Income Tax

(A.Y. 2011-12 & 2011-12)

INDEX
1. Introduction 2. Residential Status 3. Tax Rates 4. Income from Salary 5. Income from House Property 6. Income from Business & Profession 7. Capital Gains 8. Income from Other Sources 9. 2/14/2014 Clubbing of Income

Contd
10.Set-off Carry Forward 11.Deductions from Gross Total Income 12.Agricultural Income

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2/14/2014

Charge of Income Tax

Income tax is charged in assessment year at rates specified by the Finance Act applicable on 1st April of the relevant assessment year. It is charged on the total income of every person for the previous year. Total Income is to be computed as per the provisions of the Act. Income tax is to be deducted at source or paid in advance wherever required under the provision of the Act.
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Important Definitions
1. Person u/s 2(31) includes,
a. b. c. d. e. f. g. An Individual, Hindu Undivided Family (HUF), A Company, A Firm, An Association of Persons(AOP) or Body of Individuals (BOI), A Local Authority, Every other Artificial Juridical Person

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Contd
2. Assessment Year u/s 2(9) means, the period of 12 months commencing on the 1st April every year. It is the year (just after previous year) in which income is earned is charged to tax. The current Assessment is 2011-2012.

3. Previous Year u/s 2(34) means, the year in which income is earned.

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Contd
4. Gross Total Income (G.T.I) :- The aggregate income under the 5 heads of income (viz. Salary, House Property, Business or Profession, Capital Gains & Other Sources) is termed as Gross Total Income. 5. Total Income (T.I) :- Total Income of assessee is gross total income as reduced by the amount permissible as deduction under sections 80C to 80U.

Index
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2/14/2014

Types of Residential Status

The different types of residential status are:Resident(R) Not Ordinarily Resident (NOR)

Non-Resident (NR)

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Residential Status of Individual

The residential status of individual will be determined as underAssessee

Basic Condition

Additional Condition

Resident

He must satisfy at one of the basic Not required. conditions. He must satisfy either one or both He must satisfy at least one of the the additional conditions given u/s basic conditions. 6(6).

Not Ordinarily Resident

Non-Resident

Should not satisfy any of the basic Not required. conditions.

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Contd
Basic Conditions u/s 6(1):
i. He must be in India for a period of 182 days or more during the previous year; or ii. He must be in India for a period of 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year.

Additional Conditions u/s 6(6):

i. He must be a non-resident in India in nine out of the ten previous years preceding that year; or ii. He must be in India during 7 preceding previous years for aggregate period of 729 days or less.
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Residential Status of HUF

The residential status of HUF depends upon the control and management of its affairs.
Resident HUF: If the control and management of the affairs of HUF is situated wholly or partly in India then HUF is said to be Resident in India. Non- Resident HUF: If the control and management of the affairs of HUF is situated wholly outside India then HUF is said to be Non- Resident in India. Not Ordinarily Resident HUF: A resident HUF is said to be Not Ordinarily Resident in India if Karta or manager thereof, satisfies any of the additional conditions u/s 6(6).

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Residential Status
According to section 6(3) an Indian Company is always Resident in India. A foreign Company will be resident in India if Control or Management of its affairs is wholly situated in India. Residential Status of a firm or AOP or other person depends upon control and management of its affairs.
Resident: If the control and management of the affairs of a firm or AOP or other person is situated wholly or partly in India then such a firm or AOP or other person is said to be resident in India. Non-Resident: If the control and management of the affairs of a firm or AOP or other person is situated outside India then such a firm or AOP or other person is said to be non-resident in India.
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Incidence of Tax
Tax Incidence Particulars R NOR NR

Income received in India by or on behalf of assessee

Income deemed to received in India by or on behalf of assessee

Yes
Yes

Yes
Yes

Yes
Yes

Income accruing or arising in India Income deemed to accrue or arise in India

Yes Yes

Yes Yes

Yes Yes

Income which accrues or arise outside India

Yes

No

No

15

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16

RATES OF INCOME TAX (Assessment Year 2009-10)

1.

In case of every Individual/ HUF/ AOP/BOI artificial juridical Person.

S.No INCOME TAX RATE

Up to 180000

NIL

180010-500000

10%

500010-800000

20%

Above 800000

30%

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17

Contd
2. In case of resident women below 65 years of age.

S.No

INCOME

TAX RATE

Up to 190000

NIL

2 3 4

190010-500000 500010-800000 Above 800000

10% 20% 30%

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Contd
3. In case of resident senior citizen i.e. age of 65 years or above

S.No

INCOME (A.Y. 2010-11) Up to 250000

TAX RATE

NIL

250010-500000

10%

500010-800000

20%

Above 800000

30%

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Contd
PERSONS TAX RATE

FIRMS
DOMESTIC COMPANY FOREIGN COMPANY LOCAL AUTHORITIES CO-OPERATIVE SOCIETIES Up to 10000 10000-20000 Above 20000

30%
30% 40% 30%

10% 20% 30%

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Surcharge & Cess

PERSON Individual / AOP / BOI / HUF / Artificial Juridical Person Firm Domestic Company Foreign company Co-operative Society RATE OF SURCHARGE 10% of tax liability if Income Exceeds Rs 10 Lacs 10% of tax liability, if Income exceeds Rs. 1 Crore 10% of tax liability, if Income exceeds Rs. 1 Crore 2.5% of tax liability, if Income exceeds Rs. 1 Crore N.A.

Local Authority

N.A.

Education Cess and Secondary & Higher Education Cess is applicable on every person @ 2% & 1% respectively on tax liability and surcharge applicable, if any.

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Index

21

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Meaning
Salary includes [section17(1)] :i. Wages ii. Any annuity on pension iii. Any gratuity iv. Any fees, commission, bonus, perquisite on profits in lieu of or in addition to any salary on wages v. Any advance of salary vi. Any earned leave vii.Employers contribution (taxable) towards recognized provident fund.

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BASIS OF CHARGE
Income is taxable under head Salaries, only if there exists Employer Employee Relationship between the payer and the payee. The following

incomes

shall be chargeable to income-tax under the head

Salaries:1.Salary Due 2.Advance Salary [u/s 17(1)(v)] 3.Arrears of Salary Note: (i)Salary is chargeable on due basis or receipt basis, whichever is earlier. (ii)Advance salary and Arrears of salary are chargeable to tax on receipt basis only.

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Allowances
Allowance is generally defined as a fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by the employee or as compensation for unusual conditions of that service. 1.Dearness Allowance - It is Always Taxable. 2.City Compensatory Allowance - It is Always Taxable.

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Contd
3. House Rent Allowance
Exemption In Respect Of House Rent allowance is regulated by rule 2A. The least of the three given below is Exempt from Tax.

An Amount Equal to 50 % of Salary. Where Residential House in situated at Bombay, Calcutta, Delhi or Madras and An Amount Equal to 40 % of Salary where Residential House is situated at any Other Place.

House Rent Allowance Received by The Employee in Respect of The Period during which Rental Accommodation is Occupied by the Employee during the Previous Year.

The Excess of Rent Paid over 10 % of Salary.

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Contd
4. Entertainment allowance [sec.169(ii)]Entertainment allowance is first included in salary in come under the head salaries and thereafter a deduction is given on the basis enumerated below:
Status of Employee

Non- Government

Government

Nothing is deductible

Least of the Following is deductible : 1. Rs. 5000 2. 20 % of basic salary 3. Amount of entertainment allowance grated during the previous year
27

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Contd
5. Special allowances prescribed as exempt under section 10(14) In the cases given below the amount of exemption under section 10(14) is :
i. ii. The amount of the allowance ; or The amount utilized for the specific purpose for which allowance is given. Whichever is lower.

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Contd
Exemption is available on the aforesaid basis in the case of following allowances

:-

NAME OF ALLOWANCE Travelling Allowance/ Transfer Allowance

NATURE OF ALLOWANCE Any allowance granted to meet the cost of travel on tour or on transfer (including sum paid in connection with transfer, packing and transportation of personal effects on such transfer).

Conveyance Allowance

Conveyance allowance granted to meet the expenditure on conveyance in performance of duties of an office (expenditure for covering the journey between office and residence is not to be included).

Daily Allowance

Any allowance whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from this normal place of duty.

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Contd
6. When exemption does not depend upon expenditure - In the cases given below, the amount of exemption does not depend upon expenditure incurred by the employee. Regardless of the amount of expenditure, the allowances given below are exempt to the extent of
i. the amount of allowance ; or ii. the amount specified in rule 2BB,

Whichever is lower.
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Contd
Name of allowance Special Compensatory (Hill Areas) Allowance Exemption as specifiedin rule 2BB Amount exempt from tax varies from Rs. 300 per mount to Rs. 7,000 per month The amount of exemption varies from Rs. 200 Per month to Rs. 1,300 per month Rs. 200 Per Month The amount of exemption isa.70 per cent of such allowance; or b.Rs. 6,000 per month, whichever is lower. The amount exempt is limited to Rs. 100 per month per child up to a maximum of two children. It is exempt from tax to the extent of Rs. 300 per month per child up to a maximum of two children.

Border area allowance

Tribal areas/ scheduled areas allowance Allowance for transport employees Children education allowance

Hostel expenditure allowance

Compensatory field area allowance 2/14/2014

Exemption is limited to Rs. 2,600 per month in some cases.

31

Contd
Name of Allowance Compensatory modified area allowance Counter insurgency allowance Transport allowance Underground allowance High altitude allowance Highly active field area allowance Exemption as Specified in Rule 2BB Exemption is limited to Rs.1,000 per month in some cases. Exemption is limited to Rs.3,900 per month in some cases. It is exempt up to Rs. 800 per month (Rs. 1,600 per month in the case of an employee who is blind or orthopedically handicapped) Exemption is limited to Rs. 800 per month. It is exempt from tax up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month (for altitude above 15,000 feet). It is exempt from tax up to Rs. 4,200 per month.

Island duty allowance

It is exempt up to Rs. 3,250 per month.

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Contd
7. Allowance to Government employees outside India [Sec. 10( 7)] - Any allowance paid or allowed outside India by the Government to an Indian citizen for rendering service outside India is wholly exempt from tax. 8. Tiffin allowance - It is taxable. 9. Fixed medical allowance It is taxable. 10.Servant allowance - It is taxable.
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Contd
11.Allowance to High Court and Supreme Court Judges - Any allowance paid to High Court Judges under section & 22C of the High Court Judges (Conditions of Service) Act, 1954 is not chargeable to tax. 12. Allowance received from a United Nations Organization - Allowance paid by a United Nations Organization to its employees is not taxable by virtue of section 2 of the UN (Privileges and Immunities) Act, 1974.
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PERQUISITES
Perquisite may be defined as any Casual Emolument or Benefit attached to an office or position in Addition to Salary or Wages. It also denotes something that benefits a man by going in to his own pocket. Perquisites may be provided in cash or in kind. Perquisites are included in salary income only if they are received by an employee from his employer.

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Perquisites as defined u/s 17 (2)

The term perquisites is defined by section 17 (2) as including the following items:
1.The value of Rent-free Accommodation provided to the assessee by his employer 2.The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer

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Contd
3. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases :
i. ii. By a company to an employee who is a director thereof ; By a company to an employee, being a person who has substantial interest in the company ; iii. By any employer (including a company) to an employee to whom provisions of (i) and (ii) above do not apply and whose income under the head salaries exclusive of the value of all benefits or amenities not provided for by way of monetary benefits, exceeds Rs. 50,000

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Contd
4. Any sum paid by the employer in respect of any obligation which but for such payment would have been payable by the assessee. Obligation of Employee met by Employer. 5. Any sum payable by the employer, whether directly or through a fund other than a recognized provident fund or approved superannuation fund or a deposit-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity 6. The value of any other fringe benefits or amenity as may be prescribed
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TERMINAL BENEFITS
1. Gratuity [Sec.10(10)] Gratuity is a retirement benefit. It is generally payable at the time of cessation of employment and on the basis of duration of service. Tax treatment of gratuity is given below:

Status of Employee

Government Employee

Non-government employee covered by the payment of Gratuity Act, 1972

Non-government employee not covered by the payment of Gratuity Act, 1972

It is fully exempt from tax under section 10(10)(i)

Least of following is exempt: 1) 15 days salary x Length of service 2) Rs. 3, 50, 000 3) Gratuity actually received.

Least of following is exempt: 1) month avg. salary x Length of service 2) Rs. 3, 50, 000 3) Gratuity actually received. 39

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Contd
2. PENSION [SEC. 17(1)(ii)] - Pension is chargeable tax as follows :PENSION

COMMUTED

UNCOMMUTED

Government Employee

Non-Government Employee
If Gratuity Received If Gratuity not Received Taxable for Government as well as Non-Government employees

Entire Commuted Pension is exempt whether or not Gratuity received.

1/3 of commuted pension is exempt

1/2 of commuted pension is exempt 40

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Contd
3.Annuity [Sec. 17(1)(ii)] An annuity payable by a present employer is taxable as salary even if it is paid voluntarily without any contractual obligation of the employer. An annuity received from an ex-employer is taxed as profit in lieu of salary. 4.Retrenchment compensation [Sec. 10(10B)] Compensation received by a workman at the time of retrenchment is exempt from tax to the extent of the lower of the following:
a. an amount calculated in accordance with the provisions of sec. 25F(b) of the Industrial Disputes Act, 1947; or b. such amount as notified by the Government (i.e., Rs, 5, 00, 000); or c. the amount received.
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Contd
5. Compensation received at the time of Voluntary Retirement [sec.10 (10C)] Compensation received at the time of voluntary retirement is exempt from tax, subject to certain conditions. Maximum amount of exemption is Rs. 500000.

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Provident Fund
Provident Fund Scheme is a welfare scheme for the benefit of employees. The employee contributes certain sum to this fund every month and the employer also contributes certain sum to the provident fund in employees A/c. the employers contribution to the extent of 12% is not chargeable to tax.

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LEAVE SALARY
Encashment of leave by surrendering leave standing to ones credit is known as leave salary.
LEAVE ENCASHMENT

During Employment

Retirement / Leaving the Job

Chargeable to Tax

Government Employee

Non-Government Employee

Fully Exempt

Least of following is exempt :1) Earned Leave on the basis of Average Salary 2) 10 x Average monthly salary 3) Rs. 300000 4) Leave Salary Received 44

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Deductions Admissible in Computing Income under head SALARIES

1. Entertainment allowance granted by employer [Sec.16(ii)]: This deduction is available in case of Government employees only. 2. Employment Tax / Professional Tax [Sec.16(iii)]: Any sum paid by assessee on account of a tax on employment within the meaning of Article 276(2). Under the said article employment tax cannot exceed Rs. 2500 p.a.

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Relief in respect of Advance or Arrears of Salary u/s 89

When an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, Relief is granted on an application made by the assessee to the assessing officer.

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Index

46

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47

Basis of Charge
The basis of charge of income under the head income from house property is the Annual Value of the property. Annual Value is inherent capacity of the property to earn an income. It is the amount for which the property might reasonably be expected to let from year to year. Income from house property is charged to tax on Notional Basis, as generally tax is not on receipt of income but on the inherent potential of the house property to generate income.
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Conditions to be Satisfied
1. The property must consist of buildings or lands appurtenant to such buildings. 2. The assessee must be the owner of such house property. 3. The property should not be used by the owner thereof for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax.

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Computation of Gross Annual Value (GAV)

Step 1 : Calculate Expected Rent as follows:Particulars (a) Fair Rent of the House (b) Municipal Value of House (c) Whichever is more of (a) and (b) (d) Standard Rent Expected Rent [whichever is less of (c) and (d)] Amount xxx xxx XXX xxx XXX Amount

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Contd
Step 2 : Compare Expected Rent & Actual Rent Receivable (ARR). Where the property or any part thereof is let out, If ARR is more than ER referred to in Step 1, then, GAV = ARR If ARR is less than ER and it is due the vacancy of property then, GAV = ARR If ARR is less than ER not owing to vacancy GAV = ER
Note: ARR = Rent Received / Receivable less Unrealized Rent
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Net Annual Value (NAV)

Net Annual Value is the sum computed after deducting from Gross Annual Value, the taxes levied by any local authority in respect of the property. NAV = GAV Municipal Taxes Paid

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Meaning
1. Municipal Valuation :- For collecting municipal taxes, local authorities make a periodical survey of all building in their jurisdiction. Such valuation may be taken as strong evidence representing the earning capacity of a building. 2. Fair Rent of the Property :- Fair rent of the property can be determined on the basis of a rent fetched by a similar property in the same or similar locality. 3. Standard Rent :- Standard rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act.
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Self-occupied Property [Sec. 23(2)]

Property is considered to be self occupied where, the property consisting of house or part thereof is in the occupation of the owner for the purposes of his own residence; or such property cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him.
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Contd

In case of Self-occupied House Property Net Annual Value is always Zero.

Since NAV is zero, the municipal taxes paid by the owner of the house are not deductible.

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Deduction Admissible u/s 24

i. Statutory deduction :- 30% of Annual Value (i.e. 30% of NAV) ii.Interest payable on capital borrowed for acquisition, construction, repair, renewal or reconstruction of house property :- Actual amount of interest for the year on accrual basis plus 1/5th of the interest, if any, pertaining to the preacquisition or pre-construction period.

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Deduction for Interest on Capital Borrowed in case of SOP

Maximum limit of deduction in respect of interest on capital borrowed in case of a Self-occupied property whose annual value is assessed at NIL, is Rs. 1,50,000
CASE Interest on capital borrowed on or after 1-4-1999 for acquisition or construction of house MAXIMUM DEDUCTION

1,50,000 30,000

In any other case

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Recovery of Unrealized Rent [Section 25AA]

Any amount of rent realized by the assessee during the previous year, which he could not realize from a property let to a tenant, shall be deemed to be income chargeable under the head Income from house property. 100% of the amount actually received is taxable in the previous year in which it is realized.

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Arrears of Rent [Section 25B]

Arrears of rent shall be deemed to be income chargeable under the head Income from house property. It shall be charged to income tax as income of previous year in which it is received. Taxable amount is computed as under :PARTICULARS The amount received as arrears of rent Less: 30% of such amount AMOUNT XXX xxx

Amount taxable as arrears of rent

XXX

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Index

59

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Basis of Charge [sec. 28]

The following income is chargeable to tax under the head Profits and gains of business or profession: 1.Profits and gains of any business or profession; 2.Any compensation or other payments due to or received by any person specified in section 28(ii); 3.Income derived by a trade, professional or similar association from specific services performed for its members; 4.The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;
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Contd
5. any profit on transfer of the Duty Entitlement Pass Book Scheme. 6. Any profit on the transfer of the duty free replenishment certificate; 7. Export incentive available to exporters; 8. Any interest, salary, bonus, commission or remuneration received by a partner from firm; Any sum received for not carrying out any activity in relation to any business or not to share any know-how, patent, copyright, trademark, etc.
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Contd
9. Any sum received under a Keyman insurance policy including bonus; 10. Profits and gains of managing agency; and 11. Income from speculative transaction.

Income from the aforesaid activities is computed in accordance with the provisions laid down in section 29 to 44D.

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Expenses Expressly Allowed

1. Rent, rates, taxes, repairs and insurance for building [Sec. 30] 2. Repairs and insurance of machinery, plant and furniture [Sec. 31] 3. Depreciation allowance [Sec. 32] 4. Tea/coffee/rubber development account [Sec. 33AB] 5. Expenditure on acquisition of patent rights and copyrights [Sec. 35A] 6. Insurance premium [Sec. 36 (1) (i)] 7. Premier for insurance on health of employees [Sec. 36(1) (ib)]
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Contd
8. Bonus or commission to employees [Sec. 36(1)(ii)] 9. Interest on borrowed capital [Sec. 36(1)(iii)] 10. Employers contribution to recognized provident fund and approved superannuation fund [Sec. 36(1)(iv)] 11. Contribution towards approved gratuity fund [Sec. 36(1)(v)] 12. Employees contribution towards staff welfare schemes 13. Bad debts [Sec. 36(1)(vii)] 14. Family planning expenditure [Sec. 36(1) (ix)]
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Contd
15. Banking cash transaction tax, securities transaction tax and commodities transaction tax. 16. Advertisement expenses [Sec. 37(2B)]. 17. General Deduction [Sec. 37(1)].

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EXPENSES NOT DEDUCTIBLE

[Section 37(1)]

1. Damages and penalty paid for transgressing the terms of agreement with the State. 2. Penalty and damages paid in connection with infringement of law. 3. Litigation expenditure incurred for curing any defect in the title of assets or completing that title. 4. Litigation expenses for registration of shares. 5. Fees paid for increase of authorized capital.

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Contd
6. Expenditure on raising equity share capital and preference share capital. However, expenditure on issue of bonus shares id deductible. 7. Amount paid for acquiring technical know-how which is to be utilized for the purpose of manufacturing any new article and such know-how is to become the property of the assessee at the end of the stipulated period. 8. Amount expended for acquiring a business or a right of permanent character or an asset which generates income or for avoiding compensation in business.
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Contd
9. Payments made for acquisition of good will. 10. Expenditure incurred for acquiring right over or in land to win minerals. 11. Fees paid to obtain license to investigate and search minerals. 12. Payment made in consideration of acquiring a monopoly right to manufacturer a producer (royalty payable on the basis of goods produced under the same arrangement is, however, deductible).

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Contd
13. Tax paid by the assessee (who is defaulter by not deducting tax at source under section 195) on behalf of non-resident. 14. Compensation paid to contracting party with the object of avoiding an unnecessary investment in capital assets. 15. Expenditure on shifting of registered office. 16. Insurance premia paid by a firm on life insurance policies of its partners. 17. Amount paid by liquor contractor to police staff and other officer to enable it to make unauthorized purchases and sales of liquor.
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Contd
18. Amount paid by a company to the Registrar of Companies as filing fee for enhancement of capital base of the company. 19. Payment made by assessee company which was partner in a firm, to outgoing partners of firm on account of their agreeing to restrain from carrying on similar business for a period of 15 years.

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Specific Disallowances
1. Interest, Royalty, fees for Technical Services payable outside India,if on such amount tax is deductible but tax has not been deducted or deposited with Government. [Sec. 40(a)(i)] 2. Fringe Benefit Tax [Sec. 40(a)(ic)] 3. Income-Tax [Sec. 40(a)(ii)] 4. Salary Payable Outside India without Tax Deduction [sec. 40(a)(iii)] 5. Provident Fund Payment without tax Deduction at Source [Sec. 40(a)(iv)] 6. Certain specified expenses in case of Partnership Firm
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Contd
7. Interest paid by an AOP/ BOI to its members is not allowed as deduction by virtue of sec. 40(ba) 8. Payment to relatives in excess of fair value not deductible [Section 40A(2)] 9. Expenditure in excess of Rs. 20,000 in aggregate in a day paid otherwise than by account payee cheque drawn on a bank or account payee bank draft Not allowable [Section 40A(3))] 10. Amount not deductible in respect of certain unpaid liabilities [Sec.43B]
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Books of Accounts to be maintained [Section 44AA]

The persons carrying on specified professions are required to maintain specified books of account only if the gross receipts of their profession have exceeded Rs. 1,50,000 Every other person carrying on business or profession shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
a) If his income from business or profession exceeds Rs. 1,20,000; b) Total sales/turnover/gross receipts thereof exceeds Rs.10,00,000 c) the assessee has claimed his income lower than deemed profits
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Tax Audit u/s 44AB

This section applies to following :Person carrying on Business Profession Accounts are to be audited for previous year in which Total sales, turnover or gross receipts exceed Rs. 40,00,000 Gross receipts exceed Rs. 10,00,000

Business covered u/s 44AB, He has claimed his income to be lower than the profits or gains 44AE, 44AF, 4BB and 44BBB so deemed under the respective section.

The assessee is required to get his accounts of such previous year audited by a Chartered Accountant before 30th September of the assessment year.
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Special Provisions for Computing Income on Estimated Basis 44AD, 44AE & 44AF
Not withstanding anything contained in Sections 28 to 43C, the following provisions will apply.
Sec. 44 AD Business of Assessee This Section applies if Civil construction or supply of labour for it. Gross receipts of such business during the previous year do not exceed Rs. 40 lacs. Sec. 44 AE Plying, hiring or leasing goods carriages owned by him. Goods carriages owned by assessee at any time during previous year doesnt exceed 10 lacs Sec. 44AF Retail trade in any goods or merchandise. Total business turnover in that previous year doesnt exceed Rs. 40 lacs. 5% of Gross receipts or such higher sum as declared by him in his Return of Income.

Deemed Profits

8% of Gross receipts

(No. of heavy goods vehicle x Rs. 3500 x NM) + (No. of other vehicles x Rs. 3150 x NM) NM = No. of months

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DEPRICIATION [Sec. 32]

Depreciation allowance [Sec. 32] - Depreciation shall be determined according to the provisions of section 32. Conditions for claiming Depreciation - In order to avail depreciation, one should satisfy the following conditions:
Asset must be owned by the assessee. It must be used for the purpose of business or profession. It should be used during the relevant previous year. Depreciation is available on tangible as well as intangible assets.

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Contd
Block of Assets [Sec. 2(11)] - The term block of assets means a group of assets falling within a class of assets comprising
tangible assets, being buildings, machinery, plant or furniture; intangible assets, being know-how, patents, copyrights, trade marks, licenses, franchises or any other business or commercial rights of similar nature. In respect of which the same percentage of depreciation is prescribed.
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Contd
Written Down Value [Sec. 43(6)] - Written down value for the assessment year 2009-10 will be determined as under:
Find out the depreciated value of the block on the April 1, 2008. Step 1 To this value, add actual cost of the asset (falling in the block) acquired during the previous year 2008-09.

Step 2

Step 3

From the resultant figure, deduct money received/receivable (together with scrap value) in respect of that asset (falling within the block of assets) which is sold, discarded demolished or destroyed during the previous year 200809.

2/14/2014

79

Contd
Meaning of Actual Cost [Sec. 43(1)] - It means the actual cost to the assessee as reduced by the proportion of the cost thereof, if any, as has been met, directly or indirectly, by any other person or authority. If written down value of the block of asset is reduced to zero, though the block is not empty - No depreciation is admissible. If the block of assets is empty or ceases to exist on the last day of the previous year though the written down value is not zero - No depreciation is admissible.
2/14/2014 80

Contd
Additional depreciation @ 20% is available on new plant or machinery acquired & installed after 31.03.05, if used in production or manufacturing. If asset is used for less than 180 days during the previous year, in which its purchased, then deprecation & additional depreciation is restricted to 50% of actual depreciation. However in subsequent year full depreciation is allowed irrespective of use. When a depreciable asset(on which depreciation is claimed on straight line basis) of a power generating unit is disposed in a previous year, then terminal depreciation (loss) is deductible or balancing charge (gain) is taxable.
2/14/2014 81

Partnership
Deductibility of interest paid to partners by firm depends upon following : Payment of interest should be authorized by the partnership deed Payment of interest should pertain to the period after the partnership deed. Rate of interest should not exceed 12 percent

Deduction of Remuneration to Partners can be claimed if paid : to a Working Partner According to the Partnership Deed Does not exceed the Permissible Limits.
2/14/2014 82

Contd
The maximum amount of salary paid to all the partners during the previous year should not exceed the limits given below :In case of a firm carrying of a profession referred to in section 44AA On the first Rs. 1,00,000 of the book profit or in case of a loss On the next Rs. 1,00,000 of the book profit On the balance of the book profit In the case of any other firm On the first Rs. 75,000 of the book profit or in case of a loss On the next Rs. 75,000 of the book profit On the balance of the book profit Rs. 50,000 or at the rate of 90 percent of the book profit, whichever is more At the rate of 60 percent At the rate of 40 percent 83 Rs. 50,000 or at the rate of 90 percent of the book profit, whichever is more At the rate of 60 percent At the rate of 40 percent

Minimum Alternate Tax (MAT)

Applicability of Minimum alternate tax (MAT) sec. 115JB : Minimum alternate tax (MAT) sec. 115 JB MAT is applicable in case of companies only. If tax liability of a company under normal provision is lower than 10% of book profit. In such case, book profit shall be deemed as total income & 10% of book profits should be deemed as tax liability. Up to assessment year 2001-02 these provisions were covered by sec. 115 JA.
2/14/2014 84

Contd
A company is allowed credit of tax paid u/s 115JB for the assessment year 2006-07 and onwards in accordance with the provisions of section 115-JAA. MAT credit can be carried forward for a period of seven years.

Index
2/14/2014 85

2/14/2014

86

Basis of Charge
Capital Gains tax liability arises only when the following conditions are satisfied: 1.There should be a capital asset. 2.The capital asset is transferred by the assessee 3.Such transfer takes place during the previous year. 4.Any profit or gains arises as a result of transfer. 5.Such profit or gains is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, and 54GA

2/14/2014

87

Capital Assets
Capital asset is defined to include property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible. However, following are excluded from the definition of capital assets: 1.Any stock-in-trade, consumable stores or raw material held for the purposes of business or profession. 2.Personal effects of the assessee, that is to say, movable property including wearing apparel and furniture held for his personal use or for the use of any member of his family dependent upon him. However, Jewellery, Archaeological Collections, Drawings, Paintings, Sculptures, or Art Work will not be considered as personal effects.
2/14/2014 88

Contd
3. Agricultural land in India provided it is not situated
in any area within the territorial jurisdiction of a municipality or cantonment board, having a population of 10,000 or more; or in any notified area.

4. 6 percent Gold Bonds, 1977 or 7 percent Gold Bonds, 1980 or National Defense Gold Bonds, 1980 issued by the Central Government. 5. Special Bearer Bonds, 1991. 6. Gold Deposit Bonds issued under Gold Deposit Scheme, 1999.
2/14/2014 89

Short-term / Long-term Capital Assets

Short term capital asset means a capital asset held by an assessee for not more than 36 months, immediately prior to its date of transfer. In other words, if a capital asset is held by an assessee for more than 36 months, then it is known as long term capital asset. However in following cases 36 months will be replaced by 12 months : Equity or preference shares in a company Listed Securities Units of UTI Units of a mutual fund specified under section 10(23D) Zero coupon bonds
2/14/2014 90

Important Terms
1. Transfer of Capital Asset :- Transfer, in relation to capital asset, includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law [sec. 2(47)]. 2. Full Value of Consideration :- The expression full value means the whole price without any deduction whatsoever. 3. Expenditure on Transfer :- The expression expenditure on transfer means expenditure incurred which is necessary to effect the transfer.
2/14/2014 91

Contd
4. Cost of Acquisition :- Cost of acquisition of an asset is the value for which it was acquired by the assessee. In case of Depreciable Asset COA is the WDV of asset in the beginning of the year. In case of Slump Sale COA is the Net Worth of the undertaking. 5. Cost of improvement :- Cost of improvement is capital expenditure incurred by an assessee in making any additions/ improvement to the capital asset.

2/14/2014

92

Contd
6. Indexed Cost of Acquisition :- the amount which bears to the COA, the same proportion as CII for the year in which the asset is transferred bears to the CII for the first year in which the asset was held by the assessee or on 01.04.1981, whichever is later. 7. Indexed Cost of Improvement :- an amount which bears to the COI, the same proportion as CII for the year in which the asset is transferred bears to the CII for the year of improvement.

2/14/2014

93

Capital Gain Exemption

1. Profit on sale of property used for residence [S. 54]:Available to Individual & HUF on transfer of Long-term Residential Property and new residential House property is purchased or constructed. 2. Capital gains on transfer of agricultural land [S.54B]:Available to Individual on transfer of Agricultural land used by individual or his parent for agricultural purposes during 2 year preceding date of transfer and Agricultural land (urban or rural) is purchased.

2/14/2014

94

Contd
3. Investment in certain bonds [S.54EC] :Available to all assesses on transfer of any long-term capital asset for purchase of Bonds, redeemable after 3 years issued by (a) National Highway authority of India; or (b) Rural Electrification Corporation,

2/14/2014

95

Contd
4. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house [S. 54F]:- Available to Individual & HUF on transfer of Long-term Asset other than Residential house Property and residential House property is purchased or constructed.

2/14/2014

96

Contd
5. Compulsory acquisition of land & building [S.54D]:- Available to all assesses on Compulsory acquisition of land or building which was used in the business of industrial undertaking during 2 years prior to date of transfer, if New land or building for the industrial undertaking is purchased or constructed.

2/14/2014

97

Contd
6. Shifting of undertaking to rural area [Sec.54G]:Available to all assesses on Transfer of plant, machinery or land or building for shifting industrial undertaking from under area to rural area, if (a) Purchase/ Construction of plant, machinery, land or building in such rural area or, (b) Shifting original assets to that area or, (c) Incurring notified expenses.

2/14/2014

98

Contd
7. Shifting of undertaking to SEZ [Sec.54GA]:Available to all assesses on Transfer of plant, machinery or land or building for shifting industrial undertaking from urban area to special Economic Zone, if (a) Purchase/ Construction of plant, machinery, land or building in such SEZ or (b) Shifting the original asset to SEZ or, (c) Incurring notified expenses.

2/14/2014

99

Computation of Short-term Capital Gains

Particulars Full Value of Consideration Less: Expenses incurred wholly and exclusively for Net Consideration Less: Cost of Acquisition Less: Cost of Improvement Less: Exemption u/s 54B, 54D, 54G, 54GA Taxable Short -term Capital gains such transfer Amount XXX xxx XXX xxx xxx xxx XXX

2/14/2014

100

Computation of Long-term Capital Gains

Particulars Full Value of Consideration Less: Expenses incurred wholly and exclusively for Net Consideration Less: Indexed Cost of Acquisition Less: Indexed Cost of Improvement Less: Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA such transfer Amount XXX xxx XXX xxx xxx xxx

Taxable Long- term Capital gains

XXX

2/14/2014

101

Indexed Cost
Cost Inflation Index (CII) for the first year in which the asset was held by the assessee or for the year beginning on 1.4.1981, whichever is later / the year of improvement

Indexed Cost of Acquisition / Improvement

Cost of acquisition / improvement x Cost inflation Index of the year of transfer

2/14/2014

Index

102

2/14/2014

103

General [Section 56(1)]

Income of every kind, which is not to be excluded from the total income and not chargeable to tax under any other head, shall be chargeable under the head Income from Other Sources.

2/14/2014

104

Specific Income [Section 56(2)]

1. Dividends. 2. Lottery winnings etc.: Winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. 3. Any sum received by an employer-assessee from his employees as contributions to any welfare fund, if the same is not chargeable under the head Profits and Gains of Business or Profession. 4. Income by way of interest on securities if not chargeable as Profits and Gains of Business or Profession 2/14/2014 105

Contd
5. Income from letting on hire of Plant, machinery or furniture belonging to the assessee, if not chargeable to under the head Profits and Gains of Business or Profession. 6. Income from letting on hire of machinery, plant or furniture and also buildings, and the letting of buildings is inseparable from letting of such machinery, plant or furniture, if the same is not chargeable to income tax under the head Profits and Gains of Business or Profession. 7. Interest on bank deposits and loans
2/14/2014 106

Contd
8. Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy, if the same is not chargeable to income-tax under the head Profits and Gains of Business or Profession or under the head Salaries. 9. Cash Gifts exceeding Rs. 50,000 10.Interest on foreign government securities 11.Agricultural income received from outside India 12.Income from sub-letting 13. Directors fee 14.Income of race establishment
2/14/2014

Index

107

2/14/2014

108

Cases where Clubbing Applies

1. Transfer of income without transfer of asset [Sec. 60] : The income from the asset would be taxable in the hands of the transferor. 2. Revocable transfer of assets :- Income from such asset is taxable in the hands of the transferor. 3. An individual is assessable in respect of remuneration of spouse [Sec. 64(1)(ii)] :- When Spouse is employed in the concern without any technical or professional knowledge or experience or when he/ she has substantial interest in that concern.
2/14/2014 109

Contd
4. An individual is assessable in respect of income from assets transferred to spouse:- When the asset is transferred otherwise than (a) for adequate consideration, or (b) in connection with an agreement to live apart. 5. An individual is assessable in respect of income from assets transferred to sons wife [Sec. 64(1)(vi)]:- When the asset is transferred otherwise than (a) for adequate consideration

2/14/2014

110

Contd
6. An individual is assessable in respect of income from assets transferred to a person for the benefit of spouse [Sec. 64(1)(vii)] :- It is transferred for the immediate or deferred benefit of his/her spouse. The transfer is without adequate consideration. 7. An individual is assessable in respect of income from assets transferred to a person for the benefit of sons wife [Sec. 64(1)(viii)] :- It is transferred for the immediate or deferred benefit of his/her sons wife. The transfer is without adequate consideration.

2/14/2014

111

Contd
8. An individual is assessable in respect of income of his minor child [Sec. 64(1A)] :- The income of minor will be included in the income of that parent whose total income [excluding the income includible under section 64(1A)] is greater. 9. Clubbing in case of transfer of property to HUF [Section 64(2)] :- When Income from asset transferred to HUF for inadequate consideration.

2/14/2014

112

Undisclosed Income / Investments

1. Cash credit [Sec. 68] - Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

2/14/2014

113

Contd
2. Unexplained investments [Sec.69] Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account maintained by him and the assessee offers no explanation about the nature and source of the investments, the value of the investments may be deemed to be the income of the assessee of such financial year.
2/14/2014 114

Contd
3. Unexplained money, etc [sec. 69A] - Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery, or other valuable article which are not recorded in the books of account maintained by him and the assessee offers no explanation about the nature and source of acquisition then value of such things may be deemed to the income of the assessee for such financial year.
2/14/2014 115

Contd
4. Amount of investments, etc., not fully disclosed in books of account [Sec.69B] Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the A.O. finds that the amount expended on making such investments or in acquiring such things exceeds the amount recorded in the books of account maintained by the assessee, and he offers no explanation about such excess amount, the excess amount may be deemed to be the income of the assessee, for such financial year.
2/14/2014 116

Contd
5.Unexplained expenditure, etc. [Sec. 69C] Where in any financial year an assessee has incurred any expenditure & he offers no explanation about the source of such expenditure, the amount covered by such expenditure, may deemed to be the income of the assessee for such financial year. 6.Amount borrowed or repaid on hundi [Sec. 69D] Where any amount is borrowed on a hundi, or any amount due thereon is repaid otherwise than through an account payee cheque, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying for the previous year in which the amount was borrowed or repaid.
2/14/2014

Index

117

2/14/2014

118

Process of Set-off & Carry Forward

The process of setting off of losses and their carry forward may be covered in the following steps:

Step 1

Inter-source adjustment under the same head of income

Step 2

Inter-head adjustment in the same assessment year. Step 2 is applied only if a loss cannot be set off under Step 1.

Step 3

Carry forward of loss. Step 3 is applied only if a loss cannot be set off under Steps 1 and 2.

2/14/2014

119

Unabsorbed Depreciation
While dealing with unabsorbed depreciation one should keep in mind the following points:
Depreciation allowance of the previous year is first deductible from the income chargeable under the head Profits and gains of business or profession.

Step 1

Step 2

If depreciation allowance is not fully deductible under the head Profits and gains of business or profession because of absence or inadequacy of profits, it is deductible from income chargeable under other heads of income [except income under the head Salaries] for the same assessment year.

If depreciation allowance is still unabsorbed, it can be carried forward to the subsequent assessment year(s) by the same assessee. Step 3

2/14/2014

120

Inter-Source Set Off [Section 70]

Loss arising from one source of income under a head can be set off against income arising from any other source under the same head, except in the following cases
Loss Long-term capital Loss Speculation business loss Loss from business of owning and maintaining race horse Loss from lottery, card games, gambling betting etc. Set-off allowed against Long-term Capital Gain Speculation business gain Income from business of owning and maintaining race horse Income from lottery, card games, gambling betting etc.

2/14/2014

121

Inter-Head Set-off [Section 71]

Loss arising under one head of income can be set off against income under any other head, except in the following cases 1.Loss arising under the head capital gain cannot be setoff from income under any other head 2.Losses under the head Profits and gains of business or profession cannot be set off against income under the head Salaries.
Note: Unabsorbed depreciation of past year(s) is carried forward u/s 32(2); therefore, the same can be set-off against income under the head Salaries.

2/14/2014

122

Provisions relating to carry forward and setoff of losses

Sec. 71B Loss to be carried forward Loss from house property

Income against which the No. of years for which it loss can be setoff can be carried forward
Income from house property 8 years from the end of the relevant A.Y. 8 years from the end of the relevant A.Y.

72

Losses under Profits & Gains of Profits of any Business or Profession, except Business/Profession (including speculation business profits speculation business loss. also) Losses in speculation business. Income business from

73

speculation 4 years from the end of the relevant A.Y. 8 years from the end of the relevant A.Y. and 4 years from the end of the relevant A.Y.

74

Losses under the head Capital gains.

Capital Gains

74A

Loss incurred in activity of owning Income from owning maintaining race horses and maintaining race horses.

2/14/2014

Index

123

2/14/2014

124

Meaning
Agricultural Income means:
1. Any rent or revenue derived from land which is situated in India and used for agricultural purposes [sec. 2(1A) (a)]. 2. Any income derived from such land by agricultural operations including processing of the agricultural produce, raised or received as rent-in-kind so as to render it fit for the market or sale of such produce [sec. 2(1A)(b)]. 3. Income attributable to a farm house subject to certain conditions. 4. With effect from the assessment year 2009-10, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
2/14/2014 125

Partially Agricultural & Partially Business Income [Rules 7, 7a, 7b And 8]

INCOME BUSINESS INCOME 40% AGRICULTURAL INCOME 60%

Growing and manufacturing tea in India

Sale of centrifuged latex or cenex or latex based creps (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India

35%

65%

Sale of coffee grow and cured by seller Sale of coffee grown, cured, roasted and grounded by seller in India with or without mixing chicory or other flavoring ingredients

25%
40%

75%
60%

2/14/2014

126

The Scheme of Partial Integration of Non-Agricultural Income with Agricultural Income

The scheme of partial integration of non-agricultural income with agricultural income is applicable if the following conditions are satisfied
Condition 1 The taxpayer is an individual, a Hindu undivided family, a body of individual, an association of persons or an artificial juridical person.

Condition 2

The taxpayer has non-agricultural income exceeding the amount of exemption limit [i.e., Rs. 1,80,000(in case a resident woman below 65 years), Rs. 2,25,000 (in case of a resident senior citizen 65 years or more) and Rs. 1,50,000 (in case of any other individual or every HUF for the assessment year 2009-10]

The agricultural income of the taxpayer exceeds Rs. 5,000. Condition 3

2/14/2014

127

Contd
Income-tax will be computed for the assessment year 2009-10 in the following manner:
Step 1 Step 2 Net agricultural income is to be computed as if it were income chargeable to income-tax. Agricultural & non-agricultural income of the assessee will then be aggregated & income-tax is calculated on the aggregate income. The net agricultural income will then be increased by the amount of exemption limit and incometax is calculated on net agricultural income, so increased, as if such income was the total income of the assessee. The amount of income-tax determined at Step two will be reduced by the amount of income-tax determined under Step three. Find out the balance. Add surcharge; education cess & SHEC. The amount so arrived will be the total income-tax payable by the assessee.

Step 3

Step 4

Step 5 Step 6

2/14/2014

Index

128

2/14/2014

129

Introduction
Deductions to be made [Section 80A] : The total income of an assessee is to be computed after making deductions permissible u/s 80C to 80U. However, the aggregate amount of deductions cannot exceed the Gross Total Income. No deduction from certain (following) Incomes :
Long term Capital Gains referred u/s 112, and Short Term Capital gains referred u/s 111A. Winnings from lotteries, races, etc. as referred to in section 115BB. Incomes referred to in section 115A (1) (a), 115AC, 115ACA, 115AD, 115BBA and 115D.
130

2/14/2014

Deduction for Payment of Life Insurance Premia, etc., [Section 80C]

Deduction under this section is allowed as follows Deduction is available only in respect of specified sums actually paid or deposited during the previous year (sum not actually paid and outstanding is not allowed) Specified sums must have been paid/deposited by an Individual or HUF; and The total amount of deduction under this section is subject to a maximum limit of Rs.1,00,000.

2/14/2014

131

Contribution To Certain Pension Funds [Section 80CCC]

Amount paid or deposited by individual in the previous year
out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of LIC or any other insurer for receiving pension from the fund referred to in section 10(23AAB).

Quantum of Deduction: Deduction shall be allowed to the extent of lower of the following
Amount so paid or deposited; or Rs. 1,00,000

2/14/2014

132

Contribution to Pension Scheme of Central Government or any Other Employer [Sec. 80CCD]
Deduction in respect of: Deduction is available in
respect of both of the following
Sum deposited by assessee in his account in notified pension scheme; and Contribution made by Central Govt. or any other employer to assesses A/c.

Quantum of Deduction: Deduction shall be allowed to the extent of aggregate of the following Sum paid/deposited by assessee to the credit of his a/c or 10% of salary, whichever is lower Sum contributed by the employer in assesses A/c or 10% of salary, whichever is lower
2/14/2014 133

Aggregate Limit u/s 80C, 80CCC & 80CCD The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs.1,00,000.

2/14/2014

134

Deduction In Respect Of Health Insurance Premia [Sec. 80D]

Deduction is available in respect of the amount paid to effect or to keep in force health insurance under a scheme
made by General Insurance Corporation of India (GIC) and approved by Central Government; or made by any other insurer and approved by Insurance Regulatory and Development Authority.

Deduction shall be to the extent of lower of

Health insurance premia paid in respect of health of any member of that HUF; or Rs. 15,000 (Rs. 20,000 in case the insured is a senior citizen).
2/14/2014 135

Maintenance of A Dependant Being Person With Disability [Section 80DD]

Deduction is available in respect of
expenditure incurred for medical / treatment / nursing / training/ rehabilitation, or amount paid under scheme LIC / UTI other insurer approved by CBDT for maintenance, of a dependant, being a person with disability.

Deduction shall be allowed to the extent of

Rs. 50,000 (Rs. 75,000 in case of dependant suffering with severe disability), irrespective of expenditure incurred or sum paid.

2/14/2014

136

Deduction in respect of Medical Treatment, etc. [Sec. 80DDB]

Deduction is available in respect of sum actually paid during previous year for medical treatment of prescribed disease or ailment for the following
In case of individual: himself or his spouse, children, parents, brothers and sisters, In case of HUF: its member(s), dependant mainly on such individual or HUF for his support and maintenance.

Deduction shall be available to the extent of lower of the following

sum actually paid; or Rs. 40,000 (Rs. 60,000 in case of a senior citizen).
2/14/2014 137

Deduction in respect of Interest on Loan taken for Higher Education [Sec.80E]

Deduction in available in respect of sum paid by the assessee in the previous year, out of his income chargeable to tax, by way of interest on loan taken for his higher education, or for the higher education of his relative. 100% of the amount of interest on such loan Deduction will be admissible.
2/14/2014 138

Deduction in respect of Donations [Section 80G]

Deduction is allowed under this section to all assesses in respect of donations of sum of money in the following manner
100% deduction will be allowed if donations are given to any of the 19 specified funds. 50% deduction will be allowed if donations made to any of the 5 specified funds. 100% deduction shall be allowed subject to the qualifying amount if donations are made for promoting family planning. 50% deduction shall be allowed subject to the qualifying amount if donations are made towards any of the 5 specified purposes.
2/14/2014 139

Deductions in respect of Rents Paid [Sec.80GG]

Rent actually paid for any furnished or unfurnished residential accommodation occupied by the Individual, who is not in receipt of any House Rent Allowance (HRA). The deduction shall be allowed to the extent of least of the following Rs. 2,000 per month; 25% of adjusted total income; Rent paid less 10% of adjusted Total Income.
2/14/2014 140

Deduction in respect of person with Disability [Section 80U]

Eligible Assessee: Individual resident in India, who, at any time during the previous year, is certified by the medical authority to be a person with disability Deduction: Rs. 50,000 (Rs. 75,000 for severe disability). Severe disability means 80% or more of disability.

2/14/2014

141

Other Deductions
Deduction in respect of certain Donations for Scientific Research or Rural Development [Sec.80GGA] Deduction in respect of Contribution to Political Parties [Sec. 80GGB & 80GGC] Profits & Gains from Industrial Undertaking engaged in Infrastructure Development [Sec. 80 IA] Profits & Gains from Undertaking engaged in Development of SEZs [Sec. 80IAB] Profits & Gains from Industrial Undertaking engaged in other than in Infrastructure Development [Sec.80IB]
2/14/2014 142

Contd
Deduction available to certain Undertakings in certain Special category States [Sec.80IC] Profits & Gains from business of Hotels & Convention Centre in Specified Areas [Sec. 80ID] Special provisions in respect of certain Undertakings in North-Eastern States [Sec. 80IE] Deduction available to assessee in the business of Collecting & Processing Bio-Degradable Waste [Sec.80JJA] Deduction in respect of Employment of New Workmen [Sec. 80JJAA]
2/14/2014 143

Contd
Deduction from incomes of Off-shore Banking Units & International Financial Services Centre [Sec.80LA] Deduction in respect of income of Co-operative Society [Sec. 80P] Deduction in respect of Royalty Income, etc. of Author of certain Books other than Text Books [Sec.80QQB] Deduction in respect of Royalty Income of Patents [Sec. 80 RRB]
Index
2/14/2014 144

2/14/2014

145

Liability to pay Advance Tax

Every person is liable to pay tax on income in advance i.e. from completion of the previous year (advance tax) if tax payable is Rs. 5,000 or more. All items of income are liable for payment of advance tax. However, from Assessment 2010-2011 liability to pay advance tax arises, if the tax payable is Rs. 10,000 or more

2/14/2014

146

Due Dates
Due Date Amount payble by Corporate Assessee Amount payble by NonCorporate Assessee

On or before June 15 of the Up to 15 percent of advance previous year tax payable

On or before September 15 of Up to 45 percent of advance Up to 30 percent of advance the previous year tax payable tax payable On or before December 15 of Up to 75 percent of advance Up to 60 percent of advance the previous year tax payable tax payable On or before March 15 of the Up to 100 percent of advance Up to 100 percent of advance previous year tax payable tax payable

2/14/2014

147

Default in payment of Advance Tax [Sec. 234B]

Under section 234B(1), interest is payable as follows:
When interest is payable Interest is payable on Rate of interest Period for which interest is payable

An assessee who is Interest is Simple interest @ 1 From April 1 of the assessment year liable to pay payable on percent for every to the date of determination of advance tax, has accessed tax month or part of income under section 143(1) or failed to pay such month where regular assessment is made tax to the date of regular assessment

An assessee who Assessed tax has paid advance minus advance tax but the amount tax of advance tax paid by him is less than 90 percent of assessed tax.

Simple interest @ 1 From April 1 of the assessment year percent for every to the date of determination of month or part of income under section 143(1) or month where regular assessment is made to the date of regular assessment

2/14/2014

148

Deferment of Advance Tax [Sec. 234C]

Interest is payable under section 234C if an assessee has not paid advance tax or underestimated installments of advance tax. Simple Interest at the rate of 1% per month is payable for period 3 months for each installment due.

Index
2/14/2014 149

2/14/2014

150

Time for filing Return of Income [Sec. 139(1)]

Different Situations 1. Where the assessee is a company Due Date for filing Return September 30

2. Where the assessee is person other than a company a)In case where accounts of the assessee are required to be audited under any law b)Where the assessee is working partner in a firm whose accounts are required to be audited under any law c)In any other case

September 30

September 30

July 31
151

2/14/2014

Filing of Return in Electronic Form [Sec. 139D]

Section 139D has been inserted from June 1, 2006. It provides that the Board may make rules providing for the class or classes of persons who shall be required to furnish the return of income in electronic form; the form and the manner in which the return of income in electronic form may be furnished; the documents, statements, receipts, certificates or audited reports which may not be furnished along with the return of income in electronic form but shall be produced before the Assessing Officer on demand; the computer resource or the electronic record to which the return of income in electronic form may be transmitted.
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Filing of Return after Due Date [Sec. 139(4)]

If the return is not furnished within the time allowed under section 139(1) or within the time allowed under section 142(1), the person may (before the assessment is made), furnish the return of any previous year at any time before the end of one year from the end of relevant assessment year.

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Consequences of Late Submission

If return is submitted after the due date of submission of return of income, the following consequences will be applicable. These rules are applicable even if a belated return is submitted within the time-limit given above
The assessee will be liable for penal interest u/s 234A. A penalty of Rs. 5,000 may be imposed u/s 271F if belated return is submitted after the end of assessment year. If return of loss is submitted after the due date, a few losses cannot be carried forward. If return is submitted belated, deduction under section 10A, 10B, 80-IA, 80-IB, 80IC, 80-ID and 80-IE will not be available.

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Interest for defaults in furnishing Return of Income [Section 234A]

If any person fails to furnish his return of income u/s 139 for any assessment year or furnishes such return after due date specified in section 139(1), then, he will liable to pay interest at the rate of 1% per month for the period beginning from the date immediately following the due date of furnishing return of income and ending on the Date of furnishing the return or completion of assessment, whichever is earlier, calculated on the amount of self-assessment tax payable.

Index
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