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Income Tax Act

INCOME TAX ACT notes

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5 views4 pages

Income Tax Act

INCOME TAX ACT notes

Uploaded by

venturamoffice
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1.

Income from Salary

Formula:

Gross Salary = Basic Salary + Allowances + Perquisites


Taxable Salary = Gross Salary - Exemptions under Section 10
Taxable Income = Taxable Salary - Standard Deduction (₹50,000)

Example:

 Basic Salary: ₹5,00,000


 Allowances: ₹1,00,000
 Perquisites: ₹50,000
 Exemptions: ₹20,000

Calculation:

1. Gross Salary = ₹5,00,000 + ₹1,00,000 + ₹50,000 = ₹6,50,000


2. Taxable Salary = ₹6,50,000 - ₹20,000 = ₹6,30,000
3. Taxable Income = ₹6,30,000 - ₹50,000 = ₹5,80,000

2. Income from House Property

Formula:

Net Annual Value (NAV) = Annual Rental Value - Municipal Taxes Paid
Taxable Income = NAV - Standard Deduction (30% of NAV) - Interest on Home Loan

Example:

 Annual Rental Value: ₹3,00,000


 Municipal Taxes Paid: ₹30,000
 Interest on Home Loan: ₹1,00,000

Calculation:

1. NAV = ₹3,00,000 - ₹30,000 = ₹2,70,000


2. Standard Deduction = 30% of ₹2,70,000 = ₹81,000
3. Taxable Income = ₹2,70,000 - ₹81,000 - ₹1,00,000 = ₹89,000
3. Profits and Gains from Business or Profession

Formula:

Taxable Income = Net Profit as per Books + Disallowed Expenses - Allowed Deductions

Example:

 Net Profit as per Books: ₹4,00,000


 Disallowed Expenses: ₹50,000
 Allowed Deductions: ₹30,000

Calculation:

1. Taxable Income = ₹4,00,000 + ₹50,000 - ₹30,000 = ₹4,20,000

4. Capital Gains

Formula:

Taxable Capital Gains = Sale Price - (Indexed Cost of Acquisition + Indexed Cost of Improvement +
Expenses on Transfer)

Example (Long-term Capital Gains):

 Sale Price: ₹10,00,000


 Indexed Cost of Acquisition: ₹4,00,000
 Indexed Cost of Improvement: ₹1,00,000
 Expenses on Transfer: ₹50,000

Calculation:

1. Taxable Capital Gains = ₹10,00,000 - (₹4,00,000 + ₹1,00,000 + ₹50,000) = ₹4,50,000

5. Income from Other Sources

Formula:

Taxable Income = Total Income - Deductions (if any)

Example:

 Interest Income: ₹1,00,000


 Winning from Lottery (Gross): ₹50,000
 Deductions: ₹0

Calculation:

1. Taxable Income = ₹1,00,000 + ₹50,000 = ₹1,50,000


Gross Total Income

Gross Total Income = Income from Salary + Income from House Property + Profits from Business +
Capital Gains + Income from Other Sources

Example:

 Income from Salary: ₹5,80,000


 Income from House Property: ₹89,000
 Profits from Business: ₹4,20,000
 Capital Gains: ₹4,50,000
 Income from Other Sources: ₹1,50,000

Calculation:
Gross Total Income = ₹5,80,000 + ₹89,000 + ₹4,20,000 + ₹4,50,000 + ₹1,50,000 = ₹16,89,000

Taxable Income after Deductions

Formula:

Taxable Income = Gross Total Income - Deductions under Chapter VI-A (e.g., 80C, 80D, etc.)

Example:

 Gross Total Income: ₹16,89,000


 Deductions under Section 80C (PPF): ₹1,50,000

Calculation:
Taxable Income = ₹16,89,000 - ₹1,50,000 = ₹15,39,000

Tax Calculation on Taxable Income

Formula (For Individuals Below 60 Years under Old Tax Regime):

 Up to ₹2,50,000: Nil
 ₹2,50,001 - ₹5,00,000: 5%
 ₹5,00,001 - ₹10,00,000: 20%
 Above ₹10,00,000: 30%

Example:

Taxable Income = ₹15,39,000

1. ₹2,50,000: Nil
2. ₹2,50,001 - ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
3. ₹5,00,001 - ₹10,00,000: 20% of ₹5,00,000 = ₹1,00,000
4. Above ₹10,00,000: 30% of ₹5,39,000 = ₹1,61,700

Total Tax = ₹12,500 + ₹1,00,000 + ₹1,61,700 = ₹2,74,200


Final Tax Payable:

Add Cess @ 4% on Total Tax:


Cess = 4% of ₹2,74,200 = ₹10,968
Final Tax Payable = ₹2,74,200 + ₹10,968 = ₹2,85,168

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