2. Income From Five Heads are as Follows
1. Income from salary
2. Income from house property
3. Income from profit or gain from business or
profession.
4. Income from capital gain.
5. Income from other sources.
3. Complete Process of Computation of Taxable Income
& Tax
1) Determine the residential status of the assesse
2) Determine the incidence of tax
3) Classify income after considering specific
exemption into respective head.
4) Aggregate the income.
5) Apply clubing Provision.
6) Setoff/Carry forward losses (if any)
7) Balance shall be gross total income.
4. Cont
8. Allow deduction 80C to 80U chpt VI A.
9. Balance shall be total income.
10. Determine the tax payable, applying the rates applicable.
11. Deduct rebate/relief of tax.
12. Add surcharge.
13. Add educational cess.
14. Balance is tax payable.
15. File return of income before the due date of filing.
5. Income From Salary
Salaries U/S 17(1) include following:-
1. Wages
2. Pension
3. Gratuity
4. Any fees, Commission, Perquisite,Profit in
lieu of salary
5. Any advance salary etc
6. List of Allowance exempted from tax
1. Conveyance allowance .
2. Children education allowance .
3. Any allowance granted to an employee to meet the hostel
expenditure of his child .
4. Transport allowance .
5. House rent allowance .
6. Provident Fund .
7. Gratuity .
8. Leave travel concession .
9. Compensation received at the time of voluntary
retirement .
10. Encashment of earned leave at the time of retirement .
11. Computation of pension .
12. Entertainment allowance .
7. Statement of total income from salary
Particular Rs Rs
Basic salary XXX
Dearness Allowances (DA) XXX
House Rent Allowances xxx
Less :- Exemptions Under sec10 (13 A) xxx XXX
Eduacation Allowances XXX
Less :- Exemptions Under sec10 (14) xxx XXX
Conveyance Allowance xxx
Less :- Exemption Under sec 10(14) xxx XXX
Bonus XXX
Gratuity xxx
Less:- Exemption Under sec 10(10) xxx XXX
Perquisities (Taxable) XXX
Entertainment Allowances XXX
Gross Salary XXX
Less :- Deductions
U/S 16 xxx
U/S 16(2) xxx
U/S 16(3) xxx XXX
Taxable Income from Salary XXX
8. INCOME FROM HOUSE PROPERTY
Sec 22 of Income Tax Act 1961
Income from houses, buildings, bungalows
Tax is based on Annual value.
9. POINTS TO BE REMEMBERED
Assessee should be the Owner of the Property
Should be not be used for Own Business or
Profession
In Case of Dispute Regarding Title
Property Let Out along with other Assets
In case of sub-Letting
10. ANNUAL VALUE (SEC 23)
EXPECTED RENT
Municipal Rent Value (MRV) XXX
Fair Rental Value (FRV) XXX
Whichever is higher (ER) X X X ( If no SR)
Standard Rent (SR) ( If available) XXX
Whichever is less (ER) XXX
FAIR RENT
The rent which a similar property will fetch at
the same or nearby similar locality.
11. MUNICIPAL RENT
The value fixed by the municipal or local
authority
STANDARD RENT
Rent fixed by the Rent Control Act
Max rent an owner can claim from his tenant as
rent
ACTUAL RENT
Rent for which property has been let out
12. CALCULATION OF GAV
Particular House 1 House 2
MRV 1,05,000 1,05,000
FRV 1,07,000 1,07,000
Whichever is higher 1,07,000 1,07,000
SR 1,35,000 1,35,000
ER (Whichever is Less) 1,07,000 1,07,000
AR 1,12,000 98,000
GAV 1,12,000 1,07,000
13. COMPUTION OF HOUSE PROPERTY
INCOME
Particulars amount amount
Gross Annual Value xxx
Less: Municipal tax -Paid by owner xxx
Net Annual Value xxx
Deduction U/S 24
1. Standard deduction -30% of NAV xxx
2. Int. on borrowed capital- Paid or due xxx
xxx
Income from House Property xxx
14. Income from Profit/Gain from
Business/Profession
Chargeability Under sec 28
1. Profit/Gain from any business/Profession
2. Profit on sale of import entitlement license
3. Duty drawback
4. Value of benefit arising from any business/profession
5. Income derived by trade/profession
6. Income from speculative transaction
7. Income received under keyman insurance policy
8. Any interest,salary, Bonus, commision or
remuneration received by partner of a firm.
15. Case business income is not taxable
u/s 28
• Rental business
• Dividend on share
• Speculative transactions
excluded :-Hedging contracts and derivative
transaction.
16. How to compute PGBP
U/S 30 Deductions allowed
Rent taken
Repairs not in a nature of capex
Insurance premium
U/S 31 Deductions allowed w.r.t plant & machinery.
Sec 32 Depreciation
17. Income from Capital Gain
Chargeability U/S 45 (1)
Capital Gain tax liability arises when following
conditions get satisfied:-
• There should be a Capital Asset
• There should be a Transfer
• Transfer should be in previous year
• Result of transfer should be profit or gain
• Such Profit/Gain is not exempt.
18. Exemption for Capital Assets
• Any Stock-in-Trade.
• Movable Property (excludes jewellery
archeological, Drawings, Paintings, Sculpture).
• Agricultural Rural Land.
• 65% Gold Bond -1977 / 7% Gold Bonds-1980/
National Defense Gold Bond issued by Central
Government.
• Special Bearer Bonds 1991.
• Gold Deposit Bond issued under Gold deposit
scheme 1999.
19. Types of Capital Assets
There are two types of Capital Assets
I. Short Term Capital Asset
II. Long Term Capital Asset
20. Income from Other Sources
Chargeability U/S 56(2)
It includes the following
• Dividend.
• Windfall from lotteries crossword gambling.
• Income by way of interest on securities.
• Income from Royalty
• Director fees
• Income from investment
