CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.

ATAL BIHARI VAJPAYEE

CHAPTER 1
INTRODUCTION TO
INCOME TAX
"बाधाएं आती हैं आएं
घिरें प्रलय की िोर िटाएं ,
पावों के नीचे अंगारे ,
घिर पर बरिें यघि ज्वालाएं ,
घनज हाथों में हं िते-हं िते,
आग लगाकर जलना होगा.
किम घमलाकर चलना होगा.”

SCOPE OF THIS CHAPTER

❖ Understanding the basic concept of taxes and the purpose behind the levy of tax.
❖ Recognition of previous year and assessment year for the purpose of levy of income tax.
❖ Identification of cases where income of the previous year is assessed in the same year.
❖ Understanding the important terms used in the Income Tax Act, 1961.
❖ Determination of tax liability of Individual, HUF, AOP, BOI, Co-operative society, Firm, Company.

TAX

Tax is a mandatory financial charge levied by Government on a product, income or activity.

TYPES OF TAXES AND WHY IT IS LEVIED?

There are 2 types of taxes
Direct taxes Indirect taxes
It is directly levied on the income or wealth of a person. It is levied on goods & services. In case of indirect taxes,
E.g., Income Tax. the person paying tax passes on the incidence to another
person.
E.g., Goods & Services Tax & Custom Duty
Why taxes are levied? Taxes are basic source of revenue to the Government for the betterment of the nation. The taxes
collected are utilised for meeting expenses in the nature of defence, education, health care, infrastructures facilities like
roads, dams etc.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.2

OVERVIEW OF INCOME TAX LAW

COMPONENTS OF INCOME TAX LAW

Income Tax Act The levy of Income Tax in India is governed by the Income Tax Act 1961. It extends to the whole
of India. It came into force on 1st April, 1961. It contains sections 1 to 298 and schedules I to
XIV.
A section may have sub-sections or clauses and sub-clauses:
o When each part of the section is independent of each other and one is not related with
other, such parts are called a “Clause. “Sub sections”, on the other hand refers to such
parts of section where each part is related with other and all sub sections taken together
completes the concept propounded in that section.
A section may also have Provisos and Explanations.
o A Proviso to a section spells out the exception to the provision contained in the respective
section.
o An Explanation to a section gives a clarification relating to the provision contained in the
respective section.
Annual Finance Act Every year, the Finance Minister of the Government of India introduces the Finance Bill in the
Parliament’s Budget Session. When the Finance Bill is passed by both the houses of the
Parliament and gets the assent of the President, it becomes the Finance Act. Amendments are
made every year to the Income-tax Act, 1961 and other laws by the Finance Act. Amendments
as per FA 2022 are applicable for the F/Y 2022-23.
Income Tax Rules The administration of direct taxes is looked after by the Central Board of Direct Taxes (CBDT).
The CBDT is empowered to make rules for carrying out the purposes of the Act. For the proper
administration of the Income-tax Act, 1961, the CBDT frames rules from time to time. These
rules are collectively called Income-Tax Rules, 1962.
Circulars / Notifications o Circulars are issued by the CBDT from time to time to deal with certain specific problems
and to clarify doubts regarding the scope and meaning of certain provisions of the Act.
Circulars are issued for the guidance of the officers and/or assesses. The department is
bounded by the circulars. While such circulars are not binding on the assesses, they can
take advantage of beneficial circulars.
o Notifications are issued by the Central Government to give effect to the provisions of the
Act. The CBDT is also empowered to make and amend rules for the purposes of the Act by
issue of notifications which are binding on both department and assesses.
Legal Decisions of Court Case Laws refer to decision given by courts. The study of case laws is an important and
unavoidable part of the study of Income-tax law. It is not possible for Parliament to conceive
and provide for all possible issues that may arise in the implementation of any Act. Hence the
judiciary will hear the disputes between the assesses and the department and give decisions
on various issues.
The Supreme Court is the Apex Court of the Country and the law laid down by the Supreme
Court is the law of the land.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.3

PROCESS OF COMPUTATION OF TOTAL INCOME & TAX LIABILITY

1. Determination of Residential Status

The residential status helps in ascertaining the incomes to be included in computing total income of a person. [Detailed
discussion in Ch. 2]

2. Computation of income under 5 heads

[Salary + House Property + PGBP + Capital Gains + IFOS] [Discussed in Ch 3 to Ch 7]

3. Clubbing of Income & Set off of Losses

Clubbing provisions have been incorporated to eliminate tax reduction by assessee [Ch 8]. Set off of losses is a process
of adjusting the losses from income [Ch 9]

4. Computation of Gross Total Income

GTI = Income under 5 heads + Clubbing of income – Set off of Losses

5. Deductions from GTI

Deductions are covered u/c VI-A (Section 80C – 80U) [Ch. 10]

6. Computation of Total Income

Total Income = GTI – Deductions u/c VI-A
p

7. Application of Rates of Tax on Total Income

Different rates of taxes are applicable for different class of assessees. Special rates are also applicable on specific
incomes like lottery, LTCG etc.

8. Surcharge, Rebate and Health & Education Cess

Surcharge is applicable where the income exceeds a certain limit.
Rebate is granted where income is upto a certain limit.
HEC @ 4% is applicable in all cases after giving effect to surcharge & rebate.

9. TDS, Advance Tax & AMT Credit

Advance Tax paid / TDS / AMT credit is set-off from the tax liability computed at stage 8 to arrive final tax liability [Ch
13, 14 & 16]

10. Filing of Income Tax Return

ITR is the declaration of income by the assessee in a specified format to the Income Tax Department by a specified
date.

BASIS OF CHARGE OF INCOME TAX [SECTION 4]

The total income of previous year of every person shall be charged to income tax in the next following assessment year at
the rates applicable to the relevant assessment year.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.4

INCOME [SECTION 2(24)]

1) The value of any perquisite or profits in lieu of salary taxable under the head salaries.
Salary
2) Any allowance granted to meet expenses for the performance of the duties of an office.

3) Rent from building House Property

4) Profits and gains of business or profession.

PGBP
5) The value of any benefit or perquisite received from business or profession.

6) Any capital gains on transfer of a capital asset chargeable u/s 45. Capital Gains

7) Income not covered anywhere i.e. income from other sources such as dividend, lottery, interest, gift in excess of ₹
50,000 etc.
IFOS

PREVIOUS YEAR [SECTION 3]

Previous year means the financial year immediately preceding the assessment year. Income tax is payable on the income
earned during the previous year and it is assessed in the immediately succeeding financial year which is called an assessment
year.

Previous year for newly setup business shall start from the date of setting-up of the business to the end of the financial
year in which business was setup. If a source of income comes into existence in the said financial year, then the previous
year will commence from the date on which the source of income newly comes into existence to the end of the financial
year.
Previous year for undisclosed source of Income: Where income is not disclosed by the taxpayer but is detected by the
Income Tax Department and the source for which is not satisfactorily explained by the assess to A.O., it is deemed to
be the income of the year in which it is disclosed. The assessee will liable to tax @ 60% + mandatory surcharge @ 25%
of tax and cess @ 4% of tax and surcharge. Thus, the effective rate of tax is 78% on such undisclosed income u/s
115BBE.

PERSON [SECTION 2(31)]

The term person includes:

a) An Individual
b) A Hindu undivided family
c) A Company
d) A Firm (including LLP)
e) Local Authority
f) An association of persons or body of individuals whether incorporated or not.
g) Every artificial person not covered above

ASSESSMENT YEAR [SECTION 2(9)]

Assessment year means the period of 12 months commencing on the first day of April every year. Income of previous year
of an assessee is taxed during the next following assessment year.
For e.g., the assessment year 2023-24 will commence on 1st April 2023 and will end on 31st March 2024 and the previous
year to this assessment year will commence from 1st April 2022 to 31st March 2023.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.5

Q 1: Find out the income for the assessment year 2023-24 and 2024-25?
Calendar Year Quarter-wise break-up of income (₹)
Jan – March Apr – June July – Sept Oct – Dec
2022 25,000 28,000 10,000 20,000
2023 32,000 16,000 27,000 29,000
2024 12,000 24,000 29,000 34,000

Sol 1: Computation of income for the A/Y 2023-24 & A/Y 2024-2025:
A/Y 2023-24 = P/Y 2022-23 = 1st April, 2022 – 31st March, 2023
₹ 28,000 + ₹ 10,000 + ₹ 20,000 + ₹ 32,000 = ₹ 90,000
A/Y 2024-25 = P/Y 2023-24 = 1st April, 2023 – 31st March, 2024
₹ 16,000 + ₹ 27,000 + ₹ 29,000 + ₹ 12,000 = ₹ 84,000

Q 2: What will be the previous year in relation to assessment year 2023-24 in the following cases?
(a) Sonu started a medicine business on 14.03.2023.
(b) A person gives loan of ₹ 6,00,000 @ 10% p.a. on 17.09.2022.

Sol 2: Computation of previous year:

Previous year for newly setup business shall start from the date of setting-up of the business to the end of the financial year
in which business was setup.
Case (a): 14.03.2023 – 31.03.2023
Case (b): 17.09.2022 – 31.03.2023

Q 3: Which of the following is a direct tax?

(a) Goods and Services Tax (c) Custom Duty
(b) Income Tax (d) None of the above [Ans: (b)]

CASES WHERE INCOME OF THE PREVIOUS YEAR IS ASSESSED IN THE SAME YEAR

1. Income of non-resident from shipping business: Tax on income is charged when the ship leaves India. 7.5% of the
freight paid or payable to such non-resident, whether in India or outside India shall be deemed to be his income which
is charged to tax in the same year in which it is earned.
2. Assessment of persons leaving India with no intension of return to India: Tax on income upto the date of departure
shall be charged.
3. Income of bodies formed for short period / particular event: Income for the period for which such body was formed
shall be charged to tax in the same year in which it is earned.
4. Assessment of person likely to transfer property to avoid tax: Where assessing officer is of the opinion that assessee
will transfer his property to avoid tax, then income of such person shall be charged to tax in the same year in which
property is transferred.
5. Income of a discontinued business: Income upto the date of discontinuance shall be taxable in the same year.
However, the assessing officer may, at his discretion charge income of a discontinued business in the assessment year
also.

Q 4: In which of the following cases, income of a person is not taxed in the same year?
(a) Assessment of person leaving India
(b) Assessment of person likely to transfer property to evade tax liability
(c) An association of persons formed for a particular task
(d) Income of resident from shipping business [Ans: (d)]
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.6

ASSESSEE [SECTION 2(7)]

An assessee means a person by whom any tax or any other sum of money is payable under the Income Tax Act, 1961 and
shall include:
(i) Every person in respect of whom any proceedings under the Income Tax Act have been taken for assessment of:
o his income; or
o the income of any other person in respect of which he is assessable; or
o the loss sustained by him; or
o the amount of refund due to him
(ii) A person who is deemed to be an assessee under any provisions of this Act. It shall include legal representative of a
deceased person or the legal guardian to a minor.
(iii) Every person who is deemed to be an assessee in default. If any person fails to comply with the duties imposed upon
him under the Income Tax Act, he shall be considered as an assessee in default.

Q 5: Every assessee is person but not every person is an assessee. True or False.

Sol 5: True: Every assessee is a person but every person need not be an assessee. A person becomes an assessee only when
any tax or any other sum of money is payable under the Income Tax Act or against whom any proceedings under the income
tax act have been taken or who is deemed to be an assessee or is an assessee in default.

CONSTITUTIONAL PROVISION

The Constitution of India by virtue of Article 246 empowers, the Central and State Government to levy taxes, whether direct
or indirect.
Seventh Schedule to Article 246 contains 3 lists (shown below) under which the Central and the State Government make
laws for levying taxes in India.
Particulars UNION LIST STATE LIST CONCURRENT LIST (LIST III)
(LIST I) (LIST II)
Meaning The parliament has an The legislature of any state has The parliament and legislature of
exclusive right to make law in an exclusive right to make law any state has an exclusive right to
respect of that entry. in respect of that entry. make law in respect of that entry.
Power to levy Central Government State Government Central & State Government
tax
Taxes levied Income Tax, Custom Duty, GST. GST -

The Central Government has been empowered by ENTRY NO. 82 of the Union List of Schedule VII of the Constitution of
India to levy tax on all incomes other than agricultural income.

Q 6: Entry No. 82 empowers the Central Government to levy tax on all incomes except:
(a) Dividend Income (c) Agricultural Income
(b) Lottery Income (d) Both (a) & (c) [Ans: (c)]
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.7

RATES OF INCOME TAX FOR THE ASSESSMENT YEAR 2023-24

A. If the Individual opts to be taxed under old regime

1. For a RESIDENT INDIVIDUAL (man or woman), who is of the age of 60

years or more but upto 79 years at any time during the previous year.
[Senior citizen]

A resident individual who attains the age of 60 years on 1st April 2023,
shall be considered a senior citizen for PY 2022-23.

Income Rate of Tax

Upto ₹ 3,00,000 Nil
More than ₹ 3,00,000 but upto ₹ 5,00,000 5% of the income exceeding ₹ 3,00,000
More than ₹ 5,00,000 but upto ₹ 10,00,000 ₹ 10,000 + 20% of the amount by which the income
exceeds ₹ 5,00,000.
More than ₹ 10,00,000 ₹ 1,10,000 + 30% of the amount by which the income
exceeds ₹ 10,00,000.

Q 7: Compute the tax liability of Mr. Ankit (aged 64 years), resident of India in the following cases assuming he does not
wish to opt for the new scheme u/s 115BAC: (Ignore Health & Education Cess)
(a) ₹ 5,90,000
(b) ₹ 12,30,000
(c) ₹ 34,80,000

Sol 7: Computation of Tax Liability

(a) Tax liability on income of ₹ 5,90,000
First ₹ 3,00,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000
Remaining ₹ 90,000 @ 20% ₹ 18,000
₹ 28,000

(b) Tax liability on income of ₹ 12,30,000

First ₹ 3,00,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 2,30,000 @ 30% ₹ 69,000
₹ 1,79,000

(c) Tax liability on income of ₹ 34,80,000

First ₹ 3,00,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 24,80,000 @ 30% ₹ 7,44,000
₹ 8,54,000
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.8

2. For a RESIDENT INDIVIDUAL (man or woman), who is of the age of 80

years or more at any time during the previous year. [Super Senior
citizen]
➢ A Resident Individual who attains the age of 80 years on 1st April 2023,
shall be considered a super senior citizen for PY 2022-23.

Income Rate of Tax

Upto ₹ 5,00,000 Nil
More than ₹ 5,00,000 but upto ₹ 10,00,000 20% of the amount by which the income exceeds ₹
5,00,000.
More than ₹ 10,00,000 ₹ 1,00,000 + 30% of the amount by which the income
exceeds ₹ 10,00,000.

Q 8: Compute the tax liability of Mrs. Charu (aged 82 years), resident of India in the following cases assuming he does not
wish to opt for the new scheme u/s 115BAC: (Ignore Health & Education Cess)
(a) ₹ 8,70,000
(b) ₹ 26,75,000

Sol 8: Computation of Tax Liability

(a) Tax liability on income of ₹ 8,70,000
First ₹ 5,00,000 Nil
Next ₹ 3,70,000 @ 20% ₹ 74,000
₹ 74,000

(b) Tax liability on income of ₹ 26,75,000

First ₹ 5,00,000 Nil
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 16,75,000 @ 30% ₹ 5,02,500
₹ 6,02,500

3. For INDIVIDUAL (man or woman) other than those mentioned

above / HUF / AOP / BOI / Artificial Judicial Person

Income Rate of Tax

Upto ₹ 2,50,000 Nil
More than ₹ 2,50,000 but upto ₹ 5,00,000 5% of the income exceeding ₹ 2,50,000
More than ₹ 5,00,000 but upto ₹ 10,00,000 ₹ 12,500 + 20% of the amount by which the income
exceeds ₹ 5,00,000.
More than ₹ 10,00,000 ₹ 1,12,500 + 30% of the amount by which the income
exceeds ₹ 10,00,000.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.9

Sir, what if a non-resident whose

age is 60 years or above, will he be
allowed 3,00,000 as first
In case of non-resident individuals, special rates of
exemption limit?
senior citizen or super senior citizen are not
applicable. Therefore, a non-resident whose age is
60 years or more shall only be allowed ₹ 2,50,000
as first exemption limit instead of ₹ 3,00,000 / ₹
5,00,000 as the case may be.

Q 9: An individual is born on 1st April 1943. He is resident in India during the P/Y 2022-23. The first exemption limit applicable
to him shall be:
(a) ₹ 2,50,000 (c) ₹ 5,00,000
(b) ₹ 3,00,000 (d) Nil [Ans: (c)]

Q 10: Compute the tax liability in the following cases: (Ignore HEC & 115BAC)
(a) Ashok & Sons (HUF) having income of ₹ 9,20,000. Karta’s age – 60 years. Karta is a resident of India.
(b) Mr. Puneet (Non-resident; aged – 76 years) having an income of ₹ 10,70,000.
(c) Mrs. Radhika, resident of India born on 1st April 1963 having an income of ₹ 45,80,000.
(d) DF & Associates (an AOP) having income of – ₹ 14,56,000.

Sol 10: Computation of Tax Liability

(a) Tax liability on income of ₹ 9,20,000 of Ashok & Sons (HUF)
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Remaining ₹ 4,20,000 @ 20% ₹ 84,000
₹ 96,500
Note: Age & Residential status of the Karta is immaterial for computing tax liability of the HUF.

(b) Tax liability on income of ₹ 10,70,000 of Mr. Puneet (NR) – aged 76 years
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 70,000 @ 30% ₹ 21,000
₹ 1,33,500
Note: A Non-resident senior citizen shall only be allowed ₹ 2,50,000 as first exemption limit instead of ₹ 3,00,000.

(c) Tax liability on income of ₹ 45,80,000 of Mrs. Radhika born on 1st April 1962
First ₹ 3,00,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 35,80,000 @ 30% ₹ 10,74,000
₹ 11,84,000
Note: As Mrs. Radhika attains the age of 60 years on the 1st April 2023 (i.e. on the first day of the A/Y), she will be
considered as a senior citizen and eligible for ₹ 3,00,000 as first exemption limit.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.10

(d) Tax liability on income of ₹ 14,56,000 of DF & Associates (an AOP)

First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 4,56,000 @ 30% ₹ 1,36,800
₹ 2,49,300

B. If the Individual (irrespective of the age or residential status) or HUF opts to be taxed under new regime
(i.e. 115BAC)

Income Rate of Tax

Upto ₹ 2,50,000 Nil
More than ₹ 2,50,000 but upto ₹ 5,00,000 5% of the amount by which the income exceeds ₹
2,50,000.
More than ₹ 5,00,000 but upto ₹ 7,50,000 ₹ 12,500 + 10% of the amount by which the income
exceeds ₹ 5,00,000.
More than ₹ 7,50,000 but upto ₹ 10,00,000 ₹ 37,500 + 15% of the amount by which the income
exceeds ₹ 7,50,000.
More than ₹ 10,00,000 but upto ₹ 12,50,000 ₹ 75,000 + 20% of the amount by which the income
exceeds ₹ 10,00,000.
More than ₹ 12,50,000 but upto ₹ 15,00,000 ₹ 1,25,000 + 25% of the amount by which the income
exceeds ₹ 12,50,000.
More than ₹ 15,00,000 ₹ 1,87,500 + 30% of the amount by which the income
exceeds ₹ 15,00,000.

Q 11: Compute the tax liability in the following cases assuming the individual wishes to opt for the new regime u/s 115BAC:
(Ignore HEC)
(a) Mr. Shantanu (aged 67 years) – Resident of India having income of ₹ 8,64,000.
(b) Patiala & Sons (HUF) having an income of ₹ 12,30,000.
(c) Mr. Tondon (aged 80 years) – Non-resident of India having income of 18,72,000.

Sol 11: Computation of Tax Liability

(a) Tax liability on income of ₹ 8,64,000 of Mr. Shantanu (aged 67 years)
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 2,50,000 @ 10% ₹ 25,000
Remaining ₹ 1,14,000 @ 15% ₹ 17,100
₹ 54,600
Note: Age of an individual does not matter where the assessee wishes to opt for 115BAC.

(b) Tax liability on income of ₹ 12,30,000 of Patiala & Sons (HUF)

First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 2,50,000 @ 10% ₹ 25,000
Next ₹ 2,50,000 @ 15% ₹ 37,500
Remaining ₹ 2,30,000 @ 20% ₹ 46,000
₹ 1,21,000
 CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.11

(c) Tax liability on income of ₹ 18,72,000 of Mr. Tondon (aged 80 years – Non-resident)
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 2,50,000 @ 10% ₹ 25,000
Next ₹ 2,50,000 @ 15% ₹ 37,500
Next ₹ 2,50,000 @ 20% ₹ 50,000
Next ₹ 2,50,000 @ 25% ₹ 62,500
Remaining ₹ 3,72,000 @ 30% ₹ 1,11,600
₹ 2,99,100
Note: Age & Residential status of an individual does not matter where the assessee wishes to opt for 115BAC.

I. Conditions to be satisfied for availing concessional rates of tax: The following are the conditions to be satisfied for
availing concessional rates of tax:
S. No. Particulars
(i) Certain deductions/exemption not allowable: Section 115BAC(2) provides that while computing total income,
the following deductions/exemptions would not be allowed, if an individual or HUF opts for concessional rates
of taxes under sect 115BAC(1)
Section Exemption/Deduction
10(5) Leave travel concession
10(13A) House rent allowance
10(14) Exemption in respect of special allowances or benefit to meet
expenses relating to duties or personal expenses (other than Discussed in salary
those as may be prescribed for this purpose) chapter
16 (i) Standard deduction under the head “Salaries”
(ii) Entertainment allowance
(iii) Professional Tax
10(17) Daily allowance or constituency allowance of MPs and MLAs Discussed in income
10AA Tax holiday for units established in SEZ exempt from tax chapter
10(32) Exemption in respect of income of minor child included in the Discussed in clubbing of
income of parent income chapter
24(b) Interest on loan in respect of self-occupied property Discussed in house
property chapter
32(1)(iia) Additional depreciation
Normal depreciation u/s 32 would be restricted to 40%
on the written down value of such block of assets in
respect of block of assets entitled to more than 40. Discussed in PGBP
35(1)(ii)(iia)(iii) Deduction in respect of contribution to outsiders for scientific chapter
or 35(2AA) research & social science & statistical research
35AD Investment linked tax incentives for specified businesses
35CCC Deduction in respect of expenditure incurred on notified
agricultural project
57(iia) Deduction in respect of family pension Discussed in Income from
other sources chapter
80C to 80U Deductions under Chapter VI-A (other than employers Discussed in deductions
contribution towards NPS u/s 80CCD(2) and deduction for from GTI chapter
employment of new employees u/s 80JJAA).

(2) Certain losses not allowed to be set-off: While computing total income, set-off Discussed in set-off & carry
of any loss – forward of losses chapter
(i) carried forward or depreciation from any earlier assessment year, if such loss
or depreciation is attributable to any of the deductions referred to in (1)
above; or
(ii) under the head house property with any other head of income;
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.12

Note: Where there is an unabsorbed additional depreciation, which has not been given full effect to prior to A.Y. 2023-24
and which is not allowed to be set-off in the A.Y. 2023-24 due to exercise of option u/s 115BAC from that year, the WDV as
on 1-4-2022 will be increased by the unabsorbed additional depreciation not allowed to be set-off.

ICAI Example: Let us consider the case of Mr. X, who carries on business of manufacturing of steel. He has unabsorbed
depreciation as on 1-4-2022, which includes amount attributable to additional depreciation u/s 32(1)(iia) of P.Y. 2021-22 or
any earlier previous year in respect of block of plant and machinery. If he exercises option under section 115BAC for P.Y.
2022-23 relevant to A.Y. 2023-24, the amount so attributable to additional depreciation of earlier years remaining
unabsorbed as on 1-4-2022 would not be eligible for set-off against current year income. Accordingly, the WDV of the block
as on 1-4-2022 has to be increased by the said amount not allowed to be set-off.

Q 12: Mr. Pawan (aged 74 years – resident of India) has a taxable income after claiming deduction u/s 80C of ₹ 1,40,000 is
₹ 8,30,000. He wishes to pay minimum tax liability. Advice.

Sol 12: Computation of tax liability for Mr. Pawan so that his tax liability is minimum:
Normal Provisions [Deduction u/s 80C is permissible] 115BAC [Deduction u/s 80C is not permissible, therefore
total income = ₹ 8,30,000 + ₹ 1,40,000 = ₹ 9,70,000]
Tax Liability on ₹ 8,30,000 Tax Liability on ₹ 9,70,000
First 3,00,000 Nil First ₹ 2,50,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000 Next ₹ 2,50,000 @ 5% ₹ 12,500
Remaining ₹ 3,30,000 @ 20% ₹ 66,000 Next ₹ 2,50,000 @ 10% ₹ 25,000
₹ 76,000 Next ₹ 2,20,000 @ 15% ₹ 33,000
Add: Health & Education Cess @ 4% ₹ 3,040 ₹ 70,500
Total Tax Liability ₹ 79,040 Add: Health & Education Cess @ 4% ₹ 2,820
Total Tax Liability ₹ 73,320
Conclusion: Since the tax liability as per the provisions of 115BAC is lower than the normal provisions, it is advisable for
Mr. Pawan to follow 115BAC.

Q 13: Compute the tax liability of Mrs. Ruhi (aged – 63 years), resident of India from the following information assuming she
wishes to pay tax u/s 115BAC:
(i) Salary income after claiming ₹ 50,000 as standard deduction u/s 16(ia) – ₹ 3,40,000;
(ii) Business income – ₹ 5,60,000 after claiming additional depreciation of ₹ 40,000;
(iii) Deductions u/s 80C & 80D: ₹ 1,20,000

Sol 13: As Mrs. Ruhi wishes to pay tax liability as per the provisions of Section 115BAC, she will be ineligible for standard
deduction u/s 16(ia), additional depreciation & deductions u/s 80C & 80D.
Her income shall be as under:
Salary income: ₹ 3,40,000 + ₹ 50,000 = ₹ 3,90,000
Business Income: ₹ 5,60,000 + ₹ 40,000 = ₹ 6,00,000
Total income as per 115BAC = ₹ 9,90,000
Tax liability on income of ₹ 9,90,000 of Mrs. Ruhi (aged 63 years – Resident)
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 2,50,000 @ 10% ₹ 25,000
Remaining ₹ 2,40,000 @ 15% ₹ 36,000
₹ 73,500
Add: Health & Education Cess @ 4% ₹ 2,940
Total Tax Liability ₹ 76,440

Time Limit for exercise of 115BAC

1. For Individual / HUF having no income u/h PGBP: Can choose from year to year. They may choose to exercise the option
of 115BAC in one year and not to exercise the option in another year.
2. For Individual / HUF having income u/h PGBP: The option once exercised in any previous year shall apply to all the
subsequent years as well. The option can be withdrawn once and thereafter the individual or HUF shall never be eligible
to exercise option u/s 115BAC except where such individual / HUF ceases to have any business income.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.13

Incomes which are taxable at a specific rate irrespective of the fact whether the assessee is following the old rates
of taxes or the new regime u/s 115BAC:
S. No. Particulars Tax Rate
1. Long-term Capital Gains u/s 112 20%
2. Long-term Capital Gains u/s 112A above ₹ 1,00,000 10%
3. STCG u/s 111A 15%
4. Lottery income / casual income 30%

Imp. Note:
1. First exemption of ₹ 2,50,000 / ₹ 3,00,000 / ₹ 5,00,000, as the case may be, shall be given for incomes chargeable under
slab rate and balance exemption, if any shall be given to LTCG u/s 112 or 112A or STCG on listed shares u/s 111A in a
manner which is more beneficial to the assessee. Non-residents shall not avail the benefit of balance exemption.
2. Lottery income is taxable at a flat rate of 30% without any exemption for resident as well as non-resident.

SURCHARGE
Individual (resident / non-resident) or HUF or AOP or BOI or Artificial Juridical Person Surcharge
(i) Where the total income (including dividend income and capital gains chargeable to 10%
tax u/s 111A, 112 and 112A) > ₹ 50 lakhs but is < ₹ 1 crore.
(ii) Where the total income (including dividend income and capital gains chargeable to 15%
tax u/s 111A, 112 and 112A) > ₹ 1 crore but is < ₹ 2 crores.
(iii) o Where the total income (excluding dividend income and capital gains 25%
chargeable to tax u/s 111A, 112 and 112A) > ₹ 2 crores but is < ₹5 crores.
o Rate of surcharge on the income-tax payable on the portion of dividend income Not exceeding 15%
and capital gains chargeable to tax u/s 111A, 112 and 112A
(iv) o Where the total income (excluding dividend income and capital gains 37%
chargeable to tax u/s 111A, 112 and 112A) > ₹ 5 crores.
o Rate of surcharge on the income-tax payable on the portion of dividend income Not exceeding 15%
and capital gains chargeable to tax u/s 111A, 112 and 112A.
(v) Where the total income (including dividend income and capital gains chargeable to 15%
tax u/s 111A, 112 and 112A) > ₹ 2 crores in cases not covered in (iii) and (iv) above.

Q 14: What shall be the rate of surcharge applicable to an individual earning income from business of ₹ 1.8 crores & capital
gains u/s 111A is ₹ 70 lakhs.
(a) 10% (c) 15% u/s 111A & 25% on others
(b) 15% (d) 25% [Ans: (b)]

Q 15: Compute the tax liability in the following cases: (ignore 115BAC)
(a) Mr. Anuj (aged 32 years – Non-resident) having business income of ₹ 65,92,000.
(b) Mr. Pankaj (aged 70 years – Resident) having LTCG u/s 112 of ₹ 34,00,000 & salary income of ₹ 86,50,000.
(c) Ms. Priya (aged 41 years – Resident) having STCG u/s 111A of ₹ 46,00,000, LTCG u/s 112A of 23,00,000 & business
income of ₹ 1,84,00,000.
(d) Ms. Ruchi (aged 51 years – Resident) having STCG u/s 111A of ₹ 1,20,00,000, dividend income of ₹ 34,00,000 & business
income of ₹ 6,89,00,000.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.14

Sol 15: Computation of tax liability:

(a) Mr. Anuj (aged 32 years – Non-resident) having business income of ₹ 65,92,000.
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 55,92,000 @ 30% ₹ 16,77,600
₹ 17,90,100
Add: Surcharge @ 10% ₹ 1,79,010
₹ 19,69,110
Add: Health & Education Cess @ 4% ₹ 78,764.4
Final Tax Liability ₹ 20,47,874 (rounded off to ₹ 20,47,870)

(b) Mr. Pankaj (aged 70 years – Resident) having LTCG u/s 112 of ₹ 34,00,000 & salary income of ₹ 86,50,000.
Tax on Salary income as per the slab rate
First ₹ 3,00,000 Nil
Next ₹ 2,00,000 @ 5% ₹ 10,000
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 76,50,000 @ 30% ₹ 22,95,000
₹ 24,05,000
Add: Tax on LTCG @ 20% (₹ 34,00,000 x 20%) ₹ 6,80,000
₹ 30,85,000
Add: Surcharge @ 15% ₹ 4,62,750
₹ 35,47,750
Add: Health & Education Cess @ 4% ₹ 1,41,910
Final Tax Liability ₹ 36,89,660

(c) Ms. Priya (aged 41 years – Resident) having STCG u/s 111A of ₹ 46,00,000, LTCG u/s 112A of 23,00,000 & business
income of ₹ 1,84,00,000.
Tax on Business income as per the slab rate
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 1,74,00,000 @ 30% ₹ 52,20,000
₹ 53,32,500
Add: Tax on STCG u/s 111A @ 15% (₹ 46,00,000 x 15%) ₹ 6,90,000
Add: Tax on LTCG u/s 112A @ 10% above ₹ 1,00,000 (22,00,000 x 10%) ₹ 2,20,000
₹ 62,42,500
Add: Surcharge @ 15% ₹ 9,36,375
₹ 71,78,875
Add: Health & Education Cess @ 4% ₹ 2,87,155
Final Tax Liability ₹ 74,66,030
Note: As the total income excluding STCG u/s 111A & LTCG u/s 112A does not exceed 2 crores, the applicable rate of
surcharge shall be 15%.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.15

(d) Ms. Ruchi (aged 51 years – Resident) having STCG u/s 111A of ₹ 1,20,00,000, dividend income of ₹ 34,00,000 & business
income of ₹ 6,89,00,000.
Tax on Business income & Dividend income as per the slab rate
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 7,13,00,000 @ 30% ₹ 2,13,90,000
₹ 2,15,02,500
Add: Tax on STCG u/s 111A @ 15% [1,20,00,000 x 15%] ₹ 18,00,000
₹ 2,33,02,500
Add: Surcharge [WN 1] ₹ 80,03,464
₹ 3,13,05,964
Add: Health & Education Cess @ 4% ₹ 12,52,239
Final Tax Liability ₹ 3,25,58,203
(rounded off to ₹ 3,25,58,200)
WN 1: Computation of Surcharge
Particulars Calculation (₹) Final Amount (₹)
Surcharge @ 37% on tax relating to business income ₹ 2,04,91,317 x 37% ₹ 75,81,787
(₹ 2,15,02,500 x ₹ 6,89,00,000 / ₹ 7,23,00,000 = ₹ 2,04,91,317)
Surcharge @ 15% on tax relating to dividend income + STCG u/s 111A ₹ 28,11,183 x 15% ₹ 4,21,677
[(₹ 2,15,02,500 x ₹ 34,00,000 / ₹ 7,23,00,000 = ₹ 10,11,183) + ₹
18,00,000]
Total Surcharge ₹ 80,03,464

REBATE U/S 87A [Imp.]

This is provided in order to provide tax relief to the Resident Individual Tax payers who are in 5% tax slab.
A resident individual assessee can claim a rebate of lower of the following:
(i) Income tax payable or
(ii) ₹ 12,500
provided the total income does not exceed ₹ 5,00,000 after availing deductions u/c VI-A.
Rebate u/s 87A is not available in respect of tax payable under LTCG taxable u/s 112A.

Q 16: Compute the tax liability in the following cases: (ignore 115BAC)
(a) Mr. Anup (aged 65 years – resident) having a business income of ₹ 4,82,000.
(b) Ms. Sujata (aged 45 years – resident) having salary income of ₹ 2,90,000 & LTCG u/s 112 of ₹ 1,50,000.
(c) Ms. Aarti (aged 32 years – Non-resident) having income of ₹ 1,80,000 from house property & STCG u/s 111A of ₹
1,90,000.
(d) Mr. Karan (aged 39 years – resident) having business income of ₹ 2,80,000, LTCG u/s 112A of ₹ 1,40,000 & Lottery of ₹
10,000.
(e) Mr. Sujeet (aged 67 years – resident) having house property income of ₹ 2,60,000, LTCG u/s 112 of ₹ 90,000, STCG u/s
111A of ₹ 80,000 & lottery income of ₹ 8,000.

Sol 16: Computation of tax liability:

(a) Mr. Anup (aged 65 years – resident) having a business income of ₹ 4,82,000.
First ₹ 3,00,000 Nil
Remaining ₹ 1,82,000 @ 5% ₹ 9,100
₹ 9,100
Less: Rebate u/s 87A (tax liability being ₹ 9,100 or ₹ 12,500 whichever is lower) ₹ 9,100
Final Tax Liability Nil
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.16

(b) Ms. Sujata (aged 45 years – resident) having salary income of ₹ 2,90,000 & LTCG u/s 112 of ₹ 1,50,000.
Tax on salary income as per slab rate
First ₹ 2,50,000 Nil
Remaining ₹ 40,000 @ 5% ₹ 2,000
₹ 2,000
Add: Tax on LTCG u/s 112 @ 20% (₹ 1,50,000 x 20%) ₹ 30,000
₹ 32,000
Less: Rebate u/s 87A (tax liability being ₹ 32,000 or ₹ 12,500 whichever is lower) ₹ 12,500
₹ 19,500
Add: Health & Education Cess @ 4% ₹ 780
Final Tax Liability ₹ 20,280

(c) Ms. Aarti (aged 32 years – Non-resident) having income of ₹ 1,80,000 from house property & STCG u/s 111A of ₹
1,90,000.
Tax on house property income as per the slab rate
Tax on ₹ 1,80,000 Nil
Tax on STCG u/s 111A @ 15% (₹ 1,90,000 x 15%) ₹ 28,500
₹ 28,500
Add: Health & Education Cess @ 4% ₹ 1,140
Final Tax Liability ₹ 29,640
Note: Non-resident shall neither be allowed the benefit of balance first exemption limit not rebate u/s 87A.

(d) Mr. Karan (aged 39 years – resident) having business income of ₹ 2,80,000, LTCG u/s 112A of ₹ 1,40,000 & Lottery of ₹
10,000.
Tax on lottery @ 30% ₹ 3,000
Tax on business income as per slab rate
First ₹ 2,50,000 Nil
Remaining ₹ 30,000 @ 5% ₹ 1,500 ₹ 1,500
Tax on LTCG u/s 112A @ 10% on income > ₹ 1,00,000 ₹ 4,000
₹ 8,500
Less: Rebate u/s 87A (tax liability being ₹ 4,500 or ₹ 12,500 whichever is lower) ₹ 4,500
₹ 4,000
Add: Health & Education Cess @ 4% ₹ 160
Final Tax Liability ₹ 4,160
Note: Rebate u/s 87A is not admissible from tax on LTCG u/s 112A.

(e) Mr. Sujeet (aged 67 years – resident) having house property income of ₹ 2,60,000, LTCG u/s 112 of ₹ 90,000, STCG u/s
111A of ₹ 80,000 & lottery income of ₹ 8,000.
Tax on lottery @ 30% ₹ 2,400
Tax on house property income as per the slab rate Nil
Tax on LTCG u/s 112 @ 20% [(₹ 90,000 – ₹ 40,000) x 20%] (Note) ₹ 10,000
Tax on STCG u/s 111A @ 15% (₹ 80,000 x 15%) ₹ 12,000
₹ 24,500
Less: Rebate u/s 87A (tax liability being ₹ 24,500 or ₹ 12,500 whichever is lower) ₹ 12,500
₹ 12,000
Add: Health & Education Cess @ 4% ₹ 480
Final Tax Liability ₹ 12,480
Note: Balance exemption limit of ₹ 40,000 (₹ 3,00,000 – ₹ 2,60,000) is utilized against LTCG u/s 112 to minimize the tax
liability.

4. FIRMS (INCLUDING LLP): 30%

5. LOCAL AUTHORITY: 30%

CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.17

6. CO-OPERATIVE SOCIETIES (If they opt to be taxed under old regime):

Income Rate of Tax

Upto ₹ 10,000 10%

More than ₹ 10,001 but upto ₹ 20,000 ₹ 1,000 + 20% of the amount by which the income exceeds
₹ 10,000.
More than ₹ 20,000 ₹ 3,000 + 30% of the amount by which the income exceeds
₹ 20,000.

Surcharge:
Every Firm (including LLP) or Local authority or Co-operative society having a total income exceeding 1 crore shall be liable
to surcharge @ 12% of such income tax.

If the Co-operative Society opts to be taxed u/s 115BAD: 22% + Surcharge @ 10% + HEC @ 4% = 25.168%.
The conditions / restrictions applicable u/s 115BAC(2) shall apply here as well.

7. COMPANIES (If it opts to be taxed as per the old regime):

Domestic Foreign
Turnover upto ₹ 400 crores in the Turnover more than ₹ 400 crores
P/Y 2020-21 in the P/Y 2020-21 40%
25% 30%

SURCHARGE
Domestic Company Surcharge

Total Income more than ₹ 1 crore but upto ₹ 10 crores 7% of such income tax
Total Income is more than ₹ 10 crores 12% of such income tax

Foreign Company
Total Income more than ₹ 1 crore but upto ₹ 10 crores 2% of such income tax
Total Income is more than ₹ 10 crores 5% of such income tax

DOMESTIC COMPANIES (If it opts to be taxed as per the new regime i.e. u/s 115BAA):
All domestic companies (whether manufacturing or not) shall have an option to pay tax @ 22% + compulsory surcharge @
10% + HEC @ 4% = 25.168%.

DOMESTIC COMPANIES (If it opts to be taxed as per the new regime i.e. u/s 115BAB):
All domestic companies (only manufacturing) shall have an option to pay tax @ 15% + compulsory surcharge @ 10% + HEC
@ 4% = 17.16%.

Conditions to be satisfied to claim concessional rate u/s 115BAB:

❖ Company should be set up before 1st October 2019 & manufacturing started before 31st March 2023.
❖ No splitting up or re-construction of a business already in existence.
❖ Only 20% old plant & machinery allowed. Second hand imported machinery shall be treated as new.
❖ Required to opt in first year itself. If not opted for this section in the first year, then will become ineligible to opt in
subsequent years.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.18

Restrictions for the company opting for 115BAA & 115BAB:

o Deduction u/s 10AA
o 80IA to 80RRB (except 80JJAA)
o Section 32AD, 33AB, 33ABA, 35AD, 35CCC, 35CCD
o Additional depreciation under section 32(1)(iia)
o Set off of brought losses

9. HEALTH & EDUCATION CESS (HEC): HEC @ 4% on income tax and surcharge (if any) shall be applicable in all cases.

10. MARGINAL RELIEF: The additional tax payable, including surcharge, on the excess of income over ₹ 50 lakhs/₹ 1
crore cannot exceed the income in excess of ₹ 50 lakhs/₹ 1 crore as the case may be.

11. ROUNDING OFF:

o The amount of total income shall be rounded off to the nearest multiple of ten rupees u/s 288A.
o Any tax payable or refund due shall be rounded off to the nearest multiple of ten rupees u/s 288B.

MAXIMUM MARGINAL RATE AND AVERAGE RATE OF INCOME TAX

Section 2(29C) defines “Maximum Marginal Rate” to mean the rate of income tax (including surcharge, if applicable) in
relation to the highest slab of income in the case of individual, AOP, BOI as specified in Finance Act of the relevant year.

Section 2(10) defines “Average Rate of income – tax” which means the rate arrived at by dividing the amount of income –
tax calculated on the total income, by such total income.

Q 17: Where the total income of an artificial judicial person is 4,50,000, the income tax payable is ………….. and surcharge
payable is ……………
(a) ₹ 10,400; nil (c) Nil; nil
(b) ₹ 1,40,400; ₹ 6,750 (d) ₹ 20,800; nil [Ans: (a)]

Q 18: In case of a domestic company whose gross receipts for the PY 2020-21 is ₹ 451 lakhs, the rate of tax applicable for
AY 2023-2024 i.e. PY 2022-2023 will be:
(a) 25% (c) 29%
(b) 30% (d) 40% [Ans: (a)]

Q 19: Income of Mr. Shaw (non-resident) (Age – 68 years) is 9,40,000. Compute his tax liability.
(a) ₹ 1,44,500 (c) ₹ 1,01,920
(b) ₹ 1,50,280 (d) ₹ 1,04,520 [Ans: (d)]

Q 20: The term “Income” has been defined u/s

(a) 2(31) (c) 2(9)
(b) 2(24) (d) 2(7) [Ans: (b)]

Q 21: Which of the following is not an assessee?

(a) Mr. Lakhan (resident), aged 32 years having income of ₹ 4,92,000
(b) Ms. Shivani (resident), aged 60 years having income of ₹ 5,03,000
(c) Mr. Kumar (non-resident), aged 61 years having income of ₹ 2,92,000
(d) AB & Sons (HUF), Karta’s age 83 years having income of ₹ 3,51,000 [Ans: (a)]

Q 22: Compute the tax liability in the following cases: (ignore 115BAC)
(a) Mr. Indra (resident), aged 28 years having salary income of ₹ 4,65,000.
(b) ABC Ltd., foreign company having turnover in the P/Y 2020-21 of ₹ 365 crores – ₹ 4,90,00,000.
(c) Lotus Co-operative Society – ₹ 6,81,000.
(d) SS & Sons (HUF), Karta’s age 71 years is a resident – ₹ 62,98,000.
(e) Mr. Shiva (non-resident), aged 63 years having business income of ₹ 2,80,00,000.
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.19

Sol 22: Computation of tax liability:

(a) Mr. Indra (resident), aged 28 years having salary income of ₹ 4,65,000
First ₹ 2,50,000 Nil
Remaining ₹ 2,15,000 @ 5% ₹ 10,750
₹ 10,750
Less: Rebate u/s 87A (₹ 10,750 or ₹ 12,500 whichever is lower) ₹ 10,750
Tax liability Nil

(b) ABC Ltd., foreign company having turnover in the P/Y 2020-21 of ₹ 365 crores – ₹ 4,90,00,000.
Flat rate @ 40% on total income ₹ 1,96,00,000
Add: Surcharge @ 2% ₹ 3,92,000
₹ 1,99,92,000
Less: Health & Education Cess @ 4% ₹ 7,99,680
Tax liability ₹ 2,07,91,680
Note: The turnover of P/Y 2020-21 is irrelevant for a foreign company. Flat rate of 40% shall be applicable irrespective of
the turnover.

(c) Lotus Co-operative Society – ₹ 6,81,000

First ₹ 10,000 @ 10% ₹ 1,000
Next ₹ 10,000 @ 20% ₹ 2,000
Remaining ₹ 6,61,000 @ 30% ₹ 1,98,300
₹ 2,01,300
Add: Health & Education Cess @ 4% ₹ 8,052
Tax liability ₹ 2,09,352 (rounded off to ₹ 2,09,350)

(d) SS & Sons (HUF), Karta’s age 71 years is a resident – ₹ 62,98,000

First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 52,98,000 @ 30% ₹ 15,89,400
₹ 17,01,900
Add: Surcharge @ 10% ₹ 1,70,190
₹ 18,72,090
Add: Health & Education Cess @ 4% ₹ 74,883.60
Tax liability ₹ 19,46,973.6 (rounded off to ₹ 19,46,970)

(e) Mr. Shiva (non-resident), aged 63 years having business income of ₹ 2,80,00,000
First ₹ 2,50,000 Nil
Next ₹ 2,50,000 @ 5% ₹ 12,500
Next ₹ 5,00,000 @ 20% ₹ 1,00,000
Remaining ₹ 2,70,00,000 @ 30% ₹ 81,00,000
₹ 82,12,500
Add: Surcharge @ 25% ₹ 20,53,125
₹ 1,02,65,625
Add: Health & Education Cess @ 4% ₹ 4,10,625
Tax Liability ₹ 1,06,76,250
CA SHREY RATHI INTRODUCTION TO INCOME TAX 1.20

QUICK REVISION BEFORE EXAMS

Section Particulars
Tax: Compulsory charge by Government. There are 2 types of taxes: Direct – levied on income (burden can’t
be shifted) & Indirect Taxes – levied on goods & services (burden shifted)
4 Basis of Charge: Total income (5 heads + clubbing – set off of losses – deductions) of P/Y is of every person is
taxable in A/Y at the relevant rates of A/Y 2023-24.
5 cases where income is assessed in the same year:
1. Income of NR from shipping business.
2. Assessment of persons leaving India.
3. Income of bodies formed for short period.
4. Transfer of property to avoid tax
5. Income from a discontinued business.
2(7) Assessee: A person paying tax under Income Tax Act 1961 and includes:
1. Any person against whom any legal proceedings are taken;
2. A person deemed to be an assessee
3. Assessee in default
Constitutional Provisions: Article 246 empowers CG + SG to make laws.
3 list in in seventh schedule to article 246
1. Union List – Power with CG. Entry No. 82 has empowered the CG to levy tax on all incomes except
agricultural income.
2. State List – Power with SG
3. Concurrent List – Power with CG + SG
Rates of taxes for A/Y 2023-24: Refer Page 1.5

NOTES FOR STUDENTS

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