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Income Tax
(A.Y. 2009-10 & 2010-11)
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. 03/24/12
    Clubbing of Income                 2
Contd…
1.   Set-off Carry Forward
2.   Deductions from Gross Total Income
3.   Agricultural Income
4.   Advance Tax
5.   Assessment Procedures




     03/24/12                             3
03/24/12   4
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.

03/24/12                                               5
Important Definitions
1. Person u/s 2(31) includes,
    i.   An Individual,
    ii.  Hindu Undivided Family (HUF),
    iii. A Company,
    iv.  A Firm,
    v.   An Association of Persons(AOP) or Body of
         Individuals (BOI),
    vi. A Local Authority,
    vii. Every other Artificial Juridical Person



03/24/12                                         6
Contd…

     ssessment 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 2009-2010.

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


03/24/12                                                 7
Contd…
•    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”.
•    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
03/24/12                                              8
03/24/12   9
Types of Residential Status

The different types of residential status are:-
                    Resident(R)

            Not Ordinarily Resident (NOR)

                 Non-Resident (NR)




03/24/12                                      10
Residential Status of Individual
The residential status of individual will be determined
as under-
           Assessee       Basic Condition       Additional Condition
                        He must satisfy at one
       Resident                                  Not required.
                        of the basic conditions.
                                                 He must satisfy either
                        He must satisfy at least
                                                 one or both the
Not Ordinarily Resident one of the basic
                                                 additional conditions
                        conditions.
                                                 given u/s 6(6).
                        Should not satisfy any
    Non-Resident                                 Not required.
                        of the basic conditions.



03/24/12                                                             11
Contd…
Basic Conditions u/s 6(1):
ii. He must be in India for a period of 182 days or more during
    the previous year; or
iii. 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):
v. He must be a non-resident in India in nine out of the ten
                     previous years preceding that year; or
vi. He must be in India during 7 preceding previous years for
    aggregate period of 729 days or less.

  03/24/12                                                    12
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).


  03/24/12                                                        13
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.

 03/24/12                                                       14
Incidence of Tax

                                               Tax Incidence
                 Particulars
                                               R     NOR NR
 Income received in India by or on behalf of
                                               Yes   Yes     Yes
 assessee
 Income deemed to received in India by or
                                               Yes   Yes     Yes
 on behalf of assessee
 Income accruing or arising in India           Yes   Yes     Yes
 Income deemed to accrue or arise in India     Yes   Yes     Yes
 Income which accrues or arise outside
                                               Yes   No      No
 India
                                                     Index
03/24/12                                                           15
03/24/12   16
RATES OF INCOME TAX
           (Assessment Year 2009-10)
1. In case of every Individual/ HUF/ AOP/BOI
   artificial juridical Person.
             INCOME            INCOME          TAX RATE
            (A.Y. 2009-10)   (A.Y. 20010-11)
           Up to 150000      Up to 160000        NIL
           Next 150000       Next 140000         10%
           Next 200000       Next 200000         20%
           Above 500000      Above 500000        30%




03/24/12                                                  17
Contd…

1. In case of resident women below 65 years of
   age.
             INCOME            INCOME          TAX RATE
            (A.Y. 2009-10)    (A.Y. 2010-11)
           Up to 180000      Up to 190000        NIL
           Next 120000       Next 110000         10%
           Next 200000       Next 200000         20%
           Above 500000      Above 500000        30%




03/24/12                                                  18
Contd…

1. In case of resident senior citizen i.e. age of 65
   years or above
             INCOME            INCOME          TAX RATE
            (A.Y. 2009-10)    (A.Y. 2010-11)
           Up to 225000      Up to 240000        NIL
            Next 75000        Next 60000         10%
           Next 200000       Next 200000         20%
           Above 500000      Above 500000        30%




03/24/12                                                  19
Contd…

                   PERSONS          TAX RATE
           FIRMS                      30%
           DOMESTIC COMPANY           30%
           FOREIGN COMPANY            40%
           LOCAL AUTHORITIES          30%
           CO-OPERATIVE SOCIETIES
                   Up to 10000        10%
                  10000-20000         20%
                  Above 20000         30%




03/24/12                                       20
Surcharge & Cess
             PERSON                       RATE OF SURCHARGE
Individual / AOP / BOI /
HUF / Artificial Juridical   10% of tax liability if Income Exceeds Rs 10 Lacs
Person
Firm                         10% of tax liability, if Income exceeds Rs. 1 Crore
Domestic Company             10% of tax liability, if Income exceeds Rs. 1 Crore
Foreign company              2.5% of tax liability, if Income exceeds Rs. 1 Crore
Co-operative Society         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.
                      Note: surcharge on personal income-tax will be
                      eliminated from A.Y. 2010-11
                                                               Index
  03/24/12                                                                  21
03/24/12   22
Meaning
Salary includes [section17(1)] :-
ii.  Wages
iii. Any annuity on pension
iv.  Any gratuity
v.   Any fees, commission, bonus, perquisite on profits in lieu of or in
     addition to any salary on wages
vi. Any advance of salary
vii. Any earned leave
viii.Employers contribution (taxable) towards recognized provident fund.




  03/24/12                                                          23
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”:-
2.Salary Due
3.Advance Salary [u/s 17(1)(v)]
4.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.

03/24/12                                                      24
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.
•Dearness Allowance - It is Always Taxable.
•City Compensatory Allowance - It is Always Taxable.




03/24/12                                             25
Contd…
1. 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.

      n Amount Equal to 50 % of Salary. Where Residential House
 1    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
 2    of The Period during which Rental Accommodation is
      Occupied by the Employee during the Previous Year.
 3    The Excess of Rent Paid over 10 % of Salary.
03/24/12                                                     26
Contd…
•    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

                                     Least of the Following is deductible :
           Nothing is deductible     1. Rs. 5000
                                     2. 20 % of basic salary
                                     3. Amount of entertainment
                                     allowance grated during the previous
                                     year
03/24/12                                                                      27
Contd…

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




03/24/12                                             28
Contd…
Exemption is available on the aforesaid basis in the case
of following allowances :-
NAME OF ALLOWANCE                    NATURE OF ALLOWANCE
Travelling Allowance/ Any allowance granted to meet the cost of travel on
Transfer Allowance    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
  03/24/12                                                               29
                      on account of absence from this normal place of duty.
Contd…

•    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.
03/24/12                                            30
Contd…
   Name of allowance                 Exemption as specifiedin rule 2BB
Special Compensatory      Amount exempt from tax varies from Rs. 300 per mount to
(Hill Areas) Allowance    Rs. 7,000 per month
                          The amount of exemption varies from Rs. 200 Per month
Border area allowance
                          to Rs. 1,300 per month
Tribal areas/ scheduled
                          Rs. 200 Per Month
areas allowance
                          The amount of exemption is-
Allowance for transport
                          b.70 per cent of such allowance; or
employees
                          c.Rs. 6,000 per month, whichever is lower.
Children education        The amount exempt is limited to Rs. 100 per month per
allowance                 child up to a maximum of two children.
Hostel expenditure        It is exempt from tax to the extent of Rs. 300 per month
allowance                 per child up to a maximum of two children.
Compensatory field area   Exemption is limited to Rs. 2,600 per month in some
allowance                 cases.
   03/24/12                                                                    31
Contd…
   Name of Allowance                   Exemption as Specified in Rule 2BB
Compensatory modified      Exemption is limited to Rs.1,000 per month in some
area allowance             cases.
Counter insurgency         Exemption is limited to Rs.3,900 per month in some
allowance                  cases.
                           It is exempt up to Rs. 800 per month (Rs. 1,600 per
Transport allowance        month in the case of an employee who is blind or
                           orthopedically handicapped)
Underground allowance      Exemption is limited to Rs. 800 per month.
                           It is exempt from tax up to Rs. 1,060 per month (for
High altitude allowance    altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month
                           (for altitude above 15,000 feet).
Highly active field area
                           It is exempt from tax up to Rs. 4,200 per month.
allowance
Island duty allowance      It is exempt up to Rs. 3,250 per month.
  03/24/12                                                                      32
Contd…

•    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.
•    Tiffin allowance - It is taxable.
•    Fixed medical allowance – It is taxable.
•    Servant allowance - It is taxable.


03/24/12                                            33
Contd…
•       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.
•         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.
    03/24/12                                            34
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.




03/24/12                                                35
“Perquisites” as defined u/s 17 (2)

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




03/24/12                                          36
Contd…
•     The value of any benefit or amenity granted or provided
      free of cost or at concessional rate in any of the
      following cases :
     i.   By a company to an employee who is a director thereof ;
     ii.  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



    03/24/12                                                         37
Contd…
•       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.
•       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
•       The value of any other fringe benefits or amenity as
        may be prescribed

    03/24/12                                                 38
TERMINAL BENEFITS
 •       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            Non-government                Non-government
       Employee           employee covered by           employee not covered
                             the payment of               by the payment of
It is fully exempt         Gratuity Act, 1972             Gratuity Act, 1972
from tax under
section 10(10)(i)    Least of following is exempt:   Least of following is exempt:
                     2)“15 days’ salary” x “Length   3)“½ month avg. salary” x
                     of service”                     “Length of service”
                     3)Rs. 3, 50, 000                4)Rs. 3, 50, 000
                     4)Gratuity actually received.   5)Gratuity actually received.
     03/24/12                                                                        39
Contd…

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


               COMMUTED                            UNCOMMUTED


     Government          Non-Government
      Employee              Employee                Taxable for
                                                   Government as
                     If Gratuity     If Gratuity
Entire Commuted                                     well as Non-
                      Received      not Received
Pension is exempt                                   Government
 whether or not        1/3 of          1/2 of       employees
Gratuity received.   commuted        commuted
                     pension is      pension is
                      exempt          exempt
 03/24/12                                                          40
Contd…
• 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.
• 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.


  03/24/12                                                             41
Contd…

•    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.




03/24/12                                          42
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.




03/24/12                                           43
LEAVE SALARY
Encashment of leave by surrendering leave standing to
one’s credit is known as “leave salary”.
                 LEAVE ENCASHMENT


                          Retirement / Leaving the Job
   During Employment


                       Government              Non-Government
    Chargeable          Employee                  Employee
      to Tax
                                        Least of following is exempt :-
                                        4)Earned Leave on the basis of
                         Fully          Average Salary
                        Exempt          5)10 x Average monthly salary
                                        6)Rs. 300000
                                        7)Leave Salary Received
03/24/12                                                                  44
Deductions Admissible in Computing
      Income under head ‘SALARIES’
•    Entertainment allowance granted by employer
     [Sec.16(ii)]: This deduction is available in case of
     Government employees only.
•    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.




03/24/12                                               45
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.




03/24/12                                       Index   46
03/24/12   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.

03/24/12                                              48
Conditions to be Satisfied
•    The property must consist of buildings or lands
     appurtenant to such buildings.
•    The assessee must be the owner of such house
     property.
•    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.




03/24/12                                             49
Computation of Gross Annual Value
             (GAV)

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




03/24/12                                                                 50
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

03/24/12                                              51
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




03/24/12                                             52
Meaning
•      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.
•      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.
•      Standard Rent :- Standard rent is the maximum rent
       which a person can legally recover from his tenant
       under a Rent Control Act.

    03/24/12                                              53
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.
03/24/12                                            54
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.




03/24/12                                       55
Deduction Admissible u/s 24

• Statutory deduction :- 30% of Annual Value (i.e.
                            30% of NAV)
• 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 pre-
             acquisition or pre-construction period.



03/24/12                                            56
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
                                                   MAXIMUM
                        CASE
                                                  DEDUCTION
       Interest on capital borrowed on or after
       1-4-1999 for acquisition or construction      1,50,000
       of house
       In any other case                               30,000




03/24/12                                                        57
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.




03/24/12                                             58
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                 AMOUNT
       The amount received as arrears of rent      XXX
      Less: 30% of such amount                      xxx
      Amount taxable as arrears of rent            XXX


03/24/12                                          Index   59
03/24/12   60
Basis of Charge [sec. 28]
The following income is chargeable to tax under the head
“Profits and gains of business or profession”:
2.Profits and gains of any business or profession;
3.Any compensation or other payments due to or received
by any person specified in section 28(ii);
4.Income derived by a trade, professional or similar
association from specific services performed for its
members;
5.The value of any benefit or perquisite, whether convertible
into money or not, arising from business or the exercise of a
profession;

 03/24/12                                                61
Contd…
1. any profit on transfer of the Duty Entitlement Pass
   Book Scheme.
2. Any profit on the transfer of the duty free
   replenishment certificate;
3. Export incentive available to exporters;
4. 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.

03/24/12                                            62
Contd…
 1. Any sum received under a Keyman insurance
    policy including bonus;
 2. Profits and gains of managing agency; and
 3. Income from speculative transaction.

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




03/24/12                                               63
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)]
 03/24/12                                             64
Contd…
1. Bonus or commission to employees [Sec. 36(1)(ii)]
2. Interest on borrowed capital [Sec. 36(1)(iii)]
3. Employer’s contribution to recognized provident fund
   and approved superannuation fund [Sec. 36(1)(iv)]
4. Contribution towards approved gratuity fund [Sec.
   36(1)(v)]
5. Employee’s contribution towards staff welfare
   schemes
6. Bad debts [Sec. 36(1)(vii)]
7. Family planning expenditure [Sec. 36(1) (ix)]

03/24/12                                            65
Contd…

1. Banking cash transaction tax,      securities
   transaction tax and commodities transaction
   tax.
2. Advertisement expenses [Sec. 37(2B)].
3. General Deduction [Sec. 37(1)].




03/24/12                                      66
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.




03/24/12                                              67
Contd…
1. Expenditure on raising equity share capital and
   preference share capital. However, expenditure on
   issue of bonus shares id deductible.
2. 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.
3. Amount expended for acquiring a business or a right of
                     permanent character or an asset
                     which generates income or for
                     avoiding compensation in business.

 03/24/12                                              68
Contd…
1. Payments made for acquisition of good will.
2. Expenditure incurred for acquiring right over or in
   land to win minerals.
3. Fees paid to obtain license to investigate and
   search minerals.
4. 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).


03/24/12                                            69
Contd…
1. Tax paid by the assessee (who is defaulter by not
   deducting tax at source under section 195) on behalf of
   non-resident.
2. Compensation paid to contracting party with the object of
   avoiding an unnecessary investment in capital assets.
3. Expenditure on shifting of registered office.
4. Insurance premia paid by a firm on life insurance policies
   of its partners.
5. Amount paid by liquor contractor to police staff and other
   officer to enable it to make unauthorized purchases and
   sales of liquor.

  03/24/12                                               70
Contd…
1. Amount paid by a company to the Registrar of
   Companies as filing fee for enhancement of capital
   base of the company.
2. 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.




03/24/12                                            71
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

 03/24/12                                               72
Contd…
1. Interest paid by an AOP/ BOI to its members is not
   allowed as deduction by virtue of sec. 40(ba)
2. Payment to relatives in excess of fair value – not
   deductible [Section 40A(2)]
3. 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))]
4. Amount not deductible in respect of certain unpaid
   liabilities [Sec.43B]

03/24/12                                            73
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.
                »   If his income from business or profession
                    exceeds Rs. 1,20,000;
                »   Total sales/turnover/gross receipts thereof
                    exceeds Rs.10,00,000
                »   the assessee has claimed his income lower
                    than deemed profits
03/24/12                                                   74
Tax Audit u/s 44AB
   This section applies to following :-
  Person carrying on -   Accounts are to be audited for previous year in
                         which -
  Business               Total sales, turnover or gross receipts exceed
                         Rs. 40,00,000
  Profession             Gross receipts exceed Rs. 10,00,000
  Business covered u/s He has claimed his income to be lower than the
  44AB, 44AE, 44AF, profits or gains so deemed under the respective
  4BB and 44BBB        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.
 03/24/12                                                             75
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                Sec. 44 AE            Sec. 44AF
Business of Civil construction or Plying, hiring or leasing Retail trade in
Assessee    supply of labour for it. goods carriages owned any goods or
                                     by him.                merchandise.
This         Gross receipts of such   Goods carriages owned     Total business
Section      business during the      by assessee at any time   turnover in that
applies if   previous year do not     during previous year      previous     year
             exceed Rs. 40 lacs.      doesn’t exceed 10 lacs    doesn’t exceed
                                                                Rs. 40 lacs.
Deemed       8% of Gross receipts     (No. of heavy goods       5% of Gross
Profits                               vehicle x Rs. 3500 x      receipts or such
                                         NM) + (No. of other    higher sum as
                                         vehicles x Rs. 3150    declared by him
                                         x NM)                  in his Return of
03/24/12                              NM = No. of months        Income.       76
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.



  03/24/12                                                     77
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.



03/24/12                                                   78
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
    Step 1
             April 1, 2008.
             To this value, add “actual cost” of the asset (falling
    Step 2   in the block) acquired during the previous year
             2008-09.
             From the resultant figure, deduct money
             received/receivable (together with scrap value) in
    Step 3   respect of that asset (falling within the block of
             assets) which is sold, discarded demolished or
             destroyed during the previous year 2008-09.
03/24/12                                                          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.

 03/24/12                                               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.
03/24/12                                                      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.
03/24/12                                                  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   Rs. 50,000 or at the rate of 90 percent
profit or in case of a loss             of the book profit, whichever is more
On the next Rs. 1,00,000 of the book
                                         At the rate of 60 percent
profit
On the balance of the book profit        At the rate of 40 percent
In the case of any other firm
On the first Rs. 75,000 of the book      Rs. 50,000 or at the rate of 90 percent
profit or in case of a loss              of the book profit, whichever is more
On the next Rs. 75,000 of the book
                                         At the rate of 60 percent
profit
On the
03/24/12   balance of the book profit    At the rate of 40 percent            83
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.



 03/24/12                                             84
Contd…

• A company is allowed credit of tax paid u/s 115-
  JB 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
03/24/12                                           85
03/24/12   86
Basis of Charge
Capital Gain’s tax liability arises only when the
following conditions are satisfied:
•There should be a capital asset.
•The capital asset is transferred by the assessee
•Such transfer takes place during the previous year.
•Any profit or gains arises as a result of transfer.
•Such profit or gains is not exempt from tax under
                    section 54, 54B, 54D, 54EC, 54F,
                    54G, and 54GA


03/24/12                                          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”:
2.Any stock-in-trade, consumable stores or raw material held for
the purposes of business or profession.
3.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”.
   03/24/12                                                   88
Contd…
1. 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.
2. 6½ percent Gold Bonds, 1977 or 7 percent Gold Bonds,
   1980 or National Defense Gold Bonds, 1980 issued by the
   Central Government.
3. Special Bearer Bonds, 1991.
4. Gold Deposit Bonds issued under Gold Deposit Scheme,
   1999.

  03/24/12                                                           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

 03/24/12                                                   90
Important Terms
•      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)].
•      Full Value of Consideration :- The expression “full value”
       means the whole price without any deduction
       whatsoever.
•      Expenditure on Transfer :- The expression “expenditure
       on transfer” means expenditure incurred which is
       necessary to effect the transfer.

    03/24/12                                                    91
Contd…
•    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.
•    Cost of improvement :- Cost of improvement is
     capital expenditure incurred by an assessee in
                  making any additions/ improvement to
                    the capital asset.


03/24/12                                                 92
Contd…
•    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.
•    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.




03/24/12                                                  93
Capital Gain Exemption
•     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.
•     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.


    03/24/12                                              94
Contd…

•   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,




03/24/12                                        95
Contd…

•    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.




03/24/12                                             96
Contd…

•    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.




03/24/12                                               97
Contd…

•    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.




03/24/12                                                98
Contd…
•    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.



03/24/12                                            99
Computation of Short-term
                Capital Gains

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




03/24/12                                                     100
Computation of Long-term
                Capital Gains

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




03/24/12                                                     101
Indexed Cost
                                      Cost Inflation
                                   Index (CII) for the
                     Cost of       first year in which
                  acquisition /   the asset was held
Indexed Cost     improvement
     of
                                  by the assessee or
                     x Cost
Acquisition /                          for the year
                    inflation
Improvement       Index of the        beginning on
                     year of             1.4.1981,
                    transfer      whichever is later /
                                        the year of
                                      improvement


03/24/12                                 Index   102
03/24/12   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”.




03/24/12                                           104
Specific Income [Section 56(2)]
•      Dividends.
•      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.
•      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.’
•      Income by way of interest on securities if not
       chargeable as Profits and Gains of Business or
       Profession
    03/24/12                                             105
Contd…
1. 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’.
2. 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.’
3. Interest on bank deposits and loans

03/24/12                                              106
Contd…
1. 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.”
2. Cash Gifts exceeding Rs. 50,000
3. Interest on foreign government securities
4. Agricultural income received from outside India
5. Income from sub-letting
6. Director’s fee
7. Income of race establishment
03/24/12                                    Index   107
03/24/12   108
Cases where Clubbing Applies
•      Transfer of income without transfer of asset [Sec.
       60] :– The income from the asset would be taxable in
       the hands of the transferor.
•      Revocable transfer of assets :- Income from such
       asset is taxable in the hands of the transferor.
•      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.

    03/24/12                                             109
Contd…
•    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.
•    An individual is assessable in respect of income
     from assets transferred to son’s wife [Sec. 64(1)
     (vi)]:- When the asset is transferred otherwise
              than (a) for adequate consideration



03/24/12                                            110
Contd…
•    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.
•    An individual is assessable in respect of income from
     assets transferred to a person for the benefit of son’s
     wife [Sec. 64(1)(viii)] :- It is transferred for the
                immediate or deferred benefit of his/her
                      son’s wife. The transfer is without
                      adequate consideration.


03/24/12                                                 111
Contd…

•    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.
•    Clubbing in case of transfer of property to HUF
     [Section 64(2)] :- When Income from asset
     transferred to HUF for inadequate consideration.




03/24/12                                              112
Undisclosed Income / Investments

•    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.




03/24/12                                        113
Contd…
•    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.

03/24/12                                         114
Contd…
•    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.

03/24/12                                          115
Contd…
•       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.
    03/24/12                                             116
Contd…
• 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.
• 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.
   03/24/12                                       Index   117
03/24/12   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:
             Inter-source adjustment under the same head of
    Step 1
             income
             Inter-head adjustment in the same assessment
    Step 2   year. Step 2 is applied only if a loss cannot be set
             off under Step 1.
             Carry forward of loss. Step 3 is applied only if a
    Step 3
             loss cannot be set off under Steps 1 and 2.




03/24/12                                                            119
Unabsorbed Depreciation
While dealing with unabsorbed depreciation one
should keep in mind the following points:
              Depreciation allowance of the previous year is first
   Step 1     deductible from the income chargeable under the
              head “Profits and gains of business or profession”.
              If depreciation allowance is not fully deductible under
              the head “Profits and gains of business or
              profession” because of absence or inadequacy of
   Step 2
              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
   Step 3     carried forward to the subsequent assessment year(s)
              by the same assessee.
03/24/12                                                       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                      Set-off allowed against
 Long-term capital Loss             Long-term Capital Gain
 Speculation business loss          Speculation business gain
 Loss from business of owning and   Income from business of owning
 maintaining race horse             and maintaining race horse
 Loss from lottery, card games,     Income from lottery, card games,
 gambling betting etc.              gambling betting etc.




 03/24/12                                                           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 –
2.Loss arising under the head capital gain cannot be setoff
from income under any other head
3.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’.



 03/24/12                                                              122
Provisions relating to carry forward
         and setoff of losses
                                                       No. of years for
     Loss to       be   carried Income against which
Sec.                                                   which it can be
     forward                    the loss can be setoff
                                                       carried forward
71B   Loss from house property Income from house       8 years from the end
                                property               of the relevant A.Y.
72    Losses under ‘Profits &      Profits of any Business/ 8 years from the end
      Gains of Business or         Profession (including    of the relevant A.Y.
      Profession’,       except    speculation business
                                   profits also)
      speculation business loss.
73    Losses in speculation        Income             from   4 years from the end
      business.                    speculation business      of the relevant A.Y.
74     Losses under the head       Capital Gains             8 years from the end
       Capital gains.                                        of the relevant A.Y.
74A    Loss incurred in activity of Income from owning 4 years from the end
       owning and maintaining       and maintaining race of the relevant A.Y.
       race horses.                 horses
03/24/12
                                                                   Index
                                                                                123
03/24/12   124
Meaning
“Agricultural Income” means:
2. Any rent or revenue derived from land which is situated in
   India and used for agricultural purposes [sec. 2(1A) (a)].
3. 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)].
4. Income attributable to a farm house subject to certain
   conditions.
5. 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.

03/24/12                                                        125
Partially Agricultural & Partially Business
     Income [Rules 7, 7a, 7b And 8]
                                          BUSINESS   AGRICULTURAL
               INCOME
                                           INCOME       INCOME
Growing and manufacturing tea in India      40%          60%
Sale of centrifuged latex or cenex or
latex based creps (such as pale latex       35%          65%
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
Sale of coffee grow and cured by seller     25%          75%
Sale of coffee grown, cured, roasted        40%          60%
and grounded by seller in India with or
without mixing chicory or other
flavoring ingredients
03/24/12                                                       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 –
               The taxpayer is an individual, a Hindu undivided family, a
   Condition 1 body of individual, an association of persons or an
               artificial juridical person.
               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
   Condition 2
               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]
   Condition 3 The agricultural income of the taxpayer exceeds Rs. 5,000.


  03/24/12                                                            127
Contd…
  Income-tax will be computed for the assessment year
  2009-10 in the following manner:
Step 1   Net agricultural income is to be computed as if it were income chargeable to
         income-tax.
Step 2   Agricultural & non-agricultural income of the assessee will then be
         aggregated & income-tax is calculated on the aggregate income.
Step 3   The net agricultural income will then be increased by the amount of
         exemption limit and income-tax is calculated on net agricultural income, so
         increased, as if such income was the total income of the assessee.
Step 4   The amount of income-tax determined at Step two will be reduced by the
         amount of income-tax determined under Step three.
Step 5   Find out the balance. Add surcharge; education cess & SHEC.
Step 6   The amount so arrived will be the total income-tax payable by the assessee.


                                                                     Index
  03/24/12                                                                      128
03/24/12   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.
 03/24/12                                                      130
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.


03/24/12                                          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


 03/24/12                                                       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
     assesse’s 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 assesse’s A/c or 10% of
  salary, whichever is lower
 03/24/12                                                   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.




 03/24/12                                          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).



 03/24/12                                                       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.




  03/24/12                                                        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).

  03/24/12                                                      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.




03/24/12                                            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.


03/24/12                                                         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.




03/24/12                                               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.




03/24/12                                        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]


03/24/12                                              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]

03/24/12                                                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
03/24/12                                              144
03/24/12   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



03/24/12                                          146
Due Dates

                                              Amount payble by
                       Amount payble by
           Due Date                            Non-Corporate
                      Corporate Assessee
                                                 Assessee

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

On or before September Up to 45 percent of Up to 30 percent of
15 of the previous year advance tax payable advance tax payable

On or before December Up to 75 percent of Up to 60 percent of
15 of the previous year advance tax payable advance tax payable

On or before March 15 Up to 100 percent of Up to 100 percent of
of the previous year  advance tax payable  advance tax payable


03/24/12                                                    147
Default in payment of Advance Tax
               [Sec. 234B]
  Under section 234B(1), interest is payable as follows:
When interest is      Interest is    Rate of interest     Period for which interest is
   payable            payable on                                    payable
An assessee who Interest      is    Simple interest @ 1
                                                      From April 1 of the assessment
is liable to pay payable     on     percent for every year     to   the    date    of
advance tax, has accessed tax       month or part of  determination of income under
failed to pay such                  month             section 143(1) or where regular
tax                                                   assessment is made to the date
                                                      of regular assessment
An assessee who      Assessed tax Simple interest @ 1 From April 1 of the assessment
has paid advance     minus        percent for every year       to   the    date    of
tax    but    the    advance tax  month or part of determination of income under
amount          of                month               section 143(1) or where regular
advance tax paid                                      assessment is made to the date
by him is less                                        of regular assessment
than 90 percent of
assessed tax.
  03/24/12                                                                      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
03/24/12                                        149
03/24/12   150
Time for filing Return of Income
              [Sec. 139(1)]
         Different Situations          Due Date for filing Return
1. Where the assessee is a company          September 30
2. Where the assessee is person
other than a company –
b)In case where accounts of the
assessee are required to be audited         September 30
under any law
c)Where the assessee is “working
partner” in a firm whose accounts           September 30
are required to be audited under any
law
d)In any other case                             July 31


03/24/12                                                       151
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.

  03/24/12                                                152
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.




03/24/12                                        153
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.



 03/24/12                                                          154
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
03/24/12                                                155
DISCLAIMER
Our views expressed herein are based on the facts and
assumptions indicated above. The views cannot be
considered as an authorized representation, warranty or
guarantee that the revenue authorities or the courts will
concur with the same. The views are based on the existing
provisions of law and its interpretation, which are subject to
change from time to time. The views contained may not be
used or reproduced in whole or in part or otherwise referred
to in any document or delivered to any one without our prior
                  written consent.




03/24/12                                                   156
03/24/12   157

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Income Tax Overview

  • 2. 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. 03/24/12 Clubbing of Income 2
  • 3. Contd… 1. Set-off Carry Forward 2. Deductions from Gross Total Income 3. Agricultural Income 4. Advance Tax 5. Assessment Procedures 03/24/12 3
  • 5. 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. 03/24/12 5
  • 6. Important Definitions 1. Person u/s 2(31) includes, i. An Individual, ii. Hindu Undivided Family (HUF), iii. A Company, iv. A Firm, v. An Association of Persons(AOP) or Body of Individuals (BOI), vi. A Local Authority, vii. Every other Artificial Juridical Person 03/24/12 6
  • 7. Contd… ssessment 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 2009-2010. revious Year u/s 2(34) means, the year in which income is earned. 03/24/12 7
  • 8. Contd… • 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”. • 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 03/24/12 8
  • 10. Types of Residential Status The different types of residential status are:- Resident(R) Not Ordinarily Resident (NOR) Non-Resident (NR) 03/24/12 10
  • 11. Residential Status of Individual The residential status of individual will be determined as under- Assessee Basic Condition Additional Condition He must satisfy at one Resident Not required. of the basic conditions. He must satisfy either He must satisfy at least one or both the Not Ordinarily Resident one of the basic additional conditions conditions. given u/s 6(6). Should not satisfy any Non-Resident Not required. of the basic conditions. 03/24/12 11
  • 12. Contd… Basic Conditions u/s 6(1): ii. He must be in India for a period of 182 days or more during the previous year; or iii. 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): v. He must be a non-resident in India in nine out of the ten previous years preceding that year; or vi. He must be in India during 7 preceding previous years for aggregate period of 729 days or less. 03/24/12 12
  • 13. 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). 03/24/12 13
  • 14. 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. 03/24/12 14
  • 15. Incidence of Tax Tax Incidence Particulars R NOR NR Income received in India by or on behalf of Yes Yes Yes assessee Income deemed to received in India by or Yes Yes Yes on behalf of assessee Income accruing or arising in India Yes Yes Yes Income deemed to accrue or arise in India Yes Yes Yes Income which accrues or arise outside Yes No No India Index 03/24/12 15
  • 16. 03/24/12 16
  • 17. RATES OF INCOME TAX (Assessment Year 2009-10) 1. In case of every Individual/ HUF/ AOP/BOI artificial juridical Person. INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 20010-11) Up to 150000 Up to 160000 NIL Next 150000 Next 140000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30% 03/24/12 17
  • 18. Contd… 1. In case of resident women below 65 years of age. INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 2010-11) Up to 180000 Up to 190000 NIL Next 120000 Next 110000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30% 03/24/12 18
  • 19. Contd… 1. In case of resident senior citizen i.e. age of 65 years or above INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 2010-11) Up to 225000 Up to 240000 NIL Next 75000 Next 60000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30% 03/24/12 19
  • 20. Contd… PERSONS TAX RATE FIRMS 30% DOMESTIC COMPANY 30% FOREIGN COMPANY 40% LOCAL AUTHORITIES 30% CO-OPERATIVE SOCIETIES Up to 10000 10% 10000-20000 20% Above 20000 30% 03/24/12 20
  • 21. Surcharge & Cess PERSON RATE OF SURCHARGE Individual / AOP / BOI / HUF / Artificial Juridical 10% of tax liability if Income Exceeds Rs 10 Lacs Person Firm 10% of tax liability, if Income exceeds Rs. 1 Crore Domestic Company 10% of tax liability, if Income exceeds Rs. 1 Crore Foreign company 2.5% of tax liability, if Income exceeds Rs. 1 Crore Co-operative Society 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. Note: surcharge on personal income-tax will be eliminated from A.Y. 2010-11 Index 03/24/12 21
  • 22. 03/24/12 22
  • 23. Meaning Salary includes [section17(1)] :- ii. Wages iii. Any annuity on pension iv. Any gratuity v. Any fees, commission, bonus, perquisite on profits in lieu of or in addition to any salary on wages vi. Any advance of salary vii. Any earned leave viii.Employers contribution (taxable) towards recognized provident fund. 03/24/12 23
  • 24. 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”:- 2.Salary Due 3.Advance Salary [u/s 17(1)(v)] 4.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. 03/24/12 24
  • 25. 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. •Dearness Allowance - It is Always Taxable. •City Compensatory Allowance - It is Always Taxable. 03/24/12 25
  • 26. Contd… 1. 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. n Amount Equal to 50 % of Salary. Where Residential House 1 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 2 of The Period during which Rental Accommodation is Occupied by the Employee during the Previous Year. 3 The Excess of Rent Paid over 10 % of Salary. 03/24/12 26
  • 27. Contd… • 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 Least of the Following is deductible : Nothing is deductible 1. Rs. 5000 2. 20 % of basic salary 3. Amount of entertainment allowance grated during the previous year 03/24/12 27
  • 28. Contd… • Special allowances prescribed as exempt under section 10(14) – In the cases given below the amount of exemption under section 10(14) is :– i. The amount of the allowance ; or ii.The amount utilized for the specific purpose for which allowance is given. Whichever is lower. 03/24/12 28
  • 29. Contd… Exemption is available on the aforesaid basis in the case of following allowances :- NAME OF ALLOWANCE NATURE OF ALLOWANCE Travelling Allowance/ Any allowance granted to meet the cost of travel on Transfer Allowance 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 03/24/12 29 on account of absence from this normal place of duty.
  • 30. Contd… • 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. 03/24/12 30
  • 31. Contd… Name of allowance Exemption as specifiedin rule 2BB Special Compensatory Amount exempt from tax varies from Rs. 300 per mount to (Hill Areas) Allowance Rs. 7,000 per month The amount of exemption varies from Rs. 200 Per month Border area allowance to Rs. 1,300 per month Tribal areas/ scheduled Rs. 200 Per Month areas allowance The amount of exemption is- Allowance for transport b.70 per cent of such allowance; or employees c.Rs. 6,000 per month, whichever is lower. Children education The amount exempt is limited to Rs. 100 per month per allowance child up to a maximum of two children. Hostel expenditure It is exempt from tax to the extent of Rs. 300 per month allowance per child up to a maximum of two children. Compensatory field area Exemption is limited to Rs. 2,600 per month in some allowance cases. 03/24/12 31
  • 32. Contd… Name of Allowance Exemption as Specified in Rule 2BB Compensatory modified Exemption is limited to Rs.1,000 per month in some area allowance cases. Counter insurgency Exemption is limited to Rs.3,900 per month in some allowance cases. It is exempt up to Rs. 800 per month (Rs. 1,600 per Transport allowance month in the case of an employee who is blind or orthopedically handicapped) Underground allowance Exemption is limited to Rs. 800 per month. It is exempt from tax up to Rs. 1,060 per month (for High altitude allowance altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month (for altitude above 15,000 feet). Highly active field area It is exempt from tax up to Rs. 4,200 per month. allowance Island duty allowance It is exempt up to Rs. 3,250 per month. 03/24/12 32
  • 33. Contd… • 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. • Tiffin allowance - It is taxable. • Fixed medical allowance – It is taxable. • Servant allowance - It is taxable. 03/24/12 33
  • 34. Contd… • 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. • 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. 03/24/12 34
  • 35. 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. 03/24/12 35
  • 36. “Perquisites” as defined u/s 17 (2) The term “perquisites” is defined by section 17 (2) as including the following items: •The value of Rent-free Accommodation provided to the assessee by his employer •The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer 03/24/12 36
  • 37. Contd… • The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases : i. By a company to an employee who is a director thereof ; ii. 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 03/24/12 37
  • 38. Contd… • 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. • 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 • The value of any other fringe benefits or amenity as may be prescribed 03/24/12 38
  • 39. TERMINAL BENEFITS • 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 Non-government Non-government Employee employee covered by employee not covered the payment of by the payment of It is fully exempt Gratuity Act, 1972 Gratuity Act, 1972 from tax under section 10(10)(i) Least of following is exempt: Least of following is exempt: 2)“15 days’ salary” x “Length 3)“½ month avg. salary” x of service” “Length of service” 3)Rs. 3, 50, 000 4)Rs. 3, 50, 000 4)Gratuity actually received. 5)Gratuity actually received. 03/24/12 39
  • 40. Contd… • PENSION [SEC. 17(1)(ii)] - Pension is chargeable tax as follows :- PENSION COMMUTED UNCOMMUTED Government Non-Government Employee Employee Taxable for Government as If Gratuity If Gratuity Entire Commuted well as Non- Received not Received Pension is exempt Government whether or not 1/3 of 1/2 of employees Gratuity received. commuted commuted pension is pension is exempt exempt 03/24/12 40
  • 41. Contd… • 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. • 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. 03/24/12 41
  • 42. Contd… • 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. 03/24/12 42
  • 43. 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. 03/24/12 43
  • 44. LEAVE SALARY Encashment of leave by surrendering leave standing to one’s credit is known as “leave salary”. LEAVE ENCASHMENT Retirement / Leaving the Job During Employment Government Non-Government Chargeable Employee Employee to Tax Least of following is exempt :- 4)Earned Leave on the basis of Fully Average Salary Exempt 5)10 x Average monthly salary 6)Rs. 300000 7)Leave Salary Received 03/24/12 44
  • 45. Deductions Admissible in Computing Income under head ‘SALARIES’ • Entertainment allowance granted by employer [Sec.16(ii)]: This deduction is available in case of Government employees only. • 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. 03/24/12 45
  • 46. 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. 03/24/12 Index 46
  • 47. 03/24/12 47
  • 48. 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. 03/24/12 48
  • 49. Conditions to be Satisfied • The property must consist of buildings or lands appurtenant to such buildings. • The assessee must be the owner of such house property. • 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. 03/24/12 49
  • 50. Computation of Gross Annual Value (GAV) Step 1 : Calculate Expected Rent as follows:- Particulars Amount Amount (a) Fair Rent of the House xxx (b) Municipal Value of House xxx (c) Whichever is more of (a) and (b) XXX (d) Standard Rent xxx Expected Rent [whichever is less of (c) and (d)] XXX 03/24/12 50
  • 51. 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 03/24/12 51
  • 52. 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 03/24/12 52
  • 53. Meaning • 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. • 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. • Standard Rent :- Standard rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act. 03/24/12 53
  • 54. 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. 03/24/12 54
  • 55. 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. 03/24/12 55
  • 56. Deduction Admissible u/s 24 • Statutory deduction :- 30% of Annual Value (i.e. 30% of NAV) • 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 pre- acquisition or pre-construction period. 03/24/12 56
  • 57. 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 MAXIMUM CASE DEDUCTION Interest on capital borrowed on or after 1-4-1999 for acquisition or construction 1,50,000 of house In any other case 30,000 03/24/12 57
  • 58. 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. 03/24/12 58
  • 59. 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 AMOUNT The amount received as arrears of rent XXX Less: 30% of such amount xxx Amount taxable as arrears of rent XXX 03/24/12 Index 59
  • 60. 03/24/12 60
  • 61. Basis of Charge [sec. 28] The following income is chargeable to tax under the head “Profits and gains of business or profession”: 2.Profits and gains of any business or profession; 3.Any compensation or other payments due to or received by any person specified in section 28(ii); 4.Income derived by a trade, professional or similar association from specific services performed for its members; 5.The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; 03/24/12 61
  • 62. Contd… 1. any profit on transfer of the Duty Entitlement Pass Book Scheme. 2. Any profit on the transfer of the duty free replenishment certificate; 3. Export incentive available to exporters; 4. 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. 03/24/12 62
  • 63. Contd… 1. Any sum received under a Keyman insurance policy including bonus; 2. Profits and gains of managing agency; and 3. Income from speculative transaction. Income from the aforesaid activities is computed in accordance with the provisions laid down in section 29 to 44D. 03/24/12 63
  • 64. 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)] 03/24/12 64
  • 65. Contd… 1. Bonus or commission to employees [Sec. 36(1)(ii)] 2. Interest on borrowed capital [Sec. 36(1)(iii)] 3. Employer’s contribution to recognized provident fund and approved superannuation fund [Sec. 36(1)(iv)] 4. Contribution towards approved gratuity fund [Sec. 36(1)(v)] 5. Employee’s contribution towards staff welfare schemes 6. Bad debts [Sec. 36(1)(vii)] 7. Family planning expenditure [Sec. 36(1) (ix)] 03/24/12 65
  • 66. Contd… 1. Banking cash transaction tax, securities transaction tax and commodities transaction tax. 2. Advertisement expenses [Sec. 37(2B)]. 3. General Deduction [Sec. 37(1)]. 03/24/12 66
  • 67. 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. 03/24/12 67
  • 68. Contd… 1. Expenditure on raising equity share capital and preference share capital. However, expenditure on issue of bonus shares id deductible. 2. 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. 3. Amount expended for acquiring a business or a right of permanent character or an asset which generates income or for avoiding compensation in business. 03/24/12 68
  • 69. Contd… 1. Payments made for acquisition of good will. 2. Expenditure incurred for acquiring right over or in land to win minerals. 3. Fees paid to obtain license to investigate and search minerals. 4. 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). 03/24/12 69
  • 70. Contd… 1. Tax paid by the assessee (who is defaulter by not deducting tax at source under section 195) on behalf of non-resident. 2. Compensation paid to contracting party with the object of avoiding an unnecessary investment in capital assets. 3. Expenditure on shifting of registered office. 4. Insurance premia paid by a firm on life insurance policies of its partners. 5. Amount paid by liquor contractor to police staff and other officer to enable it to make unauthorized purchases and sales of liquor. 03/24/12 70
  • 71. Contd… 1. Amount paid by a company to the Registrar of Companies as filing fee for enhancement of capital base of the company. 2. 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. 03/24/12 71
  • 72. 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 03/24/12 72
  • 73. Contd… 1. Interest paid by an AOP/ BOI to its members is not allowed as deduction by virtue of sec. 40(ba) 2. Payment to relatives in excess of fair value – not deductible [Section 40A(2)] 3. 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))] 4. Amount not deductible in respect of certain unpaid liabilities [Sec.43B] 03/24/12 73
  • 74. 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. » If his income from business or profession exceeds Rs. 1,20,000; » Total sales/turnover/gross receipts thereof exceeds Rs.10,00,000 » the assessee has claimed his income lower than deemed profits 03/24/12 74
  • 75. Tax Audit u/s 44AB This section applies to following :- Person carrying on - Accounts are to be audited for previous year in which - Business Total sales, turnover or gross receipts exceed Rs. 40,00,000 Profession Gross receipts exceed Rs. 10,00,000 Business covered u/s He has claimed his income to be lower than the 44AB, 44AE, 44AF, profits or gains so deemed under the respective 4BB and 44BBB 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. 03/24/12 75
  • 76. 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 Sec. 44 AE Sec. 44AF Business of Civil construction or Plying, hiring or leasing Retail trade in Assessee supply of labour for it. goods carriages owned any goods or by him. merchandise. This Gross receipts of such Goods carriages owned Total business Section business during the by assessee at any time turnover in that applies if previous year do not during previous year previous year exceed Rs. 40 lacs. doesn’t exceed 10 lacs doesn’t exceed Rs. 40 lacs. Deemed 8% of Gross receipts (No. of heavy goods 5% of Gross Profits vehicle x Rs. 3500 x receipts or such NM) + (No. of other higher sum as vehicles x Rs. 3150 declared by him x NM) in his Return of 03/24/12 NM = No. of months Income. 76
  • 77. 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. 03/24/12 77
  • 78. 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. 03/24/12 78
  • 79. 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 Step 1 April 1, 2008. To this value, add “actual cost” of the asset (falling Step 2 in the block) acquired during the previous year 2008-09. From the resultant figure, deduct money received/receivable (together with scrap value) in Step 3 respect of that asset (falling within the block of assets) which is sold, discarded demolished or destroyed during the previous year 2008-09. 03/24/12 79
  • 80. 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. 03/24/12 80
  • 81. 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. 03/24/12 81
  • 82. 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. 03/24/12 82
  • 83. 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 Rs. 50,000 or at the rate of 90 percent profit or in case of a loss of the book profit, whichever is more On the next Rs. 1,00,000 of the book At the rate of 60 percent profit On the balance of the book profit At the rate of 40 percent In the case of any other firm On the first Rs. 75,000 of the book Rs. 50,000 or at the rate of 90 percent profit or in case of a loss of the book profit, whichever is more On the next Rs. 75,000 of the book At the rate of 60 percent profit On the 03/24/12 balance of the book profit At the rate of 40 percent 83
  • 84. 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. 03/24/12 84
  • 85. Contd… • A company is allowed credit of tax paid u/s 115- JB 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 03/24/12 85
  • 86. 03/24/12 86
  • 87. Basis of Charge Capital Gain’s tax liability arises only when the following conditions are satisfied: •There should be a capital asset. •The capital asset is transferred by the assessee •Such transfer takes place during the previous year. •Any profit or gains arises as a result of transfer. •Such profit or gains is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, and 54GA 03/24/12 87
  • 88. 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”: 2.Any stock-in-trade, consumable stores or raw material held for the purposes of business or profession. 3.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”. 03/24/12 88
  • 89. Contd… 1. 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. 2. 6½ percent Gold Bonds, 1977 or 7 percent Gold Bonds, 1980 or National Defense Gold Bonds, 1980 issued by the Central Government. 3. Special Bearer Bonds, 1991. 4. Gold Deposit Bonds issued under Gold Deposit Scheme, 1999. 03/24/12 89
  • 90. 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 03/24/12 90
  • 91. Important Terms • 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)]. • Full Value of Consideration :- The expression “full value” means the whole price without any deduction whatsoever. • Expenditure on Transfer :- The expression “expenditure on transfer” means expenditure incurred which is necessary to effect the transfer. 03/24/12 91
  • 92. Contd… • 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. • Cost of improvement :- Cost of improvement is capital expenditure incurred by an assessee in making any additions/ improvement to the capital asset. 03/24/12 92
  • 93. Contd… • 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. • 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. 03/24/12 93
  • 94. Capital Gain Exemption • 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. • 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. 03/24/12 94
  • 95. Contd… • 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, 03/24/12 95
  • 96. Contd… • 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. 03/24/12 96
  • 97. Contd… • 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. 03/24/12 97
  • 98. Contd… • 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. 03/24/12 98
  • 99. Contd… • 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. 03/24/12 99
  • 100. Computation of Short-term Capital Gains Particulars Amount Full Value of Consideration XXX xxx ess: Expenses incurred wholly and exclusively for such Consideration Net transfer XXX Less: Cost of Acquisition xxx Less: Cost of Improvement xxx Less: Exemption u/s 54B, 54D, 54G, 54GA xxx Taxable Short -term Capital gains XXX 03/24/12 100
  • 101. Computation of Long-term Capital Gains Particulars Amount Full Value of Consideration XXX xxx ess: Expenses incurred wholly and exclusively for such Consideration Net transfer XXX Less: Indexed Cost of Acquisition xxx Less: Indexed Cost of Improvement xxx Less: Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, xxx 54GA Taxable Long- term Capital gains XXX 03/24/12 101
  • 102. Indexed Cost Cost Inflation Index (CII) for the Cost of first year in which acquisition / the asset was held Indexed Cost improvement of by the assessee or x Cost Acquisition / for the year inflation Improvement Index of the beginning on year of 1.4.1981, transfer whichever is later / the year of improvement 03/24/12 Index 102
  • 103. 03/24/12 103
  • 104. 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”. 03/24/12 104
  • 105. Specific Income [Section 56(2)] • Dividends. • 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. • 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.’ • Income by way of interest on securities if not chargeable as Profits and Gains of Business or Profession 03/24/12 105
  • 106. Contd… 1. 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’. 2. 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.’ 3. Interest on bank deposits and loans 03/24/12 106
  • 107. Contd… 1. 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.” 2. Cash Gifts exceeding Rs. 50,000 3. Interest on foreign government securities 4. Agricultural income received from outside India 5. Income from sub-letting 6. Director’s fee 7. Income of race establishment 03/24/12 Index 107
  • 108. 03/24/12 108
  • 109. Cases where Clubbing Applies • Transfer of income without transfer of asset [Sec. 60] :– The income from the asset would be taxable in the hands of the transferor. • Revocable transfer of assets :- Income from such asset is taxable in the hands of the transferor. • 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. 03/24/12 109
  • 110. Contd… • 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. • An individual is assessable in respect of income from assets transferred to son’s wife [Sec. 64(1) (vi)]:- When the asset is transferred otherwise than (a) for adequate consideration 03/24/12 110
  • 111. Contd… • 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. • An individual is assessable in respect of income from assets transferred to a person for the benefit of son’s wife [Sec. 64(1)(viii)] :- It is transferred for the immediate or deferred benefit of his/her son’s wife. The transfer is without adequate consideration. 03/24/12 111
  • 112. Contd… • 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. • Clubbing in case of transfer of property to HUF [Section 64(2)] :- When Income from asset transferred to HUF for inadequate consideration. 03/24/12 112
  • 113. Undisclosed Income / Investments • 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. 03/24/12 113
  • 114. Contd… • 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. 03/24/12 114
  • 115. Contd… • 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. 03/24/12 115
  • 116. Contd… • 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. 03/24/12 116
  • 117. Contd… • 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. • 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. 03/24/12 Index 117
  • 118. 03/24/12 118
  • 119. Process of Set-off & Carry Forward The process of setting off of losses and their carry forward may be covered in the following steps: Inter-source adjustment under the same head of Step 1 income Inter-head adjustment in the same assessment Step 2 year. Step 2 is applied only if a loss cannot be set off under Step 1. Carry forward of loss. Step 3 is applied only if a Step 3 loss cannot be set off under Steps 1 and 2. 03/24/12 119
  • 120. Unabsorbed Depreciation While dealing with unabsorbed depreciation one should keep in mind the following points: Depreciation allowance of the previous year is first Step 1 deductible from the income chargeable under the head “Profits and gains of business or profession”. If depreciation allowance is not fully deductible under the head “Profits and gains of business or profession” because of absence or inadequacy of Step 2 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 Step 3 carried forward to the subsequent assessment year(s) by the same assessee. 03/24/12 120
  • 121. 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 Set-off allowed against Long-term capital Loss Long-term Capital Gain Speculation business loss Speculation business gain Loss from business of owning and Income from business of owning maintaining race horse and maintaining race horse Loss from lottery, card games, Income from lottery, card games, gambling betting etc. gambling betting etc. 03/24/12 121
  • 122. 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 – 2.Loss arising under the head capital gain cannot be setoff from income under any other head 3.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’. 03/24/12 122
  • 123. Provisions relating to carry forward and setoff of losses No. of years for Loss to be carried Income against which Sec. which it can be forward the loss can be setoff carried forward 71B Loss from house property Income from house 8 years from the end property of the relevant A.Y. 72 Losses under ‘Profits & Profits of any Business/ 8 years from the end Gains of Business or Profession (including of the relevant A.Y. Profession’, except speculation business profits also) speculation business loss. 73 Losses in speculation Income from 4 years from the end business. speculation business of the relevant A.Y. 74 Losses under the head Capital Gains 8 years from the end Capital gains. of the relevant A.Y. 74A Loss incurred in activity of Income from owning 4 years from the end owning and maintaining and maintaining race of the relevant A.Y. race horses. horses 03/24/12 Index 123
  • 124. 03/24/12 124
  • 125. Meaning “Agricultural Income” means: 2. Any rent or revenue derived from land which is situated in India and used for agricultural purposes [sec. 2(1A) (a)]. 3. 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)]. 4. Income attributable to a farm house subject to certain conditions. 5. 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. 03/24/12 125
  • 126. Partially Agricultural & Partially Business Income [Rules 7, 7a, 7b And 8] BUSINESS AGRICULTURAL INCOME INCOME INCOME Growing and manufacturing tea in India 40% 60% Sale of centrifuged latex or cenex or latex based creps (such as pale latex 35% 65% 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 Sale of coffee grow and cured by seller 25% 75% Sale of coffee grown, cured, roasted 40% 60% and grounded by seller in India with or without mixing chicory or other flavoring ingredients 03/24/12 126
  • 127. 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 – The taxpayer is an individual, a Hindu undivided family, a Condition 1 body of individual, an association of persons or an artificial juridical person. 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 Condition 2 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] Condition 3 The agricultural income of the taxpayer exceeds Rs. 5,000. 03/24/12 127
  • 128. Contd… Income-tax will be computed for the assessment year 2009-10 in the following manner: Step 1 Net agricultural income is to be computed as if it were income chargeable to income-tax. Step 2 Agricultural & non-agricultural income of the assessee will then be aggregated & income-tax is calculated on the aggregate income. Step 3 The net agricultural income will then be increased by the amount of exemption limit and income-tax is calculated on net agricultural income, so increased, as if such income was the total income of the assessee. Step 4 The amount of income-tax determined at Step two will be reduced by the amount of income-tax determined under Step three. Step 5 Find out the balance. Add surcharge; education cess & SHEC. Step 6 The amount so arrived will be the total income-tax payable by the assessee. Index 03/24/12 128
  • 129. 03/24/12 129
  • 130. 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. 03/24/12 130
  • 131. 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. 03/24/12 131
  • 132. 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 03/24/12 132
  • 133. 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 assesse’s 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 assesse’s A/c or 10% of salary, whichever is lower 03/24/12 133
  • 134. 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. 03/24/12 134
  • 135. 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). 03/24/12 135
  • 136. 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. 03/24/12 136
  • 137. 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). 03/24/12 137
  • 138. 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. 03/24/12 138
  • 139. 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. 03/24/12 139
  • 140. 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. 03/24/12 140
  • 141. 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. 03/24/12 141
  • 142. 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] 03/24/12 142
  • 143. 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] 03/24/12 143
  • 144. 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 03/24/12 144
  • 145. 03/24/12 145
  • 146. 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 03/24/12 146
  • 147. Due Dates Amount payble by Amount payble by Due Date Non-Corporate Corporate Assessee Assessee On or before June 15 of Up to 15 percent of - the previous year advance tax payable On or before September Up to 45 percent of Up to 30 percent of 15 of the previous year advance tax payable advance tax payable On or before December Up to 75 percent of Up to 60 percent of 15 of the previous year advance tax payable advance tax payable On or before March 15 Up to 100 percent of Up to 100 percent of of the previous year advance tax payable advance tax payable 03/24/12 147
  • 148. Default in payment of Advance Tax [Sec. 234B] Under section 234B(1), interest is payable as follows: When interest is Interest is Rate of interest Period for which interest is payable payable on payable An assessee who Interest is Simple interest @ 1 From April 1 of the assessment is liable to pay payable on percent for every year to the date of advance tax, has accessed tax month or part of determination of income under failed to pay such month section 143(1) or where regular tax assessment is made to the date of regular assessment An assessee who Assessed tax Simple interest @ 1 From April 1 of the assessment has paid advance minus percent for every year to the date of tax but the advance tax month or part of determination of income under amount of month section 143(1) or where regular advance tax paid assessment is made to the date by him is less of regular assessment than 90 percent of assessed tax. 03/24/12 148
  • 149. 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 03/24/12 149
  • 150. 03/24/12 150
  • 151. Time for filing Return of Income [Sec. 139(1)] Different Situations Due Date for filing Return 1. Where the assessee is a company September 30 2. Where the assessee is person other than a company – b)In case where accounts of the assessee are required to be audited September 30 under any law c)Where the assessee is “working partner” in a firm whose accounts September 30 are required to be audited under any law d)In any other case July 31 03/24/12 151
  • 152. 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. 03/24/12 152
  • 153. 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. 03/24/12 153
  • 154. 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. 03/24/12 154
  • 155. 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 03/24/12 155
  • 156. DISCLAIMER Our views expressed herein are based on the facts and assumptions indicated above. The views cannot be considered as an authorized representation, warranty or guarantee that the revenue authorities or the courts will concur with the same. The views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. The views contained may not be used or reproduced in whole or in part or otherwise referred to in any document or delivered to any one without our prior written consent. 03/24/12 156
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