CA Inter Short Notes 2019 20 PDF

Assessment Year 2019-20
Revision Notes
1 CA Shashank S. Sharma
1. INTRODUCTION TO INCOME TAX
TYPES OF TAXES
Direct Taxes Indirect Taxes
Income Tax Goods & service Tax
WHAT IS INCOME TAX? - Tax on income
COMPONENTS:
(a) The Income Tax Act, 1961.

(b) The Income Tax Rules, 1962.
(c) Notifications / Circulars — C.G. CBDT.
(d) Judgments.
(e) Annual Finance Acts.
CHARGING SECTION (SEC 4): Every person whose total income of the previous year,
exceeds the maximum income not chargeable to tax is an assessee and chargeable to income
tax at the rates prescribed in the finance Act for the relevant assessment year.
PERSON - SEC. 2(31) ASSESSEE-SEC. 2(7)

Person includes - “Assessee means any person by whom any
a) Individuals – natural born persons. tax or any other sum of money is
(Male/Female/Major/Minor/Lunatic) payable under this Act and includes;
b) Companies - Indian and Foreign a. Every person in respect of whom any
companies (artificial person). proceedings under this Act has been
c) Partnership firm including LLP (only for taken;
income tax separate legal entity).  For the assessment of his income or
d) Hindu undivided family (HUF), (including of the income of any other person in
Jain & Sikh families). respect of which he is assessable or;
e) AOP / BOI.  To determine the loss sustained by
f) Local authorities. him or by such other person or;
g) Any other artificial juridical persons.  The amount of refund due to him or
to such other person.
b. Every person who is deemed to be an
assessee under any provision of this Act.
c. Assessee in Default: Every person who is
deemed to be an assessee in default
under any provision of this Act.
TOTAL INCOME: The aggregate of the following 5 heads of income
PARTICULARS ₹
Income fromSalaries (Sec. 15 to Sec.17) XXX
Income fromHP (Sec. 22 to 27) XXX
Income fromPGBP (Sec. 28 to 44DB) XXX
Income fromCG's (Sec. 45 to 55A) XXX
Income fromOther Sources (Sec. 56 to 59) XXX
Total of Five heads XXX
Less/Add: Clubbing provisions (Sec. 60-65) XXX
Deemed income (Sec. 66-69D) XXX
Set off & c/f of losses (Sec.70-79)
XXX
Gross total income XXX
Less: Chapter VIA deductions (Sec. 80A to 80U) XXX
Taxable income/ Net total income XXX
FY PY AY
As per Income Tax Act The financial year in The financial year in which
Financial year means: which you earn the you pay the tax is called
F.Y commences on 1st day of income is called assessment year.
April and ends with last day of previous year. Current assessment
March and it consists 12 Current previous year: 2019-20.
months. year: 2018-19.
Is a common name for both
Previous year and Assessment
year.
General rule: income earned in the P.Y is taxable in the next F.Y.
Exceptions: But in the following cases income of the P.Y taxable in the P.Y itself
instead of A.Y.
Non- Resident shipping business (Sec. 172):
Assessment of persons leaving India (Sec. 174):
Association of person /Body of Individuals or artificial judicial person formed for a particular
event or purpose (Sec, 174A):
Assessment of person trying to transfer assets with a view to avoid tax (Sec. 175):
Discontinued business (Sec. 176).
INCOME TAX RATES APPLICABLE FOR THE A.Y. 2019-20

A. Individual / Hindu Undivided Family/ AOP /BOI
TAXABLE INCOME RESIDENT MALE / RESIDENT RESIDENT VERY
(₹) FEMALE SENIOR CITIZEN SR. CITIZEN  80
<60 YRS.  60 & <80 YRS. YRS.
UP TO 2,50,000 Nil Nil Nil
250,001 to 3,00000 5% Nil Nil
3,00,001 to 5,00,000 5% 5% Nil
5,00,001 to 10,00,000 20% 20% 20%
Above 10,00,000 30% 30% 30%
Note: All HUF/ AOP/ BOI/ non-resident individuals are covered in first category (No Age
Limit).
Rebate u/s 87A is applicable for a resident individual whose total income
does not exceed Rs. 3,50,000 Rebate = ₹2,500 or 100% of tax payable,
whichever is lower.
Health & Education Cess: 4% cess on (tax + surcharge) in all cases.
B. Firm / LLP / Local Authority / Company (Domestic or Foreign)
The rate of tax for AY 2019-20 is
 Firm / LLP / Local Authority / Domestic Company 30%
Note: If domestic Co, having turnover, or gross receipts in the P.Y. 2015-16 ≤ 250
crore: 25% of the total income.
In other case: 30% of the total income
Foreign Company @ 40%
C. SPECIAL TAX RATES:

i) Sec.112 (LTCG) - 20% flat rate. ii) Sec. 115BB (Lottery) - 30% flat rate.
iv) Sec. 68 to 69D (Deemed income) - 60%
iii) Sec. 111A (STCG) - 15% fat rate.
flat rate.
Note: In all the above cases, rates are same for all the Assesses.
SURCHARGE: It is a tax on tax.

Applicable Surcharge
Assessee TI > ₹50 lakh TI > ₹1 Cr, but
TI > ₹10 Cr
TI ≤ ₹1 Cr TI ≤ ₹10 Cr
1. Individual/HUF/AOP/BOI/AJP 10% 15% 15%
2. Other (i.e., firms / LLP, local - 12% 12%
Authorities, Co-operative
Societies
3. Domestic Companies - 7% 12%
4. Foreign Companies - 2% 5%
CESS: Health and Education Cess is 4% on (Tax + Surcharge).
Computation of Marginal Relief:
Marginal Relief = (Additional Tax – Additional Income)
Tax payable = Tax on total income including surcharges
Less: marginal Relief as computed above
ROUNDING OFF OF INCOME – SEC 288A: The total income, shall be rounded off to the
nearest multiple of ten rupees.
ROUNDING OFF OF TAX – SEC 288B: It may be noted that, the aggregate of tax,
surcharge and education cess payable shall be rounded off to nearest multiples of ten
rupees.
AGRICULTURE INCOME
POINTS TO BE REMEMBERED
Agriculture Income [Sec. 2(1A)]:
 Rent or Revenue derived from Agricultural Land in India.
 Income derived from Agricultural Land through Agriculture (Basic/Subsequent Operation)
 Income derived by sale of agricultural produce, or by the process ordinarily employed to
render the produce fit for the market and sale, by a Cultivator or Receiver of rent in kind.
 Income from sapling or seedlings grown in nursery.
 Income from a Farm House (Conditions:
- Situated on or Vicinity - Used as dwelling house or out house or store room
- No business or other use - Assessed to Land Revenue if in urban area)
Tax Computation Steps: (Aggregation only if AI > ₹ 5000 & TI > BEL)
Step Description
1 Compute Agricultural Income + Total Income
2 Compute Tax on Step 1
Compute Agricultural Income + Maximum Amount not chargeable to tax (Basic
3
Exemption)
4 Rebate for Agricultural Income = Tax on Step 3
5 Compute Net Tax Payable (Step 2 - Step 4)
6 Compute Education Cess at 2% on Total Tax Payable as per Step 5
7 Compute Secondary and Higher Education Cess (SHEC) at 1% on Total Tax Payable
as per Step 5
8 Compute Net Tax Payable (Step 5 + Step 6 + Step 7)
Growing and Manufacturing or Rubber/Coffee/Tea: Computation of Agricultural and
Non- Agricultural Income is done on the basis of percentage of profits of business:
Rule Description Agricultural Income Business Income
Income from growing and
7A 65% of Profits 35% of Profits
manufacture of Rubber
Income from grown and cured
7B 75% of Profits 25% of Profits
Coffee
Income from grown and cured,
7B 60% of Profits 40% of Profits
roasted and grounded Coffee
Income from growing and
8 60% of Profits 40% of Profits
manufacture of Tea
Rule 7: Actual segregation in of composite income in cases other than mentioned above.
Definition of Urban Area:

 Area having population  10,000
 Area Prescribed Distance Population of Municipality or Cantonment
within > 10,000 but  1,00,000
2 Kms
6 Kms > 1,00,000 but  10,00,000
8 Kms > 10,00,000
2. RESIDENTIAL STATUS
DETERMINATION OF RESIDENTIAL STATUS FOR INDIVIDUALS – SEC. 6
He is in India in the PY for  182 days (B1) Resident for at least 2 out of 10 years
Or preceding the PY (A1)
He is in India in the P.Y. for  60 days &  365 And
days during 4 years preceding the PY (B2) He has been in India for > = 730 days during
7 years preceding the PY. (A2)
Explanations/Exceptions:
a) For an Indian citizen leaving India during the P.Y. for the purpose of employment (or)
b) For an Indian citizen leaving India during the P.Y. as a crew of an Indian ship.
c) For an Indian citizen, or a person of Indian origin who comes to India on a visit.
In all the above cases, apply only 1st basic condition "B1".
Points to be noted:
1. For counting no. of days, both day of entry and departure is taken (hourly, if near-about),
2. The stay need not be continuous, and also place and purpose of stay is immaterial
The tables given below summarize the rule of residence for the assessment year
2018-19:
Resident and ordinarily Resident but not ordinarily Non-Resident

resident resident (3)
(1) (2)
Must satisfy at least one of Must satisfy at least one of the Must satisfy none of the
the basic conditions and both basic conditions and one or none basic conditions.
of the additional conditions, of the additional conditions.
Decision criteria:
If Y If Y
B1 (Or) B2 Resident A1 (And) A2 ROR
Satisfied Satisfied
N
N
R but NOR
NR
Determination of Residential Status of Crew Member of a ship: In case of an
individual, being a 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 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 Date entered into Continuous Discharge
Discharge Certificate in respect of joining Certificate in respect of the signing off by
the ship by the said individual for the that individual from the ship in respect of
eligible voyage such voyage
RESIDENTIAL STATUS OF OTHER PERSONS

Other
Status HUF Company AOP / Firm
Person
i) Indian company is
Control & magt. of its
always resident. Same as in Same as in
Resident affairs is wholly / partly
ii) Other companies- if HUF HUF
in India.
POEM in India.
If the karta satisfies If it is a `R' it will become Same as in Same as in
ROR both the additional ROR Co. Co.
conditions
R but If the karta does not
NOR satisfy any of the --x-- --x-- --x--
additional conditions.
If the C & M is wholly Other companies- if POEM Same as in Same as in
NR
outside India. is outside India HUF HUF
Note: Place of Effective Management (POEM): It means a place where key management
and commercial decision that are necessary for the conduct of the business of an Entity as a
whole are, in substance made.
SCOPE OF TOTAL INCOME - SEC. 5

The scope of total income of a person depends upon the residential status of that person for
the relevant assessment year.
Particulars R & OR R & NOR NR
1. Income Received/deemed to be received in India T T T
2. Income Accruing/deemed to accrue in India T T T
3. Income Accruing or arising outside India from
a. Business controlled from / or profession setup in India T T NT
b. Any other source T NT NT
INCOME DEEMED TO ACCRUE OR ARISE IN INDIA SEC. 9
Following are such incomes:
1) Any Income through or from any business connection in India.
Exceptions:
1. Only that part corresponding to operations carried out in India shall be deemed.
2. Not deemed as income in case of NR:
 Purchase of goods for the purpose of export.
 Running news agency and activity confined to collection of news and views in
India for transmission out of India.
 Shooting of Cinematograph film in India. Provided, if Individual, he should not be
citizen, if Firm/Company, no partner/member shall be citizen or resident.
 Diamond mining business displaying uncut and unassorted diamonds in special zone.
2) Any Income through or from any property, any asset or source of income in India.
3) Income through the transfer of a capital asset situated in India.
4) Income chargeable under the head "Salaries" if such income is payable for
i) Service rendered in India &
ii) The rest period or leave period which is preceded and succeeded by services rendered
in India and forms part of the service contract of employment.
5) Salary paid by the Government to a citizen of India for services outside India. However
allowances and perquisites paid outside India by the Government is exempt U/s. 10(7).
6) Dividend paid by an Indian Company outside India. [Though exempted U/s. 10(34)]
7) Interest, Royalty and fees for technical services as indicated below:
Payable by 
Government Resident Non Resident
Nature of Income
Interest on money Deemed to Deemed to accrue or Deemed to accrue or
borrowed accrue or arise arise in India except arise in India only
in India when used for a when used for the
business / profession purposes of business
carried on outside India or profession carried
or for any source of on in India.
income outside India.
Royalty in respect -Do- or for any source
of any rights etc. -Do- -Do- of income in India
Fees for technical

services -Do- -Do- -Do-
Clarification regarding liability to income tax in India of a non-resident seafarer receiving

remuneration in NRE account maintained with an Indian bank: Income by way of salary,
received by non-resident seafarers, for services rendered outside India on a foreign going ship
(with Indian flag or foreign flag) and received into the NRE bank account maintained with an
Indian bank shall not be included in the total income.
3. EXEMPTED INCOMES
THE FOLLOWING SECTIONS EXEMPT THE INCOMES IN TOTAL OR IN PART
Section Assessee Nature of Exempt Income
10(1) All Assessee Agriculture Income in India
Share income from HUF. A married daughter/widow receiving
10(2) Members of HUF
Income from Father's HUF is not exempt from tax.
Share in Total Income of the Partnership Firm to the extent allowed
10(2A) Partner of a firm
u/s 40(b), when Firm is assessed as such.
Royalties and fees for technical services (FTS) payment by NTRO to
10 (6D) Non - Resident
a non-resident to be tax-exempt.
10(10BB) Individuals Amount received under Bhopal Gas Disaster Claim / Scheme.
Amount received from CG/SG/LA by way of compensation on
10(10BC) Individuals
account of any disaster.
Tax actually paid by employer on non-monetary perquisites - not
10(10CC) Individuals
taxable to employee.
Any payment from an account, opened as per the Sukanya Samriddhi
10(11A) Individuals Account Rules, 2014 made under the Government Savings Bank Act,
1873, is exempt from Tax.
Payment from the National Pension System Trust to an Employee on
closure of his account or on his opting out of the Pension Scheme
10(12A ) All Assesses referred u/s 80CCD is exempt upto 40% of the total amount payable.
However, the whole amount received by the nominee, on death of
the assessee shall be exempt from tax.
10(15) All Assesses Income from Notified Bonds / Deposits & Securities.
10(16) All Assessee Scholarship granted to meet Cost of Education.
10(17) MLAs and MPs Daily Allowance, Constituency Allowance.
Reward or Award either in cash or in kind instituted and approved
10(17A) At Assesses
by Govt.
Pension/Family Pension received by winner of Gallantry Award or
10(18 ) Armed Personnel
his family members.
Widow / Children Family Pension received by family member of Armed Force died in
10(19) of member of duty.
Armed Forces
Income of minor clubbed in the hands of a minor is exempt upto
10(32) Individuals ₹1,500 per minor child.
Dividend referred u/s 115-0 by a domestic company except the
10(34) All Assesses dividend as referred u/s 115BBDA (taxable @10% if Div. Income >
10 lakhs).
10(35) All Assesses Income from units of Mutual Funds
10(43) Individuals Loan received under the scheme of reverse mortgage.
NEW UNDERTAKINGS IN SPECIAL ECONOMIC ZONE (SEZ) – SEC.10AA
Special Provisions in respect of newly established units in SEZ (sec. 10AA)
Conditions Amount of deductions Period of deduction
Profit of the x Export

undertaking Turnover First 5 years Next 5 years Last 5 years
Total Turnover
100% of the 50% of such Amount transferred

profits and profits to SEZRARA
gains derived (or) 50% of profit
from export of whichever is
1. The assesse is an entrepreneur articles or less is deductible,
as per SEZ Act, 2005. from provided the
2. The units begin to manufacture services. following conditions
or produce article or things or are satisfied
provide services during the F/Y
2005-06 or any subsequent
year. (a) For acquiring new P & M which is first put to use
3. The assesse should derive before the expiry of 3 years following the year in
income from export of articles which reserve was created.
of services. (b) Until acquisition the new P & M, for the purpose of
4. Assesse should be audited by a business other than distribution of dividend or
CA and his report in the remittance outside India or creation of any asset
prescribed form should be outside India.
enclosed to ROI. (c) The particulars in this behalf should be furnished in
the Form No. 56FF in respect of new P&M which
was first put to use.
Life Insurance Policy SEC – 10 (10D)

Sum received from Life Insurance policy including bonus is exempted u/s 10(10D)
However, the exemption is not available to the following
Any sum received Any sum received Policy Issued Annual Premium
U/s 80DD(3) of under a Keyman On or before 31.3.2012 – > 20% of capital sum assured
U/s 80DDA(3) Insurance Policy On or after 1.4.2012 – > 10% of capital sum assured
On or after 1.4.2013 – Covered under U/s 80U &
80DDB > 15% of capital sum
Assured, for others > 10% of
capital sum assured
4. INCOME FROM SALARIES
Overview of
Salaries
Income from salaries Sec. 15 to 17
Sec. 15 Sec. 16 Sec. 17
Charging Deductions
Sec. 17 (1) Sec. 17 (2) Sec. 17 (3)
Section
Sec. 16 (ii) Sec. 16 (iii) Definition Perquisite
Due or Profit in lieu
of salary of salary
Receipt
Entertainment Professional
Basis
Allowance Tax
whichever is
(Only for Govt. Ee’s)
earlier
CHARGING SECTION – SEC. 15

BASIS OF CHARGE- SEC. 15 Salary is taxable on due or receipt basis whichever is
earlier. Exception: Following salaries charged to tax
only on receipt basis:
(i) advance salary (ii) bonus (iii) salary in lieu of notice
period (iv) arrears of salary
POINTS TO BE NOTED:
i) Amount includes both monetary payments as well as non-monetary payments
ii) To be chargeable as an income under this head, there must be employer and
employee relationship, between the payer and payee.
iii) Employer can be present or past or future employer. There could be more than
one employer. Further the employment could be full time or part time.
CONCEPT OF EMPLOYEE - EMPLOYER RELATIONSHIP:
Particulars Salary other heads of income

Managing Director 
Retainer Fee/ Remuneration paid to Advocate by Govt.  (PGBP)
Remuneration received by Judge 
Salary received by Partner from Firm  (PGBP)
Salary by MP/MLA  (IOS)
Chartered Accountant in Service/Employment 
Chartered Accountant in Practice/Retainer Fee  (PGBP)
FOREGOING & SURRENDER OF SALARY
Foregoing is taxable. It is only application of income. Surrender of salary to C.G. is not

chargeable to tax.
COMPUTATION OF TAXABLE SALARY – FORMAT

Particulars ₹ ₹
Salary or wages (including advance salary) XXX
Allowances XXX
Perquisites XXX
Gross salary XXX
Less: Deduction u/s.16:
1. Standard Deduction [16(ia)] XXX
Least of the following:
(i) ₹ 40,000 or
(ii) Amount of Salary
2. Entertainment allowance [16(ii)] XXX
Note: Entertainment allowance is allowed only for government
employees.
This allowance is first included in gross salary then Deduction is
allowed least of following:
• Actual Entertainment Allowance received
• 1/51h of Basic Salary (20% of Salary)
• ₹ 5,000
3. Profession tax [16(iii)] XXX XXX
Note: Professional Tax is deductible on "payment basis". If it is paid by
the employer on behalf of the employee, it is first included in gross
salary as perquisite and then deduction is allowed u/s 16(iii), if it is paid
by employee then directly deduction is allowed u/s16(iii)
Taxable salary XXXX
VARIOUS COMPONENTS TO BE INCLUDED IN GROSS SALARY
Retirement Contribute to
Salaries Allowances Perquisites benefits Provident funds
i) Wages i) Fully Taxable i) Taxable in the i) Gratuity-10(10) i) SPF

ii) Advance Salary Allowances hands of all ii) Pension-10(10A) ii) RPF
iii) Annuity ii) Exempted employees iii) Leave iii) URPF
iv) Fee & Commission Allowances in ii) Taxable only encashment- iv) PPF
v) Bonus case of in the hands of 10(10AA) v) Approved
certain Specified Superannuation
persons employees fund
vi) Contribution made iii) Partial iii) Tax free iv) Retrenchment
by employer under a Exempted Perquisites in Compensation
pension scheme Allowances case of all - 10(10B)
referred to Sec. employees v) VRS-10(10C)
80CCD
ALLOWANCES
Fully Taxable Exempted Allowances in case Partial Exempted

Allowances of certain persons Allowances
• D.A  Citizen of India who is Govt. employee i) 10(13A)- HRA
• City compensatory rendering service outside India u/s 10(7) ii) 10(14)- Allowance
allowance  Allowances to high court judges which are exempt to
• Medical Allowance  Compensatory allowance received certain extent
• Lunch/ Tiffin allowance by judge
• Overtime allowance  Sumptuary allowance given to high court
• Servant allowance & supreme court Judges (nature of
• Warden allowance entertainment allowance)
• Non- practicing allowance  Allowance received by employees of UNO
• Family allowance from his employer
HRA - Sec. 10(13A)

HRA granted by an employer is exempt to the extent of the least of the following:
Metro Cities (i.e. Delhi, Kolkata,
Other Cities
Mumbai, Chennai)
1. HRA actually received. 1. HRA actually received
3. Rent paid-10% of salary (relevant period) 2. Rent paid - 10% of salary (relevant period)
3. 50% of salary for the relevant period 3. 40% of salary for the relevant period
SALARY = Basic + DA (forming part of retirement benefits) + commission (% of turnover)
Note: This exemption is not available to assessee who lives in his own House, or in a house
for which he does not pay any rent or if he pays rent which does not exceed 10% of salary.
PRESCRIBED ALLOWANCE WHICH ARE EXEMPT TO CERTAIN EXTENT U/S 10(14)

SPECIAL ALLOWANCES TO MEET PERSONAL EXPENSES
ALLOWANCES NATURE OF ALLOWANCE AMOUNT OF EXEMPTION
a) Daily allowances a) Children Education 100 P.M. per child for 2 children
b) Travelling allowances b) Hostel Expenditure 300 P.M. per child for 2 children
c) Conveyance allowances c) Tribal Area 200 P.M.
d) Academic allowances d) Compensatory Field Area 2600 P.M.
e) Helper allowances e) Transport Allowance 3200 P.M for blind / Deaf and Dumb/
f) Uniform allowances handicapped persons
ACTUAL ALLOWANCE
RECEIVED
WHICHEVER
OR f) Allowances to transport 70% of allowance OR 10,000 P.M.
IS LOWER
AMOUNT SPENT FOR
employees WHICHEVER IS LESS
OFFICE PURPOSE
g) Underground Allowance 800 P.M.
h) Special compensatory 300 P.M. to 1300 P.M.
Area Allowance
i) Compensatory Modified 1000 P.M.
Field
PERQUISITES AND VALUATION OF PERQUISITES

Perquisites: Means benefits / amenities in cash/in kind, provided by the employer to the
employee whether free of cost or at a concessional rate.
PERQUISITES (3 CATEGORIES)
1. TAXABLE In the Hands of all 2. TAXABLE only in the hands 3. Tax Free Perquisites
Employees of specified employees
1. Taxable in the hands of all employees:

a) RFA provided to employees (furnished or unfurnished)
b) Any concession in rent.
c) Any sum paid by the "employer" in discharging monetary obligation of "employee"
d) Any sum payable by the employer whether directly or through fund to effect an
assurance on the life of the assessee.
e) The value of any other fringe benefits.
f) Specified security of sweat equity
g) Contribution to superannuation fund in excess of ₹ 1,50,000
2. Taxable only in the hands of specified employees: Any benefit / amenity in the form
of facility provided by employer which is not tax free shall be taxable only in hands of
specified employees,
a) Services of sweeper, gardeners, watchman or personal attendant.
b) Free or concessional use of gas, electric energy & water for household.
c) Free or concessional educational facilities.
d) Use of motor car.
e) Personal or Pvt. Journey provided free of cost or at concessional rate to "employee" or
member of his household.
f) The value of any benefit or amenity provided by "employer"
Note: if above items are paid in "money" then perquisite to *all employees.
Who is a specified employee u/s 17(2)(iii)?
a) He is employee + director of a company
b) He is employee +He holds 20% or more Equity shares of the company i.e substantial
interest
c) His Income under the head "Salaries" from one or more employers excluding Non-
Monetary payments, if it exceeds 50,000 p.a. for this purpose salary should be calculated
after making deductions (a) Entertainment Allowance & (b) Professional Tax
VALUE OF CONCESSIONAL ACCOMMODATION – SEC. 17(2)(II)
Value of accommodation (AS RENT FREE ACCOMMODATION) XXX

Less: Rent paid/payable by the employee XXX
Value of perquisite XXX
RENT FREE ACCOMMODATION U/S. 17(2)(i)
Rent free Accommodation u/s. 17(2)(i)
Unfurnished accommodation (UFA) Furnished accommodation
Taxable Value UFA XXX

Govt. Employees Non Govt. Employees
Add:
 10% p.a. of the original
License fee Cost of furniture XXX
determined by Govt. Owned by Taken on
employer lease (or) (if owned by employer)
(-) Rent payable by  If hired; Hire charges XXX
rent
the employee. Taxable Value: XXX
Least of
 Rent paid by employer
Population of Population Any other
 15% of salary
the > 10 lakhs
city > 25 lakhs <= 25 lakhs 7.5% of Salary
15% of Salary 10% of Salary
• In case of hotel accommodation least of 24% of salary (or) actual charges paid.
• Not taxable if accommodation is provided < 15days on the transfer of employee.
• Salary means: Basic salary + D.A (terms of employment) + Bonus + Commission + Fees
+ Taxable Allowances + monetary payment from employer.
• Not Include: D.A (not part of terms) + Employer PF + exempted allowance + perquisite
U/s. 17(2)
• Exemption:
On the basis of transfer: Exemption of one house for the first 90 days of transfer. (After
90 days both the houses are taxable)
On the basis of situation of house:
- House is situated 40 kms away from town having population of 20,000 or more, or
- 8 kms away from local limits of municipality or cantonment and temporary nature and
not more than 800 sq ft plinth area.
TREATMENT OF OTHER PERQUISITES
Rule Nature of Perquisite Taxable Value of Perquisite (TVP)

3 (3) Service of Sweeper, Actual Cost to the Employer
Gardener or Less: Amount paid by the Employee
Watchman or Personal
Attendant
3 (4) Supply of Gas, Electricity or Procured from outside Agency: Amount paid
Water for household to outside agency.
consumption Resources owned by employer himself:
Manufacturing cost p. u.
Less: Amount paid by the Employee
a) Free Education to Cost of education in a similar institution in the
children in the school near locality. Any amount collected from the
maintained by the Employer employee shall be reduced.
or the school sponsored by If the Cost of Education per Child does not
the Employer exceed 1,000 p.m. then Not Taxable,
otherwise fully taxable.
3 (5) b) Where educational Cost of such education in a similar institution
facility is provided to any in the near locality (-) amount collected from
other member of his the
household in an education employee
institution owned by the Note: The benefit of ₹1000/- is not available
employer or in other
institution.
Housing Loan / Vehicle Loan • Interest Charged by Employer  SBI Rates:
— For acquiring Capital NOT taxable. (Not a Perquisite)
Assets and not for repairs • Interest charged is lower than SBI rates (It
SBI Rate = SBI Rate is treated as perquisite):
prevailing on the First Day of Interest at SBI rates on maximum
the Previous Year outstanding balance Less Interest paid by
the Employee on that loan.
• Interest Charged by Employer  SBI
Rates: NOT Taxable. (Not a Perquisite)
3 (7) (i) • Interest charged is lower than SRI rates(It
is treated as perquisite):
• Interest at SBI Rate on maximum
outstanding balance Less Interest paid by
Other Loans
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 20,000 in aggregate.
Actual Cost to the Employer (upto 50 per
Free Meals during office hours Meal / Tea / Snacks is NOT taxable)
3(7) (iii) Less: Amount recovered from the Employee
Free Meal in remote area or
Not taxable.
offshore installation area
Tea or Non- Alcoholic
Beverages / Snacks during
working hours
3 (7) (iv) Value of any gift or voucher • Value of Gift,
or token other than gifts • In case the aggregate value of gift during
made in cash or convertible the previous year Less than 5,000, then it
into money (e.g. gift is not a taxable perquisite.
cheques) on Ceremonies.
Expenditure incurred on • Actual expenditure to Employer
credit card or add on card Less: Amount recovered from Employee.
3 (7) (v) including membership fee • If it is incurred for official purpose and
and annual fee. supported by necessary documents then it
is not taxable.
• Actual Expenditure incurred by the
Employer
Expenditure on Club other
Less: Amount recovered from Employee.
than Health Club or Sports
• If the expenditure is incurred exclusively
3 (7) (vi) Club or similar facilities
for official purposes and supported by
provided uniformly to all
necessary documents then it is not taxable.
Employees.
• Initial Fee of Corporate Membership of a
Club is not a taxable perquisite.
Use of any Movable Asset 10% of Actual Cost if owned by the
other than Computer or Employer, or Actual Rental Charge Paid
3 (7) (vii)
Laptops or other assets /Payable by Employer Less: Amount
already mentioned recovered from Employee
Transfer of Movable Asset to Employees:
Computers &
Electronic Motor Car Other Assets
Items
Actual Cost Actual Cost Actual Cost
Less: Depreciation @ Less: Depreciation Less: Depreciation @ 10% for
50% for every @ 20% every every completed year under
completed year under completed year SLM Method.
3 (7) (viii) WDV method. under WDV method Less: Amount recovered from
Less: Amount Less: Amount the employee
recovered from the recovered from the
employee employee
Value of the Value of the Value of the perquisite

perquisite perquisite
Electronic gadgets include Computer, Digital Diaries andPrinters, but exclude
washing machines, Microwave ovens, Mixers, Hot plates, Ovens etc.
3 (7) (ix) Any other benefit or Cost to the employer
amenities or service right or Less: Amount recovered from employee
privilege provided by the
employer other than
telephone or mobile phone
ESOP/ FMV of the ESOP or Sweat Equity Shares on the date of exercise of option
Sweat Less: Amount recovered from the employee
Equity
Perquisite in respect of Motor car
18
When car is owned by employee When car is owned or hired by employer
Maintenance and running Maintenance and running expenses are Maintenance and running Maintenance and running
expenses are met by the met by the employer or reimbursed by expenses are met by the expenses are met by the
employee and the car is used the employer and the car is used employer and the car is used employee and the car is used
1. For official 4. For official Not a perquisite 7. For official Not a perquisite
purposes purposes Hence not taxable purposes hence not taxable 10. For official Not a perquisite
Not a perquisite purposes hence not taxable
2. For private Actual expenditure
hence not taxable 5. For private Actual expenses
purposes 8. For private incurred including Depreciation @
purposes incurred by the 11. For private
purpose of drivers, salary 10% p.a. of cost
3. Partly for employer is purposes
employee or any (+) depreciation
6. Partly for taxable in the of the car to the
official and member of his @ 10% p.a. of cost
official and hands of all 12. Partly for employer/hire
partly for household of the car to the
private partly for employees official and charges in the
employer /hire
purpose private charges is taxable partly for hands of specified
CA Shashank S. Sharma
purpose in the hands of private purpose employee only.
9. Partly for official specified employees
and partly for
private purpose of
If the cubic capacity of If the C.C. of the engine the employee or
the engine not exceeds exceeds 1.6 litres any member of his
1.6 litres house-hold
If the C.C. of the engine If the C.C. of the engine
Substitute Rs.2,400 in does not exceed 1.6 exceed 1.6 liters
Actual expenditure incurred place of Rs.1,800 liters
by the employer (-) Rs.1,800 If the C.C. of the engine If the C.C. of the engine
per month (-) Rs.900 P.M. if does not exceed 1.6 exceed 1.6 liters Rs.600 pm (+) Rs.900 Substitute Rs.900
the chauffeur is provided, the PM if chauffeur is
liters in place of
perquisite taxable in the provided is taxable in Rs.600
hands of employees Substitute Rs.2,400 in the hands of specified
Rs.1,800 pm (+) Rs.900 Pm if place of Rs.1,800 employees only
chauffeur is provided is taxable in the
hands of specified employees only
PERQUISITE IN RESPECT OF MEDICAL FACILITY
a) Family refers an Individual, Spouse, any children, dependent parents of an Individual,
dependent brothers and sisters of an Individual.
1. Hospital maintained by employer NIL
2. Government hospital expenditure NIL
3. Approved by Chief Commissioner for prescribed diseases NIL
4. Premium paid on health of employee NIL
b) Medical treatment expenses incurred by employer outside India exempt to the extent of
the following.
Medical Travel Stay
Treatment of member/ family Exemption available only if Gross
As permitted Total Income(before including this As permitted by
One attendant by RBI travel expenditure) does not RBI
exceed ₹2,00,000
Medical allowance: Any medical allowance given by the employer is fully taxable
irrespective of the actual expenses incurred by the employee on medical treatment.
3. Tax free perquisites (For all employees)

Sr Nature of perquisites Nature of perquisites
Medical Facility: Hospital is maintained by the 9.
1. Perquisite provided outside India u/s10(7)
employer shall be tax free.
Medical reimbursement: Subject to ₹15,000 10. Rent free house / Facility to Judge of supreme / high
2.
Exempted court is not taxable
Recreational Facilities: Provided to Residence to officials of Parliament M.P. / M.L.A. /
3. group of employee not taxable 11. Union Ministers, Leader of Opposition in Parliament.
Accommodation in a Remote area / Mining Site / On

4. Training of employees 12.
shore oil Exportation.
use of health club, sports uniformly to all Educational Facility for children of the employee (not
5. 13.
employees member of household) < 1000 P.M per child
6. Exp on telephone 14. Use of laptops and Computers
15. tax paid by employer on non-Monetary Perquisites of
Premium paid by employer on accident policy is not
7. the employee shall be exempt in the hands of the
taxable.
employee* u/s10(10cc)
Amount given by employer of assessee to assessee
8.
child as scholarship u/s10(16)
Leave Travel Concession: Exempt twice in a block of 4 years (2018-2021)

AMOUNT EXEMPT = Actual Expenditure or maximum ceiling whichever is less
By Air Economy Class, Shortest Route, National Airway
By Train Class I AC Fare, Shortest Route
By Recognized Transport Deluxe Class, Shortest Route
By Other Means Class I AC Fare for equivalent distance, Shortest Route
RETIREMENT BENEFITS
GRATUITY SEC.10(10)
Gratuity u/sec.10 (10)
Government employee Non-Government employee
Any gratuity received is

wholly exempt from tax Covered by payment of Not covered by payment
Gratuity Act 1972 of Gratuity Act 1972
Salary Last drawn Exempt from tax to the Exempt from tax to the
∗ 15 days salary = × 15 days extent of least of the extent of least of the
26 days
following following
 20,00,000  10,00,000
 15 days / 7 days salary based on last  ½ month salary on basis of last 10
drawn salary for each completed year of months (preceding the month of
services (or) part of the year excess of 6 retirement) average salary X No. of
months. years of completed service.
 Gratuity actually received.  Gratuity actually received.
Salary = Basic + DA Salary = Basic + DA (forming part of RB)

+ Commission (on fixed percentage of turnover)
Note: Gratuity received during the period of service always taxable.

a) For the purpose of Gratuity Act, month = 26 days only & for the purpose of employees
not covered by Gratuity Act, month means a full month.
b) In case where the employee has received gratuity in any earlier year from his former
employer & also receives gratuity from another employer in a later year, the limit of
₹20,00,000 shall be reduced by the amount of gratuity exempt in any earlier year.
c) Gratuity received by legal heirs of a government employee is exempt from tax.
PENSION - SEC 10(10A)

Uncommuted Pension: Uncommuted refers to pension received periodically. So, Taxable
as salary.
Commuted Pension: It means lump sum amount taken by commuting the pension or part
of the pension. Where an employee commutes, under pension rules, part of the pension, the
remaining portion will be periodically received, which is chargeable u/s 15.
PENSION – SEC. 10(10A)
Uncommuted Pension Commuted Pension
Govt. & Non Govt. employee

Government Non-Government
Fully Taxable employee - exempt employee
Fully exempted
Employee is in Is not in receipt of
receipt of Gratuity Gratuity
× × 100% × %
× 100%
%
LEAVE SALARY – Sec 10(10AA)
Leave salary
Govt. (C.G or state) Others (non-Govt.)
Fully exempt a) Leave encashment received

b) 10 months avg. salary x 10
c) Cash equivalent of unavailed leave calculated on the
Least of
basis of Max 30 days for every year of service
d) 3,00,000
Note:
a) Salary = Basic + D.A (forming part of R.B) + % of commission
b) Avg. Salary of Last 10 months immediately preceding the date of retirement
c) Leave salary received during service fully taxable (For Govt. and Non — Govt. Employees).
RETRENCHMENT COMPENSATION —SEC. 10(10B)

Such compensation is exempt to the extent of the lower of the following:
a) Amount calculated under the Industrial disputes Act
(i.e., 15/26 x Average salary of last 3 months x completed years of service and part thereof
in excess of 6 months) Or
b) 5,00,000 Or
c) Amount actually received by the employee.
Note: Compensation in excess of the aforesaid limits is taxable as profit in lieu of salary.
VOLUNTARY RETIREMENT SCHEME (VRS) - SECTION 10 (10C)

Least of the following is exempt:
1. Compensation actually received.
2. ₹5,00,000.
3. Last drawn salary x 3 months x completed years of service. Which ever is higher
4. Last drawn salary x remaining months of service
Salary = Basic + D.A. (forming part of R. B) + Commission (as a % of turnover)
CONTRIBUTION TO PROVIDENT FUND'S
TAXTREATMENT RELATING TO PROVIDENT FUNDS
Particulars Statutory (SPF) Recognised (RPF) Unrecognised Public (PPF)
EPF Act, 1952 &
Provident Not recognized by the Public Provident Fund
recognised by
Constituted Fund commissioner of Act 1968
commissioner of PF
Act, 1925. Income Tax
& I. Tax.
Contribution Employer (E' er) + Individuals
E' er + E’ ee E’ er + E' ee
by Employee (E' ee) independently
Assessee's Eligible for Ded. Eligible for Ded. Not eligible for Eligible for Ded.
contribution u/s. 80C. u/s. 80C. Deduction u/s. 80C.
Employer's Amount exceeding
contribution Not Taxable (N.T.) 12% of Salary is Not taxable N.A
taxable
On employee cont. -
taxable under income
Interest on Exempt upto 9.5%
Fully exempt, from other sources. On Fully exempt.
contributions (E'er + Eee)
employer cont. - not
taxable.
Employee's cont. is
N.T. (But int is Taxable
Amount
Not taxable Not taxable Under IFOS) Not Taxable
received on
Sec.10 (11) Sec.10(12) Employer's cont. + Sec.10 (11)
retirement
interest thereon is
taxable as Salaries.
SALARY DEFINITION IN DIFFERENT SITUATIONS

Different Situations Meaning of salary
1. Rent Free accommodation and concessional Salary = basic Salary + D.A (terms of employment)
accommodation + Bonus + Commission + Fees + all taxable
allowance + Monetary Payment from Employer
Not include: D.A. (not part of terms) + Employer's
contribution to P.F's +Exempted allowance +
Perquisites LYS 17(2)
2. a) Gratuity (in case of non-government
employees covered by the payment of
Basic Salary + dearness allowance
Gratuity Act, 1972)
b) Retrenchment Compensation u/s 10(10B)
3. (a) Gratuity (in case of non-
Government employee not covered by
Payment of Gratuity Act, 1972) Basic salary + dearness allowance, if provided in
(b) Leave Salary terms of employment, + commission calculated as
(c) House Rent Allowance a fixed percentage of turnover.
(d) Recognized Provident Fund
(e) Voluntary Retirement Compensation
4. Entertainment allowance u/s 16(ii) Salary = Basic Salary
Relief when salary is paid in arrears or in advance (Sec. 89)
If by reason of
(a) any portion of an assessee’s salary being paid in arrears or in advance, or
(b) his having received in any one financial year, salary for more than twelve months, or a
payment of profit in lieu of salary under section 17(3)
his income is assessed at a rate higher than that at which it would otherwise have been
assessed, Assessing Officer shall, on an application made to him in this behalf, grant such
relief as prescribed.
Computation of Relief when salary is paid in arrears or in advance

Step 1 Calculate tax payable of the P.Y. in which the arrears/advance salary is received by
considering:
(a) Total Income inclusive of additional salary
(b) Total Income exclusive of additional salary
Step 2 Compute the difference the tax calculated in Step 1(a) and Step 1(b)
Step 3 Calculate the tax payable of every P.Y. to which the additional salary relates:
(a) On total income including additional salary of that particular P.Y.
(b) On total income excluding additional salary.
Step 4 Calculate the difference between (a) and (b) in Step 3 for every P.Y. to which the additional
salary relates and aggregate the same.
Step 5 Relief u/s 89(1) = Amount calculated in Step 2 – Amount calculated in Step 4
5. INCOME FROM HOUSE PROPERTY
Overview of IFHP
Income from House Property (sec. 22 to 27)
Sec. 22 Sec. 23 Sec. 24 Sec. 25 Sec. 26 Sec. 27
Charging Computation Co-ownership

section of Income S. D. @ Int. on U.R. Arrears of
30% Loan subsequently rent
received- received- Deemed owner
(25AA) (25B)
LOP SOP/UOP Deemed LOP
Section 22. Charge

Law: The Annual Value of building or land attached thereto of which assessee is the owner not
occupying the building for his own business or Profession.
Annual Value It represents the earning capacity of building. Section 23.
Building. (Construction Residential Four walls with roof.
should be completed) Commercial Four walls optional roof.
Land attached Charged under the head House Property.
land attached with
with building
building
Independent Land Charged under the head other Sources.
Registered maintained with Stamp Valuation
Registered Owner
Owner Authority
Deemed Owner 6 cases of deemed owner specified in Section 27.
Owner not occupying the Let out of
building for his own Charged under the head business.
employees
business or profession.
Let out to others Charged under the head house property.
“OWNERSHIP”
Includes a legal owner & deemed owner Person who owns the building need not be the
owner of land.
Exceptions to the above rule:

A. Need not be the owner in A.Y. (if the title of the ownership is under dispute in a court of
law, the decision about who is owner rests with the Income tax Dept.)
B. Deemed Owner (Sec.27): Chargeable to tax even if not the owner.
Situation Consequences
Applicable:
 Individual
Transfer to spouse / minor
 Transfer house property
child
 To his or her spouse /minor child
 Without consideration / inadequate consideration
 Transferor is deemed owner Not applicable:
 For adequate consideration or
 Agreement to live a part/ Minor married daughter
Part performance of a Transferee is deemed owner if the following conditions are satisfied
contract ( u/s 53 A of  Agreement between purchaser and seller
Transfer of Property Act)  Paid or ready to pay consideration
 Taken possession of property
 A member (deemed owner)
Member of a co-operative
 To whom building allotted
Society Co, AOP.
 Under house building scheme
 An individual (deemed owner)
Holder of an impartible
 Of all the properties
Estate
 Comprised in the estate
 A person (deemed owner)
 Who acquires right in a building
Right in a building
 By way of lease
 For a period of 12 years or more (continuously)
COMPUTATION OF INCOME FROM HOUSE PROPERTY

Income from let out house property is computed as under: ₹
Gross annual value Xxxx
Less: Municipal taxes Xxxx
Net Annual value Xxxx
Less: Deduction under section 24
- Standard deduction xxxx
- Interest on borrowed capital xxxx
Income from house property xxxx
COMPUTATION OF GROSS ANNUAL VALUE

Step 1 Compare fair rent with municipal value
Whichever is higher
Step 2 Compare Step 1 value with standard rent
Whichever is lower is the expected rent
Step 3 Compare the expected rent determined above with actual rent
AR > ER AR < ER
AR < ER because of vacancy AR < ER because of any other reason
AR is GAV ER is GAV
DEDUCTION FOR MUNICIPALITY TAXES
a) Deduction is given subject to 2 conditions:
i) Should be borne by the assessee &
ii) Should be actually paid during the P.Y. (i.e. allowed on cash basis).
b) If paid in a later year-then deduction is given for that later year.
c) Properties situated outside the country deductible.
d) If municipal taxes paid > GAV, NAV could be negative.
DEDUCTIONS U/S. 24
1. Repairs & Collection Charges:
a) 30% of NAV, irrespective of actual expenditure.
b) Allowed even if no expenditure incurred.
c) Assessee can avail even if tenant pays.
2. Interest on Loans:
a) Allowed on "accrual" basis.
b) Given in two parts - Current year interest & Pre - Construction period (PCP) interest.
c) Purpose of borrowing: Purchase, Construction, Renovation, Repairing and
Reconstruction.
d) PCP interest: In 5 equal installments – 1st installment is from the year in which
construction of property is completed.
e) PCP = From the date of borrowing to (31st March immediately prior to the date of
completion of construction or Date of repayment of loan, whichever is earlier).
f) Interest relating to the year of completion of construction- fully claimed irrespective of
date of completion.
Limits applicable in respect of deduction - Self occupied / unoccupied properties:

Up to 2,00,000: 3 conditions are to be satisfied.
a) Borrowed on or after 1.4.99 for acquiring or construction.
b) Should be completed within 5 years from the end of financial year in which the capital
was borrowed &
c) The lender should certify that loan was taken for specified purpose only.
Up to 30,000: If any of the above three conditions [(a) or (b) or (c)] are not satisfied
Points to be noted:
i) Limits NOT applicable for Let out property / DLOP
ii) If a fresh loan raised to repay the original loan- interest on fresh loan admissible
iii) Interest on interest is not deductible.
iv) No deduction is allowed for any brokerage or commission for arranging the loan.
Note: If we converts due amount into loan with respect to purchase of property-it
qualifies for deduction,
27
Deduction:
Types of House
Properties
New Section 25A

Self-occupied Let out Deemed Let Unoccupied
Property Property out Property Property
Partly LO and Let out for part of
Partly So year and SO for
Municipal If assesse Un-occupied part of year
NAV = XXX
taxes paid are (GAV- have more due the
not allowed as than one reason of his Each part is
Municipal
Arrears of Rent / Unrealised Rent

deduction SOP, the one treated as  AR is taken for actual
tax) employment
separate period of LO
Taxable in the year of receipt / realization

(-)Deduction is treated as a:a different
SOP, and property  MV, SR, FR, municipal
place and he
30% of rent received/realized

u/s 24 = (XX) taxes are taken for
NAV = Nil (standard another is should stay in
treated as full year
(-) Deduct rented house
Taxable even if assessee is not the owner of the

deduction MV, FR, SR
u/s 24 = (XX) interest on DLOP in that place
Interest are
property in the financial year of receipt / realisation.

(30,000 (or) loan) given for whole Interest on loan is
2,00,000) income from then apportion allowed as deduction
IFHP (XX) HP (XX) GAV = ER Only
based or area without any condition
deduction of plinth etc.
interest u/s
Only deduction GAV=ER= XXX 24 is
(-) Municipal available Interest on loan
Recovery of unrealised rent & arrears of rent (Sec.25A)

allowed
is interest tax (XX) relating to SOP
NAV is allowed with
and duly paid.

(-) Ded. conditions And
u/s 24 (XX) NAV = Nil LOP without
(standard ded. (-) Ded. conditions
And interest Interest = (XXX)
on loan) IFHP = (XXX)
IFHP (XX)
Tax Deducted at source (Sec. 25)
24(b) unless TDS has been deducted

Interest on loan payable outside India
shall not be allowed as deduction u/s
CO-OWNERSHIP - SEC. 26
a) If SOP- annual value for each of such co-owner shall be nil and each shall be entitled to
the deduction of ₹30,000 / ₹2,00,000.
b) If LOP- shall be first computed as if this property/part is owned by one owner and then
apportion among each co- owner as his share.
COMPOSITE RENT
Composite rent
Property + Facilities Property + Machinery
Separable In Separable Separable In Separable
Rent portion Total income Rent portion Total income

taxable under taxable under the taxable under taxable under the
head house head PGBP head house head PGBP OR
property OR other sources property other sources
Portion of Facilities Portion of Machinery

taxable under the taxable under the
head other sources head other sources
HOUSE PROPERTY IN A FOREIGN COUNTRY

A resident assessee is taxable U/S 22 even if property is situated outside India, then the
annual value computed as if the property is situated in India.
Note: Municipal taxes paid outside the country are also deductible.
The following points should be remembered while solving practical questions in

House Property
Fair Rent should be given the question. If it is not given then actual rent is treated as
1.
fair rent.
2. Expected rent is always computed for 12 months. It can be less than 12 months only if
the property comes into existence in same PY of computation.
3. Interest is limited only in case of SOP- R. In remaining cases (LOP) actual amount of
interest is allowed as deduction,
4. MT is allowed as deduction on paid basis. SD on uniform basis.
6. INCOME FROM BUSINESS OR PROFESSION
Overview of PGBP
Sec. 28 Sec. 29 Sec. 30 Sec. 40; Sec. 33AB; Sec. 44B; Sec.
to 37 40A & 43B 33ABA 44BBA; 44AD; 44AE
35ABB; 41 44BBB; 44B
Sec. 28 Computation
Presumptive
Deemed Presumptive Income-
Income Income- Non Resident
Specific Inadmissible
Deductions Expenses Resident
CHARGING SECTION- 28
1. Profits and gains of any business or profession.
2. Compensation received for termination or modification of contract by
(i) A Person in respect of service to manage an Indian Company
(ii) Any Person in respect of agency
(iii) Any Person in respect of service to Govt, Govt Corp.
(iv) Any Person in respect of any business contract.
3. Profit on sale of Import Entitlement License,
4. Cash Compensatory Support and Duty Drawback,
Charging
5. Any profit on the transfer of the Duty Entitlement Pass Book Scheme.
Section —
6. Any profit on the transfer of Duty Free Replenishment Certificate.
28
7. Value of any benefit or perquisite arising from any business or profession,
(Incomes 8. Sum received under a key man insurance policy.
shall be 9. FMV of inventory on the date of its conversion into Capital Asset.
chargeable 10. Income derived by a trade professional or similar association from specific
under the Services performed for its members.
head PGBP) 11. Any interest, salary, bonus commission or remuneration, by whatever name
called, due to or received by a partner of a firm from such firm to the extent
allowed under section 40(b).
12. Any sum received under an agreement for-
a) Not carrying out any activity in relation to any business or profession
provided it is not taxable as capital gains. E.g. Non- compete fees; or
b) Not sharing any know- how, patent, copyright, trademark, license, etc.
13. Any sum received from the transfer/destruction/demolition of asset
whose cost has been allowed as deduction 35AD.
SPECULATION BUSINESS
Meaning of speculative business
Sec. 43(5) Definition Carrying both speculative & Non-speculative Exceptions
Means: A transaction in which Explanation 2 Contract in respect of

a contract for purchase/sale of To Sec.28. Speculative business a) raw material b) stocks & shares to safe
any commodity shall be considered as a separate guard against price fluctuations,
Including stocks & shares and distinct business A company Whose principal business is
that of trading in shares.
Note: Trading in commodity derivative not a speculative transaction. Which is chargeable to
commodities Transaction Tax (CTT) @ 0.01%. However, the requirement of
chargeability of CTT is not applicable in respect of trading in agricultural
commodity derative from AY 2019-20.
METHOD OF ACCOUNTING –SEC.145: Either Cash basis or mercantile basis regularly

followed by the assessee. Except Sec 32, Sec 43B, Sec35D, DD, DDA Etc.
MODE OF INCOME COMPUTATION – SEC.29 In accordance with Sec. 30 to Sec. 43D

Expenses relating to
Building Sec.30 Plant & Machinery Furniture Sec.31
Tenant Owner Current repairs Insurance premium
Actual rent Current Land Revenue; local taxes Current

Repairs Insurance premium Repairs
Note: Rent paid/payable on plant & machinery and Furniture shall be allowed as deduction
u/s 37(1)
DEPRECIATION – SEC.32
Depreciation shall be allowed on following assets
Tangible Assets Buildings, Plant & Machinery, Furniture
Intangible assets Know-how, patents, trademarks etc.
Is it compulsory to claim depreciation? Yes,
Types: Usual depreciation, reduced depreciation & Additional dep.
Conditions for claiming depreciation u/s32
Ownership Usage Impact of date of purchase Basic condition

for depreciation
Asset must be owned Assessee must use Must acquired during
by assessee the asset for the the year Atleast one asset
in the block
purpose of B/P
Exceptions during the P.Y. If put to use
Must be some
value to the block
< 180 days  180 days
50% of Normal rate Claim full

of Depreciation Depreciation
Occupying as a Property purchased Joint ownership Registered ownership not necessary

tenant of building - Sec.53Af transfer of property act
On hire purchase basis
Any capital expenditure incurred
towards renovation extension etc.
Note:
a) The restriction of 180 days-only for year of acquisition.
b) Passive usage is sufficient (ready for use)
c) When the asset is neither used nor kept ready for use-no depreciation is available.
Block of assets: Each such group of assets falling under same classification and having same
rate of deprecation will be identified as a block of assets.
How to compute WDV of the Block of Assets - Sec. 43(6):

Opening WDV of the block XXX
Add: Actual cost of additions - Sec.43(1) XXX
Less: Money receivable in respect of assets sold, demolished, discarded & destroyed XXX
Amount on which dep. can be claimed XXX
Less: Current year depreciation XXX
Closing WDV XXX
Remember that assets which do not qualify for depreciation such as land, personal assets etc.,
will not form part of any block.
ACTUAL COST - SEC. 43(1): (Applicable for 'individual' assets)
Total cost of the asset XXX

Less: Amount of subsidy or grant received XXX
Add: Interest on capital borrowed for purchase asset, paid from the date on which XXX
the capital was borrowed up to the date such asset was first put to use shall not be
allowed as deduction. 4F-ACT:2015)
Expenses incurred for acquiring the asset (E.g. Freight) XXX
Expenses incurred in connection with the installation XXX
Actual cost of the Asset XXX
Explanations to Sec. 43(1):
Exp Mode of acquisition Actual cost

Asset acquired for scientific research Actual cost less deduction availed /fs.35 (i.e.
1
subsequently brought into business use. Nil).
2 Acquired by way of gift or inheritance WDV to the previous owner.
Asset acquired from other person, using the
Determined by the A.O. with prior approval of
3 Asset for his Business or Profession with a view
Deputy Commissioner
to claim enhanced depreciation.
The WDV at the time of original transfer or the
4 Asset transferred and reacquired by him. price paid for reacquiring the asset, whichever
is less.
Actual cost to the buyer (person who has
4A Sale & lease Back leased back) would be the WDV to the seller
at the time of transfer.
Building used for private purpose
5 Cost less notional depreciation
subsequently brought into business use.
Asset transferred by a holding Co. to its WDV to the transferor company=actual cost
subsidiary co. or vice versa if the following 2 to the transferee company.
6 conditions are satisfied:
a) 100% subsidiary co.
b) Transferee co. is Indian company.
7 Transfer of asset by amalgamating co, to WDV to the amalgamating co.= actual cost to
amalgamated Indian co. the amalgamated company.
Asset transferred by a Demerged Co. to the WDV to the Demerged Co. = actual cost to
7A
resulting Indian company Resulting Co.
Interest up to the date of commencing the
8 Asset acquired out of borrowed funds
commercial production shall be added.
Asset acquired subject to levy of excise duty or To the extent of CENVAT credit taken shall
9
customs duty. not from part of the actual cost.
Subsidy or grant or reimbursement received
10 Reduced from cost
from govt.
Asset acquired by Non-Resident outside India Actual cost less depreciation calculated at the
and brought by him to India and used for the rate in force that would have been allowable
11 purposes of his business or profession had the asset been used in India for the said
purposes since the date of its acquisition by
the assessee.
Assets acquired by a company under scheme of Amount which would have been regarded as
12 corporatization of a recognised stock exchange actual cost had there been no such
in India, approved by the SEBI corporatization.
Actual cost of Sec.35AD asset accrued by way
of:
a) Gift or will of Irrevocable trust
b) On any distribution on liquidation of the Nil
company
c) Transfer through any specified business
reorganization as referred in Sec.47.
13
(including conversion to LLP)
However, where an asset, in respect of which Actual cost to assessee as reduced by the
deduction is claimed and allowed u/s 35AD is amount of depreciation allowable had the asset
deemed to be the income of the assessee in been used for the purpose of business,
accordance with Sec 35AD(7B) (on account of calculated at the rate in force, since the date of
its acquisition
being used for a purpose other than specified
business u/s 35AD)
GENERAL CONSIDERATIONS ON COST / DEPRECIATION:
1. Depreciation in the case of Amalgamation, demerger, succession of Partnership firm,
proprietary concern by a company:
In all the above cases, depreciation shall be apportioned between the predecessor and
the successor, or the amalgamating company and the amalgamated company, or the
demerged company and the resulting company, in the ratio of number of days, for which
the assets were used by them.
2. Composite Subsidy: Proportionate amount shall be excluded.
3. Allowed to lessor not to lessee (Against to AS 19).
4. If depreciable assets are sold -Sec.50 becomes applicable.
5. While claiming dep. for building- cost of the land should be excluded.
If any asset is partly used for business and partly for personnel purposes. Only
proportionate expenses and depreciation can be claimed - Sec.38.
BUILDINGS:
 Buildings which are used mainly for residential purposes 5%
 Building which are not used mainly for residential purpose 10%
 Purely temporary erections such as wooden structures 40%
FURNITURE AND FITTINGS:
Furniture and fittings including electrical fittings 10%
PLANT & MACHINERY:
 Motor cars, other than those used in a business of running them on hire. 15%
 Motor buses, Motor lorries and Motor taxis used in a business of running them on hire. 30%
 Computers including computer software,(Including Laptops) 40%
 Air & Water pollution control equipment. 40%
 Books owned by assessee carrying on a profession being annual publications 40%
 Books other than those mentioned above. 40%
 Other plant and machinery 15%
ADDITIONAL DEPRECIATION
An assesses which is an industrial undertaking engaged in
 The business of manufacture or production of any article or thing or
 Generation or transmission or distribution of power
 Claim Additional Depreciation.
a) Additional depreciation @ 20%: An assessee who is engaged in manufacturing
activity or engaged in power sector is eligible to claim an additional depreciation @
20% of actual cost (50% of 20% in case of the asset put to use for less than 180
days). in respect of “ELIGIBLE PLANT AND MACHINERY”
b) Additional depreciation @ 35% : In order to encourage acquisition and installation
of plant and machinery for setting up of manufacturing units in the notified backward
areas of the states of Andhra Pradesh, Bihar, Telangana and West Bengal, a proviso
has been inserted to section 32(1)(iia) to allow higher additional depreciation @35%
(instead of 20%) (50% of 35% in case of the asset put to use for less than 180 days)
in respect of the actual cost of new machinery or plant (other than a ship and aircraft)
acquired and installed during the period between 1st April, 2015 and 31st March, 2020
by a manufacturing undertaking or enterprise which is set up in the notified backward
areas these specified States on or after 1st April, 2015.
c) Balance 50% of additional depreciation to be allowed in the subsequent

year(applicable to both (a) & (b) points): Balance 50% of the additional
depreciation on new plant and machinery acquired and used for less than 180 days
which has not been allowed in the year of acquisition and installation of such plant &
machinery, shall be allowed in the immediately succeeding previous year.
Note: However a Power Generating Unit which claims depreciation on SLM basis can't claim
additional depreciation.
TERMINAL DEPRECIATION
Terminal depreciation (i.e. loss on transfer) can be claimed in the case of power units when
the asset on which depreciation has been claimed is sold/ destroyed/ discarded etc., in the
previous year.
Terminal depreciation = WDV – (Sale proceeds + Scrap value)

- Terminal depreciation is allowed only if it is actually written off in the books of the assessee
- When the asset is sold in the PY in which it is first put to use, any loss arising therefrom
will not allowed as terminal depreciation but will be treated as short term capital loss.
Balancing charge (i.e. surplus on transfer) is the business profit which arises on the sale of
asset in the case of power plant. Balancing charge = (Sale Proceeds + Scrap Value) – WDV
Balancing Charge cannot exceed the depreciation claimed. It is taxable as business income
u/s 41(2)
Capital Gains u/s 50A = Sale proceeds – Cost of acquisition u/s 50A
There can be long term capital gains if the assets are held for more than 36 months and STCG
if held for 36 months or less.
UNABSORBED DEPRECIATION - SEC.32
Where in any year, depreciation can't be absorbed in full, because of:

a) There being no profits or gains chargeable for that previous year Or
b) The profits or gains chargeable being less than the depreciation allowance.
It is deductible from income chargeable under other heads of income (Except Income from
salaries) for the same assessment year.
Carry forward: Unabsorbed Depreciation can be carry forward to the subsequent years by
the same assesses for indefinite period. Even though the business or profession is not in
Existence.
Order of priority:
 Current Year Depreciation
 Brought forward Business loss
 Unabsorbed Depreciation
INVESTMENT IN NEW PLANT & MACHINERY SEC. 32 AD
Eligible Investment Amount of

Section Investment Period Deduction
Aseessee In Investment
All New Plant & Machinery in Acquired and installed
Assesses Backward areas i.e. AP, BIHAR, between 1.04.2015 to 15% of cost
No limit
32AD (Company TELANGANA, WEST BENGAL 31.03.2020 PY's of New Plant
(Any Amount)
& Non (15-16 to 19-20) & Machinery
corporates)
Note: Where assessee is a company, it can claim Double Benefits i.e. 32 AD, subject to satisfaction
of above conditions.
a) Sale of new asset:
i) In case of transfer of new asset within 5 years from the date of its installation, the
amount claimed as deduction shall be chargeable to tax in the previous year of
transfer.
ii) In case of sale / transfer under amalgamation / demerger within 5 years from date of
installation, the above provision shall apply to the amalgamated company / resulting
company, in the same way as it would have applied to the amalgamating comapny
demerged company.
b) “New Asset” means any new Plant or Machinery (other than ship or Aircraft), but does
not include-
i) Any Plant or Machinery which before its installation by the assesse was used whether
within or outside India by any other person.
ii) Any Plant or Machinery installed in any office premises or any residential
accommodation including accommodation in the nature of a Guest house
iii) Any office appliances including computers or computer software.
iv) Any vehicle, or
v) Any plant or machinery the whole of the actual cost of which is allowed as deduction
(whether by way of depreciation or otherwise) in computing the income chargeable
under the head "Profits and Grains from Business or Profession" of any previous year.
POINTS TO BE NOTED:
i) Amount of deduction computed under Sec 32AC(1A) shall not reduce the WDV of the
Assets
ii) It may be noted that deduction u/s. 32AD in respect of new plant & machinery acquired
and installed shall be allowed as a deduction in addition to the normal depreciation u/s.
32 and additional depreciation u/s. 32(1)(iia), irrespective of number of days for which
the asset is put to use.
iii) The Eligible plant & machinery discussed under sec. 32AD, 32(1)(iia) (Excludes computers
and computer software) & 54GB are one and the same.
SEC. 35 SERIES
EXPENDITURE ON SCIENTIFIC RESEARCH - Sec. 35
Expenditure on Scientific research
Company engaged in Business of Biotechnology or in any 150% of expenditure
business of manufacture or production of any article, not being incurred(other than
article or thing specified in the list of the Eleventh Schedule expenditure on land & building
Incurred by assesse (a) Revenue Expenditure 100% of the expenditure
(b) Capital Expenditure incurred (other than
expenditure on land)
(a) Company for scientific research
(b) University, college or Research 100% of sum paid
association for social science or
Paid to statistical research
(a) University, college or Research
association for scientific research 150% of sum paid
(b) National Laboratory/ university/
IIT
POINTS TO BE NOTED:
a) Deduction is available, even if Contribution not related to the assesses business.
b) Unabsorbed capital expenditure: Treatment shall be same as of unabsorbed
depreciation
c) For approval, should make an application to the C.G.
d) Application shall be disposed of within 12 months.
e) Institution, association, University/College approved u/s 35 are required to file ROI -
Sec.139 (4D).
OTHER SECTIONS
Payment to Associations and • 100% Contribution shall be allowed as deduction, If
35CCA Institutions for Rural approval is withdrawn subsequent to payment, then
Development Programs deduction cannot be denied.
Expenditure on Agriculture • 150% of the expenditure incurred
35CCC Extension Project notified by
CBDT.
Expenditure on Skill • 150% of the expenditure incurred (other than cost
35CCD Development Project notified of Land & Building)
by CBDT
Amortization of preliminary • For Indian Companies: 5% of Cost of Project, or 5%
expenses incurred for setting of Capital Employed (whichever is higher).
35D
up or extension • Resident Non- Corporates: 5% of Cost of Project
undertaking or Business Unit • Time Period: Amortized in 5 equal installments.
Amortization of Expenditure • Allowed in 5 installments after the payment was
incurred under VRS made.
35DDA
• Deduction to Resulting Entity in case of Business Re-
organization.
Deduction in respect of expenditure on specified business [Sec. 35AD]
37
Amount of Deduction
Conditions to be satisfied to avail of the benefit of Other points
100% of capital expenditure incurred wholly and exclusively for the purpose of sepcified business carried
by on by the assessee.
1. Expenditure incurred on the acquisition of an land or

The Assessee should the engaged in "Specified business'. The specified business should not goodwill or financial instrument is not eligible for
'Specified business means any one or more of the following be setup by splitting up or the deduction U/S 35AD.
business, namely. 2. Expenditure incurred prior to the commencement of
reconstruction of an existing
i) Setting up and operating a cold chain facility. operation of specified during the P.Y. in which the
business.
ii) Setting rap and operating a warehousing facility for assessee commences the operation of his specified
storage of agricultural produce. business, if the amount is capitalized in the books of
iii) Laying and operating a cross-country natural gas or It should not be set up by the account of the assessee on the date of commencement of
crude OF petroleum Oil pipeline networks for transfer of old P & M. However, P operation.
distribution, including storage facilities being an & M used outside India by any 3. Any sum received or receivable on account of any capital
integral part of such network person other than assessee can be asset, in respect of which deduction has been allowed U/S
iv) Building and operating anywhere in India, a new hotel used subject to certain conditions. 35AD, being demolished destroyed, discarded or
OF 2 star or above category, transferred shall be treated as Income of the assessee and
Further, exemption cannot be
v) Building and operating anywhere in India, a new chargeable to tax under the head profits & gain of
denied where the total value of old
hospital with at least 100 beds for patients. business or profession.
machinery or plant transferred to
vi) Developing and building a housing project. Under a 4. Where an assessee avails deduction U/s 35AD, then no
the new business does not exceed deduction shall be allowed under the provisions of Sec.
scheme for slum redevelopment / rehabilitation.
20% of the total value of P & M 10AA and Chapter VI-A (Part-C) for such business income.
vii) Developing & Wilding a housing project: –a under a
used in that business. 5. Any asset in respect of which a deduction is allowed shall
scheme for affordable housing.
viii) Production of fertilizer in India. be used only for the specified business, for a period of 8
ix) Setting op and operating an inland container depot or years beginning with the previous year in which such asset
a container freight station. Books of the account of the is acquired or constructed. Sec 35AD(7A)
x) Bee-keeping and production of honey and beeswax. assessee should be audited. Exception: The restriction of the holding period of 8
xi) Setting up and operating a warehousing facility for years does not apply:
storage of sugar. a) Where the assets are destroyed, discarded or
xii) Laying and mating a slurry pipeline for the transferred; or
transportation of iron ore, b) The company is declared a sick company.
Any payment made in excess Consequences if asset is not used for 8 years:
xiii) Setting up and operating a semi-conductor wafer
of ` 10,000 in a day to a In case the asset is used for a purpose other than the
fabrication manufacturing unit notified by the Board in
accordance with the prescribed guidelines. person otherwise than by A/c specified business within the period of 8 years, the amount
Note: Where an assessee builds a two-star jar above payee cheque, A/c payee of deduction allowed earlier shall be deemed as income
category) hotel and, subsequently, while continuing to own the bank draft or ECS would not under the head “profits and gains from business or
hotel, transfers the operation thereof to another person, the be eligible for deduction. profession” of the previous yea in which the asset is so
assessee shall be deemed to be carrying on the specified used. However, the assessee shall be entitled to reduce
business of building and operating hotel for the purpose of the amount of eligible depreciation u/s.32, while
section 35AD (applicable from the assement year 2011-12) computing such deemed income Sec 35AD(7B)
CERTAIN DEDUCTIONS—SEC. 36(1)
Sec. Kind of expenditure Conditions
36(1)(i) Insurance premium Paid in respect of stocks, stores, etc,
36(1)(ib) Insurance premium Paid (other than cash) for insuring the health of
employees under an approved insurance scheme.
36(1)(ii) Bonus or commission Paid to employees, for services rendered. (subject To
43B)
36(1)(iii) Interest Paid in respect of capital borrowed for the purpose of
business or profession. (subject To 43B)
Note: Any interest paid for acquisition of Asset, Upto
the asset was first put to use, Shall not be allowed as
deduction.
36(1)(iiia)Discount on Zero coupon bonds Allowed as deduction on pro rata basis
36(1)(iv) Contribution to fund: Allowed as deduction subject to 43B (cash basis)
RPF, Super annuity fund,
Gratuity fund
36(1)(iva) Contribution towards Pension Contribution should not exceed 10% of the salary
Scheme u/s 80CCD Salary includes DA if the terms of employment so
provide, but excludes all other Allowances and
Perquisites.
36(1)(v) Employer’s Contribution to an Allowed when paid before due date of filing Return
Approved Gratuity Fund [Sec. 43B]
36(1)(vii) Bad debts a) Incidental to the business or profession.
b) The business / profession must be in continuation.
c) Mere provision is not sufficient but actual write off
of account is required.
However, actual written off in the books of
accounts is not necessary, if a debt which
has not been recognized in the books of
accounts as per the accounting Standards
but has been taken into Account in the
computation of Income As per noticed ICDS
has become irrecoverable, still it can be
claimed as bad debts.
Note: The successor of a business/profession is
entitled to claim deduction in respect of debt created
by the predecessor.
36(1)(vi) Purchase of animals (Other than allowed as deduction in the year in which such
SIT) animals die or become permanently useless
Deduction = sale proceeds – capital expenditure
36(1)(ix) Family planning expenditure: a) Any revenue expenditure
(only for companies) b) Any capital expenditure – 5 equal annual
installments.
c) Unabsorbed: Same as of unabsorbed
depreciation.
36(1)(xv) CTT, STT Any amount paid.
Bad-debts written off [Sec 36(1)(vii) & 36(2)]
Deduction in respect of actual bad debts written off is allowable subject to following
conditions:
 There should be relationship of debtor and creditor.
 The debt must be incidental to the business or profession.
 The debt must have been taken into account in the computation of income, or it
represents money lent in ordinary course of the business of banking or money-lending.
 Bad debt should be written off as irrecoverable in assessee’s accounts in the PY.
It is not necessary for the assessee to establish that the debt, in fact has become irrecoverable;
to claim deduction u/s 36(1)(vii) it is enough if bad debt is written off as irrecoverable in the
books of accounts of the assessee.
2nd Proviso to Sec 36(1)(vii) Where

 the amount of such debt or part thereof has been taken into account in computing the
income of the assessee,
 of the PY in which the amount of such debt or part thereof becomes irrecoverable or of an
earlier PY
 on the basis of ICDS without recording the same in the accounts,
then,
 such debt or part thereof shall be allowed in the PY in which such debt or part thereof
becomes irrecoverable
 and it shall be deemed that such debt or part thereof has been written off as irrecoverable
in the accounts for the purposes of this clause.
Explanation 1 to Sec 36(1)(vii): Any bad debt or part thereof written off as irrecoverable
in the accounts of the assessee shall not include any provision for bad and doubtful debts
made in the accounts
SEC. 37- RESIDUARY SECTION

Sec. 37
General deduction
Residuary section
Conditions to be Explanation - I Explanation - II

Advertisement in
satisfied for allowing
souvenir
deduction
No deduction in No deduction in
respect of any exp. respect of any exp.
Published by political
party
Which is an
Which is incurred on
offence/prohibited by
activities relating to Not allowed as
any law
decuction
Corporate social
responsibility
Not specified u/s 30 Should not be a Should not be a Should be incurred for
to 36 capital exp. personal exp. the purpose of B/P
DISALLOWANCES IN THE CASE OF ALL THE ASSESSEE'S – SEC. 40(a)
Particulars 40(a)(i) 40(a)(ia)

1. The amount paid or Interest, Royalty, fee for Any payments covered in TDS chapter
payable is technical service or any other
sum chargeable under IT Act
2. The sum is paid or payable to Non-resident / foreign company Resident
3. TDS obligation i. TDS has been deducted i. TDS has been deducted
ii. The TDS amount paid during ii. The TDS amount paid during the pre-
the pre-year or in the year or in the
subsequent year before the subsequent year before the expiry of
expiry of the time prescribed the time prescribed u/s 139(1)
u/s 139(1)
4. Assessee made any default in
TDS obligation then amount 100% of such amount 30% of such amount
of disallowance is
SOME OTHER DISALLOWANCES U/S 40(a)
40(a)(ii)/(iia) Income tax, Wealth tax, DDT paid is not deductible

Disallowance of royalty, license fee, service fee etc.levied exclusively on State Government
40(a)(iib)
Undertakings by the State Government
Any salary payable outside India or to a non-resident shall be disallowed if tax has not been
40(a)(iii)
deducted or paid
40(a)(iv) Contribution to Welfare Fund of Employees if no arrangements for TDS- NOT ALLOWED
Tax actually paid by any employer on behalf of the employee in respect of nonmonetary
40(a)(v) perquisites provided to such employee, is DISALLOWED. Which is exempt u/s 10(10CC) in the
hands of Employee.
SEC. 40A SERIES
Section Kind of expenditure Conditions
Payments to Relatives as specified Payment considered as excessive or unreasonable
40A(2) shall not be allowed. No disallowance, if transaction
is at Arm's Length Price as per Sec. 92F
Single or Aggregate payments in  Whole of the payment shall be disallowed.
respect of allowable expenditure in Expenditure allowed on due basis but
excess of ₹20,000, (₹35, 000 if Payment aggregate payments made in subsequent
40A (3) is made for Plying, Hiring, or Leasing P.Y., in excess of ₹20,000/35,000 shall be
Goods Carriages) other than by way of disallowed
A/c Payee Cheque or A/c Payee DD to a  Exceptions given in Rule 6DD
single person on a single day.
Provision of Gratuity Disallowed, except in case of provision for
40A(7) contribution to Recognised Gratuity Fund or
actual liability incurred.
Contribution to Non- Recognised Funds  Payment to any Unrecognised / Non-Statutory
Employer Welfare Fund is disallowed
40A (9)
 Contribution u/s 36(1)(iv)/(v) or under any
law, is allowable.
DEEMED PROFITS - SEC. 41
REFUND OF EXPENDITURE – SEC. 41[1]
Where previously allowed loss/expenditure/trading liability subsequently received by assessee
or successor of the business by way of remission or cessation- shall be deemed to be income.
Expl.1 - Recovery or remission can be by the same assessee or by any other assessee also.
Expl.2 - Sec.41 (1) is applicable even if remission / cessation arises because of a unilateral act.
SALE OF ASSETS USED FOR SCIENTIFIC RESEARCH – SEC. 41(3)

Where any capital asset used for scientific research is sold -Income to the extent of deduction
allowed u/s.35 is taxable as PGBP. If the sale proceeds exceeds the COA then- capital gains.
BAD DEBIT – SEC. 41(4)

Bad debts recovered shall be taxable if it was allowed earlier irrespective of continuance of
business. However, such amount cannot be taxed in the hands of the successor.
SPECIAL RESERVE – SEC. 41(4A)

Any amount withdrawn will be charged to tax irrespective of continuance of business.
SEC. 41(5) — SET OFF

Any loss incurred in the year in which the business was discontinued by the assessee shall be
allowed to be set off against the deemed profits & only the balance if any shall be taxed.
SEC. 43CA
Full value of consideration = value adopted by stamp valuation authority, for
transfer of land/ building other than capital assets:
a) If the actual consideration received for transfer is less than the Stamp Duty Value then
Stamp duty value will be deemed as Value of consideration.
b) Sec 43CA will not apply if the Stamp Duty Value does not exceed 105% of the
stamp duty value.
c) Sec. 50C: Provisions u/s 50C(2), 50C(3) shall apply in relation to determination of the
value adopted or assessed or assessable u/s 43CA(1)
d) Relevant date: The date of agreement may be taken as the relevant date instead of date
of registration if any amount is received by Account Payee Cheque/ Account Payee
Bank Draft/ ECS on or before the date of agreement.
DEDUCTION BASED ON ACTUAL PAYMENT –SEC. 43B
Deduction based on actual payment Sec: 43B
Tax, duty Bonus (or) Leave Employer Interest on loan from Any payments
etc paid commission to encashment contribution any public financial made to Indian
employees to welfare institution (or) state railways for the
funds industrial investment use of Railway
corporation (or) any assets
scheduled bank
MAINTENANCE OF ACCOUNTS- SEC. 44AA
1. Notified Professionals: Gross Receipts or Income exceeds ₹1,50,000 in all three Prior
Previous Years.
2. Non- Specified Professionals and Business Assesses:
• Business Income exceeds ₹1,20,000 either during the current P.Y in which business
commences or any one of three Prior Previous Years.
• Gross Turnover or Receipts exceeds ₹10 lakhs either during the current P.Y in which
business commences or any one of three Prior Previous Years.
• Declaring lesser income than as prescribed u/s 44AD/44ADA/44AE.
TAX AUDIT – SEC. 44AB
Compulsory When they are covered by the provisions of compulsory

audit of audit section 44AB (audit report should be obtained on
Different taxpayers
Books of or before the due date of submission of return of
Accounts income)
[Sec. 44AB] If the total sales, turnover or gross receipt in business
A person carrying for the previous year(s) relevant to the assessment year
on business exceed or exceeds Rs.1 crore (But if a person opts for
presumptive taxation then the limit is ₹2 Croes).
if his gross receipts in profession for the previous year
A person carrying
(s) relevant to the assessment year exceeds ₹50
on profession
Lakhs.
If such person claims that the profits and gains from the
A person covered
business are lower than the profits and gains computed
under section 44AE,
under these sections (irrespective of his turnover).
If such person claims that the profits and gains from the
A person covered
business/profession are lower than the profits and gains
under section
computed in accordance with the provisions of section
44AD, 44ADA or
44AD(1) / 44ADA and if his income exceeds the
4AD(4)
maximum amount which is not chargeable to tax.
Disallowance in the case of partnership firms including LLP
when the following conditions are not satisfied – [Sec.40(b)]
For remuneration For interest Condition

(salary, Bonus, Comm.) s
i) A partnership is backed
written deed.
Should be Should Rate of ii) The shares of each partner
Must be Should
Should be Should authorized not interest are specified in such deed
authorized not
paid to not by pertain to should not (As a % or as a fixed
by pertain to
working exceed the partnership the period exceed 12% amount).
partnership the period
partner permissible deed prior to per annum iii) A copy of partnership deed
deed prior to
limit partnershi (simple rate is enclosed with the return
partnership of interest)
p of income.
deed.
iv) Where there is a change in
the constitution of the firm,
the firm shall furnish a
certified copy of the revised
Books profit partnership deed.
v) Change in the constitution:
Net profit as per P &L XXX
• If one or more partners
adjustments (+/-) cease to be partners or
As provided by one or more new
On the first Rs.3,00,000/- Rs.1,50,000 partners are admitted, in
Sec – 28 to 44D XXX
of book profit or in case of or such circumstances that
loss 90% of Add remuneration XXX one or more of the
books to partners who were
Profit partners of the firm
Partners which is XXX
on the balance of book before the change,
profit 60% of Book already continue as partner after
Profits debited to P&L the change or
• All the partners continue
Book profit XXX
with a change in their
respective profit sharing
ratios or in the shares of
some of them.
PRESUMPTIVE TAX
ASSESSEE ENGAGED IN ELIGIBLE
BUSINESS – SEC. 44AD
Presumptive tax
Sec.44AD. Sec.44ADA. Sec.44AE.

Assesses engaged Assesses engaged Assesses engaged in
in eligible business in profession good transport business
All assess but should not

Eligible Gross 8% of Eligible Gross 50% of own more than 10
assesses: receipt turnover, is assesses: receipts gross vehicles during PY
HUF, India does not deemed as Resident < 50 receipts
Partnership exceed 2 business and Lakhs deemed as
changed in income For all type of goods
firm crore (Not income
profession carriage
(Not LLP) LLP)
referred Upto12MT 7500 pm
u/s >12MT 1000 per
Not applicable to 44AA(1) ton pm
 Income commission, brokerage (Including any part of
 Agency business month)
 Specified profession (Sec: 44AA(1))
 No deduction U/S 30 to 38
 No decuction u/s 40(b) for Sec 44AD but 40(b) can claim for Sec. 44AE
 Assesse can voluntarily declare higher income
 Deductions u/s 80C to 80U available
Sec.44AD(4): If an assessee declares profit for any previous year under the scheme of section 44AD he
cannot declare lower profit for the next 5 consecutive subsequent assessment years. If he declares lower
profit, then he shall not be eligible to claim the benefit of the provisions of section 44AD for 5 subsequent
assessment years.
Sec. 44AD(5): It assessee fails under Sec. 44AD(4) then
a. He will have to maintain the books of account as per section 44AA [irrespective of income or turnover] and
b. He will have to get his books of account audited under section 44AB (irrespective of turnover). If his total
income exceeds the exemption limit.
c. Gross receipt
1.Through banking channel (A/c payee, Demand Draft, ECS) = 6% of Gross receipt. (before due date)
2.Through other mode = 8% of Gross receipt.
7. CAPITAL GAINS
Overview of C. Gain
Capital Gains (45 to 55A)
Sec. 45(1) Sec. 46 Sec. 47 Sec. 48 Sec. 49 Sec. 50 Sec. 54 Sec. 55A
Chargeability Companies in Exceptions Computation Exceptions Reference

COA
Liquidation to transfer of C.G. for to valuation
non-dep. Officer
assets
45(1A) 45(2) 45(3) 45(4) 45(5) 50- C.G. 50B 50B – 50C – SDV 50D – FMV is
for dep. Power Slump is deemed as taken as full
Asset Sector Sale consideration value of
consideration
CHARGING SEC. 45(1)
Any profits arising on the Transfer of any Capital Asset shall be chargeable to tax under this
head in the year of transfer.
YEAR OF CHARGEABELITY: Capital gains shall be chargeable to income tax in the PY in
which the transfer took place (on accrual basis).
Exceptions: Sec 45(1A), 45(2), 45(5)
It is not necessary that the consideration should be received i At year of transfer itself.
Capital asset Sec. 2(14)
Include Exclude
• Movable or immovable, • Stock in trade

tangible or intangible • Personal effects (but excludes Jewellery,
• Any securities held
any work of art)
by foreign institutional
• Agriculture land in rural area
investor accordance
with the regulations • Bearer Bonds 1991
made under the SEBI • Gold Bonds (Issued under gold deposit
act, 1992 scheme 1999)
• Deposit certificate issued under gold
monelization scheme 2015
1. Meaning of short term capital asset section 2(42A): A capital asset held by an
assessee for less than 12 or 24 or 36 months immediately preceding the date of its
transfer resulted gain or loss treated as short-term capital.
Shares or any other securities listing in recognized stock

exchange in India, units of UTI, unit of equity oriented fund Less than 12 months
zero coupon bonds
Unlisted shares, land or building or both Less than 24 months
Unlisted securities, units of debt oriented funds Less than 36 months
2. Meaning of long term capital asset section 2(29A): it means other than STCA.
Note:
Tax Rates:
a) In case of Specified Securities: Indexation + 20 % flat rate (*) Or Without indexation
+ 10 % flat rate, Whichever is more beneficial to the Assesses can be opted i.e. the
alternative which results in less tax liability can be adopted.
Specified Securities are Listed Shares & Zero coupon bonds. (includes bonus
shares also)
b) In case of any other capital asset: At 20 % flat rate.
WHAT IS A TRANSFER? {Sec. 2 (47)}
Sale The maturity (or) redemption of

Exchange zero coupon bonds
Sec – 2(47) Any transfer covered by

Relinquishment
transfer sec.53A of transfer of
Of asset
includes property Act
Extinguishment of Conversion of an
right in assets asset into stock
Compulsory
acq. by govt.
Sec. 47 - EXCEPTIONS TO TRANSFER
COST OF ACQUISITION COA
DIRECT OWNERSHIP: Cost incurred to purchase a capital asset.

INDIRECT OWNERSHIP - PREVIOUS OWNER: Acquired in any of the modes mentioned
in Sec.49 (1)
Exception to transfer u/s 47 Treatment of cost of acquisition
1. Gift or inheritance. a) Section 49(1):
2. On partition of H.U.F. Cost of acquisition = cost to the
3. Amalgamation previous owner. (For points 1 to 11 of
4. Demerger. Sec.47)
5. Transfer from a holding Co. to its 100% b) Section 2 (42A): In determining the
subsidiary Co., & vice-Versa. Both the nature of capital asset in the hands of
Companies must be Indian companies. transferee
6. Conversion of debentures and deposit Period of holding = Previous
certificates into shares. owner holding period + assessee
7. Amalgamation — Shares holding points period (For 1 to 11
8. Demerger — Shares of Sec. 47)
9. 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
treated as a transfer,
10. Transfer of sovereign gold bonds scheme by
way of redemption.
CONCEPT OF REVERSE MORTGAGE – SEC.47(XVI)
Applicability:
a) Senior Citizens who own a residential house property.
b) They can mortgage their house with a scheduled bank/housing finance co. for a lump
sum amount / regular income.
Concept:
a) Use the amount for any purpose other than for speculative / trading purpose.
b) Bank will recover the (loan + accumulated interest) by selling the house after the death
& excess amount will be given to the legal heirs.
c) Before resorting to the sale of the house, preference will be given to the legal heirs.
Tax implication:
a) Not a transfer for capital gain purposes.
b) The Amount received by the senior citizen as loan is exempt from tax WS 10(43).
PERIOD OF HOLDING & COST OF ACQUISITION UNDER DIFFERENT CASES
Special Cases Period of Holding Cost of Acquisition

Period of holding of Amalg. - Shares: The cost of acquisition of the shares in
Amalgamation the asset of the the amalgamated company shall be the cost of acquisition
shares transferor shall also of the shares of the amalgamating company.
be considered.
Period of holding of Demerger - Shares:
the asset of the 1. Cost of acquisition of the shares in the resulting
transferor shall also company:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 ℎ𝑒𝑙𝑑
be considered. 𝑏𝑦 𝑡ℎ𝑒 𝑎𝑠𝑠𝑒𝑠𝑠𝑒𝑒 𝑖𝑛 𝑡ℎ𝑒
𝐷𝑒𝑚𝑒𝑟𝑔𝑒𝑑 𝑐𝑜𝑚𝑝𝑎𝑛𝑦
𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ 𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑟𝑒𝑑 𝑖𝑛 𝑎 𝐷𝑒𝑚𝑒𝑟𝑔𝑒𝑟
Demerger- ×
𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ 𝑜𝑓 𝑎 𝑑𝑒𝑚𝑒𝑟𝑔𝑒𝑑 𝑐𝑜. 𝑖𝑚𝑚𝑒𝑑𝑖𝑎𝑡𝑒𝑙𝑦 𝑏𝑒𝑓𝑜𝑟𝑒 𝑑𝑒𝑚𝑒𝑟𝑔𝑒𝑟
shares 2. Net Worth = Paid up share capital + General
Reserves.
3. Cost of acquisition the shares in demerged co. (Post
demerger): cost of acquisition of the original
shares (in demerged co.) minus cost of shares as
obtained in 'a' above (resulting co.)
Conversionof Period of holding of
debentures and debentures period is
COA of share = COA of debentures
deposit certificates to be taken into
into shares. account
A Unit of a Shall be included 1. A Unit of a business trust allotted pursuant to
business trust the period for which transfer of share: The cost of acquisition of units so
Allotted pursuant the share or shares received on exchange shall be cost of the share of
to transfer of share were held by the the special purpose vehicle which wants exchange
or shares of assesse in special for such unit.
special purpose purpose vehicle.
vehicle (domestic company)
If the right 1. Shares (Original & Rights) (i.e. Financial Assets):
to subscribe to a) The cost of acquisition (C.O.A.) of original
shares is renounced shares - Amount actually paid.
to any other person b) The C.O.A. of the right shares - Amount actually
the period of paid.
Right holding of the asset c) Right Renouncements - While computing
Renouncement (Right capital gains C.O.A. to be taken as N I L.
Renouncement) Cost to the purchaser of right shares: Amount paid
shall be calculated to the company for acquiring the shares + the amount
from the date of the paid to the owner towards rights renouncement.
offer of such right
by the company up
to the date of
renouncement.
Specified The period of 1.ESOP/Sweat Equity Shares - Sec.49(2AA):

Security/Sweat holding for any a) While computing salary, value of any specified security
equity shares specified security or or sweat equity shares allotted or transferred,
sweat equity shares directly or indirectly, by the employer or former
allotted or employer free of cost or at concessional rate to an
transferred, by the employee shall be considered as taxable perquisite.
employer free of b) In a case where such specified security or sweat equity
cost or at shares are subsequently transferred, for the purpose
concessional rate to of computation of capital gains, the cost of acquisition
his employees shall of such specified security or sweat equity shall be the
be reckoned from fair market value which was adopted for the purpose
the date of of calculation of perquisite u/s 17 under the head
allotment or transfer 'Salaries'
of such specified
security or sweat
equity shares.
Bonus Shares Assessee first held Original Shares (O.S.) & Bonus Shares (B.S.)
a) If O.S. & B.S. are allotted before 1-4-1981
In case of O.S.- FMV as on 1-4-1981 or C.O.A.
In case of B.S.- FMV as on 01-04-1981.
b) If O.S. are acquired before 1-4-1981 & B.S. are allotted
on or After 1-4-1981
In case of O.S. - FMV as on 1-4-1981 or COA 
In case of Bonus Shares - NIL.
c) If O.S. & B.S. are acquired on or after 1-4-1981
In case of O.S. - Cost incurred.
In case of B.S. - NIL.
Capital Asset From the date of FMV on the date of conversion of SIT into Capital
which was conversion of SIT Asset.
converted from into Capital Asset
Stock in trade
SEC. 45 SERIES
Year of
Sec Event Consideration Indexation
chargeability
Damage or Year in which Value of money
Destruction compensation received FMV of only up to the year
45(1A)
of any or the asset is the asset received of destruction
Capital Asset received
Conversion of The year in Indexation available
a capital which such stock only up to the year
FMV as on the date
45(2) asset into was sold. of conversion.
of conversion
stock in
trade.
Transfer of a Value of such asset
Capital was recorded in
45(3) Asset by way Year of transfer. partnership firm Available
of capital books.
contribution.
Transfer of a FMV as on date of
Capital Asset Year in which transfer. Cost of
45(4) by way of transfer takes acquisition-Value Not available
distribution on place recorded in the
dissolution. books.
Transfer of a P.Y in which
45(5) Capital Asset compensation is
Up to the year of
(SEE by way of received Compensation.
transfer.
NOTE) Compulsory (Full / Part).
Acquisition.
Transfer of a The P.Y. in which
capital asset, the
being land or certificate of
building or completion
both, by an for the whole or The stamp duty
individual or part of value of
HUF, who the project is his share in the
enters into a issued by the project,
specified competent being L or B or both,
agreement for authority. on the
45(5A) development of date of issue of
a project, completion
provided he certificate
does not (+)
transfer his Consideration
share in project received in
on or before cash, if any
the date of
issuance of
completion
certificate.
Note: If Compensation is received by the legal representative — taxable.
a) Enhanced compensation / consideration: In the year of receipt.
b) C.G’s shall be revised if such compensation or enhanced compensation is reduced by
court.
c) In case of interim order compensation shall be chargeable only in the P.Y. in which final
order is given by the court
d) Interest on enhanced compensation-chargeable under other sources, subject to 50%
Deduction u/s 57.
e) Expenses incurred for getting the enhanced compensation is allowable as expenditure.
DISTRIBUTION OF ASSETS BY COMPANY IN LIQUIDATION (Sec. 46)

1. Tax treatment in company's hands:
Sale by liquidator and Distribution of capital assets in shareholder
distribution of sale (as it is)
In case of
proceeds to
shareholders
Taxable in the Not a transfer. Hence not taxable [Sec 46 (1)]
Tax effect company's hands as
capital gains
2. Tax treatment in shareholders hands:

a) Computation of capital gains on receipt of assets/cash from company
Total value received = FMV of asset received on date of liquidation and

Step 1
amount received in cash
Determine the shareholders interest in accumulated profits on the date
Step 2
of liquidation, i.e., deemed dividend u/s 2(22)(c)
Step 3 Consideration for transfer for determining capital gain = Step 1 - Step 2
Step 4 gain = consideration for transfer for determining capital gain (Step 3)
Less: Cost of acquisition of shares (indexed cost, in suitable cases)
b) Capital gain on subsequent sale of asset receivable by shareholders on

liquidation
Capital gain = net consideration less fair market value U/s. 46(2) and cost of
improvement.
BUY BACK OF SHARES [SEC. 46 A]
Sec. 46 A - buyback of shares & capital gains
1. Where a company purchases its own shares the difference between the cost of acquisition
& consideration received by the shareholder shall be taken as C.G.'s.
2. Indexation: If the shares are long term capital asset indexation facility is available.
3. Year of chargeability: In the year in which such shares are purchased by the Co.
However, in case of buyback of unlistedd shares by domestic companies, additional income
tax @ 20% leviable in the hands of the company. Consequently, the income arising to the
shareholders in respect of such buyback of unlisted shares by the domestic company would
be exempt under section 10(34A), where the company is liable to pay additional income tax
on the buyback of shares
(1) (2) (3)

Taxability in the Buyback of unlisted Buyback of shares other than shares
hands of the - shares by referred to in column (2)
domestic companies
i) Company Subject to additional Not subject to tax in the hands of the
income tax @ 20% company.
ii) Shareholders Income arising to Income arising to shareholders taxable as
shareholders exempt capital gains under section 46A
under section 10(34A)
COMPUTATION OF CAPITAL GAINS [Sec. 48]

STCG: Capital gains arising on transfer of a short term capital asset are called STCG.
Manner of Computation - Sec.48 (For Non depreciable assets)
Full value of Consideration XXX

Less: Transfer Expenses XXX
Net Consideration XXX
Less:
Cost of Acquisition XXX
Cost of Improvement XXX XXX
Gross Capital Gains/Lossf XXX
Less: Exemption U/s. 54B, 54D, 54G, 54GA XXX
Net STCG/L XXX
LTCG: Capital gains arising on transfer of a Long term capital asset are called LTCG.
Manner of computation of LTCG: Replace Indexed Cost of acquisition and Indexed Cost
of Improvement for Cost of Acquisition and Cost of Improvement and available all exemptions
Sec. 54 to 54GB.
COA IN CASE OF SPECIAL CATEGORY ASSETS -SEC. 55
COST OF ACQUISITION & COST OF IMPROVEMENT

Nature of Asset Cost of Acquisition Cost of Improvement
Self- Generated Goodwill of Business, Right to
manufacture / produce! process any NIL NIL
article/right to carry on business
45
Self- Generated Tenancy rights, Route Actual Cost Incurred
permits, Loom Hours, Trade Marks, Brand NIL
name related to business
Any other self-Generated Asset Not ascertainable Not ascertainable
(C G. is not (C.G is not chargeable)
chargeable)
C.B.D.T. Circular: Transfer of Goodwill by professional firm & notional transfer of goodwill
will not attract capital gains.
FORFEITURE ADVANCE - SEC. 51
ADVANCE RECEIVED &

FORFEITED
Before 1-4-2014 After 1-4-2014
It is reduced from COA (Before

It is directly charged under the head
indexation) charged under the Head
IFOS U/s 56(2)(ix).
CG u/s 51.
INDEXATION
Current Year (FY: 2017-18): CII No. 272

Available from the year of acquisition or from the year 2000-01 whichever is late.
𝟏
INDEXED COST OF ACQUISITION = = 𝟐 × 𝟑
1 = Cost of Acquisition [or] FMV as on 1/4/2000 as the case may be.

2 = Indexed factor for2000-01 or for the first year of acquisition by the assessee, whichever
is later.*
3 = Indexation factor for the year of transfer.
* The previous owner holding period is to be ignored as per Act, But as per Manjula.
J. Shah case law (Mumbai High court) the previous owner holding period is taken
for indexation
COST OF IMPROVEMENT
Cost of improvement
The amount incurred for improving the asset Indexation
• Cost of improvement incurred indexed COI

CII in year of transfer
before 1/4/1981 is IGNORED = COI ×
• COI in relation to Good will, Right CII in year of COI incurred
are also Ignored
RATES OF TAXES ON CAPITAL GAINS
Taxation of capital gains
Indexation is not LTCG @ 20% STCG

available for
following In care listed
financial
securities Sec.111A Other than
Non-resident Slump Debentures securities sec. 111A
investing in sale except
financial indexed @ 15%
asset by way bonds Without With As per slab
of foreign @ 20% issued by Indexation Indexation rates
exchange LTCG govt. @ 10% @ 20% Sec:111A
securities are
@ 10% equity shares
Tax @ LTCG or equity
10% Which is more oriented
beneficial to an mutual funds
assesse. should be a
STCA and STT
(securities
transition tax)
have to paid
Section Particulars
Any income arising from the transfer of a capital asset being a unit of Unit
10(33)
Scheme 1964 of UTI.
Individual/HUF + Transfer of UAL + compulsory acquired by CG/RBI + Used
10(37) for agriculture purpose + 2 years before transfer by Individual/HUF or his
parents.
Any income arising from the transfer of a long term capital asset being an
equity share in a company or a unit of an equity oriented fund shall be
exempt, if such transaction is chargeable to securities transaction tax.
Note: The income arising from transaction undertaken in foreign currency
10(38)
on a recognized
stock exchange located in an International Financial Services Centre shall be
exempted U/S 10(38) even though STT is not paid in respect of such
transactions.
SEC. 50 - COMPUTATION OF C.G’S IN CASE OF DEPRECIABLE ASSET'S
Must be at No
least 1 asset in
the block
Yes
Yes Must be some No

value of asset in
the block
Sec. 32 Sec. 50
(Depreciation) (Short term capital gain)
Whole block Part of block

transferred transferred
NC > WDV NC > WDV

STCG = NC - WDV STCG = NC - WDV
NC < WDV NC < WDV

STCL = NC - WDV Sec. 32 depreciation
SEC. 50B – SLUMP SALE

a) Transfer of whole business for Lumpsum consideration (Without valuing individual assets
& liabilities)
b) Any profits arising from such sale shall be chargeable as capital gains.
c) > 36 Months: If business was held for more than 36 Months, Then the capital
gains shall be treated as LTCG.
d) Cost of Acquisition + Cost of Improvement = Net worth of the business.
e) Net worth = Total value of total assets-value of outside liabilities. The total value of
total assets shall be:
i) In the case of depreciable assets - WDV as per I. Tax act.
ii) In the case of other assets -Book values (Other than Revaluation Figures)
iii) Sec. 35AD assets- Nil.
f) A C.A. report certifying the computation of Net worth to be enclosed.
SEC. 50C - SPECIAL PROVISIONS FOR COMPUTATION OF CONSIDERATION

a) What it says: Where the consideration for the transfer, of land or building or both
whether registered or through agreement to sell or by power of attorney, is < stamp duty
value, then the value so adopted shall be taken as consideration, (i.e. Stamp duty value
= Consideration)
b) Sec 50C shall not apply if the Stamp Duty valuation does not exceed 105% of
the actual consideration.
c) Refer to V.O.: When the assessee claims that the stamp duty value > FMV.
d) Such reference shall not be made, if the stamp duty value has been disputed in any appeal
e) Action can be taken on report:
i) Value determined by V.O. >Stamp duty- A.C. shall take stamp duty value =
Consideration
ii) Value determined by V.O. < Stamp duty-A.O. may take determined value =
Consideration.
iii) Value determined by V.O. < Sale consideration-A.O. shall take Actual consideration
Consideration.
f) C.G.'s = Consideration – Cost / lndexed Cost
g) Subsequent to the making of assessment, if such value is revised in any appeal, the A.O.
shall amend the assessment order to recompute the capital gain.
SEC. 50D – FMV TO VE 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 then the value of such asset shall be deemed to be valued
at the fair market value of said asset on the date of transfer.
SEC. 55A – REFERENCE TO VALUATIONER

For ascertaining FMV, the A.O. may refer the valuation of a Capital Asset to a V.O. (V.0.)
a) Already valued: Even if the A. O. is of the opinion that the value so claimed is less than its
FMV
b) If not so, if the A.O. is of the opinion.
i) That the FMV of the asset > 15 % of the value Or by ₹25,000 Or
ii) That having regard to the nature of the Asset, it is necessary to make the reference.
The valuation report of the V.O. shall be binding on the A.O.
Sec. 112A – LONG TERM CAPITAL GAINS ON CERTAIN ASSETS

a) Conditions:
i. Total Income includes Capital gains on transfer of an equity share/ a unit of equity
oriented fund/ a unit of business trust
ii. STT has been paid
 In case of Equity Share: on acquisition and transfer
 In case of a unit of Equity Oriented Fund or Business Trust: on Transfer
b) Tax Payable shall be the aggregate of:
i. Amount of income tax calculated on such LTCG exceeding ` 100000 @ 10%
ii. The amount of income tax payable on Total Income [Excluding (i) above]
Sec. Applicab Applicabil Sale of New Asset / Other
No le Asset to be ity of Investment Conditions
Asset to be Purchased Time Limit Quantum of Exemption
Assesse Transfer C.G. A/c
e Scheme
54 If New Asset is –
transferred
With in 3 Yrs., STCG
Individual
Residential House Purchase within 1 Least Amount of Applicabl arising on transfer shall
& One Residential House
Property (LTCG) Yr. before (or) 2 Yrs. Investment Or Capital Gain e be computed
HUF
by Adjusting COA
(Exemption
Claimed Earlier
54B 2 Yrs. In use
Individual
Urban Agriculture Agriculture Land Within 2 Yrs. From Applicable before (Assesses/
& Same as Sec. 54 Same as Sec. 54
Land (Capital Asset or not) the Date of Transfer Parents/ Any
HUF
Member of HUF)
54D Compulsory L&B is Purchased / Purchase / Construct 2 Yrs. In use
Any Acquisition of L & B Constructed for within 3Yrs. After Applicabl before Sale
Same as Sec 54 Same as Sec. 54
Assessee Industrial Industrial Undertaking Transfer e Assesses
Undertaking
54F If Investment is  Net If New Asset
Purchase within 1 Yr. Consideration then Total C.G. Transferred within 3 Not >
Individual
Any LTCA before (or) 2 yrs. After is Exempt otherwise Applicabl Yrs., CG Exempted 1 RHP on
& One Residential House
(Other than RHP) Construction Within 3Yrs. proportionate e Earlier Shall be Taxed as Date of Transfer
HUF
From the Date of Transfer (C.G x Act. Investment CG (Other than New')
Net Consideration) in PY of Transfer.
If investment
LTCA Purchased NHAI / Same as Sec. 54 Transferred / converted
Any (Land or RECL bonds/PCFL/ IRFC (But Restricted to 50 Lakhs within 3 Yrs., CG
54EC Purchase within 6 months N.A
Assessee Building or redeemable after 3 in any F.Y) exempted earlier shall –
from the date of Transfer
both) years be taxed as LTCG in PY
of transfer
LTCG/Conversion
Purchase notified units of
Any Any LTCA Same as Sec. 54
specified fund units issued Purchase within 6 months
54EE Assessee transferred on or (But Restricted to 50 Lakhs in NA Same as Sec. 54 EC –
before 01.04.19 from the date of transfer
after 01.04.16 any F.Y.)
of such fund
8. INCOME FROM OTHER SOURCES
Overview of IOS
Income from Other Sources (Sec.56 to 59)
Sec. 56 Sec. 57 Sec. 58 Sec. 59
Chargeability Deductions Amounts not Deemed Income

deductible
CHARGING SECTION - SEC.56(1)

Basis Incomer from other sources is the last and residual head of income. It covers
of any income, which does not fall under any other head of income. in other
charge words, the following conditions should be satisfied –
a) There must be an income.
b) Such income is not exempt under the provisions of this Act.
c) Such income is not chargeable to tax under any of the previous heads of
income.
Examples:
Director’s
Rent from Income from
Sitting Fee, Interest Royalty
vacant land sub letting
Mp’s, MLA’s
METHOD OF ACCOUNTING – SEC. 145

Cash basis or mercantile basis whichever is opted by assessee.
Exceptions: The following are taxable only on actual receipt basis
a) Deemed dividend income covered u/s. 2(22)(e);
b) Interest on compensation or enhanced compensation-Sec 145A
INCOME CHARGEABLE UNDER THIS HEAD - SEC.56(2)
INCOME CHARGEABLE ONLY UNDER THIS HEAD
1. Dividend (u/s 2(22)(e), Foreign dividend) 8. Gift
2. Winning from lotteries, etc. 9. Interest on compensation./ Enhanced
3. Employees' contribution towards staff compensation
welfare scheme. 10. Any sum received during the previous year
4. Interest on securities (debentures, 2014-15 (or any subsequent year) as an
Government securities/bonds) advance or otherwise in the course of the
5. Rental income of machinery, plant or negotiations for transfer of a capital asset (if it
furniture let on hire. is forfeited and the negotiations do not result in
6. Rental income of plant, machinery or transfer of such capital asset.
furniture along with letting out of building 11. Any compensation received in connection
and they are not separable. with the termination or modification of
7. Sum received under Keyman Insurance terms of any employment (if not
policy including bonus by legal representative chargeable under PGBP and Salary)
Note: Income mentioned at point numbers 3, 4, 5, 6, and 7 are taxable under the head "IFOS" only
if the same is not taxable under section 28 as business income.
58 CA Shashank Sharma
DIVIDEND
Final dividend & Deemed dividend u/s 2(22)(a), 2(22)(b), 2(22)(c), 2(22)(d) from
Indian Co. is exempted u/s 10(34) in the hands of SH upto 10 lakhs. (because
DIVIDEND co. will have to pay D.D.T u/s 115-0) (Refer sec. 115BBDA)
Deemed dividend u/s 2(22)(e) from Indian Co. (or) any dividend from Foreign
Co. is taxable in the hands of SH under the head IFOS
TAX ON CERTAIN DIVIDENDS RECEIVED FROM DOMESTIC COMPANIES

[SEC.115BBDA] (W.E.F. A.Y. 2018-19]
a) Applicability: Assessee being an Individual, HUF or a firm, Resident in

India.
b) Nature of Income: Any income in aggregate exceeding ₹10 Lakhs, by way of Dividends
declared, distributed or paid by a Domestic Company.
c) Rate of tax: Tax = 10% on the Income in aggregate by way of such Dividends. (Note: this
is in addition to the Tax payable on Other Total Income).
d) No Deduction: No deduction in respect of any expenditure or allowance or set off of loss
shall be allowed to the Assessee under any provision of the Act in computing the income
by way of dividends u/s.115BBDA (1)(a).
e) Meaning: Dividend shall have the same meaning as per Sec. 2(22) (a), (b), (c), (d) but
Excludes sub – clause (e) thereof
Trade advance not to be treated as deemed dividend under section 2(22)(e)
CONCEPT OF GIFT
Gifts received by Individuals and HUF [Sec. 56(2)(vii)]
1) Applicability: Individual and HUF. (Gift is taxable Irrespective of the fact the donors (or)
recipients are Resident/Non-resident)
2) Taxability: The following amounts received by an individual or HUF from any person(s)
(subject to exceptions) is taxable as Income from Other sources.
Movable and Tax treatment Singlet all

immovable property transactions
If aggregate amount > ₹50,000, then
Cash Gift All transactions
whole amount will be taxable
Immovable property
If SDV> ₹50,000, SDV is taxable. Single transaction
without consideration
If (consideration-SDV) > ₹50,000, then
immovable property for
the difference is chargeable to tax. Single
inadequate
Note: SDV may be taken on the date transaction.
consideration
of agreement.
Movable property without If aggregate FMV > ₹50,000, then it is
All transactions
consideration taxable
Movable property for If (consideration-FMV) > ₹50,000, then
All transactions
inadequate consideration the difference is chargeable to tax
Exceptions - Any sum of money/property which is received
a) From any relative.
b) On the occasion of marriage of an individual.
Under a will or by way of inheritance.
c) In contemplation of death of payer.
d) From a local authority.
e) From any fund, university, other educational institution, hospital/medical institution, any
trust.
f) From registered charitable institutions.
FIRM OR CLOSELY HELD COMPANY RECEIVES SHARES OF ANOTHER CLOSELY

HELD COMPANY [Sec.56(2) [vii a].
Nature of Receipt Sum Taxable

The shares are received without
If aggregate FMV > ₹50.000, then it is taxable
consideration
The shares are received for an if (consideration-FMV) > ₹50,000. then the
inadequate consideration. difference is chargeable to tax.
Note: Any shares received by an individual or HUF as a consequence of demerger or
amalgamation of a company or business reorganization of a co-operative bank shall not be
subject to tax by virtue of the provisions contained in section 56(2)(vii).
SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE TO BE TREATED AS

INCOME [Sec.56 [2][vii b]
Applicability : Closely held company
Event : Issue of shares to a resident at a premium i.e. In excess of face value.
Consideration : If aggregate amount received in excess of fair market value is taxable
in the hands of company under the head other sources
Share premium in excess of FMV

[Sec. 56(2) (viib)]
Any co. received consideration No tax in case

by issue of shares exceeds the
face value
Issue of shares received by a
venture capital undertaking from
The amount exceeds the FMV of a venture capital company.
shares shall be taxable
TREATMENT OF SOME INCOMES
Winnings from Gross winnings from lotteries, crossword puzzles and races including
lotteries, horse races (other than income from the activity of owning and
crossword maintaining race horses), card games and other games of any sort or
puzzles, horse from gambling or betting (of any nature whatsoever) are chargeable
races and card to income-tax. These incomes are taxable at a flat rate of 30 percent
games, etc. (+SC+EC+SHEC) on the gross winnings (without claiming any
allowance or expenditure)
Taxable on "receipt" basis, if the assessee maintains books of account
Interest on
on "cash basis". It is taxable on "due" basis when books of accounts
securities
are maintained on mercantile system. Interest becomes due on due
Grossing up of
dates specified on securities irrespective of the holding period of the
interest
Assessee.
Income from If there is letting of machinery, plant and furniture and also letting of
composite letting the building and the two lettings form part and parcel of the same
of building, transaction or the two lettings are inseparable (in the sense that letting
machinery, plant of one is not acceptable to the other party without letting of the other;
or furniture for instance, letting of cinema house along with letting of furniture)
then such income is taxable under the head "IFOS" (if it is not taxable
as business income). This rule is applicable even if sum receivable for
the two lettings is fixed separately.
Interest received on compensation/ enhanced compensation shall be
Interest received
taxable in the year in which is received. However, 50 percent of such
on compensation/
interest is deductible under section 57. in other words, 50 percent
enhanced
interest received on compensation / enhanced compensation is
compensation
effectively chargeable to tax.
EXPENSES DEDUCTIBLE UNDER THIS HEAD [SEC.57]
Expenses deductible under this

Head (sec.57)
Interest is Employees Family Letting of plant, Interest received Any other

payable contribution to pension furniture with on compensation exp. incurred
outside India welfare fund (or) without (or) enhanced for earning
building compensation income
1/3rd of
Deductible if Deductible if it such
Tax has been is credited to income (or) Repairs, 50% such Not be a cap.
Deducted at employees a/c 15,000 insurance and Income (or) personal
source within due whichever depreciation expense
date is less Incurred during
P.Y.
INADMISSIBLE EXPENDITURE – SEC. 58
a) Income tax.
b) Interest or salary payable outside India, if tax has not been paid or deducted at source.
c) Expenses in respect of royalty and technical fees received by a foreign company.
d) No deduction in respect of winnings from lotteries, crossword puzzles, races including
horse races etc.
DEEMED INCOME CHARGEABLE TO TAX - SEC. 59

Loss or Expenditure already allowed in computation of Income recovered shall be treated as
the income of the previous year in which it is Recovered.
9. CLUBBING PROVISIONS
Clubbing Income
(Sec; 60) Sec; 61 Sec; 64(1)(ii) Sec; 64(1)(vi) if Sec;

Income alone is Income arise as Remuneration asset is transferred 64(1)(vii)(viii)
transferred a results of of spouse to son’s wife when asset is
without transfer transfer of without adequate transferred for
of asset asset consideration then benefit of
income from such spouse or
asset is taxed in son’s wife
It is deemed to It is deemed to the hands of
be the income of be the income of transferor
transferor transferor
Income from
that asset is
taxed in the
Only if Transfer is
hands of
revocable, retransfer (or) In case individual Not applicable in transferor to
given right to reassume have “substantial case of technical the extent of
power over the asset (or) interest in the & professional such benefit
income to transferor concern knowledge
In case both have substantial interest

then income clubbed in income of
person who have higher income
before not including such income
*Substantial interest for this purpose means the interest of individual together with the
interest of relatives. Relative includes brother, sister, spouse, any linear ascendant or
descendant (Sec.2(41)).
GIFT TO SPOUSE -SEC. 64(1)(iv)
Where an asset (other than house property)

Exceptions to Sec.64(1)(iv):
is transferred by an individual to his or her,
a) If the assets are transferred before
spouse directly or indirectly, otherwise
marriage.
than for adequate consideration or in
b) If the assets are transferred in
connection with an agreement to live connection with an agreement to live
apart, any income from such asset will be
apart.
deemed to be the income of the transferor.
c) If on the date of accrual of income,
transferee is not spouse of the transferor.
Other than H.P.: H.P. was excluded d) If the assets are transferred for adequate
because it is covered u/s 27(1). consideration
e) If the property is acquired by the spouse
out of pin money.
Income of minor child Sec: 64(1A)
Income of minor child is In case of manual Minor child Minor suffering

clubbed in the hands of works or income of (Age < 18 from any disability
parents whose income professional work years) specified u/s 80U
is more
Clubbing is
Clubbing Includes Step
Exempt up to Rs.1500 not applicable
provision does child Adopted
p.a. per child u/s sec: not apply child Married
10(32) minor
daughter
Note: Income from accretion property is not clubbed in the income of transferor
Conversion of self-acquired
property Sec: 64(2)
If asset is converted or transferred When the converted property is portioned

for inadequate consideration in to among the members of family, then income
joint family property derived from such property, as received by
the spouse of transferor will be included in
hands of transferor
Income from that property is
included in transferor income
OTHER POINTS TO BE REMEMBERED

Spouse / Son's Wife Minor Child
1. Income from transferred asset is to be clubbed. Correct Correct
2. Income from income cannot be clubbed. Correct Wrong
Income from accretion of asset cannot be
3. Correct Wrong
clubbed.
4. All income is clubbed, No only income from Yes all income
the transferred asset is
is clubbed clubbed
10. SET OFF AND CARRY FORWARD OF
LOSSES
Sec. Nature of Loss Details of set-off Conditions / Exceptions
70 Current Year Loss Set-off within the same Exceptions: Loss from –
within the same source 1) Activity of owning and maintaining of
Source race horses.
2) Speculation Business.
3) Short Term Capital Loss (set-off against
STCG / LTCG.)
4) Long Term Capital Loss-(set-off only
against LTCG.)
71 Current Year Loss Set-off against income Exceptions:
under any head under any other head. 1) Loss from —
a) Activity of owning and maintaining
of race horses.
b) Speculation business.
c) Capital Gains.
2) Loss under the head PGBP cannot be
set-off against Income from Salaries.
3) Loss from specified business u/s 35AD
can be set-off only against Income from
any other specified business [U/S.73A]
71B Brought forward Set-off only against Permissible for 8 Assessment years
Unabsorbed Loss Income from House immediately succeeding the Assessment
from House Property. And from any other Year in which the loss first arose.
Property Head upto Rs. 200,000
72 Brought Forward Set-off only against income 1) Carry forward and set-off is permissible
Unabsorbed under the head Profits and for 8 assessment years immediately
Business Gains of Business Or succeeding the assessment year in
Loss other than Profession which the loss first arose.
Speculation Loss 2) Loss can be carried forward, only if the
return is filed u/s 139 (1) and
determined and communicated u/s 157.
32(2) Brought forward Set-off against any head Unabsorbed Depreciation Loss can be
Unabsorbed of Income carried forward for any number of years until
it is fully set-off.
73 Brought forward Set-off only against 1) Carry forward and set-off is permissible
Unabsorbed income under Speculation for 4 assessment years
Speculation business immediately succeeding the assessment
Business year in which the loss first arose.
Loss 2) Loss can be carried forward, only if the
return is filled u/s 139(1) and
determined and communicated u/s 157
73A Brought forward Set-off only against 1) Loss can be carried forward for any
loss Income from any other number of years until it is fully set-off.
of Specified Specified Business 2) Loss can be carried forward, only if the
Business return is filed u/s 139 (3) and
u/s 35AD determined and communicated u/s 157
74 Brought forward Set-off only against 1) Carry forward and set-off is permissible
Unabsorbed Loss Income under the head for 8 assessment years immediately
under the head Capital Gain. succeeding the assessment year for
Capital Gains. which the loss was computed.
2) Loss can be carried forward, only if the
return is filed u/s 139(1) and is
determined and communicated u/s 157
3) STCL can be set-off against any Capital
Gain. However. LTCL can be set-off only
against LTCG.
74A Brought forward Set-off only against 1) Carry forward and set-off is permissible
Unabsorbed Loss Income from owning and for 4 assessment years immediately
from activity of maintaining Race succeeding the assessment year
owning & Horses for which the loss was computed.
maintaining 2) Loss can be carried forward, only if the
Race Horses return is filled u/s 139(1) and
determined and communicated u/s.
157.
Note: Set-off of losses not permissible against unexplained income, investments, money etc.
chargeable under sections 68/69/69A/69B/69C/69D [Section 115BEE] Effective from:
A.Y.2017-18
SUMMARISED TABLE
Carry forward Time Return
Set off in the & set off in the limit for u/s
Head of income under year of loss subsequent c/fwd, 139(1)
which loss previous years and set Apply
is incurred Under Under Under Under off of (sec 80)
same other same other losses
head head head head
Income from house property (71B) Yes *Yes Yes No 8 A.Y. No
Profits and gains from business or Yes
profession: (except
 Non-speculation business (72) Yes salaries) Yes No 8 A.Y. Yes
 Speculation business(73) Yes No Yes No 4 A.Y. Yes
 Specified business(73A) Yes No Yes No No limit Yes
 Unabsorbed depreciation Yes Yes Yes Yes No limit No
Capital gains: (74)
 Short term Yes No Yes No 8 AN. Yes
 Long term (NOTE) No No Yes No 8 A.Y. Yes
Income from other sources
 Lotteries, crossword puzzles, Profit from
card games, gambling etc. similar
activities No No No N.A Yes
 Loss from activity of owing and Yes No Yes No 4 A Y. Yes
maintaining race horses (74A)
 Other income Yes Yes No No N.A No
Note: LTCL will be set-off only against LTCG

Loss from Speculation business & Specified business can be Set-off only against similar
business
*house property allowed to be set off from any other head upto rs.200,000
LOSS RETURNS - SEC.80
Assessee claiming the benefit of carry forward of losses u/s 72, 73, 74, 74A (71B is not given)
must file the income tax return within the due date specified u/s 139(1).
11. DEDUCTIONS UNDER CHAPTER -VI A
The aggregate amount of deductions under this chapter shall not exceed GTI.
Sec. 80A(4): Where any assessee claims deduct on U/s 10A, 10AA or IOBA, 80IA, 801B etc.-
no Chapter VI-A deductions are available.
To grant deduction under Sections 80 JJA, JJAA, LA, P, QQB and RRB, the assessee should
have made a claim in ROI. Such failure makes assessee ineligible to avail the deduction.
SEC.80B
GTI = Aggregate of five heads income-adjustment of losses for set off and carry forward (but
before chapter VI A)
SEC. 80AB
Deductions in respect of certain incomes shall be allowed only to the extent they are included
in GTI
Permissible
Section Eligible Assesse Particulars of the section
Deduction
1. Contribution to Life Insurance Premium/Annuity
2. Contribution to Welfare Funds (PPF, SPF,
RPF& superannuation fund )
80C Individual & HUF 3. Contribution to Central Government / post 1,50,000
office/other notified schemes
4. Repayment of housing loan
5. Payment of tuition fees of children
Contribution to certain Pension Funds
- Contribution made to annuity plain of ,the LIC or
any other insurance company approved,
- by IRDA for receiving pension from a fund
80CCC Individual 1,50,000
- If the Assessee or his nominee surrenders the
annuity before its maturity, the surrender value
will be taxable in the year hands of assessee or
nominee.
Contribution to Atal pension Yoiana or Notified
Pension Scheme of Government: In case of a 10% of salary or
Applicable to salaried individual, deduction of own contribution 20% of GTI, as the
those individual U/s 80CCD(1) is restricted to 10% of his salary, in case may be
who are any other case restricted to 20% of G.T.I (However , the limit
80CCD
employed by the Note 1: The entire employers' contribution would of 1.5 lakh u/s
(1)/(2)
C.G or any other be included in the salary of the employee. 80CCE does not
self-employed Employers contribution U/s 80CCD(2) is apply to employer's
individuals restricted to 10% of salary. contribution u/s
Note 2: Lump sum amount received by the nominee 80CCD(2)
on account of closure or opting out of pension
scheme referred in sec 80CCD(1) or (18), on the
death of the assessee to be exempt (Sec 80CCD)
Contribution made
Applicable to
by
those individual
employee/ then he
who are
80CCD Contribution to Notified Pension Scheme of can avail further
employed by the
(1B) Government: deduction of
C.G or any other
₹50,000 in addition
self-employed
to the overall ceiling
Individuals
limit of ₹1,50,000.
Maximum amount deductible u/s 80C+80CCC-1-
80CCE
80CCD can't exceed 1.5 lakh
Deduction in respect of Investment made
under any equity' savings scheme
Conditions
1. His gross total income does not exceed ₹12
Lakhs.
50% of amount
Resident 2. He has acquired listed equity shares or listed
invested or
80CCG Individual, being a units of equity oriented - fund in accordance
25,000
new retail investor with a notified scheme.
Whichever is lower
3. The assessee is a new retail investors as
specified in the above notified scheme.
4. The investment is locked - in for a period of 3
years from the date of acquisition in accordance
with the above scheme,
Note: Deduction shall be allowed for 3 consequent
AYs beginning with AY relevant to the PY in which
listed equity shares or listed units of EOF were
acquired.
Medical Insurance Premium Maximum
1. GIC or any other insurance company (approved R5.25,000
by IRDA) and approved by the Central (50,000 in case the
government on health of assessee, spouse, individual /his
dependent children is deductible upto ₹25,000 or her
(in case of senior citizens the limit is ₹50,000) spouse is a senior
2. Payment should be made by any other mode citizen)
80D Individual/HUF
other than cash. However, payment on account (+)
preventive health check-up (upto ₹5,000 with in Maximum
the ceiling limit) can be made be any mode ₹25,000
(including cash). (50,000 in
3. In case of senior citizens, the medical case either
expenditure incurred is allowed as deduction or both
of the parents
upto ₹50,000 even if no insurance premium is are senior citizen)
paid.
4. The Contributory health service scheme of the
department of Atomic Energy, contribution to
which would qualify for deduction.
Maintenance including Medical treatment of a

dependent disabled
1. The assesses should have incurred any
expenditure for the medical treatment (including
Flat deduction
nursing), training and rehabilitation of
₹75,000
dependent person with disability.
(irrespective of
2. The assessee shall have to furnish a copy of the
expenditure
certificate issued by the medical authority in
incurred .
the prescribed form and manner, along with
80DD Resident Note: In case
ROI.
Individual/1HUF of severe
3. If the dependent, being a person with disability,
disability
predeceases the individual or the member of
(80%) flat
HUF in whose name the amount was
deduction
invested, then an amount equal to the amount
shall be
deposit under the scheme shall be deemed to be
₹1,25,000
the income of the assesses of the P/Y in which
such amount is received by the assessee and
shall accordingly be taxable as the income of
that P/Y
Deduction for medical treatment of specified Actual X
diseases expenditure
1. For claiming deductions the assessee shall have or 40,000
to submit a certified obtained from proscribed (1,00,000 in
authority in proscribed form. case of senior
2.For this purpose dependent means citizen)
3. In case of the assessee is Individual – For whichever is
himself or his dependent spouse, children, lower
Resident
80DDB parents. brother or sister In case of the assessee Less: The X
individual/HUF
is HUF – For any member of his family amount
reimbursed
from the
Insurance
company
or employer.
Permissible X
Deduction
₹75,000 in case of a
person with
Deduction in case of a person with disability Any disability.
Resident
80U person, who is certified by the medical authority to ₹1,25,000 in case of
Individual
be a person with disability, a person with severe
disability (80% or
more disability).
Interest on loan taken for higher education The deduction is
1. Interest on loan should be taken from any available for interest
financial institution or approved charitable payments in the
institution. Initial A/Y and 7
2. Such loan is taken for pursuing his higher A/Y’s immediately
80E Individual education of his or her relative (i.e., spouse or succeeding the
children of the individual ) Initial A/Y. Or
Until the interest is
paid in full by the
assesses.
Whichever is earlier
Additional deduction of ₹60,000 for interest
on loan borrowed for acquisition of self
occupied house property from any financial
Deduction upto
institution.
₹50,000 (This
Subject to following conditions:
80EE Individual amount is in addition
1. Loan taken period 01-04-2016 to 31-03-2017
to 2 lakhs u/s
2. Amount of loan ≤ 35 lakhs
24(b))
3. Value of house property ≤ 50 lakhs
4. The assesses does not own any residential
house property on the date of sanctioned loan.
Donations to certain funds, charitable
institutions etc
C–1 C–2 C–3 C–4
100% 50% 100% 50%

deduction of deduction of deduction of deduction of
amount amount amount amount
donated donated donated donated
without any without any subject to subject to
Qualifying Qualifying 10%of 10%of
limit limit *adjusted *adjusted
Gross Total
Mode of Payment-
Gross Total
Income Income Donations can be
C–1 C–3 C– 4 given in cash or by
cheque or draft.
1. PM’s national 1. Govt. or any 1. Any fund or
relief fund
However, no
other approved institution which
2. National local authority satisfies deduction shall be
defense fund institution or conditions
All 3. National Association to mentioned in allowed under
80G children fund be utilized for 80G(5).
assessee 4. Swachh the purpose of 2. Govt. or any local section 80G in
Bharat Kosh promoting authority to be
5. Clean Ganga utilized for any
respect if cash of
family planning
Fund, etc. 2. Donation by a purpose other an amount
company to the than purpose of
C–2 Indian Olympic promoting family exceeding ₹10000
Associations or planning.
to an institution 3. Any authority set from the
1. PM’s Fund notified U/s up for promoting
any housing
assessment year
Drought relief 10(23C) for the
Fund. development of accommodation or 2013-14.
2. Jawaharlal Infrastructure town planning
Nehru for sports and 4. Any corporation
Memorial games in India established by the
Fund. of for the Govt. for
3. Indira Gandhi sponsorship of promoting int. of
memorial sports and minority
Trust games in India community.
4. Rajiv Gandhi 5. Any notified
Foundation Temple, Mosque,
Gurudwara,
Church or other
place for
renovation or
repair.
6. Temple, Mosque,
Notes:
1. *Adjusted GTI = Gross Total Income - Deductions u/s.
80C to 80U except 80G-Long term Capital gain -
STCG taxable u/s. 111A.
2. Category III & IV put together should not exceed 10%
of Adjusted GTI
3. Donations in kind, Donations to Individuals and
Donations given for
4. the benefit of a particular religious community are
not qualified for
Rent Paid If all the
1. Assessee should be a self-employed or a conditions are
salaried employee who is not in receipt of HRA. satisfied rent
2. The assesses, his spouse, minor child or the deduction to the
HUF of which he is a member should not own extent of least of
any residential accommodation at that place. the following :
Where he resides or performs the duties of his - ₹5,000 per
office or employment. month
- Excess of rent
paid over 10%
of total
80GG Individual
income.
- 25% of total
income.
Note: Here total
income means
GTI-Deductions
U/s 80C to 80U
except 80GG-
LICG-STCG
taxable U/s
111A.
Donations scientific research or rural
development
- Donations to approved scientific research
association, University, College or institution
for scientific research, Statistical research,
All assesses
Research in social or to the National Fund for
not rural development. Similarly, and contribution
having any Actual
80GGA to the National Urban Poverty Eradication Fund
income setup by the Govt. is also eligible for deduction. contribution
chargeable
- Donations can be given in cash or by cheque
under PGBP or draft.
Note: However, no deduction shall be allowed
under section 80GGA in respect of a cash
contribution (exceeding ₹10,000) from the AN
2013-14.
Actual
Contribution to political parties and electoral
contribution
trust
Indian (otherwise than
80GGB Any amount contributed to a political party or
Company by way of cash)
electoral trust is deductible while calculating the
total income of an Indian Company.
All Contribution to political parties and
assesses electoral trust
(other Any amount contributed to a political party or
Actual
than Local electoral trust is deductible while calculating the
contribution
authority total income of the assessee
80GGC (otherwise than
and every
by
Artificial
judicial way of cash)
funded by
Govt.)
Where the gross total income of an assessee to
whom section 44AB applies, includes any profits
and gains derived from business, deduction u/s
80JJAA would be allowed for three assessment
years including the assessment year relevant to
the previous year in which such employment is
provided.
Note:
Additional employee cost: Total emoluments
paid or payable to additional employees employed
during the previous year.
Emoluments: any sum paid or payable to an
employee in lieu of his employment by whatever
name called a deduction of
Additional employee: An employee who has an amount
been employed during the previous year and equal to 30 %
whose employment has the effect of increasing of additional
80JJAA Any assessee
the total number of employees employed by the employee cost
employer as on the last day of the preceding year. course of such
Exclusions from the definition: business in the
a) an employee whose total emoluments are previous year
more than ₹25,000 per month; or
b) an employee for whom the entire contribution
is paid by the Government under the
Employees' Pension Scheme notified in
accordance with the provisions of the
Employees' Provident Funds and
Miscellaneous Provisions Act, 1952: or
c) an employee employed for a period of less
than 240 days during the
previous year; (150 days for Apparel/
Footware/ leather industry) or
d) an employee who does not participate in the
recognised provident fund.
Deductions in respect of Certain Incomes:
Eligible Permissible
Section Eligible Income
Assessee Deduction
Royalty income, etc., of authors of Amount received
certain books other than text books: or receivable or
Lump sum consideration for assignment or ₹3,00,000,
Resident grant of any of his interests in the copyright whichever is less.
80QQB
individual of any book, being a work of literary, artistic Maximum 15% of
or scientific nature or of royalty or copyright value of books sold
fees Royalty or copyright fee received
otherwise than by way of lump sum
Resident Royalty on patents:, Any income by way of Whole of such
individual, royalty on patents income or
80RRB
being a ₹3,00,000,
patentee whichever is less.
Interest on deposits in savings account: Actual interest
Any income by way of interest on deposits in subject to
a savings account with a bank, a co-operative a maximum of
society or a post office (not being time ₹10,000.
Individual
80TTA deposits, which are repayable on expiry of
or a HUF
fixed periods)
Other than assessee referred to in
section 80TTB
Interest on deposits in savings account: Actual interest

Senior Any income by way of interest on deposits in a subject to
80TTB
citizen savings account with a bank, a co-operative a maximum of
society or a post office. ₹50,000
12. RETURN OF INCOME
Section Particulars Time Limit

(i) Every Company and Firm should 1. Co. have any
Return of Income or Loss international transactions u/s
(ii) Individual/HU FIA0P/B0I/AJP to file 92E- NOV 30th
Return if Total income before 2. Company- SEP 30th
10(38), Chapter VIA is > Basic 3. Person other than
Exemption Limit. company-
(iii) W.e.f AY 2016-17 Person, being a (a) Where Tax Audit
Resident other than Not Ordinarily required u/s 44A8- SEP
Resident in India as per Sec. 6(6), 30th
139 (1)- who is not required to furnish a (b) Any other Case- July
Voluntary Return u/s 139(1) and who at any 31th
Return time during the previous year-
• Holds, as a Beneficial owner or
otherwise. any Asset (including
any Financial Interest in any
entity) located outside India or
has Signing Authority in any
Account located outside India, or
• Is a Beneficiary asset including
any Financial interest in any
Entity) located outside India.
1) Assessee has incurred loss and
wants to carry forward u/s 72, 73,
73A, 74 and 74A
139 (3) -
2) This Return mandatory only for c/fd
Loss Due date u/s 139(1)
of current year loss. and not for prior
Return
year losses. Not applicable for carry of
losses u/s 71B, 32(2), 35(4),
36(1)(ix).
Assessee fails to furnish the return on or Before the completion of
before the due date u/s 139(1) assessment or before the end of
POINTS TO BE NOTED: RAY, ‘Whichever falls Earlier.
 Loss cannot be c/fd. Thus belated return can be filed
139 (4) -  It can be revised. only in case a person has not
Belated  Liable for interest u/s 234A. furnished his return within the
Return  Return filed after end RAY, liable for time allowed under section
271F penalty ₹5,000. 139(1). Also, the belated return
cannot be furnished after the
end of the relevant
assessment year.
Filed Return within the date u/s 139 (1) Before completion of assessment
or belated return u/s 139(4), and in that or within 1 year from end of RAY,
139 (5) - return discover any error omission / whichever falls Earlier.
Revised wrong statement
Return POINTS TO BE NOTED:
 Loss return can be revised.
 Belated Return can be revised.
1) All Annexures/Statements/Columns Within 15 days of receipt of notice
not filled in from AO, or such time as extended
2) General / specific / Other details not by him.
enclosed.
PONITS TO BE NOTED:
• The Assessing Officer shall intimate to
139 (9) –
the Assessee, the defect in the Return,
Defective
and give him an opportunity to rectify
Return
the defect.
• If not rectified, the Return is to be
treated as Invalid Return.
• It Rectification is done before
completion of assessment, AO can
condone the delay.
Sec: 139(A)
Sec: 139(4B) Sec: 139(4C) Sec: 139(4D) Sec: 139(4E)

Returns of By certain
political parties associations /
institutions Any university, Every business
college (or) trust shall
research furnish return
If total income Following entities association of its income in
of political have furnish ROI which are every PY
party exceeds income before accorded
basic exemption allowing exemption approval u/s.35
limit before u/s 10, chapter VI, For Sec:139(1)
allowing exemption exceed basic and all provisions
u/sec 13A, exemption limit Have file ROI as
of this act shall
Chapter for Sec: 139(1)
apply
VIA
CEO have to
furnish ROI
 Research association 10(21)
 News agency 10(22B)
Due date  Association or institution 10(23A) / (23B)
Audit done – 30th Sep  Institution, university or other education institution (or)
Audit not done – 31st hospital (or) other medical institution 10(23C)
July  Trade union 10(24)
 Mutual fund referred 10(23D)
It is permanent account number allotted by assessing officer for the
What is PAN? purpose of Identification. Its number contains 10 digit both numeral
and alphabet
Who should Every person who is required to file return of income. Apply in Form
apply? No. 49A.
No PAN for 1. Non Resident 2. Charitable 3. Person earning only
whom? Trusts agriculture Income
Compulsory i. On all iii. Shares v. Bank account vii. Land &

quotation of returns exceeds Building
PAN? ₹50,000 exceeds
ii. Motor iv. Jewellery > vi. Hotel Bill ₹10,00,000
Vehicle ₹5,00,000 exceeds
₹50,000
What if PAN not Section 272B: Penalty
Higher deduction of tax at source
quoted ₹10,000
RETURN TO BE SIGNED BY WHOM - SEC.140
No Assessee Signatory /verified by

1. Political party Chief Executive Officer
2. Local Authority Principal officer.
3. a. Individual a. Individual himself.
b. When absent from India, mentally b. His guardian or any other person
incapacitated, for any other reason he duly authorised by him.
is not able to sign.
4. a. HUF a. Kartha
b. When the Kartha is absent from India b. Any other adult member of family.
or is mentally incapacitated.
5. a. Company a. Managing Director
b. No MD or MD is unable to sign. b. Any other director.
c. When Co. is not resident in India. c. A person who holds a Power of
d. Where Co. is in liquidation. attorney from the company,
e. When the Co. managed by Govt. d. Liquidator.
e. The principal officer.
6. Partnership firm Managing partner (or) any other
partner other than minor.
7. Limited Liability Partnership (LLP)  Designated Partner
 Any partner (When Designated
partner is unable to sign and
verify the return)
8. Association of Persons (AOP) Any member or principal officer.
9. Any other person That person/other competent person.
Note: A return of income U/S 139, which are not signed, is not regarded as return. w.e.f.
01-10-2014, the word signed is substituted with "verified" and similarly for all its grammatical
variations.
13. ADVANCE TAX AND INTEREST
1. Liability of pay Advance Tax:
Who is liable to pay If Tax payable by any person for the Assessment year
Advance Tax (Sec. 208) immediately following the Financial Year, is ₹10,000 or
more.
Advance Tax Not The provisions of Advance Tax shall not apply to a Resident
applicable (Sec. 207) Senior Citizen who is of the age of 60 years or more, and
does not have any income chargeable under the head
Profits and Gains of Business or Profession.
2. Amount of Advance Tax payable (Sec. 209):
Compute tax on estimate total income xxx

Less: Rebate and Relief (xxx)
Add: Surcharge and Cess xxx
Less: Tax deducted at source and tax collected at source (xxx)
Note: The amount of TDS & TCS shall not be reduced from Total income, if the Deductor
has paid the amount without deduction of tax or the collector has received the amount
without the collection of tax (Sec.209)
3. Due Dates:
a) Common advance tax payment schedule for both corporates and non-corporates
(other than an eligible assessee in respect of eligible business referred to in section
44AD) from 1st June 2016.
[Amount payable w.e.f. 1-6-2016 for corporate

Due date of
and non-corporate assessee (i.e., all assessees)]
installment
other than eligible assessee u/s 44AD
On or before 15 June
th
Not less than 15% of advance tax liability
On or before 15th Not less than 45% of advance tax liability, as reduced by
September the amount, if any, paid in the earlier installment.
Not less than 75% of advance tax liability, as reduced by
On or before 15th
the amount or amounts, if any, paid in the earlier
December
installment or installments.
The whole amount of advance tax liability as reduced by
th
On or before 15 March the amount or amounts, if any, paid in the earlier
installment or installments.
b) Assessess covered u/s 44AD: w.e.f. 1-06-2016, an eligible assessee opting profit
on presumptive basis u/s 44AD, shall be required to pay advance tax of the whole
amount in one installment on or before the 15th march of the financial year.
However any amount paid by way of advance tax on or before 31st March shall also
be treated as advance tax paid during each financial year on or before 15th March.
4. Sec.234B - Payment of Interest for Default in payment of Advance tax:
Amount on Ret of
Period for which
When interest is which Interest
interest
payable interest is
is payable
payable
An assessee who From April 1st of the
is liable to pay assessment year to the
Simple interest
advance Interest is date of determination of
@ 1 per cent for
tax, has failed to payable on income u/s143 (1) or if
every month or
pay such tax. assessed tax regular assessment is
part of month
Or made to the date of
regular assessment.
An assessee who
has paid advance
tax but the Simple interest @
Assessed tax
amount of 1 per cent for
minus - do -
advance tax paid every month or
advance tax
by him is less part of month
than 90% of
assessed tax.
5. Sec. 234C - Payment of Interest for Deferment in payment of Advance tax:

a) Manner of computation of interest under section 2340 for deferment of advance
tax by corporate and non-corporate assesses other than an eligible assessee u/s
44AD.
Specified Specified
Shortfall in advance tax. Period
date %
15% of tax due on returned income (-)
15th June 15% 3 months
advance tax paid up to 15th June
15th 45% of tax due on returned income (-)
45% 3 months
September advance tax paid up to 15th September
15th 75% of tax due on returned income (-)
75% 3 months
December advance tax paid up to 15th December
100% of tax due on returned income (-)
15th March 100% 1 month
advance tax paid up to 15th March
Note: However, if the advance tax paid by the assessee on the current income,
on or before 15th June or 15th September, is not less than 12% or, as the case
may be, 36% of the tax due on the returned income, then, the assessee shall not
be liable to pay any interest on the amount of the shortfall on those dates.
b) Computation of interest under section 234C in case of an eligible
assessee in respect of eligible business referred to in section 44AD:,
Assessee has failed to pay the advance on its current income on or before 15th
March is less than the tax due on the returned income, then, the assessee shall
be liable to pay simple interest at the rate of 1% on the amount of the
shortfall from the tax due on the returned income.
c) Non-applicability of interest under section 234C in case of Capital gains
and casual income:, Interest under section 234C shall not be leviable in respect
of any shortfall in payment of tax due on returned income, where such shortfall is
on account of under-estimate or failure to estimate —
i) The amount of capital gains;
ii) Income of nature referred to in section 2(24)(ix) i.e., winnings from lotteries,
crossword puzzles etc.
iii) Income under the head "Profits and gains of business or profession" in cases
where the income accrues or arises under the said head for the first time.
However, the assessee should have paid the whole of the amount of tax payable in
respect of such income referred to in (i), (ii) and (iii), as the case may be, had such
income been a part of the total income, as part of the remaining installments of advance
tax which are due or where no such installments are due, by 31st March of the financial
year.
6. Sec. 234F – Fees For Default In Furnishing Return Of Income:

a) Condition: Return is not filed within due date u/s. 139(1)
b) Amount of Penalty:
Total Income of the person Upto ` 5,00,000 Above ` 5,00,000
Return On or before 31st Dec ` 1,000 ` 5,000
is filed After 31 Dec
st
` 1,000 ` 10,000
14. TAX DEDUCTED AT SOURCE
TAX DEDUCTED AT SOURCE – Sec. 192 TO 206
a) There is always a time gap between deriving of income and payment of tax thereon.
The objective of the provisions of tax deduction at source is to avoid this time gap in
collection and also to ensure regular flow of tax revenue to the Government.
b) The payer, being the person who is deducting tax at source, is responsible for interest,
penalty and prosecution in respect to defaults committed.
c) Different rates of TDS are provided under respective sections for various payments
made. Only in the case of salary payment, the employer shall apply the income-tax
rates applicable for individual assesses.
Threshold Rate of Time of Payments / Income
Sec. Payment Payer Payee
Limit TDS deduction exempted from TDS
Basic Average rate
exemptio of Income
n limit tax
Allowances, to the extent
(₹2.50.00 computed on
At the time of exempt under section 10,
192 Salary 0/ Any person Individual the basis of
payment and exempted perquisites
₹3,00,00 the rates in
would be excluded
0 as the farce
case may
be)
trustees of 10% (if PAN
premature
EPFS is furnished,
withdrawal At the time of
192A 50,000 or any individual otherwise ––
from payment
authorised IMMR)
RPF
person
8% Some exempted interest
Savings payments are interest -
(Taxable)  On any security of
Bonds, the Central
2003 - Government or a State
10,000 Government.
Interest on Interest  Payable to LIC, GIC or
Securities on any of the four public
Debentur sector insurance
At the time of
es issued companies formed by
credit of such
by a GIC in respect of any
income to the
company securities owned by it
account of the
in which Any or in which it has full
193 Any person 10% payee or at
the public Resident beneficial interest.
the time of
are
payment,
substanti
whichever is
ally
earlier.
interested
; paid or
credited
to a
resident
individual
or
HUF -
₹5,000
 Payable to anyother
insurer in respect of
any securities owned
by it or in which it has
full beneficial interest,
 Payable on any
security issued by a
company, where such
security is in
dematerialized form
and is listed on a
recognized stock
exchange in India
 Dividend credited or
paid to LIC, GIC or any
of the four public
sector insurance
companies formed by
GIC, or any other
insurer, in respect of
The Principal
2,500 in a shares owned by it or
Officer of a Resident At the time of
194 Dividend financial 10% in which it has full
domestic Individual payment
year beneficial interest.
company
 Dividend referred to in
section 115-O, since
the domestic company
distributing dividend
has paid dividend
distribution tax on
such dividend.
1) 10,000 Interest credited or paid
in a Any to:
financial Resident  any banking company,
year or a cooperative
(50,000 society engaged in the
for Senior business banking
Citizen),  any early financial
in case of corporation
interest established or under a
paid by — Central, State
i) a Provincial Act
b Any person,  The Life Insurance
anki other than Corporation of India
At the time of
ng an  the Unit Trust of India;
credit of such
com individual or  Any company and
income to the
Interest pany HUF not cooperative society
account of the
other than : liable to tax carrying on the
194A 10% payee or at
interest on ii) a audit business of insurance.
the time of
securities coop u/s,44AB in  Notified institution,
payment,
erati the association, body class
whichever is
ve immediately of institutions,
earlier.
Socie preceding associations bodes
ty financial year  Interest credited or
enga paid by a firm to a
ged partner, Interest
in credited or paid by a
Bank cooperate society to
ing its member or to any
busin ot-cr cooperative
ess; society, etc.
and
iii) Depo
sits
with
post
office
.
2) 5,000 in
a financial
year, in
other
cases.
Winnings
from any Payment
lottery,
of an
crossword Any At the time of
194B puzzle or card
Amount. Any Person 30% Nil
Person payment
game or other exceeding
game of any 10,000
sort
Book Maker
Payment or a person
of an holding
Winnings
amount license for Any At the time of
194BB from horse 30% Nil
exceedin horse racing, Person payment
race
g wagering or
₹10,000 betting in any
race course
Single sum Central /State 1% of sum
credited or Govt., Local paid or
paid authority credited, if
exceedi Central/' the payee is Any sum credited or paid
ng State, an At the time of to a contractor in
30,000 company' Individual credit of such transport business, if the
or The trust Any or HUF 2% sum to the contractor furnishes his
aggregat firm, trust, Resident of sum paid account of PAN to the person
Payments
e of cooperative contractor or credited, the paying or crediting such
194C To
sums Society, for if the payee contractor or sum.
Contractors
credited individuals/ carrying is any other at the time of Any sum credited or paid
or paid HUFs liable out any person payment, by an individual or HUF
during to tax audit work whichever is Exclusively for personal
the in the (includin Earlier purposes of such
financial immediately g supply individual or HUF.
year preceding of
exceeding financial labour)
1,00,000 year.
At the time of
credit of such
income to The
15,000 in a account
Insurance Any
194D financial Any person 5% of the payee Ni
Commission Resident
year or at the time
of payment,
whichever is
earlier
Less than
100000
(aggregat
e amount
Any sum
of
under a Life Any At the time of Sums which are exempt
194DA payment Any person 1%
Insurance Resident Payment under section 10(10D)
to a
Policy
payee in
a
financial
year)
Any person, At the time of
other than an credit of such
individual or income to the
HUF not account of the
Commission 15,000 in a liable to tax payee or at Commission or brokerage
Any
194H or financial audit u/a 5% the time of payable by BSNL or MTNL
Resident
brokerage year 44AB in the payment, to their PCO franchisees
immediately whichever is
preceding earlier.
financial
year.
Any person, Al the time of
other than an credit of such
For P & M
individual or income to the
or
HUF not account of the
1,80,000 in equipment-
liable to tax Any payee or at
a 2%
194-I Rent audit US Resident the time Nil
financial For land,
44AB in the payment, of
year building,
immediately pay whichever
furniture or
preceding is earlier.
fixtures 10%
financial
year.
At the time of
credit of such
Payment on to the account
₹50 lakh
transfer of Any person, of the
(Considerati Resident Payment for transfer of
194-IA certain being a 1% transferor or
on Transferor agricultural land
immovable transferee at the time of
for transfer
property payment,
whichever is
earlier
At the time of
Individual/ HUF
credit of rent,
(other than
for the last
Individual/HUF
month of the
whose total
P.Y. or the last
sales, gross
month of
receipts or
tenancy, if the
Payment of turnover from
50,000 for property is
rent by business or
a month or Any vacated
194-IB certain profession 5%
part of a resident during the
individuals carried on by
month year, as the
or HUFs him exceed the
case may be,
limits specified
to the account
u/s 44AB in the
of the payee
immediately
or at the time
preceding F.Y.)
of payment
responsible for
whichever is
paying rent
earlier?
Fees for 30,000 in a Any person, At the time of Any sum by way of fees
professional financial other than an credit of such for professional services
or technical year, individual or sum to the credited or paid by
Royalty/ for each HUF not account of the an individual
Non-compete category liable to tax payee or at the or HUF exclusively for
fees/ of income. audit u/s time of personal purposes of
Director's (However, 44AB in the Any payment, such individual or any
194J 10%
remuneration this immediately Resident whichever is member of HUF.
limit does preceding earlier
not financial
apply in year.
case of
payment
made to
director of
a
company).
Compensati
on on ₹2,50,00
Compensation on
acquisition 0 in a Any At the time of
194LA Any person 10% acquisition of
of certain financial Resident Payment
agricultural land.
immovable year
property
Any payment At the time of
195 to Non- nil Any person Non- As specified credit of such
resident (Resident or resident by Finance sum to the
(other than non- Act or under account of the
salary) resident) an payee or at the Nil
agreement tune of
u/s. 90 or payment,
90A whichever is
earlier
Note: TDS when deductible?
Section Time of Deduction

192,194,194B,194BB,194DA,194EE, 194F,194LA Only at the time of payment
193,194A,194C,194D,194E,194G,194H,194-1,194- Time of Credit
IA,194J,194LB,194LC,194LD,195 Or whichever is earlier
Time of Payment
Note: No education cess on the above rates except payment to non-residents, No
surcharge except payment to foreign company (2%) u/s 195 and u/s,192(1A).Where the
payment exceeds Rs,1 crore,
Applicability of Surcharge and Education Cess over and above the rates of TDS prescribed
under respective sections are summarized hereunder:
Payee Applicability of surcharge & Education cess

i) Surcharge and Education Cess as applicable to individuals shall be
applied on the amount of TDS computed on Salaries.
Resident
ii) No Surcharge and cess shall be applied in other cases of deduction of
tax at Source.
Non Resident, Surcharge @ 15% is applicable where the aggregate payment or credit
other than subject to TDS exceeds ₹1 crore Education cess @ 3% is applicable.
company
Surcharge % 2% is applicable where the aggregate payment or credit
Foreign
subject to TDs exceeds ₹1 crore and @ 5% where such income exceeds
Company
₹10 crores. Education cess @3% is applicable.
TIME OF REMITTANCE TO THE GOVERNMENT -Sec.200 / Rule 30
Tax deducted by or on behalf of the Government:
Situation Time of deposit of TDS

Payment of tax without production of On the same day when tax is deducted.
income Tax Challan
Payment of tax accompanied by Income On or before 7 days from the end of the month
Tax Challan in which the deduction is made or income tax
is due u/s 192 (1A)
Tax deducted by other persons:
Situation Time of deposit of TDS

Income or amount is credited or paid in On or before the 30th of April
the month of March
In any other case On or before 7 days from the end of the month
in which the deduction is made or income tax
is due u/s 192 (1A)
The AO may in special cases, with the approval of JCIT, permit the payment of TDS on
quarterly basis as under -
Applicable Sections 192, 194A, 194D, 194H

Payment Date July 7th, Oct. 7th, January 7th , April 30th
CONSEQUENCES OF FAILURE TO DEDUCT OR PAY — SEC. 201
1. According to Sec.201 (1), a person shall be deemed to be an `assessee in default' in case

he commits any of the following violation:
Responsibility Violation
To deduct tax in respect of all types of Fails to deduct or after deduction fails to pay
payments covered under TDS provisions, the whole or any part of the tax as per law.
Employer to pay tax on the non-monetary Employer fails to pay, whole or any part of Tax
perquisites provided to the employee. on such non-monetary benefit.
Where an assessee is deemed to be in default, the assessing officer may levy penalty to
the extent of tax and interest in arrears. However, in a case where the assessing officer
is satisfied that there exist good and sufficient reason which force the assessee to commit
such breach of law, penalty shall not be levied.
2. Interest: Once the assesse is deemed to be in default, interest shall be leviable u/s
201(1A) at the rate of
a) From the date from which tax was deductible to the date of deduction – 1% p.m.
or part there of (delay in deduction).
b) For the date of deduction of tax to the date of actual payment 1.5% p.m. or part
there of (delay in payment).
c) Such interest shall be paid before furnishing the statement u/s 200(3),
FORMS OF TDS CERTIFICATE Sec. 203
1) Form 16 for Salary Sec.192 &Form 16A for all other section except Sec, 194-IA. Form
16B for TDS u/s 194-IA.
2) To be issued from TRACES Websites, by using Manual / Digital Signatures,
3) Time for Issue of TDS Certificates
Form No. Periodicity Time Limit

By 31st May of the Financial Year immediately following the
16 Annual financial in year in which the income was paid and tax
deducted.
Within 15 days from the due date for furnishing Challan
16A Quarterly cum Statement of TDS u/r 31st i.e. 30th July, 30th October,
30th January and 30th May
Within 15 days from the due date for furnishing Challan cum Statement in
16B Form 260B u/s 31A, i.e., within 7 days from date of deduction of Tax.
[Notification No. 39/2013, dated 31.05.2013]
SELF DECLARATION BY PAYEE FOR NON — DEDUCTION— See. 197A
Self-Declaration for Non — Deduction of tax  For All Assesses u/s 193, 194, 194A,
by a person other than Companies / Firms- 194EE, -Form 15G (in duplicate)
the Deductor shall forward a copy of the  For Senior Citizens (Resident in India) —
declaration to PCCIT / CCIT / PCIT / CIT Form 15H (in duplicate) only.
within 7 days from the end of the month in
which such declarations are furnished
LOWER RATE OF DEDUCTION / NO DEDUCTION CERTIFICATE FROM AO – SEC. 197
For lower rate of deduction or no deduction  Sec.192, 193, 194, 194A, 194C,
of tax, the Payee shall file an application and 194D,194G, 194H, 1941, 194J, 194LA:
get a Certificate from AO and submit to the Application in Form 13, Certificate in Plain
Payer. Certificate is valid only for the AY Paper
specified therein  Sec.195 — Application in Form 15C or
15D, Certificate in Plain Paper
QUARTERLY STATEMENT / RETURN AND DUE DATE
Sec. 192 193 to 196D 194-IA

27Q 26QB
For Non — Resident, not 26Q For all For Resident Transferor
Form No. 24Q being a Company or other (other than the person
Foreign Company, or Deductees referred in Sec.194LA)
RNOR
31st July, 31st October, 31st January in respect of Challan cum Statement
Due Date, if the
first three quarters of the financial year and on in Form 26QB shall be
Deductor is an
or before 15th May for the last quarter of the furnished within 7 days
office of Govt.
financial year from the date of
15 July, 15 October, le January in respect of deduction of TDS.
th th
Due Date,for first three quarters of the financial year and on [Notification 39/2013,
other persons or before 15th May for the last quarter of the dtd. 31.05.2013]
financial year.
Form 27A The above forms shall be accompanied by declaration in Form 27A
Note: On rectification of field TDS Returns, Correction Statement or Rectification shall also
be furnished.
Difference between TDS and TCS:
TDS TCS
TDS is tax deduction at source TCS is tax collection at source.
Person responsible for paying is Seller of certain goods is responsible for
required to deduct tax at source at the collecting tax at source at the prescribed rate
prescribed rate from the buyer.
Person who grants licence or lease (in respect of
any parking lot, toll plaza, mine or quarry) is
responsible for collecting tax at source at the
prescribed rate from the licensee or lessee, as the
case may be.
Generally, tax is required to be Generally, tax is required to be collected at source
deducted at the time of credit to the at the time of debiting of the amount payable by
account of the payee or at the time of the buyer of certain goods to the account of the
payment, whichever is earlier. buyer or at the time of receipt of such amount
However, in case of these sections i.e., from the said buyer, whichever is earlier.
192,194,194B,194BB,194DA, However, in case of sale of jewellery or bullion, tax
194EE, 194F, 194LA tax is required collection at source is required at the time of
to be deducted at the time of payment receipt of sale consideration in cash.
 Consequences of Not Furnishing PAN:

[Sec 206AA]
In case where deductee does not furnish PAN to the deductor following consequences will
arise:
(i) Tax will be deducted at the higher of rate specified in the relevant provisions, or rate in
force or 20%.
(ii) Declaration u/s 197A, i.e., declaration in Form 15G or 15H as the case may be is not
valid.
(iii) Certificate u/s 197 of lower/ nil deduction will not be issued in case of such deductee.

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Assessment Year 2019-20

Direct Taxes Indirect Taxes

Income Tax Goods & service Tax

WHAT IS INCOME TAX? - Tax on income

(a) The Income Tax Act, 1961.

PERSON - SEC. 2(31) ASSESSEE-SEC. 2(7)

INCOME TAX RATES APPLICABLE FOR THE A.Y. 2019-20

C. SPECIAL TAX RATES:

SURCHARGE: It is a tax on tax.

Definition of Urban Area:

Resident and ordinarily Resident but not ordinarily Non-Resident

Period beginning From Period ending to

RESIDENTIAL STATUS OF OTHER PERSONS

SCOPE OF TOTAL INCOME - SEC. 5

Fees for technical

Clarification regarding liability to income tax in India of a non-resident seafarer receiving

Special Provisions in respect of newly established units in SEZ (sec. 10AA)

Conditions Amount of deductions Period of deduction

Profit of the x Export

100% of the 50% of such Amount transferred

Life Insurance Policy SEC – 10 (10D)

However, the exemption is not available to the following

Income from salaries Sec. 15 to 17

Sec. 15 Sec. 16 Sec. 17

CHARGING SECTION – SEC. 15

Particulars Salary other heads of income

Foregoing is taxable. It is only application of income. Surrender of salary to C.G. is not

COMPUTATION OF TAXABLE SALARY – FORMAT

VARIOUS COMPONENTS TO BE INCLUDED IN GROSS SALARY

i) Wages i) Fully Taxable i) Taxable in the i) Gratuity-10(10) i) SPF

Fully Taxable Exempted Allowances in case Partial Exempted

HRA - Sec. 10(13A)

PRESCRIBED ALLOWANCE WHICH ARE EXEMPT TO CERTAIN EXTENT U/S 10(14)

PERQUISITES AND VALUATION OF PERQUISITES

1. Taxable in the hands of all employees:

Value of accommodation (AS RENT FREE ACCOMMODATION) XXX

RENT FREE ACCOMMODATION U/S. 17(2)(i)

Rent free Accommodation u/s. 17(2)(i)

Unfurnished accommodation (UFA) Furnished accommodation

Taxable Value UFA XXX

15% of Salary 10% of Salary

Rule Nature of Perquisite Taxable Value of Perquisite (TVP)

Value of the Value of the Value of the perquisite

3. Tax free perquisites (For all employees)

Accommodation in a Remote area / Mining Site / On

Leave Travel Concession: Exempt twice in a block of 4 years (2018-2021)

Government employee Non-Government employee

Any gratuity received is

Salary = Basic + DA Salary = Basic + DA (forming part of RB)

Note: Gratuity received during the period of service always taxable.

PENSION - SEC 10(10A)

Uncommuted Pension Commuted Pension

Govt. & Non Govt. employee

Govt. (C.G or state) Others (non-Govt.)

Fully exempt a) Leave encashment received

RETRENCHMENT COMPENSATION —SEC. 10(10B)

VOLUNTARY RETIREMENT SCHEME (VRS) - SECTION 10 (10C)

SALARY DEFINITION IN DIFFERENT SITUATIONS

Computation of Relief when salary is paid in arrears or in advance