way of transaction not regarded as transfer under section 47

11 Cost of Improvement

1) Cost of improvement means expenditure incurred to increase the productive quality of the asset. It includes all expenditure of a capital nature incurred in making any additions or alteration to the capital asset.

2) Deemed cost of Acquisition: Cost to Previsions owner 3) Indexed cost of Acquisition: Inflation adjusted cost Notes: Any improvement expenditure incurred before 1/4/2001 shall be ignored. Improvement expenditure incurred by Assessee and previous owner after

1/4/01 shall be considered. TO CLACULATE INDEXED COST OF ACQUISITION & IMPROVEMENT

Indexed cost of acquisition [Explanation (iii) to Section 48) Cost of acquisition X Cost inflation index for the year in which the asset is transferred

Cost inflation index for the PY in which the asset was 1st held by the assessee

Indexed cost of improvement [Explanation (iv) to Section 48) Cost of improvement X Cost inflation index for the year in which the asset is transferred

Cost inflation index for the year in which the improvement to the asset took place

COMPUTATION OF CAPITAL GAIN IN CERTAIN CASES CAPITAL GAIN IN CASE OF INSURANCE CLAIM RECEIVED ON DAMAGE OR

DESTRUCTION OF CAPITAL ASSETS SEC 45(1)

Compensation received from an insurance company for the specified damages is treated as

transfer.

Specified Damage Here specified damages mean flood, cyclone, earthquake, riot, civil

disturbance, accidental fire, enemy action etc.

Sale consideration If compensation received is in cash: Compensation so received

If compensation received is in kind: Fair Market value

(As on date of receipt) of assets received as Compensation.

Indexation benefit

available

Till year of destruction




Taxable In the year of receipt of compensation

Other Points 1) Compensation received for any damages to capital asset shall be

treated as capital receipt and shall not be taxable.

2) Compensation received for any damages to non-capital asset may

be chargeable u/s 28 or 56. E.g. Compensation received on theft of

stock in trade shall be treated as business income.

CAPITAL GAIN ON CONVERSION OF CAPITAL ASSETS INTO STOCK IN TRADE SEC

45(2)

From A.Y. 1985-86 onwards, conversion of capital assets into stock shall be treated as transfer.

Sale consideration Fair Market value as on date of such conversion.

Indexation benefit available (if any) Till year of conversion

Taxable In the year in which such stock is actually sold

Tax rate As applicable in the year of actual sale of such

Converted stock.

Treatment of difference of actual sale

value and Fair market value as on date of

conversion

It shall be treated as business Income.

TRANSFER OF SECURITIES BY DEPOSITORY [SECTION 45(2A)]

CONDITIONS TREATMENT

Sale consideration Value at which shares sold

Cost of acquisition Cost of acquisition & period of holding of any securities, shall be

determined on the basis of the FIFO method. This method is

applicable to dematerialized form. Securities held in physical forms

shall be dealt separately.

Indexation benefit As usual

Taxable In the year in which asset is sold

Expenses on transfer As usual

CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS BY A PARTNER/MEMBER TO

FIRM/AOP/BOL AS CAPITAL CONTRIBUTION SEC 45(3)

Sale consideration The amount recorded in books of account of the firm.

Cost of acquisition/ improvement As usual

Taxable In the year of such transfer




Indexation benefit As usual

CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS BY A FIRM/AOP/BOL TO PARTNER/

MEMBER BY WAY OF DISTRIBUTION ON ITS DISSOLUTION [SEC 45(4)]

Sale consideration Fair market value as on date of transfer

Cost of acquisition / Cost of improvement /

Expenditure on transfer and Indexation

As usual

Taxable In the year of such transfer

CAPITAL GAIN ON TRANSFER BY WAY OF COMPULSORY ACQUISITION [SEC 45(5)]

Tax treatment of initial compensation received.

Sale consideration Total compensation or consideration received or receivable

Taxable In the year when such compensation is first received.

Indexation benefit available Till the year of compulsory acquisition.

Tax treatment of enhanced compensation

Sale consideration Total enhance compensation/consideration received/receivable

Expenditure on transfer Litigation expenses for getting the enhanced

Compensation

Cost of acquisition/

Improvement

Nil

Taxable In year when enhanced compensation is first received.

Nature of gain As in case of initial compensation or consideration.

W.e.f. ASSESSMENT YEAR 2005 – 06 SECTION 10(37) HAS BEEN INSERTED, WHICH

PROVIDES AS UNDER

Applicable: An individual or an HUF.

Conditions:

1. Assessee has transferred urban agricultural land (being a capital asset).

2. Such land was used for agricultural purposes by such HUF or individual or his parents during

the period of 2 years immediately preceding the date of transfer.

3. Such land is transferred:

a. By way of compulsory acquisition under any law, or

b. For a consideration to be determined or approved by the Central Government or the RBI.

4. The compensation or consideration for such transfer is received by such assessee on or

after 1.1.04.

Treatment: Income on such transfer shall be exempted.




EC. 45(5A): CAPITAL GAIN ON TRANSFER OF LAND OR BUILDING OR BOTH, UNDER

DEVELOPMENT AGREEMENT

Asset Transferred Land or building or both, under a specified agreement

PY of taxability PY in which the certificate of completion for the whole or part of

the project is issued by the competent authority;

Full value of

consideration:

The stamp duty value, on the date of issue of completion

certificate, of his share, being land or building or both in the

project, as increased by the consideration received in cash, if any.

Exception provisions of this sub-section shall not apply where the assessee

transfers his share in the project on or before the date of issue

of said certificate of completion, and the capital gains shall be

deemed to be the income of the previous year in which such

transfer takes place and the provisions of this Act, other than

the provisions of this sub-section, shall apply for the purpose of

determination of full value of consideration received or accruing

as a result of such transfer.

BUY BACK OF SHARES SEC 46A 1. Transfer: Where a shareholder receives any consideration from the company for purchase of its own

shares Or other specified securities, it is a transfer chargeable under the head Capital Gains. 2. Year of taxability: Such Capital Gain is chargeable to tax in the previous year in which the shares or

securities are purchased by the Company. 3. Capital Gains = Value of consideration received Less Cost of Acquisition or Indexed cost of Acquisition. 4. No Deemed Dividend: In case of buyback of shares, there is no question of Deemed dividend u/s

2(22) (d). CAPITAL GAIN ON CONVERSION OF DEBENTURES INTO SHARES SEC 49(2A)

Cost of acquisition of new Asset

Cost of old asset (convertible debentures) shall be taken as cost of acquisition of new asset (converted share).

Holding Period Starts from the date of allotment of new asset Indexation benefit Benefit of indexation shall be available from the date of allotment of

new asset.




SEC 49(2AA) GAIN ON SPECIFIED SECURITY OR SWEAT EQUITY SHARES If the market value has been charged as perquisite under sec. 17 (2) (VI), the cost of acquisition shall be the Market value at the time of exercising option to take ESO SEC 49(2ABB) TRANSFER OF SHARE ACQUIRED ON REDEMPTION OF GDR BY NR ASSESSEE Effective from: AY 2016-17 Cost of acquisition: of shares of a company acquired by a non-resident assessee on redemption of GDRs [referred to in section 115AC (1) (b)] = price of such share or shares prevailing on any recognised stock exchange on the date on which a request for such redemption was mode. Period of holding of shares acquired on redemption of GDRs would be reckoned from the date on which a request for such redemption was made. CAPITAL GAINS IN THE CASE OF SLUMP SALE SEC 50B

Sale consideration As usual Cost of Acquisition / Improvement Net worth of the undertaking Indexation Benefit Not available Nature of gain weather. short term or long term

If undertaking is owned & held for not more than 36 months, then capital gain shall deemed to be short-term capital gain otherwise long-term capital gain.

VALUATION OF CONSIDERATION IN CASE OF LAND OR BUILDING OR BOTH SEC 50C

In case of transfer of immovable capital asset being lane building or both, sale consideration shall be higher of the following: 1) Actual consideration received or accrued on such transfer; of 2) 110% of the value adopted or assessed or assessable by Stamp Valuation authority for payment of

stamp duty 3) Where valuation is referred to the Valuation Officer, sale consideration of the asset shall be taken

as minimum value adopted or assessed or assessable for purpose of stamp duty or value determined by Valuation Officer.

SEC 50D FAIR MARKET VALUE DEEMED TO BE FULL VALUE OF CONSIDERATION IN CERTAIN CASES




Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the FMV of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.

TREATMENT OF ADVANCE MONEY RECEIVED & FORFEITED SECTION 51 Where any capital asset, was on any previous occasion, the subject of negotiations transfer, any advance or other money received and retained by the assessee in respect of such negotiations, shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition. 1) W.e.f from AY 15-16 any advance money received and forfeited shall be treated as Income from other

source and hence shall not be deducted from the cost of asset. 2) If advance money is received before 31-3-14 then it is to be reduced from the cost of acquisition and

if it is received on or after 1-4-14 then it shall be taxable as income from other source.

CAPITAL GAIN IN THE CASE OF SELF-GENERATED ASSETS Goodwill of a business (not of a profession), right to carry on a business, right to manufacture or process any article

Sale Consideration Cost of acquisition Cost of improvement Expenditure on transfer Capital gain

Actual Nil Nil Actual Sale consideration less expenditure on transfer

Tenancy right, route permits, loom hours, trade-mark & brand name associated with the business. Sale Consideration Cost of acquisition Cost of improvement Expenditure on transfer Capital gain

Actual Nil Actual Actual Sale consideration less cost (or indexed cost) of improvement less expenditure on transfer.

CAPITAL GAIN IN CASE OF BONUS SHARE




Cost of Acquisition If bonus shares are allotted before

1/4/2001 Fair market value of such share as on 1/4/2001

If bonus shares are allotted after 1/4/2001 Nil CAPITAL GAIN IN CASE OF TRANSFER OF RIGHT SHARE AND RIGHT ENTITLEMENT

Case Right shares Right Entitlement Shares acquired by Right Renounce

Cost of Acquisition Right issue price Nil Amount paid for right entitlement+ Amount paid to company

Period of holding starts from

Date of allotment of such shares

The date of declaration of such right by the company

The date of allotment of such shares

CAPITAL GAIN ON TRANSFER OF SHARES / DEBENTURES BY A NON-RESIDENT Applicable A non-resident assessee Nature of asset

Capital assets whether long-term or short term being shares in, or debentures of an Indian company acquired by utilizing foreign currency

Step Conversion of Particulars Conversion rate 1 Sale

consideration Find sale consideration in Indian currency and convert it into foreign currency

At average exchange rate1 on the date of transfer

2 Expenditure on transfer

Find expenditure on transfer in Indian currency and convert it into foreign currency

At average exchange rate on the date of transfer (not on the date when expenditure was incurred)

3 Cost of acquisition

Find cost of acquisition in Indian currency and convert it into foreign currency

At average exchange rate on the date of acquisition.

4 Capital gain in foreign currency

Step 1 - Step 2 - Step 3 Not applicable




5 Taxable Capital gain

Capital gain so calculated (in step 4) will be reconverted into Indian currency

At buying rate2 on the date of transfer

COST OF ACQUISITION OF RECONSTITUTED PLOT OF LAND RECEIVED UNDER ANDHRA PRADESH CAPITAL LAND POOLING SCHEME [SEC. 49(6)]

Capital gain is chargeable where the reconstituted plot of land is transferred after the expiry of 2 years from the end of the financial year in which the possession of such asset was handed over the assessee, Cost of Acquisition = Stamp duty value as on the last day of the 2nd financial year after the end of the financial year in which the possession of the said specified capital asset was handed over to the assesse SECTION 46 & 47 – TRANSACTIONS NOT REGARDED AS TRANSFER

Sr No Particulars Explanation 1 Sec. 46(1) Distribution of capital assets on liquidation of a company to its shareholders in

the hands of company. Key note: Sale of asset at the time of liquidation of company shall be taxable transfer.

2 Sec. 47(i) Distribution of capital assets on the partition of an HUF. 3 Sec. 47(iii) Gift, will or creation of irrevocable trust.

However, gift of shares acquired through ESOP is not exempted. 4 Sec. 47(iv) Any transfer of a capital asset by a holding company to its100% subsidiary

company, if the subsidiary company is an Indian company. However, in the following cases the above exemption shall be withdrawn, if: a) Within 8 years from the date of the transfer, the capital asset to transferred

is converted by transferee-company into stock; or b) Within 8 years from the date of the transfer, the 100% relationship between

holding and subsidiary company reduces or cases to exist. Note: Exemption so withdrawn shall lead to reassessment.

5 Sec. 47(vi) Capital asset transferred in a scheme of amalgamation, by the amalgamating company to the amalgamated Indian company.

6 Sec.47 (viab) Any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign company, referred to in Explanation 5 to Sec. 9(1)(i),which derives, directly or indirectly, its value substantially from the share or shares of an




Indian company, held by the amalgamating foreign company to the amalgamated foreign company; and 1) At least 25% of the shareholder of the amalgamating foreign company

continue to remain shareholders of the amalgamated foreign company; and 2) Such transfer does not attract tax on capital gains in the country in which

the amalgamating company is incorporated. 7 Sec. 47 (vicc) Any transfer in demerger, of a capital asset, being a share of a foreign company,

referred to in Explanation 5 to Sec. 9(1)(i), which drives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by a demerged foreign company to the resulting foreign company, if,- 1) The shareholders, holding not less than ¾ in value of the shares of the

demerged foreign company, continue to remain shareholders of the resulting foreign company; and

2) Such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated.

Provided that the provisions of section 391 to 394 the companies Act, 1956 shall not apply in case of demerger referred to in this clause

8 Sec. 47(vib) Transfer of asset on a demerger by the demerged company to the resulting company, if the transferee company is an Indian company

9 Sec.47 (vid) Transfer of shares in a scheme of demerger to the shareholder if the transfer or issue is made is consideration of demerger of the undertaking.

10 Sec.47 (vii) 1) Any transfer of share(s), 2) In a scheme of amalgamation 3) In the amalgamating company, provided, the transfer is made in consideration

of the allotment of any share or shares in the amalgamated, and 4) The amalgamated company is an Indian company. Key note: if the shareholders of amalgamating company receives shares, debentures and cash in lieu of their old shareholdings then the transfer shall be taxable. W.e.f. A.Y. 13-14, it shall not be necessary for the amalgamated co. to issue share to the shareholders of the amalgamating co. to the extent the amalgamated co. itself is the shareholder in the amalgamating company.

11 Sec.47 (viia) Any transfer of foreign currency convertible bonds or Global Depository Receipts made outside India by a non-resident to another non-resident.




12 Sec.47 (viib) Any transfer of a capital asset, being a government security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident shall not be considered as a transfer for the purpose of charging capital gains.

13 Sec.47 (viic) Any redemption of Sovereign Gold Bond issued by RBI under the Sovereign Gold Bold Scheme 2015 by an Individual shall not be considered as transfer However of transfer of Sovereign Gold Bond shall be taxable and indexation benefit is available on transfer of long term of Sovereign Gold Bond.

Particulars

Sovereign Gold Bonds, 2015 Monetization Owned by an

individual Owned by

others Interest Taxable Taxable Not taxable

u/s 10(15)(vi)

It is capital asset Yes Yes No Capital gains arising on time of redemption

Not Taxable u/s 47(viic)

Taxable Indexation available

Not taxable (as not an asset)

Capital gains arising on time of transfer



Not taxable (as not an asset)

14 Sec. 47(ix) Any transfer of a work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to the Government or a University for the National, Museum, National art Gallery, National Archives or any such other public museum or institution as may be notified by the Central Government.

15 Sec.47(x) Any conversion of bonds or debenture into shares or debentures of that company , Note: However conversion of preference share into equity share shall be treated as transfer.

16 Sec.47 (xiii) Exempted

Any transfer in a scheme of succession by a firm to a company, subject to the following conditions -




Transfer [Sec. 46 & 47]

1) All assets and liabilities of a firm are transfer 2) All the partners become the member of the company 3) Partners of the firm become member of the company in the same proportion

in which they held the capital in the books of the firm. 4) Partner receive consideration only by way of allotment of shares in the

company; and 5) The aggregate or the shareholding in the company of the partners of the

firm is not less than 50% of the total voting power in the company 6) Such shareholding must be maintained for a period of 5 years from the date

of succession. Key notes: 1) If the share allotted to the partners is more than 50% then partners can

sell their excess share continue to get exemption u/s 47 (xiii) 2) Cost of acquisition of such assets in the hands of the succeeded company

shall be the price at which such assets have been transferred by the firm to the company.

3) W.e.f. 1999-00, in case of conversion of sole-proprietorship concern or firm into a company which is not regarded as transfer, the COA of the asset in the hands of company will be the same as that in hands of sole-proprietorship concern of firm as the case may be.

17 Sec. 47(xiiia) Any transfer of a membership right of a recognised stock exchange in India for acquisition of shares and trading or clearing rights in that recognised stock exchange in accordance with a scheme for demutualization which is approved by SEBI.

18 Sec. 47 (xiiib)

Any transfer of a capital asset or intangible asset by a private company or unlisted public company (hereafter in this clause referred to as the company) to a limited liability partnership as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008 1) Under Section 47(xiiib), any transfer of a capital asset or intangible asset

on conversion of a private company or unlisted public company to a Limited Liability Partnership (LLP) shall not be regarded as transfer as transfer of levy of capital gains tax, on fulfilment of certain conditions.




2) The proviso to section 47(xiiib) stipulated the various conditions to be fulfilled for the transaction to not constitute a transfer for the purpose of capital gains. One of the conditions is that the company’s gross receipts, turnover or total sales in any of the preceding three previous years should not exceed Rs. 60 lakh

3) Clause (ea) has been inserted in the said proviso to stipulate an additional condition for claim exemption under section 47(xiib). Accordingly, the total value of assets as appearing in the books of account of the company in any of the three previous years preceding the previous year in which the conversion takes place, should not exceed Rs. 5 crore. (Amendment Finance Act 2016)

19 Sec. 47(xiv) If a sole proprietary concern in a scheme of succession transfer its capital asset to the company then such transfer shall be exempted provided - 1) All assets and liabilities of the firm are transferred 2) The proprietor become the member of the company 3) The proprietor receives consideration only by way of allotment of shares in

the company; and 4) The aggregate of the shareholding in the company of the proprietor is not

less than 50% of the total voting power in the company. Lock in period: 5 years from the date of succession.

20 Sec. 47(v) Any transfer of a capital asset by a subsidiary company to its 100% holding company, if the holding company is an Indian company. However, in the following cases the above exemption shall be withdrawn, if: 1) Within 8 years from the date of transfer, the capital asset so transferred is

converted by the transferee-company into stock; or 2) Within 8 years from the date of the transfer, the 100% relationship between

holding and subsidiary company reduces or ceases to exist. Note: Exemption so withdrawn shall lead to reassessment.

21 Sec. 47(via) Any transfer of shares in an Indian company by the amalgamating foreign company to the amalgamated foreign company subject to following condition: 1) At least 25% of a shareholder (stress is or number of shareholder rather

than value of shareholding) of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and




2) Such transfer is not taxable in the country, in which a amalgamating company is incorporated

22 Sec.47(vii) Any transfer, in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into for by a Central Government u/s 45(7) of the Banking Regulation Act, 1949, of a capital asset by the banking company to the banking institution. Key notes: 1) “Banking Company” shall have the same meaning as assigned to it in clause

(C) of section 5 of the banking Regulation Act, 1949 2) “Banking institution” shall have the same meaning as assigned to it u/s

45(15) of the Banking Regulation Act, 1949 23 Sec. 47(vic) Any transfer of shares in an Indian company by the demerged foreign

company to the resulting foreign company shall be exempted if following conditions are satisfied - 1) The shareholders holding not less 3/4th in value of the shares (irrespective

of number of shareholder) of the demerged foreign company continue to remain shareholders of the resulting foreign company; and

2) Such transfer is not taxable in the country, in which the demerged foreign company is incorporated.

24 Sec.47 (vica) Any transfer in a business reorganization, of a capital asset by the predecessor co-operative bank to the successor co-operative bank

25 Sec. (vicb) Any transfer by a shareholder, in a business organization, of a capital asset being a share or shares held by him in the predecessor co-operative bank if the transfer is made in consideration of the allotment to him of any share or shares in the successor co-operative bank.

26 Sec.47(xviii) Any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund: Provided that the consolidation is of two or more schemes of equity oriented fund or of two or more scheme of a fund other than equity oriented fund. Explanation: 1) “consolidating scheme” means the scheme of a mutual fund which merges

under the process of consolidation of the schemes of mutual fund in




accordance with the securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the securities and Exchange Board of India Act, 1992;

2) “Consolidated Scheme” means the scheme with which the consolidating scheme merges or which is form as a result of such merger;

3) “equity orient fund” shall have the meaning assigned to it in sec. 10(38); 4) “mutual fund” means a mutual fund specified u/s 10(23D) As per Sec. 49(2AC), where the capital assets being unit in consolidated scheme of a mutual fund became the property of the assessee in consideration of a transfer referred to in sec. 47(xviii) the cost of acquisition of asset shall be deemed to be the cost of acquisition to him of the unit in consolidating scheme of the Mutual Fund. A.Y. 2016-17

27 Sec. 47(xvi) Any transfer of a capital asset by way of reverse mortgage under a notified scheme shall not be treated as transfer. Theme of Reserve mortgage 1) An old aged borrower 2) Who does not have a regular source of income 3) Can mortgage in house property 4) With scheduled bank of housing finance company 5) The lender will give the fixed regular installments during the life time of

borrower as per the scheme. 6) After death of borrower the money will be recovered by selling such property

by lender, and 7) If any surplus remains then it is returned to the legal heir of the borrower.

28 Sec.47(xvii) Any transfer of a capital asset, being share of a special purpose vehicle, to a business trust in exchange of units allotted by that trust to the transferor shall not be regarded as transfer for the purpose of section 45. Sec. 10(23fC). Note: As per sec. 49, where the capital asset, being a unit of a business trust, became the property of the assessee in consideration of a transfer referred to in sec.47 (xvii) the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share to in the said clause.

29 SEC. 47 XIX Transfer of units by holders on consolidation of plans within a mutual fund scheme not to be regarded as transfer [Section 47(xix)]




Effective from: AY 2017-18 Exemption for consolidation of mutual fund schemes: Under section 47(xviii), any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidation of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund is not regarded as a transfer and is, hence, not subject to capital gains tax.

BONUS STRIPPING 1. Bonus Stripping: Where any person acquires any unit (original unit) within period of 3 months prior

to the record date and is allotted bonus unit on such date and such person transfers original unit within a period of 9 months after such date then any loss arising to him shall be ignored and the amount of loss so ignored shall be deemed to be the cost c acquisition of such bonus unit held by him on the date of such sale or transfer.

SUMMARY OF SECTION 54

Sec. Nature Applicable

New Asset Time limit for investment

Exemption Deposit scheme

Revocation of benefit

54 Long term Residential House

Individual or HUF

One / two Residential House in India [FA 2019] provided LTCG does not exceed Rs 2 cr.

Within 1 year before or 2 years after the date of transfer in case of purchase, or within 3 years after the date of transfer, in case of new construction.

Capital gains or amount invested, whichever is less

Yes If new asset is sold within 3 years, then benefit availed earlier will be revoked and shall be reduced from cost of new asset.

54B Agricultural land used for agro

Individual Agricultural Land

Within 2 years after transfer

Capital gains or amount

Yes If new asset is sold within 3 years, then




purpose for 2 years by him or his parents.

invested. Whichever is less?

benefit availed earlier will be revoked and shall be reduced from cost of new asset.

54D Land and building used for industrial undertaking for 2 years.

Any assessee

Land and Building for industrial undertaking.

Within 3 years after receipt of initial compensation.

Capital gains or amount invested, whichever is less.

Yes If new asset is sold within 3 years, then benefit availed earlier will be revoked and shall be reduced from cost of new asset.

54EC

Land or building or both

Any assessee

Specified bonds redeemable after 5 years in National Highways Authority or Rural Electrification Corp. Ltd.

Within 6 months after transfer Authority Rural Electrification Corp. Ltd.

Capital gains or amount invested. Whichever is less. Max. Rs. 50 lacs

No. If bonds are redeemed in 5 yrs from the date of acquis ion then benefit availed earlier shall be revoked and deemed to be LTCG in the year of redemption.

54F Any LTCA other than

Individual or HUF

Residential house

Within 1 year before or two

(Capital Gain/Net

Yes If new asset is sold within




residential house.

Assessee should not own more than one house.

years after transfer in case of purchase or 3 years after transfer in case of construction.

consideration) * Amount invested

3 years, or new asset acquired within 3 years, then earlier exemption shall be revoked and will be deemed to be LTCG.

54EE

Any long term capital asset

Any assessee

Long term specified assets

Within 6 months from the date of transfer

Capital gain or amount invested whichever is lower

NO If specified assets is transferred/loan taken in 3 yrs from the date of acquis ion then benefit availed earlier shall be revoked and deemed to be LTCG in the year of redemption.

54G Plant & machinery or land & building for industrial under taking in urban

Any assessee.

Plant and machinery or land and building used for industrial under taking in non-

Within one year before or 3 year after the date of transfer.

Capital gain or amount invested whichever is lower.

Yes If new asset is sold within 3 years then capital gain will be revoked and shall be




area (LTCA or STCA)

urban area or meeting expenses of shifting.

reduced from cost of new asset.

54G Plant & machinery or land & building for industrial under taking in urban area (LTCA or STCA)

Any assessee.

Plant and machinery or land and building used for industrial under taking in SEZ area or meeting expenses of shifting.

Within one year before or 3 year after the date of transfer.

Capital gain or amount invested whichever is lower.

Yes If new asset is sold within 3 years then capital gain will be revoked and shall be reduced from cost of new asset.

54GB

Long term residential property

Individual or HUF

Equity shares of eligible company Such company shall acquire new assets

Within due date of furnishing return of income Within 1 year from the date of such subscription in equity shares

(Capital Gain/ Net consideration *amount invested

Yes If new asset is sold within 5 years, 3 yes in case of computer software by an eligible start up [FA 2019 ] then capital gain will be revoked and will be deemed to be LTCG.

KEY

NOTE

S 1. Meaning of Eligible Company: a

It is an Indian company: The company should be incorporated during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due




date of furnishing of return of income u/s. 139(1) by the assessee. E.g. : If Mr. X has transferred his residential property as on 10/8/2019, then company should be incorporated between 01/04/2019 and due date of furnishing return u/s. 139(1) by Mr. X (i.e. 31/07/2020 assumng his accounts are not liable for tax audit).

b The company is engaged in the business of manufacture of an article or a thing. c It is a company in which the assessee has more than 25% share capital [ FA 2019] or more

than 25% voting rights [ FA 2019] after the subscription in shares by the assessee; and d It is a company which equalities to be a small or medium enterprise (i.e. SME) under the

Micro. Small and Medium Enterprises Act, 2006 (i.e. investment in plant and machinery is more than Rs. 25 lakhs but does not exceed Rs. 10 crore). or is an eligible start up

New asset means new plant and machinery but does not include: a Any machinery or plant which before its installation by the assessee, was used either within

or outside India by any other person (Second hand machine), b Any machinery or plant installed in any office premises or any residential accommodation,

including accommodation in the nature of a guest-house. c

Any office appliances including computers or computer software; Note: W.e.f. 1/4./2016, New Asset includes Computers or Computer Software in the case of an Eligible Start-Up, being a technology driven Start-Up so certified by the Inter-Ministerial Board of Certification notified by the Central Government.

d Any vehicle; or e Any machinery or plant for which 100% deduction is allowed (whether by way of depreciation

or otherwise) in computing the income chargeable under the head “profits and gains of business or profession” of any previous year.

2) What is eligible start up or eligible business Eligible business means a business which involves innovation, development, deployment, or commercialized of new products processes or service driven by technology or intellectual property. Eligible start-ups means a company engaged in eligible business and satisfies he following conditions: a It is incorporated during 1/4/2016 – 31/3/2019 b Total turnover of its business does not exceed Rs. 25 crore in any of the PY during 1/4/2016

to 31/3/2021 c It holds a certificate of eligible business from the enter – Ministerial Board of certification

notified by the CG]




TAX RATES APPLICABLE TO STCG & LTCG

Special rates of tax Sec. Natures of Income Tax Rate Basic

exemption Chapter VI-A

Ded 111A STCG on @ 15% Allowed to

Resident Individual / HUF

Not Allowed 1 Equity shares or 2 Units of equity oriented fund 3 Unit of business trust on which

STT is paid (In case of sale on a RSE in International Financial Service Centre in SEZ, payment of STT is not required, if consideration is in foreign currency)

Note: Short – term capital gains arising on transfer of other short-term capital assets would be chargeable at normal rates of tax.

Normal As per the assessee applicable

Allowed

112 LTCG on any asset (STT not applicable) @ 20% Allowed to Resident Individual / HUF

Not allowed

LTCG on listed securities (other than a unit) STT not paid or

@ 20% after indexation, or @ 10% without indexation,

Allowed to ‘R’ Individual / HUF

Not Allowed

112A Tax @ 10% on long-term capital gains exceeding Rs. 1,00,000 on the transfer of following long-term capital asset.

10% Allowed to ‘R’ Individual / HUF

Not allowed

- Listed equity shares, if STT has been paid on acquisition and transfer of such shares




- Units of equity oriented fund and unit of business trust, if STT has been paid on transfer of such units

If such transaction undertaken on a recognized stock exchange located in an International Financial Services Centre (IFSC), LTCG would be taxable at a concessional rate of 10% where the consideration for transfer is received or receivable in foreign currency, even though STT is not paid in respect of such transaction.

7) Benefit of indexation and currency fluctuation would not be available.

Bonds / Debentures (Benefit of indexation not available)

10%

Note Rebate u/s 87A is not available in respect of tax payable @ 10% on long-term Capital Gains u/s 112A.




SR NO PARTICULARS EXPLANATIONS 1 Introduction A receipt shall be taxable under this head if such income does not

specifically fall under any one of the other four heads of income. 2 Basis of chargeability Income under this head shall be chargeable on 'accrual' or 'cash' basis

depending on the method of accounting regularly followed by the assessee.

3 Dividend Sec 2(22) Case Tax Treatment

a) Dividend from a domestic company including dividend u/s. 2(22)(e)

Taxable in the hands of shareholder [Amendment Fin Act 20]

b) Dividend from a non-domestic company.

Taxable in the hands of recipient.

c) Dividend from a co-operative society

Taxable in the hands of recipient.

DDT Rate Removed W.e.f 14-20 Dividend covered by

Sec 115BBDAA Not Applicable from 1-4-20

4 Casual Income Sec 56(2)(ib)

Winning from lotteries, crossword puzzles, etc. are taxable under this head. Tax is charged on such -come at a flat rate of 30% plus surcharge (if any) plus education cess& SHEC. Notes 1) Any expenditure incurred to earn above income is not allowed as

deduction. 2) Deductions u/s 80C to 80U not available. 3) TDS is to be deducted if income exceeds Rs 10,000.

5 Interest on securities Sec 56(2)(id)

As per Sec. 2(2BB) “interest on securities” means a) Interest on any security of the Central Government or a state

Government.

CHAPTER 8: INCOME FROM OTHER SOURCE




b) Interest on debentures or other securities issued by or on behalf of:

1) A local authority. 2) A company. 3) A corporation established by a central or state government Expenditure allowed as deduction

Collection expenditure Interest on loan.

6 Income from letting of machinery, plant or furniture

is charged to tax under this head, if such income is not chargeable Wider the head "Profits and gains of business or profession".

7 Composite rent If letting of building is inseparable from letting of machinery, furniture, etc. then income from such letting is charged to tax under the head "Income from other sources" otherwise Income from house property.

8 Sum received under key man insurance policy

Any sum received under a Keyman Insurance Policy including bonus, if not chargeable under the head “PGBP” or “Salary”;

9 Family pension It is taxable under the head "Income from other sources" after allowing standard deduction to the minimum of a) 1/3rd of such pension; or b) Rs.15000.

10 Gift Sec 56(2)(vii) Applicable to All person Property includes –

a) Immovable property being land or building or both; b) Share and securities c) Jewellery d) Archaeological collections; e) Drawings f) Paintings g) Sculptures; h) Any work of art; or Bullion

Category of gift Taxable if exceed Rs 50,000




Any sum of money (cash, cheque, draft, etc.) from one or more persons. The aggregate value of such receipt during the previous year exceeds Rs 50,000

The whole of the aggregate value of such sum shall be considered as income of that previous year

Immovable property is received without consideration. The stamp duty value of such property exceeds Rs. 50000.

The stamp duty value of such property shall be considered as income of that previous year

Immovable property is received for consideration. Which is less than stamp duty value by an amount exceeding Rs. 50,000

Difference between SDV and the consideration shall be taxable only if such difference is greater than Rs 50,000 plus 10% [ F.act 2020] of the consideration.

Movable property is received without consideration. The aggregate fair market value of such receipts during the previous year exceeds Rs. 50000.

The whole of the aggregate fair market value of such property shall be considered as Income of the previous year

Movable property is received for a consideration. Such consideration is less than the aggregate fair market value of the property by an amount exceeding Rs. 50000.

The aggregate fair market value of such property Less consideration paid shall be considered as income of the previous year.

Exceptions: a) Gift received from any relative, b) Gift received on the occasion of the marriage of the individual, c) Any sum of money which is received under a will or by way of inheritance, d) Any sum of money which is received in contemplation of death of the payer e) Any sum of money which is received from - local authority, any fund or foundation or

university or other educational institutions or hospital or other medical institutions or any trust or institution referred u/s 10(23C) or a registered trust.

f) By way of transaction not regarded as transfer under clauses (i) / (vi) / (via) / (viaa) / (vib) / (vic) / (vica) / (vicb)/(vid)or(vii)ofsection47

11 Compensation received in connection with employment Sec 56(2)(XI)

Any compensation or any other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of




the terms and conditions relating to thereto shall be chargeable to tax under this head.

12 Share premium in excess of FMV of Share Sec 56(2)(viib)

Where a company not being a company in which the public are substantially interested, receives, in any previous year from any person being a resident any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the FMV of the shares shall be treated as income of the company.

13 Interest on Compensation Sec 56(2)(viii)

Taxable after deduction of 50%

14 Advance received & forfeited Sec 56(2)(ix)

Any sum forfeited against capital asset on or after 1-4-14 shall be treated as Income from Other Sourse.

15 Deduction u/s 57 Commission or remuneration for is releasing interest on securities (section 57(i)):

Deduction in respect of employees’ contribution towards staff welfare schemes section 57 (ia):

Repairs, depreciation in the case of letting out of plant, machinery, furniture, building:

Standard deduction in the case of family pension section (57(iia)):

In the case of income in the nature of family pension, the amount deductible is Rs. 15000 or 33 1/3 present of such income, whichever is less.

for this purpose, “family pension” means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death.

Note:-If an individual opts for the alternative tax regime under section 115 BAC, deduction under section 57 (iia) is not available from the assessment year 2021 - 22. [Finance Act - 20]




Any other expenses for earning income (section 57(iii)):

Expenditure incurred to earn dividend income other than deduction on account of interest expense and in any previous year such deductions shall not exceed 20% of the dividend income for income from units included in the total income for that Year Without deduction under section 57. [Finance Act - 20]




Key Notes: 1. Clubbing of income includes clubbing of negative income 2. The credit of TDS shall be given to the person in whose hands the income is taxable. 3. Income shall be clubbed even when form of the transferred asset is subsequently changed 4. Income arising from the accretion of such property is not to be clubbed. 5. Income on income is not to be clubbed. 6. Income shall be, first, computed in hands of recipient and then clubbing shall be made head wise. If the clubbed income is eligible for deduction u/s 80C to 80U, then such deduction shall be allowed to the assessee in whose hands such income is clubbed.

Sec. Particulars 60 Where an income is transferred without transferring the asset yielding such income, then

income so transferred shall be clubbed in the hands of the transferor. The above provision holds good: - 1) Whether the transfer is revocable or not, or 2) Whether the transaction is effected before or after the commencement of this Act.

61 If an assessee transfers an asset under a revocable transfer, then income generated from such asset, shall be clubbed in the hands of the transferor. Revocable transfer means, there is any provision for the retransfer of any part or whole of the income/assets to the transferor or gives the transferor a right to re-assume power over any part or whole of the income/ assets. Exceptions: 1) A transfer by way of creation of a trust which is irrevocable during the lifetime of the

beneficiary; 2) Any transfer which is irrevocable during the lifetime of the transferee;

64(1) (ii)

The total income of an individual shall include income arising (directly or indirectly) to the spouse by way of salary, commission, fees or any other remuneration (whether in cash or in kind) from a concern in which such individual has substantial interest. An individual shall be deemed to have substantial interest in a concern if he shares 20% profits of that concern or holds 20% voting power of that company.

CHAPTER 9: CLUBBING OF INCOME




Exception: If income to spouse generated due to his/her technical or professional qualification, skill etc. Notes 1. Where both, husband and wife, have substantial interest in a concern, remuneration will be

included in hands of Spouse, whose total income excluding such remuneration, is higher. 2. When both are not getting any other income then it shall not be clubbed.

64(1) (iv)

Subject to sec. 27(i), any income arising from assets transferred (directly or indirectly) to spouse otherwise than in connection with an agreement to live apart without adequate consideration, shall be included in the Income of the transferor. Marital Relationship: The relationship of husband and wife must subsist on the date of transfer of assets as well as on the date of accrual of income i.e. no clubbing provision shall be attracted if :- 1) When such transfer is for adequate consideration; or 2) The transfer is under an agreement to live apart; or 3) Where the asset transferred is house property (as such transfer will be governed by Sec.

27). 4) Where the asset is transferred before marriage. 5) If on the date of accrual of income, transferee is not spouse of the transferor.

64(1) (vii)

If asset is transferred to other person or an AOP, for inadequate consideration, for immediate or deferred benefit of spouse, then income on asset so transferred shall be clubbed in the hands of the transferor.

64(1) (vi)

Income arising (directly or indirectly) from assets transferred to son's wife, without adequate consideration, shall be included in income of transferor.

64(1) (viii)

If an asset is transferred to other person or an AOP, for inadequate. Consideration, for immediate or deferred benefit of son's wife, then income on asset so transferred shall be clubbed in the hands of the transferor.

64(1A) Income of a minor child shall be clubbed with income of the parent whose total income (excluding this income) is higher. Once clubbing is made with either parent, then in any subsequent years clubbing shall be made with the same parent, unless the AO is satisfied. If marital relationship does not subsist, income shall be clubbed with that parent who maintains the minor child. Exceptions: a) Income arises or accrues to the minor child due to any manual work, his skill, talent; or b) The minor child is suffering from any disability of nature specified u/s 80U.




Exemption u/s 10(32) lower of a) Rs.1500; or b) Income so clubbed. 64 (2) Where an individual has converted his property into property of HUF, for inadequate

consideration, then income derived from such converted property shall be clubbed with individual as under:

Before partition The entire income from such property After partition Income from the assets attributable to the spouse of transferor.




WHEN SET OFF IS AVAILABLE? When these is a loss in one or more sources under one or more heads of income, the provisions of set off and carry forward are applicable as under. 1. Inter Source Adjustment (Sec 70) 2. Inter head Adjustment (Sec 71) 3. Carry forward of losses. 1. Inter source adjustment (sec 70): Under this section loss from any source of income can be set off

against same head of income for the same assessment year. NOTE: Assessee does not have any option to set off or not to set off.

SR NATURE OF LOSS SET OFF AVAILABLE U/S. 70 1 House property loss House property income 2 Speculation business loss Profit from speculation business 2A Non-speculation business loss Profit from speculative, non-speculative &

specified business 2B Loss of Specified Business Sec. 35AD Income of Specified Business Sec. 35AD. 3 Short term capital loss Long term & short term capital gain 4 Long term capital loss Long term capital gain 5A Losses from activity of maintaining race

horses Income from such business.

5B Winning from lotteries. Crossword puzzles, card games, gambling or betting.

Cannot be set off against any income.

5C Loss from other source except 5A & 5B Income from other source except casual income. 6 Loss from income which is exempt u/s. 10 Cannot be set off against any income.

2. Inter head adjustment (Sec 71): Sec. 71 is appliance if loss cannot be set off against Sec. 70.

SR. NATURE OF LOSS SET OFF AVAILABLE U/S. 71. 1 House property loss (max 2 lakhs) Any income other than lottery, card games, crossword

puzzles, gambling or betting. 2 Non-speculation loss Any income other than salary, lottery, card games,

crossword puzzles, gambling or betting.

CHAPTER 10: SET OFF AND CARRY FORWARD OF LOSSES




3 Loss from other source except casual income and income from owning and maintaining race horse

Income from other source except casual income.

4 Loss from income which is exempt u/s. 10

Cannot be set off against any income.

CARRY FORWARD OF LOSSES If loss cannot be set off as per provision of sec. 70 & sec. 71 then it is to be carry forward under the act. The following losses can be carried forward. a) Business Loss (Non-Speculative) b) Business Loss (speculative) c) Loss under Capital Gain (Short term and Long term) d) Losses from the activity of owning and maintaining race horses. e) HP loss. The table given below highlights the rule of carry forward of loss –

Type of loss to be carried forward & set off

Income against which carried forward loss can be

set off in next year(s)

For how many yrs loss can

be carried forward

Should the source be continued

Is it necessary to submit return of

loss of loss in time

Sec. 71B House property loss w.e.f. A.Y. 1999-2000]

Income under the head "Income from house property"

8 years No No

Sec. 72 No speculation business loss Business losses (other than depreciation etc.)

Any income under the head 'Profits &gains of business or profession' (whether from speculation or otherwise)

8 years No Yes

Sec. 32(2) On account of unabsorbed depreciation, capital expenditure on scientific research and family planning

Any income other than Income under the head Salaries and winning from lotteries, etc.

Indefinite years

No

No

Sec. 73 Speculation loss Income from speculation 4 years No Yes




Transaction. Sec. 73A Loss of specified business covered u/s 35AD

Income from any specified business.

Indefinite years

No Yes

Sec. 74 Capital loss Short Term Long Term

Income under the head "Capital gains “Long term capital gain”

8 years No Yes

Sec. 74A Loss from activity of owing and maintaining race horses

Income from the activity of owing and maintaining race horses

4 years Yes Yes

Summary Nature of loss Section 70 Section 71 Carry

forward House Property Yes Yes Yes Speculation Loss Yes No Yes Non-Speculation Loss Yes Yes Yes Loss of Specified Business Yes No Yes Capital Gain Yes No Yes Casual Income No No No Income from Owning & Maintaining Race Horse Yes No Yes Other than casual Income Yes Yes No

CARRY FORWARD AND SET OFF OF LOSSES IN CASE OF CHANGE IN CONSTITUTION OF FIRM OR ON SUCCESSION [SEC. 78] Where a change occurred in the constitution of a firm, nothing in this chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner are exceeds his share of profits, if any, in the firm in respect of the previous year.

As per Sec. 78(1), in case of death or retirement of partner (e.g. change in the constitution of a firm), share of losses of the outgoing partner cannot be carry forward.

CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPANIES [SEC. 79(a)] Amendment to section 79

Section 79 regulates carry forward and set off of losses in case of a closely held company (i.e. not being a company in which the public are substantially interested). Clause (a) of section 79 applies to




all such companies (except an eligible start-up as referred to in section 80-IAC), while clause (b) applies only to such eligible start-up. These provisions are as follows —

Clause (a) of section 79: Loss of a closely held company - Where a change in shareholding has taken place during the previous year in the case of a closely held company, earlier year losses shall be carried forward and set off against the income of the current previous year, only if the persons beneficially holding 51 per cent of the voting power on the following two dates are same —

a) On the last day of the previous year in which the loss was incurred b) On the last day of the previous year in which the company wants to set off the brought

forward loss

Clause (b) of section 79 : Loss of a start-up - In case of a closely held start-up (as referred to in section 80-IAC), brought forward loss can be set off against current year's income only if all the shareholders of the company (who held shares carrying voting power on the last day of the previous year in which the loss was incurred), continue to hold shares on the last day of the current year (i.e., the year in which the company wants to set off the brought forward loss). This restriction is applicable only for such loss which is incurred during the period of 7 years beginning from the year in which such company is incorporated

Amendment for eligible start-up - Currently, a closely held company (which owns an eligible start up) cannot carry forward and set off loss under section 79(a)

To further facilitate ease of doing business in the case of an eligible start-up, the scheme of section 79 has been modified (with effect from the assessment year 2020-21) so as to provide that brought forward loss of a closely held eligible start-up shall be carried forward and set off against the income of current previous year on satisfaction of either of the two conditions stipulated currently under clause (a) or clause (b) as given above

For other closely held companies, there would be no change, and loss incurred in any year prior to the previous year shall be carried forward and set off only on satisfaction of condition currently permitted at clause




SUBMISSION OF RETURN FOR LOSSES [SEC 80]

Notwithstanding anything contained in this chapter, the following losses shall not be allowed to be carried forward unless a return of loss is filed in accordance with the provisions of section 139(3)-

a) Normal business losses u/s 72(2). b) Speculation business loss u/s 73. c) Loss under the head Capital Gains u/s 74, and d) Loss from the activity of ‘Owning and maintaining racehorses’ u/s 74 A

Notes -

1. House property losses and special business losses (sec. 73A) can be carry forward even if belated return is filed.

2. Intra head and inter head adjustments are not disallowed u/s 80 3. Losses of preceding’s PYs can be carried forward to subsequent PYs.




DEDUCTION NOT TO BE ALLOWED UNLESS RETURN FURNISHED. [SEC. 80AC] Where in computing the total income of an assessee, any deduction is admissible u/s 80-IA or 80-IAB or 80-IB or 80-ICor 80-ID or 80-IE, 80JJA, 80LA, 80P, 80PA, 80QQB & 80RRB no such deduction shall be allowed to him unless he furnishes a ROI for such assessment year on or before the due date specified u/s 139(1) SECTION 80C

Applicable 1

Individual & HUF whether resident or non-resident Life Insurance Premium including payment made by Govt. employee to the central Govt. employees' insurance scheme. a. Paid on his own life policy, life of the spouse or any child (child may be dependent/

independent, male/ female, major/minor or married/unmarried) b. Deduction allowed is. Date of issue of policy Policyholder suffering from

disability/ disease Any other

Before 1st April 2012 20% of sum assured 20% of sum assured During 2012-13 10% of sum assured 10% of sum assured On or after 1st April 2013

15% of sum assured 10% of sum assured

If value of policy is not given then premium paid will be allowed Lock in period 2yrs

2 Contribution to Statutory provident fund and Recognized provident Fund 3

1) Contribution towards Public provident fund (PPF) maximum 1, 50,000 per year. Subscription should be in the name of such individual, his spouse and child whether major or minor & in case of HUF any member of the family

2) Accrued interest which is deemed as reinvested is also qualified for deduction except all last year

CHAPTER 11: DEDUCTIONS SEC 80C TO 80U




4 1) Contribution to Unit linked insurance plan. Subscription should be in the name of such individual, his spouse and child whether major or minor & in case of HUF any member of the family

2) Lock period 5yrs 5 Contribution to National saving certificates including interest on NSC 6 Contribution to notified Mutual funds 7 Any sum paid as tuition fees to any university/college/ educational institution/play

school/pre nursery [Institute situated in India for full time education for max. 2 children] 8 Repayment of housing loan (principal amount) 9 Amount deposited under Senior citizen saving scheme 10 Amount deposited as term deposit for a period of 5 yrs or more in accordance with a

scheme framed by central government. 11 Subscription to any notified bonds of NABARD. 12 Stamp duty, registration fee and other expenses for the purpose of transfer of house

property 13 Amount invested in approved debentures of and equity shares in a public company engaged

in infrastructure. 14 Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account

Scheme ( Interest exempt/ Maturity amount exempt ) Following persons referred to in section 80C (4) (ba) shall be eligible for deduction under section 80C: (i) individual, or (ii) any girl child of that individual, or (iii) any girl child for whom such person is the legal guardian, if the scheme so specifies.

15 Contribution by a Central Government employee to additional account under NPS [specified account- Tier II] referred to in section 80CCD for a fixed period of not less than 3 years

[Amendment Finance Act 2020]

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80C is not available from the assessment year 2021-22

Deduction Amount invested or Rs 1500000 whichever is less

Sec. Applicable to Condition(s) Deduction

80CCC Pension fund

Individual Deposit in LIC or other insurer’s annuity plan.

Maximum Rs. 1,50,000 Notes:





If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80CCC is not available from the assessment year 2021-22.

Pension or surrender value received from such pension scheme shall be taxable in the hands of recipient on cash basis.

Interest or bonus accrued as per the scheme shall not be eligible for deduction but shall be liable to tax.

80CCD Specified Pension Fund

An individual. Assessee has in the previous year paid or deposited any amount in his account under a pension scheme notified by the Central Government. [Amendment Finance Act 2020]

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80CCD [except employers contribution NPS under section 80CCD (2)] is not available from the assessment year 2021-22.

In case of salaried individual: Lower of the following 1) The whole of the amount so paid or

deposited 2) Maximum of 10% of his salary in the

previous year Plus Employers contribution to the extent of 10% of salary & 14% in case of contribution made by central government. Salary means Basic +DA, if the terms of employment so provide. Another cases: 20%of GTl Additional deduction of Rs 50,000 shall be allowed. (For salaried + Others)

Note Aggregate deduction under Sec. 80C, 80CCC and 80CCD cannot exceed Rs. 1,50,000.(Excluding employers contribution to NPS to the extent of 10% shall not be consider for calculating limit of Rs. 1,50,000)




Particulars Amount Deduction u/s 80C **** Deduction u/s 80CCC **** Deduction u/s 80CCD [other than deduction in respect of Employer’s Contribution] **** Total [Restricted to maximum of Rs. 1,50,000 u/s 80CCE] ***** Add: contribution of NPS by any individual allowable u/s 80CCD(1B) [sub. To maximum of Rs. 50,000/-]

****

Add: Employer’s contribution to New Pension System referred to in Sec. 80CCD [Subject to max. of 10% / 14% of salary]

****

Deduction available u/s 80C, 80CCC & 80CCD *****

80D Mediclaim

Individual (Himself/herself, spouse or dependent children and parents) HUF Any member of the family

Paid medical insurance for relative by any mode other than cash from taxable income. Note: Individual can also contribute' to the Central Government Health Scheme for himself / spouse /dependent children [Amendment finance act 2020] If an individual / HUF opts for the alternative tax regime under

section 115 BAC, deduction under section 80D is not available from the assessment year 2021-22

Maximum Rs. 25,000 /Rs.50,000 (in case insured is a senior citizen) (Additional Rs. 25,000 / Rs.50,000 for parents) Above amount includes Rs.5,000 for preventive health check up Medical expenditure for super senior citizen Rs 50,000.

80DD Disability

Resident individual Spouse, children, parents, brothers

1) Assessee has disable dependent relative.

2) Assessee deposited medical with return.

1) Rs. 125000 for severe disability.( 80% or more)

2) Rs. 75000 for non-severe disability




and sisters of the individual. Resident HUF

Any member of the Hindu Undivided Family.


If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80DD is not available from the assessment year 2021-22.

80DDB Specified Disease

As above 1) Assessee himself or his relative is suffering from specified diseases

Quantum of deduction 1) Actual expenditure on medical

treatment or Rs. 40,000 (in case of senior citizen & Super senior citizen Rs. 1,00,000) whichever is less, is deductible.

2) Deduction under this section shall be reduced by the amount received, if any under insurance from an insurer or reimbursed by the employer for the medical treatment of the person referred to above.

2) Assessee deposited medical certificate along with return. Where the patient is a senior citizen


If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80DDB is not available from the assessment year 2021-22.

80E Interest on Education Loan

Individual Assessee is repaying the interest on loan (taken for higher education). [Amendment Finance Act 2020] If an individual / HUF opts for the alternative tax

Interest paid during the year for a maximum period of 8 years




regime under section 115 BAC, deduction under section 80E is not available from the assessment year 2021-22.

80EE

Individual

Payment of Interest on loan taken by Assessee from any Financial Institutional for the purpose of acquisition of a Residential Property. [Amendment Finance Act 2020]

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80EE is not available from the assessment year 2021-22.

1. Conditions: a. Amount of Deduction: deduction

shall not exceed Rs. 50,000 b. Period: Beginning from AY 2017-18

and subsequent AY’s c. Loan section period: 1/4/2016 to

31/3/2017. d. Maximum Loan Amount: 35 lskhs e. HP Value: Value of Residential House

Property does not exceed Rs. 50 Lakhs.

f. No other house: The assessee should not own any Residential House Property on the date of sanction of loan.

2. No Further Deduction: Where a deduction u/s 80EE is allowed for any interest, deduction shall not be allowed in respect of such interest under any under provision of this Act for the same or any other assessment year

80EEA [FA 2019]

Individual

Payment of Interest on loan taken by Assessee from any Financial Institutional for the purpose of acquisition of a Residential Property. [F. Act 20]

Conditions: a) Amount of Deduction: deduction shall

not exceed Rs. 1,50,000 b) Loan section period: 1/4/2019 to

31/3/2021. [F. Act 20]




If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80EEA is not available from the assessment year 2021-22.

c) HP Value: Value of Residential House Property does not exceed Rs. 45 Lakhs.

d) No other house: The assessee should not own any Residential House Property on the date of sanction of loan.

e) No Further Deduction: Where a deduction u/s 80EE is allowed for any interest, deduction shall not be allowed in respect of such interest under any under provision of this Act for the same or any other assessment yea

80EEB

In Individual Loan for purchase of an electric vehicle [Amendment Finance Act 2020]

No Deduction if assessee opt for Alternate tax regime.

Loan Taken from Financial institution.

Interest payable, subject to a maximum of Rs. 1,50,000.

No deduction under any other section.

80G Donation

All assessee Assessee donated an amount (otherwise than in kind) to specified organizations or funds. Amendment Finance Act 2020]

No Deduction if assessee opt for Alternate tax regime.

50% or 100% of amount donated (subject to limit applicable, if any, on amount of donation) Donation exceeding 2,000 must be any mode other than cash.

80GG Rent Paid

Individual

1) Assessee is paying rent.

Minimum of the following- 1) Rs. 5,000 p.m.




2) He or his relative has no house at the place of employment of the assessee.

3) He is neither receiving HRA nor has claimed any benefit for self-occupied property.

2) 25% of Adjusted GTl 3) Rent paid - 10%n of adjusted GTl Amendment finance act 2020]

If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction under section 80GG is not available from the assessment year 2021-22.

80GGA Rural Development

Any assessee not having income under the head “Profits & gains of business or profession"

Assessee has contributed certain amount for rural development, scientific research, etc.

Amounts contributed. [Amendment finance act 2020]

No deduction shall be allowed under this section in respect of any sum exceeding Rs. 2,000 unless such sum is paid by any mode other than cash Amendment finance act 2020]

No deduction if assessee opt for alternate tax regime.

80GGB Political party

Indian Company Assessee contributed an amount to political party or an electoral trust

Amount so contributed Amendment finance act 2020]


80JJA Any assesse Business of collecting & processing of Bio-degradable waste

100% of profits for first 5 yrs

Amendment finance act 2020]


80JJAA Any assessee subject to tax audit

Employment of new workmen

30% of additional wages

80M [Newly inserted as

Assesse is a domestic company

Income of the assesse includes dividend from domestic companies,

aggregate dividend income (as per section 8) of the investor company during the previous year from domestic




per finance act 2020]

foreign companies or business trusts.

or foreign company/companies or business trust(s) [it includes final dividend interim dividend and even deemed dividend under section 2(22)(a)/(b)/(c)/(d)/(e)];

80PA Certain producer company

Carrying eligible business 100% profit for 5 yrs. starting from AY 19-20 Amendment finance act 2020]


80QQB Royalty

Resident Individual

1) Assessee is author of the specified book.

2) He earned royalty income (whether received in lump sum or otherwise).

3) A certificate from the payer in Form 10CCDis to be submitted along with return of income.

4) In case income is earned outside India, money must be brought into Indian convertible foreign exchange and a certificate must be obtained from the prescribed authority.

Minimum of the following (as the case may be) 1) Royalty fee (to the maximum of 15%

of the value of the book sold; or 2) Lump sum fee; 3) Income brought into India

inconvertible foreign exchange; or 4) RS.3,00,000 Amendment finance act 2020]


80RRB Resident Individual

Resident Individuals, being a patentee in receipt of any income by way of royalty in respect of a

Rs 3,00,000 or amount received whichever is less




patent registered on or after 1.4.2014 under the patents Act, 1970



80 TTA Interest on Saving

Individual & HUF

Interest from saving account in bank, post office or cooperative society

Max Rs. 10,000 Assessee claiming deduction u/s 80TTB can not claim deduction under this section. Amendment finance act 2020]


80TTB Interest on deposits

Resident Senor citizen

Interest on deposits Max Rs 50,000 Note: Cannot claim deduction again under Sec 80TTA. Amendment finance act 2020]


80U Disability

Resident Individual

1) Assessee himself suffering from disabilities.

2) Medical certificate submitted along with return

1) Severe disabilityRs.1,25,000 2) Non-Severe disabilities. 75,000 Amendment finance act 2020]


80-IA An Indian Company

Infrastructure Facility 100% of profit for 10 yrs out of 15 AY starting from commencement.


No deduction if assessee opt for

New undertaking Telecommunication Facility

100% of profit for 5 yrs and 30% for next 5 yrs. out of 15 AY starting from commencement.




alternate tax regime. New undertaking Industrial Park or

Special economic zone 100% of profit for 10 yrs out of 15 AY starting from commencement.

New undertaking Power Generation /distribution

100% of profit for 10 yrs out of 15 AY starting from commencement.

Any assesse Reconstruction/Revival of power generation unit

100% of profit for 10 yrs out of 15 AY starting from commencement.

80-IAB Developer of SEZ Development of SEZ 100% of profit for 10 yrs out of 15 AY starting from commencement. Amendment finance act 2020]


80 IAC Eligible start up Deduction in case of specified business

100% profit exempt for 3 yrs out of 7 yrs. Amendment finance act 2020]


Sec 80 IB New undertaking Production/Refining of Mineral oils & commercial production of natural gas

100% of profit for 7 yrs Amendment finance act 2020]


Any assesse Processing, preservation and packing of fruits or vegetables

100% of profit is deductible for the first 5 years and 30% for next 5 yrs (25% for non-corporate assessee)

80-IBA

All assessee Business of developing and building Housing Projects

100% of the Profits & Gains derived from such Business.Period of completion 5 yrs. instead of earlier 3 yrs.

80-ID Any assesse Hotel or convention Centre in NCR

100% of profits for first 5 years.




80-IE Any assesse Certain undertaking in North-Eastern states

100% for first 10 yrs




CHAPTER 12: TDS & TCS TAX DEDUCTED AT SOURCE Important Notes: 1) TDS means pay tax as you earn. 2) The main objective of introducing TDS/TCS is quicker realization of tax and effective realization tax. 3) In few cases an individual or HUF cannot deduct TDS if their books of accounts are not required to

be audited. 4) Surcharge on TDS for FY 20-21 shall be added in following cases:

Applicability of surcharge and education cess while computing TDS 1 On salary resident or non-resident Surcharge, E CESS and SHEC shall be considered. 2 Any other payment to resident No. S.C., E. CESS and SHEC 3 Any other payment to non-resident 4 Where amount of such payment be exceeds

Rs. 10 crore Surcharge (5%) E CESS and SHEC shall consider.

5 Where amount of such payment exceeds Rs. 1 crore

Surcharge (2%) education cess & SHEC shall be considered

6 Where amount of such payment does not exceed Rs. 1 crore

Education cess & SHEC shall be considered.

Sec. Nature of payment

Person responsible to deduct tax

Recipient Time of deduction

Rate of TDS

Maximum payment up to which tax shall not be deducted

192 Salary Employer Employee At the time of payment

Average rate of tax

Basic exemption Limit

Salary (F.Act 20)

Employer is start up

allots any specified security/ sweat equity

within 14 days- from a) expiry of




shares/ ESOP to its employees,

48 month from the end of relevant AY b) from the date of sale c) from the date of laving org

192A RPF

The Trustees of the EPF Scheme

Any Employee

At the time of payment

10%

Rs 50,000

193 Interest on securities

Payer of interest on securities (Central or state government, Local Authority, Company or Corporation established under the central or State Act)

Resident person

At the time of payment or crediting the payee, whichever is earlier

10% Till 13/05/20 & 14/05 to 31-03-21 @7.5%

[Amendments Finance Act 20]

Interest exceeds Rs. 5,000 (subject to certain conditions) & central government > 10,000

194 Dividend Domestic Company

Resident person


10% Till 13/05/20 & 14/05 to 31-03-21 @7.5%


Rs. 5,000 Amount paid to Individual by any mode and if recipient is LIC,GIC etc




194A Interest other than interest on securities

Any person other than individual and HUF whose accounts are not required to be audited during immediately preceding previous year

Resident person

At the time of payment or crediting the payee, whichever is earlier.

@10%

Till 13/05/20 & 14/05 to 31-03-21 @7.5%


Rs. 5,000 (Subject to certain conditions) (Rs. 40,000 in case of Bank FD & Recurring) Rs 50,000 in case of senior citizen

194B Winning from Lotteries, etc.

Any person paying such income

Any person At the time of payment

30% plus SC and cess in case of NR [Amendments Finance Act 20]

Rs. 10,000

194BB

Winning from horse races

Any person paying such income

Any person At the time of payment

30% plus SC and cess in case of NR [Amendments Finance Act 20]

Rs, 10,000

194C Contract work

Any specified person including individual and HUF whose accounts are required to be audited during immediately

Resident person


Payee is Individual or HUF 1% other payee 2%. Till 13th may and from 14th May to 31st March

a.Rs.30,000 (provided aggregate amount paid during the financial year does not exceed Rs. 1,00,000).




preceding previous year

0.75% and 1.5% respectively. Finance Act 20

b. No TDS for any sum credited or paid to contractor owns 10 or less goods carriage at any time during PY & providing PAN. & contract of personal nature

194D Insurance Commission

Any person 5% and 10% for domestic company till 13th may and from 14th May to 31st March 03.75% and 10% respectively. Finance Act 20

Rs. 15,000

194DA

Payment of life Insurance policy

Any person Resident At the time of payment

5% till 13th may and from 14th May to 31st March 03.75%

Rs 1,00,000




Finance Act 20

194E Sports person or entertainer

Any person paying specified income

Non-resident foreign citizen sportsman or sports association or entertainer

At the time of payment or crediting the payee, whichever is earlier.

20% Nil

194EE Deposit in NSC Post Office Any person At the time of payment

10% up to 13/05/20 and 7.5 % up to 31/03/21 (Amendments Finance Act 20]

Rs. 2,500

194F Units of Mutual Fund/UTI

Mutual Fund or UTI

Unit holder u/s. 80CCB


20% Nil

194G Commission on sale of lottery tickets

Any person paying commission on sale of lottery tickets

Any person At the time of payment or crediting the payee, whichever is earlier

5% up to 13/05/20 and 3.75 % up to 31/03/21 (Amendments Finance Act 20]

Rs. 15,000

194H Other commission

Any person other than individual

Resident person

At the time of

5% up to 13/05/20

Rs. 15,000




and HUF whose accounts are not required to be audited during preceding P.Y.

payment or crediting the payee, whichever is earlier

and 7.5 % from 14/05/20 to 31/3/21


194 I Rent Any person other than individual and HUF whose accounts are not required to be audited during preceding P.Y.

Resident At the time of payment or crediting the payee, whichever is earlier

Plant & machinery 2% Other asset 10% till 13th May and 1.5% and 7.5% 14/05/20 to 31/3/21


Rs. 2,40,000 [FA 2019]

194 IA Acquisition of immovable property other than rural agro land.

Any person who is acquiring such property


1% of consideration up to 13/05/20 and 0.75 % from (14/05 to 31/3/21) [Amendment]

Rs. 50,00,000

194IB Rent Individual or HUF Resident At the time of credit of rent for last

5% of rent up to 13/05/20 and 14/05/20 to

Rent < 50,000 pm or part thereof




month of previous year or last month of tenancy or date of payment whichever earlier

31/03/21 3.75% [Amendment]

194IC Amount payable under agreement specified under Sec 45(1A)

Any Person Resident At the time of payment or crediting the payee, whichever is earlier

10%. up to 13/05/20 and 14/05/20 to 31/03/21 @ 7.5% [Amendment Finance Act 20]

194J Professional or technical service or director fees (not covered u/s. 192), Royalty, Sum received for not carrying out any activity Sec 28 (va)

Any person other than individual and HUF whose accounts are not required to be audited during preceding P.Y.

Resident person


10% & 2% for payment being person engaged in business of call center till 13th May and from 14th May to 31st March 1.75% and 7.5% Amendmen

Aggregate of payment does not exceed Rs. 30,000 in a FY for each of nature except for director fees.




t Finance Act 20]

194K Income from units Amendment Finance Act 20]

Any person Resident person


Tax shall be deducted at the rate of 10% (7.5%) during May 14, 2020 and March 31, 2021).

Up to 5000

194M For carrying out any work, By way of commission, By way of fees for professional services [FA 2019] w. e. f 1-9-19

It may be noted that only individuals and HUFs [other than those who are required to deduct income-tax as per the provisions of section 194C or 194H or 194J] are required to deduct tax in respect of the above sums payable during the financial year to a resident


5% up to 13/05/20 and 3.75% from 14/05 to 31/03/21 [Amendment]

No tax is required to be deducted where such sum or, as the case may be, aggregate amount of such sums credited or paid to a resident during the financial year does not exceed Rs. 50,00,000.

194N Cash withdrawal

Banking company, Cooperative society, and Post office


2% of sum exceeding 1cr Case 1 If no ITR is file 20 laks to 1cr 2%

The government, Banking company, Cooperative society, and Post office,




and above 1cr 5%

white label ATM operator, RBI

194LA Compensation for compulsory acquisition of immovable property (other than agro land)

Any person responsible for such payment

Resident At the time of payment in cash or by cheque or draft or by other mode, whichever is earlier

10% up to 13/05/20 and 14/05/20 to 31/03/21 7.5% [Amendment Finance Act 20]

Rs. 2,50,000

194O Payment by ECO [Amendment Finance Act 20]

ECO E-Commerce participants

Tax is deductible by E - commerce operator at the time of credit of amount of sale of goods / services to the account of an E-Commerce participants or at the time of payment thereof o

Tax in deductible at the rate of 1% (0.75 percent up to March 31, 2021) of the gross amount of such sale of goods / services

1)An Individual or HUF 2) Gross amount up to 5 lakhs 3) Submission of PAN or Aadhar card to ECO




such e-Commerce participants buy any mode, whichever is earlier

NO DEDUCTION TO BE MADE IN CERTAIN CASES. SEC 197A

A declaration in writing in duplicate to the effect that the tax on his estimated total income of the previous year in which such income is to be included will be NIL.

Payee Section Form No Not Application Resident individual 194 and 194EE 15G

(15H by person => 60 years

The amount of such income or the aggregate of such incomes credited or paid or likely to be credited or paid during the PY < BEL

Person (Not being a company or firm)

192A, 193, 194A and 194DA

The deduct or shall deliver or cause to be delivered to the principal chief commissioner or chief commissioner or principal commissioner one copy of the declaration on or before the 7th day of the month next following the month in which the declaration is furnish to him.

TAX DEDUCTED IS INCOME RECEIVED SEC. 198.

All sums deducted in the accordance with the provisions of the foregoing provisions of this chapter shall, for the purpose of computing the income of an assessee, be deemed to be income received.

Provided that the sum being the tax paid, u/s 192(1A) shall not be deemed to the income received.

CREDIT FOR TAX DEDUCTED SEC. 199.

(1) Any deduction made in accordance with the foregoing provisions of this chapter and paid to the central government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor of the owner of property or of the unit-holder, or of the shareholder, as the case may be.




Any sum referred to in sub-section (1A) of section 192 and paid to the central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. DUE DATE FOR PAYMENT OF TDS [SEC. 200 READ WITH RULE 30] Due date for deposit of TDS or Amount Sec. 192(1A)

S No Deductor Cases Due Date 1 Government Tax paid without production of an income-tax

challan Same day

2 Tax paid accompanied by an income- tax challan 7 days from end of month

3 Any other person

Deduction made in the months of April to Feb 7 days from end of month

4 If income is credited or paid in the month of March 30th April

INCOME PAYABLE “NET OF TAX” SEC. 195A

Where, under an agreement or other arrangement, the chargeable on any income referred in the in the foregoing provision of this chapter is to be borne by the person by whom the income payable, then,

TDS = (Amount paid ∗ Rate of TDS)

(100 − Rate of TDS)

TABLE B: DUE DATE OF FILING QUARTERLY STATEMENT [RULE 31A (2)] S.No. Date of ending of the

quarter of the financial year

Due date

1. 30th June 31th July of the financial year. 2. 30th September 31th October of the financial year 3. 31st December 31th January of the financial year 4. 31st March 31th May of the financial year immediately following the financial

year in which deduction is made. TABLE C: TIME LIMITS FOR ISSUE OF CERTIFICATE [RULE 31(3)]

S.No. Form No. Periodicity Due date




1 16 & 12BA Annual By 31st day of May of the financial year immediately following the financial year in which the income was paid and tax deducted.

2 16A Quarterly Within 15 days from the due date for furnishing the statement of tax deducted as source under rule 31A.

3 16 B (Sec 194 – IA)

Within 15 days from the due date for furnishing the challan – cum statement in Form No. 26QB

4 16 C (Sec 194 – IB)

Within 15 days from the due date for furnishing the challan – cum statement in Form No. 26QC

INTEREST FOR FAILURE TO DEDUCT AND PAY TAX AT SOURCE [SEC. 201(1A)] Condition: Where a person, responsible for deducting tax at source, fails to: a) Deduct tax at source; or b) Deposit such tax after deducting the same. Amount on which interest is to be charged: On the amount of such tax. RATE OF INTEREST

Period Rate of Interest From the date on which such tax was deductible to the date on which such tax is deducted.

Simple interest @ 1% per month or part thereof.

From the date on which such tax was deducted to the date on which such tax is actually paid

Simple interest @ 1.50% per month or part thereof.

Period: From the date on which such tax was deductible to the date on which such tax is actually paid to the Government.

FEE FOR DEFAULTS IN FURNISHING STATEMENTS (SECTION 234E) Condition: Where a person fails to deliver a quarterly TDS / TCS return within the prescribed time. Amount of fee: Rs.200 for every day during which the failure continues subject to maximum of

amount of TDS / TCS.




KEY

NOT

E

- The fee shall be paid before delivering a statement. - The fee is in addition to other consequences of non – delivering such return.

TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER (SECTION 203A) Every person, deducting tax or collecting tax, who has not been allotted a tax – deduction account number or tax collection account number, shall within specified time, apply to the Assessing Officer for the allotment of a “tax deduction and collection – account number” in Form 49B.

REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER SEC. 206AA 1) Any person entitled to receive any sum or income or amount, on which tax is deductible shall furnish

his PAN to the person responsible for deducting such tax, failing which tax shall be deducted at the higher of the following rates, namely:

a. At the rate specified in the relevant provision of this Act; or b. At the rate of rates in force; or c. AT the rate of 20%.




TAX COLLECTION AT SOURCE Meaning of important terms 1. “Seller” means – a. The Central Government; or b. State Government; or c. Local authority; or d. Statutory corporation; or e. Authority established by or under a Central, State or Provincial Act; or f. Company; or g. Firm; or h. Co – operative society; or i. An individual or HUF, whose books of account are required to be audited under section 44AB during

the financial year immediately preceding the financial year in which such goods are sold. 2. “Buyer” means a person who obtains in any sale (by way of auction, tender or any other mode)

specified goods or the right to receive any such goods but does not include,: a. A public sector company, the Central Government, a State Government and an embassy, a High

Commission, legation, Commission, consulate and the trade representation, of a foreign state and a club; or

b. A buyer in the retail sale of such goods purchased by him for personal consumption. 3. “Specified goods” includes:

Particulars Rate as a % of the amount payable by the buyer or licensee

or lessee*

1 Alcoholic liquor for human consumption 1% 2 Tendu leaves 3.75% 3 Timber obtained under a forest lease 2.5% /(1.875% )# 4 Timber obtained by any mode other than under a forest

lease 2.5%/ (1.875%) #

5 Any other forest produce (not being timber or tend leaves) 2.5% 6 Scrap 1% (0.75)# 7 Specified minerals 1% (0.75)#




8 Parking lot, toll plaza, mining and quarrying 2% (1.5)# 9 Motor car 1% (0.75)# 10 [Amendments Finance Act 20]

(foreign remittance through LRS and overseas tour package) (applicable from October 1, 2020)- E1- Foreign remittance through liberalised remittance scheme (LRS) of Rs. 7 lakh or more in a financial year. E2- selling of overseas tour package

5 5

11 [Amendments Finance Act 20] (sale of any other goods) (applicable from October 1, 2020)- F1- sale of any other goods of the value (or aggregate of such value) exceeding Rs. 50 lakh in a previous year by a person whose total sale / gross receipts/ turnover from business exceeds Rs. 10 crores during the immediately preceding financial year (tax to be collected on sale consideration of exceeding Rs. 50 lakh)

0.1 (0.075)#

Note: # applicable from 14, May to 31, March 21 [Amendment Finance Act 20] TCS on Purchase of Motor Vehicle (w.e.f. 1/6/2016) Section 206(1F) Any person being a seller who receives any amount as consideration of sale of motor vehicle of Value exceeding Rs. 10,00,000 shall collected the tax at the rate of 1% of sale consideration. Note: This will be applicable whether payment is made by the purchase in cash or by cheque of draft or by any other mode. DEPOSIT OF TAX (SECTION 206C(3)) Assessee in default – Same as TDS. COLLECTION OF TAX AT SOURCE AT LOWER RATE (SECTION 206C(9)) Where buyer or licensee or lessee applies to the Assessing Officer in Form 27F, and receives a certificate authorizing the seller to collect tax at lower rate, seller or lesser may collect tax at the rate specified in the certificated till the cancellation of such certificate. REQUIRED TO FURNISH PAN BY COLLECTEE. SEC 206CC




(1) Notwithstanding anything contained in any other provisions of this Act, any collected shall furnish his PAN to the collector, failing which tax shall be collected at the higher of the following rates, namely: - i) At twice the rate specified in the relevant provision of this Act; or ii) At the rate of 5%




CHAPTER 13: ADVANCE TAX SCHEME OF ADVANCE TAX [SEC. 208] Where the advance tax liability of the assessee is Rs. 10000 or more, the assessee should pay such tax in the previous year itself within the due date. ADVANCE TAX LIABILITY [SEC. 209]

Particulars Amount Rs Estimated Gross Total Income Less: Deduction under chapter VIA Estimated Total Income Gross tax liability on Estimated Total Income Add: Surcharge (if applicable) Total and surcharge payable Add: Education cess & SHEC Total liability after education case Less: Tax deducted or collected at source.

Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx

Advance Tax Liability Xxxx If Advance tax is payable by Resident Individual Then Relief u/s. 87 A should be considered. INSTALLMENTS OF ADVANCE TAX AND DUE DATES [SECTION 211]

Due date of Installment in the relevant previous year

Other than 44AD or 44ADA Eligible assessees carrying on eligible business u/s 44AD or

44ADA On or before June 15 15 % of such advance tax On or before September 15 45% of Advance Tax Payable On or before December 15 75% of Advance Tax Payable On or before March 15 100% of Advance Tax Payable 100% of Advance Tax Payable




Notes: KE

Y N

OTES

a. Any amount paid under section 211 on or before 31st March of the previous year, shall be treated as advance tax paid during the financial year.

b. Provisions of advance tax is not applicable in the following cases: - Where an assessee is a senior citizen and does not have any income chargeable under the head

“Profits and gains of business or profession”. In other words, senior citizen not having business income is not liable to pay advance tax.

c. Every income including capital gain, winning from lotteries, etc. is subject to advance tax. However, it is not possible to estimate capital gain or casual gain, therefore, where the assessee has paid the whole of the amount of tax payable in respect of such income:

1. As part of the remaining installments of advance tax which were due; or 2. Where no installments were due, by March 15 of the financial year immediately preceding the

assessment year, - Then it is deemed that all the provisions are complied. d. If the last day for payment of any instalment of advance tax is a day on which the receiving

bank is closed the assessee can make the payment on the next working day. In such case, the mandatory interest leviable under section 234B and 234C would not be charged (Circular no. 676 dt. 14.1.1994)

e. While calculating advance tax, net agricultural income shall also be taken into consideration for computing tax liability.

f. If any assessee does not pay any instalment within due date he shall be deemed to be an assessee in default in respect of such instalment (Section 218).

g. Any sum, other than a penalty or interest, paid by an assessee as advance tax shall be treated as a payment of tax and credit for such shall be given to the assessee in the regular assessment (Section 219).

Advance tax installments in case of Casual income and Capital Gain

Date of earning income Installments 12/6/20 15/8/20 1/12/20 1/2/21

15th june 15th Sept 15th Dec 15th March




Total The advance on certain income can be paid after its occurrence as it cannot be estimated

1) LTCG 2) Casual income 3) Dividend income chargeable u/s 115BBDA

Interest on delayed payment of Advance tax u/s 234C

If short fall in payment of advance tax is on account of under estimation or failure in estimation of income of the nature referred to insect 115BBDA the interest u/s234C shall not be levied.




Filling of return: Following person need to file a return of income.

Assessee Size of income A company or a firm or any University/College/ other institution referred to on Sec.35(1)(ii) or (iii)

Irrespective of size of income

Individual , HUF Every individual, HUF, etc. must file return of income of its Gross Total Income before claiming deduction u/s 10(38), 80C to 80U & Sec 54 [FA 2019]

Trust Must file return if income before exemption u/s. sec. 11 or 12 exceeds maximum amount not chargeable to tax.

Political party Must file return if GTI before exemption u/s 13A exceeds maximum amount not chargeable to tax.

Scientific research association; News agency; etc.

Must file return if income before giving effect u/s. 10 exceeds maximum amount not chargeable to tax.

MANDATORY FURNISHING OF RETURN OF INCOMES BY CERTAIN PERSONS [SEC.139]

Under the amended version, a person (other than a company or firm) shall be mandatorily require to file is return of income, if during the previous year, he – has deposited an amount (or aggregate of the amount) exceeding Rs. 1 Crore is one or more current account maintained with a banking company or a co-operative bank; or Has encored expenditure of an amount (or aggregate of the amount) exceeding of 2 lakhs for himself or any other person for travel to the foreign country; or has incurred expenditure of an amount (or aggregate of the amount) exceeding Rs. 1 Lakh towards consumption of electricity or,

CHAPTER 14: RETURN, ASSESSMENT PROCEDURE AND INTERST




INTER-CHANGEABILITY OF PAN AND ADHAAR AND MANDATORY QUOTING IN PRESCRIBED TRANSACTIONS [SEC. 139A]

Section 139(A), inter alia, provides that every person specified therein, who has not been allotted a PAN, shall apply to the assessing officer for allotment of PAN. 1 In many cases, person entering into high value transactions (such as purchase as foreign

currency or huge withdraw from the banks) do not possess a shall also apply for allotment of pan.

2 For this purpose, provisions of section 139A have been amended (with effect from September 1, 2019) as follows-

a Every person who is required to furnish or intimate or quote his pan under the act, and he has not been allotted a pan but possesses adhaar number, may furnish or intimate or quote his adhaar number, in lieu of pan and such person shall be allotted a pan in the prescribed manner

b Every person who has been allotted a pan and who has been linked his adhaar number under section 139AA. May furnish or intimate or quote his adhaar number in lieu of a pan

AMENDMENT TO SECTION 139 AA

Section 139AA(2) provides that the pan allotted to a persons shall be deemed to be invalid, in case the person fails to intimate the adhaar number, on or before the notified date In order to protect validity of transactions previously carried out through a such pan, the scheme of section 139 AA has been modified (with effect from September 1, 2019) to provide that if a person fails to intimate the adhaar number, the pan allotted to such person shall be made inoperative in the prescribed manner.




FORMS – RETURN OF INCOME Rule 12 provides following Form for filing return of income for different assessee: 1 [sahaj] For individuals having income from Salary / Pension / Income from One House Property

(excluding loss brought forward from previous years) / income from Other Sources (Excluding Winning from Lottery and income from Race Horses).

2 For Individuals & HUFs not having income from Business or Profession. 3 For Individuals/HUFs being partners in firms and not carrying out business or profession

under any proprietorship. 4 For Individuals & HUFs having income from a proprietary business or profession. 4S-Sugam For Person having income from presumptive business. 5 For firms, AOPs and BOIs 6 For Companies other than companies claiming exemption under Sec. 11 7 For persons including companies required to furnish return under section 139(4A) or

section 139(4B) or section 139(4C) or section 139(4D). ITR – V Indian Income tax Return Verification Form [Where the data of the Return of Income in

Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-4S & ITR-5 transmitted electronically without digital signature].

COMPULSORY E-RETURN

Following assessee is required to file return of Income in electronic format with digital sign. 1) Company, 2) For Assessee whose books are required to be audited 3) For An Individual or HUF if income exceeds Rs 5 lakhs 4) A person claiming relief u/s 90 and 91. 5) A resident individual (other than not – ordinarily resident) or a resident HUF (other than not –

ordinarily residency must file the return of income electronically (with or without digital sign) if he / it has:

a. Assets (including financial interest in any entity) located outside India; or b. Signing authority in any account located outside India.




TIME LIMIT FOR FILING RETURN OF INCOME [EXPLANATION 2 TO SEC. 139(1)] Return should be filed on or before the following due date (of respective assessment year)

Assessee Company Due date Where the company is required to furnish a report in Form 3CEB u/s. 92E pertaining to international transaction(s)

30th November.

In case of any other company. 30th October [F.A-20]

Any other assesse Where accounts of the assessee are required to be audited under any law. 30th October

[F.A-20] Where the assessee is a working partner in a firm and the accounts of the firm are required to be audited under any law

30th October [F.A-20]

In any other case. 31st July. S N PARTICULARS EXPLANATION 1 Loss-Return

Sec 139(3) A Company must file its return of income even when there is loss to the company. Other assessee must file their loss-return within time if they want to claim the loss to be carried forward. However, the following losses cannot be carried forward if the return of loss is not submitted within the time allowed u/s. 139(1). 1) Business loss (speculative or otherwise). 2) Capital loss. 3) Loss from the activity of owning and maintaining race horses. Notes: 1) Loss declared in belated return cannot be carried forward. However, set-

off of losses of current year is not prohibited while computing the total income, even if the return of loss is filed after the due date.

2) Delay in filing the return of loss may be condoned in certain cases. 3) Unabsorbed depreciation u/s. 32 and loss under the head “Income from

House Property” can be carried forward even if the loss return is filed after the due date u/s. 139(1).




4) Although the loss of the current year cannot be carried forward unless the return of loss is submitted before the due date but the loss of earlier years can be carried forward if the return of loss of that year was submitted within the due date.

2 Belated Return: A return which is filed after due date of filing return. Sec 139(4)

Time Limit: Assessee may file such return: 1) Within the end of relevant assessment year; or 2) Before the completion of assessment (u/s. 144).

Whichever is earlier However, if an assessee files a belated return, he would be liable to penal

interest u/s. 234A.

3 Return of income of Charitable Trust

A charitable trust must file its return of income if Gross total income (before allowing exemption u/s 11 or 12) exceeds the maximum amount not chargeable to tax, before the due date as per sec. 139(1). Penalty: Where an assessee fails to file return of income under this section, within the time limit. It shall be liable to pay a penalty of Rs. 100 per day during which such failure continues [Sec. 272A (2)].

4 Return of income of Political Party

The chief executive officer of any political party must file return of income, if the amount of gross total income (before allowing exemption u/s 13A) exceeds the maximum amount not chargeable to tax. Penalty : Where an assessee fails to file return of income under this section, within the time limit, it shall be liable to pay a penalty of Rs. 100 per day during which such failure continues [Sec. 272A(2)].

5 Return of research association, etc

Every research association, etc. who are eligible for exemption u/s 10 are require to file their return of income, if the total income without giving exemption u/s 10, exceeds the maximum amount not chargeable to income tax.

6 Revised Return If an assessee discovers any omission or wrong statement (Bonafide in nature) in return originally filed, he can revise his return u/s. 139(5). Conditions to file a revised return: a. Only return filed u/s. 139(1) or in pursuance of a notice u/s. 142(1)

can be revised. b. Revised return can be filed only if the assessee discovers any omission

or wrong statement in return originally file in other words, an assessee




cannot revise a return if the omission or error in the original return was pre-known to him. Time Limit: Assessee may file the revised return: Before end of relevant assessment year; or [FA 17] Before completion of regular assessment, whichever is earlier

7 Defective Return

The assessee must rectify the error within a period of 15 days from the date of intimation (served on the assessee) or within such extended time as allowed by the Assessing Officer. Consequence when defect is not rectified: If defect is not rectified within the time limit, the Assessing Officer will treat the return as an invalid return and provisions of the Act will apply as if the taxpayer had failed to furnish the return at all.

8 Signing of Return Sec 140

Assessee Case Signed and verified by Individual In general Individual himself. Where the individual

concerned is absent from India.

Individual himself or by the duly authorized person of such individual.

Where the individual is mentally incapacitated.

Guardian of such individual or any other person competent to act on his behalf.

Where by any other reason it is not possible for the individual to sign the return.

Any person duly authorized by him.

Note: When return is signed by any authorized person in that case the return should be accompanied with power of attorney.

HUF In General Where the ‘Karta’ is absent from India or is mentally incapacitated.

Karta Any adult member of the family

Firm In general If due to any reason it is not possible for meaning partner

Meaning partner Any adult partner.




to sign or where there is no managing partner.

Limited liability partnership

In general Designated partner.

If due to an unavoidable reason such designated partner is not able to sign and verify the return, or where there is no designated partner as such.

Any partner.

Local authority

Principal officer

Political Party

Chief Executive Officer In general

Company If due to any reason it is not possible for MD to sign or where there is no MD Non-resident company. Company in process of winding up. Where the management of the company has been taken over by the Central or State Government.

Managing Director (MD) Any Director A person holding a valid power of attorney. Copy of such power of attorney must be attached with the return. Liquidator of the company.

Any other association

Any other person Principal Officer.

Any other Such person or any other person competent to act on its behalf.

9 PAN It’s a 10 digit alpha numeric code assign by Income tax department.




PENALTY FOR FAILURE TO APPLY FOR PAN

Failure to apply for PAN or to quote PAN in prescribed documents (discussed later in this chapter) attract penalty of Rs. 10000 u/s. 272B.

Form of Application – Form 49A. However, from 01.11.2011, the prescribed forms are as under:

Case Form No. For Indian Citizen / Indian Company / Entitles incorporated in India / Unincorporated entitled formed in India

49A

For Individuals not being Indian Citizen / Entitles incorporated outside India / Unincorporated entitles formed outside India.

49AA

QUOTING OF AADHAAR NUMBER SEC. 139AA 1. Every person who is eligible to obtain number shall, on or after the 1st day of July, 2017, quote

Adhaar number – (i) In the application form for allotment of PAN (ii) In the RIO: Provided that where the person does not possess the Aadhar Number, the Enrolment ID of Aadhar application form issued to him at the time of enrolment shall be quoted in the application for PAN or, as the case may be, in the RIO furnished by him. 2. Every person who has been allotted PAN as on the 1st day of July, 2017 and who is eligible to obtain

Aadhar number, shall intimate his Aadhar number to such authority in such form and manner as may be prescribed, on or before a date of to be notified by the Central Government in the Official Gazette: Provided that in case of failure to intimate the Aadhar number, the PAN allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of PAN.

3. The provisions of this section shall not apply to such person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.




ASSESSMENT PROCEDURE

S N PARTICULARS EXPLANATION 1 Inquiry before

assessment a. If the assessee has not submitted a return of income within the time

allowed u/s 139(1), the Assessing Officer may -require him to submit a return. 142(1)

b. The Assessing Officer may ask assessee to produce such documents or accounts as he may require. 142(1) book of accounts can be asked for 3 yrs prior to relevant PY for which notice was served.

c. Assessing Officer may require the assessee to furnish in writing information in such form and on such points or matters as he may require.

d. For the purpose of obtaining full information in respect of the income (or loss) of any person, the AO may make such inquiry, as he considers necessary 142(2)

e. The AO may direct the assessee to get his accounts audited even the accounts of the assessee have already been audited. Audit report must be furnished within specified period not exceeding 180 days 9 [ SEC 142 (2A) TO (2D)]

Consequences of failure to get books of account audited : In case assessee fails to get books of account audited, it :- Will be liable to Best Judgement Assessment u/s. 144; and

Attracts penalty u/s. 271(1)(b) and prosecution u/s. 276D 2 Summary

Assessment [Sec.143 (1):

This is not a regular assessment.AO merely sends an intimation to the assessee when any tax or interest is found payable or refundable, on the basis of return filed, before the expiry of 1 year from the end of financial year in which return of income is filed.

3 Scrutiny Assessment u/s 143(3):

If AO considers it necessary or expedient to ensure that the assessee has not understated his income, declared excessive loss or under-paid the tax, he can make a scrutiny in this regard. AO shall serve a notice (before expiry of 6 months from the end of the financial year in which the return is furnished) requiring the assessee, on a particular date, to produce any evidence in support of the return. After collecting such information and evidence as he deems fit and on the basis of such information and evidence so collected, he shall pass an assessment order. Such order shall be treated




as regular assessment order. Assessment u/s 143(3) should be completed within 12 months from the end of the relevant assessment year.

4 Best Judgment Assessment [Sec.144]:

In the following situation, assessment shall be made by the Assessing Officer to the best of his judgment after considering all relevant materials, which he has gathered. a. If the person fails to file the return; or b. If the person fails to comply with the terms of notice u/s 142(1); or c. If the person fails to get his accounts audited u/s 142(2A); or d. if the person fails to comply with the notice u/s 143(2) requiring in

presence or production of evidence and documents. Best judgment assessment must be made before 12 months from the end of relevant assessment year.

5 Income Escaping Assessment [Sec. 147]:

The Assessing officer may assess or reassess an income, if he has reason to believe that such income through chargeable to tax has escaped assessment for any assessment year. AO shall serve a notice required assessee to furnish a return. Notice can be issued subject to the following time limit –

Income Escaped Time limit from the end of the relevant A.Y.

Any Amount Upto 4 years

Rs. 100000 or more Upto 6 years

Rs. 100000 or more and the income in relation to any asset (including financial interest in any entity) located outside India; chargeable to tax has escaped assessment.

Upto 16 years.

Assessment u/s 147 must be completed within 9 months from the end of the financial year in which notice was served.

SUMMARY OF ASSESSMENT PERIOD

Particulars Section Time limit

Intimation of summary assessment

143(1) Must be send within 1 year from the end of financial year in which return of income is filed.




Issuance of notice for scrutiny assessment

143(2) Must be served within 6 months from the end of the financial year in which return of income is filed.

Completion of Scrutiny assessment u/s. 143(3) Completion of Best Judgment assessment u/s 144.

153(1) Assessment must be completed within 18 months from the end of the relevant assessment year.

Issuance of notice for Income escaping assessment u/s. 147

149 Notice must be issued within 6 years (maximum) from the end of the relevant assessment year. [Further refer Sec. 149 for detail study].

Completion of Income escaping assessment u/s. 147

153(2) Assessment must be completed within 9 months from the end of the financial year in which notice for such assessment u/s. 148 was served.

RECTIFICATION OF MISTAKE [SEC. 154]

An income-tax authority, is empowered (suo moto or on application by assessee) to :-

a) Rectify any mistake apparent in an order passed by him; or b) Amend any intimation issued u/s. 143(1) or deemed intimation.

Tax Point: Such order of rectification must be passed in written: Within 4 years from the end of the financial year in which the order sought to be amended was passed. However, in respect of an application made by the assessee, the authority shall, within a period of 6 months from the end of the month in which the application is received by it, pass an order :-

a. Making the amendment, or b. Refusing to allow the claim.

OPPORTUNITY OF BEING HEARD [SEC. 154(3)]

If such rectification order is prejudicial to the assessee, an opportunity of being heard must be given to the assessee, before passing such order




INTEREST Interest u/s 234A, 234B and 234C

Points 234A 234B 234C Rounded off Previous Rs. 100 Previous Rs. 100 Previous Rs. 100 Rate of Interest 1% per month or part

thereof 1% per month or part thereof

1% per month or part thereof

Condition a. fails to furnish return b. furnishes it after the

due date specified u/s 139 (1)

e. advanced tax not paid at all

b. advanced tax paid less than 90% of assessed tax

a) Failure to pay the amount or lesser amount as required by the schedule.

Amount on which interest is to be calculated

Tax on Assessed income (-)TDS / TCS Advanced Tax (-) MAT

Tax on assessed income (-) TDS / TCS (-) Advanced Tax

Tax on Declared income (-) TDS / TCS (-) Advanced Tax

When period of default will begin?

after the last date of filing return

from the first day of assessment year

during previous year when required amount instalment is not paid

How to Calculate period of default?

a. If return is not filed - up to date of assessment

b. If return is filed after the due date - up to date of filing return

a) From the first day of assessment year till the date of assessment.

a) Period 3 months (1 month for last Instalment)

INTEREST FOR EXCESS REFUND GRANTED TO ASSESSEE SEC 234D Condition: Where any refund is granted to the assessee under section 143(1) and:

a. No refund is due on regular assessment; or b. The amount refunded exceeds the amount refundable on regular assessment;

Rate of interest: Simple interest @ ½ % for every month or part of the month. Amount on which interest is to be charged: On the whole or excess amount refunded. Period: From the date of grant of refund to the date of such regular assessment.




FEE FOR DIFFICULT IN FURNISHING RETURN OF INCOME 234F 1. Without prejudice to the provisions of this Act, where a person required to furnish a return of income

u/s 139, fails to do so within the time prescribed in section 139(1), he shall pay, by way of fee, a sum of, - a) Rs. 5,000/-, if the return is furnished on or before 31st December of the AY; b) Rs. 10,000/- in any other case

Provided that if the total income of the person does not exceed Rs. 5 lakh, the fee payable under this section shall not exceed Rs. 1,000/-.The provisions of this section applicable from AY 18 – 19




ALTERNATE MINIMUM TAX SEC 115JC 1. Applicability: The provisions shall be applicable to a person, other than a company, whose regular

income – tax payable for a previous year is less than the alternate minimum tax payable. 2. Adjusted total income to be deemed income: If regular income tax payable for a previous year is less

than the alternate minimum tax payable then the adjusted total income shall be deemed to be the total income of that person for such previous year and he shall be liable to pay tax on such income @ 18.5% of adjusted total income.

3. Meaning of Adjusted Total Income: Adjusted Total Income shall be the total income as increased by: a. Deductions claimed under sections 80IA to 80RRB (other than section 80P); b. Deduction under section 10AA; and c. Deduction claimed, if any, under section 35AD as reduced by the amount of depreciation allowable in

accordance with the provisions of section 32 as if no deduction under section 35AD was allowed in respect of the assets on which the deduction under that section is claimed. (Bold portion amended by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 i.e. AY 2015 – 16).

4. Provisions applicable when adjusted total income exceeds Rs.20 lakhs: The above provisions shall not apply to an individual or HUF or an AOP / BOI, whether incorporated or not, or an artificial juridical person, if the adjusted total income of such person does not exceed Rs.20 lakhs.

5. Report to be obtained from a Chartered Accountant: Every such person shall obtain a report, in prescribed form, from a chartered Accountant, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter and furnish such report on or before the due date of filing of return under section 139(1).

6. Tax credit for alternate minimum tax (Section 115JD): The credit for tax paid by a person under section 115JC shall be allowed in accordance with the provisions of this section as under:

a. Tax credit to be allowed = Alternate minimum tax paid – regular income tax payable. b. No interest shall be payable on tax credit so allowed. c. The tax credit so allowed shall be credited forward and set – off during 15 subsequent assessment

years. d. If the regular income tax exceeds the alternate minimum tax, the tax credit shall be allowed to be set

off to the extent of the excess of regular income tax over the alternate minimum tax and the balance of the tax credit, if any, shall be carried forward.

CHAPTER 15: COMPUTATION OF INCOME OF VARIOUS PERSON




INCOME OF CO-OPRATIVE SOCIETY

CONDITION EXPLAINATION Meaning Co-operative society means a co-operative society registered under the Co-

operative Societies Act, 1912 Meaning of Specified Activity facilities to its members,

a. Banking business or providing credit b. Cottage industry; c. Marketing of the agricultural produce grown by its members; or d. Purchase of agricultural implements, seeds, livestock or other articles intended

for agriculture for the purpose of supplying them to its members; or e. Processing, without the aid of power, of the agricultural produce of its

members; or f. Collective disposal of the labor of its members; or g. Fishing or allied activities like catching, curing, processing, preserving, storing

or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members.

h. Supplying milk, oilseeds, fruits or vegetables raised or grown by its members to (only in the case of a primary society) :

Deduction u/s. 80P in respect of co-operative societies

Applicable to A co-operative society.

Quantum of Deduction Income derived from

Deduction

Specified Activities 100% of income from such activities Activity other than specified activities

Assessee is a consumers' co-operative society Rs. 100000 In any other case Rs. 50000

Following income of any co-operative society is also exempt: 1) Interest or dividends from its investments with any other co-operative society. 2) Letting of godowns or warehouses for storage, processing of facilitating the marketing of commodities;

and 3) Interest on securities or any income from house property, provided certain conditions are satisfied.




ASSESSMENT OF AOP/BOI In case of AOP/BOI income will be determined as under 1. If any salary, bonus, commission or remuneration is paid by AOP/BOI to its members, it will not be

deductible. [Sec 40(ba)] 2. Similarly any interest paid by AOP/BOI to its members on loan, capital or borrowings by whatever

name called is not deductible. [Sec 40 (ba)] 3. When interest is paid by the AOP/BOI to any of its member who has paid interest to the AOP/BOI,

the amount of interest to be disallowed shall be limited to the amount by which the payment of interest by AOP/BOI to the member exceeds the payment of interest by the member to the AOP/BOI.

PUTATION OF TAX OF AOP/BOI

AOP/BOI

When none of the members is a foreign company

When one or more partners is a foreign company

Tax incidence on AOP/BOI

Tax incidence on members

Tax incidence on AOP/BOI

Tax incidence on members

A) When shares of members are determinates A1) When none of the members has income exceeding the maximum amt. chargeable to tax

Income is taxable as If AOP/BOI is an individual and if AOP/

Share of members shall be included in taxable income of members the company BOI has paid tax then the members can claim rebate under section 86.

Share of foreign company shall be taxable at the rate applicable to (40%) and the remaining income is taxable at the maximum marginal rate (30%)

Share of member is not taxable.

A2) When one or more members has income exceeding the maximum amount chargeable to tax

Income will be taxed at the maximum marginal rate. (30%)

Share of member is not taxable.

As given above As given above




B)When shares of members are indeterminate

As given above (30%)

As given above At the rate applicable to the foreign company

As given above




ASSESSMENT OF NON RESIDENT Meaning of Non-Resident

Under Income Tax Act, non-resident in India can be of two types:- A. Non-resident Indian 1. The definition of this term is given under section 115C (Chapter XII-A) which deals with special

provisions relating to certain income of non-resident Indians. 2. According to section 115C (e), non-resident Indian means an individual, being a citizen of India or a

person of Indian origin who is not a resident. 3. A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-

parents, was born in undivided India; 4. Non-resident Indians can only be individuals. B. Any other non-resident person i.e. Foreign Nationals (other than individuals of Indian origin) or

foreign companies or Overseas financial organizations (Offshore funds) or foreign institutional investors, etc. Therefore, in the following discussion wherever the term non-resident in India is used, it includes persons covered in category (a) and (b) above. On the other hand where the term non-resident Indian is used, it refers to individuals only of category (a) mentioned above.

TAXATION OF NON-RESIDENT

Particulars All Non-Residents including foreign Co.

Overseas financial

organs/ i.e. offshore funds

All Non-Residents including

foreign Co.

Resident Individual

employee of Indian Co.

Foreign Institutio

nal Investors

Section 115A(1)(a) 115AB 115AC 115ACA 115AD Investment made in Foreign Currency

Mandatory Mandatory Mandatory Mandatory Mandatory

Source of Income

1. Dividends other than dividends u/s 115-0)

2. Interest from Govt, of Indian Concern or on

Income received, and LTCG from transfer of,

1. Interest on – (a) bonds of Indian

Dividends (other dividends u/s 115-0) & LTCG on transfer of GDRs

1. Income (other than Dividen




Foreign Currency Loan (Exempt Point 3, 4 below).

3. Interest from infrastructure Debt Fund u/s 10(17).

4. Interest referred u/s 194LC/194LD/194LBA(2)

5. Income from units of Mutual Funds u/s 10(23D) or UTI

Units of UTI / Mutual Funds

Company issued abroad, or (b) Bonds of PSU sold by Govt. or (c) GDRs

2. Dividends (other than dividends u/s 115-0)

3. LTCG on transfer of above

(allotted under Govt approved ESOP Scheme) (See Notes 8 & 9)

ds u/s 115-0) from Securities (other than units mentioned u/s 115AB)

2. STCG/LTCG from above Securities

Tax Rate (Surcharge as applicable, EC and SHEC)

1. Point 1, 2 and 5 above at 20%

2. Point 3 and 4 above at 5%

On Income at 10%

On Income at 10%

On dividends at 10%

On Income at 20% (5% for 194LD Income)

STCG N.A STCG N.A STCG N.A STCG N.A STCG 30% (15% for STT)

LTCG N.A. LTCG at 10%

LTCG at 10% LTCG at 10% LTCG at 10%

Filling of Return Income

Exempt of total income consists of above income only provided TDS is made and no other income. Otherwise mandatory

Mandatory

Exempt if Total Income consists of Interest & dividend provided TDS is made and

Mandatory

Mandatory




no other income. Otherwise mandatory

TDS Section

195 196B 196C - 196D

Notes: 1. No deduction / expenditure shall be allowed u/s 28 to 44C or Sec. 57 in computing the above Incomes. 2. Indexation Benefit for LTCG (Second proviso to Sec. 48) is not available. 3. Benefit of Conversion to Foreign Currency (First Proviso to Sec. 48) is not available. 4. Benefit of Set Off and Carry Forward of Loss is available (Subject to Chapter VI). 5. Benefit of DTAA can be availed by the above Persons. 6. Deduction under chapter VI-A are not allowed against the above the above Incomes. If there is any

other income, deductions are available against such other income. (a) Basic Exemption Limit is not available for the above Income.

ASSESSMENT OF COMPANIES

MAT CREDIT (SEC 115JAA)

When the amount tax on book profit is more than tax payable under normal provisions of the act, the excess paid shall be allowed to be carried forward for 15 assessment year. The set off is available only if tax payable under normal provision is more than MAT.

MAT credit = Tax paid under Sec 115JB minus tax payable on the total income under normal provision of the act.

MAT Rate : 15% plus SC and CESS




Appeal is not a natural right of assessee. Each and every order of AO cannot be appealed.

Following 7 matters cannot be appealed against: 1) An order levying interest u/s 234A, 234B, 234C. 2) A re visionary order passed u/s 264 by CIT 3) An order u/s 264 by CIT rejecting the application for revision u/s 263. 4) An order of Settlement Commission. 5) An order of Advance Ruling Authority 6) An order passed by ITAT involving matter of Fact. 7) An order of CIT u/s 273A(1) or 273A(4) (Power to waive penalty) Hierarchy of Appellate authorities in Income Tax Act

Appeal Appellant Appellate Authorities Against the order of Final

Appeal Assessee

Or, The commissioner of

Income Tax

Supreme Court High Court

3rd Appeal High Court ITAT (the case must involve substantial question of law)

2nd Appeal Income Tax Appellate Tribunal (ITAT)

Commissioner (Appeals)

1st Appeal Assessee only. Commissioner of Income Tax (Appeals)

Assessing officer

S N Particulars Explanations 1 First Appeal

– Commissioner Appeal Sec 246

Who can apply? Only Assessee Time Limit to file application Sec 249(2) The appeal should be filed within a period of 30 days of ;- The date of service of notice of demand relating to assessment or penalty if the appeal relates to assessment or penalty ; or The date of which intimation of the order sought to be appealed against is served it relates to any other cases.

CHAPTER 16: APPEAL, REVISION, PENALTIES AND PROSECUTION




From no: 35 Document to be submitted Appeal in duplicate memorandum of appeal statement of facts The grounds of appeal Notice of Demand in original In case appeal against penalty the Assessment order also. Fees for Appeal Assessed income less than 1,00,000 – Rs 250 Assessed income more than 1,00,000 but less than 2,00,000 – Rs 500 Assessed income less than 2,00,000 – Rs 1,000 Appeal in any other case – Rs 250 Procedure in hearing of Appeal Sec 250: a) The following persons shall have a right of being heard at the hearing of

the appeal : 1) The appellant either in person or through authorized representative 2) The Assessing Officer either in person or through a representative b) B) The order of the appellate authority disposing off the appeal shall be in

writing and shall state the points for determination the decisions thereon and the reason for the decision.

c) The order passed by the Commissioner (Appeals) shall be communicated to the assessee and to the Commissioner of income tax

Time limit For disposal of appeal If possible, within 1 year from the end of the financial year in which such appeal was filed

Power of Commissioner Appeal Sec 251 a) In an appeal against an order of assessment he may confirm reduce enhance

or annual the assessment or b) In an appeal against an order imposing a penalty he may confirm or cancel

such order or very it so as either to enhance or to reduce the penalty c) In any other case – he may pass such orders in the appeal as he thinks

fit




2 Second Appeal – Income Tax Appellate Tribunal (ITAT) Sec 252

Who can apply? Assessee or Department Time Limit to file application Sec 253 (3) The appeal to the Appellate Tribunal shall be filed within 60 days of the date on which the order sought to be appealed against. It communicated to the assessee or to the CIT, as the case may be. Time Limit to file cross objection (4) 30 days from the date of receiving notice. Delay is above period may be permitted by ITAT. From no : 36 and 36A from cross objection Fees Payable by Assessee for Appeal Assessed income less than 1,00,000 – Rs 500 Assessed income more than 1,00,000 but less than 2,00,000 – Rs 1000 Assessed income less than 2,00,000 – 1 % of the assessed income (subject

to a maximum of Rs. 10,000) Appeal in any other case – Rs 500 No Fees payable when 1. The appeal is filed by the Commissioner or 2. Where the memorandum of cross objections is filed either by the assessee

or the department [section 253(6)] Time limit For disposal of appeal Sec 254 In every appeal, the Appellate Tribunal, where it is possible, may hear and decide every such appeal within a period of 4 years from the end of the financial year in which such appeal is filed. Rectification of Order Within 4 years from the date of order Any application filed by the assessee for rectification shall be accompanied

by a fee of Rs.50. Copy of order The appellate tribunal shall send a copy of any orders passed to the assessee and the Principal Commissioner or Commissioner. Note: ITAT can be challenged only when case involves a question law and not fact.




3 Appeal to High Court: Sec 260A

Time limit for appeal for assessee or department The CCIT / CIT / assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal shall be – Filed within 120 days from the date on which the order appealed against

is received by the person filing the appeal; Other procedure As per code of civil procedure 1908

4 Appeal to Supreme Court Sec 261 & 262

An appeal shall lie to the Supreme Court against any order of the High Court made in respect of an appeal filed under section 260A provided the case is certified by the High Court to be a fit one for appeal to the Supreme Court. Time limit for appeal for assessee or department 90 days from the date of receiving order of high court Other procedure As per code of civil procedure 1908

REVISION BY PRINCIPAL COMMISSIONER OR COMMISSIONER (SEC 263 AND 264)

SR Particulars Explanations 1 Revision of

orders prejudicial to revenue (Section 263):

When revision can be done? any order passed therein by the Assessing Officer is erroneous so far that is prejudicial to the interests of the revenue, (a) The order the passed without making inquiries or verification which should

have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) the order has not been passed in accordance with any order, direction or

instruction issued by the board u/s 119; or (d) The order has not been passed in accordance with any decision which is

prejudicial to the assessee, rendered by the jurisdictional High Court or supreme court in the case of the assessee an any other person.

He may, after giving the assessee an opportunity of being heard and after making the necessary inquiry, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.




Time – limit for passing of order: The order for revision should be passed within 2 years from the end of the financial year in which the order sought to be revised was passed. Appeal can be filed to tribunal: An appeal against the revision order so passed by the Principal Commissioner or Commissioner can be filed before the Appellate Tribunal.

2 Revision order to be passed either on own motion or on application of assessee Sec 264:

When Revision can be done? a) In the case of any order, other than an order to which section 263

applies, passed by an authority subordinate to him, the Principal Commissioner or Commissioner:

b) Either of his own motion or on an application by the assessee for revision, c) Call for the record of any proceeding in which any such order has been

passed, and d) May make necessary inquiry and may pass such order thereon, not being

an order prejudicial to the assessee. Time limit for filing of application: The application must be made by the assessee within 1 year from the date on which the order in question was communicated to him or the date, on which he came to know of it, whichever is earlier. ( fee Rs 500) Time limit for passing of revision order: In case of suo moto within 1 year from the date of order In case of application by assessee within 1 year from the end of FY in which application received. Case where revision cannot be done? a) Where an appeal against the order lies to the Commissioner (Appeals) or

Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired and the assessee has not waived his right of appeal; or

b) Where the order has been made the subject of an appeal to the Commissioner (Appeals) or Appellate Tribunal.

No appeal but writ petition can be filed: No appeal can be filed against such order. However, such order can be challenged before the High court by a writ petition and before the Supreme Court by a special Court by a special leave petition.




PENALTIES Section Nature of default Quantum of Penalty 221(1) When assessee is in default or is deemed to be

in default in making a payment of tax. Such amount as the Assessing Officer may direct but not exceeding amount of tax in arrears.

271(1)(b) Failure to comply with notice issued under section 142(1) / 143(2) or with a direction issued under section 142(2A).

Rs.10,000 for each failure (See note).

271(1)(c) Concealment of particulars of income or furnishing inaccurate particulars of income.

100% to 300% of tax sought to be evaded.

271A Failure to keep, maintain or retain books of accounts or documents, etc. as required by section 44AA or the rules made there under.

Rs.25,000

271AA In respect of an international transaction or specified domestic transaction: a) Failure to keep and maintain any

information and document as required by section 92D(1) or 92D(2), or

b) Failure to report such transaction as he is required to do so, or

c) Maintains or furnishes an incorrect information and document.

2% of value of each international transaction or specified domestic transaction entered into by such person.

271AAA Penalty on undisclosed income in case where search has been initiated on or before 30.6.2012

10% of undisclosed income

271AAB Penalty on undisclosed income in case where search has been initiated on or before 1.7.2012.

a. 10% or b. 20% or c. 30% to 90% of undisclosed income

of specified previous year, as the case may be.

271B Failure to get accounts audited in respect of any previous year(s) relevant to an assessment year or furnish a report of such audit as required under section 44AB.

a. 0.5% of the total sales, turnover or gross receipts of the business or profession; or

b. Rs.1,50,000,




Whichever is less. (see note) 271BA Failure to furnish report under section 92E. Rs.1,00,000 (see note) 271C Failure to:

a. Deduct the whole or any part of TDS under Chapter XVII – B, or

b. Pay the whole or any part of the tax as required under section 115 – O(2) or second proviso to section 194B.

Amount of tax which such person failed to deduct or pay (see note).

271CA Failure to collect tax at source. Amount of tax which such person failed to collect

271D Loan or deposit taken or accepted in contravention of the provisions of section 269SS.

Amount of the loan or deposit so taken or accepted

271DA ( F. Act 2017)

Receiving an amount of Rs 2 lakh or more otherwise than account payee cheque/draft/use of electronic clearing system through a bank account in contravention of provision of Sec 269ST

100 % of Receipt of such amount

271E Loan or deposit referred to in section 269T repaid otherwise than in accordance with the provisions of that section.

Amount of the loan or deposit so repaid

271F Failure to furnish a return of income as required under section 139(1) or by the proviso to that section before the end of the relevant assessment year.

Rs. 5,000

271FA Failure to furnish statement of financial transaction or reportable account within the prescribed time under section 285BA. (Bold portion as amended by Finance (no. 2) Act, 2014 w.e.f. 1.4.2015)

Rs.100 for every day during which the failure continues. Rs.500 for every day for which default continues, starting from the day immediately following the day on which the time specified in notice under section 285BA(5) for furnishing the statement expires till the date of furnishing of statement. (bold portion




as amended by Finance (no. 2) Act, 2014 w.e.f. 1.4.2015) (see note)

271FAB Penalty for failure to furnish statement or information or document by an eligible investment fund

Rs 5,00,000 (Finance Act 15)

271G Failure to furnish any information or document under section 92D(3).

The Assessing Officer or the Transfer Pricing Officer as referred to in section 92 CA or the Commissioner (Appeals) may direct a penalty equal to 2% of the value of international transaction or specified domestic transaction for each failure.

271GA Penalty for failure to furnish information or document under section 285A (Indian concern fails to furnish any information or document which is required to be furnished under section 285A) (Finance Act 2015)

a. A sum equal to 2%of the value of transaction in respect of which such failure has taken place in a case where such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern

b. A sum of Rs 5,00,000 in any other case

271H Failure to furnish submit quarterly TDS/TCS returns

Rs 1,00,000

271-I Penalty for failure to furnish information inaccurate information under section 195 If a person who is required to furnish information under section 195(6) fails to furnish information

AO may direct that such person shall pay by way of penalty a sum of Rs 1,00,000 (Finance Act 15)

272A(1) 1) Refusal to answer any question put to a person legally bound to state the truth of any matter touching the subject of his

Rs. 10,000 for each such failure or default.




assessment, by an Income Tax Authority in exercise of its powers under this Act, or

2) Refusal to sign any statement made by a person in the course of any proceedings under this Act, which an Income Tax authority may legally require him to sign; or

3) Omission to attend to give evidence or produce books of account or other documents at a certain place or time as required by the summons issued under section 131(1) (see note)

272B Failure to comply with the provisions of section 139A.

Rs.10,000

272BB Failure to comply with the provisions of section 203A.

Rs.10,000

271DA [FA 17]

No person should receive an amount of Rs 2 lakh or more otherwise than by way of account payee cheque or ECS (aggregate amount or in a day)

Penalty equal to amount of receipt

271J [FA 17]

Penalty for incorrect information in statutory report by accountant/ banker/valuer

Rs 10,000 for each such report

KE

Y NO

TE

Penalty not to be imposed in certain cases (section 273B): No penalty shall be impossible on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure.




PROSECUTION REMOVEL, CONCEALMENT, TRANSFER OR DELIVERY OF PROPERTY TO THWART TAX RECOVERY (SECTION 276) a. Type of offence: Fraudulent removal, concealment, transfer or delivery to any person, any property or

any interest therein, intending thereby to prevent that property or interest therein from being taken in execution of a certificate under the provisions of the Second Schedule.

b. Imprisonment and Fine: Rigorous imprisonment for a term which may extend to 2 years and with fine.

WILLFUL ATTEMPT TO EVADE TAX, ETC. (SECTION 276C(1)) a. Type of offence: Willful attempt to evade any tax, penalty or interest chargeable or imposable under

this Act. b. Imprisonment and Fine:

1) Where the amount sought to be evaded exceeds Rs.25,00,000: Rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine.

2) In any other case: Rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.

Explanation: A wilful attempt to evade any tax, penalty or interest chargeable or impassable under this Act or the payment thereof shall include a case where any person: 3) Has in his possession or control any books of account or other documents (being books of account

or other documents relevant to any proceeding under this Act) containing a false entry or statement; or

4) Makes or causes to be made any false entry or statement in such books of account or other documents; or

5) Wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or

6) Causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.

WILFUL ATTEMPT TO EVADE PAYMENT OF TAX (SECTION 276C(2))

a. Type of offence: Wilful attempt to evade the payment of any tax, penalty or interest under this Act. b. Imprisonment and Fine: Rigorous imprisonment for a term which shall not be less than 3 months

but which may extend to 2 years and shall, in the discretion of the court, also be liable to fine. Explanation: Same as discussed above in section 276C(1).




FALSE STATEMENT IN VERIFICATION, ETC. (Section 277) a. Type of offence: If a person makes a statement in any verification under this Act or under any rule

made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true.

b. Imprisonment and Fine: 7) Where the amount of tax, which would have been evaded if the statement or account had been

accepted as true, Rs.25,00,000 – Rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine;

8) In any other case: Rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.

FALSIFICATION OF BOOKS OF ACCOUNT OR DOCUMENT, ETC. (Section 277A) a. Type of offence: If any person wilfully and with intent to enable any other person to evade any tax

or interest or penalty chargeable and imposable under this Act, makes or causes to be made any entry or statement which is false and which the first person either knows to be false or does not believe to be true, in any books of account or other document relevant to or useful in any proceedings against the first person or the second person, under this Act.

b. Imprisonment and Fine: The first person shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.

Explanation: For the purposes of establishing the charge under this section, it shall not be necessary to prove that the second person has actually evaded any tax, penalty or interest chargeable or imposable under this Act. ABATMENT OF FALSE RETURN, ETC. (Section 278) a. Type of offence: If a person abets or induces in any manner another person to make and deliver an

account or a statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true or to commit an offence under section 276C(1).

b. Imprisonment and fine: 9) Where the amount of tax, penalty or interest which would have been evaded, if the declaration,

account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds Rs.25,00,000




- Rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine;

10) In any other case – Rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 2 years and with fine.

PUNISHMENT FOR SECOND AND SUBSEQUENT offences (Section 278A) a. Type of offence: If any person convicted of an offence under section 276B or 276C(1) or 276CC or

276E or 277 or 278 is again convicted of an offence under any of the aforesaid provisions, he shall be punishable for the second and for every subsequent offence.

b. Imprisonment and fine: Rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine.

KEY

NOT

E

Directorate of Income tax (Criminal Investigation) – DCI (w.e.f. 30.5.2011): The President of India has granted its approval to create DCI as a subordinate office to CBDT, which will perform functions in respect of criminal matters having any financial implication punishable as an offence under Income Tax or Wealth – tax.




SECTION EXPLAINATION Sec 156 Section 156 lays down that the Assessing Officer shall serve upon the assessee a

notice of demand in Form No. 7, when any tax interest or penalty, fine or other sum is payable inconsequence of any order passed under the Act.

Sec 220(1) This section deals with time limit for payment of tax 30 day from the date of service of notice

Sec 220(2) Interest for delay 1% per month after 30 days. Sec 220(3) Extension in payment of tax is given Sec 220(4) If demand not paid then assessee is treated as Assessee in default. Section 221 1) Penalty for non- payment of tax as AO may direct.

2) Penalty cannot be more than amount of tax in arrears. 3) Opportunity of heard must be given to assessee.

Sec 226: Mode of Recovery

1) Deduction from salaries [Section 226(2)]: 2) Attachment of deposit [Section 226(3)]: 3) Money in court custody [Section 226(4)]: 4) Distrait and Sale of movable property [Section 226(5)]: 5) Recovery against the assesses property in foreign country [Section 228A]

CHAPTER 17: COLLECTION & RECOVERY OF TAX




REFUND

Person eligible to claim refund:

Following persons can claim refund –

Sec. 137 A person who has paid tax in excess of the amount for which he is chargeable under this Act.

Sec. 138(1)

In case income of a person is clubbed in the hands of the other person, then the letter can claim refund for tax paid for tax paid on such clubbed income.

Sec. 238(2)

In case an assessee is unable to claim or receive any refund due to him on account of death, incapacity, insolvency, liquidation or any other cause, then his legal representative, trustee, guardian or receiver, as the case may be, can claim and receive such refund for the refund for the benefit of such person or his estate.

Form and Time Limit for claiming refund

A claim for refund should be made in Form 30 & from 1-9-19 along with return of income under section 139

[Sec. 239] Refund shall be claimed within 1 year from the end of relevant assessment year

2) Interest payable to Assessee Sec 244A Rate of interest: Simple interest @ ½ % per month or part thereof. Period for calculation of interest:

Interest if return is timely filed: Section 244A inter alia provides that an assessee as entitled to interest on refund arising out of excess payment of advance tax, tax deducted or collected at source from the 1st April of the assessment year and till the date on which refund is granted.

Interest if return is timely not filed: In case where the return is filed after the due date, the period for grant of interest on refund shall being from the date of filing of return.

Interest on refund of self-assessment tax: In the interest of fairness and equity, it is further purposed to provide that an assessee shall be eligible to interest on refund of self-assessment tax for

CHAPTER 18: REFUND




the period beginning from the date of payment of tax or filing of return, whichever is later, to the date on which the refund is granted. For the purpose of determining the order of adjustment of payments received against the taxes due, the prepaid taxes i.e. the TDS, TCS and advance tax shall be adjusted first. Refund arises out of appeal: It is also provided that where a refund arises out of appeal effect being delayed beyond the time prescribed u/s 153(5), the assesse shall be entitled to receive, in addition to the interest payable u/s 224A(1), an additional interest on such refund amount calculated at the rate of 3% per annum, for the period beginning from the date following the date of expiry of the time allowed u/s 153(5) to the date on which the refund is granted. Note: In case where extension is granted by the Principal Commissioner or Commissioner by invoking proviso to section 153(5), the period of additional interest, if any, shall being from the expiry of such extended period. Key notes:

Interest on refund due to TDS or TCS shall be allowed, provided the amount of refund is not less than 10% of the tax liability as determined u/s 143(1) or regular assessment

Tax liability of refund Refund of tax : Not Taxable Interest on delayed refund : Taxable as IFOS


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