INCOME FROM BUSINESS/PROFESSION

Business is an activity of purchase and sell of goods with the intention of making profit. Profession is an occupation
requiring intellectual skill. E.g. Doctor, Lawyer etc. Vocation is an activity, which requires a special skill, which is
used to earn income. E.g. Painter, Singer etc. For income tax purpose there is no difference between business income,
profession income and vocation income.

Section 2 (13): Business: Business includes any trade, commerce or manufacture or any adventure or concern in the
nature of trade, commerce or manufacture.

Explanation:
Thus business is any activity carried out with the intention to earn profit, whether such an activity is continuous or
temporary is immaterial. In determining whether a particular transaction is an adventure in the nature of trade or not,
total impression and effect of all relevant facts and circumstances of the transaction have to be seen. To bring a
transaction within the term business, the transaction must be a trade or in the nature of trade. Hence everything
depends upon the facts and circumstances of the case. E.g. A person making investment of surplus funds in shares or
debentures cannot be deemed to be carrying on the business of trading in shares although occasionally he may be
selling some shares or debentures and making gains thereon.

DEDUCTIONS FOR EXPENSES SPECIFICALLY ALLOWED SECTION 30 TO SECTION 43D

A. Rent, rates, taxes, repairs and insurance of building (Section 30):

1) If assesse has occupied the premises as a tenant, rent of the premises and if he has agreed to bear cost of repairs,
such cost is allowed as deduction, provided it is not of capital nature.
2) If assesse has occupied premises as the owner; repairs, land revenue, local taxes, Insurance premium etc. is allowed
as deduction. However, no expenditure in form of capital expenditure is allowed.

B. Repairs & Insurance of machinery, Plant & Furniture (Sec.31):

1. Amount paid on account of repairs and insurance premium against risk of damage in respect of machinery, plant &
furniture are allowed as deduction provided they are not of capital nature.

C. Depreciation u/s 32: Under Section 32 depreciation on assets is allowed as deduction while computing
income from business or profession.

To claim this deduction following conditions should be satisfied:
1) Assesse should be owner of the asset.
2) Asset must be used for the business.
3) Such use must be in the previous year.

Depreciation is allowed not on individual asset items, but on block of assets under following categories:
1) Buildings
2) Plant & Machinery
3) Furniture
4) Intangible Assets acquired after March 31, 1998 such as know how, Patents, Trademarks, licenses, franchises or
any other business or commercial rights of similar nature.

The term plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the business but
excludes tea bushes or livestock.
If any asset falling in block of assets is acquired during the year and put to use during the previous year for less than
180 days depreciation on such asset shall be restricted to 50% of the normal depreciation.
No depreciation is allowed on motor car which is manufactured outside India and acquired on or after 1st March 1975
but before 1st April 2001.
However, this restriction does not apply if:
1) Assesse carries on a business of running the car on the hire for tourist, or
2) If assesse is using the car outside India for his business in another country. If business is carried on in a building not
owned by the assesse but acquired on lease or any other occupancy right and any capital expenditure is incurred by
him in respect of this building, such expenditure will be considered as cost of asset as if he is the owner of such
property


D. Deduction u/s. 36 & 37:

1. Insurance: Section 36(1) (i) Premium paid to cover the risk of damage or destruction of stocks, stores, cattle and
on health of employees under the approved scheme.
2. Insurance Premium paid by Federal milk coop. society on the lives of cattle owned by the members of a Primary
Milk Coop, Society affiliated to it. Section 36(1) (ia)
3. Premia for insurance on health of employees in accordance with scheme framed by GIC & approved by Central
Government or any other insurer & approved by the Insurance Regulatory & Development Authority (only if paid by
cheque) Section 36(1) (ib).
4. Bonus or commission paid to Employees: Section 36(1) (ii): It is allowed as deduction so far as they are not paid
as profit or dividend.
5. Interest on borrowed capital: Section 36(1) (iii): It is allowed as deduction. However, interest paid by firm to
its partners is allowed subject to provisions of Sections 40(b).
6. Discount on zero coupon bonds is deductible by issuing Company on pro rata Basis Sec.36 (1) (iii a)
7. Contribution to recognized Provident fund or an approved super annuation fund: Section
36(1) (iv).Any sum paid by the assesse as an employer by way of contribution towards pension scheme.
8. Contribution to Pension Scheme: Section 36(1) (iv a) Any contribution by an employer by way of contribution
towards a pension scheme for an employee up to 10% of salary shall be allowed as deduction.
9. Contribution to approved Gratuity Fund Section 36(1) (v): Amount contributed to the fund which is for the
exclusive benefit of the employees will be allowed as deduction.
10. Contributions received from employees (when deposited) Section 36(1) (va): Any contribution received from
employees towards any funds for the welfare of the employees
e.g. P.F. will be allowed as deduction when such contribution is credited to employees a/c on or before the due date.
It is allowed as deduction not because it is an expenditure of the assesse. In fact, it is not at all an expenditure of the
assesse. But when this amount is deducted from salary of employees, it is treated as an income under section 2(24) (x).
Therefore, deduction is allowed when payment is made by the due date.
11. Animals used for the business: Section 36 (1) (vi): Deduction is allowed when animals have died or have become
permanently useless. Amount of deduction will be difference between actual cost of the animals and amount realized
if any in respect of carcasses of the animals. Deduction is allowed only if animals are used for the purpose of business
but not as stock in trade.
12. Bad debts: Section 36(1) (vii) and Section 36(2): Deduction is allowed on this account if debts have arisen out
of business transaction. It is the responsibility of the assesse to prove to the satisfaction of income tax officer that such
debts are irrecoverable.
13. Expenditure for promoting family planning: Section 36(1) (ix): Only a company can claim this deduction. Any
expenditure incurred by a company to promote family planning among its employees is allowed as deduction fully,
provided it is revenue expenditure. Any capital expenditure on this account is allowed as deduction in 5 equal
installments. If profit is not sufficient to absorb this expenditure it can be carried forward to be set off in future. No
depreciation can be claimed under section 32 on capital assets used for promoting family planning and allowed as
deduction under section 36(1)(ix).
14. Any amount of banking cash transaction tax paid during the year. 36(1) (xiii)
15. General Expenditure for the purpose of business or profession Section 37: Any other expenditure not covered
by section 30 to 36 which is of revenue nature will be allowed as deduction provided it is incurred exclusively for the
purpose of business or profession.
e. g
1. Embezzlement of cash.
2. Expenses on local festival such as Diwali, Muhurta etc.
3. Cash shortage found in the business at the end of the day.
4. Entertainment Expenses
5. Advertisement Expenses
6. Travelling Expenses
7. Guest House Expenses.
8. Lawful expenses related to illegal business.
9. Premium on redemption of debentures
10. Discount on issue of debentures (on pro rata basis)




Expenses Not Deductible under Section 37
1. Donations
2. Charities
3. Gifts to relatives
4. Income tax
5. Wealth tax
6. Advance income tax
7. Fines and penalties for breach of any laws.
8. Personal Drawings
9. Salary to owner
10. Interest on proprietors capital
11. Capital expenditure
12. Purchase of an assets
13. Extension of building
14. Personal expenditure
15. Household expenses.
16. Drawings
17. Education expenses of children
18. Residential telephone bill
19. Residential electricity bill
20. Residential maintenance
21. Amount transferred to reserve
22. Personal Hotel expenses

INCOME UNDER THE HEAD CAPITAL GAINS

1. BASIS OF CHARGE:-
a) There must be a capital asset
b) Capital asset must have been transferred
c) There must be profit or loss on such transfer
d) Such capital gain should not be exempt u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA

2. MEANING OF CAPITAL ASSET: - Capital asset means property of any kind, whether or not connected with business
or profession of assesse but does not include:-
a) Any stock-in- trade
b) Personal effects meaning
Movable property
Held for use by assesse or member of family dependent upon him
The following assets can never be personal effects:-
Jewellery
Archeological collections
Drawings
Paintings
Sculptures
Any other work of art
Does not include house property as it is immovable property
c) Rural agricultural land
- Within municipal limits and population less than 10000
- If outside municipal limits at least 8km. away from municipal limits

d) 7% gold bonds and 6.5% bonds of CG
e) Bearer bonds, issued by CG
f) Gold deposit bonds under Gold deposit scheme, 1999


3. TYPES OF CAPITAL ASSETS: -
- SHORT TERM CAPITAL ASSET: - Asset held by assesse for not more than 36 months immediately preceding date of
transfer.
- LONG TERM CAPITAL ASSET: - An asset which is not a short term capital asset.

Notes:-
a) In case of following assets the period of 36 months is reduced by 12 months:-
Equity or preference shares
Any other security on recognized stock exchange
Units of UTI or mutual fund
Zero coupon bonds3
b) For calculating period of 36 months or 12 months, the date of transfer should be excluded.



4. TYPES OF CAPITAL GAIN: -
- Short term capital gain: - on transfer of short term capital assets
- Long term capital gain: - on transfer of long term capital assets

The need for such distinction arises because STCG is taxable at normal rates and added to gross total income
whereas LTCG is taxable at concessional rate of 20%.

5. TRANSFER (section 2(47)): - The capital asset must have been transferred, here transfer means:-
a) Sale, exchange or relinquishment of asset
b) Extinguishment of right over asset
c) Compulsory acquisition under any law
d) Personal effects converted into Stock-in-trade
e) Maturity of zero coupon bonds
f) Allowing possession under transfer of property act, 1882
g) Allowing enjoyment of immovable property

6. COMPUTATION OF CAPITAL GAIN: -
- SHORT TERM CAPITAL GAIN: - It is excess of full value of consideration over expenses of transfer, cost of
acquisition, and cost of improvement
- LONG TERM CAPITAL GAIN: - It is excess of full value of consideration over expenses of transfer,
indexed cost of acquisition, and indexed cost of improvement.

7. PERIOD OF HOLDING: -The total period for which asset was held by assesse together with the period of ownership
by previous holder u/s 49(1) is called period of holding. While calculating it date of acquisition is included and date of
transfer is excluded.

8. COST OF ACQUISITION (COA): - The cost incurred to acquire any asset by the assesse is called as its cost of
acquisition. It is to be noted that cost of acquisition includes deemed cost of acquisition where asset was acquired by
some other person other than assessee but was gradually passed on to assessee and in such a case cost means cost
incurred by previous owner.

COST OF ACQUISITON FOR ASSETS ACQUIRED ON OR BEFORE 1-4-1981:-
It would be any one of:-
Cost incurred or
Fair market value on 1-4-1981
Whichever is beneficial to assessee

9. COA OF GOODWILL, PATENTS, TRADEMARKS, RIGHTS, ETC: -
- IF ACQUIRED: - TAKE ACTUAL COST. COST ON 1-4-1981 NOT ALLOWED IN THIS CASE.
- IF SELF GENERATED: - COST OF SUCH ASSET IS ASSUMED TO BE NIL


10. COA OF RIGHT SHARES: -
Cost at which such shares are purchased
If right is sold, whole amount is capital gain and COA is NIL
Sale of shares by such person acquiring right:-
COA= COST TO PURCHASE RIGHT + PAYMENT TO COMPANY FOR PURCHASE OF SHARES


11. COA OF BONUS SHARES: -
Here COA is NIL
But if such shares acquired on or before 1-4-1981, cost on 1-4-1981 can be
taken as COA

12. TREATMENT OF ADVANCE MONEY FORFIETED: - If assessee has received any advance money for sale of asset
but later on such sale could not complete and as an result some advance money was forfeited by assessee such
advance money would be treated as follows:-
It would be deducted from cost of asset
If such amount is received by previous owner, it would not be deducted
Such amount would be deducted before indexation.
If advance money is more than COA, such advance money received would be a capital receipt and hence not
taxable however capital gain on sale would be taxable.

13. COST OF IMPROVEMENT: - Cost incurred to add value to the asset is called its cost of improvement. It is
calculated as follows: -
If asset acquired before 1-4-1981 it is always NIL
In relation to Goodwill or right to manufacture any product or right to carry on business it would always be
NIL
In all other cases it is expenditure actually incurred by assesse or the previous owner
It does not include routine expenditure on repairs, etc. which are allowed in PGBP, other sources, house
property.


DEDUCTIONS FROM GROSS TOTAL INCOME

Section 80 C Deduction in respect of life insurance premia, deferred annuity,
contributions to provident fund, subscription to certain equity shares or
debentures, etc.
80CCC Deduction in respect of contribution to certain pension funds
80CCD Deduction in respect of contribution to pension scheme of Central Government
80D Deduction in respect of medical insurance premia
80DD Deduction in respect of maintenance including medical treatment of a dependent who is a
person with disability
80GGA Deduction in respect of certain donations for scientific research or rural development
80U Deduction in case of person with disability



DEDUCTION U/S 80C SAVINGS IN SPECIFIED SCHEMES
Only Individuals & HUFs are eligible for this deduction. Hence companies, firms etc. are not eligible.
Deduction is available on payment basis i.e. if the contributions to approved saving schemes are not made
during the previous year, but say during the assessment year, they are not eligible for deduction during
current financial year, but in the year of payment i.e. during the next year.
The section has also been amended to provide that the sums paid or deposited need not be out of income
chargeable to tax of the previous year

ELIGIBLE SAVING SCHEMES
1. Life Insurance premium: The premium paid by individual on his life or on the life of his spouse /children is eligible
for deduction maximum up to 10% of sum insured. Spouse may be working or dependent. Similarly children may be
married / unmarried, minor or major, dependent or independent, male or female. In case of HUF, the policy may be
taken on any member of the family. The policy must continue for a minimum period of 2 years. The limit was 20% of
sum assured till AY 2012-13.
2. Contract for deferred annuity: Payment made for a contract of deferred annuity on his own life or on life of
spouse/children is eligible for deduction.
3. Deferred annuity for Govt. employee: Deduction from the salary payable to a Govt. employee for the purpose of
securing him a deferred annuity or making provision for his wife or children is also eligible. The maximum limit is
20% of salary.
4. Employees contribution to recognized / statutory provident fund / public provident fund. Repayment of loan shall
not be considered for this purpose. Maximum contribution in PPF in one year is Rs 1,00,000.
5. Employees contribution to approved superannuation fund.
6. Contribution to Unit-Linked Insurance Plan of UTI
7. Contribution to Unit-Linked plan of LIC Mutual Fund: Dhanraksha, 1989 Plan is a notified plan for this purpose.
8. Contribution in respect of annuity plans of LIC: Any contribution for Jeevan Dhara and Jeevan Akshay annuity plans
of LIC fully qualifies for deduction. Such schemes offered by other insurance companies also qualified for deduction.
9. Subscription by an Individual or HUF to National Savings Certificates VIII Issue. Interest accrued also qualifies for
first 5 years.
10. Deposit in Post Office under Cumulative Time-Deposit Scheme:- Any amount deposited in a 10 year or 15 year
account under PO Savings Bank (Cumulative Time-Deposit) Rules, 1959, also qualifies for deduction.
11. Any installment/part payment towards the cost of purchase / construction of a residential house property to a
housing board or co-operative society (including repayment of housing loan taken from Govt., Bank, Cooperative
bank, LIC, National Housing Bank, assesses employer where such employer is public company / Public Sector
Company / university / cooperative society) shall be allowed as a deduction.
12. Subscription to equity shares or debentures forming part of any eligible issue of capital (means an issue made by
a public company formed and registered in India and the issue is wholly and exclusively for the purposes of
developing, maintaining and operating an infrastructure facility)
13. Any contribution to a notified pension fund set up by any mutual fund notified u/s 10(23D) or by the Unit Trust of
India;
14. Any subscription by an individual or HUF to the Home Loan Account Scheme of the National Housing Bank.
15. A subscription by an individual or HUF to any such deposit scheme of:
(a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses
in India for residential purposes; or
(b) an authority constituted for development of towns and cities.
16. Contribution to notified units of a Mutual Fund/ UTI.
17. Any sum paid as tuition fees (no other charges payable in school like development fee, donation, transportation
fee etc.) to any university / college / educational institution in India for full time education of any two children of the
assesse. Full time education includes even play-school activities, pre-nursery and nursery classes.
18. Term deposit for a period of 5 years or more in accordance with a scheme approved by the Govt.
19. Subscription to bonds of National Bank for Agricultural and Rural Development (NABARD).
20. Amount deposited under Senior citizens saving scheme for five years or more.
21. Amount deposited in five year deposit scheme in post office.


QUALIFYING AMOUNT: The maximum qualifying amount is Rs 1, 00,000. The deduction under section 80C is the
amount deposited/paid in above schemes or Rs 1, 00,000 whichever is less. Combined maximum ceiling: The
aggregate amount of deduction under sections 80C, 80CCC & 80CCD(1) [i.e., contribution by an employee towards
NPS] cannot exceed Rs 1,00,000.
After the amendments, employers contribution towards NPS (to the extent of 10% of employees salary) shall not be
considered for the ceiling of Rs 1, 00,000.



LOCK IN PERIOD FOR INVESTMENTS
1. Unit-Linked Insurance Plan 5 years
2. Life insurance premium 2 years
3. Cost of purchase / construction of a residential house property including repayment of loan 5 years
4. Deposit under Senior Citizen Saving Scheme 5 years
5. Time deposit in Post Office 5 years
If any of the above time limits are broken, the assesse shall become taxable in the year of default to the extent of
deductions already claimed based on above investments.

Deduction in respect of contribution to certain pension funds (Sec. 80CCC)
It provides for a deduction to an individual for any amount paid or deposited by him in an annuity plan of the Life
Insurance Corporation of India [or any other insurer] for receiving pension from a fund set-up by the said
corporation.
The maximum amount deductible under this section in Rs. 100,000 i.e. amount paid or Rs. 100,000
whichever is less.
The taxpayer must be an Individual only.(He may be resident or non-resident, Indian citizen or foreign
citizen)
PLEASE NOTE: The aggregate deduction under section 80C, 80CCC & 80CCD cannot exceed Rs 1, 00,000.

Deduction in respect of contribution to a National Pension Scheme [Sec. 80CCD]
The following are salient features of section 80CCD
What is NPS National Pension Scheme (NPS) is a retirement benefit scheme. It is applicable in the case of an
employee who joins the Central Government (or any other employer) on or after January 1, 2004. Even a self-
employed person can join NPS.
Employers contribution to NPS Is it income Employers contribution to NPS is taxable as salary income in the
year of contribution.
Deduction available under section 80CCD (2) in respect of employers contribution Contribution by the employer
to NPS is deductible in the hands of the concerned employee in the year in which contribution is made. However, no
deduction is available in respect of employers contribution, which is in excess of 10 per cent of the salary of the
employee. This deduction is in addition to the overall limit of Rs 1, 00,000.
Deduction available under section 80CCD(1) in respect of employees contribution Employees contribution to NPS
is deductible in the year in which contribution is made. However, no deduction is available in respect of employees
contribution, which is in excess of 10 per cent of the salary of the employee.
If contribution is made by a person (other than an employee), deduction is available in respect of his contribution, up
to 10 per cent of his gross total income.
Is there any combined maximum ceiling The aggregate amount of deduction under sections 80C, 80CCC and
80CCD cannot exceed Rs.1, 00,000. However, from the assessment year 2012-13, employers contribution towards
NPS (to the extent of 10 per cent of employees salary) is in addition to one lac limit.
What is tax treatment of pension Pension (or any other payment) out of NPS account (for which deduction has
been claimed under section 80CCD) will be taxable in the hands of recipient. If, however, the amount of pension
received from NPS is used for purchasing an annuity plan in the same previous year, then it will be exempt from tax.



Payment of Medical Insurance Premium (Sec. 80D)
Assessee entitled to the deduction. The deduction is available to (i) an individual, or (ii) a Hindu undivided family.

Conditions for Deduction. The deduction is allowed if the following conditions are satisfied:
(i) Payment of Medical insurance premium: The assesse should pay medical insurance premium to effect or to keep
in force an insurance policy covered under the scheme of General Insurance Corporation of India. The amount
deposited in a similar scheme of any other who is approved by the IRDA shall also be eligible for deduction.
(ii) Beneficiaries under the policy: Where the assessee is an "individual", the said policy may be taken in respect of
the health of the assessee, his spouse, his parents [whether dependent or not) or his dependent children.
(iii) Where the assesse is a Hindu undivided family, the policy may be in respect of the health of any member,
whether dependent on the family or not.
Thus, where the medical insurance premium is paid in respect of a policy taken on the life of dependent
brother/sister/nephew/grandfather or grandmother etc. no deduction can be allowed.
In case of Individual, payment can also be made to the Central Govt. Health Scheme and/or on account of
preventive health checkup.
(iv) Medical insurance premium should be paid by any mode other than cash. However, payment on account of
preventive health checkup can be made by any mode (including cash).
(iv) Payment to be made out of taxable income: The payment should be out of taxable income. Thus, where
insurance premium is paid out of agriculture income or any other exempted income under Sec. 10, no deduction can
be allowed.

Deduction in respect of maintenance including medical treatment of handicapped dependent (Section 80DD)
Essential conditions for claiming deduction under this section
(1) Deduction is available to a person who is:
(a) Resident in India, and
(b) Either an individual or a HUF
(2) Deduction is available in respect of:
(a) Any expenditure incurred by way of medical treatment (including nursing), training and rehabilitation of a
handicapped dependent; or/and
(b) The amount paid or deposited, by the above assesse in the previous year under any scheme framed by the LIC
or any other insurer or UTI and which is approved by the CBDT. The scheme should provide for the payment of
annuity or a lump sum amount for the benefit of a handicapped dependent in the event of the death of the
individual or the member of the HUF, in whose name subscription to the scheme has been made by the HUF for the
benefit of the handicapped member.
The assesse must nominate either the handicapped dependent or any other person or a trust to receive
the payment on his behalf for the benefit of the handicapped dependent.
(3) The amount is paid or deposited out of the eligible assessee's income chargeable to tax

Expenditure incurred on Rent (Sec. 80GG)
Assessee entitled to deduction. The deduction is available to an individual. It provides relief in respect of rent paid
for residential accommodation. The accommodation, occupied by the assessee, may be furnished or unfurnished but
it must be occupied by him for his own residence.
Condition for the deduction. The deduction is allowed if the following conditions are satisfied:
(i) Assessee-employee not getting any HRA: The assessee-employee is not in receipt of any house rent allowance
(HRA) from his employer [under Sec. 10(13A)]. But deduction can be claimed in respect of rent paid by employee to
employer for concessional accommodation u/s 17(2)(ii).
(ii) Assessee and specified persons not to own any residential accommodation at the place of employment/business
etc. The assessee or his spouse or minor child or an Hindu undivided family of which the assessee is a member, does
not own any residential accommodation at the place where he ordinarily resides, or performs duties of his office or
employment or carries on his business or profession
(iii) Assessee not to own any self-occupied residential accommodation at any other place: The assessee has no
residential accommodation at any other place in his self-occupancy and the annual value of which is taken nil under
Sec. 23(2). Thus, the assessee may own a residential accommodation at any other place, which is let out.

100% Deduction under section 80GGA in respect of certain donations for scientific
research or rural development -
An assessee (other than an assessee whose gross total income includes income chargeable under the head "Profits
and gains of business or profession") is entitled to deduction in the computation of his total income in respect of the
following payments/donations:
Sum paid to an approved scientific research association or to an approved university, college or other
institution to be used for scientific research/ for research in social science or statistical research.
Sum paid to an approved association or institution which has as its object, the undertaking of any
programme of rural development or the training of persons for implementing programmes of rural
development
Sum paid to a public sector company or a local authority or an association or institutiona approved by the
National Committee for carrying out any eligible project or scheme provided that the assessee furnishes the
certificate referred to in section 35AC(2)(a).
Sum paid to National Fund for Rural Development set-up
Sum paid to the notified National Poverty Eradication Fund.
Note: Where deduction under this section is claimed and allowed, deduction will not be allowed in respect of the
same payment under any other provision of the Act for the same or any other assessment year.
Contributions to above mentioned institutions will be qualified for deduction even if after the date of making
contribution, the approval granted to these institutions have been withdrawn.
Mode of payment Donation can be given in cash or by cheque or draft. However, no deduction shall be allowed
under section 80GGA in respect of a cash contribution (exceeding Rs.10,000) from the assessment year 2013-14.

Section 80U: DEDUCTION FOR PHYSICALLY DISABLED PERSONS
Resident Individual
Blind or suffering from permanent physical disability- including mental retardation
Disability in any case should be 40% or more as certified by the medical authority as per Disabilities Act,
1995.
Disability can be:
blindness
low vision
leprosy
hearing impairment
mental retardation
mental illness
locomotor disability (movement related)
Deduction = Rs. 50,000 (flat).
A higher deduction of Rs. 1, 00,000 is available if person is suffering from severe disability i.e. disability to the
extent of 80% or more.
A salaried person/ self-employed can also claim deduction under this section i.e. this section does not
require that the assessee should be unemployed.

Deduction in respect of royalties on patents Section 80RRB Conditions
The following conditions should be satisfied in order to claim deduction under section 80RRB
1. The taxpayer is an individual (may be an Indian citizen or foreign citizen).
2. He is resident in India (he may be ordinarily resident or not ordinarily resident but deduction under section 80RRB
is not available if he is non-resident).
3. He is a patentee (he may be a co-owner of patent). Patentee means the person (being the true and first inventor
of the invention), whose name is entered on the patent register as he patentee, in accordance with the Patents Act,
1970.
4. He is in receipt of any income by way of royalty in respect of patent, which is registered under the Patent Act after
March 31, 2003. It includes advance royalty which is not returnable. However, it does not include any consideration
for sale of product manufactured with the use of patented process. Further, any consideration, which is chargeable
under the head Capital gains is not royalty.
5. The assessee shall have to furnish a certificate in Form No. 10CCE, duly signed by the controller of the Patents Act)
along with the return of income setting forth such particulars as may be prescribed.
Amount of deduction If the aforesaid conditions are satisfied, then the amount of deduction is
a. Rs. 3,00,000; or
b. Royalty Income Whichever is lower.















INDIRECT TAXES

Indirect Taxes are the charges levied by the State on consumption, expenditure, privilege, or right but not on income
or property. Customs duties levied on imports, excise duties on production, sales tax or value added tax (VAT) at
some stage in production-distribution process, are examples of indirect taxes because they are not levied directly on
the income of the consumer or earner. Also called consumption taxes, they are regressive measures because they
are not based on the ability to pay principle.

Some of the indirect taxes are:
Excise Duty
Customs Duty
Value Added Tax
Central Sales Tax
Service Tax
Expenditure Tax
Stamp duties
Securities Transaction Tax

Excise Duty:
It is an indirect tax levied and collected on the goods manufactured in India. Generally, manufacturer of goods is
responsible to pay duty to the Government. This indirect taxation is administered through an enactment of the
Central Government viz., The Central Excise Act, 1944 and connected Rules - which provide for levy, collection and
connected procedures. The rates at which the excise duty is to be collected are stipulated in the Central Excise Tariff
Act, 1985. It is mandatory to pay duty on all goods manufactured, unless exempted. For example, duty is not payable
on the goods exported out of India.
Similarly exemption from payment of duty is available, based on conditions such as kind of raw materials used, value
of turnover (clearances) in a financial year, type of process employed etc.

Custom Duty:
The Custom Duty in India is one of the most important tariffs. The custom duty in India is regulated by the Customs
Act of 1962. The main purpose of the custom duty in India is the prevention of the illegal export and import of
goods. The rates of the custom duty levied on the imported and exported goods are assigned in the Custom Act,
1962.