CONTENTS AND WEIGHTAGE IN PREVIOUS EXAMS

CHP.NO TOPICS
May 2007 Nov
2007
May
2008
Nov
2008
1 INTRODUCTION AND BASIC CONCEPTS OF TAX. 0 0 0
2 RESIDENTIA! STATUS AND TAX INCIDENCE 1" 0 0 2
# CONCEPT AND CA!CU!ATION OF TAX $ 0 0
INCOME UNDER THE HEAD SA!AR% 0 # 1" "
& FBT AND NEW PER'UISITES 0 0 0 0
" INCOME UNDER THE HEAD HOUSE PROPERT% 0 0 8 $
7
INCOME UNDER THE HEAD BUSINESS AND
PROFESSION
10 27 0 8
8 INCOME UNDER THE HEAD CAPITA! GAINS 0 10 10 "
$ INCOME UNDER THE HEAD OF OTHER SOURCES 0 0 0 0
10 C!UBBING OF INCOMES # 1# 0
11 SET OFF AND CARR% FORWARD OF !OSSES 10 # $ "
12 AGRICU!TURE INCOME AND ITS TAXABI!IT% 0 0 0 0
1# DEDUCTION FROM GROSS TOTA! INCOME 2 10 2
1 EXEMPTED INCOMES 0 2 0 2
1& ASSESSMENT PROCEDURE 8 # " "
1" ADVANCE PA%MENT OF INCOME TAX 0 # 8 0
17 TAX DEDUCTED AT SOURCE # 2 0
18 CHARITAB!E AND RE!IGIOUS TRUST 2 0 2 0
1$ SERVICE TAX 2" 17 20 22
20 VA!UE ADDED TAX 1# 10 8
21 ASSESSMENT OF INDIVIDUA!S 20 20 0 20
22 ASSESSMENT OF HUF( 0 0 20 8
SUMMAR% OF 1
ST
CHAPTER
BASIC CONCEPTS AND DEFINATIONS
1. The Income-tax Act, 1961 came into force with effect from 1/4/1962. It has XXIII chapters and 298 sections in a.
2. I)*+a, S-./+o) 202&A1 India means the territor! of India as referred to in Artice 1 of the "onstit#tion, its territoria waters, sea$ed and s#$soi
#nder!in% s#ch waters, continenta shef, exc#si&e economic 'one or an! other maritime 'one as referred to in the Territoria (aters, "ontinenta
)hef, *xc#si&e *conomic +one and other maritime +ones Act, 19,6 and the air space a$o&e its territor! and territoria waters.
-. P-2(o), S-./+o) 20#11 inc#des se&en t!pes of persons name! an indi&id#a, a .ind# #ndi&ided fami! /.012, A compan!, A firm, An association
of persons /A342 or a $od! of indi&id#as /53I2, A oca a#thorit!, *&er! artificia 6#ridica person not fain% within an! of the precedin% s#$
ca#ses.
4. The 2 $asic differences $etween AOP a)* BOI are7
a1 In 53I there are on! indi&id#as $#t in A34 there can $e an! t!pe of persons.
31 53I is creation of aw whereas A34 can $e created $! different persons comin% to%ether for doin% some income prod#cin% acti&it! on the
&o#ntar! $asis.
8. A((-((--, S-./+o) 2071 means an! person $! whom tax, interest or penat! is pa!a$e #nder an! pro&ision of this act and inc#des7
1. deemed assessee
2. assessee in defa#t
-. 4erson a%ainst whom an! income tax proceedin%s ha&e $een started for the assessment of his income or oss or the income of some other
person or the oss for whom he is ia$e.
6. A((-((4-)/ y-a2, S-./+o) 20$1 means the period of 12 months startin% from 1
st
Apri e&er! !ear and endin% on -1
st
march of the s#cceedin% !ear.
,. P2-v+o5( y-a2, S-./+o) 20#1 means the !ear immediate! preceedin% to assessment !ear. Income for the pre&io#s !ear is awa!s taxed in the
assessment !ear. The foowin% are the exceptions to the %enera r#e that income of e&er! pre&io#s !ear is char%ea$e to tax in the ree&ant
assessment !ear.
)ection 1,27 )hippin% $#siness of a non-resident9
)ection 1,47 4erson ea&in% India9
)ection 1,4A7 An A34 formed for the p#rpose of a partic#ar e&ent.
)ection 1,87 4ersons i:e! to transfer propert! to a&oid tax9
)ection 1,67 ;iscontin#ed $#siness or profession
8. I).o4- +).65*-( /7- 8+9/( recei&ed in excess of <s.8====. If an!one has recei&ed %ift in cash exceedin% <s.8==== from a non-reati&e then whoe of
s#ch amo#nt recei&ed sha $e considered his income.
9. .owe&er %ifts recei&ed from reati&es sha not $e co&ered in the said 82 point a$o&e.
1=. S-./+o) 1, >ross tota income is the a%%re%ate of income from a fi&e heads of Income, name!
Income #nder the head saar!
Income #nder the head ho#se propert!
Income #nder the head $#siness and profession
Income #nder the head capita %ains
Income #nder the head other so#rces
11. S-./+o) 1A, whie comp#tin% tota income no ded#ction sha $e aowed for that expendit#re which has $een inc#rred to earn exempted income.
12. S-./+o) 20&1, Tota income is income after red#cin% the ded#ction #nder chapter ?I-A from the %ross tota income. This income is aso caed
taxa$e income on which tax has to $e imposed.
1-. S-./+o) 288A, The tota income sha $e ro#nded off in the m#tipes of <s. 1=.
14. APP!ICATION OF INCOME V:S DIVERSION OF INCOME, Appication of income means spendin% the mone! after it has $een earned $! the
assessee. )#ch an amo#nt is awa!s inc#ded whie comp#tin% taxa$e income in the hands of assessee. In other words once an income has $een
earned it co#d not $e exc#ded on the %ro#nds that it has $een appied for some p#rpose. 3n the other hand di&ersion of income is the process of
di&ertin% the income $efore it is earned $! the assessee.
FOR EXAMP!E, @ Atd ses a #nit of a prod#ct at <s.1== with &er! cear messa%e to c#stomer that o#t of <s.1== <s.8 wi %o to the charita$e instit#tion.
Bow on! <s.98 sha $e re%arded as the income in the hands of compan! and <s.8 wi $e :nown as di&ersion of income.
FOR EXAMP!E, Cr. @ inherited propert! from his father $#t s#$6ect to the ri%ht of residence in fa&o#r of mother of Cr. @. This means that Cr. @ has the
ri%ht o&er the ownership of the propert! $#t mother has ri%ht o&er residence in the ho#se. If the ho#se is to $e sod then for the effecti&e sae of ho#se $oth
sho#d transfer their ri%hts in ho#se. 1rom the tota saes consideration Cr. @ can not $e hed ia$e for the tax on that portion which represents the ri%ht of his
mother.
18. REVENUE VS CAPITA!, An! receipt of mone! can either $e cate%ori'ed as re&en#e or capita. <e&en#e receipts are awa!s f#! taxa$e #ness
specific exemption has $een pro&ided for that. "apita receipts are ne&er taxa$e. ThatDs wh! amo#nt recei&ed from ins#rance compan! at the time of
mat#rit! is not taxed #/s 1=/1=;2. )imiar! oan ta:en is aso not taxed. .owe&er, some of the capita receipts are taxa$e since the! ha&e $een
specifica! pro&ided in the definition of Income s#ch as tax on "apita %ains on sae of "apita asset.
DIFFERENCE BETWEEN CAPITA! RECEIPT AND REVENUE RECEIPT
Ca;+/a6 R-.-+;/ R-v-)5- R-.-+;/(
"apita receipt is %enera! refera$e to fixed
capita. 1or e%. )ae price on the sae of assets,
which assessee #ses as a fixed asset in his $#siness
is a capita receipt
<e&en#e receipt refers to circ#atin% capita. 1or
e%. )ae price of the stoc: in trade is a re&en#e
receipt
4a!ment recei&ed towards the compensation for
the extinction of a profit earnin% so#rce is a capita
receipt
4a!ment recei&ed to compensate oss of earnin%s
is a re&en#e receipt
A receipt in ie# of so#rce of income is a capita
receipt. 1or e%. "ompensation for the oss of
empo!ment is a capita receipt.
A receipt in ie# of income is a re&en#e receipt
"apita receipts are exempt from tax #ness the!
are expressi&e! taxa$e i:e in the case of capita
%ains
<e&en#e receipts are awa!s taxa$e #ness
express! exempt from tax #nder section 1=
16. 1or the p#rposes of Income Tax Act "ompan! has &er! wide meanin% as compared to what has $een defined #nder the compan! aw. The term
compan! has $een defined #nder section 2/1,2 and it has $een f#rther cassified into7
1. ;omestic compan! 7 )ection 2/22A2
2. 1orei%n compan! 7 )ection 2/2-A2
-. Indian compan! 7 )ection 2/262
4. A "ompan! in which p#$ic is s#$stantia! interested 7 )ection 2/182
SUMMAR% OF 2
ND
CHAPTER
RESIDENTIA! STATUS
1. S-./+o) "011, An Indi&id#a can $e resident or a non resident in India. To $e a resident he has to satisf! one of the foowin% conditions7
1. )ta! in India E/F 182 da!s in a 4G 3<
2. )ta! in India E/F 6= da!s in a 4G and )ta! in India E/F -68 da!s in preceedin% 4 4Gs.
2. 1or the $2 condition a$o&e, we ha&e - exceptiona cases. In a these - cases 6= da!s sha $e ta:en as 182 da!s7
1. A citi'en of India who ea&es India for the empo!ment p#rposes.
2. A citi'en of India who ea&es India as a mem$er of crew of Indian ship.
-. An Indi&id#a who is a citi'en of India 3< is a person of Indian ori%in who comes to India on a &isit.
-. S-./+o) "0"10a1, A <esident indi&id#a can $e <3< or B3<. <3< is one who satisfies $oth of the foowin% conditions
1. <esident in 2/1= preceedin% 4Gs.
2. )ta! in India E/F ,-= da!s in a , precedin% 4Gs.
4. 1or an indi&id#a, residentia stat#s is determined $ased on the period of sta! in India. .owe&er, for .01, 1irm, A34 and other non-corporate entities the contro and mana%ement
is critica in determinin% residentia stat#s.
8. (hie determinin% residentia stat#s of .01 period of sta! of :arta is not at a ree&ant. (hat is important is whether contro and mana%ement of s#ch .01 is sit#ated in India or
not. 1#rther to chec: whether .01 is <3< or B3< residentia stat#s of :arta as an indi&id#a $ecomes ree&ant.
6. An Indian compan! is awa!s re%arded as a ;omestic "ompan!. A compan! incorporated o#tside India ma! aso $e treated as a domestic compan! if certain conditions are
f#fied.
,. An Indian compan! is awa!s a resident. A "ompan! incorporated o#tside India is treated as HresidentD on! if contro and mana%ement is who! in India.
8. <esident and ordinari! resident is taxed on his %o$a income.
9. Bot ordinari! resident is taxed in respect of Indian Income. In respect of forei%n income he is taxed on! if it is from $#siness controed in India or profession set #p in India.
1=. Bon resident is taxed in respect of Indian Incomes on!.
11. <emittance in India is ne&er taxed in India, since it is the second receipt.
12. A%ric#t#re income from a and in India is awa!s exempt from tax. .owe&er, if and is not in India then a%ric#t#re income wi $e taxed in India.
1-. ;i&idend from ;omestic "ompan! is not taxed $#t from forei%n compan! it is f#! char%ea$e to tax. ;i&idends from cooperati&e societies are f#! taxa$e.
SUMMAR% OF #
RD
CHAPTER
CA!CU!ATION OF INCOME TAX
1. Income of e&er! person is char%ea$e to tax at the rates prescri$ed in the 1inance Act s#ch as sa$ rates. .owe&er some of the income tax rates are not mentioned in 1inance Act
$#t the! ha&e $een mentioned in Act itsef, s#ch as Tax on otter! income is -=I as per section 11855 and tax on on%-term capita %ains is 2=I as per section 112 and if eJ#it!
shares are sod after 1/1=/2==4 the )T"> are taxa$e at 18I as per section 111A.
2. Indi&id#as, .01, A34, 53I and e&er! artificia 6#ridica person %et their income taxa$e on the $asis of sa$ rate.
-. )#rchar%e K 1=I is e&ia$e on the tax ia$iit! in the case of indi&id#a and .01 where their taxa$e income exceeds <s. 1= a:hs and <s. 1== Aa:hs in case of firms and
companies for the AG 2==9-2=1=.
4. 1irms L domestic companies are char%ea$e at a fat rate of -=I.
8. )#rchar%e e&ia$e for the AG 2==9-2=1= has $een 1=I except in case of forei%n companies where it is 2.8I.
6. Bo s#rchar%e is imposed on oca a#thorit! and co-operati&e societies.
,. *&er! person whose tota income of the assessment !ear exceeds the maxim#m amo#nt not char%ea$e to tax sha pa! the tax as per the rates mentioned in the finance act, in the
pre&io#s !ear itsef. )#ch tota income is to $e cac#ated on the $asis of the residentia stat#s of a person.
8. *d#cation cess for the AG 2==9-2=1= is 2I for primar! ed#cation and 1I for hi%her and secondar! ed#cation. (e sho#d not cac#ate and char%e ed#cation cess at -I, it wo#d
$e principa! wron%.
SUMMAR% OF THE
TH
CHAPTER
INCOME UNDER THE HEAD SA!AR%
1. E4;6oy-2 < E4;6oy-- 2-6a/+o)(7+;, Income is taxa$e as income from saar! if there is an empo!er - empo!ee reationship $etween 2 persons. 4artners are not empo!ees of
partnership firm and thatDs wh! saar! recei&ed from the firm is not taxa$e as saar! income $#t it is taxa$e as income from $#siness and profession. )imiar! mem$ers of
pariament ha&e no empo!er and therefore sittin% fees recei&ed $! them for attendin% pariament session sha $e taxa$e as income from other so#rces.
2. Co)/2a./ o9 (-2v+.- v( Co)/2a./ 9o2 (-2v+.-, (here&er there exists empo!er-empo!ee reationship there is a =.o)/2a./ o9 (-2v+.->. In this
empo!er can contro and direct the wor: to $e performed $! empo!ee. In this case income recei&ed $! a person sha $e re%arded as saar!. (here
there is )o -4;6oy-2?-4;6oy-- 2-6a/+o)(7+; then two peope en6o! the reationship of =.o)/2a./ 9o2 (-2v+.->. In this the contractee can on! $e tod
what is to $e done. There can $e no specific instr#ctions a$o#t how it is to $e done. In this case income sha $e taxa$e as income of $#siness and
profession or income of other so#rces.
-. @"ontract of )er&iceD creates empo!er M empo!ee reationship whereas Hcontract for ser&iceD doesnDt res#t in s#ch a reationship. Therefore an! Income from s#ch reation is not
to $e taxed #nder this head of Income.
4. TDS o) (a6a2y v( TaA 92-- (a6a2y, 0nder the concept of T;) empo!er wi cac#ate and ded#ct tax on the month! $asis $efore handin% o&er saar! to empo!ee. 5#t in case of
tax free saar! empo!er wi pa! tax on the saar! income of empo!ee o#t of his own poc:et and therefore s#ch amo#nt of tax is added in the saar! of the empo!ee.
8. A*va).- (a6a2y v( a*va).- a8a+)(/ (a6a2y, 0nder the concept of ad&ance saar! empo!ee %ets saar! from the empo!er $efore saar! %ets d#e to him. 5#t in case of ad&ance
a%ainst saar! empo!er %i&er oan to empo!ee on a condition that instament of s#ch oan wo#d $e ded#cted from the month! saar! of empo!ee.
111111111111111111111111111111111111111111111111111111111111111111111111111111111111
6. S-./+o) 1&, )aar! income is taxa$e on d#e or receipt $asis whiche&er is earier. 5#t if it is taxed on d#e $asis it wi not $e a%ain taxed when it is recei&ed.
,. S-./+o) $011, )aar! is awa!s accr#ed at a pace where the ser&ices are rendered. .owe&er in case of %o&ernment empo!ee who is wor:in% o#tside India, his saar! sha awa!s
$e accr#ed in India.
8. S522-)*-2 a)* 9o28o+)8 o9 (a6a2y, Is saar! is s#rrendered in fa&or of the %o&ernment then s#ch saar! is not taxed. .owe&er if empo!ee for%oes his saar! in fa&or of some
other empo!ee then s#ch saar! is taxa$e in hands of empo!ee.
9. Sa6a2y 92o4 4o2- /7a) 1 -4;6oy-2, If saar! is recei&ed from more than 1 empo!er then a%%re%ate of saar! from a empo!ers sha $e taxed.
1=. P2o9+/( +) 6+-5 o9 (a6a2y, Amo#nt of compensation from an! person $efore assessee 6oinin% an! empo!ment with that person or after cessation of his empo!ment with that person
is profit in ie# of saar! and taxa$e #/s 1,/-2.
11. TaA ;a+* 3y -4;6oy-2 o) /7- ;-2B5+(+/- va65- o9 )o)?4o)-/a2y ;-2B5+(+/-(, If empo!er pa!s tax on $ehaf of empo!ee then saar! paid to empo!ee wi :now as tax free
saar!. )#ch amo#nt of tax paid $! empo!er on $ehaf of empo!ee sha $e empo!eeDs income and wi $e added to his %ross saar!. .owe&er if empo!er pa!s s#ch amo#nt of
tax on non monetar! perJ#isites then so m#ch of tax sha B3T $e inc#ded in %ross saar! of empo!ee---)ection 1=/1=""2.
12. E)/-2/a+)4-)/ a66oCa).- is %i&en a ded#ction on! to %o&ernment empo!ees. >o&ernment empo!ees mean empo!ees of "entra >o&ernment and )tate >o&ernment---)ection
16/ii2.
1-. P2o9-((+o)a6 /aA is imposed $! the )tate >o&ernment and ne&er $! "entra >o&ernment. 4rofessiona Tax is aowed as ded#ction #/s 16/iii2 on the pa!ment $asis and not on
accr#a $asis. 4rofessiona Tax is %i&en a ded#ction e&en if amo#nt has $een paid $! empo!ers atho#%h it wi $e first inc#ded in the %ross saar!.
14. G2a/5+/yDS-./+o) 100101 1or %o&ernment empo!ees, %rat#it! is f#! exempt from tax at the time of retirement. >o&ernment empo!ees mean empo!ees of "entra
>o&ernment, )tate >o&ernment, Aoca A#thorit!. 1or other maxim#m exemption for the ife time is <s.-8====. >rat#it! recei&ed an!time $efore retirement sha $e f#! taxa$e
and %rat#it! at death is exempt from tax.
18. Co445/-* P-)(+o)DS-. 10010A1, 1or %o&ernment empo!ees or non %o&ernment empo!ees #ncomm#ted pension is awa!s f#! taxa$e. 4ension is aowed to $e comm#ted
to the maxim#m of 4=I of the f#t#re 1== months. "omm#ted pension is awa!s f#! exempt from tax for %o&ernment empo!ees $#t for non %o&ernment empo!ees its exemption
depends on whether assessee has recei&ed %rat#it! or not at retirement. >o&ernment empo!ees mean empo!ees of "entra >o&ernment, )tate >o&ernment, Aoca A#thorit! and
)tat#tor! "orporation.
16. Fa4+6y ;-)(+o), After the death of the empo!ee pension sha $e paid to his fami! mem$ers and s#ch pension is caed fami! pension. After death of mem$er of armed forces
who was winner of %aantr! award pension %i&en to his fami! mem$ers sha $e f#! exempt from tax #nder section 1=/182. If mem$er of armed forces die d#rin% com$at d#ties
then pension %i&en to his fami! mem$ers sha $e f#! exempt from tax #nder section 1=/192. In a other cases fami! pension is re%arded as income from other so#rces and is
exempt from tax #nder section 8, to the ower of7
1. 1/- of fami! pension recei&ed.
2. Caxim#m imit of <s. 18===/
1,. !-av- (a6a2y??S-.10010AA1, *ncashment of ea&e d#rin% ten#re of 6o$ is awa!s f#! taxa$e for a :inds of empo!ees whether %o&ernment or non %o&ernment. *ncashment of
ea&e at retirement is exempt for maxim#m of <s.-=====. >o&ernment empo!ee means empo!ee of "entra >o&ernment and )tate >o&ernment. Aea&e encashment %i&en to
fami! mem$ers after the death of the empo!ee sha $e f#! exempt from tax.
18. P2ov+*-)/ F5)*, "ontri$#tion of empo!er to )41 is f#! exempt from tax. 1#rther interest accr#ed on )41 is aso f#! exempt from tax #nder section 1=/112. "ontri$#tion of
empo!er to <41 acco#nt of empo!ee is exempt #p to 12I of saar! and interest thereon is exempt #p to 9.8I of tota contri$#tion. "ontri$#tion to 0<41 and interest thereon is
f#! taxa$e at the time of retirement or withdrawa.
19. !TC, *xemption #/s. 1=/82 in respect of ea&e tra&e concession or aowance is with reference to 2 trips in a $oc: of 4 caendar !ears.
2=. Fo2-+8) a66oCa).-( a)* ;-2B5+(+/-(, An! aowances or perJ#isite %i&en to empo!ee of %o&ernment o#tside India sha $e f#! exempt from tax #nder section 1=/,2. )#ch an
aowance is aso :nown as forei%n aowance.
21. ESOP( are not taxa$e as perJ#isite if iss#ed in accordance with the %#ideines specified $! the "entra >o&ernment.
22. The foowin% is the tax treatment for &ario#s aowances7
A1 HRA 5:( 1001#A1 RWR 2AD*xempt #p to the east of
1. Act#a .<A recei&ed.
2. <ent paid in excess of 1=I of saar! i.e. rent paid M1=I of saar!.
-. 8=I of the saar! in metros and 4=I in other paces.
)aar! wo#d mean 5)N;A/<2Ncommission on fixed I $asis of saes.
52 3fficia aowances #/s 1=/1427 a66 /7-(- a66oCa).-( a2- -A-4;/ 5; /o /7- 6oC-2 o9,
a2 a4o5)/ 2-.-+v-* o2
$2 A./5a6 a4o5)/ (;-)/ 9o2 /7- o99+.+a6 ;52;o(-(
Co)v-ya).- A66oCa).-E A.a*-4+. A66oCa).-E T2av-6+)8 A66oCa).-E H-6;-2 A66oCa).-E U)+9o24 A66oCa).-E Da+6y A66oCa).-
C1 A66oCa).-( C7+.7 a2- -A-4;/ /o /7- 6oC-2 o9 a4o5)/ 2-.-+v-* a)* 6+4+/ (-/ 3y 6aC.
i. .oste *xpendit#re Aowance7 exempt #p to <s.-== p.m. per chid #p to a maxim#m of two chidren. "hidren wi inc#de adopted and step chidren $#t sha not inc#de %rand-
chidren. That means aowance for %rand-chidren sha $e f#! taxa$e.
ii. 0nder%ro#nd Aowance7 exempt #p to <s.8== 4er month.
iii. Tri$a Area Aowance7 It is exempt #p to <s.2== per month.
i&. "hidren *d#cation Aowance7 It is exempt #p to <s.1== p.m. per chid for maxim#m of 2 chidren. "hidren ma! inc#de adopted or step chidren $#t sha not inc#de
%randchidren. "hidren can $e an! 2 chidren.
&. "o#nter Ins#r%enc! aowances7 *xempt #p to <s.-9== pm.
&i. Transport Aowance7 *xempt to the extent of <s.8== p.m. $#t if the empo!ee is ph!sica! handicapped then the amo#nt exempt is <s.16== pm.
&ii. 3#tstation aowance7 The amo#nt of exemption sha $e7 /a2 ,=I of s#ch aowance or /$2 <s.6 === p.m. (hiche&er is ess.
D1 A66oCa).-( C7+.7 a2- 9566y /aAa36- a2-
;earness aowances /;A2, 3&ertime aowance, "it! compensator! aowance /""A2, )er&ant aowance/ warden aowance, A#nch aowance/Tiffin
aowance, 1ami! aowance, Cedica aowance is awa!s f#! taxa$e irrespecti&e of an! amo#nt spent on medica treatment, *ntertainment aowance,
;ep#tation aowance, )pit d#t! aowance, datin% aowance etc.
2#1 T7- 9o66oC+)8 a2- -A-4;/ ;-2B5+(+/-(,
i. Interest free oan in respect of medica treatment for specified aiments.
ii. .oida! home .eath c#$ sports and simiar faciities made #niform! a&aia$e to a empo!ees.
iii. .ote accommodation #p to 18 da!s on transfer.
i&. Cotorcar and "on&e!ance faciit!.
&. Cedica faciit! in own hospita9 p#$ic hospita9 >o&ernment hospita or appro&ed hospita.
&i. "ar credit card and c#$ faciit!.
&ii. 0se of comp#ters and aptop.
&iii. *xpenses on phones inc#din% mo$ie phones i.e. teephone faciit!.
ix. Bewspapers and periodicas.
x. Ceas Tea coffee snac:s etc pro&ided.
xi. Amo#nt spent on the trainin% of empo!ee or on refreshment co#rse.
xii. An! :ind of %ood of which empo!er is a prod#cer and is s#ppied $! him to his empo!ee at concessiona rate.
xiii. <ecreationa faciit! pro&ided $! empo!er to empo!ee.
xi&. 4erJ#isites o#tside India to citi'en of India who is %o&ernment empo!ee.
x&. 4a!ment of the premi#m on the accidenta poic! of empo!ee.
x&i. <1A pro&ided to 6#d%es of ." or )" or officia of pariament or #nion minister or eader of opposition in pariament.
x&ii. "on&e!ance pro&ided to 6#d%es of ." or )".
21 T7- 9o66oC+)8 ;-2B5+(+/-( a2- -A-4;/ +9 /7- va65- *o-( )o/ -A.--* /7- ;2-(.2+3-* 6+4+/.
1. Interest on pett! oans not exceedin% <s. 2==== in a%%re%ate
2. *d#cationa $enefit not exceedin% <s. 1=== per chid per month.
-. Cedica reim$#rsement #p to <s. 18=== in a !ear.
2&1 P-2B5+(+/-( /aAa36- o)6y 9o2 (;-.+9+-* -4;6oy--(?????(-./+o) 17021 0+++1
1. >ardner, watchman, sweeper or an! other persona attendant--------<#e -/-2.
2. >as, eectricit!, water faciit!---------<#e -/42.
-. *d#cationa faciit!---------------------<#e -/82.
2"1 E4;6oy-- +( (;-.+9+-* -4;6oy-- +9 7- 9a66( 5)*-2 a)y 1 o9 /7- 9o66oC+)8 # .a/-8o2+-(,
1. .e is an! director of the compan! and is aso empo!ee of compan!.
2. .e is the empo!ee with the s#$stantia interest in the compan! i.e. he hods 2=I or more of the &otin% power.
-. .is income #nder the head OsaariesP exc#din% non monetar! perJ#isites exceeds <s.8====.
271 P-2B5+(+/-( /aAa36- 9o2 a66 F+)*( o9 -4;6oy--(,
1. <1A----------------------------------------------------)ection 1,/22/i2 <(< -/12.
2. Accommodation at concessiona rate --------)ection 1,/22/ii2 <(< -/12.
-. *mpo!eeDs o$i%ation met $! empo!er-----------------)ection 1,/22/i&2
4. Amo#nt of premi#m paid $! empo!er on $ehaf of empo!ee--------)ection 1,/22/&2
8. 1rin%e $enefits---------)ection 1,/22/&i2 <(< -/,2
1. Interest free or concessiona oan
2. 0se of mo&a$e asset $eon%in% to empo!er
-. Transfer of a mo&a$e asset $! empo!er to empo!ee.
SUMMAR% OF THE &
TH
CHAPTER
FRINGE BENEFIT AND NEW PER'UISITES
1. This chapter reates to the frin%e $enefits pro&ided $! empo!er to empo!ee and #p on which empo!er wi $e ia$e to pa! tax.
2. A compan!, partnership firm, A34, 53I, oca a#thorit! and artificia 6#dicia person arte re%arded as empo!ers and 15T is e&ied on them.
-. An indi&id#a, a .01, centra %o&ernment, state %o&ernment, a poitica part! and tr#sts sha not $e re%arded as empo!er and no 15T is
e&ied on them..
4. *&er! empo!er sha $e ia$e to pa! 15T of -=I on the &a#e of frin%e $enefits pro&ided to empo!ee or deemed to ha&e $een pro&ided to
empo!ee d#rin% the 4G. 1#rther s#rchar%e sha $e appica$e if the &a#e of frin%e $enefits exceeds <s. 1== a:hs and ed#cation cess sha
aso $e appica$e.
8. )ection 118(5 /12 and /22 defines the nat#re of frin%e $enefits and section 118(" defines the &a#e of frin%e $enefits.
6. (*1 AG 2==8-2==9, the concept of ad&ance tax has $een made appica$e to 15T aso. The amo#nt of 15T sha $e paid in instaments in
the pre&io#s !ear itsef #nder section 118(@/22.
,. If ad&ance tax of 15T is not paid then assessee sha $e char%ed simpe interest of 1I pm for the dea! in the pa!ment of 15T #nder section
118(@ /-2, /42 and /82.
8. The perJ#isite of car sha $e taxa$e for empo!ee if empo!er is not ia$e for 15T.
9. The perJ#isite &a#e of car taxa$e for empo!ee wi depend on the ownership of car and who has inc#rred expenses for the r#nnin% and
maintaince of car.
1=. If car is #sed exc#si&e! for the officia p#rposes then perJ#isite &a#e of car sha $e Bi and nothin% sha $e taxa$e for empo!ee $#t for
this few doc#ments ha&e to $e maintained.
11. If empo!er has pro&ided more than 1 car to empo!ee and a cars are #sed part! for officia and part! for persona p#rposes then one car
sha $e taxa$e as per the r#es of 4344 p#rposes and a other cars sha $e taxa$e as per the r#es of car #sed for persona p#rposes.
12. 4ic: and drop faciit! pro&ided $! the empo!er to empo!ee sha $e f#! exempt from tax for empo!ee.
1-. 1aciit! of tra&ein%, to#rin% and accommodation sha $e taxa$e for empo!ee and for this 4? sha $e the &a#e at which these faciities are
a&aia$e to %enera p#$ic.
14. 4? of the meas pro&ided sha $e the act#a expendit#re inc#rred $! the empo!er $#t <s. 8= per mea sha $e exempt from tax.
18. 4? of tea and snac:s pro&ided $! the empo!er d#rin% office ho#rs sha $e f#! exempt from tax $#t which are pro&ided after office ho#rs
sha $e f#! taxa$e.
16. >ifts recei&ed from empo!er $! the empo!ee in :ind are exempt #p to <s. 8=== pa. 5#t %ift is cash or in con&erti$e in cash sha $e f#!
taxa$e.
1,. 4erJ#isite &a#e of credit card and c#$ sha $e f#! exempt from tax for empo!ee if #se of card or c#$ is for exc#si&e for officia
p#rposes. 5#t is #se is persona or part! officia and part! persona then it sha $e f#! taxa$e.
18. The car is taxa$e for the empo!ee is empo!er is ia$e for 15T and empo!ee is a s specified empo!ee. The detaied taxa$iit! of motor car
pro&ided to the empo!ee is as foows
1. IF THE CAR IS OWNED:HIRED B% EMP!O%ER AND IS USED B% EMP!O%EE
1. CAR IF USED ON!% FOR THE OFFICIA! PURPOSES7 Its 4? sha $e BIA pro&ided some specified doc#ments ha&e $een maintained.
2. CAR IS USED ON!% FOR THE PRIVATE PURPOSES, Its 4? sha $e a%%re%ate of foowin%7
Act#a r#nnin% and maintaince char%es
A;; Act#a cha#ffer char%es /dri&erDs saar!2
A;; (ear and tear char%es, which sha $e 1=I of the historica cost of car.
1.# CAR IS USED PART!% FOR OFFICIA! AND PART!% FOR PERSONA! PURPOSES, Its 4? &a#e sha
$e cac#ated as foows7
1. IF RUNNING AND MAINTAINCE CHARGES ARE MET B% EMP!O%ER THEN,
i. If carDs en%ine capacit! is of 16== cc or ess7 <s. 12== pm.
ii. If carDs en%ine capacit! is of more than 16== ccQ<s.16== pm.
2. IF RUNNING AND MAINTAINCE CHARGES ARE MET B% EMP!O%EE THEN,
i. If carDs en%ine capacit! is of 16== cc or ess-----<s. 4== pm
ii. If carDs en%ine capacit! is of more than 16== ccQ<s.6== pm
NOTES,
1. If aon% with car cha#ffer is aso pro&ided then 6== pm has to $e added in $oth of the a$o&e cases.
2. 4ower of car can $e defined in terms of cc /c#$ic capacit!2 or in terms of iters. Therefore 16== cc ma! $e said as 1.6 iters of en%ine capacit!.
2. IF EMP!O%EE OWNS CAR AND IS USED B% EMP!O%EE HIMSE!F AND EXPENSES ARE MET B% EMP!O%ER OR REIMBURSED
B% HIM
2.1 CAR IF USED ON!% FOR THE OFFICIA! PURPOSES, Its 4? sha $e BIA pro&ided some specified doc#ments ha&e $een maintained.
2.2 CAR IS USED ON!% FOR THE PRIVATE PURPOSES, Its 4? sha $e taxed #nder section 1,/22/i&2 i.e. it sha $e f#! taxa$e for $oth
specified as we as non specified empo!ees.
2.# CAR IS USED PART!% FOR OFFICIA! AND PART!% FOR PERSONA! PURPOSES, Its 4? &a#e sha $e cac#ated as foows7
Act#a expendit#re done $! empo!er
A*)) 12== pm 3< 16== pm as the case ma! $e dependin% #pon c#$ic capacit! of car
A*)) 6== pm for cha#ffer
NOTES
1. F2a./+o) o9 4o)/7, 1or comp#tin% the 4? of a car the fraction of the month sha $e exc#ded.
2. M-a)+)8 o9 4o)/7, Conth has to $e rec:oned in respect to the 5ritish caendar. 1or this p#rpose month sha
$e #nderstood in this manner7 18/8/2==9 to 14/6/2==9 or 19/8/2==9 to 18/9/2==9 or 2/1=/2==9 to 1/11/2==9 and
i:ewise.
-. A4o5)/ 2-.ov-2-* 3y -4;6oy-2 92o4 -4;6oy--, If an empo!ee has paid an! amo#nt $ac: to the empo!er then it sha not $e red#ced from the
4? of car, if the car has $een #sed for 4344 p#rposes. 5#t if the car has $een #sed for the persona p#rposes then the amo#nt ret#rned $! empo!ee
to empo!er sha $e red#ced to cac#ate the 4?.
4. Poo6 o9 .a2(, If the empo!er has pro&ided more than 1 car for part! officia and part! persona p#rposes then it wi $e a case of 4oos of "ar. In
s#ch a case an! one car wi $e taxed as per the r#es of 4344 and remainin% car/s2 wi $e taxed as per the r#es of persona #se.
8. V-7+.6- o/7-2 /7a) .a2, If empo!er has pro&ided an! other &ehice other than car then its 4? sha $e 6== pm.
6. P+.F a)* *2o; 9a.+6+/y, If empo!er has pro&ided pic: and drop faciit! then its 4? sha $e exempt from tax.
7. S;-.+9+-* *o.54-)/( 4-a)(,
1. A Ao%$oo:, which contains compete detais of 6o#rne! #nderta:en for the officia p#rpose, which ma! inc#de date of 6o#rne!, destination,
miea%e and the amo#nt of expendit#re, inc#rred thereon.
2. The empo!er %i&es a certificate that the expendit#re was inc#rred who! and exc#si&e! for the officia p#rposes.
8. 4ersona p#rposes inc#de the $enefit to mem$ers of ho#sehod of empo!ee. Cem$ers of ho#sehod mean spo#se, chidren, spo#se/s2 of chidren,
parents, ser&ants and dependents
SUMMAR% OF THE "
TH
CHAPTER
INCOME FROM HOUSE PROPERT%
1. .o#se propert! m#st comprise of $#idin% 3< ands attached to s#ch $#idin% to attract taxa$iit! #nder this head of income.
2. This is the on! head of income where income ma! %et comp#ted on notiona $asis and taxed.
-. Taxa$iit! arises in the hands of the owner or deemed owner as defined #nder section 2,.
4. BA? is comp#ted #/s 2- and for this p#rposes the foowin% steps are foowed7
1. )tep 17 .i%her of C#nicipa &a#e and 1air <ent.
2. )tep 27 Aower of )tandard rent and &a#e at step 2.
-. )tep -7 ?a#e of step 2 ess Aoss of rent d#e to &acanc! of propert!.
4. )tep 47 .i%her of &a#e at step - and act#a rent recei&ed is >A?.
8. )tep 87 1rom >A? cac#ated at step 4 we red#ce m#nicipa taxes paid $! andord on or $efore -1/-/4G
8. C#nicipa taxes are ded#cted on pa!ment $asis and not on the accr#a $asis. 1#rther taxes which are paid $! andord are to $e red#ced and not which
ha&e $een paid $! tenant.
6. )ection 24/a2 aows -=I fat ded#ction on BA? and section 24/$2 aows interest on capita $orrowed.
,. In case of one sef occ#pied propert!, net ann#a &a#e is ni $#t interest on $orrowed capita #/s 24/$2 is aowed as a ded#ction #p to <s. -=,===, if oan
was ta:en $efore 1/4/99.
8. If oan is ta:en on or after 1/4/99 and p#rchase or constr#ction of ho#se is competed within - !ears from the end of the financia !ear of o$tainin% the
oan, then the imit of <s. -==== is s#$stit#ted $! <s. 1,8=,===.
9. Interest on oan $orrowed which is pa!a$e o#tside India sha $e aowed as ded#ction on! if tax is ded#cted or paid at so#rce.
1=. In case of ho#se propert! which is &acant, m#nicipa taxes are aowed to $e red#ced and th#s we can ha&e ne%ati&e BA?.
11. 0nreai'ed rent does not form part of act#a rent if a the conditions of <#e 4 are satisfied.
12. If s#$seJ#ent! #nreai'ed rent is recei&ed it is taxed #/s. 28AA in the !ear of receipt witho#t an! ded#ction #/s. 24.
1-. Arrears of rent recei&ed from a tenant sha $e taxed #/s. 285 $#t s#$6ect to -=I ded#ction of s#ch arrear.
14. "o-ownerDs share of income from propert! is inc#ded in each co-owners indi&id#a assessment and is not assessa$e as on A34.
18. In case where the propert! is part! sef occ#pied and part! et o#t on the $asis of area then C?, 1<, )<,CT paid and Interest on $orrowed capita has
to $e $if#rcated on the $asis of area. .owe&er, if propert! is 4A3/4)3 on the $asis of time period then nothin% has to $e $if#rcated.
16. Bet ann#a &a#e of a propert! can $e ne%ati&e pro&ided m#nicipa taxes paid are hi%her than the amo#nt of >A?.
1,. If assessee has the main $#siness of ettin% o#t propert! or deain% in propert! e&en then the renta income is to $e taxed #nder this head of income and
not #nder the head of 4>54.
18. In case assessee recei&ed composite rent for ettin% o#t the propert! as we as faciities aon% with s#ch propert! then it has the foowin% tax treatment7
1. If ettin% o#t of $#idin% and faciities is separa$e then rent of the propert! is to $e taxed #nder the head of .4 and rent of faciities #nder the head 4>54 or 3) as the case ma! $e.
2. If ettin% o#t of $#idin% and faciities is not separa$e then rent of the propert! as we as rent of faciities is to $e taxed #nder the head 4>54 or 3) as the case ma! $e.
1. 1oowin% .4 are not char%ea$e to tax #nder the head of .47
1. Income from a farmho#se.
2. 4ropert! hed $! a charita$e tr#st
-. 4ropert! #sed for own $#siness or profession.
4. A )3 or a &acant ho#se.
8. A paace of ex r#er.
2=. Ad&ance rent recei&ed $! the assessee sha $e taxa$e in the !ear to which it reates.
21. In the case of ho#se propert! which is &acant, m#nicipa taxes are aowed to $e red#ced.
SUMMAR% OF THE 7
TH
CHAPTER
INCOME FROM BUSINESS G PROFESSION
1. S-./+o) 1&, 4rofits and %ains of 5#siness or 4rofession sha $e comp#ted either on cash $asis or mercantie $asis of acco#ntin%.
2. )pec#ation 5#siness income sho#d to $e comp#ted separate! as oss from s#ch $#siness cannot $e set off a%ainst an! other $#siness income.
-. <e&en#e oss or expendit#re incidenta to $#siness is exc#da$e in the comp#tation e&en tho#%h there is no specification pro&ision. 1or exampe
expendit#re on stationer! is ded#cti$e e&en tho#%h there is no specific section for this.
4. A the assets #se for $#siness can $e cassified as #nder7
Ta)8+36-, /a2 Aand M it is not ei%i$e for depreciation.
/$2 5#idin%, machiner!, pant and f#rnit#re are ei%i$e for depreciation.
I)/a)8+36-, Rnow-how, patents, cop!ri%hts, trademar:s, icenses, franchises are ei%i$e for depreciation.
1. <e&en#e expenses inc#rred in reation to the assets mentioned in point 42 sho#d $e considered for ded#ction #/s. -=, -1 and -,/12. "apita expendit#re
not J#aif!in% #nder these pro&isions ma! $e capitai'ed and depreciation #/s. -2 can $e caimed if ei%i$e.
2. 3n! in the case of #nderta:in%s en%a%ed in the $#siness of %eneration or %eneration and distri$#tion of power, there is an option to a&ai depreciation
on strai%ht-ine method. This option is for on! those assets, which ha&e $een p#rchased after -1/-/98. In a other cases depreciation is ded#cti$e on!
on written down &a#e method. The option has to $e exercised in the $e%innin% and sha app! to a the s#$seJ#ent assessment !ears.
-. If depreciation has $een char%ed as per )AC $asis as mentioned in 62 a$o&e and then $oc: of asset has $een sod7
1. 1or the &a#e ess than the &a#e of $oc: then we %et termina depreciation, which can $e de$ited, to 4A acco#nt.
2. 1or the &a#e more than the &a#e of $oc: then #p to the amo#nt of depreciation de$ited to the da! is treated as
4>54 income and $aance if an! is treated as )T">.et destro!ed
4. Interest on oan $orrowed for acJ#irin% on asset #sed in the $#siness has to $e treated as #nder7
1. 5efore the commencement of prod#ction/5#siness has to $e capitai'ed.
2. Interest reatin% to the period after the asset is first p#t to #se sha ne&er form part of the cost of the asset. As per )ec. 4-/12 it sha $e aowed as re&en#e expendit#re.
9. 0na$sor$ed depreciation is treated as part of c#rrent !ear depreciation and therefore, can $e set off a%ainst income #nder other heads of income as we
/except income of saar! and cas#a incomes2. It can $e carried forward indefinite! e&en if the $#siness is discontin#ed.
1=. As per section 8= there sha $e awa!s )T"> on sae of a deprecia$e asset.
11. In case of asset $ein% destro!ed and ins#rance compan! %i&es a simiar asset to assessee then the &a#e of s#ch asset destro!ed sha not $e red#ced from
the $oc: as per the )" case of CIT v( Ha(/52+ a)* So)( !/*.
12. The ded#ction of scientific research expendit#re #/s. -8 sha $e as foows7
4artic#ars ;ed#ction permissi$e.
1
*xpendit#re inc#rred for own $#siness7
- 0/s. -8/2A52 M specia acti&ities s#ch as pharmace#ticas, $io-technoo%!,
comp#ters etc.
- 0/s. -8 M 3ther cases
(ei%hted ded#ction of 18=I
;ed#ction of 1==I
2 "ontri$#tion to >o&ernmentDs, appro&ed #ni&ersit!Ds, coe%e or instit#tionDs
a$orator!
(ei%hted ded#ction of 128I
1#1 >enera!, re&en#e expendit#re is ded#cti$e in the !ear when expendit#re has $een inc#rred and capita expendit#re is capitai'ed. The concept of deferred re&en#e expendit#re is
not pre&aent in Indian income tax str#ct#re. .owe&er, s#ch principe is made appica$e #nder the foowin% sections7
A1 S-./+o) #&D M Amorti'ation of preiminar! expendit#re M write it off o&er 8 !ears. S#aif!in% amo#nt sha $e foows7
1. 1or non-corporate assessee it cannot exceed 8I of cost of pro6ect
2. 1or a "ompan! it cannot exceed 8I of cost of pro6ect 3< 8I capita empo!ed which e&er is hi%her.
B1 S-./+o) #&DD M *xpenses inc#rred for ama%amation and demer%er M write off o&er 8 !ears.
C1 S-./+o) #&DDA M ?o#ntar! <etirement )er&ice compensation M write off o&er 8 !ears.
D1 S-./+o) #7011 M ;isco#nt/ premi#m on redeema$e preference shares or $onds or de$ent#res can $e spread o&er the ife of the instr#ment < Ma*2a(
I)*5(/2+a6 I)v-(/4-)/ Co2;o2a/+o) !/*.
14. The $ad de$ts written off d#rin% precedin% pre&io#s !ears and which are reco&ered d#rin% the pre&io#s !ear then reco&er! is f#! taxa$e in the !ear of reco&er! pro&ided
it is reco&ered $! the same assessee who has inc#rred s#ch $ad de$t as was decided $! SC +) /7- .a(- o9 P.H.Ha+4a6.
18. *xpendit#re on ad&ertisement in so#&enir, $roch#re, pamphet etc. p#$ished $! a poitica part! is not aowed as ded#ction. .owe&er a ded#ction for the same or/and
simiar expendit#re is aowed as ded#ction #nder section 8=>>5 and 8= >>".
16. *xpenses not ded#cti$e are as foows7
1. S-.. 00a1 MAn! pa!ment o#tside India on which no T;) has $een done or has $een paid.
2. S-.. 0A021 M *xcessi&e and #nreasona$e expendit#re where a reati&e and s#$stantia interest hodin%
is in&o&ed.
-. S-.. 0A0#1 M *xpendit#re paid in excess of <s.2==== otherwise than $! acco#nt pa!ee cheJ#e or $an:
draft s#$6ect to r#e 6;;.
4. S-.. 0A071 M 4ro&ision for %rat#it!.
8. S-.. 0A0$1 M "ontri$#tion to #nappro&ed f#nds.
6. S-.. #B M "ertain expenses not paid within the stip#ated time imit. This appies irrespecti&e of
method of acco#ntin%.
14. (here the partnership deed stip#ates terms of interest and saar! to partners, the amo#nt a#thori'ed $! the deed or the imit prescri$ed $! )ec. 4=/$2, whiche&er is ower,
sha $e aowed as ded#ction. This imit is as foows7
BOOH PROFITS OF PROFESSIONA!
FIRMS
BOOH PROFITS OF
OTHER FIRMS
REMUNERATION AS I OF BOOH
PROFITS
3n first <s.1===== or
in case of Aoss
3n first <s.,8=== or
in case of Aoss
<s.8==== or 9=I of $oo: profits which
e&er is hi%her
3n next 1===== 3n next ,8=== 6=I
3n 5aance 3n 5aance 4=I
181 U:(. AA the assessee needs to maintain $oo:s of acco#nt in the foowin% cases7
1. Botified professions M >ross receipts exceed <s. 1.8 a:hs.
2. 3ther professions/$#sinessM Income exceeds <s. 12 a:hs or t#rno&er exceeds <s. 1= a:hs.
1$1 U:(.AB A#dit is mandator! if
1. 4rofession %ross receipts exceed <s. 1= a:hs.
2. 4res#mpti&e cases co&ered $! 44A;9 44A* L 44A1. 4455 and 44555, where the income is ess than prescri$ed imit.
2=. 4res#mpti&e $#siness income pro&isions are as foows7
P2ov+(+o) S-..AD S-..AE S-..AF
Bat#re L
*i%i$iit!
"i&i constr#ction $#siness ha&in%
T#rno&er 4= a:hs.
Transport $#siness-ha&in% no. of &ehices
1=
<etai Traders ha&in%
T#rno&er 4= a:hs.
;eemed
Income
8I or more of t#rno&er. .ea&! &ehice M <s. -,8== or more. 3thers
<s. -,18= or more /p.m. or part of the
month2
8I or more of T#rno&er.
SUMMAR% OF THE 8
TH
CHAPTER
INCOME FROM CAPITA! GAINS
1. In order to attract taxa$iit! #nder this head of income there m#st $e Hcapita assetD and it m#st $e co&ered #nder the term of HtransferD.
2. As per section 2/142 stoc: in trade, persona effects and a%ric#t#ra and in r#ra area are not considered as capita asset and hence there sha $e no capita %ains on their
transfer.
-. Transactions constit#tin% HtransferD are i#strated #/s. 2/4,2 some of which are as foows7
1. )ae, exchan%e or reinJ#ishment of a capita asset.
2. *xtin%#ishments of an! ri%ht in asset.
-. "omp#sor! acJ#isition $! of capita asset $! %o&ernment
4. "on&ersion of capita asset into stoc: in trade.
8. An! transaction as referred as to in )ection 8-A of Transfer 3f 4ropert! Act 1882.
4. These transactions are not re%arded as HtransferD #/s. 4,, therefore no capita %ains sha $e char%ed
i. Transfer #nder %ift or wi
ii. ;istri$#tion of assets on partition of .01
iii. Transfer of the artistic, scientific wor: etc. to the %o&ernment, #ni&ersit!, m#se#m etc.
i&. "on&ersion of the $onds, de$ent#res, deposits etc into shares or the de$ent#res of that compan!.
&. Transfer of shares hed $! sharehoders #nder the ama%amation if7
1. Ama%amated compan! is an Indian compan!.
2. Transfer is made in consideration of aotment to him of the shares in the ama%amated compan!.
8. A capita asset is treated as on%-term capita asset on the $asis of period of hodin% as foows7
0a1 )hares, isted sec#rities, 0nits of 0TI and m#t#a f#nds reco%ni'ed #/s. 1=/2-;2 M 12 months or more.
031 A other capita assetsM-6 months or more /;eprecia$e assets are awa!s treated as )T"A2
1. In case of AT"A, "3A is to $e indexed with the factor for that !ear in which the asset was for the first time acJ#ired $! the assessee.
2. )ection 48Ds pro&isos7
1. 1st 4ro&iso appies to non residents on transfer of shares and de$ent#res on!.
2. 2nd pro&iso appies to a :inds of AT"A.
-. -rd pro&iso appies to $onds and de$ent#res and indexation is not done.
1. 5enefit of indexation is not a&aia$e in case of7
1. )hort term capita assets9
2. 5onds and de$ent#res since -
rd
pro&iso to section 48 is appica$e.
-. )#mp sae #/s. 8=5
9. There are 8 sef %enerated assets in respect of which the .o(/ o9 a.B5+(+/+o) sha $e adopted as )+6 in case an assessee has not inc#rred an! cost for acJ#isition them.
These assets are sef %enerated %oodwi9 tenanc! ri%ht9 ro#te permit9 Aoom ho#rs9 <i%ht to man#fact#re, prod#ce or process an! artice or thin%9 5on#s shares acJ#ired
after 1/4/819 <i%ht to s#$scri$e to shares 9 trademar: or $rand name.
1=. In the case of $on#s shares acJ#ired $efore 1/4/1981, it is possi$e to a&ai fair mar:et &a#e as on 1/4/1981 as the cost of acJ#isition. In fact, it is the on! asset9 amon%
the 8 assets referred to a$o&e for which fair mar:et &a#e as on 1/4/1981 can $e a&aied if the $on#s shares ha&e $een acJ#ired prior to that date. I) /7- .a(- o9 /7- o/7-2
a((-/(E -v-) +9 /7-y a2- a.B5+2-* ;2+o2 /o 1::1$81E .o(/ C+66 3- /aF-) a( )+6.
11. In case of %ift or wi or inheritance cost of acJ#isition sha $e the cost at which the pre&io#s owner acJ#ired the asset. 1#rther in whie cac#atin% the period of hodin%
the period for which the asset was hed $! pre&io#s owner and c#rrent owner sha $e added to%ether.
12. The differentia treatment $etween on% term and short term capita assets sha $e as foows7-
Pa2/+.56a2( !o)8 T-24 S7o2/ T-24
Indexation $enefit A&aia$e Bot a&aia$e
*xemption #/s 84, 84*",841 L 84>
*xemption #/s 845, 84;, 84> L 84>A
A&aia$e
A&aia$e
Bot a&aia$e
A&aia$e
"oncessiona tax rate #/s. 112 A&aia$e in case of sec#rities Bot a&aia$e
5asic exemption imit
/Indi&id#a L .012
A&aia$e to residents if
incomes except AT"> are
ess than $asic exempt imit
A&aia$e
;ed#ctions of section 8=" to 8=0 Bot a&aia$e A&aia$e
1. S-./+o) &01A1, "apita %ains tax norma! arises in the !ear of transfer except in the case of ins#rance compensation where it is taxed in the !ear of receipts.
2. S-./+o) &021, "on&ersion of capita asset into stoc:-in-trade is taxed in the !ear of sae of s#ch stoc:-in-trade $#t whie indexin% the cost of acJ#isition sha ta:en for
the !ear in which con&ersion too: pace.
-. S-./+o) &0&1, In case of comp#sor! acJ#isition capita %ain is taxed in the !ear of receipt of compensation or part of the compensation. In case of enhanced
compensation "> sha ha&e the same nat#re as that of ori%ina compensation. In case of red#ction of compensation, the tax on ori%ina compensation or enhanced
compensation sha $e re&ised.
4. ?a#es to $e considered for the adoption for comp#tation of capita %ains are as7
1. S-./+o) &021 "on&ersion of capita asset into stoc: M 1air mar:et &a#e on date of con&ersion.
2. S-./+o) &0#1 4artner or mem$er introd#cin% asset to firm or A34 M 5oo: &a#e recorded in firm.
-. S-./+o) &01 ;isso#tion of firm and distri$#tion of assets M 1air mar:et &a#e on the date of distri$#tion. In other cases, act#a consideration to $e adopted.
1. "omp#tation of capita %ains in case of non-deprecia$e assets sha $e cac#ated #/s. 48 and in the case of deprecia$e assets it sha $e as #nder7
i. S-./+o) &0, In case of deprecia$e assets #sed for the $#siness and professiona p#rposes.
ii. S-./+o). &0A, where strai%ht-ine method is adopted $! power sector #nderta:in%.
iii. S-./+o). &0B, where s#mp sae is affected.
18. S-./+o). &0C of &a#ation for the )tamp ;#t! Act we ha&e to ta:e hi%her of7
a1 )ae consideration
31 ?a#e as fixed #nder that act.
19. 5enefit of indexation is not a&aia$e in case of7
1. )hort term capita assets9
2. 5onds and de$ent#res since -
rd
pro&iso to section 48 is appica$e.
-. )#mp sae #/s. 8=5
201 EA-4;/+o)( o9 .a;+/a6 8a+)( ava+6a36- o)6y /o +)*+v+*5a6 a)*:o2 HUF a((-((--(, S-./+o) &E &B a)* &F
P2ov+(+o)(
Ca;+/a6 8a+)( o) (a6-
o9 2-(+*-)/+a6
;2o;-2/y 5(-* 9o2
2-(+*-)/+a6 ;2o;-2/y,
S-./+o) &
Ca;+/a6 8a+)( o) (a6- o9
523a) a82+.56/52a6
6a)* a)* 5(-* 9o2
a)o/7-2 a82+.56/52-
6a)*
S-./+o) &B
Ca;+/a6 8a+) o) (a6- o9
!TCA )o/ /o 3-
.7a28-* +) .a(- o9
+)v-(/4-)/ +)
2-(+*-)/+a6 7o5(-,
S-./+o) &F
1. A((-((-- Indi&id#a/.01 Indi&id#a Indi&id#a/.01
2. A((-/ /2a)(9-22-* <esidentia ho#se
propert! $ein%
$#idin%s or ands
app#rtenant thereto.
A%ric#t#ra and #sed
$! indi&id#a or his
parent for a%ric#t#ra
p#rposes d#rin% 2 !ears
precedin% date of
transfer
An! capita asset not
$ein% residentia ho#se
propert!. *xemption is
not a&aia$e if assessee
owns more than 2
residentia ho#ses
inc#din% a new ho#se.
#. Na/52- o9 A((-/ AT"A AT"A / )T"A AT"A
. N-C A((-/ /o 3-
;52.7a(-*:.o)(/25./-*
<esidentia ho#se
propert! i.e. $#idin%s
or ands app#rtenant
thereto
A%ric#t#ra and /in
#r$an or r#ra area2
<esidentia ho#se
propert! i.e. $#idin%s or
ands app#rtenant
thereto
&. T+4-?6+4+/ 9o2
;52.7a(-:.o)(/25./+o)
4#rchase7 (ithin 1
!ear $efore or 2 !ears
after the date of
transfer.
"onstr#ction7
compete constr#ction
within - !ears !ear
from date of transfer
4#rchase within 2 !ears
from the date of transfer
4#rchase7 (ithin 1 !ear
$efore or 2 !ears after
date of transfer9 and
"onstr#ction7 "ompete
constr#ction within -
!ear from date of
transfer
". D-;o(+/ (.7-4-
0D+(.5((-* 6a/-21
Appica$e Appica$e Appica$e
7. A4o5)/ o9 EA-4;/+o) Aower of M "apita
%ains or in&estment in
new asset
Aower of M capita %ains
or cost of new asset
"ost of new ho#se x
"apita >ains T Bet
consideration $ein% 1#
?a#e of consideration
ess *xpenses on transfer
8. W+/7*2aCa6 o9
EA-4;/+o) o)
If transfer of the new
asset within - !ears
from its p#rchase/
constr#ction
If transfer of the new
asset within - !ears
from its p#rchase
/a2 if assessee p#rchases
within 2 !ears or
constr#cts within - !ears
from date of transfer of
ori%ina asset, a
residentia ho#se other
than new ho#se9 or
/$2 transfer new asset
within - !ears from date
of its p#rchase/
constr#ction
$. TaAa3+6+/y o) W+/7*2aCa6 Amo#nt of exemption
caimed earier sha
$e red#ced from the
cost of acJ#isition of
new asset.
*xemption caimed
earier sha $e red#ced
from cost of acJ#isition
of new asset.
Amo#nt exempted
earier sha $e taxa$e
as on%-term capita
%ains in pre&io#s !ear in
which M /a2 another
residentia ho#se is
p#rchased or
constr#cted, or /$2 the
new asset is transferred.
211 EA-4;/+o)( +) 2-(;-./ o9 .a;+/a6 8a+)( ava+6a36- /o a66 a((-((--(, S-./+o) &DE &ECE &G a)* &GA
P2ov+(+o)(
Co4;56(o2y
a.B5+(+/+o) o9 6a)*
G 35+6*+)8(
S-./+o) &D
I)v-(/4-)/ +) .-2/a+)
3o)*(,
S-./+o) &EC
S7+9/+)8 o9
5)*-2/aF+)8 /o
252a6 a2-a,
S-./+o) &G
S7+9/+)8 o9 5)*-2/aF+)8
/o SEJ,
S-./+o) &GA
1. A((-((-- An! person An! person An! person An! person
2. A((-/
/2a)(9-22-*
"omp#sor!
acJ#isition of and
or $#idin% which
was #sed in the
$#siness of
ind#stria
#nderta:in% d#rin%
2 !ears prior to date
of transfer.
An! on% term capita
asset
Transfer of pant,
machiner! or and
or $#idin% for
shiftin% ind#stria
#nderta:in% from
#r$an area to r#ra
area
Transfer of pant,
machiner! or and or
$#idin% for shiftin%
ind#stria #nderta:in%
from #r$an area to
)pecia *conomic +one
#. Na/52- o9
A((-/
)hort term/ Aon%
term
Aon% term )hort term/ Aon%
term
)hort term/ Aon% term
. N-C A((-/
/o 3-
;52.7a(-*:
.o)(/25./-*
Bew and or
$#idin%s for the
ind#stria
#nderta:in%.
5onds, redeema$e after
- !ears iss#ed M
/a2 $! Bationa .i%hwa!
A#thorit! of India9 or
/$2 $! <#ra
*ectrification
"orporation, maxim#m
exemption imit $ein%
<s. 8= a:hs /Amended
$! 1A, 2==, w.e.f. 1-4-
=82
/a2 4#rchase/
"onstr#ction of
pant, machiner!,
and or $#idin% in
s#ch r#ra area or,
/$2 )hiftin% ori%ina
assets to that area
or, /c2 Inc#rrin%
notified expenses
/a2 4#rchase/
"onstr#cted of pant,
machiner!, and or
$#idin% in s#ch )*+ or,
/$2 )hiftin% the ori%ina
assets to )*+ or, /c2
Inc#rrin% notified
expenses.
&. T+4-?6+4+/
9o2
;52.7a(-:
.o)(/25./+o
) o9 )-C
a((-/.
(ithin - !ears from
date of receipt of
initia
compensation.
(ithin 6 months from
the date of transfer of
ori%ina asset.
(ithin 1 !ear
$efore or - !ears
after the date of
transfer.
(ithin 1 !ear $efore or
- !ears after the date of
transfer.
". D-;o(+/ Appica$e - Appica$e Appica$e
(.7-4-
7. a4o5)/ o9
EA-4;/+o)
Aower of M capita
%ains or in&estment
in new asset.
Aower of M capita %ains
or in&estment in new
asset
Aower of M "apita
%ains, or "ost
inc#rred for /a2 to
/c2 of point 4.
Aower of "apita %ains,
or "ost inc#rred for /a2
to /c2 of point 4.
8. W+/7*2aCa6
-A-4;/+o)
Transfer of new
asset within a period
of - !ears from the
date of its
acJ#isition or
constr#ction.
Transfer of new asset,
con&ersion thereof in
mone! of ta:in% oan or
ad&ance on its sec#rit!
within - !ears from date
of its acJ#isition
Transfer of new or
shifted asset within
a period of - !ears
from the date of its
acJ#isition or
constr#ction or
shiftin%
Transfer of new or
shifted asset within a
period of - !ears from
the date of its
acJ#isition or
constr#ction or shiftin%
$. TaAa3+6+/y
o)
W+/7*2aCa6
o9
EA-4;/+o)
Amo#nt of
exemption caimed
earier sha $e
red#ced from the
cost of acJ#isition
of new asset.
*xempted capita %ain
wi taxa$e as on%-term
capita %ains in pre&io#s
!ear in which s#ch
transfer/con&ersion ta:es
pace.
Amo#nt of
exemption caimed
earier sha $e
red#ced from the
cost of acJ#isition
of new or shifted
asset.
Amo#nt of exemption
caimed earier sha $e
red#ced from the cost of
acJ#isition of new or
shifted asset.
No/-, If exemption has $een caimed #/s 84*" in respect of in&estment in a new asset, no ded#ction sha $e aowed
#/s 8=" with reference to the amo#nt of in&estment for which exemption has $een caimed.
221 Indexation factors to $e #sed for indexation of AT"A are7
P2-v+o5( %-a2
I)*-Aa/+o)
9a./o2
P2-v+o5( %-a2
I)*-Aa/+o)
9a./o2
P2-v+o5( %-a2
I)*-Aa/+o)
9a./o2
1981-1982 1== 1991-1992 199 2==1-2==2 426
1982-198- 1=9 1992-199- 22- 2==2-2==- 44,
198--1984 116 199--1994 244 2==--2==4 46-
1984-1988 128 1994-1998 289 2==4-2==8 48=
1988-1986 1-- 1998-1996 281 2==8-2==6 49,
1986-198, 14= 1996-199, -=8 2==6-2==, 819
198,-1988 18= 199,-1998 --1 2==,-2==8 881
1988-1989 161 1998-1999 -81 2==8-2==9 882
1989-199= 1,2 1999-2=== -89
199=-1991 182 2===-2==1 4=6
SUMMAR% OF THE $
TH
CHAPTER
INCOME FROM OTHER SOURCES
1. The foowin% incomes are awa!s taxa$e as income from other so#rces7
1. ;i&idend income from forei%n compan!.
2. "as#a income s#ch as winin% from otter!, crossword p#''es, %am$in%, card %ames, winnin% from horse races etc.
-. "ontri$#tion of 41 recei&ed $! the empo!ee and not deposited with the 41.
4. Interest on sec#rities.
8. <ent from ettin% of pant and machiner! aon% with $#idin%.
6. )#m recei&ed $! :e!man from :e!man ins#rance poic! if empo!er and empo!ee reation is a$sent.
,. Income from s#$ettin% of ho#se propert!.
8. >ifts in cash recei&ed exceedin% <s. 8==== from non reati&es. 5#t %ifts on the occasion of marria%e are not taxa$e. )imiar! %ifts %i&en in anticipation of death sha not $e
taxa$e.
2. S-./+o) 1&, Income #nder the head of other so#rces sha $e cac#ated on the cash $asis or accr#a $asis of acco#ntin% whiche&er is foowed $! the assessee.
-. 1oowin% are some of the incomes which are taxa$e #nder the head of other so#rces7
1. ;irectorDs fee.
2. A%ric#t#re income from o#tside India.
-. <ent of open pot of and.
4. )aar! pa!a$e to mem$ers of pariament.
8. 1ami! pension recei&ed $! fami! mem$ers of deceased empo!ee is taxa$e as income from other so#rces. 5#t an exemption of 18=== or 1/- of s#ch income sha $e aowed as
per section 8,.
6. Interest on empo!eeDs own contri$#tion in 0<41 when he %ets retired.
,. An! income from #ndiscosed so#rces.
8. An! other cas#a income.
9. Income from ro!at!.
1=. >ro#nd rent.
11. *xamination fees recei&ed $! a teacher from a person other than his empo!er.
4. ;i&idends recei&ed $! sharehoders from a domestic compan! other than those co&ered $! section 2/222/e2 is exempt from tax #/s. 1=/-42 for sharehoder since compan! has to
pa! ";T.
8. Income from 3ther )o#rces is a resid#ar! head of income, which inc#des a income which is not co&ered $! other heads of income and which are not exempt from tax.
6. (hie income from $#idin% propert! and and app#rtenant thereto is taxa$e #nder the head HIncome from ho#se propert!D, if &acant and is et o#t, the rent is assessa$e #nder the
head HIncome from other so#rcesD.
,. Income from a%ric#t#ra acti&ities is exempt from tax #/s 1=/12, if a%ric#t#re and is sit#ated in India $#t if and is o#tside India then income sha not $e exempt $#t it wi $e
taxa$e as the income from other so#rces.
8. Apart from the specific ded#ctions permissi$e #/s. 8,, an! expendit#re who! and exc#si&e! inc#rred for the p#rpose of earnin% an! income assessa$e #nder this head is aso
aowa$e and ded#ction.
9. If the assessee recei&es pension after retirement, the same is assessa$e #nder the head H)aariesD. (hereas, if fami! pension is recei&ed $! the e%a heir of the deceased empo!ee,
it is taxa$e #nder this head s#$6ect to 1/- of fami! pension or <s. 18,=== whiche&er is ess.
1=. (innin%s from otter!, crossword p#''es, races, etc. sha $e taxed at the rate of -=I /p#s s#rchar%e and ed#cation cess2 #/s. 11855.
11. 1rom the cas#a incomes no :ind of expenses are aowed to $e ded#cted and %ross amo#nt is taxa$e.
SUMMAR% OF THE 10
TH
CHAPTER
C!UBBING OF INCOMES
1. S-./+o) "0, If income is transferred witho#t transfer of the asset then s#ch income sha $e taxa$e for the transferred and not for the transferee.
2. S-./+o) "1, In the case of re&oca$e transfer, income from the asset sha $e taxa$e for the transfer and not for the transferee $#t if the transfer is not re&oca$e then it
sha $e taxa$e for the transferor.
-. S-./+o) "0110++1, An indi&id#a is char%ea$e to tax in respect of an! saar!, commission, fees or an! other form of rem#neration recei&ed $! the spo#se froa concern in
which the indi&id#a has s#$stantia interest except in case where income of spo#se is earned on! d#e to appication of technica or professiona :nowed%e or experience.
4. S-./+o) "0110+v1, if person has transferred an asset to spo#se and spo#se earns some income from s#ch asset then s#ch income sha $e taxa$e for the transferor of the
asset.
8. Income on the asset transferred is c#$$ed $#t not the income on accretion to the asset.
6. S-./+o) "01A17 An! income accr#in% or arisin% to a minor chid is ia$e to $e c#$$ed with the income of father or mother whose so e&er has hi%her tota income $efore
s#ch c#$$in%.
,. Income deri&ed $! a minor chid o#t of s:i and taent or $! wa! of saar! and wa%es sha not $e c#$$ed. .owe&er, if s#ch income is in&ested and income is earned
thereon, s#ch income sha $e c#$$ed.
8. "#$$in% ceases to operate when the minor $ecomes a ma6or.
9. There is no c#$$in% of income in the case of a minor chid who is ei%i$e for ded#ction #/s. 8=0.
1=. )imiar!, where a minor chid does not ha&e parents, c#$$in% of income does not arise. The minor chid wi $e assessa$e in his own case. >#ardian wi $e
representati&e assessee for assessment p#rposes.
11. If the income is to $e c#$$ed then it sha $e comp#ted first in the hands of recei&er #nder ree&ant head and then it sha $e inc#ded in the tota income indi&id#a #nder
same head.
)0CCA<G 31 T.* 11
th
".A4T*<
SET OFF G CARR% FORWARD OF !OSSES
1. S-./+o) 70, Aoss from one so#rce can $e set-off a%ainst income from another so#rce #nder the same head in the same !ear except
1. )pec#ation oss.
2. Aon%-term capita oss.
-. Aoss from ownin% and maintainin% racehorses.
4. Bo oss to $e set off from income, which is exempt from tax.
8. Bo oss to $e set off from income of otteries, card %ames, races etc.
6. Aoss of 4>54 can not $e set off from saar! income
2. S-./+o) 71, Aoss #nder one head of income can $e set-off a%ainst income #nder another head of income in the same !ear except those which are mentioned in 12
a$o&e.
-. The J#estion of comp#tin% oss #nder the head HsaariesD does not arise. 0nder a other heads, there is a possi$iit! that the net res#t of comp#tation is a oss.
)#ch oss remainin% #na$sor$ed after set-off can $e carried forward #p to 8 assessment !ear /4 !ears in the case of oss from the acti&it! of owin% and
maintainin% race horses and spec#ation $#siness oss2 to $e set-off a%ainst income #nder the same head.
4. )pec#ation oss, on%-term capita oss and oss from the acti&it! of ownin% and maintainin% racehorses can $e set-off on! a%ainst income of the same nat#re.
8. S-./+o) 72A, In the case of ama%amation the #na$sor$ed oss and depreciation is treated as that of the ama%amated compan!. Therefore, carr! forward of oss
is a&aia$e for s#$seJ#ent 8 assessment !ears and depreciation can $e carried forward indefinite!. This period of 8 !ears is irrespecti&e of the period of oss,
which has $een, carr! forwarded $! ama%amatin% compan!.
6. In the case of demer%er, the oss attri$#ta$e to the res#tin% compan! sha $e carried forward for the #nexpired period of 8 !ears.
,. If $#siness is s#cceeded $! wa! of inheritance, oss of the predecessor from s#ch $#siness can $e carried forward $! the s#ccessor.
8. S-./+o) 7$, "ose! hed compan! can carr! forward oss on! if 81I of &otin% ri%ht is hed $! the same sharehoders.
9. "arr! forward $enefit of $#siness oss9 spec#ation oss9 oss #nder Hcapita %ainsD and oss from the acti&it! of ownin% and maintainin% race horses can $e
a&aied on! if the ret#rn of oss is f#rnished within the d#e date #/s. 1-9/12. This condition does not app! to #na$sor$ed depreciation #/s. -2/22 and oss from
ho#se propert! #/s. ,15.
SUMMAR% OF THE 12
TH
CHAPTER
IB"3C* 1<3C A><I"0AT0<* IB"3C*
1. As per section 1=/12 a%ric#t#re income is exempt from income tax if a%ric#t#ra and is sit#ated in India. If a%ric#t#re and is o#tside India
then the a%ric#t#ra income sha $e taxa$e.
2. 4ower to tax a%ric#t#re income has $een %i&en to state %o&ernments $! the constit#tion of India.
-. ;efinition of a%ric#t#re income is %i&en in section 2/1A2.
4. To term an! acti&it! as a%ric#t#ra acti&it! $oth $asic conditions and s#$seJ#ent conditions ha&e to $e satisfied as was decided $! )" in the
case of <a6a 5ino! R#mar )ahas <o!.
8. Acti&ities which are aied acti&ities to a%ric#t#re s#ch as anima h#s$andr!, dair! farmin%, fisher! etc. are not re%arded as a%ric#t#ra
acti&ities and therefore income from these so#rces are not exempt. The! are taxa$e as income from $#siness and profession.
6. If a partnership is ha&in% main acti&it! of a%ric#t#re then rem#neration and interest recei&ed $! the partners from s#ch firm sha $e re%arded
as a%ric#t#re income and hence not char%ea$e to tax $#t share in the post tax profits of firm is not a%ric#t#re income as was decided $! the
in the case of <. C. "hidam$aram 4iai.
,. Income from sae of r#$$er, coffee and tea sha $e $if#rcated as $#siness income and a%ric#t#re income as per r#e ,, r#e ,5 and r#e 8.
8. In case of Indi&id#a, .01, A34 and 53I a%ric#t#re income and non a%ric#t#re income ha&e to $e c#$$ed to%ether to cac#ate tax on the
non a%ric#t#re income. This sha $e done when a%ric#t#re income exceeds <s. 8=== pa and non a%ric#t#re income exceeds $asic exempt
imit. This eads to partia taxation of a%ric#t#re income.
9. (e can sa! that a%ric#t#re income is not f#! exempt from tax $#t it is partia! taxa$e in some specia cases.
SUMMAR% OF THE 1#
TH
CHAPTER
DEDUCTIONS FROM GTI
1. ;ed#ctions #nder section 8=" to 8=0 are not aowed to $e ded#cted from Aon% Term "apita >ain and cas#a incomes s#ch as winnin% of
Aotteries, races etc.
2. A%%re%ate of a ded#ctions cannot exceed >TI. In other words we can not ha&e oss d#e to ded#ctions.
-. U)*-2 (-./+o) 80C ded#ction sha $e aowed to an indi&id#a /whether resident or non resident2 or .01 /whether resident or non resident2.
Indi&id#a can $e a forei%n nationa.
4. ;ed#ction #nder section 8=" is aowed for sa&in%s and in&estments done. These sa&in%s and in&estments can $e made from taxa$e income
or from exempted income. .owe&er maxim#m ded#ction aowed is <s. 1=====.
8. U)*-2 (-./+o) 80CCC ;ed#ction is a&aia$e on! to an Indi&id#a who can $e either resident or can $e a non-resident or can $e a forei%n
nationa. ;ed#ction is a&aia$e if indi&id#a has in the 4G deposited an! amo#nt o#t of his taxa$e income /which can $e from c#rrent !earDs
income or preceedin% !earDs income2 towards ann#it! pan of AI" or an! other ins#rer for recei&in% pension. Caxim#m ded#ction aowed is
<s. 1=====.
6. U)*-2 (-./+o) 80CCD ded#ction is aowed to indi&id#a who is empo!ee of centra %o&ernment or an! other empo!er, for the contri$#tion
to new pension scheme. ;ed#ction is aowed s#$6ect to maxim#m contri$#tion of 1=I of saar! $! empo!ee and empo!er.
,. A( ;-2 (-./+o) 80CCEE a%%re%ate ded#ction #nder section 8=", 8=""", 8=""; can not $e more than <s. 1=====.
8. U)*-2 (-./+o) 80D ded#ction is aowed to indi&id#a and .01 whether resident or non resident for the medica ins#rance premi#m paid $!
an! mode other cash. ;ed#ction aowed sha $e maxim#m of <s. 18=== $#t in case of senior citi'en <s. 2====.
9. U)*-2 (-./+o) 80DD ded#ction is aowed to indi&id#a and .01 whether resident or non resident for the medica, reha$iitation, n#rsin%
expenses inc#rred for the dependent who is s#fferin% form disa$iit!. ;ed#ction aowed is <s. 8==== $#t in case of se&ere disa$iit!
ded#ction aowed is <s. ,8===.
1=. U)*-2 (-./+o) 80DDB ded#ction is aowed to resident Indi&id#a or resident .01 for the medica expenses inc#rred on the treatment of
dependent. ;ed#ction aowed is maxim#m of <s. 4==== $#t in case of senior citi'en ded#ction aowed is maxim#m of <s. 6====.
11. U)*-2 (-./+o) 80E ded#ction is aowed to resident or non resident indi&id#a for the interest paid on the oan ta:en for the hi%her ed#cation
for the st#dies of sef, spo#se or chidren. 3n! interest is aowed as a ded#ction for the consec#ti&e period of 8 !ears.
12. U)*-2 (-./+o) 80G ded#ction is aowed to a assessees whether resident or non resident for the donations %i&en. Bo ded#ction is aowed
for the donations %i&en in :ind. )ome donations %i&en are aowed 1==I ded#ction and some other are aowed 8=I ded#ction.
1-. U)*-2 (-./+o) 80GG ded#ction is aowed to indi&id#a who is resident or a non resident for the rent paid for a sef occ#pied residentia
ho#se where he is not entited to .<A from his empo!er. Caxim#m ded#ction aowed is <s. 2=== pm.
14. U)*-2 (-./+o) 80GGA ded#ction is aowed to a assesses whether resident or non resident for the 1==I of donations %i&en for scientific
research where assessee is not ha&in% income from $#siness or profession.
18. U)*-2 (-./+o) 80GGB a)* 80GGC ded#ction is aowed for the donations %i&en to poitica part! $! Indian compan! and other assessees.
16. U)*-2 (-./+o) 80KKA ded#ction is aowed for 1==I of profits earned from the $#siness of coection and processin% of $io-de%rada$e
waste. ;ed#ction is aowed to a assessees for consec#ti&e period of 8 !ears.
1,. U)*-2 (-./+o) 80KKAA ded#ction is aowed on! to Indian "ompan! which has the $#siness of man#fact#rin% an! artice or thin%.
;ed#ction aowed is -=I of the saar! for - !ears paid to wor:men who ha&e $een empo!ed after initia 1== wor:men.
18. U)*-2 (-./+o) 80!A ded#ction is aowed to $an:in% companies ha&in% $ranch ocated in offshore area or )*+. ;ed#ction aowed is 1==I
of the profits earned for first 8 !ears and 8=I of the profits earned for next 8 !ears.
19. U)*-2 (-./+o) 80P ded#ction is aowed to co-operati&e societ!.
2=. U)*-2 (-./+o) 80''B ded#ction is aowed to resident indi&id#a who is a professiona a#thor. ;ed#ction aowed is for the ro!at! income
earned from sae of $oo:s s#$6ect to maxim#m of <s. -=====.
21. U)*-2 (-./+o) 80RRB ded#ction is aowed to resident indi&id#a who is an in&entor of a technoo%! which is re%istered #nder 4atents Act
19,=. ;ed#ction aowed is for the ro!at! income earned from s#ch in&ention s#$6ect to maxim#m of <s. -=====.
22. U)*-2 (-./+o) 80U ded#ction is aowed to resident indi&id#a who is s#fferin% from a ph!sica disa$iit!. ;ed#ction aowed is <s. 8====
$#t in case of se&ere disa$iit! ded#ction aowed is <s. ,8===.
SUMMAR% OF THE 1
TH
CHAPTER
EXEMPTED INCOMES
1. S-./+o) 10, A of the foowin% incomes are exempt from tax
1. A%ric#t#re income from and in India.
2. )hare of income of .01 for mem$er of .01.
-. )hare of income of firm for the partner of firm.
4. "ompensation from disasters Uw.e.f section 1= /1=5"2V.
8. Amo#nt recei&ed on the mat#rit! of ife ins#rance poic!.
6. )choarships recei&ed for meetin% cost of ed#cation.
,. Income from awards.
8. Income from di&idends from shares and #nits of m#t#a f#nds.
9. Income from internationa sportin% e&ents.
2. S-./+o) 10A, 4ro&isions for new! esta$ished #nderta:in%s in free trade 'ones, or specia economic 'one.
-. S-./+o) 10AA, )pecia pro&isions in respect of new! esta$ished #nits in specia econom! 'one.
4. S-./+o) 10B, 4ro&isions in respect of new! esta$ished 1==I export oriented #nderta:in%.
8. S-./+o) 10BA, ;ed#ction in respect of export of artistic handmade wooden artices
SUMMAR% OF THE 1&
TH
CHAPTER
ASSESSMENT PROCEDURE
1. SECTION 1#$011, It is comp#sor! for e&er! compan! and a partnership firm to fie its ret#rn of income on or $efore d#e date irrespecti&e of e&e
of income. 1#rther in case of oss aso the! ha&e to fie ret#rn of income in the prescri$ed format.
2. It is comp#sor! for e&er! person other than a compan! and partnership firms to fie ret#rn of income on or $efore the d#e date if his tota Income or
tota income of some other person in respect of which he is assessa$e d#rin% the !ear exceeds the $asic exempt imit.
-. (here the assessee is compan!, partnership firm, a person /other than compan!2 whose acco#nts are reJ#ired to $e a#dited, a co-operati&e, the
person is wor:in% partner of a firm whose acco#nts are reJ#ired to $e a#dited, d#e date is -1/)eptem$er/AG and in an! other case d#e date is -1/
@#!/AG.
4. If an assessee has defa#ted in fiin% ret#rn of income then he sha $e ia$e to pa! interest #nder section 2-4A and to pa! penat! #nder section
2,11.
8. If the <3I is f#rnished after the d#e date or is not f#rnished at a then assessee has to pa! interest #nder section 2-4A K 1I pm or part of the month.
Interest sha $e paid for the period startin% from the date next to the d#e date of <3I and endin% on the date when <3I is fied.
6. S-./+o) 1#$0#1, It is not mandator! to fie a ret#rn of oss, as there is no taxa$e income. .owe&er osses of OBon spec#ati&e $#siness #nder section
,2/12P 9 O)pec#ati&e $#siness #nder section ,-/22 9 O"apita >ains #nder section ,4P 9 Oosses from the acti&it! of ownin% and maintainin% of race
horses #nder section ,4AP can $e carried forward on! if a ret#rn of oss is fied. .owe&er, Aoss #nder O.o#se 4ropert!P and O0na$sor$ed
;epreciationP can $e carried forward e&en if ret#rn of oss is fied after d#e date.
,. S-./+o) 1#$01, If <3I is not fied within the time aowed #/s 1-9/12 the A3 can iss#e a notice reJ#irin% the assessee to f#rnish <3I within the time
specified $! him. If the ret#rn is not f#rnished within time aowed #/s 1-9/12 or within the time aowed #nder notice iss#ed $! A3 sti assessee can
fie <3I and s#ch <3I sha $e :now as $eated ret#rn. 5eated <3I can $e fied $efore7
0+1 *nd of one !ear from the end of ree&ant AG or
0++1 5efore competion of assessment C7+.7-v-2 +( -a26+-2.
8. S-./+o) 1#$0&1, If assessee disco&ers an! omission or wron% statement in ret#rn fied #/s 1-9 /12 or #/s142 /12 he ma! f#rnish a re&ised ret#rn. <3I
can $e re&ised
+1 5efore the end of one !ear from the end of the ree&ant assessment !ear 3<
++1 5efore the competion of assessment C7+.7-v-2 +( -a26+-2.
$. B-6a/-* 2-/52) .a)L/ 3- 2-v+(-* a( Ca( *-.+*-* 3y SC +) .a(- o9 HUMAR KAGDISH CHANDRA SINHA.
10. R-/52) o9 6o(( .a) 3- 2-v+(-* a)* a( 4a)y )543-2 o9 /+4-( a( o)- *-(+2-( 35/ +9 *o)- C+/7+) /7- /+4- 6+4+/ (;-.+9+-*
11. *&er! person who has $een aotted 4AB sha J#ote it7
1. (hie recei&in% income on which T;) has to $e done and sha $e tod to the person doin% T;). This is not reJ#ired where income is not char%ea$e
to tax.
2. In a ret#rn and correspondence with income tax dept.
-. )ae/4#rchase of Cotor ?ehice /*xc#din% 2 wheeers2.
4. )ae/4#rchase of an! immo&a$e propert! for 8 a:hs or more.
8. )ae/4#rchase of sec#rities exceedin% <s. 1 a:hs.
6. Appication for teephone connection.
,. 3penin% of a 5an: Acco#nt.
8. 4a!ment to hotes or resta#rant of $i exceedin% <s. 28,=== at one time.
,. Time deposits with a $an: or post office exceedin% <s.8=,===.
8. 4a!ment in cash for the $an: draft for <s. 8==== or more.
9. "ash deposit of <s. 8==== or more in a $an: in one da!.
1=. 4a!ment in cash exceedin% <s. 28=== in connection with the tra&e to the forei%n co#ntr!.
121 T!pes of ret#rn forms appica$e are7
Fo24 )o. 1orm appica$e to
ITR 1
Indi&id#a ha&in% income from one or more of the foowin% so#rces7
1. )aar!.
2. 1ami! pension.
-. Interest income char%ea$e as income from other so#rces.
ITR 2 An indi&id#a or .01 not ha&in% income #nder the head of 4>54
ITR # An indi&id#a or .01 $ein% a partner in a partnership firm and whose income #nder the head
4>54 comprises on! of interest or rem#neration recei&ed or recei&a$e from that firm.
ITR Indi&id#a or .01 deri&in% income from proprietar! $#siness or profession.
ITR &
An! person other than
1. Indi&id#a
2. .01
-. "ompan!.
4. 4erson for whom IT<L is appica$e
In other words this form is appica$e to partnership firms, A34/53I and artificia 6#ridica
persons.
ITR " "ompan! except that compan! for which IT<, is appica$e.
ITR 7 An! person inc#din% compan! /whether or not re%istered #nder section 28 of the companies act
19862 reJ#ired to fie a ret#rn #nder section 1-9/4A2, /452, /4"2 or /4;2
ITR 8 A person who is not reJ#ired to f#rnish the ret#rn of income $#t is reJ#ired to f#rnish the ret#rn
of frin%e $enefits.
SUMMAR% OF THE 1"
TH
CHAPTER
ADVANCE TAX AND INTEREST PA%AB!E
1. S-./+o) 207, Ad&ance tax is pa!a$e on the income of the c#rrent !ear inc#din% on the income of capita %ains and cas#a incomes.
2. S-./+o) 208, Ad&ance tax is pa!a$e if the income tax after T;) is <s. 8=== or more.
-. S-./+o) 20$, 1rom the income tax ia$iit!, T;) has to $e red#ced and the $aance sha $e pa!a$e as per instaments mentioned in
section 211.
4. S-./+o) 210, income tax is pa!a$e $! the assessee if assessin% officer sends him a notice for the same. This notice can $e sent atest
$! the ast da! of the 1e$r#ar! of the pre&io#s !ear.
8. S-./+o) 211, Ad&ance tax sha $e pa!a$e as per foowin% instaments.
D5- *a/- o9 +)(/a664-)/ A4o5)/ ;aya36-
Co4;a)+-(
3n or $efore 18/=6/4G
3n or $efore 18/=9/4G
3n or $efore 18/12/4G
3n or $efore 18/=-/4G
18I of ad&ance tax pa!a$e
48I of ad&ance tax pa!a$e as red#ced $! an! amo#nt aread! paid.
,8I of ad&ance tax pa!a$e as red#ced $! an! amo#nt aread! paid.
1==I of ad&ance tax pa!a$e as red#ced $! the amo#nt aread! paid.
O/7-2 /7a) Co4;a)+-(
3n or $efore 18/=9/4G
3n or $efore 18/12/4G
3n or $efore 18/=-/4G
-=I of ad&ance tax pa!a$e
6=I of ad&ance tax pa!a$e as red#ced $! an! amo#nt aread! paid.
1==I of ad&ance tax pa!a$e as red#ced $! the amo#nt aread! paid
1. S-./+o) 211B, If assessee does not pa! ad&ance tax when he is ia$e to pa! then he wi $e deemed to $e assessee in defa#t.
2. "onseJ#ences for non-pa!ment of ad&ance tax sha $e
1. Assessee is :nown as assessee in defa#t.
2. Assessee sha $e ia$e to pa! interest #nder section 2-4" and section 2-45.
-. Assessee sha $e ia$e to pa! penat! #nder section 14=A/-2 which can $e maxim#m of 1==I of s#ch tax.
8. S-./+o) 2#A, If the <3I is f#rnished after the d#e date or is not f#rnished at a then assessee has to pa! interest #nder section 2-4A
K 1I pm or part of the month. Interest sha $e paid for the period startin% from the date next to the d#e date of <3I and endin% on
the date when <3I is fied.
9. S-./+o) 2#B, If assessee has paid ad&ance tax ess than the 9=I of the assessed tax then he sha $e ia$e to pa! interest #nder
section 2-45 at rate of interest pa!a$e sha $e 1I pm or part of the month. Interest sha $e paid for the period startin% from the
1/4/AG and endin% on the date when s#ch tax is paid.
1=. S-./+o) 2#C, If an! person has not paid his ad&ance tax on the d#e dates as mentioned in section 211 then s#ch person has to pa!
interest #nder section 2-4" at the rate of interest sha $e 1I per month or for part of the month. The period of interest sha $e -
months $#t for the ast instament the period sha $e on! 1 month.
SUMMAR% OF THE 17
TH
CHAPTER
TAX DEDUCTED AT SOURCE
1. To/a6 +).o4- o9 /7- a((-((-- 9o2 /7- ;2-v+o5( y-a2 +( /aAa36- +) /7- a((-((4-)/ y-a2. HoC-v-2 +).o4- /aA +( 2-.ov-2-* 92o4 /7- a((-((-- +) /7- 4a))-2 o9 a*va).-
;ay4-)/ o9 /aA-( +) *+99-2-)/ +)(/a664-)/( o2 3y /aA *-*5./-* a/ (o52.-.
2. T;) on saaries7 )ection 1927 TDS /o 3- *o)- 3y -4;6oy-2 a/ /7- /+4- o9 ;ay4-)/ o9 (a6a2y -A.-;/ +) .a(- C7-2- (a6a2y +).o4- +( 6-(( /7a) 3a(+. -A-4;/ 6+4+/. B-9o2-
*-*5./+)8 TDS /7- -4;6oy-2 (7o56* .a6.56a/- /7- /o/a6 +).o4- o9 -4;6oy-- a)* 9o2 /7+( *-*5./+o) 5)*-2 (-./+o) 80CE80CCCE 80DE 80DDE 80EE 80GE 80GG a)* 80U
(7o56* 3- a66oC-*. Sa6a2y +).o4- (7a66 3- 2-*5.-* 3y 6o(( o9 7o5(- ;2o;-2/y 3-9o2- TDS +9 -4;6oy-- *-.6a2-( (5.7 6o((. HoC-v-2 7- .a)L/ *-.6a2- a)y o/7-2 6o((.
-. T;) on interest on sec#rities7 )ection 19-7 TDS +( /o 3- *o)- a/ /+4- o9 .2-*+/ o2 ;ay4-)/ C7+.7-v-2 +( -a26+-2. No TDS +( /o 3- *o)- o) *-3-)/52- +)/-2-(/ o9 +9 +)/-2-(/
*o-( )o/ -A.--* R(.2&00 9o2 /7- ;2-v+o5( y-a2. TDS (7a66 3- *o)- 3y /7- ;ay-2 M 10I +) .a(- o9 6+(/-* *-3-)/52-( a)* +) .a(- o9 )o)?6+(/-* *-3-)/52-( M 20I. I9 /7-
2-.+;+-)/ +( a *o4-(/+. .o4;a)y /7-) TDS (7a66 3- *o)- M 20I. S52.7a28- a)* -*5.a/+o) .-(( a( a;;6+.a36- (7a66 a6(o 3- .7a28-*.
4. T;) on di&idends7 )ection 1947 T7- *o4-(/+. .o4;a)y?;ay+)8 *+v+*-)* o9 (-./+o) 202210-1 /o a 2-(+*-)/ (7a2-7o6*-2 (7a66 *o TDS M 20I a)* )o TDS o) *+v+*-)* +).o4-
o9 2-(+*-)/ +)*+v+*5a6 +9 +/ +( ;a+* 3y A:C ;ay-- .7-B5- a)* a4o5)/ *o-( )o/ -A.--* R(.2&00 *52+)8 /7- ;2-v+o5( y-a2.
8. T;) on interest other than sec#rities7 )ection 194A7 TDS (7a66 3- *o)- a/ /7- /+4- o9 .2-*+/ o2 ;ay4-)/ C7+.7-v-2 +( -a26+-2 M o9 20I +9 2-.+;+-)/ +( .o4;a)y a)* +9
2-.+;+-)/ +( a 2-(+*-)/ )o)?.o4;a)y a((-((-- /7-) TDS (7a66 3- *o)- M 10I. No TDS (7a66 3- *o)- +9 +)/-2-(/ ;aya36- 3y a 3a)FE .o?o;-2a/+v- (o.+-/y a)* ;o(/ o99+.- +(
R(. 10000 o2 6-(( E +) o/7-2 .a(-( C7-2- +)/-2-(/ ;aya36- +( R(. &000 o2 6-((.
6. T;) on winnin% of otter!/%ames7 )ection 19457 TDS (7a66 3- *o)- a/ /7- /+4- o9 ;ay4-)/ a)* (7a66 3- *o)- M #0I. B5/ +9 /7- C+))+)8 a2- R(. &000 o2 6-(( /7-) )o TDS +(
2-B5+2-* /o 3- *o)-.
,. T;) on winnin% from horse races7 )ection 194557 TDS (7a66 3- *o)- a/ /7- /+4- o9 ;ay4-)/ a)* (7a66 3- *o)- M #0I 35/ +9 /7- C+))+)8 a2- R(. 2&00 o2 6-(( /7-) )o TDS
+( 2-B5+2-* /o 3- *o)-.
8. T;) on pa!ment to contractor/s#$-contractor7 )ection 194"7 I) .a(- o9 (;-.+9+-* ;ay-2( TDS (7a66 3- *o)- a/ /7- 9o66oC+)8 2a/-(,
a. 1I and s#rchar%e and ed#cation cess of %ross receipt in case of ad&ertisin% and
3. 2I and s#rchar%e and ed#cation cess of %ross receipt in an! other case
4a!ments co&ered are the pa!ment for wor: contract and sha $e done at the time of pa!ment or credit which e&er is earier. Bo T;) sha $e done if the
sin%e pa!ment is <s. 2==== or ess and the a%%re%ate pa!ment does not exceed <s. 8==== d#rin% the financia !ear. (here a resident contractor has to
ma:e a pa!ment to another resident contractor the T;) has to $e done in e&er! case K 1I p#s s#rchar%e and ed#cation cess as appica$e. Bo T;)
sha $e done if the sin%e pa!ment is <s. 2==== or ess and the a%%re%ate pa!ment does not exceed <s. 8==== d#rin% the financia !ear.
9. TDS o) +)(52a).- .o44+((+o), S-./+o) 1$D, T;) sha $e done at the time of pa!ment or credit of commission whiche&er is earier and sha $e
done K 1=I if recipient is resident non-corporate assessee and if recipient is resident compan! then T;) sha $e done K 2=I. There sha $e no
T;) if pa!ment is <s. 8=== or ess.
1=. TDS o) ;ay4-)/ /o )2 (;o2/(4-) a)* (;o2/( +)(/+/5/+o)(, S-./+o) 1$E, An! person ma:in% a pa!ment to a non resident sportsman or a sports
association. )ha do T;) at the time of ma:in% pa!ment or at the time of credit which e&er is earier. <ate of T;) sha $e 1=I.There is no
exemption imit #nder this section.
11. TDS o) ;ay4-)/ +) 2-(;-./ o9 )a/+o)a6 (av+)8 (.7-4-, S-./+o) 1$EE, T;) has to $e done $! post office for the pa!ment of B)) to an! person.
T;) sha $e done on $oth principa and interest. T;) has to $e done $! post office at the time of ma:in% pa!ment K of 2=I. Bo T;) has to $e
done $! post office is the pa!ment is ess than or eJ#a to <s. 28== or 4a!ment is made to e%a heirs of the depositor.
12. TDS o) .o44+((+o) o) (a6- o9 6o//-2y /+.F-/(, S-./+o) 1$G, T;) has to $e done $! an! person pa!in% commission on sae of otter! tic:ets to
an! other person. T;) has to $e done at the time of pa!ment or credit whiche&er is earier at the rate of 1=I. Bo T;) has to $e done where the
pa!ment is ess than or eJ#a to <s. 1===.
1-. TDS o) .o44+((+o) o) 32oF-2a8-, S-./+o) 1$H, T;) has to $e done $! an! person pa!in% commission or $ro:era%e. T;) has to $e done at the
time of pa!ment or credit whiche&er is earier. T;) has to $e done at 1=I.Bo T;) has to $e done where the pa!ment is ess than or eJ#a to <s.
28==. 1#rther no T;) sha $e done on the pa!ments of commission or $ro:era%e pa!a$e $! 5)BA or CTBA to their p#$ic ca office franchisees.
14. TDS o) 2-)/, S-./+o) 1$?I, T;) has to $e done at the time of pa!ment or credit whiche&er is earier $#t Bo T;) has to $e done where the pa!ment
is ess than or eJ#a to <s. 1==== pm and no T;) if the pa!ee is a %o&ernment or a oca a#thorit!. T;) sha $e done at rate of 1=I on rent of pant
and machiner!. T;) sha $e done at the rate of 18I on the rent of and, $#idin%, f#rnit#re and fittin% if the recipient is indi&id#a or .01 $#t at the
rate of 2=I in case of an! other recipient.
18. TDS o) 9-- o9 ;2o9-((+o)a6 o2 /-.7)+.a6 (-2v+.-(, S-./+o) 1$?K, T;) sha $e done on fees for technica, professiona ser&ices or on ro!at!
income, at the time of pa!ment or credit whiche&er is earier. Bo T;) sha $e done if the pa!ment for technica, professiona ser&ices or of ro!at!
income is <s. 2==== or ess d#rin% the financia !ear. Ra/- o9 TDS, T;) has to $e done at 1=I. 4rofessiona ser&ices means ser&ices of e%a,
medica, en%ineerin%, acco#ntanc!, interior decoration and Technica ser&ices means ser&ices of mana%eria, cons#tanc! ser&ices.
1". I) a66 o9 /7- a3ov- .a(-( /7- 2a/- o9 TDS (7a66 3- +).2-a(-* 3y (52.7a28- a)* -*5.a/+o) .-((.
SUMMAR% OF THE 18
TH
CHAPTER
CHARITAB!E OR RE!IGIOUS TRUSTS
1. Tr#st means o$i%ations attached to the ownership of the propert! which arises o#t of the confidence reposed $! one person to some another
person. The person who imposes s#ch confidence is caed A#thor of tr#st and who accepts s#ch confidence is caed Tr#stee and the propert!
in respect of which o$i%ation is attached is caed Tr#st propert!.
2. The income of capita %ains, &o#ntar! contri$#tions recei&ed $! tr#st and simiar instit#tions which are re%istered as companies #nder section
28 of companies act sha $e exempt from tax if tr#sts is a re%istered tr#st and its acco#nts are a#dited.
-. Tr#st m#st #tii'ed 88I of its income within the same pre&io#s !ear for acJ#irin% assets or to promote the o$6ects of the tr#st. A tr#st can #se
the mone! for re&en#e or capita expendit#re pro&ided the expendit#re is done for the p#rpose of promotin% the o$6ects of tr#st.
4. If the f#nds can not $e #sed then f#nds can $e acc#m#ated $#t acc#m#ation is not aowed for the period exceedin% 8 !ears. 1#rther the
amo#nt so acc#m#ated sho#d $e in&ested in the specific in&estments s#ch as in an! acco#nt in the post office, deposit in an! acco#nt of a
sched#ed $an:, 0nits of 0TI, )ec#rities iss#ed $! centra or state %o&ernment.
8. Anon!mo#s donations /when name and address of donor is not maintained2 sha not $e exempt and hence sha $e taxa$e at the rate of -=I.
.owe&er in the case of rei%io#s tr#st it sha not $e taxa$e.
6. Tr#st has to s#$mit appication for re%istration to "IT $efore the expir! of 1 !ear from the date of creation of tr#st. "IT after satisf!in%
himsef a$o#t the %en#ineness of the acti&ities of the tr#st sha pass the orders in writin% re%isterin% the tr#st. The time imit for passin% the
orders is 6 months from the end of the month in which the appication was made.
SUMMAR% OF THE 1$
TH
CHAPTER
SERVICE TAX
1. )er&ices tax was imposed $! chapter ? of 1inance Act 1994 and there is no separate O)er&ice Tax ActP. )er&ice tax is imposed e&er! !ear $! ma:in%
amendment to the 1inance Act 1994. "entra excise department has $een entr#sted to oo: after the administration of ser&ice tax.
2. )er&ice tax extends to whoe of India except the state of @amm# and Rashmir. There sha $e no ser&ice tax on the ser&ices pro&ided/cons#med in the
state of @amm# and Rashmir. .owe&er if ser&ice pro&ider is in the state of @amm# and Rashmir and pro&ides ser&ices to an!one o#tside the state of
@amm# and Rashmir then ser&ice tax sha $e imposed on s#ch ser&ices rendered.
-. )er&ice tax is imposed on taxa$e ser&ices pro&ided or to $e pro&ided in f#t#re $! the ser&ice pro&ider. )er&ices to $e pro&ided in f#t#re sha $e
char%ea$e to ser&ice tax on! if the ad&ance pa!ment for it is recei&ed.
4. Taxa$e ser&ices are mentioned in section 68/1=82 of 1inance Act 1994.
8. )er&ice tax is char%ed at the rate of 12I and ed#cation cess as appica$e.
6. (*1 1/4/2==8 a threshod imit of <s. 1= Aa:hs has $een prescri$ed. Ti this imit &a#e of a taxa$e ser&ices pro&ided $! the ser&ice pro&ider is
f#! exempt from ser&ice tax.
,. The method of pa!ment of ser&ice tax is mentioned in )er&ice Tax <#es 1994. )er&ice tax has to $e paid $! the ser&ice pro&ider on the receipt of
consideration. If an! ad&ance has $een recei&ed then ser&ice tax sha $e imposed on s#ch ad&ance amo#nt.
8. Va65a/+o) o9 /aAa36- (-2v+.-(, (-./+o) "7
1. )er&ice tax sha $e char%ed on %ross amo#nt char%ed. It sha mean on! the amo#nt recei&ed from the ser&ice recei&er and not the amo#nt
which has $een $ied to him.
2. The ser&ice pro&ider is reJ#ired to show the ser&ice tax separate! in the in&oice/$i. If it is not shown separate! then the &a#e of the
ser&ices sha $e ta:en as an inc#si&e of ser&ice tax.
-. If the ser&ice pro&ider has paid an! excess ser&ice tax to the %o&ernment, in respect of that ser&ices which ha&e not $een pro&ided for an!
reason then s#ch excess ser&ice tax paid can $e ad6#sted a%ainst ser&ice tax pa!a$e $! him for an! s#$seJ#ent period. This sha $e
appica$e on! if the ser&ice pro&ider has ref#nded ser&ice tax to the person from whom it was recei&ed.
4. If the amo#nt char%ed $! the ser&ice pro&ider inc#des &a#e of the %oods and materia sod then ser&ice tax is not pa!a$e on the &a#e of
s#ch %oods sod. There sho#d $e proper doc#mentar! e&idence showin% &a#e of the %oods and materia sod. .owe&er in some cases s#pp!
of %oods is inte%ra part of the ser&ices and s#pp! of %oods canDt $e separated from the ser&ices rendered. In s#ch case ser&ice tax sha $e
char%ed on the f# amo#nt inc#din% the &a#e of %oods.
8. The ser&ice pro&ider often caims reim$#rsement of certain expenses inc#rred $! him /i:e expenses on tra&ein%, $oardin% and oadin% etc2
whie pro&idin% a taxa$e ser&ice. These are often termed as o#t of poc:et expenses. A s#ch expenses wi $e inc#di$e in the &a#e of
taxa$e ser&ices.
6. *xpenses which are inc#rred $! the ser&ice pro&ider on the $ehaf on ser&ice recei&er /as a p#re a%ent2 sha not $e part of &a#e of the
ser&ices.
,. If the ser&ices are pro&ided free of cost, there sha $e no ser&ice tax pa!a$e e&en if ser&ices are taxa$e.
8. )er&ice pro&ided d#rin% the warrant! period of the %oods is taxa$e ser&ices and it is s#$6ect to ser&ice tax.
9. If consideration of ser&ices has $een recei&ed in :ind then the ser&ice tax sha $e imposed and for this the &a#e of the identica ser&ices
pro&ided sha $e deemed to $e the &a#e of s#ch ser&ices which ha&e $een pro&ided and for which consideration has $een recei&ed in :ind.
$1 EA-4;/+o) 92o4 (-2v+.- /aA
1. )ma ser&ice pro&iders pro&idin% a%%re%ate ser&ices #p to <s. 1= a:hs are exempt from pa!in% ser&ice tax.
2. *&en if the ser&ice pro&ider crosses t#rno&er of <s. 1= a:hs in c#rrent !ear, he wi $e ia$e to ser&ice tax on! on t#rno&er exceedin% <s. 1= a:hs
and not on entire t#rno&er. .owe&er, if taxa$e t#rno&er in c#rrent exceeds <s. 1= a:hs, there wi $e no exemption from ser&ice tax in next financia
!ear.
-. There is no ser&ice tax on export of ser&ices, if ser&ice is exported
4. )er&ices pro&ided to 0nited Bations L Internationa A%encies is exempt from ser&ice tax.
8. A ser&ices pro&ided to forei%n dipomatic missions or cons#ar posts in India are f#! exempt pro&ided ser&ices are #se for their officia p#rposes.
6. *xemption from ser&ice tax has $een pro&ided to a taxa$e ser&ices pro&ided $! <eser&e 5an: of India
,. )ometimes the %ross amo#nt of contract sha inc#de the amo#nt char%ed for ser&ices as we as some other faciities pro&ided. In s#ch case ser&ice
tax is pa!a$e at ower rates, i.e. partia a$atement is a&aia$e from %ross &a#e.
101 R-8+(/2a/+o) 5)*-2 S-2v+.- TaA
9. Bo re%istration is reJ#ired ti t#rno&er exceeds <s. 9 a:hs.
1=. Time imit to app! for re%istration is -= da!s from the e&! of ser&ice tax or start of the $#siness
as the case ma! $e.
11. <e%istration is pro&ided in , da!s and if not then deemed to ha&e $een pro&ided after ,
th
da!.
12. Bo doc#ment except 4AB iss#ed $! the income tax ;eptt is reJ#ired.
1-. )er&ice tax re%istration no is 18 di%its aphan#merica no.
14. <#es for centrai'ed re%istration and non centrai'ed re%istration exist.
18. In case of more than 1 ser&ice, sin%e re%istration co&erin% a ser&ices is done.
111 Pay4-)/ o9 (-2v+.- /aA
1. )er&ice tax is pa!a$e at the time of reai'ation of the amo#nt for ser&ices from the cient.
2. )er&ice tax is pa!a$e on the ad&ance mone! recei&ed.
-. (here there is short reco&er! of the $ied amo#nt, ser&ice pro&ider sho#d re&ise the $i otherwise he
sha $e ia$e to pa! ser&ice tax on the f# amo#nt which has $een $ied to ser&ice recei&er.
4. (here there is excess reco&er! from a cient or c#stomer then s#ch excess amo#nt can $e ref#nded to
s#ch cient or c#stomer
121 D5- *a/-( 9o2 /7- ;ay4-)/ o9 (-2v+.- /aA
1. If the assessee is an indi&id#a or proprietar! firm or partnership firm, the ser&ice tax sha $e paid to the "entra >o&ernment $! the 8
th
of the next month immediate!
foowin% the J#arter in which the pa!ments are recei&ed, towards the &a#e of taxa$e ser&ices. I) .a(- -?;ay4-)/ +( 4a*-E *5- *a/- +( "
/7
.
2. In a other cases ser&ice tax recei&ed d#rin% an! caendar month sha $e paid to the "entra >o&ernment $! the 8
th
of the month immediate! foowin% the caendar
month in which pa!ments are recei&ed, towards &a#e of taxa$e ser&ices. I) .a(- -?;ay4-)/ +( 4a*-E *5- *a/- +( "
/7
.
-. If the ser&ice tax on the &a#e of taxa$e ser&ices is recei&ed d#rin% the month of Carch, or the J#arter endin% in Carch, as the case ma! $e, sha $e paid to the
>o&ernment $! the -1
st
da! of Carch of the caendar !ear.
1. S-2v+.- TaA To B- Pa+* E6-./2o)+.a66y, (here the assessee has paid ser&ice tax of <s. 8= a:hs or more d#rin% the
preceedin% financia !ear or has aread! paid ser&ice tax of <s. 8= a:hs in c#rrent financia !ear, he sha deposit the ser&ice
tax ia$e to $e paid $! him eectronica!, thro#%h internet $an:in%.
2. S;-.+a6 ;2ov+(+o) 9o2 /7- ;ay4-)/ o9 (-2v+.- /aA +) .a(- o9 6+9- +)(52a).- 35(+)-((, An ins#rer carr!in% on ife ins#rance
$#siness who is ia$e for pa!in% ser&ice tax has the option to pa! an amo#nt cac#ated K 1I of the %ross amo#nt of premi#m
char%ed $! him towards the dischar%e of his ser&ice tax ia$iit! instead of pa!in% ser&ice tax K 12I.
-. )er&ice tax ret#rn sha $e s#$mitted on haf !ear! $asis on 28
th
3cto$er and 28
th
Apri e&er! !ear.
4. )er&ice tax ret#rn can $e re&ised within 9= da!s from fiin% of ori%ina ret#rn.
8. 5eated ser&ice tax ret#rn is aso aowed #pon the pa!ment of prescri$ed fees which is as foows7
1. If dea! is #p to 18 da!s from the d#e date of ret#rn7 1ess of <s. 8== is to $e paid.
2. If dea! is $e!ond 18 da!s $#t #p to -= da!s from d#e date7 1ees of <s. 1=== is to $e paid.
-. If dea! is $e!ond -= da!s from the d#e date7 1ees of <s. 1=== is to $e paid N rs. 1== for e&er! da! from the -1
st
da! ti the date of f#rnishin% of
ret#rn $#t s#$6ect to the maxim#m of <s. 2===.
SUMMAR% OF THE 20
TH
CHAPTER
VA!UE ADDED TAX 0VAT11
1. 0nder the s!stem of ?AT the saes tax e&ied and coected at each sta%e of sae on! the &a#e added at e&er! sta%e.
2. As common! #nderstood this is a method $! which fina cons#mer sha $e taxed at different sta%es of prod#ction and distri$#tion in &ario#s
instaments. 1or this difference $etween the sae price and p#rchase price is ta:en as &a#e added and a tax is imposed at e&er! e&e where there is
some &a#e addition.
#. N--* 9o2 VAT +) I)*+a
1. A&oids distortions in the econom! d#e to #niformit! a across the channe.
2. 4re&ents cascadin% effect /m#tipe taxation2 $! pro&idin% credit of Inp#t taxation.
-. ?AT is 6#st and o%ica wa! of taxin% a deaers in eJ#ita$e manner where$! a deaers share $#rden of tax.
4. This s!stem eads to eas! comp#tation and compiance.
8. "redit of inp#t taxation eads to cost efficienc!.
1 M-2+/( o9 VAT
1. *iminates m#tipe taxation.
2. Bo tax e&asion.
-. )impe method.
4. Aowerin% tax $#rden.
8. Transparenc!.
6. 5etter re&en#e coection and sta$iit!.
,. 5etter acco#ntin% s!stems.
&1 D-4-2+/( o9 VAT
1. ?AT does not co&er ser&ices.
2. Bon inte%ration of centra ?AT with state ?AT.
-. Acco#ntin% $#rden.
4. "ost of administration for %o&ernment.
8. *xemptions on %oods.
"1 Co).-;/ o9 +);5/ /aA .2-*+/, The main feat#re of s!stem of ?AT is that it pro&ides the $enefit of set off of inp#t tax from the main o#tp#t tax. The
&a#e added tax is $ased on the &a#e addition to the %oods, and the reated ?AT ia$iit! of the deaer is cac#ated $! ded#ctin% inp#t tax credit from the
tax coected on saes d#rin% a partic#ar period.
,. Va2+a)/( o9 VAT, ?AT co#d $e e&ied #nder three &ariants. >ross prod#ct &ariant, Income &ariant, "ons#mption &ariant. These &ariants
co#d $e f#rther distin%#ished accordin% to their methods of cac#ation and the! are addition method and s#$traction method. The s#$traction
method co#d $e f#rther di&ided into direct s#$traction method, intermediate s#$traction method, and indirect s#$traction method.
8. M-/7o*( 9o2 .o4;5/a/+o) o9 VAT, ?AT is form of a saes tax and is char%ed at each sta%e on the W?a#e AddedD to the %oods. W?a#e
AddedD is the difference saes and p#rchases of the $#siness. There are se&era methods to cac#ate the W?a#e AddedD to the %oods for e&!
of tax. The three common! #sed methods are addition method, in&oice method /tax credit method2 and s#$traction method.