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DIRECT TAX
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DOMBIVLI SHIKSHAN PRASARAK MANDAL’S
K.V. PENDHARKAR COLLEGE OF ARTS, SCIENCE AND
COMMERCE (AUTONOMOUS), DOMBIVLI (E)
RITIKA RAVINDRA SONAR
T.Y.B.M.S
B – 234738
SUBJECT : DIRECT TAX
GUIDED BY
BHAGYASHREE MA’AM
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DIRECT TAX
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RESIDENTIAL STATUS
Under Income Tax, the residential status of a person is one of the most important criteria in determining the
tax implications. The residential status of a person can be categorized into:
•Resident and Ordinarily Resident (ROR),
•Resident but Not Ordinarily Resident (RNOR) and
•Non- Resident (NR)
Resident
A resident taxpayer is an individual who satisfies any one of the following conditions:
•Resides in India for a minimum of 182 days in a year, or
•Resided in India for atleast 365 days in the immediately preceding four years and for a minimum of 60
days in the current financial year.
Non-Resident
An individual who does not satisfy the basic conditions of resident can be considered as a non-
resident.
Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR)
There is a further classification under the resident status – Resident and Ordinarily Resident
(ROR) and Resident but Not Ordinarily Resident (RNOR).
In addition to the basic conditions, if both the below conditions are met, he will be a ROR:
•He has resided in India for at least 2 out of 10 immediate previous years.
•He has resided in India for at least 730 days in 7 immediately previous years.
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RESIDENTIAL STATUS
Ms Ritika is an individual born in India and stayed in India . She never went out of India. Determine her
residential status for the assessment year 2023-24
Ms Ritika is an individual.
Ms Ritika is said to be an resident of India if she satisfies either of the 2 set of condition mentioned under sec (1) of
income tax act 1961.
Set 1 Ms Ritika must be in India for the period of 182 days or more during the relevant previous year.
OR
Set 2 (a) Ms Ritika must be in India for the period of 60 days or more during the relevant previous year.
AND
(b) Ms Ritika must be in India for the period of 365 days or more during 4 year preceeding the previous year.
Residential Status : Ms Ritika being an individual satisfies both sets of condition as she was in India since birth and
never left.
Hence, Ms Ritika is a resident of India under sec 6(1) of income tax act 1961
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INCOME FROM HOUSE PROPERTY
While income from employment is taxed under the salaries,
income from house property is taxed under the head “income
from house property”. Sections 22 to 27 deal with the
computation of income from house property.
S.22 Lays down what is taxable under this head.
S.23 States how the gross taxable amount, known as annual value,
is computed
S.24 Lists the deduction allowed from the annual value to
determine the taxable amount
S.25 Lists the items which are not deductible.
S.26 Deals with the situation where the house property is jointly
owned by more than one person
S.27 Contains definitions of relevant terms such as “owner” etc.
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TYPES OF HOUSE PROPERTY
1. Let out house property rent
The term let-out property refers to a property leased or rented to a tenant. Let-out properties could be
residential such as apartments or houses as well as commercial like office space or retail space.
2. Self occupied house property for own
A self-occupied house property is used for one’s own residential purposes. A vacant house property is
considered as self-occupied for the purpose of Income Tax.
3. Partly let out house property for both
Where a house property is let out for part of the year and self-occupied for the remaining part of the year, or any other
benefit therefrom is derived by the owner, then such a property will come under this category. Similarly, where one
portion (part) of a unit is let out and the remaining portion is self–occupied, then also it shall be regarded as falling
under this category.
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ILLUSTRATION
Ritika owns a house property which was occupied by her for the purpose of
her residence. she was transferred to Bangalore in June 2022 and therefore
she let out the property with the effect from July 1 2022 on a month rent of
Rs 4000 the municipal tax payable in respect of property @20 % of the
rateable value was Rs 8000 of which 50 percent was paid by her before
March 31 2023 . Fair rent of the property is Rs 30000. Interest on money
borrowed for the construction of the property amounted to Rs 30000 compute
the income from house property for the assessment year 2023 24 in tabular
form
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Individual AY 2023-24
ROR Ms Ritika PY 2022-23
1 Gross Annual Value
(a) Fair Rent 30000
(b) Municipal value 32000
Higher 32000
(c) Actual Rent 36000
Goss Annual Value 36000
Less : municipal tax 4000
Net Annual Value 32000
Less : Deduction u\s 24
(a) standard deduction 9600
( 30% of NAV)
(b) Interest payable 30000 39600
Total income from house (-7600)
property
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ITR PRACTICAL
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SALARY
A salary is a form of fixed compensation given to a person for performing work during a specified period. However, in
income tax, the definition of salary also includes various other forms of payments offered by the employer to the
employee.
Sub-section(1) of Section 17 of the Income Tax Act provides an inclusive definition of “Salary”. It is a much broader
term than it is usually understood. In a financial year, the amount received by the employee from his employer in any of
the following forms will be considered “Salary” for income tax purposes:
Wages- A sum of money paid under contract by the employer to the employees for services rendered is called
wages.
Annuity or Pension – Annuity or pension is the payment received from the previous or present employer after
attaining retirement. It may be a payout from the pension plans created by the employer.
• Annuity received from a present employer is taxed as ‘Salary’.
• Annuity received from a previous employer is taxed as ‘Profits in lieu of Salary’.
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Profits in lieu of Salary or Wages- These payments include:
• Employment termination compensation or employment terms modification compensation.
• Payment due or received from an unrecognized provident fund or an unrecognized superannuation fund to
the extent of contribution by the employer and interest on the employer’s contribution.
• Payments from the keyman insurance policy and the sum allocated as a bonus on such policy.
• Any amount received from any person before joining or after cessation of the employment is also termed as
‘profits in lieu of salary’.
Gratuity- A lump-sum amount voluntarily paid by the employer to the employee as a token of appreciation for the
services rendered to the organization is gratuity. The concept of gratuity is statutorily recognized under The Payment
of Gratuity Act, 1972.
Fees- An amount received as fees to the employee from the employer for the services rendered is included in the
definition of salary.
Commission- Any amount of commissions given to the employee for the services provided shall form part of the
salary. If the employee receives a fixed commission as a percentage of the sales or profits, it shall be considered
salary.
Perquisites- Perquisites are additional benefits received over and above the salary due to the employee’s official
position. It may be provided in cash or kind.
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The advance Salary- Payments received in a financial year are advance salary payments before the year they are
actually due. A loan taken by the employer is not an advance salary.
Leave encashment- The government and some private employers compensate employees for the accumulated
leaves. They can give the payment during the service or after retirement or resignation. The payment received for
encashment of leaves un availed during the service period will form part of the salary.
Employee Provident Fund- Contributions by the employer exceeding 12 percent of salary or the annual interest
exceeding the rate notified by the Central Government (FY 2021-22 EPF interest rate is 8.1%) on balance to the
credit of an employee’s recognized provident fund.
Transfer PF balance- The taxable portion of the transferred balance from an unrecognized provident fund to a
recognized provident fund will be considered salary.
National Pension Scheme (NPS)- A contribution made by the Central Government or any other employer in a
financial year in an employee’s account under National Pension Scheme (NPS) will form part of the salary.
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IILUSTRATION
Ms Ritika is working as a financial analyst in upstox
1. Monthly salary Rs 60000
2. House Rent allowance Rs 4500 p.m ( of which 2000 is exempt)
3. Travelling allowance Rs 2500
4. Bonus Rs 3500
5. Dearness Allowance Rs 1000 p.m
6. Taxable Conveyance Allowance Rs 3200
7. Professional tax Rs 3000
Compute the net salary for the assessment year 2023-24
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ILLUSTRATION
PARTICULARS AMOUNT AMOUNT
Basic Salary 60000
House Rent Allowance 54000
Less : exempt 24000 30000
Travelling Allowance 2500
Bonus 3500
Dearness Allowance 12000
Taxable conveyance 3200
allowance
Gross Salary 110200
Less : deduction u\s 16
(a) standard deduction 50000
(b) professional tax 3000 53000
Income from Salary 57200
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ITR PRACTICAL
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THANK YOU
