DT-FOR-CS-PROFESSIONAL-LectureDekho.com_

ADHOC CLASSES
401, Block “C” Silver Mall

R.N.T. Marg, Indore, 452001
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Compiled By: Nakul Shriwastav, ADHOC CLASSES, Contact: +91 7828880888 Page 1
Salary
MEANING: Salary means any consideration (whether in cash or in kind) received by employee
for services rendered to employer. It includes wages, annuity / pension, gratuity, fees,
commission, advances, leave encashment etc.
CHAGEABILITY: cash or due whichever is earlier. Advance & Outstanding salary both are
taxable. Even arrear salary shall be taxable on receipt basis.
BASIC ELEMENTS:
 Payer & Payee must have employer & employee relationship, i.e. he should have the
power to control or supervise payee.
 Payment may be contractual or voluntarily.
 Voluntary surrender of salary is taxable.
 Surrender of salary to Central Government u/s 2 of Voluntary Surrender of Salary
(exemption from taxation) Act, 1961, is not taxable.
 Voluntary services are not taxable.
 Payment must have been made by the employer in such capacity.
CONTRACT OF SERVICES CONTRACT FOR SERVICES

The employer can direct & control the duties The contractee can simply decide and quote the
and manner of performance of the employee. object or target to be achieved but cannot decide
Hence, employer - employee relationship exist or direct the manner of performance of the
in such a contract. contract.
It is a matter of salary It is a matter of PGBP
NATURE OF PAYMENT and EXEMPTION available therefrom

Basic salary shall be fully taxable.
Dearness allowance given to cope up with inflationary environment shall fully taxable (whether
forms the part of retirement benefit or not).
Fees shall be fully taxable.
Commission, whether as a % of turnover or profit, shall be fully taxable.
Bonus:
a) Contractual Bonus shall be fully taxable as Bonus.
b) Voluntary Bonus shall be fully taxable as Perquisite.
Gratuity received:
- On continuation of services shall be fully taxable.
- After death shall be fully exempted. (Whether Government employee or not).
On retirement:
By government employee shall not be taxable u/s 10(10)(i).
By non-government employee: (who is covered by the Gratuity Act.)
Minimum of the following shall be exempted u/s (10)(10)(ii):
- Actual Gratuity.
- Statutory Amount : 10,00,000
- 15/26 *salary p.m. *CYS Actual Gratuity Received.
*(CYS) : Completed years of service.
*CYS includes any fraction in excess of 6 months.
*Salary here means [Basic + D.A. last drawn*].
*The Gratuity Act silent about D.A. for academic purpose, assume D.A. forms a part of retirement
benefit.
*In case of seasonal establishment apply 7/26 instead of 15/26.
*In case of price rated employee salary means last 3 months average salary excluding overtime
payment.
By non-government employee: (who is not covered by the Gratuity Act.)

Minimum of the following u/s 10(10)(iii):
- Actual Gratuity
- Statutory Amount 10,00,000 as reduced by any deduction earlier claimed.
- ½ * CYS * average salary p.m.
 Any fraction of year shall be ignored.
 Salary here means, Basic + D.A. + Commission* (being last ten months average preceding
the month of retirement)
 While calculating CYS, period of employment under former employer shall also be
considered, provided the assessee has not received Gratuity from such employer.
Leave Encashment received:

On continuation of services shall be fully taxable.
After death shall be fully exempted. (Whether Government employee or not)
On retirement:
i) By Government employee shall not be taxable.
ii) Non-Government employee: Minimum of the following u/s 10(10)(10AA)
 Actual Leave Encashment
 Statutory Amount Rs. 3,00,000
 10 months *Average salary p.m.
 [(1 month maximum *CYS) – Leave Availed]*Average Salary p.m.
 Any fraction of year shall be ignored.

 In case of leave encashment, while claiming the statutory amount (i.e. Rs. 3,00,000) any
deduction claimed earlier as leave encashment shall be reduced from Rs. 3,00,000.
 Salary here means Basic + D.A.* + Commission * (being last ten months average
preceding the retirement)
Pension:
- Uncommuted Pension shall be fully taxable (whoever be the employee)
- Commuted pension received:
i) By Govt. employee shall not be taxable.

ii) By non-govt. employee.
 Receiving gratuity 1/3 rd of the total pension fund shall be exempted u/s 10(10A).
 Not receiving gratuity ½ of the total pension fund u/s 10(10A)
- After death shall be taxable as ‘Income from Other Source’.
Retirement compensation:
Minimum of the following shall be exempted u/s 0(10B):
 Actual retrenchment compensation
 Statutory Amount Rs. 10,00,000
 Amount as per IDA.
*If the compensation has been decided by the central govt. then nothing shall be taxable.
Voluntary Retrenchment Compensation:

Minimum of the following shall be exempted u/s 10(10C):
 Actual VRC
 Statutory Amount Rs. 5,00,000
*Conditions to claim 10(10C):
1. The employer must be a specified employer, i.e. other than individual, HUF, BOI, AOP, Firm.
2. Guidelines of CBDT (Central Board of Direct Tax) must be fulfilled:
 Scheme must be applicable to all employees, who has either attained the age of 40 years
or completed 10 years of service.
 The object of the scheme is to reduce number of workers.
 Vacancy caused must not be filled up.
 The retired employee is not appointed in company under the same management. (sister
concern)
 Compensation cannot exceed remaining tenure salary or 3 months average salary for
each CYS.
Here, Salary means Basic + D.A. (forming part of retirement benefit) + Commission (as a fixed
percentage of turnover), (last drawn).
10(10C) can be availed by an assessee only once. The 2nd time VRC received shall be fully
taxable.
Annuity received by any employee shall be fully taxable.
Rent Free Furnished Accommodation: Value of RFA (computed as usual) + Value of furniture.
Value of furniture -
If the furniture is owned by employer = 10% of the original cost of the furniture.
Where furniture is hired by the employer = Hire charges paid by the employer.
Notes: Furniture, here, includes all house hold appliances like refrigerator, television, radio, air
conditioner etc.
Concessional Rent Accommodation: RFA – Rent paid by employee.
Hotel Accommodation: Hotel accommodation provided for 15 days or less than that shall be
taxable.
However in excess of 15 days taxable part = (Total days for which hotel accommodation has
been provided – 15 days) * Salary * 24%.
ALLOWANCES
GENERAL ALLOWANCES:
Dearness allowance shall be fully taxable.
House rent allowance Minimum of following shall be exempted u/s 10(13A):
- Actual Allowance
- 40% of (non-metro) or 50% (metro) of salary
- Rent paid – 10% of salary
*For 50% or 40%, Place of residence is important & not place of employment.
*If assessee pays rent for more than one house, then entire rent of all the house shall be
considered.
*Salary from all sources shall be complied for calculating 10(3A).
*Salary & rent shall be taken only for the period during which HRA is received.
*If rent is not paid, HRA shall be fully taxable.
Entertainment allowance shall be fully taxable; however, a government employee can claim
deduction u/s 16(ii)
SEC. 10 (14) (1): Allowance, deduction from which depends on actual expenditure incurred:
Uniform Allowance (Dress code is necessary); Travel Allowance; Daily Allowance (given when
employee is out of town for office purpose); Profession Development Allowance; Helper
Allowance; Conveyance Allowance(given to meet journey expenditure related to office).
Deduction: Minimum of the following:
 Actual Allowance
 Amount so incurred for such purpose.
SEC. 10 (14) (II): Allowances, deduction from which does not depend on actual expenditure
incurred:
Children Education Allowance Rs.100 p.m. per child (max of 2 child)
Children Hostel Allowance Rs.300 p.m. per child (max of 2 child)
Transport Allowance (Given to meet journey Rs. 1600 p.m. (Rs. 3200 if handicapped) shall
expenses between office to home & vice versa) be exempted
Hill Area Allowance Rs. 800 p.m. shall be exempted
Boarder Area Allowance Rs. 1300 p.m. shall be exempted
Tribal Area Allowance Rs. 200 p.m. shall be exempted
Truck Driver / Air Hostess Allowance (given Minimum of the following shall be exempted:
to employee of a transport company to meet - 70% of the allowance; or
their personal expenses) -Rs. 10,000 p.m.
*Actual expenditure is irrelevant.
*Child includes adopted child, step child, but it does not include grand child, younger brother,
sister & illegitimate child.
*Both the parent can claim deduction.
*Age of child is not an issue.
*If allowances given child wise, computation shall be made child wise.
Exempted Allowances [Sec. 10(7)]: (Citizen of India + Working outside India + Government
employee). All allowances & Perquisites are exempted.
PERQUISITES:
Perquisite means any remuneration paid voluntarily in kind or any reimbursement on
production of a voucher / cash memo.
Exempted perquisite:
-Free Refreshment in office and free meal upto -Training facility
Rs. 50 per meal is exempted. -MIP paid by employer
-Health club facility -Free meal through non-transferable
coupon –Rent free accommodation to High Court and electronic card.
Or Supreme Court judge. -Conveyance facility.
-Telephone / Mobile facility -Employers contribution to staff group
insurance –Medical facility at office and medical facility upto scheme.
Rs. 15000 p.a. -Use of Computer / Laptop.
Taxable Perquisite:
Rent Free Accommodation: Non-Govt. Employer [Rule 3(1)]
City population House owned by employer Hired by employer

upto 10 lacs 7.5% of salary Minimum of 15% of salary or rent paid by
10 lacs- 25 lacs 10% of salary employer (Whichever is lower.)
more than 25 lacs 15% of salary
 Salary = Basic + DA * +Commission * + all other taxable allowances + any other

monetary payment by whatever name called (excluding perquisites)
excluding employer’s contribution to provident fund.
 Salary from all sources shall be complied & shall be computed only for the period during
which the house is occupied by the employee on due basis.
 If an employee has been provide more than one house, then taxable RFA shall be
computed for each house separately.
 If an employee has been shifted from one place to another and for the purpose, he has
been allotted house in both the cities, then 90 days any one shall be taxable, but after 90
days both houses shall be taxable.
In case any movable asset given to employee for personal use then the taxable shall be 10% of
the cost of asset (if owned by employer) or hire charges (if hired by the employer).
Medical facility - In India:

Exempted Perquisite Taxable Perquisite
MF in office perquisite Medical reimbursement to employee in
MF in Hospital owned by employer excess of Rs. 15000 p.a. shall be taxable in
MF in Govt. Hospital the hands of all employee
MF for (Cancer, Aid) specified diseases
Medical reimbursement upto Rs. 15000
Outside India:
a. Travel expenses of patient and 1 caretaker shall be exempted if the GTI is
uptoRs.2,00,000.
b. Stay expenses of patient & 1 caretaker shall be exempted upto RBI ceiling.
c. Treatment expenses of patient shall be exempted upto RBI ceiling.
Note: GTI = (Basic + DA + stay cost perquisite + Treatment cost perquisite + Income under other
head).
General Perquisites:
 Any obligation of employee paid by employer for which there is no specific provision
shall be taxable in hands of employee.
 LIP paid by employer shall be fully taxable.
 Professional tax of employee paid by employer shall be fully taxable as perquisite.
However, an employee can claim deduction u/s 16(iii).
 Free domestic servant facility, Gas, Electricity or Water facility provided by employer –
Cost to employer shall be taxable.
 Gardener facility – It must be treated same as servant facility. However, if following
conditions are satisfied, then gardener facility shall be exempted:
- House is provided by the employer.
- Such house is owned by employer.
- Gardener is appointed by employer
Education Facility:
To employee – Not taxable and treated as training which is exempted.
To child – Exempted upto Rs. 1000 p.m. per child *.
To other family members – Fully taxable.
Taxable amount:
a. Institution owned by employer = fair market value *
b. Other institution = cost to employer *
(reimbursement of education expenditure to employee shall be fully taxable.)
Sale of asset to employee:

Taxable perquisite = WDV – Sale Consideration.
As per Rule 3, WDV shall be computed as follows:
a. Car (Rate 20% and method WDV)
b. Electronic item (Rate 50% and method WDV)
c. Other assets (Rate 10% and method SLM)
Note: Depreciation should be charged on a block of 12 months. Any fraction of 12 months shall
be ignored.
Electronic item include any data processing items like laptop, computer etc.
Gift facility: Gift in cash shall be fully taxable, however, gift in kind shall be exempted upto Rs.
50,000 (in aggregate).
Interest free loan: Only interest part is taxable and not the principal.
a. If loan amount is upto Rs. 20,000 (in aggregate) then nothing shall be taxable, otherwise
entire loan shall be liable to tax (interest part).
b. Rate of interest (SBI rate)
c. Interest shall be charged on the month end balance.
d. Loan for medical treatment of specified disease shall not be taxable.
e. However, if against such disease any medical claim received then loan amount upto the
Medical amount shall taxable. (Interest part)
f. If rate charged from the employer is more than the rate as per the SBI slab then nothing
shall be taxable.
Car facility: If car is used for office purpose than nothing shall be taxable (irrespective of the fact
as to who owns and maintains it).
Owner Maintained by Used by Taxable Perquisites
Employer Employer Personal 10% of original cost + Maintenance charges
Employer Employer Both 2400 p.m. or 1800 p.m. depending on capacity of car
Employer Employee Personal 10% of original cost
Employer Employee Both 900 p.m. or 600 p.m.
Employee Employer Personal Maintenance cost
Employee Employer Both Maintenance cost - 2400 or 1800 p.m.
Driver facility: Used for Office purpose: Not taxable; Personal purpose: Actual salary to driver;
Both purpose: 900 p.m.
Leave Travel concession:

1. Travel must be made in India only and only travel expenses reimbursed exempted.
2. Travel can be made by any mode. In case of rail, upto 1st class AC fair is exempted. In
case of air, economic class is exempted (not business class).
3. Exemption is available for 2 journeys in a block of 4 calendar years. For the A.Y. 2014-
15, the relevant block is Jan. 2010 to Dec. 2013 and Jan 2014 to Dec. 2017.
4. Stay cost and other cost of journey shall be fully taxable.
5. The relevant block is [13-14-15-16] calendar year.
6. Carry forward facility: If the preceding block 4 years remained wholly or partly
unavailable, then in the succeeding block 1 extra journey is allowed in 1st year only.
7. In case of multiple journeys, from the point of origin, farthest point travel expenditure
shall be exempted.
8. Travel may be made with family, and family here, includes; Spouse, Children, Dependent
parents & Dependent brother & sister,
9. There is no restriction on number of children born or on before 30/09/98. But
thereafter, maximum number of children included in family is two.
Provident Fund:
Particulars SPF RPF URPF PPF
Employers Exempted upto 12% of Not
contribution# NT salary NT Applicable
Employees
contribution# NT NT NT NT
Deduction u/s 80C Available Available Not Available Available
Interest NT Exempted upto 9.5% p.a. NT NT
Lumpsum NT Not taxable provided # Salary NT
employee terminates / retires * NT
from job after 5 years of Int on # Salary
continuous service. Int on * IFOS
Deduction u/s 16:

Deduction u/s 16(ii): Entertainment Allowance – Fully taxable as allowance in the hands of all
employees. However, a Govt. employee can claim deduction under this section, being lower of
the following:
 Actual Entertainment Allowance
 Rs. 5000.
 20% of Basic Salary.
Deduction u/s 16(iii): Professional tax – it is allowed on cash basis whether paid by employee or
employer.
Income from House Property
MEANING: As per Sec. 22, the ANNUAL VALUE of a house property shall be chargeable to
income tax in hands of the owner under the head “Income from House Property”, provided the
property is not used for the purpose of any business or profession carried on by him.
OWNER: Only owner can be taxed under the head Income from House Property. Sub – tenancy
shall be taxable under the head Income from other source. Owner includes legal owner (in
whose name the property is registered) as well as beneficial owner (having right to let out, sell,
demolish, etc. but a few legal formalities are deficient).
HOUSE PROPERTY: The term House Property can be construed as any land surrounded by wall
having roof or not; and any land appurtenant to a building.
Notes:
 Building includes both residential as well as commercial house.
 Residential house need to have a roof but a commercial house need not to have a roof.
 Merely land cannot be treated as House Property.
 An incomplete or ruined house cannot be treated as House Property.
LET OUT HOUSE PROPERTY: (FEATURES)

 Sec. 23(1) shall be applicable only if house property is let out;
 Even letting out for a part of the year shall be considered, and
 Property must not be actually self occupied by the owner for any the part of the year.
COMPUTATION OF GROSS ANNUAL VALUE:

Step 1: Calculation reasonable expected rent (RER): Higher of municipal value or fair rent;
however RER cannot exceed standard rent.
Step 2: Calculate [Actual Rent receivable (ARR) – Unrealized Rent (UR)]
Step 3: GAV = Higher of Step 1 or Step 2
Step 4: If step 2 is less than 1 due to vacancy period than Step 2 is equal to GAV.
(Vacancy period affects ARR, not unrealized rent).
MEANIG OF IMPORTANT TERMS:

Gross Municipal value: It is the annual value of the property as per municipality records.
Gross Municipal value vs Net Municipal Value:
Delhi, Kolkata, Chennai, Mumbai 90% of GMV = NMV + Water tax / Sewerage
tax etc.
Other GMV = NMV
Fair Rent: It is the rent of the similar property (though not exactly similar) in the same locality.
Standard Rent: The maximum possible rent of all property in locality as decided by the Rent
Control Act.
Actual Rent Receivable: It is rent charged for property during the period the property is actually
let out.
De facto rent: ARR – Cost of Amenities provided to the tenant.
Actual rent receivable: = (Rent charged from tenant pm – Cost of amenities) * Months for which
property is actually let out.
Unrealized Rent: As per Rule 4, deduction for Unrealized rent shall be available only if following
conditions are satisfied:
 The tenancy agreement must be bona fide;
 All reasonable steps must have been taken to recover the rent;
 All reasonable steps must have been taken to get the property vacated;
 Defaulter tenant is not occupying any other property of the assessee.
TAXES LEVIED BY LOCAL AUTHORITY: [PROVISO TO SEC. 23(1)]

Taxes levied by local authority can be summarized as follows:
 It includes municipal tax, water tax, sewerage tax, etc. charged by any local authority on
the property.
 It is computed as a percentage of the municipal value (NMV if the property is situated in
metro-city).
 It is allowed on cash basis.
 Both Advance and Outstanding Municipal tax shall be allowed as deduction in the year of
payment.
 It must be paid by the owner. If municipal tax is paid by tenant, then no deduction shall
be allowed.
DEDUCTION U/S 24:

Standard Deduction [Sec. 24 (a)]: For sundry expenditure incurred in relation to house property
a statutory deduction shall be allowed @ 30% of the Net Annual Value (irrespective of actual
expenses).
Interest on Loan [Sec. 24 (b)]: Interest on loan can be summarized as follow:
 Loan must be taken for purchase, construction, repair, renovation of house property.
 It is allowed on actual basis.
 Loan may be taken from any one.
 For the purpose of computation, interest on loan is divided in two parts Interest for pre
– construction period and Interest for post – construction period.
Pre-construction period commence from the date of borrowing of loan or when the
construction commences whichever is later and ends on 31st March of the F.Y. immediately
preceding the year of completion of construction.
Post-construction period commences from the beginning of the year in which construction
is completed and completes when the loan is repaid or property is transferred.
Treatment: Interest for pre-construction period shall be allowed in 5 equal annual
installments commencing from the year in which post construction period begins.
 Brokerage or commission for arranging loan shall be treated as interest and allowed
u/s 24(b).
DEEMED TO BE LET OUT HOUSE PROPERTY: [SEC. 23(4)]:

In case an assessee occupies more than one House Property as Self Occupied or Unoccupied,
then he can claim benefit for one of the property either u/s [23(2)(a)] or [23(2)(b)] (at his own
choice) and the rest of the House Property (s) shall be treated as “Deemed to be Let Out”.
Tax treatment:
 Since in case of Self Occupied or Unoccupied House Property no rent is derived there
arises no question of “ARR” or Unrealized Rent”. Thus, the RER of a “Self Occupied” or
“Unoccupied Property” which is treated as “Deemed to be let our property” shall be
treated as the GAV of the property.
 Rest of the procedure in respect of Deduction u/s 24 shall be the same as in case of a
Let out House Property.
UNOCCUPIED HOUSE PROPERTY: [SEC. 23(4)]: (FEARTURES)
An assessee has a residential house meant for self occupation but the same by the owner owing
to his employment and the said house is lying vacant i.e. no other benefit is derived from such
house and the assessee resides in a house not belonging to him.
Tax treatment: Same as self occupied property.
CONDITION FOR TAXATION [SEC. 22]

Annual value of a property shall be taxable if following conditions are satisfied:
1. Assessee must be the owner of the house A person who is not an owner shall not be
liable to tax under this head even if he receives rent from house property e.g., Sub-
letting is taxable under the head ‘IFOS.’
2. The house is not used for the own business or profession of the assessee, If it is used for
own business then, rent from such house shall be taxable as business income.
EXCEPTION TO THE OWNER (FICTIONAL OR DEEMED OWNER) [SEC. 27]

As per sec. 22, only owner can be taxed under the head ‘Income from house property’ but in the
following cases a person, who is not the owner, shall be taxable under the head ‘Income from
house property’. Such person are called Deemed owner.
1. [Sec. 27(i)] In case an individual transfers Property to Spouse or Minor Child without
adequate consideration or without agreement to live apart then he shall be treated as
Deemed owner.
Special point: Minor child does not include married daughter and marriage must subsist
as on the day of transfer of property as well as on the day of accrual of income.
2. [Sec. 27(iii)] A holder of an impartible estate.
3. [Sec. 27(iii)] A person who has been allotted property against membership of a housing
society or housing company.
4. [Sec. 27(iii)] A person who has got possession of the property against part performance
of the contract as per Sec. 53A of Transfer of Property Act.
5. [Sec. 27(iiib)] A lessee for 12 years or more.
Special point: Lease period includes renewal period. However renewal period cannot be
less than 12 months.
SELF-OCCUPIED HOUSE PROPERTY: (FEATURES)

 Property may be self occupied for a part of the year and for the remaining part of the
year it can be left vacant.
 Property shall not be let out for any part of the year; and no other benefit is derived
therefrom.
Tax treatment:
Net Annual Value of such house shall always be NIL. Hence standard deduction shall also be nil.
Further deduction u/s 24(b) i.e. interest on loan shall be allowed to the maximum of Rs. 30000.
In case an assessee occupies more than one House Property as Self Occupied, then in that case
he can treat any one of the house property as Self Occupied (depending upon his choice) and the
remaining house property (s) shall be treated as Deemed to be Let Out.
Higher deduction of Interest:

However, if the following conditions are satisfied then interest shall be allowed to the maximum
of Rs. 200000
 Loan must be taken or on after 01/04/99.
 Loan must be taken for purchase or construction of the house property.
 Construction must be completed within 5 years from the end of the financial year in
which the loan was taken; and
 A lender certificate must be obtained, certifying fulfillment of above conditions.
PARTLY SELF-OCCUPIED & PARTLY LET-OUT HOUSE PROPERTY: [SEC. 23(4)]

Where a property or a part of it, which is self-occupied is also let out during the P.Y. (or a part of
it) then such property shall be treated as “Partly Self-occupied and Partly Let-out. A property
can be partly self-occupied and partly let-out in the following ways:
Area Wise: [Sec. 23(2)(a)]:

 Self-occupied portion of the house & let out portion of the house shall be treated as two
separate house (say Unit a & Unit B);
 Reasonable rent, municipal tax and interest on loan shall be divided in proportion to
area;
 Actual rent receivable and unrealized rent shall be related to Let out portion only; and
 Income of the both the units shall be computed separately.
Time Wise: [Sec. 23(3)]: In such case, no benefit shall be allowed for the self occupied period.
Income will be computed as if the property is let out throughout the year but ARR shall be
computed for the period for which the property is actually let out.
Procedures:
 Calculate Reasonable rent for the full year.
 ARR – UR shall be taken only for the let out period.
 Thereafter, GAV shall be computed as higher of the above two after considering Rule of
substitution.
Area as well as Time wise: if a house or part of the house is self occupied during any part of the
previous year and other part is let out for part of the year it is termed as ‘Partly self-occupied
and Partly Let-out’, [Sec. 23(3)].
RECOVERY OF ARREAR RENT / RECOVERY OF UNREALISED RENT

Recovery of arrear rent shall be taxable under the head “IFHP”, to the extent such amount
together with the ARR of the previous year to which it relates, exceeds GAV of that year.
From such amount a further Deduction of 30% shall be allowed as standard deduction.
Stress: 70% * [{Recovery of Arrear Rent + (Actual Rent Receivable – Unrealised Rent)} – GAV of
the concerned year].
CO-OWNER: [SEC. 26]
As per Sec. 26, co-owner of a house property shall be taxable separately for their respective
share. In case of self-occupied house, both can claim deduction of Rs. 150000 / Rs. 30000 in
respect of interest separately.
FOREIGN HOUSE PROPERTY: Foreign property shall be taxed as under:
Particulars Ordinarily Resident Not-Ordinarily Resident Non-Resident

Income received in India Taxable Taxable Taxable
Income received outside India Taxable Not-Taxable Not-Taxable
DISPUTED PROPERTY: In case of disputed property, income shall be taxable in the hands of
assessee who derives benefits from the property. In any other case, AO shall take decision for
the incidence of tax.
Profit and Gain from Business and Profession
Business Sec. 2(13):
Business means any trade, commerce or manufacturer or any adventure in nature of trade,
commerce, or manufacturer.
Whether a particular adventure shall be treated as business or not shall be decided in the light
of four:-
Amount involved; Effort involved; Time involved; Motive involved.
Profession Sec. 2(36):

Professions includes vocation & skill i.e., degree is not necessary only skill is important.
Income taxable under the head ‘PGBP’: Sec.28

Following income shall be taxed under these head:
 Any profit or gains of business and profession.
 Any speculation income.
 Any compensation for termination or modification of management agencies.
 Any interest or remuneration to partners from the partnership firm.
 Any compensation for Kerman insurance policy.
 Any perquisite from business or profession.
 Any export incentive.
 Any compensation for not to do certain business activity or not to share patent, know-
how, etc. relating to business or profession.
 Any income of trade or profession association by rendering specific services to its
members. This is an exception to the concept of ‘Mutuality cannot be taxed’.
 Money received from capital assets demolished, destroyed, discarded or transferred for
which deduction.
Net profit as per Accounting P/L ***
+ Expenses disallowed but shown in P/L ***
- Expenses allowed but not shown in P/L ***
- Income disallowed but shown in P/L ***
+ Income allowed but not shown in P/L ***
(+)(-) Stock adjustment ***
Profits or Gains of Business Or Profession ***
Rent, Rates, Repairs, Insurance, Taxes of building [Sec. 30]:

 Above expenditure is allowed if asset is used for business purpose.
 If asset is proportionately used, propionate expenditure shall be allowed.
 Rent to proprietor is disallowed; whereas rent to partner is allowed.
 Any type of premium or salami incurred to acquire property on tenancy is disallowed.
 Rent paid for previous tenant is capital expenditure (salami) hence disallowed.
 Municipal taxes shall be allowed subject to Sec. 43B.
Repair ad insurance of Plant, Machinery and Furniture [Sec. 31]:

 Same as Section 30.
 Rent paid for such asset shall be deductible u/s 37(1).
Depreciation:[Sec. 32]
Nature of Assets;
 Tangible assets like Building, Plants and Machinery, Furniture.
 Intangible asset like Patents, Trademarks, License, Copyright, Knowhow, Franchise etc.
Note: No Depreciation is allowed on Land and Goodwill.
[Sec. 32]
Condition for claiming Depreciation:
1. Assessee must be the owner.
Exceptions:
 Hire purchase can claim depreciation on cash price. He must be treated as the owner
from the 1st installment itself.
 In case of co-owner depreciation shall be proportionately allowed.
 A tenant can claim depreciation on super construction expenditure incurred by him.
Method of Depreciations:
In general depreciation is calculating using WDV method.
Procedure:
 Depreciation is charged on block of assets not individually. To fall in the same block two
conditions must be satisfied:
 Rate of depreciation must be same.
 Nature of asses must be same
.
Computational Format:
Opening WDV ****
+ Additional during the year ****
- Money payable on transfer of the asset ****
Closing depreciation before depreciation ****
- Depreciation charged ****
Closing WDV ***
Significance of date:
 Date of sale of is irrelevant.
 If assets is purchased during the year and put to use for less than 180 days than ½ year
depreciation shall be allowed.
When no depreciation is charged:

 No depreciation shall be charged if block has negative value, and in such case the
negative value shall be called short term Capital Gain.
 If block has no real assets than such value shall be treated as short term Capital Loss.
Rate of tax (an illustrative list):
Residential Building 5% / 10%
Furniture 10%
Plant & Machinery (in general), Car, Fire extinguisher 15%
Pollution Control Equipments 100%
Computer (including computer software) 60%
Printer 15%
Books (of annual publication) / (otherwise) 100% / 60%
Ocean going ships and Vessels & Speed posts 20%
Intangible Assets 25%
In case of Amalgamation / Demerger / Succession / Conversion of private limited company /
unlisted company in LLP depreciation shall be proportionately allowed.
Additional depreciation: [Sec. 32(1)]

Applicable to: All assessee.
Conditions:
 Assessee must be engaged in the business of manufacturing of articles or things.
 New plants or machinery must be acquired and installed in factory.
Depreciation: Depreciation shall be charged @ 20% (However if the machine is used for less
than 180 days in the year of purchase than it shall be charged at 10%).
Notes: No AD shall be allowed if an asset is charged to 100% deduction in the current year.
 No AD if asset is purchased and sold in the same current year.
 AD shall be available even if block has negative value.
 Additional deduction will not affect Short Term Capital Gain.
 It is available only in the 1st year.
 No Additional Depreciation on Building, Furniture or intangibles.
 No Additional Depreciation on second hand assets.
 No Additional Depreciation on second hand imported assets.
 No AD on Road Vehicles, Air craft, Water Vehicles.
 An assessee engaged in generation or distribution of power (claiming depreciation on
WDV method) shall also be eligible for AD.
Investment allowance for acquisition and installation of new plant and machinery [Sec.
32AC].
In order to encourage substantial investment in new plant and machinery, Section 32AC has
been inserted to provide for an investment allowance @ 15% of investment made in New Plant
and Machinery, subject to terms and conditions:
Applicable to: Company
Conditions – Investment allowance will be available if the following conditions are satisfied:
1) Assessee is engaged in the business of manufacture or production of any article or thing.
2) Co. has acquired and installed a “new plant or machinery” excluding.
2nd hand assets any plant or machinery which before its installation by the assessee was
used either within or outside India by any other person;
Assets installed in office / guest house etc: Any plant or machinery installed in any office
premises or any residential accommodation, including accommodation in the nature of
guest house;
Office appliances: Any office appliances including computer software;
Any vehicle, Ship or aircraft; or
100% depreciable asset: Any plant or machinery, the whole of the actual cost of which is
allowed as deduction (whether by way depreciation or otherwise) in computing the
income chargeable under the head PGBP of any previous year.
3) The aggregate amount of actual cost of such new Plant & Machinery acquired and
installed before 01.04.2017 should be more than Rs. 25 crore.
4) The new asset should be acquired and installed before 01.04.17.
Stress: Both, ‘acquisition’ and ‘installation’ of the new plant and machinery are required to
be made within the above time range.
Stress: If the new asset is acquired on or before 31.03.13 but installed after 31.03.13, then
investment allowance will not be allowed.
Quantum of investment allowance: Investment allowance will be available @ 15% .
Additional depreciation and investment allowance: Investment allowance shall be allowed apart
from Additional depreciation.
Depreciation and Investment allowance: Amount of depreciation will not be affected by
investment allowance.
Withdrawal of investment allowance:
New asset must not be sold or otherwise transferred within a period of 5 years from the date of
its installation. Otherwise the amount of investment allowance allowed to the assessee shall
deem to be income of the assessee of the previous year in which such asset is sold or otherwise
transferred. Such deemed income will be taxable under the head “Profit and Gain of Business or
Profession”. Such deemed income shall be taxable in addition to taxability of Capital gain which
arise u/s 45, read with section 50.
Above restriction not to apply in case of amalgamation / demerger:
The above restriction will not apply in case of amalgamation / demerger.
However, the amalgamated company or the resulting company should not transfer the new
asset within 5 years (from its installation by amalgamating company or demerged company). If
it is sold or otherwise transferred within 5 years by the amalgamated company / resulting
company, the national income stated above will be taxable in hands of amalgamated company or
resulting company.
Tea, Coffee or Rubber Growing & Manufacturing Business [Sec. 33AB]

Conditions:
 Assessee must be engaged in the business of growing and manufacturing of Tea, Coffee,
Rubber in India.
 Amount must have deposited in NABARD or any specific bank as per the scheme of the
Tea board, Coffee board & Rubber board etc.
 Amount must be deposited within 6 months from the end of the P.Y.
 CA report must be attached.
Deduction: Minimum of the following –
 Amount so deposited or
 40% of profit of such business.
Note: Amount must be utilized as per the scheme of Tea Board, Coffee Board, and Rubber Board.
In case of misutilization earlier deduction shall revoke and treated as current year income.
Mineral Oil Business [Sec. 33ABA]
Applicable to: All Assessee.
Conditions:
 Assessee must be engaged in the business of searching, prospecting and extracting
mineral oil or natural gas.
 Amount must be deposited with SBI or any other Bank Account as per the scheme of
Ministry of Petroleum and Natural Gas.
 Amount must be deposited by the end of previous year.
 CA report must be attached.
Deduction: Minimum of the following –
 Amount so deposited or
 20% of profit.
Note: In case of misutilization earlier deduction shall be revoke and treated as current year
income.
Scientific Research: [Sec. 35]

In house research:
Research Expenditure incurred: Before Commencement of the business:
 Prior 3 years shall be allowed.
 Within 3 years before the commencement of company.
Revenue – Only Material and Salary – 100% deduction is allowed.
Capital – All excluding land – 100% deduction is allowed.
After Commencement of the business:
Revenue – Any - 100% deduction is allowed.
Capital – All excluding land - 100% deduction is allowed.
Contribution for Scientific Research: An assessee can claim deduction at the rate of 125% /
175% / 200% for contribution made to approved research association, lab, university, college to
be used for scientific research or social science or statistical research, National Laboratory or a
university or an IIT or a specified company etc.
Scientific Research expenses incurred by specified companies: [Sec. 35(2AB)]

Applicable to: Specified companies only.
Conditions:
 Company must be engaged in the business of bio-technology or in any business of
manufacture or production of any article or thing, not being an article or thing specified
in the list of the Eleventh Schedule.
 It has entered into an agreement with the government to extend co-operation and get
data audited.
 The research must approved by the prescribed authority.
 Expenditure must be incurred on or before 31.03.17.
 Expenditure must be incurred on in house research.
Deduction:
Revenue Expenditure - 200% of the expenditure.
Capital Expenditure - 200% of the expenditure (Excluding land and building).
Valuation of Stock: [Sec. 145A]
 Stock shall be valued as per the regular method of accountancy followed by the
assessee.
 Carriage inward, commission etc. incurred to bring stock shall be added in value of
stock and Excise duty.
 In case of dissolution of firm stock shall be valued at market price.
Capital expenses incurred by Specified Business: [Sec. 35AD]
Applicable to:
 Any assessee engaged in the business of setting up and operating a ‘Cold Chain Facility’
on or after 01/04/09.
 Any assessee engaged in the business of setting up and operating a ‘Warehousing
Facility’ for storage of agriculture produce on or after 01/04/09.
 An Indian company or any consortium (combination) of Indian company engaged in the
business of laying and operating a cross country natural gas pipelines net work or on
after 01/04/07 or crude or petroleum oil pipelines net work on or after 01/04/09 or for
distribution, including storage facility being an integral part of such network.
Reservation on usage:
In case of natural gas pipeline network atleast 1/3rd & in case of petroleum product pipeline
network atleast 1/4th of its total pipeline capacity is available for use on common carrier basis
by any person other than the assessee or an ‘associated person’.
 An assessee engaged in the business of building and operating (anywhere in India), a
new hotel of two star category, as classified by the Central Government on or after
01/04/10.
 An assessee engaged in the business of building and operating (anywhere in India), a
new hospital with atleast 100 beds for patients on or after 01/04/10; and
 An assessee engaged in the business of developing and building a housing project under
a scheme for slum development or rehabilitation framed by the Central State
Government and notified by the Board in accordance with the prescribed guidelines, on
or after 01/04/10.
 Setting up an operating an inland container freight station (CFS) as notified or approved
under the Customs Act if they start their operation on or after 01.04.2012
 Bee keeping and production of honey and beeswax if they start their operation on or
after 01.04.2012
 Setting up and operating a warehousing facility for storage of sugar if they start
operation on or after 01.04.2012
Condition:
a) Undertaking should not be formed by reconstruction.
b) New Plant and machinery.
c) Books of accounts of the assessee must be audited.
Deduction: Capital expenses – 100% allowed.
Exception: Land; Goodwill; Financial instrument
Notes:
 Expenditure incurred prior to commencement of the business shall be allowed as
deduction during the previous year in which assessee commence the operation of
business.
 Deduction under chapter VIA shall not be allowed.
 Any loss of specified business can be setoff only against profit from specified business.
 If assessee has more than 1 business, one of them qualifies for Sec. 35AD then any inter
transfer of goods and services from one unit to another shall be valued at market price.
 The actual cost of any capital asset u/s 43(1) on which deduction has been allowed or is
allowable to the assessee under section 35AD shall be treated as nil.
 Money receivable on sale of such asset shall be chargeable to tax under this head.
 In case of Slump sale u/s 50B, for computing the net worth of the undertaking, the
aggregate value of total asset in the case of capital assets in respect of which the whole
of the expenditure has been allowed as a deduction under section 35AD shall be nil.
Weighted deduction shall be available @ 150% of the qualifying expenditure in the following
cases w.e.f. 13-14 if the business started on or after 01.04.2012:
1. Setting up and operating a cold chain facility.
2. Setting up and operating a warehouse facility for storage of agro produce.
3. Building and operating, anywhere in India any hospital with atleast 100 beds.
4. Developing and building a housing project under a scheme for affordable housing
scheme framed by the CG or a State Govt. and notified by the Board.
5. Production of fertilizers in India.
Expenses or contribution for Social Upliftment ect. [Sec. 35AC]

In case of a company:
a) They make there own scheme
b) Get it approved from the prescribed authority
c) Incur expenditure
d) Get data audited
Deductions: Actual expenses incurred. In case the scheme is retrospectively cancelled than
earlier deduction shall be revoked and treated as current year income.
In case of other assessee (including company): They can make contribution to approved
institution or proved fund and get 100% deduction. If the license of the Donee is retrospectively
cancelled than in the hands of the Donor earlier deduction shall not revoke.
Contribution for Rural Development [Sec. 35CCA]: Same as Section 35AC, however, a company
cannot make its own scheme.
Sec. 35CCC: Weighted deduction for expenditure for Agriculture Extension Project
Nature of expenditure: Where an assessee incurs any expenditure on agriculture extension
project (notified by the Board in this behalf) in accordance with the guidelines as may be
prescribed.
Deduction: Such expenditure shall be allowed as deduction to the extent 150% of such
expenditure.
No double deduction: Where a deduction under this section is claimed and allowed for any
assessment year in respect of any expenditure, deduction shall not be allowed in respect of such
expenditure under any other provision of this Act for the same or any other assessment year.
Sec. 35CCD: Weighted deduction for expenditure for Skill development:

Applicable to: Company
Nature of expenditure: Where an assessee incurs any expenditure on Skill development project
(notified by the Board in this behalf) in accordance with the guidelines as may be prescribed.
Expenditure not covered: Any expenditure in the nature of cost of any land or building shall not
be allowed as deduction.
Deduction: Such expenditure shall be allowed as deduction to the extent 150% of such
expenditure.
No double deduction: Where a deduction under this section is claimed and allowed for any
assessment year in respect of any expenditure, deduction shall not be allowed in respect of such
expenditure under any other provision of this Act for the same or any other assessment year.
Deduction for Preliminary expenses: [Sec. 35D]

Preliminary expenditure includes: Drafting or Project Report / Feasibility Report, Drafting of
MOA / AOA, Drafting of any legal documents, Expenses on Issue of share or debenture,
Registration of company expenditure, Engineering services, Market survey expenditure, Any
other prescribed expenditure.
Applicable to: In case of a company – Indian company, others – Resident.
Condition for claiming deduction: There must be a new company, or new organization, or a new
project. 1st year audit report must be attached.
Treatment: It is allowed in 5 equal yearly installments starting from the year of commencement
of business.
In case of a company: Preliminary expenditure cannot exceed 5% of cost of project or capital
employed (whichever is higher).
In any other case: Preliminary expenditure cannot exceed 5% of cost of projects.
Cost of Project: means all investment in intangible fixed assets till the end of the year on which
business commence.
Capital Employed: means aggregate of share capital and long term loans till the end of the year
in which business commence.
Spectrum License Fee [Sec. 35ABA]

Treatment: Deduction shall be allowed during the life of the license on cash basis.
Expenses incurred on Amalgamation or Demerger of Indian Company [Sec. 335DD]

If an Indian company incurs expenses for Amalgamation or Demerger then such expenditure
shall be allowed as deduction in 5 equal installments.
Telecommunication License [Sec. 35ABB]

Treatment: Deduction shall be allowed during the life of the license on cash basis.
Expenses incurred on Amalgamation or Demerger of Indian Company [Sec. 335DD]

If an Indian company incurs expenses for Amalgamation or Demerger then such expenditure
shall be allowed as deduction in 5 equal installments.
Voluntary Retirement Compensation [Sec. 35DDA]:

If any assessee paid VRC then such expenditure shall be allowed as deduction in 5 equal
installments on cash basis.
In case of succession of private company or an unlisted public company by a LLP, deduction u/s
35DDA shall be allowed to the successor LLP, in the year of succession.
[Sec. 36]
(i) Insurance of stock or stores are allowed as deduction.
(ib) Insurance on health of employee is an allowed expenditure provided it is paid
otherwise than by
cash.
(ii) Bonus and Commission to employee is allowed expenditure subject to Sec. 4B.
(iii) Interest to loan: Condition: A) Loan must have been taken. B) Interest must be
incurred. C) Loan must be used for business.
(iiia) Zero –Coupon Bond: It is a bond on which interest etc. is not allowed during the life of
the bond.
The bond is issued at heavy discount. It can be used by: Infrastructure capital fund,
Infrastructure capital company, Public sector company, Any Scheduled Bank.
(iv) Contribution towards Recognized Provident Fund & Approved Superannuation

Fund: is allowed as deduction subject to Sec. 43B.
Employer’s Contribution to Notified Pension Scheme [Sec. 36(1) (iva)]:

Erstwhile, employer’s contribution to NPS was allowed as deduction u/s 37(1) and not u/s
36(1). A new clause (iva) has been inserted in Sec. 36(1), which provides that employer’s
contribution to NPS [referred to Sec. 80CCD] in respect of an employee shall be allowed as
deduction u/s 36(1)(iva) to the maximum of 10% of salary of such employee. Here, Salary =
Basic + DA (forming part of retirement benefit).
Employer’s contribution towards NPS is taxable in the hands of the employee as part of salary
income. The entire contribution made by the employer shall be taxable without any limit.
Consequential amendments u/s 80CCE, (i.e. limit on aggregate deduction allowed u/s 80C,
80CCC, and 80CCD):
Sec. 80CCE has been amended so as to exclude the employer’s contribution towards NPs u/s
80CCD from the monetary limit of Rs. 1lakh.
(v) Contribution towards Approved Gratuity Fund is allowed as deduction subject to
Sec. 43B.
(vi) Deduction for dead or useless animals: Conditions:
A) Animal must be used for business.
B) It must not be held as stock in trade.
C) It must have died or became permanently useless.
D) Such animal is sold at a loss.
Notes:
A) Profit on sale shall be liable to Capital Gain.
B) If animal did not become useless but sold at loss than it is Capital Loss.
(vii) Bad Debts:
a) It is an allowed expenditure subject to following 5 conditions:
b) It must be revenue in nature.
c) It must be related to business.
d) It must be written off.
e) Business must be continued.
f) It must be earlier treated as income, Exception, in case an assessee is engaged in the
business of money lending, loan advanced later proved bad shall be allowed as
deduction.
(ix) Family Planning Expenses:
Applicable to: Companies.
Condition: Expenditure must be incurred by the company for generating family
planning awareness among its employees.
Deduction: Revenue expenditure shall be fully allowed & Capital Expenditure
shall be allowed in 5 equal installments.
(xv) Securities Transaction Tax is an allowed expenditure.
Shipping Business: [Sec. 44B]

Applicable to: Non resident.
Conditions: Assessee must be engaged in operation of ship in India.
Presumptive income: 7.5% of (Revenue earned in India + Revenue received in India)s
Commodities transaction tax [Sec. 36(1)(xvi)

Commodities transaction tax paid by an assessee in respect of the taxable commodities
transaction entered into in the course of his business during the previous year shall be
allowable as deduction, if the income arising from such taxable commodities is included in the
income computed under the head ‘PGBP’.
General Deduction: [Sec. 37(1)]

Expenses shall be available subject to following conditions:
a) Expenses must be in revenue in nature.
b) Expenses must be related to business.
c) Expenses must be incurred during the previous year
d) Expenses must not be in violation of law
e) Expenses must be real and not fictitious.
[Sec. 37(2B)]: Advertisement in souvenirs etc. of Political Party is a disallowed.
[Sec. 40A(2)]: Payment made to related person in excess of requirement then excess part shall
be disallowed.
Amendment w.e.f. AY 13-14: New section 92BA has been inserted to extend the Transfer Pricing
Provision to a few domestic transactions {including the transaction between related parties u/s
40A(2)}. Further sec. 40A(2) has been amended on following lines.
“No disallowance, on account of any expenditure being excessive or unreasonable having regard
to the fair market value, shall be made in respect of specified domestic transaction referred to in
section 92BA, if such transaction is at arm’s length price as defined u/s 92F(ii)”.
Further meaning of related person has been modified to include transaction between companies
having the same holding or controlling company and the other company carrying on business or
profession in which the first mentioned company has substantial interest.
Sec. 92BA Meaning of specified Domestic Transaction w.e.f. AY 13-14: ‘92BA. For the purpose of
this section 92, 92B, 92C, 92D and 92E,“specified domestic transaction” in case of an assessee
means any of the following transactions, not being an international transaction, namely:
(i) Any expenditure in respect of which payment has been made or is to be made to a
person referred to section 40A(2)(b);
(ii) Any transaction referred to in section 80A;
(iii) Any transfer of goods or services referred to in section 80IA (8).
(iv) Any business transacted between the assessee and other person as referred to in
80IA (10).
(v) Any transaction referred to in any other section under Chapter VI-A or section 10AA,
to which provisions of section 80IA (8) or (10) are applicable; or
(vi) Any other transaction as may be prescribed, and where the aggregate of such
transactions entered into by the assessee in the previous year exceeds a sum of five
crore rupees.
[Sec. 40A(3)]: Any payment in excess of Rs. 20000 otherwise than by A/c payee cheque or by
a/c payee draft shall be fully disallowed. (in case of transporter 35000)
Disallowed Expenses: [Sec. 40(a)]

 Interest, Royalty, Fees for technical services to a non resident or outside India without
TDS shall be disallowed.
Stress: TDS need to be deducted and deposited. If TDS deducted but not deposited than
deduction shall not be allowed.
 Interest, Royalty, Fees for technical services, Fees for professional services, Rent,
Payment to contractor, sub-contractor, Brokerage, Commission without TDS to a
residential shall be disallowed. TDS must be deposited at any time by due date of filling
of return.
Aircraft Business: [Sec. 44BBA]

Applicable to: Non resident.
Conditions: Assessee must be engaged in the business of operating of Air Craft in India.
Presumption income: 5% of (Revenue earned in India or Revenue received in India).
[Sec. 41(2)]: Terminal Depreciation and balancing charge:

Applicable to: Power Sector Undertaking.
Conditions:
a) The power sector unit chooses SLM of providing depreciation instead of WDV.
b) Concept of Block of assets would not be applied.
c) Each asset will be depreciated individually.
In case of sale there would be either loss or profit: Loss shall be treated Terminal Depreciation
and profit shall be treated as Balancing charge.
Note: Balancing Charge cannot exceed accumulated depreciation.
[Sec. 41 (3)]: Sale of Scientific research Assets:

If put to use is Added to respective block at Remaining (As usual)
nil value
If put to business use Taxable amount under PGBP Taxable amount under Capital
head: gains head:
 Actual sale or Sale price – COA (as usual)
 Earlier deduction
[Sec.41(4)]: Bad Debts Recovery: Taxable Bad Debts Recovery = Bad Debt Recovery as per
accounts – (Bad Debt Claimed – Bad Debt Allowed)
Expenses allowed only if payment made by due date of filling of return: [Sec. 43B]
Following expenses shall be allowed only if payment is made by due date of filling of return (i.e.,
31st July or 30th September).
 Taxes to Government.
 Bonus or commission to employees.
 Leave encashment to employees.
 Employer’s contribution to Provident Fund, Gratuity Fund, Pension fund etc.
 Interest to Bank or Financial institution.
 Payment to relatives
Notes: if the payment is made in the latter period it shall be allowed in the year of payment.
Advance payment is not governed by section 43B. in other words advance payment shall be
allowed in the year in which expenses is incurred.
Maintenance of accounts: [Sec. 44AA]
Specified profession: Lawyer, CA, CS, CWA, Doctors etc.

If gross receipt in the past 3 years exceeds Rs. 1.5 lacs than he has to prepare the account as per
Rule 6F otherwise assessee needs to maintains such accounts to enable the AO to compute its
income.
Business or non-Specified Profession: If profit from such business exceeds Rs. 10 lacs in any one
year out 3 years immediately preceding the P.Y. then assessee needs to maintain such an
account to enable the AO to compute its income otherwise no accounts.
Penalty: Rs. 25000 and assessee shall be liable to Best Judgment Assessment.
Tax Audit of Books of Accounts: [Sec. 44AB]

Audit is compulsory in case of:
 Business if turnover exceed Rs. 200 lacs
 Profession if gross receipt exceeds Rs. 50 lacs
Penalty:
 ½% of turnover / gross receipt; or
 Rs. 1.5 lacs whichever is lower.
Note: If assessee is engaged in more than one business / profession than the turnover / gross
receipt of
PRESUMPTIVE INCOME
Special Provision for Computing Profit & Gains of Business or Profession on presumptive basis:
[Sec. 44AD]
Applicable to: Individual, HUF, and Partnership firm. However, excludes LLP.
Conditions:
 Assessee must be engaged in any business other than the business of playing, leasing or
hiring goods car racing [Sec. 44AE].
Turnover or gross receipt from business does not exceed 200 lakh).
Presumptive income: 5% of the Total turnover or Gross receipts.
When 44AD is not applicable: A person carrying on profession specified u/s 44AA(1) i.e.
profession of Legal, Medical, Engineering, Architectural Profession of accountancy, Technical
consultancy, Interior decoration, Information technology, Company secretary, Authorized
representative, Film artist of any other profession as is notified by the Board in the Official
Gazette.
A person earning income in the nature of commission or brokerage.
A person carrying on any agency business.
Business of playing, hiring or leasing of goods carrier: [Sec. 44AE]

Conditions:
 Assessee must be engaged in the business of playing, leasing and hiring if trucks
transport business as above.
 He does not own more than 10 vehicles at any time during the relevant previous year.
Presumptive income:
 For heavy weight vehicles Rs.7500 p.m. per vehicles.
 For non heavy weight vehicles Rs. 7500 p.m. per vehicles.
Note:
 Part of the month shall be considered.
 Computation shall be made as soon as asset is purchased, no matter when it is put to
use.
 Hire purchaser shall be treated as owner.
Notes (applicable to 44AD and 44AE)
 This scheme is optional.
 No expenditure shall be allowed as deduction.
 However remuneration to partner, interest to partner shall be not allowed as deduction.
 Chapter VI deduction shall be allowed.
 Set off and carry forward of losses shall be allowed.
 Assessee can show higher income.
 Assessee can show lower income but in case he will have to prepare such an account
enable assessing officer compute his income and get his account audited.
FIRM ASSESSEMENT
Applicable to: Partnership firm including LLP.
Features:
 Tax Rate is 30% (Cess 2% + 1%); no surcharges.
 Heads of income: House property, PGBP, IFOS, Capital gains.
Conditions:
 There must be a partnership deed.
 It must mention the profit sharing ratio.
 Its attested copy must be submitted to the department.
 It has not been assessed u/s 144 (Best Judgment Assessment)
Interest to partner: It is an allowed expenditure.
Conditions: It must be authorized by the partnership deed.
Deduction: Minimum of the following:
 Actual interest.
 Interest as per partnership deed.
 Market rate of interest.
 12% p.a.
Interest on Drawings: It is fully taxable irrespective of rate of interest.
Remuneration to partner:
Conditions:
 Deduction must be authorized by the partnership deed.
 Partner must be a working partner.
Academic note: Unless it is specifically mentioned assume all partner are working partner.
Maximum limit of Remuneration:
On first 3 lacs of book profit 90% of the book profit
On Balance 60% of the book profit
Minimum limit of Remuneration: Rs. 150000 p.a. (in aggregate).

Book Profit: Profit as per I.T. Act. (Book profit here means PGBP income as per IT act after
interest and before remuneration to partner. This is subject to subtraction of unabsorbed
depreciation, however, due to unabsorbed depreciation the remaining profit should not be less
than the brought forward losses.)
Treatment in hands of Partners:
 Interest to partner shall be taxable under section 28 to the extent allowed in the hands
of the firm.
 Remuneration to partner shall be taxable under section 28 to the extent allowed in the
hands of the firms. Such remuneration shall be apportioned among the partners in the
ratio of remuneration actually received.
 Share of profit (since already taxed in the hand of the firms), is not taxable in the hand of
the partner u/s 10(2A).
Capital Gain
Capital Gain means profits or gains arising on transfer of a capital asset.
Capital asset means any asset excluding Stock in trade, Personal effect, Rural Agriculture land,
Specified Gold Bonds, Special Bearer Bond 1991, and Gold Deposits Bond 1999.
Transfer [Sec. 2(47)]: Transfer includes:

1. Sale
2. Exchange
3. Relinquishment of the asset
4. Extinguishment of any right in an asset
5. Compulsory acquisition of an asset under any law
6. Conversion of an asset into stock-in-trade by the owner
7. Any transaction of immovable property u/s 53A of the Transfer of Property Act, 1882
8. Any transaction which has the effect of transferring or enabling the enjoyment of any
immovable property
9. Maturity or redemption of a zero-coupon bond.
Exempted Transfer: [Sec. 46 & 47]

1. Distribution of capital assets on liquidation of company to its shareholders.
2. Distribution of capital assets on the partition of an HUF.
3. Transfer under a Gift, Will or creation of irrevocable trust, excluding gift of shares
acquired through ESOP.
4. Capital assets transferred in a scheme of Amalgamation, by the amalgamating company
to the amalgamated Indian company.
5. Any transfer of share(s) in the amalgamating company in the scheme of amalgamation if
the transfer is made in consideration of the allotment of any share or shares in the
amalgamated company and the amalgamated company is an Indian company.
6. Transfer of asset on a demerger by the Demerged Company to the Resulting Company &
vise-versa, if the transferee company is an Indian company.
7. Any transfer of foreign currency convertible bonds or Global Depositary Receipts made
outside India by a non-resident to another non-resident.
8. Any conversion bond or debentures into shares or debentures.
9. Any transfer in a scheme of succession by a firm to a company subject to certain
conditions.
10. Any transfer of a membership right of a recognized stock exchange in India for
acquisition of shares and trading or clearing rights in that recognized stock exchange in
accordance with a scheme for demutualization or corporatization which is approved by
SEBI.
11. Any transfer of capital asset by a subsidiary company to its 100% holding company &
vise-versa, if the holding company is an Indian company.
12. Any transfer of shares in an Indian company by the amalgamating foreign company to
the amalgamated foreign company subject to certain conditions.
13. Any transfer of a capital asset by way of reverse mortgage under a notified scheme shall
not be treated as transfer.
14. Any transfer of a capital asset or intangible asset by a private company or unlisted
public company to a LLP as a result of conversion of the company into a LLP shall be
exempted.
Short Term Capital Assets:
Asset Period
Shares(listed), Debentures or bonds, Zero- Held for not more than 12 months.
Coupon Bonds, Units of UTI, Units of Mutual
Funds.
Other assets Held for not more than 36 months

Unlisted share Held for not more than 24 months
Long Term Capital Assets:

An asset, which not a short term capital asset, is a long term capital asset.
Deemed or Notional Cost of Acquisition: [Sec. 49(1)]

In the following cases the cost of acquisition of the capital asset in the hands of the previous
owner shall be deemed to be the cost of acquisition in the hands of the assessee:
(i) Capital asset received on total or partial partition of HUF.
(ii) Capital asset received under a gift or will.
(iii) Capital asset received by way of succession, inheritance or devolution.
(iii)(b) Capital asset received on dissolution of a firm, BOI, AOP.
(iii)(c) Capital asset received at the time of liquidation of a company.
(iii)(d) Capital asset received under a trust whether revocable or not.
(iii)(e) Capital asset received under business re-organization including succession of a
private company or unlisted public company to a LLP (subject to certain conditions).
(iv) Capital asset received by an HUF from its member.
Important Computational Notes:
a. COA of asset acquired before 01/04/81 will be higher of Actual COA or Fair Market
Value as on 01/04/81; and accordingly indexation benefit shall be available from the
year 1981-82.
b. Any Cost of Improvement of asset before 01/04/81 shall be ignored.
c. The period of holding of previous owner shall also be considered to decide whether an
asset is short-term or long-term capital asst.
d. In case of Sec. 94(1), Indexation benefit for cost of acquisition shall be available from the
year when the current owner held the property. However, indexation benefit for cost of
improvement shall be available when the actual improvement expenditure were
incurred.
e. Indexation benefit shall not be available in case of following long-term capital asset:
Debentures or bonds; Undertaking under slump sale; Transactions by a non-resident;
Global Depositary Receipt.
FORMAT FOR COMPUTAION OF CAPITAL GAIN:
Particulars Details Amount

Sale consideration ***
Less: Expenses on transfer (e.g. brokerage etc.) ***
Net Sale Consideration ***
Less: Cost of acquisition / Indexed Cost of Acquisition (Expenditure incurred ***
for acquiring asset)
*** ***
Less: Cost of Improvement / Indexed cost of Acquisition (Expenditure
incurred to increase to productivity & Value of the asset)
Short / Long Term Capital Gain ***
Less: Exemption u/s [54B, 54D, 54G & 54GA (in case of STCA)] & [54, 54B, 54D, 54EC, ***
54F, 54G]
Taxable Short /Long Term Capital Gain ***
COMPUTATION OF CAPITAL GAIN [at a glance]:
Particulars Conversion of Bonus Insurance claim Transfer of Transfer of

capital asset into Shares received on Securities by capital asset
stock in trade damage or Depositary by a partner /
destruction of member to
capital asset firm / AOP /
BOI as capital
contribution
Taxable in Year in which Year of Year of receipt of Year of Year of

the year such stock is transfer compensation transfer transfer
actually sold.
[Tax rate = As
applicable in the
year of actual sale
of such converted
stock]
Sale FMV as on the As usual Compensation so As usual The amount

considerati date of such received. (Fair recorded in
on conversion Market Value as the books of
on date of receipt accounts of
of assets if the firm.
compensation is
received in kind)
Less: As usual As usual As usual As usual As usual

Expense
on transfer
Less: COA COA * (Index of If bonus COA * (Index of COA and COA * (Index
/ ICOA year of shares are: year of period of of year of
conversion/ Index Allotted destruction / holding of transfer/
of year of before Index of year of Security in De- Index of year
acquisition) 01/04/81 acquisition) Mat form shall of acquisition)
then COA be determined
shall be on the basis of
the FMV as FIFO
on technique.
01/04/81. Indexation
Allotted benefit = As
after usual.
01/04/81
then COA
shall be
nil.
Less: COI / COI * (Index of As usual COI * (Index of As usual COI * (Index of
ICOI year of year of year of
conversion/ Index destruction / transfer/
of year of Index of year of Index of year
improvement) improvement) of
improvement)
LTCG / **** **** **** **** ****

STCG
Note: Difference of Moreover, for Fair Market

actual sale value applying FIFO Value of such
of such converted technique the asset is
asset and FMV as date of entry irrelevant to
on the date of in De-Mat A/c decide sale
conversion shall is significant consideration.
be treated as and the date of
Business Income purchase of
Security is
irrelevant.
COMPUTATION OF CAPITAL GAIN [at a glance]:
Particular Transfer of Buy back of own Transfer by Tax treatment Distribution of

s capital asset shares or other way of on receiving assets by
by a Firm / specified Compulsory Enhanced companies in
BOI to partner Securities acquisition of Compensation its liquidation
/ AOP / capital assets (Tax treatment
member on (excluding in the hands of
dissolution urban agro the
land) shareholders)
Taxable in Year of In the year when In the year in In the year in In the year in
the year transfer shares or which which which the
securities are compensatio Enhanced assets of the
purchased by n or a part compensation liquidated
the company thereof is or a part company are
first received thereof is first received by the
received shareholders
Sale FMV as on the Amount Total Actual

considera date of received by a compensatio enhanced
tion transfer shareholder n or compensation
from the consideration received or
company received or receivable
receivable
Less: As usual As usual Legal Litigation --------

Expense expenditure expenses for
on incurred to getting the
transfer recover claim enhanced
shall be compensation
allowed as
deduction
Less: COA COA * (Index As usual COA * (Index Nil As usual

/ ICOA of year of of year of
transfer/ compulsory
Index of year acquisition /
of acquisition) Index of year
of
acquisition)
Less: COI COI * (Index of -------- COI * (Index -------- As usual

/ ICOI year of of year of
transfer/ compulsory
Index of year acquisition /
of Index of year
improvement) of
improvement
)
LTCG / **** **** **** **** ****

STCG
Note: Transacted Indexation Nature of gain Tax treatment

value of such benefit is on enhanced in the hands of
asset is available till compensation the company:
irrelevant to the year of shall be the Any transfer by
decide sale compulsory same as in the way of
consideration. acquisition. case of initial distribution of
Cost of compensation. assets among
acquisition of Interest on its
such assets in Enhanced shareholders at
hands of Compensation the time of
partner = = Taxable as liquidation is
Transacted ‘IFOS’ on cash not treated as
value as on basis after a transfer.
date of Standard However, if the
transfer. Deduction of assets are sold
(This Section 50% of such in the market
does not cover income. and the sale
retirement) proceeds are
distributed
among
shareholders,
then it shall be
liable to Capital
gain.
COMPUTATION OF CAPITAL GAIN (at a glance)
Particulars Distribution of assets by Conversion of Withdrawal of exemption
companies in its liquidation debentures into shares: in case of transfer by a
(Tax treatment in the hands (Conversion of holding company to its
of the shareholders) debentures into shares 100% subsidiary
is an exempted transfer) company and vice-versa.
Tax impact on sale of Tax treatment in case of
such converted shares transferor company
shall be as under:
Taxable in In the year in which the In the year of sale such Earlier exemption shall
the year assets of the liquidated converted shares. revoke and liable to tax in
company are received by the year of withdrawal of
the shareholder. exemption.
Sale Market value of As usual As usual

considerati assets received on ***
on liquidation
Less: Deemed
Dividend u/s ***
2(22)(c)
Less: ------- As usual As usual

Expenses
on transfer
Less: COA As usual Cost of old asset As usual

/ ICOA (convertible
debentures)
Less: COI / As usual As usual As usual

ICOI
LTCG / **** **** ****

STCG
Notes: Tax treatment in the hands Indexation benefit shall In case of transferee
of the company: Any be available from the company: Conversion of
transfer by way of date of allotment of new the transferred asset into
distribution of asset among asset and Period of stock in trade before the
its shareholders at the time holding shall start from end of the 8 years from
of liquidation is not treated the date of allotment of the sate of transfer shall
as transfer. new asset. be liable to capital gain in
However, if the assets are the year of such
sold in the market and the conversion.
sale proceeds are
distributed among
shareholders, then it shall
be liable to Capital gain.
Particulars Transfer of Zero- Employee Stock Transfer of Compensation of

Coupon Bond Option Plan shares in a Recognised
(Redemption, demerged or Stock Exchange
maturity or sale resulting
of such bond will company (Any
be treated as exchange of
transfer shares in a
scheme of
demerge is an
exempted
transfer)
Taxable in the In the year when In the year of In the year when In the year of
year such bond is sale or gift of shares of the transfer of shares
redeemed, such shares demerged or / trading rights
matured or sold resulting
company are
transferred
Sale Redemption If sold: Actual As usual As usual

consideration value, maturity sale proceeds.
value or sale If gifted: FMV of
value proceeds such shares or
as the case may Security as on
be the date of gift
Less: Expense on As usual As usual As usual As usual

transfer
Less: COA / ICOA Actual cost Market Price of In case of shares Of shares: COA of
(If the bond is such shares or of resulting his original
held for more Security as on company: membership.
than 12 months the date of (COA of Original Of trading or
then it shall be allotment shares * Net clearing rights:
treated as LTCA) book value of Nil
assets
transferred to
resulting co.) /
(Paid up share
capital + General
reserves
immediately
before
demerger)
Less: COI / ICOI As usual As usual As usual --------
LTCG / STCG **** **** **** ****
Notes: Indexation Taxable Period of holding Period of holding

benefit shall not perquisite in the in both the cases starts from the
be available. hands of the shall be date of acquiring
Tax rate on employee = calculated from the original
LTCG: 10% Market price (as the date of membership.
on the date of acquisition of Indexation
allotment – original shares in benefit shall be
Issue Price) demerged available from
company (before the year of
demerger). allotment of such
Indexation shares / rights.
benefit:
In case of
resulting
company: It shall
be available
when the share
of Resulting co.
was acquired.
In case of
Demerged
company: It shall
be available
when the share
of Demerged co.
(before
demerger) was
acquired
Particulars Notional sale consideration in Slump sale Transfer of shares /

case of land or building or both debentures by a non-
[Sec. 50C] resident (not being
covered u/s 115AC &
115AD)
Taxable in the In the year of transfer of such In the year of sale of In the year of transfer
year assets the undertaking
Higher of Actual sale
Sale consideration or the value The lump sum price $ *** (At average
consideration assessed or assessable by exchange rate as on
Stamp duty authority the date of transfer)
Less: Expense on $ *** At average

transfer exchange rate as on
As usual As usual the date of transfer
(not on the date when
expenditure was
incurred)
Less: COA / $ *** (At average

ICOA As usual exchange rate as on
the date of
acquisition)
-------
Less: COI / ICOI
As usual **** $ ***
LTCG / STCG
Rs. *** (At buying rate
**** **** as on the date of
transfer)
Note: At the desire of assessee, Indexation benefit

Assessing Officer can refer the shall not be
case to the Valuation Officer. available. Period of
Value decided by valuation holding of assets
officer - shall not be
 cannot be more than considered but
stamp duty valuation period of holding of
and undertaking shall be
 cannot be less than considered
Actual sale
consideration
Particulars Transfer of rights shares & Capital Gain in case of self generated asset
rights entitlement (Tax
treatment in the hands of the (Goodwill of a (Tenancy rights, route
original shareholder business, right to permit, loom hours, trade-
carry on a mark & brand name
business, right to associated with the
manufacture or business)
process any
article)
Taxable in the In the year of transfer of right In the year of transfer

year shares or right entitlement
Sale Amount charged from Actual Sale Consideration

consideration transferee
Less: Expense As usual Actual

on transfer
Less: COA / In case of right shares: Right Nil

ICOA Issue price
In case of right entitlement :
Nil
Less: COI / ------ Nil Actual cost

ICOI
**** ****
LTCG / STCG
Note: Period of Holding starts in

case of: Right shares; from
date of allotment of such
shares. Right entitlement;
from date of declaration of
such right by the company.
Sec. 54GB:
Applicable to: Individual or HUF
What to transfer LTCA being a residential house property
What to acquire Assessee must invest net sale consideration

for subscription in equity shares in an eligible
co. further eligible co. must utilize this amount
for purchase of a new P&M within 1 year from
date of subscription in equity shares
Time limit Amount must be invested by due date of filling

of return.
Deduction [Investment in new P&M by the eligible co. *
(Capital gain / net sale consideration)]
Scheme of CGDA If the eligible co. is unable to invest the money

in purchase of new asset before the due date of
furnishing return by the assessee then co.
must deposit the amount in CGDA.
Revocation a) If the equity shares in eligible co. are

sold or transferred within 5 years from
date of acquisition.
b) If the new P&M asset is sold or
transferred by the eligible co. within 5
years from the date of acquisition.
c) If CGDA is misutilized by the eligible
co.
Eligible co. means a company incorporated on
or after 1st April of the PY in which residential
property is transferred and on or before due
date of submission of return. It is engaged in
manufacturing activity. The assessee has more
than 50% voting rights in such co. the co.
qualifies for SME and investment in P&M or
more than 25 lacs and upto 10 crores.
TAX RATE:
Tax on Assets other than share on which STT is paid Usual rate
short
term Shares on which STT is paid 15% u/s 111A
capital
gain
Tax on Assets other than shares and securities U/s 112 @ 20%
long term
capital Share and securities Shares on Exempted u/s 10(38)
gain which STT is
paid
Other shares Indexation claimed U/s 112 @ 20%

and Securities
on which STT Indexation not 10%
is not paid claimed
Chapter VIA deduction cannot be claimed from LTCG and STCG u/s 111A
DEDUCTION FROM CAPITAL GAINS
Particulars Sec. 54 Sec. 54B Sec. 54D Sec. 54EC
Applicable Individual and Individual and Any assessee Any assessee
to HUF HUF
Nature of Long term Urban agricultural Any industrial Any long term
capital residential house land ( used for land or building capital asset.
asset property agro purpose for used as such for
transferre atleast 2 years atleast 2 years.
d either by him or Conditions:
his parents) Such capital asset
has been
compulsorily
acquired under
law.
Nature of New Residential New Agro land Industrial land or Specified bonds
capital house property (whether in rural building for redeemable after 3
asset or urban area) shifting or years, issued by
acquired reestablishing of NHAI or RECL
the said
undertaking
Time limit Within 2 years Within 3 years Within 6 months

for after the date of after the date of after the date of
investmen transfer receipt of transfer
t compensation
Deduction  Capital  Capital  Capital  Capital

(minimum Gain; or Gain; or Gain; or Gain; or
of the  Amount  Amount  Amount so  Amount so
following) spent for invested in invested in invested in
acquisition the new new asset new asset
of new agro land
asset
CGDA Applicable Applicable Applicable Not Applicable
Revocatio If the new asset is Same as Sec. 54 Same as Sec. 54 If the new asset is
n of transferred within transferred or
benefit 3 years from the converted into
date of its money within 3
acquisition, then years from the
earlier deduction date of its
claimed shall acquisition, then
revoke and earlier deduction
subtracted from claimed shall
the cost of new revoke and shall
asset be treated as LTCG
of the year in
which condition is
violated
Particulars 54F 54G / 54GA
Applicable to Individual and HUF Any assessee
Nature of capital asset Any long term capital asset Land, Building, Plant or
transferred other than a residential house Machinery (whether short
property term or long term) used for
purpose of an industrial
undertaking,
Condition:
Sec. 54G: The asset is
transferred for shifting of
industrial undertaking from
urban to any area.
Sec. 54GA: The asset is
transferred for shifting of
industrial undertaking from
any area to SEZ area.
Nature of capital asset New residential house Assessee either –

acquired property within the  Purchased new
prescribed time. machinery or plant for
Condition: shifting; or
On the date of transferred the  Acquired building or
assessee must not own more land for shifting in new
than one house property other (non urban) area; or
than the new house.  Incurred expenses on
shifting
Time limit for investment Any time within 1 year before

or 3 years after the date of
transfer of asset.
Deduction (minimum of the  Capital Gain; or  Capital Gain; or

following)  (Amount invested in  Amount so invested or
the new house) * expended
(Capital gain / NSC)
CGDA scheme Applicable Applicable
Revocation of benefit If the new asset is transferred Same as Sec. 54

/ or new asset is acquired
within 3 years then earlier
deduction claimed shall
revoke and shall be treated as
LTCG.
Income from Other Source

Income taxable under the head Income from Other Source: [Sec.56]
Any taxable income, which is not specifically falling under any other four heads of income, i.e.
‘Salaries’, ‘Income from House Property’, Profit & Gains of Business or Profession’, or ‘Capital
Gains’, shall be taxable under the head ‘Income from Other Source’(IFOS). In other words, this is
a residual-head of income.
Basis of Charge: [Sec. 145(1)]

As per Sec. 145(1), ‘Income from Other Sources’ shall be chargeable on ‘accrual’ or ‘cash’ basis
depending upon the method of accountancy regularly followed by the assessee.
Other income taxable under this head:

By virtue of Sec. 56(1), any taxable income which is not falling under any other head of income
shall be taxable under this head, e.g.;
1. Bank interest.
2. Interest on loan.
3. Interest on company deposits.
4. Interest on income tax refund.
5. Rent from a vacant land.
6. Rent from sub-letting.
7. Rent from agro land situated outside India.
8. Remuneration for evaluation of answer scripts provided assessee is not the employee of
the payer (if received in the capacity of employee, it shall be taxable under the head
‘Salary’).
9. Any sum charged for allotting space for hoardings etc. if such income is not taxable
under the head ‘Profit & Gains of Business or Profession’.
10. Family pension to the legal heir of a deceased employee.
11. Directors fee i.e. sitting fee given to directors for attending the Board Meeting.
12. Income from activity of owning and maintaining race-horses.
13. Stipend to article clerk etc.
14. Interest on employee’s contribution towards recognized provident fund (in case of lump
sum received from such fund).
15. Income from private tuition (if not taxable under the head PGBP).
16. Income from undisclosed sources.
17. Dividend income from a co-operative society.
18. Commission to Director for standing as a guarantor to bankers.
19. Gratuity received by a director who is not the employee of the company.
Family Pension: Casual Income:
When pension is paid to the legal heir of Casual income: It includes Winning from
deceased employee by the employer than such Lotteries, Horse races, Crossword puzzles,
pension cannot be taxed under the head Gambling and Betting, Card games, game
‘Salaries’ because payer and payee has no show or entertainment program on
employer and employee relationship, hence television or electronic mode.
such pension shall be taxable under the head Tax Rate: [30% + Surcharge + education
Income from Other Source after allowing cess]
standard deduction as under; Notes: No expenses and Chapter VIA
deduction shall be allowed from Casual
Standard Deduction: income. No set off of losses u/s 71 or 72.
[Sec. 57(iia)]; Minimum of the following: Grossing up of lottery income:
 1/3rd of the pension; Lottery Income Earned = Lottery Income
 Rs. 15000. Received / 69.1% or 70%.
LETTING OUT OF PLANT, MACHINERY OR FURNITURE ETC. [SEC. 56(2)(II)]
Plant, machinery or Time of letting out Taxable under head

furniture etc. related to
Business or profession During continuation of business PGBP
Discontinuation of business IFOS
Not relate to business or Irrelevant IFOS

profession
COMPOSITE RENT [SEC. 56(2)(II)]
If Composite Rent can be

split off If Composite rent cannot be split off
Rent for house property Rent shall be taxable under the head 'Income from other sources.
= 'Income from house
property'.
Rent for other facility =

'Income from other
sources'.
Note: If the property is not separately letting without amenities (like hotels etc.) then the
entire rent (whether can be split or not) shall be taxable under the head Income from other
sources or Profit and gains of business or profession.
INTEREST ON SECURITIES [SEC. 56(2)(ID) Income from units of UTI or Mutual Fund:
Sec. [10(35) is exempted.
Cases Taxable under the Share premium in excess of fair market value
head shall be treated as income [sec. 56(2)(viiib)]
If a closely held co. issues equity or preference
The securities are “Profit & Gains from shares at premium and issue price exceeds fair
held as stock in Business or market value of shares and Payer is resident in
trade Profession” India then Consideration received in excess of
its fair market value shall be chargeable as IFOS.
The securities as “Income from Other Above provision is not applicable if A)
held otherwise other Sources” consideration for issue of shares is received by a
than stock in trade venture capital undertaking from a venture
capital co. or venture capital fund. B) where the
consideration for issue of share received by a co.
from a class or classes of notified person.
Dividend [Sec. 2(22)]

a. Any release of asset by the company among its shareholders,
b. Any bonus, debenture, debenture-stock, deposit certificates issued by the company
among its shareholders (equity or preference),
c. Any release of assets made by the company among its equity shareholders at the time
of its Liquidation,
d. Any distribution of assets made by the company among its equity shareholders on
reduction of capital,
e. Any loan or advance (whether in cash or in kind) given by a closely held company to
any specified member or to any concern in which such member has substantial interest
or to any member on behalf of such specific member, to the extent of accumulated
profit shall be treated as dividend.
Tax treatment:
Payer company Nature of dividend Tax treatment in the hands of
Shareholder Company
Foreign company Not liable to

corporate
Any dividend Taxable u/s56 dividend tax
Indian company Dividend u/s Exempted u/s 10(34) Liable to corporate

2(22)(a) to 2(22)(d) dividend tax @
15% + surcharge +
education cess
Dividend u/s Taxable u/s56 Not liable to

2(22)(e) corporate
dividend tax
Dividend Stripping [Sec. 94(7)] Where an Bonus Stripping: [Sec. 94(8)] Where an
assessee acquires any shares or unit within a assessee acquires units within a period of 3
period of 3 months prior to the record date months prior to the record date of bonus and
and transfer such shares or units within a transfer such units within a period of 9 months
period of 3 months (9 months in case of after such record date then any loss on such
units) after such record date then any loss on transaction shall be ignored and such loss shall
such transaction shall be ignored to the be treated as cost of remaining bonus units
extent of exempted income (Dividend or with assessee.
income on such share or unit)
Interest on Enhanced Compensation: The Bond Washing Transaction: [Sec. 94(1)] If an
income by way of interest received on assessee transferred his securities few days
compensation or enhanced compensation before the due date of interest and requires the
shall be assessed under the head “Income same within few days after the due date of
from other sources” in the year in which it is interest, then interest in such security shall be
received. taxable in the hands of transferor (though such
Deduction: In case of the interest received on interest is received by the transferee).
compensation or enhanced compensation a Above provision shall not be applicable if an
standard deduction of 50% of such income assessee proves to the satisfaction of Assessing
shall be allowed. However, no other Officer that –
deduction shall be available.  The transaction was exceptional and
not systematic;
 There was no intention to avoid tax;
and
 No such transaction occurred (falling
u/s 94) during 3 years immediately
preceding the relevant previous year.
Receipt of Shares by a firm or a closely held Disallowed Expenditure [Sec. 58]

company [Sec. 56(2)(viia)] Following expenditures are not allowed:
Amendment w.e.f. June 1,2010  Income tax,
A new clause (viia) has been inserted in Sec.  Wealth tax,
56(2), w.e.f. 01/06/2010, which provides that  Any payment to relative in excess of
where a firm or a company (not being a requirement, any payment in excess
company in which the public are substantially of Rs. 20000 otherwise than by an
interested) from a person or persons account payee cheque or draft,
 without consideration and the fair  Personal expenses of the assessee,
market value of the property exceeds  Interest payable outside India on
Rs. 50,000 or which tax has not been deducted at
 for a consideration which is less than source,
the fair market value by an amount  Salary payable outside India on
exceeding Rs. 50,000 which tax has not been deducted at
then the value (being the aggregate fair market source,
value in case the shares are transferred without  Any expenditure incurred for earning
consideration or aggregate fair market value as casual income, i.e., winnings from
reduced by the aggregate consideration in case lotteries, crossword puzzles etc.
the shares are transferred for inadequate
consideration) shall be taxable in the hands of
recipient.
Deemed Income: [Sec. 59]

If an expenditure is allowed as deduction in any earlier year while computing income under the
head IFOS and subsequently, such amount is recovered or waived during the previous year,
then amount so recovered shall be taxable under the head IFOS.
Clubbing of income
Sections Particulars
60 If a person has transfer his income without transferring income generating
assets then such income shall be clubbed in the hands of the transferor.
If a person has transfer his assets to another person under a revocable

61 clause i.e. the transfer is revocable, then income of asset so transferred shall be
clubbed in the hands of the transferor.
[Sec. 63]: Revocable transfer contains any clause for the directly or indirectly
retransfer of any income or assets (or part thereof) to the transferor or it gives
the transferor directly or indirectly a right to re-assume power over income or
assets (or part thereof)
62 Exception to Sec. 61: In the following cases Sec. 61 shall not be applicable;
(i) Any property transferred by way of creation of a trust which is irrevocable
during the lifetime of the beneficiary.
(ii) Any property which is irrevocable during the lifetime of the transferee; or
(iii) Transfer made before 01.04.61, which is not revocable for a period of more
than 6 years.
Remuneration to Spouse [by way of salary, commission, fees or any other
64(1)(ii) remuneration (whether in cash or in kind)] from a concern in which assessee
has substantial interest shall be clubbed in the hands of assessee, provided the
spouse does not possess any technical or professional qualification.
Substantial interest: Assessee beneficially holds(together with relative) not
less than 20% of its equity shares of the company or 20% profits of such
concern at any time during the relevant previous year.
Stress: Where both husband and wife have substantial interest in any company
or concern and both of them are drawing remuneration without technical or
professional qualification, and then such remuneration will be clubbed in the
hands of spouse whose income excluding this income is higher.
If an individual has transferred his asset (other than house property) to spouse
64(1)(iv) without adequate consideration then income arising from such assets shall be
clubbed with the income of that individual.
64(1)(vii) If an assessee transfers his property to another person or an AOP otherwise

than for adequate consideration, for immediate or deferred benefit of his
spouse, then income from such property shall be clubbed in the hands of the
transferor.
Note: If the asset so transferred is invested in the business by the spouse then
income to be clubbed shall be the proportionate income of the business.
Proportionate income here means -
income of business or interest on capital + Value of such assets as on the 1st day
of the PY
Total investment in the business or firm by the transferee as on the same day
64(1A) Income of a minor child shall be clubbed with income of either of the parent
whose total income (excluding this income) is higher. Where any such income is
once clubbed with the total income of either parents, then any such income
arising in any subsequent years shall not be clubbed with the total income of the
other parent, unless the Assessing Officer is satisfied.
Stress: In case material relationship does not subsist at the time of accrual of
income to the minor child, income of minor child shall be clubbed with income
of that parent who maintains the minor child during the previous year.
Exception: The above clubbing provision shall not apply in the following cases -
* Income due to any manual work done by minor child; or
* Income due to his skill, talent, specialized knowledge or experience; or
* The minor child is suffering from any disability of nature specified u/s 80U.
10(32) Exemption: Minimum of the following (irrespective of the number of the child):
* Rs. 1500; or
* Income so clubbed.
64(2) An individual, being a member of an HUF, has converted a property (being self
acquired asset of the individual) into property of HUF of which he is a member,
otherwise than for adequate consideration.
Tax Treatment:
Before partition, by the Shall be
member to the HUF, then clubbed in the
In case of property is transferred
the entire income from hands of the
such property transferor.
After partition, by HUF to
its member, then the
income from the asset
attributable to the spouse
of the transferor
65 Liability of the transferee:

Where, by reason of the provision contained in this chapter or provisions
contained in Sec. 27(i) income from any asset of a person other than the
assessee, is included in the total income of the assessee and he is unable to pay
tax on the same then on the service of a demand notice by the AO in this behalf,
the person in whose name such asset stands shall be liable to pay that portion of
the tax levied on the assessee, which is attributable to the income so included,
however the tax liability cannot exceed the value of asset so transferred.
Set –Off and Carry forword

Section Particulars
70 Inter source adjustment under the same head:

a. Long term capital loss can be set off only against long term capital gain.
b. Speculation business loss can be set off only against the speculation business
income.
c. Loss from activity of owning and maintaining race-horses can be set off only
with such
income.
d. No loss can be set off from Casual income e.g. winning from lotteries,
crossword
puzzle, races, card games, gambling or betting etc.
e. Exempted income or loss cannot be used for set off.
71 Inter head adjustment:

a. Loss under the head Capital gain (whether short term or long term) cannot be
set off
with income under any other head.
b. Speculation loss cannot be set off with income under any other head.
c. Loss from activity of owning and maintaining race horses cannot be set off
with income
under any other head.
d. No loss can be set off from Casual income e.g. winning from lotteries,
crossword
puzzle, races, card games, gambling or betting etc.
e. Exempted income or loss cannot be used for set off.
f. Business loss cannot be set off with salary income.
Carry Forward
Sections Type of loss Income Numbers of Timely Should the

against years for submission source of
which which the of loss loss be
carried loss can be return continued
forward loss carried
can be set off forward
71B House Income under 8 No No
property loss the head
“Income from
House
Property”
72 Non Income 8 Yes No
speculation (whether
business loss from
(other than speculation
depreciation or otherwise)
etc) under the
head “Profit &
Gains from
Business or
Profession”
73 Speculation Income from 4 Yes No
business loss Speculation
Transaction
73A Specified Income from Infinitely Yes No
Business loss such Specified
[Sec. 35AD] business
74 Capital loss
Short term Income under 8 Yes No

Capital loss the head
“Capital Gains”
Long term Long term 8 Yes No
Capital loss Capital Gain
74A Loss from Income from 4 Yes Yes
Activity of the activity of
Owning and owning and
Maintaining maintaining
race horses race horses
32(2) Unabsorbed Any Income Infinitely No No
Depreciation, under any
capital head (except
expenses on income under
family the head
planning and “Salaries” and
scientific from Casual
research income)
78 Carry forward and set off of losses in case of change in constitution of firm or on
succession:
In case of death or retirement of partner (i.e. change in the constitution of a
firm), share of losses of the outgoing partner cannot be carry forward.
79 Carry forward and set off of losses in the case of certain companies:
In case of a company in which the public are not substantially interested no loss
incurred in any year prior to the previous year shall be carried forward and set
off against the income of the previous year unless on the last day of the previous
year shares of the company carrying not less than 51% of the voting power were
beneficially held by persons who beneficially held shares of the company
carrying not less than 51% of the voting power on the last day of the year in
which the loss was incurred.
Exemptions:
In the following cases same person need not beneficially hold 5% of the voting
powers as on the last day of both the years in which the loss was incurred and
the P.Y.
 In case of death of a shareholder or
 On account of transfer of shares by way of gift to any relative of the
shareholder making such gift.
Return of Income
Section Particulars
Return: Return is the statement of self assessment, in which assessee himself

determines his
income and tax liability.
139(1) Filling of Return:

 Every company, Firm or Limited Liability Partnership, scientific research
institution etc. which are eligible Donee for Sec. 35 must file return of income
irrespective of its size of income.
 Every individual, HUF etc. must file return of income if its Gross total income
exceeds the exempted ceiling (before allowing deduction u/s 80C to 80U and
exemptions u/s 10A, 10B and 10BA).
 The Central Government may (by notification in the Official Gazette) exempt any
class or classes of person from the requirement of furnishing a return of income
under Sec. 139(1) having regard to such conditions as may specified in that
notification.
Explanation 2 to 139(1): Time limit for filling return of income:
Assessee Due date
Where accounts are required to be audited 30th September of A.Y.
Where accounts are not required to be audited 31st July of A.Y.
139(3) Loss Return: ‘Loss return’ needs to be compulsorily filed by a company and a firm. Any
other assessee, must file the loss return for carry forward of such losses.
139(4) belated Return: If return is not filed within due date of filling of return, then assessee
can file a belated return within the end of relevant assessment year or before the
completion of assessment (u/s 144), whichever is earlier.
Penalty for Belated Return:

 Interest @ 1% pm u/s 234A.
 Cash penalty of Rs. 5000. (apart from interest as above)
Stress:
a. A loss return cannot be belated return.
b. A Belated return cannot be revised.
139(5) Revised Return: If an assessee ascertains any bonafide (genuine) error or omission in
his original return filed then he can file a revised return u/s 139(5) before completion of
regular assessment or within one year from the end of relevant assessment year
whichever is earlier.
Stress:
a. A loss return can be revised.
b. A belated return can be revised.
c. A revised return can be further revised.
139(9) Defective Return: In cases where the return has not been properly filled up, is filled
without a statement showing the computation of tax liability, without the audit report
u/s 44AB, the proof of TDS / TCS, advance tax paid or tax paid, without copies of Trading
A/c, Profit and Loss A/c and Balance sheet etc. it shall be termed as defective return.
Treatment:
The Assessing Officer may intimate the defect to the assessee and ask him to rectify the
defect within the time allowed in such intimation, i.e. at least 15 days from the date of
serving of intimation.
139(4A) Return of income of Charitable Trust:

A charitable trust of which income before claiming exemption u/s 11 or 12 exceeds the
2,50,000 must file a return of income.
Penalty: Sec. 272A(2): If an assessee fails to submit return within the time limit u/s
139(1) then it shall be liable to pay a penalty of Rs. 100 per day during which such
failure continuous.
139(4B) Return of income of Political Party:

A political party (through its chief executive officer) of which income before claiming
exemption u/s 13A exceeds the maximum amount not chargeable to tax is required to
file a return.
139(4C) Return of income of Research Association etc.:

An assessee being eligible for exemption u/s 10 are required to file their return of
income if the total income without allowing exemption u/s 10 exceeds the maximum
amount which is not chargeable to income tax must file a return of income.
Penalty: [Sec. 272A(2)]: If above assessee fails to file return it shall be liable to a penalty
of Rs. 100 per day during which such default continuous.
139(4D) Mandatory filling of return by Universities, Colleges etc.

Every university, college or other institution referred to in clause (ii) and clause (iii) of
Sec. 35(1), which is not required to furnish its return of income under any other
provision of Sec. 139 will have to mandatory furnish its return of income in respect of its
income or loss in every previous year.
140 signing of Return: The return of income shall be signed as under:
Assessee Signing authority
Individual By Individual himself (or by the duly

authorized person or such individual in case
assessee is outside India)
Where individual is lunatic or idiot or minor Guardian of such individual or minor.
Due to any other reason it is not possible for Any person duly authorized by him.
individual to sig the return.
HUF Karta (any adult member of the family if it is

not possible for the Karta to sign)
Company Managing Director (MD) (any director if it is

not possible for MD to sign)
Company under liquidation Liquidation of the company
Firm Managing partner (any adult partner if it is not

possible for managing partner to sign)
Limited liability partnership Designated partner (any other partner if it is

not possible for designated partner to sign)
Charitable trust / Political party etc. Principal Officer or Chief Executive Officer.
If the assessee is illiterate then thumb impression shall be treated as a valid signature.
139B Tax Return Prepare [TRP]: A TRP is an individual (other than a CA any legal practitioner,
an employee of the specified class, etc.) who has been duly authorized under the scheme
to support assessee (other than company & a person whose accounts are required to be
audited) to prepare and furnish their returns of income.
The scheme further specifies –

a. Educational and other qualification required to be possessed by a TRP;
b. Training and other conditions required to be fulfilled by a TRP;
c. Code of conduct of a TRP;
d. Manner in they will assist other person in filling return;
e. Disqualification of a TRP.
139(1A) Bulk filling of return by employee:

An eligible employee may furnish his return of income to his eligible employer by due
date of filling of return. The employer will transcribe return on computer readable
media through Bulk Return Preparation Software (BRPS). Employer shall furnish
returns of employee in a computer readable media to the designated Assessing Officer
by the due date.
Exception: If the following cases return cannot be submitted under this scheme:
 Return of income if PAN has been incorrectly quoted;
 Return of income for any year other than the current Assessment Year;
 Revised return of income;
 Return under block assessment;
 Return of an employee having more than one employer;
 Return of employee of the other than ‘eligible employer’ as on the last day of
the previous year.
139(1B) Return in computer readable media: An assessee may file return in computer readable
media
(including on a disk, magnetic cartridge type, CD-ROM or any other computer readable
media.
Electronic Furnishing of Return Scheme:

An eligible person (who has been allotted a PAN) may furnish his return to an e-return
intermediary. The e-return intermediary shall digitize the data of such return and
transmit the same electronically to a server designated for this purpose by the e-return
administrator (an officer, not below the rank of the Commissioner of Income Tax) on or
before the due date.
Furnishing of Return on Interest Scheme:

An eligible person (who has a PAN and has income under the head ‘Salary’ but does not
have any income under the head ‘Profit and Gains of Business or Profession’) may
furnish his return on or before due date through internet. For this purpose he shall
register himself on the website as designated by the e-return administrator for this
purpose, get a user identification number and a password and get a digital signature.
Scheme for filling returns by salaried employees through employer:

An eligible employee, at his option, may furnish his return through his employer.
Eligible employee means an individual being resident in India and satisfying following
conditions:
a) His total income includes income under the head ‘Salaries’ but does not includes
income under the head ‘Profit and gains of business or profession’, ‘Capital gains’ ; or
agriculture income.
b) The gross taxable salary (i.e. salaries before allowing deduction u/s 16) does not
exceed Rs. 1,50,000.
c) He does not receive any other income from which tax has been deducted at source
during the previous year by any person other than the employer.
TDS
Section 192 193 194 194A 194B
Nature of Salary Interest on Dividend u/s Interest other Winning
Payment Securities 2(22)(e) than interest on from
securities lotteries
etc.
Payer Any Any payer A domestic Any payer other Any
employer company than individual or payer
paying HUF (whose last
dividend u/s year turnover or
2(22)(e) gross receipt
does not exceeds
Rs. 200 lacs or Rs.
50 lacs)
Payee Any Any Resident Any Resident Any Resident Any
employee Payee Payee Payee payee
When tax At the At the time of At the time of At the time of At the
shall be time of payment or payment payment or time of
deducted payment crediting party, crediting party payment
whichever is whichever is
earlier earlier.
Rate Average 10% 20% 10% 30%
of tax
Exempted Rs. Rs. 5000 Nil Rs. 10000 Rs. 10000
Ceiling 250000 [in case of listed [banking
Rs debentures subject company, co-
300000 to certain operative society
Rs. conditions] engaged in
500000 Rs. 10000 banking
[8% Saving business]
(Taxable) bonds Rs. 5000
2003] [other cases]
Notes: If securities are
lying in Demand
Form then tax shall
not be deducted at
source.
Sections 194BB 194C 194D 194E

Nature of Winning Contracts (including sub- Insurance Sports Person
payment from contracts) Commission
horse
Races
Payer Any payer Any specified payer Any payer Any payer
including individual or HUF
whose last year turnover or
gross receipt does not
exceeds Rs. 200 lacs or Rs.
50 lacs
Payee Any payee Any resident payee Any resident Non-resident
payee foreign citizen
sport Person or a
sports
association
When tax At the At the time of payment or At the time of At the time of
shall be time of crediting party, whichever is payment or payment or
deducted payment earlier crediting party, crediting party,
whichever is whichever is
earlier earlier
Rate 30% Receipt is: 10% 20%
Individual and HUF = 1%,
Other = 2%
Any contract in case of
transport business = Nil
Exempted Rs. 10000 Rs. 30000 per bill or, Rs. Rs. 15000 p.a. Nil
Ceiling 100000 p.a. (whichever is
higher
Sections 194G 194H 194I 194J 194LA
Nature of Commissi Other Commission Rent Fee for Compensati
payment on on Professional on for
sale of or Technical compulsory
lottery Services acquisition
tickets of certain
immovable
property
(other than
agro land)
Payer Any payer Any payer including Any payer Any payer Any payer
individual or HUF including including
whose last year individual or individual or
turnover or gross HUF whose HUF whose last
receipt does not last year year turnover
exceeds Rs. 60 lacs turnover or or gross receipt
or Rs. 15 lacs gross receipt does not
does not exceeds Rs. 60
exceeds Rs. 60 lacs or Rs. 15
lacs or Rs. 15 lacs
lacs
Payee Any Any Resident Any Resident Any Resident Any
person person person person Resident
person
When tax At the time At the time of At the time of At the time of At the time
shall be of payment or payment or payment or of payment
deducted payment crediting party, crediting crediting party,
or whichever is earlier party, whichever is
crediting whichever is earlier
party, earlier
whichever
is earlier
Rate 10% 10% Plant, 10% 10%
Machinery &
Equipment =
2%
Land,
Building &
Furniture =
10%
Exempted Rs. 15000 Rs. 15000 Rs. 180000 Rs. 30000 Rs. 250000
Ceiling (for each
Professional or
technical
services or
royalty)
Sections 194-IA 194LD
Nature of Consideration for transfer of any immovable Interest on a rupee
payment property [other than agriculture land in rural denominated bond of an
area in India as per sec. 2(14) whether in India Indian Company (interest not
or Outside India to exceed notified rate of
interest) or Government
security which is payable after
May 31,2013 but before June
1,2015.
Payer Any person being a transferee for transfer of any Ant person
immovable property [other than agriculture
land in rural area in India as per sec. 2(14)
whether in India or Outside India
Payee A resident transferor of any immovable property A foreign institution investor
[other than agriculture land in rural area in or a qualified foreign investor
India as per sec. 2(14) whether in India or
Outside India
When tax Time of deduction: At the time of payment or
shall be Tax shall be deducted at the time of payment crediting party whichever is
deducted (any mode) or at the time of giving credit to the earlier.
transferor (in the book of account of the
transferee), whichever is earlier.
Rate 1% (20% if PAN is not furnished) 5% (+SC + EC + SHEC). If
recipient does not have PAN,
tax is deductible at the rate of
20%
Exempted No, tax is deductible where the consideration
Ceiling paid or payable for the transfer of an immovable
property is less than Rs. 50,00,000
Notes: Provision of TAN not applicable:
Provision of sec. 203A pertaining to TAN shall

not apply in respect of tax deducted u/s 194-IA.
Alternate Minimum Tax
In order to preserve the tax base vis-à-vis profit-linked deduction, the provision for levy of AMT
have been introduced from A.Y. 2012-13.
Applicable to: All Non Corporate Assessee w.e.f. AY 2013-14 (Previously it was applicable only
to LLP).
Exception: However Individual, HUF, AOP, BOI or Artificial or Juridical person (AJP) are not
liable to AMT if their adjusted total income does not exceed Rs. 20 lacs.
Theme:
Tax payable by the assessee shall be higher of two –
 Tax payable under the normal provision of Income Tax Act or
 18.5% of the adjusted total income.
Note: this is further subject to surcharge (if any) and education cess.
Here Adjusted total income shall be the
Total income as per IT Act as assessed by AO ***
Add: Deduction claimed under any section included in Chapter VI-A under the heading ***
“C (i.e. 80HH to 80RRB etc.)
Add: Deduction claimed if any u/s 10AA ***
Adjusted Total Income ****
Notes:
1. Here Deduction under chapter VIA shall be considered as claimed by assessee whether
or not by AO.
2. Here Deduction u/s 10AA shall be considered as claimed by assessee whether allowed
or not by AO.
Stress: Deduction u/s 80C to u/s 80GGC shall not be adjusted.
CA report: A CA report (in such form as may be prescribed) must be attached certifying that the
adjusted total income and the alternate minimum tax have been computed in accordance with
the provisions of this Chapter. Such report need to be furnished on or before the due date of
filling of return u/s 139(1).
Tax credit for alternate minimum tax [Sec. 115JD]
Tax credit for alternate minimum tax Tax credit for alternate tax = Excess of alternate
minimum tax paid over the regular income-tax payable
of any year.
Carry forward of tax credit Such tax credit can be carry forward for a maximum
period of 10 years.
Adjustment of tax credit In any assessment year in which the regular income-tax
exceeds the alternate minimum tax, the tax credit shall
be allowed to be set off to the excess of regular income-
tax over the alternate minimum tax and the balance of
the tax credit, if any, shall be carried forward.
Interest No interest shall be payable on tax credit.
Note If the amount of regular income-tax or the alternate

minimum tax is reduced or increased as a result of any
order passed under this Act, the amount of tax credit
allowed under this section shall also be varied
accordingly.

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CONTRACT OF SERVICES CONTRACT FOR SERVICES

NATURE OF PAYMENT and EXEMPTION available therefrom

By non-government employee: (who is not covered by the Gratuity Act.)

Leave Encashment received:

 Any fraction of year shall be ignored.

i) By Govt. employee shall not be taxable.

Voluntary Retrenchment Compensation:

City population House owned by employer Hired by employer

 Salary = Basic + DA * +Commission * + all other taxable allowances + any other

Medical facility - In India:

Sale of asset to employee:

Leave Travel concession:

Deduction u/s 16:

LET OUT HOUSE PROPERTY: (FEATURES)

COMPUTATION OF GROSS ANNUAL VALUE:

MEANIG OF IMPORTANT TERMS:

TAXES LEVIED BY LOCAL AUTHORITY: [PROVISO TO SEC. 23(1)]

DEDUCTION U/S 24:

DEEMED TO BE LET OUT HOUSE PROPERTY: [SEC. 23(4)]:

CONDITION FOR TAXATION [SEC. 22]

EXCEPTION TO THE OWNER (FICTIONAL OR DEEMED OWNER) [SEC. 27]

SELF-OCCUPIED HOUSE PROPERTY: (FEATURES)

Higher deduction of Interest:

PARTLY SELF-OCCUPIED & PARTLY LET-OUT HOUSE PROPERTY: [SEC. 23(4)]

Area Wise: [Sec. 23(2)(a)]:

RECOVERY OF ARREAR RENT / RECOVERY OF UNREALISED RENT

CO-OWNER: [SEC. 26]

FOREIGN HOUSE PROPERTY: Foreign property shall be taxed as under:

Particulars Ordinarily Resident Not-Ordinarily Resident Non-Resident

Profession Sec. 2(36):

Income taxable under the head ‘PGBP’: Sec.28

Rent, Rates, Repairs, Insurance, Taxes of building [Sec. 30]:

Repair ad insurance of Plant, Machinery and Furniture [Sec. 31]:

When no depreciation is charged:

Additional depreciation: [Sec. 32(1)]

Quantum of investment allowance: Investment allowance will be available @ 15% .

Tea, Coffee or Rubber Growing & Manufacturing Business [Sec. 33AB]

Scientific Research: [Sec. 35]

Scientific Research expenses incurred by specified companies: [Sec. 35(2AB)]

Expenses or contribution for Social Upliftment ect. [Sec. 35AC]

Sec. 35CCD: Weighted deduction for expenditure for Skill development:

Deduction for Preliminary expenses: [Sec. 35D]

Spectrum License Fee [Sec. 35ABA]

Expenses incurred on Amalgamation or Demerger of Indian Company [Sec. 335DD]

Telecommunication License [Sec. 35ABB]

Expenses incurred on Amalgamation or Demerger of Indian Company [Sec. 335DD]

Voluntary Retirement Compensation [Sec. 35DDA]:

(iv) Contribution towards Recognized Provident Fund & Approved Superannuation

Employer’s Contribution to Notified Pension Scheme [Sec. 36(1) (iva)]:

Shipping Business: [Sec. 44B]

Commodities transaction tax [Sec. 36(1)(xvi)

General Deduction: [Sec. 37(1)]

[Sec. 37(2B)]: Advertisement in souvenirs etc. of Political Party is a disallowed.

Disallowed Expenses: [Sec. 40(a)]

Aircraft Business: [Sec. 44BBA]

[Sec. 41(2)]: Terminal Depreciation and balancing charge:

[Sec. 41 (3)]: Sale of Scientific research Assets:

Maintenance of accounts: [Sec. 44AA]

Specified profession: Lawyer, CA, CS, CWA, Doctors etc.

Tax Audit of Books of Accounts: [Sec. 44AB]

Business of playing, hiring or leasing of goods carrier: [Sec. 44AE]

LTCG /

LTCG /

LTCG /

LTCG / STCG