1.

Heads of Income:

As per Sect 14 of Income Tax Act all the income shall for the purpose of Income tax
and computation of total income be classified under the following heads of income
1) Income from Salaries
2) Income from House property
3) Income from profits and gains of business or profession
4) Income from capital gains
5) Income from other sources

Income from Salaries:

Sect 15-17 of the Income Tax act covers the head of Income from salaries

Chargeability: (Sect 15)

Following income shall be chargeable to income tax under the head salaries
 Any salary due from employer or former employer to an assessee in the previous
year (normal salary)
 Any salary paid to him in previous year by employer or former employer which is
not due (advance salary)
 Any arrears of salary paid to him in previous year by employer or former
employer which is not charged to income tax in previous year (arrear salary)
Important concepts under this section:
 Charged either on due basis or receipt basis whichever is earlier
 If salary taxed on due/receipt basis it will not be taxed again on receipt/falling
due
 Between payer and payee there shall be a relationship of employer and
employee. The employment may be full or part time. The relationship shall be
that of master and servant. i.e., salaries of MP/MLA are charged under head of
income from other sources

Meaning of Salary: (Sect 17(1))

Inclusive definition. It covers 1) wages 2) annuity or pension 3) gratuity 4)
fee/commission/perquisites/profits in lieu of salary 5) leave encashment 6) advance
salary 7) annual bonus 8) allowances 9) awards 10) income from PF

Allowances: (Sect 17(3))

 Means the fixed sum paid by employer to employee to meet official or personal
expenses
 Diff types of allowances are given to employees to meet specific requirements
like rent, expenses on uniform, conveyances etc.
 These allowances are taxable and are included in gross salary unless a specific
exemption has been provided

Perquisites: (Sect 17(2))

 Benefits or amenities in cash or in kind or in money or in money worth and also
amenities which are not convertible into money provided by employer to
employee whether free of cost or at concessional rate.
 Their value to the extent these go to reduce the expenditure that the employee
normally would have otherwise incurred in obtaining these benefits and
amenities is regarded as part of taxable salary
 3 types – perquisites taxable for all, perquisites exempt, perquisites taxable only
for specified employee

Profit in lieu of salary: (Sect 17(3))

 Payment received by employee in lieu or in addition of salary or wages
 1. Terminal compensation towards termination or modification of terms of
employment 2. Payments from unrecognized PF or unrecognized superannuation
fund 3. Payment under Keyman insurance policy 4. Amount due or received
before joining or after cessation of employment

Deductions from Salaries: (Sect 16)

 Standard deduction
 Entertainment allowance for gov employee
 Professional tax

Income from House Property:

Sect 22-27 of the Income Tax act covers the head of Income from House property.
This is the only head under the IT Act where charge is on notional basis, and not on
actual receipt of income, but inherent power of the house property to generate
income.

Chargeability: (Sect 22)

 The annual value of property consisting of any buildings or lands appurtenant
there to of which the assessee is the owner shall be subject to tax under this
head.
 Essential conditions
1. The property must consist of buildings and land appurtenant thereto
2. The assessee must be the owner of such property
3. Property may be used for any purpose but should not be used by the owner
for purpose of business or profession
4. Ownership includes both freehold and lease-hold rights and also includes
deemed ownership

Property income exempt from tax:

 Farm house income used for agriculture purpose
 Palace of ex-ruler
 Property income of local authority
 Property income of approved scientific research association
 university/education institution
 hospital/medical institution
 trade union
 House property held for charitable/religious purpose (Sec.11)
 Property income of political party
 Property income of property used for own business /profession
 One self-occupied property

Types of Property:
a) Let out property – property rented by the owner for the whole previous year
b) Self-occupied property – property occupied by the assessee for his own except
for business
c) Deemed let out property – if the Self-occupied property of the assessee is more
than two then the property apart from two property which is declared as Self-
occupied property is deemed let out property
d) Partly let out and partly SOP - House property is partly let out for part of the year
and self-occupied for remaining part
e) Only one house owned and kept vacant - If the assessee owns only one house
which is kept vacant because he has to reside elsewhere due to his
employment/profession
f) Property owned by co-owners (Sect 26)- two or more persons jointly own a
property and their shares are definite and ascertainable

Computation of tax liability: (Sect 23)

a) Let out property - Annual value is the sum for which the property might
reasonably be expected to let out from year to year.
b) Self-occupied property– Annual value for the self-occupied property is NIL with
conditions 1. Property is not actually let out during any part of previous year 2.
No other benefits derived from it
c) Deemed let out property - Annual value for the deemed let out property is
similar to that of let out property
d) Partly let out and partly SOP – Annual value is determined for entire property as
if the whole has been let out excluding SOP period
g) Only one house owned and kept vacant - annual value is taken as NIL
e) Property owned by co-owners - Co-owner is entitled for the concessional
computation relating to one SOP with reference to his share of property under
his occupation.

Deductions: (Sect 24)

 Sum equal to 30% of annual value (only for let out property)
 Property has been acquired, constructed, repaired, renewed or reconstructed
with borrowed capital, the amount of any interest payable on such capital
 Municipal taxes borne by assessee and actually paid in previous year

Income from business/profession:

 Sect 28-44 of the Income Tax act covers the head of Income from
business/profession
 Sect 2(13) – business includes any trade, commerce, manufacture or any
adventure or concern in nature of trade/commerce/manufacture
 Sect 2(36) – occupation requiring purely intellectual or manual skills. Also
includes vocation

Chargeability: (Sect 28)

 Profits and gains from any business or profession
 Compensation received in connection with termination or modification of
contract relating to management affairs of company or agency for business
 Income earned by association from specific service performed for its members
 Income derived from sale of an import license or any export incentive
 Income from speculative transactions
 Value of perquisites arising from business/profession
 Interest, salary, bonus, commission or renumeration received by partner from
partnership firm
 Sum received from keyman insurance policy
 Any other income which is in nature of business income or professional income

Computation of income: (Sect 29)

 Computation shall in be in accordance with allowances and deductions provided
in Sect 30 to 43D
 Expenses will be allowed as deduction from gross receipts only if they have
incurred in the relevant previous year.
 The balance of profit remaining after claiming all the allowable expenses as
deduction will be taxable income

Allowable Expenses:
 Rent, rates, taxes, land revenues, municipal taxes, repairs and insurances of
buildings used by assessee (Sect 30)
 Repairs and insurance of plant, machinery and furniture (Sect 31)
 Depreciation of fixed assets (Sect 32)
 Tea development accounts, coffee development account and rubber
development account (Sect 33AB)
 Expenditure on scientific research (Sect 35)
 Donation for social welfare projects (Sect 35 AC)
 Donation for rural and urban development (Sect 35 CCA)
 Donation for environmental purposes
 Preliminary expenses incurred by assessee prior to commencement of business.
1/5th of total expenses are allowed as deduction for each year for five year
starting from year in which business commenced (Sect 35 D)
 Amortization of expenditure in case of amalgamation or de merger (Sect 35 DD)
 Expenses on prospecting for, extraction or production of specified minerals (Sect
35 E)
 Other deductions (Sect 36)
 General Deductions (Sect 37)

Income from capital gains:

 Any profit or gain from transfer of capital assets effected during the previous
year is chargeable under this head
 Sect 45 to 55A of the Income Tax act covers the head of Income from capital gain
 Sect 2(14) – capital asset means property of any kind held by the assessee
whether or not connected with business/profession but does not include
1. Any stock in trade, consumable or raw material
2. Personel effect held for personal use
3. Rural agricultural land
4. Special bearer bonds 1991
5. Gold bonds 1977, 1980 and national defense bonds 1980
6. Gold deposit bond under gold deposit scheme 1999
 Capital assets include 1. Immovable property 2. Art/drawing/painting 3. Jewelry
4. Agricultural land in urban area 5. Agricultural land outside India

Chargeability: (Sect 45)

 There must be capital asset
 The capital asset must have been transferred
 There must be profit or gain on such transfer which will be known as capital gain
 Such capital gain should not be exempt u/s 54 to 54 GA
Taxation of capital gains depends on 2 factors capital assets and transfer

Short term capital asset: (Sect 2(42A))

 Capital asset held by assessee for not more than 36 months immediately
preceding the date of its transfer is short term capital asset
 Following capital is treated as short term assets if they are held for not more
than 12 month
1. Equity or preference share held by company
2. Any other security listed in recognized stock exchange
3. Unit of UTI or specified Mutual funds
4. Zero coupon bond

Long term capital asset: (Sect 2(29A))

 Capital asset which are not short-term capital asset

Computation of capital gain: (Sect 48)

Full value of consideration
Less (a) expenditure incurred wholly and exclusively In connection with such a
transfer
(b)cost of acquisition
(c) cost of improvement
= Gross short term capital gains
Less exemption if available u/s 54B/54D/54G/54GA
= TAXABLE SHORTTERM CAPITAL GAINS

Full value of consideration

Less (a) expenditure incurred wholly and exclusively In connection with such a
transfer
(b)indexed cost of acquisition
(c)indexed cost of improvement
= Gross long term capital gains
Less exemption if available u/s 54B/54D/54EC/54F/54G/54GA
= TAXABLE LONGTERM CAPITAL GAINS
Exemption under capital gain:
 Exemption on sale of house property on purchase of another house property
(Sect 54)
 Exemption on capital gain from transfer of land used for agricultural purpose
(Sect 54B)
 Exemption on transfer of land and building which is used for industrial
undertaking (Sect 54D)
 Exemption on sale of house property on re investing in specific bond (Sect 54EC)
 Exemption on sale of any asset other than House property (Sect 54F)
 Exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area. (Sect 54G)
 Exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area to any Special Economic Zone. (Sect 54GA)

Income from other sources:

 Sect 56 to 59 of the Income Tax act covers the head of Income from other
sources

Chargeability: (Sect 56)

 Income of every kind which is not to be excluded from the total income under
this Act, shall be chargeable to income under this head, if it is not chargeable to
tax under any of the first four heads specified in Sec.14.
 The following conditions are to be fulfilled to be taxed under this head
1. There must be an income
2. Such income is not exempt under the provisions of this Act.
3. Such income is not chargeable to tax under any of first four heads namely,
"income from salary" "income from house property" "income from profits
and gains of business or profession" "income from capital gains"
4. Income from other source is a residuary head of income

Income falling under Sec. 56 (1):

 Agricultural income from outside India
 Salary of M.P
 Family pension received by family member of deceased pensioner
 Interest on bank deposits
 Sub-letting income
 Casual income
 Income from undisclosed sources

Specific income included under this head- Sec.56(2):

There are many income which are taxable under this head. Some of them are
• Dividends
•Winning from lotteries, cross-word puzzles, races, card games and other games or
from gambling/ betting
• Any sum received by assessee from his employees as contribution to any PF or any
welfare fund
 Income by way of interest on securities
  Income from machinery/ plant/furniture let out on hire
 Any sum received under Keyman insurance policy
 Any sum of money aggregate value of which exceeds Rs.50,000 received without
consideration by an individual/HUF from any person

Deductions (Sec. 57):

 Commission paid for receiving dividend against interest on securities
 Repairs/depreciation in relation to plant &machinery
 Standard deduction- family pensionuptoRs.15,000/-
 Expenses for earning income - in or in relation

2. Clubbing of Income
 Generally tax is levied on the income of the assessee, but in certain cases and
circumstances the rule may not be relevant or applicable. The law deviates From
this general proposition and provides that income of certain other persons
should also be included in the assesee's total income under specified
circumstances. These provisions are to prohibit the tendency on the part of some
assesses to dispose of their property or income to avoid tax liability
 When the income of another person is included in your income and taxed in your
hands, then such a situation is called Clubbing of Income. The income clubbed in
your income is called deemed income. The provisions of clubbing of income are
applicable only to individuals and no other type of assessee like
firm/HUF/Company, etc.
 The concept of Clubbing of income is enshrined in Section 60 - 64 of the Income
Tax Act, 1961. Section 64 of the act lays down various cases in which income of
dependents like spouse, children etc. would be clubbed with the individual's total
taxable income.
 The various provisions which govern the clubbing of income are
1. Section 60 - Transfer of Income without Transfer of Asset
2. Section 61 - Revocable Transfer of Asset
3. Section 64(1)(ii),64(1)(iv),64(1)(vii) - Clubbing of Income of Spouse
4. Section 64(1)(vi),64(1)(viii) - Clubbing of Income in case of Son’s Wife
5. Section 64(1A) - Clubbing of Income of Minor Child [Less than 18 years] and
an exemption of Rs.1500 is allowed to the parent.
6. Section 64(2) - Clubbing of Income & HUF

Transfer of Income without Transfer of Asset [Section 60]:

 Under section 60 where the assessee transfers to another person some income
but without the transfer of assets producing that income, such an income shall
not be the income of the transferee but it shall be chargeable to income-tax as
the income of the transferor and shall be included in his gross total income.
 Such a transfer of income may be revocable or irrevocable and whether effected
before or after the commencement of this Act.
 The most popular example that we see is the rental income when the owner of
the property asks his tenant to make the rental payments in his/her
parent’s/wife’s or children's name.

Revocable transfer of assets [Section 61]:

 All incomes arising to any person by virtue of a revocable transfer of assets shall
be chargeable to income-tax as the income of the transferor and shall be
included in his total income.
 Section 63 has defined the words 'transfer' and 'revocable transfer' as under:
(a) A transfer shall be deemed to be revocable if :
1. it contains any provision for the re-transfer directly or indirectly of the
whole or any part of the income or assets to the transferor, or
2. it, in any way, gives the transferor a right to reassume power directly
or indirectly over the whole or any part of the income or assets.
(b) Transfer includes any settlement, trust, covenant, agreement or
arrangement.
 For instance, Karan transferred his house property to Arjun. There is a condition
in the agreement that the asset will transfer back to Karan after 2 years. Now, as
per clubbing of income, any income arising to Arjun from such house during 2
years will be included in Karan’s income only.

Specified revocable transfers excluded from clubbing provisions [Section 62(1)]:

 The provisions of section 61 shall not be applicable in the case of following
revocable transfers:
1. If the transfer is by way of trust which is not revocable during the life time of
the beneficiary, or
2. If transfer is otherwise than by way of trust and is not revocable during the
life time of the transferee, or
3. If transfer is made before the 1st day of April 1961, which is not revocable for
a period exceeding 6 years.
 The income by way of the above 3 cases, is treated as the income of transferee
and shall not be clubbed with the income of the transferor. The above exception
are applicable provided the transferor derives no direct or indirect benefit from
such income.

Clubbing of Income of Spouse [Section 64(1)(ii), 64(1)(iv), 64(1)(vii)]:

 If an individual has got a substantial interest in any company or concern, then
any income accruing to the spouse of such individual from that
concern/company shall be included in the income of the individual having
substantial interest in such concern.
 The income to the spouse be by way of salary, bonus, commission, fee or any
other remuneration.
 Substantial interest means
1. In case of company. A person having at least 20% of equity shares carrying
voting rights.
2. In other cases. A person entitled to at least 20% of the voting power of the
concern.
 However, If above income derived by the employed spouse from such concern is
due to his/her knowledge, technical qualification or professional qualification or
work experience etc, it shall not be clubbed with the income of the spouse
holding substantial interest. In other words, the income shall be taxable in the
hands of employed spouse.
 If Both spouses hold substantial interest in the same concern: In this case, such
income of a spouse shall be clubbed with the income of the spouse having higher
income.
 If an individual transfers any asset (other than house property) to his/her spouse
without adequate consideration then any income arising from such asset to the
spouse shall be included in the total income of the individual transferring that
asset.

Clubbing of Income in case of Son’s Wife [Section 64(1)(vi),64(1)(viii)]:

 Any income accruing from asset which is transferred after 1-6-1973 to daughter-
in-law without adequate consideration shall be considered to be the income of
transferor.
 While computing the total income of any individual there shall be included such
income as arises directly or indirectly to any person or association of persons
from assets transferred otherwise than for adequate consideration to the person
or association of persons by such individual to the extent to which the income
from such assets is for immediate or deferred benefit of his her spouse.
 It simply means that when assets are transferred without adequate
consideration to some person or association of persons, the ultimate benefit of
which shall be of the spouse of the transferor, the income from such assets is
considered to be the transferor's income and so added in his total income.
 Where an asset is transferred by an individual, directly or indirectly without any
adequate consideration to a person or association of person for the
immediate/deferred benefit of his/her daughter-in-law, the income arising from
the transferred asset shall be included in the total income of the transferor to
the extent of such benefit.

Clubbing of Income of Minor Child [Less than 18 years] [Section 64(1A)]

 Any income of a minor shall be clubbed with the income of that parent whose
other income is higher (if marriage of the parents persists) or is the income of
that parent who maintains such minor child (if marriage of parents does not
persist).
 The above provision is not applicable on any income of a minor which accrues or
arises due to
1. manual work done by minor child or
2. activity involving application of his skill talent specialised knowledge and
experience and
3. Income of a minor child who is suffering from any of the disabilities
specified u/s 80 U, shall not be clubbed.
 U/s 10 (32), in case any income of minor child is clubbed with the income of
either parent, such parent can claim an exemption of income so clubbed or 1,500
whichever is less.
 Clubbing of Income & HUF [Section 64(2)]
 In a case where an individual (who is a member of the HUF),
1. Converts his separate property as the property of the HUF, or
2. Throws the property into the common stock of the family, or
3. Otherwise transfers his individual property to the family, for inadequate
consideration, then the income resulting from such transferred property shall
continue to be clubbed in the total income of the individual.

3. Supply under GST

 Supply under GST is mentioned in Sect 7 of Central Goods and Service Tax Act
2017.

Sect 7 states that supply included

Subsection 1
 Clause A
1. Goods and services or both
2. As sale, transfer, barter, exchange, licence, rental or disposal
3. Made or agreed to be made
4. For consideration
5. In the course or furtherance of business
 Clause B - Import of service for consideration whether or not in the course or
furtherance of business
 Clause C - Activities in Schedule I made without consideration

Subsection 1A
 Activities in subsection 1 considered as Supply of goods or Supply of service as in
Schedule II

Subsection 2
 Activities mentioned in Schedule III
 Activities undertaken by CG or SG or LG notified shall be treated neither as a
supply of goods nor a supply of services.

Subsection 3
 Gov specifies by notification on recommendation of council
o a supply of goods and not as a supply of services; or
o a supply of services and not as a supply of goods

Goods: Sect 2(52)

 Movable Property and included
1. Actionable claim like unsecured liability and lottery
2. Growing crops severed before supply
 Excludes money and securities

Services: Sect 2(102)

 Other than goods the activities carried out for consideration, excluding the
transfer of goods or ownership.
 It also includes
1. Use of money
2. Conversion of money by cash, by any other mode from one form/currency
with consideration

Following are the 6 different types of supply as defined in the Act:

• Sale: It refers to the transfer of property irrespective of its specifications. In terms
of consideration, the sale may include cash or deferred payments. Basically, it is
defined as a transfer of property in goods for cash or transfer of rights to use any
good.
• Transfer: It normally refers to the transfer of property by which an individual can
convey his property in any given time period to other individuals or to himself.
• Barter: This involves the exchange of one commodity for another. It also includes
swapping, parting ways with or transferring for an equivalent amount of cash, etc.
• Exchange: This refers to commodity exchanges, and the GST value is calculated on
the original price or valuation of the goods and not the remaining amount after
exchange.
• License: When business entities obtain special privileges like licences, mining
rights, and natural resource extraction rights against payment of fees or royalties, it
is considered a license.
• Rental: Rental income consists of payments for renting out commercial or
residential complexes. Normally, the GST Act states that no GST shall be calculated
on rent.

Consideration: Sect 2(31)

 Payment given for supply of goods and service
 Money value of act or forbearance
 Deposit adjusted in transaction
 But Subsidy given by Government is not consideration

In the Course or Furtherance of Business:

 The supply must be made in the course or furtherance of business.
 This means that the transaction should be part of the regular business activities
or operations of the supplier.
 Personal transactions, or those not related to the business’s commercial
activities, do not qualify as taxable supplies. This principle ensures that only
business-related transactions are taxed under GST.

Schedule I of the GST Act: Supply without consideration

Schedule I outlines activities that are deemed as supplies even if no consideration is
involved. This schedule includes:
 Permanent Transfer of Business Assets: When a business asset is permanently
transferred to another person or entity, it is treated as a supply. It is considered
as supply because the Input tax credit is happened during the purchase of
business asset
 Supplies Between Related Entities: Transactions between related persons or
entities, such as intra-group transfers, in the course or furtherance of business
are considered supplies.
 Supplies between principle and agent: Transaction between principal and agent
in the course of business are considered as supplies
 Imports of Services from Related Parties: When services are imported from
related parties, these are deemed supplies even if no consideration is directly
involved.
These provisions ensure that certain transactions are captured under GST,
preventing avoidance through non-monetary exchanges.

Schedule II of the GST Act: Activities considered as a supply of goods

 Transferred or disposed of business assets with or without consideration.
 Transfer of title of goods. This included transfer of title in future date also
 The owner's business assets will be deemed to have been provided to him in the
course of his business if he becomes non-taxable.
 Unincorporated associations providing good to its members
 The following situations do not apply to this: a. Business is transferred to another
individual; b. Business is carried out by a taxable representative

Schedule Il of the GST Act: Activities considered as a supply of services

Land and building
 Tenancy, easement, lease, rent, and permission to occupy land
 Leasing or renting out the building (which consists of a commercial, industrial
and residential complex for full or partial business usage)

Transfer of business assets

 Construction of a structure or complex meant to be sold in whole or in part to a
buyer
 Permitting the use of intellectual property rights or transferring them
temporarily
 Immovable property rental (residential rentals are GST-exempt)
 Creation of software for information technology
 Non-competition agreements
 Transfer of any good's usage rights in exchange for money
 A supply of services is any procedure or treatment used on someone else
property
 Business asset used for private purpose
 In composite supply work contract and catering service

Schedule III of the GST Act: Activities considered neither as sale of goods nor as a
supply of services
 Services provided to the employer by an employee
 Services given by a court or tribunal
 Services rendered by a funeral home, cemeteries, or mortuaries, including the
conveyance of the deceased
  The Chairperson, Member, or Director of a body established by the federal
government, state government, or local authority
 The MP, MLA, MLC, and Members of Local Bodies
 Sales of Land and Buildings
 Duties performed by any person who holds any post in accordance with the
provisions of the Constitution in that capacity
 Actionable claims that don't involve lotteries, wagering, or gambling
 Supply of goods from one location within the non-taxable territory to another
location within the non-taxable territory without the goods entering India
 Supply of goods in storage to any individual before authorization for domestic
use
 Supply of goods by the consignee to any other individual by endorsing
documents related to the goods, following the goods' departure from the non-
Indian port of origin but before authorization for domestic use

4. Deduction in Income Tax Act

 The scheme of income-tax Act has provided for various tax exemptions and
concessions in three forms, namely.
1. Incomes which are wholly exempt from tax by virtue of their exclusion from
total income under Sections 10 to 13.
2. Incomes which are included in the total income for rate purposes but entitled
for relief under Section 86 and
3. Deductions from gross total income which are allowed for the purpose of
computing total income in respect of payments and in respect of certain
incomes as provided u/s. 80C to 80U
 Income Tax Deductions under Chapter VI A of the Income Tax Act pertain to
reductions in taxable income for individuals or businesses, thereby lowering their
tax liabilities. Sections 80C to 80U of the Indian Income Tax Act offer various
deductions that individuals or companies can claim when calculating their
taxable income. These deductions alleviate tax burdens by allowing eligible
expenses and investments to reduce the total taxable income, resulting in lower
tax obligations.

Deductions in respect of positive income:

 It is to be noted that the deductions from gross total income are available only to
the assessee where the gross total income is a positive figure. If however, the
gross total income is nil or is negative the question of any deductions from gross
total income does not arise.
 Gross total income' means the total income of an assessee computed in
accordance with provisions of the income tax Act before making deductions u/s.
80C To 80U. (i.e Gross total income after excluding long term capital gains, short
term capital gain on sale of listed shares and winnings from lotteries, races, etc.)
 However, the aggregate amount of the deductions shall not exceed the gross
total income of the assessee.

Nature of deductions:
 At the outset, it may be noted that deductions Under Sections 80 can be
classified as
(a) Deductions in Respect of certain payments
(b) Deductions in respect of certain incomes
(c) Deductions in respect of other incomes
(d) Other deductions

Basic rules of deductions (Sec.80A/80AB/ 80AC)

1. deductions not to exceed gross total income
2. deductions not allowed to member if allowed to AOP/BOI
3. deductions to be claimed by assessee
4. assesee’s duty to place relevant material

Deductions in respect of certain payments:

 80C: Deduction in respect of life insurance premium, deferred annuity,
contributions to provident fund (PF), subscription to certain equity shares or
debentures, etc. The deduction limit is Rs 1.5 lakh together with section 80CCC
and section 80CCD(1).
 80CCC: Deduction in respect of contribution to certain pension funds. The
deduction limit is Rs 1.5 lakh together with section 80C and section 80CCD(1).
 80CCD(1): Deduction in respect of contribution to pension scheme of Central
Government – in the case of an employee, 10 per cent of salary (Basic + DA) and
in any other case, 20 per cent of his/her gross total income in a FY will be tax
free. Overall limit is Rs 1.5 lakh together with 80C and 80CCC.
 80CCD(1B): Deduction up to Rs 50,000 in respect of contribution to pension
scheme of Central Government (NPS).
 80CCD(2): Deduction in respect of contribution to pension scheme of Central
Government by employer. Tax benefit is given on 14 per cent contribution by the
employer, where such contribution is made by the Central Government and
where contribution is made by any other employer, tax benefit is given on 10 per
cent.
 80D: Deduction in respect of Health Insurance premium. Premium paid up to Rs
25,000 is eligible for deduction for individuals, other than senior citizens. For
senior citizens, the limit is Rs 50,000 and overall limit u/s 80D is Rs 1 lakh.
 80DD: Deduction in respect of maintenance including medical treatment of a
dependent who is a person with disability. The maximum deduction limit under
this section is Rs 75,000.
 80DDB: Deduction in respect of expenditure up to Rs 40,000 on medical
treatment of specified disease from a neurologist, an oncologist, a urologist, a
haematologist, an immunologist or such other specialist, as may be prescribed.
 80E: Deduction in respect of interest on loan taken for higher education without
any upper limit.
 80EE: Deduction in respect of interest up to Rs 50,000 on loan taken for
residential house property.
 80EEA: Deduction in respect of interest up to Rs 1.5 lakh on loan taken for
certain house property (on affordable housing).
  80EEB: Deduction in respect of interest up to Rs 1.5 lakh on loan taken for
purchase of electric vehicle.
 80G: Donations to certain funds, charitable institutions, etc. Depending on the
nature of the donee, the limit varies from 100 per cent of total donation, 50 per
cent of total donation or 50 per cent of donation with a cap of 10 per cent of
gross income.
 80GG: Deductions in respect of rent paid by non-salaried individuals who don’t
get HRA benefits. Deduction limit is Rs 5,000 per month or 25 per cent of total
income in a year, whichever is less.
 80GGA: Full deductions in respect of certain donations for scientific research or
rural development.
 80GGC: Full deductions in respect of donations to Political Party, provided such
donations are non-cash donations.

Deductions in respect of certain incomes:

 Section 80JJAA - In respect of employment of new employee
 Section 80RRB - In respect of Royalty on Patents
 Section 80QQB - In respect of Royalty income for authors certain books other
than text books

Deductions in respect of other Incomes:

 80TTA: Deductions in respect of interest on savings bank accounts up to Rs
10,000 in case of assessees other than Resident senior citizens.
 80TTB: Deductions in respect of interest on deposits up to Rs 50,000 in case of
Resident senior citizens.

Other deductions:
 80U: Deduction in case of a person with disability. Depending on type and extent
of disability maximum deduction allowed under this section is Rs 1.25 lakh.

5. Assessment
 According to the provisions of the Income Tax Act 1961, if an individual’s
earnings exceed the basic exemption limit, they must file income tax returns. The
new tax regime sets the basic exemption limit at Rs. 3 Lakhs for individuals under
the age of 60 years. Therefore, any person earning above Rs. 3 Lakhs in a given
financial year, must self-determine their tax liability and file their ITR. Once the
ITR is filed, the income tax department examines the accuracy of the income
details included. This scrutiny and review of ITRs by the income tax authorities is
termed as income tax assessment. Income tax assessment procedures evaluate
the returns filed by the taxpayer under different conditions and provisions.
 Accordingly, there are various types of assessments in income tax.

Types of Assessment:
 Self-Assessment.
 Summary Assessment.
 Regular Assessment
 Scrutiny Assessment.
 Best Judgment Assessment.
 Re-assessment/income escaping assessment

Enquiry before Assessment- Sec.142(1):

1. Giving notice to assessee- Sec. 142(1):
In order to make assessment, the A.O may service on any person a notice u/s 142(1)
for the following purpose
a) return of income:- if the assessee has failed to submit a return of
income with the time allowed u s 139(1) the A.O shall direct the
asseesee to file the return within the time stipulated in notice.
b) Production of documents &accounts:- A.O may ask the assessee to produce or
cause to be produced such books, accounts or documents he may require
c) Furnishing of information:- A.O may ask assessee to furnish in writing information
in such form and on such points/matters he may require which may include
statement of assets/liabilities whether included in the accounts or not

2 . Making enquiry - Sec.142 (2):

In order to get full information as to the income or loss of any person, the A.O may
make such enquiry as he considers necessary

3. Directing assessee to get accounts audited- Sec.142(2A)(2B)(2C) & (2D):

The A.O may direct assessee to get his accounts audited by an Accountant
nominated by the Chief Commissioner/ Commissioner under the following
circumstances
• At any stage of proceedings before A.O
• Having regard to nature and complexity of accounts of assessee and interest of
revenue the A.O is of the opinion to do so.
• Previous approval of Commissioner/ Chief Commissioner obtained
• The directions can be issued even if accounts of assessee have been audited under
any other law.

Self-Assessment: Sec.140A
 Self-assessment means the assessment that one makes on himself. Before
submitting his return an assessee is supposed to find out whether any tax and or
interest is payable
 Under self-assessment an assessee whose total income during the previously
year exceeds the exemption limit is required to pay tax before filing of return.
Later, the return of income along with tax paid challan has to be filed within the
due date.
 After taking into consideration the tax already paid, the assessee shall deposit
amount of tax before submission of return and the return must be accompanied
by proof of payment of such tax. Tax so paid shall be adjusted towards liability as
ascertained on regular assessment.
 If tax paid is less than the amount required to be paid, then the amount will be
first adjusted to interest and balance towards tax...
 If assessee fails to pay the whole or any part of such tax or interest or both in
accordance with the provisions of this Section, he shall be deemed to be
assessee in default in respect of the amount not paid by him

Summary Assessment -Sec.143 (1):-

 The Summary assessment is one where assessment is completed on the basis
of returns submitted by the assessee.
1.Intimation to assessee:-
(a) where interest or tax payable by assessee found due intimation has to be sent
to him specifying the sum payable. Such intimation shall be deemed to be a
notice of demand u/s 156 and all the provisions of the Act will apply.
(b)where tax is refundable to assessee an intimation to be sent
(c) where the return is acknowledged it shall be a deemed intimation
2. Time limit of intimation:-
An intimation u / s 143 (1) should not be sent after expiry of one year from the
end of financial year in which return of income is made.

Scrutiny Assessment- Sec.143(2)and(3):

 Scrutiny assessment can be made if the A.O considers it necessary or expedient
to ensure that the assessee has
(a)understated the income
(b) computed excessive loss
(c) under paid tax in any manner
 Scrutiny assessment can be made in respect of a return filed w/s 139 or in
response to a notice served u/s 142 (1). Scrutiny assessment cannot be made in a
case where no return is furnished by assessee.
 If the A.O is of the opinion that an assessee has claimed any
loss/exemption/deduction/allowance/rebate which is not admissible under the
Act, a notice shall be served under 143(2),requiring the assessee to produce any
evidence in support of the return
 This notice has to be issued before expiry of 12 months from the end of the
month in which return has been filed.

Best judgment assessment- Sec.144:-

 The A.O after considering all relevant material which he has gathered is under an
obligation to make an assessment of total income or loss to the best of his
judgment, it is known as best judgment assessment. It is made in the following
circumstances
1. if a person fails to make return required u/s 139(1) and has not made a
return or a revised return u/s 139 (4) or 139 (5)
2. if a person fails to comply with terms of notice u/s 142 (1) or fails to comply
with the direction to get his accounts audited u/s 142 (2A)
3. if a person after having filed return fails to comply with terms of notice w/s
143 (2) requiring his presence or production of evidence or documents
4. . If the A.O is not satisfied as to the correctness or completeness of the
accounts of the assessee
  The best judgment assessment can be made only after giving the assesee an
opportunity of being heard, which shall be made by issuing a notice to show
cause as to why the assessment should not be completed to the best of
judgment of A.O.

Income escaping assessment or re-assessment: Sect 147

 If the A.O has reason to believe that any income chargeable to tax has escaped
assessment he may assess/re-asses such income.
 Once an assessment has been re-opened any other income that has escaped
assessment and which has come to the notice of the A.O in the course of
proceeding u/s 147, can also be included in the assessment
 Where the original assessment was made under Sec. 143 (3)/147 and the A.O
wants to take action after expiry of 4 years from the end of assessment year the
following conditions are to be fulfilled
1. the A.O must have reason to believe that income or profit and gains
chargeable to income tax has escaped assessment
2. The A.O must also have reason to believe that such escapement has occurred
by reason of either omission or failure on the part of the assessee to disclose
fully or truly all material facts necessary
 The following shall be deemed to be cases of income escaping assessment
1. Where no return of income has been furnished by an assessee although total
income is above the taxable limit
2. Where a return of income has been furnished by no assessment has been
made and the assessee is found to have understated his income or claimed
excessive loss/deduction etc
3. Where an assessment has been made but income chargeable to tax has been
under-assessed or has been assessed at too low a rate.

Assessment in Case of Search u/s 153A:

 This type of income tax assessment is applicable on taxpayers who have been
searched u/s 132 of the Income Tax Act.
 According to the income tax assessment procedures outlined in Section 153A,
the Assessing Officer can scrutinise the taxpayer’s ITR for the last six years,
immediately preceding the ‘search’ year.
 However, it is to be noted that the assessment must be made in accordance with
the material disclosed during the search.

6. 101 Constitutional Amendment Act

 Introduction of the Goods and Services Tax (GST) in India was initially proposed
during the Prime Ministership of Atal Bihari Vajpayee around sixteen years ago.
 On 28th February, 2006, the Union Finance Minister announced in the Budget for
2006-07 that GST would be implemented from 1st April, 2010.
 Due to a lack of political consensus, the Constitution (115th Amendment) Bill,
2011, introduced in March 2011, lapsed after the dissolution of the 15th Lok
Sabha in August 2013.
 The Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha
on 19th December, 2014, and passed by the Lok Sabha in May 2015.
 It was referred to the Joint Committee of the Rajya Sabha and the Lok Sabha on
14th May, 2015, and after review, the Constitutional Amendment Bill was moved
on 1st August 2016, based on political consensus.
 The Bill was passed by the Rajya Sabha on 3rd August 2016 and by the Lok Sabha
on 8th August 2016, leading to the enactment of the Constitution (101 st
Amendment) Act 2016 on 8th September,2016.
 GST regime introduced in India on 1st July 2017 and India follows dual GST model
 It is based on principle ‘one nation one tax’. It replaces 17 taxes and 13 cess that
was enacted by central and state government previously

Salient features of 101 Constitutional amendment act:

Article 246A:
 Notwithstanding anything contained in articles 246 and 254, Parliament, and,
subject to clause (2), the Legislature of every State, have power to make laws
with respect to goods and services tax imposed by the Union or by such state
 Parliament has exclusive power to make laws with respect to goods and services
tax where the supply of goods, or of services, or both takes place in the course of
inter-State trade or commerce.

Article 366(12A):
 “Goods and services tax” means any taxon supply of goods, or services or both
except taxes on the supply of the alcoholic liquor for human consumption

Article 366(26A):
 Service means Anything other than goods

Article 366(26B):
 State With reference to articles 246A, 268, 269, 269A and article 279A includes a
Union territory with Legislature

Article 366(12):
 Goods includes all materials, commodities, and articles[Definition Already
Present prior to 101 Constitutional amendment]

Article 269A:
 GST shall be levied and collected by the Central Government and such tax shall
be apportioned between the Union and the States in the manner as may be
provided by Parliament by law on the recommendations of GST Council.
 Supply of goods, or of services, or both in the course of import into the territory
of India shall be deemed to be supply in the course of inter-State trade or
commerce
 Parliament will formulate the principles for determining the place of supply, and
when a supply takes place in the course of inter-State trade or commerce.
 The amount apportioned to a State from the tax collected on supplies in the
course of inter-state trade or commerce
 Where an amount collected as tax levied in the course of inter-state trade or
commerce has been used for payment of the tax levied by a State under
article246A. In other words, where IGST is used for payment of SGST.
 Where an amount collected as tax levied by a State under article 246A has been
used for payment of the tax levied under clause inter-state trade or commerce.
When SGST is used for payment of IGST.

Article 286:
 Article 286 of the constitution was amended to restrict the imposition of tax by
the state on the supply of goods or services or both where such collection takes
place outside the territory of the respective state or on export and import of
goods in India
 This restriction was on the sale or purchase of goods, but now it has been
replaced by the supply of goods or services or both.

Article 279A:
 Article 279A provides for constituting a Council called the Goods and Services Tax
Council within 60 days from date of commencement of 101st Constitution
Amendment Act, 2016.
 Members are as follows:- (a) the Union Finance Minister as Chairperson; (b) the
Union Minister of State in charge of Revenue or Finance; (c) the Minister in
charge of Finance or Taxation or any other Minister nominated by each State
Government. (d) Vice Chairperson to be chosen among the members.
 The Council, according to Article 279, is meant to "make recommendations to the
Union and the states on important issues related to GST, like the goods and
services that may be subjected or exempted from GST, model GST Laws".
 It also decides on various rate slabs of GST.
 Article 279A(7): One-half of the total number of Members of the Goods and
Services Tax Council shall constitute the quorum at its meetings.
 Article 279A(11): Mechanism to adjudicate any dispute arising out of the
recommendations of the Council or implementation thereof.
7. Interstate and intrastate GST:
 GST or Goods and Services Tax, was introduced in India on 1st July 2017. It
includes two important parts interstate and intrastate GST. These parts help
determine which taxes need to be paid CGSST, IGST or SGST.
  Whether a transaction is considered interstate or intrastate depends on where

the supplier is located and where the supply is made.

What is Interstate Supply?

 When goods or services are provided from one state to another or from a Union
Territory to another, it's called interstate supply. This also includes transactions
involving import, export, or trade with Special Economic Zones (SEZs) or Export-
oriented Units (EOUs).
 The Central Government charges Integrated GST (IGST) on such transactions to
ensure uniform taxation across states and territories.
 When goods or services move between states, IGST is charged by the central
government. The revenue collected through IGST is then distributed between the
central and destination states based on a predetermined formula.
 This system ensures that businesses operating across state borders don't face
multiple taxes and helps in the equitable sharing of tax revenue between the
central and state governments.

What is Intrastate Supply?

 Intrastate supply happens when both the provider of goods or services and the
place of supply are within the same state. For such transactions, the Central
Goods and Services Tax (CGST) and State/Union Territory Goods and Services Tax
(SGST/UTGST) are applicable.
 These taxes are imposed by the Central and State/Union Territory governments
respectively.
 The rate of Intrastate GST depends on the type of goods or services being
supplied. Vendors must collect both CGST and SGST/UTGST from customers in
these transactions.

Difference between GST interstate & GST intrastate

The below table shows the main differences between GST for transactions
happening between different states (interstate) and those happening within the
same state (intrastate) in India.
Parameters Interstate Supplies Intrastate Supplies
Applicable on Movement of goods/services between different Transactions within the
states/Union Territories same state/Union Territory
Levied by Central Central Government for CGST, and State/UT
 Government government for SGST/UTGST
Tax rate IGST rates CGST and SGST/UTGST rates applied separately
determined and equally based on the goods/services
based on the
specific
goods/services
Destination Receives a Receives the entire amount of SGST/UTGST
state share of the collected
IGST collected
Place of Different Same state/UT as the supplier's location
supply state/UT from
the supplier's
location
Input Tax Can utilize Once used all IGST credits, can use CGST credit
Credit IGST input tax for CGST taxes and SGST credit for SGST taxes.
credit to cover can also use both CGST and SGST credits for
IGST liability paying IGST taxes, but can't switch between
first and CGST and SGST credits.
subsequently,
CGST/SGST
liabilities, in
any sequence
desired.

Interstate and Intrastate GST Rate With Examples

 GST rates for transactions within a state and between states vary based on the
type of goods or services involved. In India, GST rates fall into four categories 5%,
12%, 18%, and 28%. Some high value goods have special rates while certain
essential goods are taxed at a Nil rate.

Interstate GST Rate Example

XYZ Ltd, based in Jaipur, Rajasthan sells mobile phones worth ₹1,00,000 to Mumbai,
Maharashtra. Since the sale is between different states, it's called an interstate
supply. The mobile phones fall under the 18% GST slab.

To calculate the IGST, we multiply the value of the goods (₹1,00,000) by the GST rate
(18%), which equals ₹18,000. This IGST amount of ₹18,000 is charged by XYZ Ltd and
paid to the Central Government. Later, it's distributed between the Central
Government and the destination state, Maharashtra.

In a special case, if XYZ Ltd sells goods from Jaipur, Rajasthan to a Special Economic
Zone unit within Rajasthan, it's also treated as an interstate supply. This applies to all
transactions involving SEZ units.
 Intrastate GST Rate Example

XYZ Ltd, based in Jaipur, Rajasthan sells mobiles worth ₹2,00,000 to another
company in Udaipur, Rajasthan. GST rate is 18% divided equally into 9% CGST and
9% SGST.

To calculate CGST/SGST, we multiply the value of goods (₹2,00,000) by the GST rate
(18%), which equals ₹36,000. This amount is split equally with ₹18,000 paid as CGST
to the Central Government and ₹18,000 paid as SGST to the Rajasthan Government.

 Both CGST and SGST are charged by the Central and state governments,
respectively. However, the combined rate of CGST and SGST equals the IGST rate
charged on interstate supplies. So, the total tax amount remains the same
regardless of whether it's an interstate or intrastate supply. The difference lies in
how the tax is levied.

8. Residential status
 Sec.6 of the Act lays down the test of residence for the following entities (a)
individual(b)FUF (c)a firm or AOP(d) a company and(e) every other person
 Incidence of tax on assessee depends upon his residential status and therefore
after determining whether a particular receipt is income chargeable to tax, it has
to be seen whether the assessee is liable to tax in respect of that income.
 The taxability of a particular receipt would thus depend not only on the nature of
income and the place of its accrual but also upon the assesee’s residential status.
 An assesee’s residential status must be determined in every case with reference
to the period of his stay in India in the previous yea. A person who is a resident in
one year may become non-resident or not ordinarily resident in another year or
vice-versa.
 Whether the assessee is a resident or non-resident is a question of fact and the
onus of proof is on the assessee (RajBahadurSethVs CIT). It is the duty of the
assessee to place all material facts before the assessing officer to enable A.O
determine the correct residential status.
 The term residential status has been coined under the income tax laws of India
and must not be confused with an individual’s citizenship in India.
 Citizenship and residential status are separate concepts. Residential status is not
based on place of birth or nationality. A person may be Indian national/citizen
but may not be resident of India. On the other hand a person may be a foreign
 national/citizen but may be a resident in India. Residential status shall be
determined for each category of persons separately.
 For the purpose of income tax in India, the income tax laws in India classifies
taxable persons as:
1. A resident and ordinarily resident (ROR)
2. A resident but not ordinarily resident (RNOR)
3. A non-resident (NR)

Individual said to be resident of India:- Sec6(1):-

 As per. Sec. 6(1) an individual is said to be resident of India in any previous year if
he satisfies at least one of the following basic conditions
1. Stay in India for a year is 182 days or more in relevant previous year or
2. Stay in India for 60 days or more in the relevant previous year and 365 days
or more during 4 previous year preceding the relevant previous year
 The conditions are alternative and if a individual is covered under any one of the
category he is said to be resident of India.

Exceptions to Residential Status

 In the event an individual who is a citizen of India leaves India as a member of
the crew of an Indian ship or for the purpose of employment during the FY, he
will qualify as a resident of India only if he stays in India for 182 days or more in
relevant previous year.
 Indian citizen or person of Indian origin who stays outside India comes on a visit
to India during the relevant previous year. However, such a person having a total
income, other than the income from foreign sources which exceeds Rs.15 lakhs
during the previous year will be treated as a resident in India if –
1. he stays in India during the relevant previous year for 182 days or more, or
2. he stayed in India for 365 days or more during the previous 4 years and has
been in India for at least 120 days in the previous year.
 As mentioned as a significant amendment above, the individual will be treated as
a “deemed resident of India” if a citizen of India having total income (other than
foreign sources) exceeds Rs 15 lakh and nil tax liability in other countries.

Individual said to be Non-Resident:-

 An individual is said to be non-resident if he satisfies none of the above
conditions mentioned above. (under Sec. 6(1))

Resident Not Ordinarily Resident

 If an individual qualifies as a resident, the next step is to determine if he/she is a
Resident and ordinarily resident (ROR) or Resident but not ordinarily Resident
(RNOR).
 He will be an ROR if he meets both of the following conditions:
1. Has been a resident of India in at least 2 out of 10 years immediately relevant
previous years and
2. Has stayed in India for at least 730 days in 7 immediately relevant previous
year
 Therefore, there are 3 situations in which an individual is said to be RNOR
 1. if any individual fails to satisfy either or none of the above-mentioned
conditions.
2. If an individual is an Indian citizen or person of Indian origin having a total
income more than exceeding Rs.15 lakhs (excluding foreign income), who has
been in India for 120 days or more but less than 182 days during that
previous year.
3. If an individual is deemed to be a resident in India, by default, he will be
considered as a Resident and Not Ordinarily Resident.

Points to note:
 Stay in India includes stay in the territorial waters of India i.e. 12 nautical miles into
the sea from the Indian coastline.
 The period of stay need not be continuous or active.
 Both the date of departure as well as the date of arrival in India are considered while
counting the number of days stayed in India.
 For Income tax purposes the residence of an individual has nothing to do citizenship,
place of birth or domicile. Therefore, an individual can be resident in more than one
country even though he has only one domicile.

Residential Status of HUF

Resident: An HUF would be resident in India if its management is made from the
members in India, if not will be considered a Non-resident.
Resident and ordinarily resident/ Resident but not ordinarily resident
If Karta (manager) of resident HUF satisfies the below conditions, then HUF will be
treated as resident and ordinarily resident, otherwise, it will be resident but not
ordinarily resident.
1. Has been a resident of India in at least 2 out of 10 years immediately relevant
previous years and
2. Has stayed in India for at least 730 days in 7 immediately relevant previous
year
Note: Only individuals and HUFs can be Resident and not ordinarily residents in
India. All other classes of assesses can be either a resident or non-resident.

Residential Status of a Company

A company would be resident in India in the following circumstances :
 If it is an Indian Company
 The place of effective management in the previous year is in India.
 Note: Place of effective management means a place where management and
commercial decisions that are necessary for the conduct of business or entity are
taken.

Residential Status of Firms, LLPs, AOPs, BOIs, Local authorities and Artificial
juridical persons
 In simple words, again, the residential status will depend on the place from where
the management of the above persons management is made, similar to HUF, if it's
done by members in India, then it will be resident, else it will be non-resident.
9. GST Council
 The 101st Amendment Act of 2016 paved the way for the introduction of a new tax
regime (i.e. goods and services tax – GST) in the country. The smooth and efficient
administration of this tax requires cooperation and coordination between the centre
and the states.
 In order to facilitate this consultation process, the amendment provided for the
establishment of a GST Council.
 The amendment inserted a new Article 279-A in the Constitution of India. This article
empowered the President to constitute a GST Council by an order.
 Article 279A provides for constituting a Council called the Goods and Services
TaxCouncil within 60 days from date of commencement of 101st
ConstitutionAmendment Act, 2016.
 Accordingly, the President issued the order in 2016 and constituted the Council. The
Secretariat of the Council is located in New Delhi. The Union Revenue Secretary acts
as the ex-officio Secretary to the Council.

Composition of the Goods and Services Tax Council

 The Council is a joint forum of the centre and the states and consists of the following
members:
1. The Union Finance Minister as the Chairperson

2. The Union Minister of State in-charge of Revenue or Finance

3. The Minister in-charge of Finance or Taxation or any other Minister nominated by

each state government

4. Vice Chairperson to be chosen among the members.

 The members of the Council from the states have to choose one amongst
themselves to be the Vice-Chairperson of the Council. They can also decide his term.
 The Union Cabinet also decided to include the Chairperson of the Central Board of
Excise and Customs (CBEC) as a permanent invitee (non-voting) to all proceedings of
the Council.

Quorum:

 One-half of the total number of Members of the Goods and Services Tax Council.
 All decisions by a majority of not less than three-fourths of the weighted votes of the
members present and voting
 Weightage of votes:

 Central Government – 1/3rd of the total votes cast, and

 State Governments – 2/3rd of the total votes cast

Functions of the Goods and Services Tax Council

The Council is required to make recommendations to the centre and the states on the
following matters:

1. The taxes, cesses and surcharges levied by the centre, the states and the local bodies
that would be merged in GST.

2. The goods and services that may be subjected to GST or exempted from GST.

3. Model GST Laws, principles of levy, apportionment of GST levied on supplies in the
course of inter-state trade or commerce and the principles that govern the place of
supply.

4. The threshold limit of turnover below which goods and services may be exempted
from GST.

5. The rates include floor rates with bands of GST.

6. Any special rate or rates for a specified period to raise additional resources during
any natural calamity or disaster.

7. Special provision with respect to the states of Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand.

8. Any other matter relating to GST, as the Council may decide.

Working of the GST Council

 The decisions of the Council are taken at its meetings. One-half of the total numbers
of members of the Council is the quorum for conducting a meeting. Every decision of
the Council is to be taken by a majority of not less than three-fourths of the
weighted votes of the members present and voting at the meeting.

 The decision is taken in accordance with the following principles:

 1. The vote of the central government shall have a weightage of one-third of
the total votes cast in the meeting.

2. The votes of all the state governments combined shall have a weightage of
two-thirds of the total votes cast in that meeting.

 Any act or proceeding of the Council will not become invalid on the following
grounds.

1. Any vacancy or deficit in the constitution of the Council

2. Any defect in the appointment of a person as a member of the Council

3. Any procedural irregularity of the Council not affecting the merits of the case.

Powers of GST Council

The GST Council, empowered by the Constitution, possesses significant authority to shape
and regulate India's GST regime. Its powers extend across various key areas:

1. Tax Rates and Exemptions: The Council can recommend GST rates for different
goods and services, including exemptions or reductions where necessary.

2. Threshold Limits: It determines the turnover thresholds at which businesses must

register for GST, ensuring uniformity and clarity in registration requirements.

3. GST Laws and Principles: The Council formulates and revises GST laws, guiding
the application of tax principles, levy mechanisms, and compliance requirements.

4. Decision Making: With representation from the central and state governments, the
Council collectively makes decisions on critical GST matters, fostering consensus and
cooperation among stakeholders.

Through these powers, the GST Council shapes the trajectory of India's GST system,
balancing the needs of businesses, consumers, and the economy at large.

Features of the GST Council

 The GST Council set up its headquarters in New Delhi, establishing itself as a unified
command center for GST implementation.

 The Revenue Secretary was appointed as the Ex-officio Secretary to the GST Council.
 The Central Board of Indirect Taxes and Customs (CBIC) Chairperson was granted
permanent observer status, ensuring the Central Government's perspective was
consistently considered.

 Four high-ranking positions (equivalent to Joint Secretaries) were created within the
GST Council Secretariat to provide specialized expertise in various GST-related
areas.

 The establishment of an Additional Secretary position further strengthened the

Council's leadership and capacity.

 Officers from both Central and State Governments were seconded to the GST Council
Secretariat, fostering collaboration and knowledge sharing.