CS EXECUTIVE

DIRECT TAX
का
सुदर्शन चक्र
Revision
As per FA 24
(PY 24-25 & AY 25-26)

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CMA Vipul Shah

 DIRECT TAX REVISION PY 24-25 & AY 25-26

DIRECT TAX
REVISION
Sr. No. Chapter Name Page No.
1 INTRODUCTION TO INCOME TAX ACT 1.1 - 1.12
2 RESIDENTIAL STATUS 2.1 – 2.8
3 INCOMES EXEMPT FROM TAX 3.1 – 3.8
4 INCOME FROM SALARY 4.1 – 4.17
5 INCOME FROM HOUSE PROPERTY 5.1 – 5.7
6 INCOME FROM BUSINESS OR PROFESSION 6.1 – 6.18
7 CAPITAL GAIN 7.1 – 7.17
8 INCOME FROM OTHER SOURCE 8.1 – 8.4
9 CLUBBING OF INCOME 9.1 – 9.3
10 SET OFF AND CARRY FORWARD OF LOSSES 10.1 – 10.3
11 DEDUCTION 11.1 – 11.11
12 TDS & TCS 12.1 – 12.12
13 ADVANCE TAX 13.1 – 13.2
14 ASSESSMENT OF VARIOUS PERSON 14.1 – 14.5
15 RETURN, ASSESSMENT PROCEDURE AND INTERST 15.1 – 15.7

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INTRODUCTION TO INCOME TAX ACT

CHAPTER 1 INTRODUCTION TO INCOME TAX ACT

1)

• The mandatory payment made by people to the Government

2)

A) Direct Tax: Tax on Income [Income Tax]

B) Indirect Tax: Tax on goods and services [GST, Custom Duty, Excise Duty, Vat]

3)

A) Income-tax Act, 1961 - governs the levy of income-tax in India.

B) Income-tax Rules, 1962 - formulated for proper administration of the Act.
C) Annual Finance Act - Amendments in the Income-tax Act, 1961 are effected every year
through the Annual Finance Act.
D) Circulars - issued by CBDT to clarify the meaning and scope of certain provisions of the Act.
E) Notifications - issued to give effect to the provisions of the Act/ make or amend Rules.

4)

• Article 246 of the Indian Constitution, distributes legislative powers including taxation,
between the Parliament of India (Central Government) and the State legislature. Schedule
VII enumerates these subject matters with the use of three lists;
A) List - I (Union List) – Entailing the areas on which only the Central Government is competent
to make laws.
• Entry no 82: Income Tax except Agri Income
• Entry no 83: custom duty
B) List - II (State List) – Entailing the areas on which only the State Legislature can make laws.
C) List - III (Concurrent List) – Listing the areas on which both the Parliament and the State
Legislature can make laws upon concurrently.

5)

Step 1 Determination of residential status

Step 2 Classification of income under different heads
Step 3 Computation of income under each head
Step 4 Clubbing of income of spouse, minor child etc.
Step 5 Set-off or carry forward and set-off of losses

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Step 6 Computation of Gross Total Income

Step 7 Deductions from Gross Total Income
Step 8 Computation of Total income
Step 9 Application of the rates of tax on the total income.
Step 10 Surcharge/ Rebate under section 87A
Step 11 Health and Education cess (HEC) on Income-tax
Step 12 Alternate Minimum Tax (AMT)
Step 13 Examine whether to pay tax under default regime under section 115BAC or pay tax
under the optional tax regime as per the regular provisions of the Act
Step 14 Credit for advance tax, TDS and TCS
Step 15 Tax Payable / (Tax Refundable)

6)

• Individual, HUF, Firm, Company, AOP, BOI, Local Authority, AJP.

7)

A) Assesse means any person who is liable to pay any tax or any other sum under the Income
Tax Act, 1961.
B) Every person in respect of whom any proceedings has been taken for the assessment of
income, loss and refund.
C) Deemed Assessee: Legal representative
D) Assessee in default: Fail to deduct TDS/ deposit TDS

8)

• 12 months commencing 1st April of every Year.

• It the year in which income tax is paid to the Government.

9)

• Its year in which income is earned. Its Financial year prior to Assessment Year. In case of
newly established business or profession from the date of set up to the end of Financial year,

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Exceptions to the general rule that income of a previous year is taxed in its assessment year
Details Assessment
Shipping Business of Non-Resident Mandatory
Persons leaving India Mandatory
AOP / BOI / AJP formed for a particular event or purpose Mandatory
Persons likely to transfer property to avoid tax Mandatory
Discontinued Business Assessment is discretionary

10)

A) Income from Salary

B) Income from house property,
C) profits and gains of business or profession,
D) capital gains
E) Income from other sources
Note: Source is part of head of income.

11)

A) Tax and surcharge is general purpose revenue.

B) Tax is applied on income.
C) Surcharge is applied on income tax.
D) Cess is specific purpose revenue. It is to be applied on tax plus surcharge.

12)

• Rounded off to nearest Ten Rupees.

13)

A) Charging Section
• Sec. 4 of the Income Tax Act provides that there shall be charged –
➢ For any assessment year (AY), at the rate(s) specified in the annual Finance Act for
that year, and
➢ In respect of the total income of the previous year of every person.
• It lays down the rates for charging income – tax in certain cases, rates for deducting
income tax from income chargeable under the head ‘Salaries’ and the rates for computing
advance – tax for the financial year 2024 – 25 i.e. AY 2025 – 26.
B) First Schedule to Annual Finance Act

It contains four parts, which, as applicable for the Finance Act, 2024 are as follows:

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INTRODUCTION TO INCOME TAX ACT

• Part I
It specifies the rates at which income tax is to be levied on income chargeable to tax for
the PY 2024 – 25.
• Part II
It lays down the rate at which tax is to be deducted at source during the financial
year 2024 – 25 i.e. AY 2025 – 26.
• Part III
It lays down the rates for charging income – tax in certain cases, rates for deducting income
tax from income chargeable under the head ‘Salaries’ and the rates for computing
advance – tax for the financial year 2024 – 25 i.e. AY 2025 – 26.
• Part IV
It lays down the rules for computation of net agricultural income.

14)

Tax Rate Resident Individual Resident Individual Resident Individua l

age < 60 During PY. (Age >= 60 during PY) (Age>=80 during PY)
(Male &
Female), HUF, AOP, Senior citizen (Male & Super senior citizen
BOI & AJP Female) (Male & Female)
NIL 2,50,000 3,00,000 5,00,000
5% 2,50,000 to 5,00,000 3,00,000 to 5,00,000 NA
20% 5,00,000 to 10,00,000 5,00,000 to 10,00,000 5,00,000 to 10,00,000
30% Above 10,00,000 Above 10,00,000 Above 10,00,000
Add: Surcharge Income Rate
50,00,001 to 1,00,00,000 10%
1,00,00,001 to 2,00,00,000 15%
200,00,001 to 5,00,00,000 25%
Above 5,00,00,000 37%
Add: Health & 4% on Tax plus Surcharge
Education Cess

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15)

A) Conditions
• A resident individual whose net income does not exceed Rs. 5,00,000 can avail rebate
u/s. 87A.
• The amount of rebate is 100% of income tax or Rs. 12,500 whichever is less.
B) Key Notes
• Net income = GTI – Deduction u/s 80C to 80U
• It is to be deducted before H & EC.

16)

A) For Non-Resident individual exempted income shall be upto Rs. 2, 50,000 irrespective of Age
B) Surcharge: as per table given above
C) Health & Education Cess @ 4% on Tax + SC
D) Rebate u/s 87A is not available.

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17)

Different Nature and quantum of Surcharge on amount of income tax Surcharge an amount
Situations income of the assesse (i.e. computed on dividend income and of income tax
individual, HUF, AOP, BOI or income which is taxable under computed on other
an artificial juridical person) section 111A, 112 and 112A incomes
Situation 1 Total income (including Nil Nil
dividend income and
income under section 111A,
112 and 112A) does not
exceed Rs.50 lakh
Situation 2 Total income (including 10% 10%
dividend income and
income under section 111A,
112 and 112A) exceeds
Rs.50 lakh but does not
exceed Rs.1 crore
Situation 3 Total income (including 15% 15%
dividend income and
income under section 111A,
112 and 112A) exceeds Rs.1
crore but does not exceed
Rs.2 crore
Situation 4 Total income (excluding 15% 25%
dividend income and
income under sections
111A, 112 and 112A)
exceeds Rs.2 crore but
does not exceed Rs.5
crore
Situation 5 Total income (excluding 15% 37%
dividend income and
income under sections
111A, 112 and 112A)
exceeds Rs.5 crore
Situation 6 Total income (including 15% 15%
dividend income and
income under section 111A,
112 and 112A) exceeds
Rs.2 crore (but it is not

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covered by Situation 4 and

Situation 5)

18)

Section Income Income tax rates (per cent)

Upto July 22, From July 23,
2024 2024
111A Short term capital gains [FA 2024] 15 20
112 Long term capital gains [FA 2024] 20 12.5
112A Long term capital gain is excess of Rs. 1 lakh* upto 10 -
July 22, 2024 [FA 2024]
112A Long term capital gain in excess of Rs. 1.25 lakh* - 12.5
from July 23, 2024
[*the aggregate cannot exceed Rs. 1.25 lakh for
the previous year 2024-25] [FA 2024]
115BB Casual Income 30%
115BBG Income on transfer of Carbon Credit 10%

19)

How to calculate Marginal relief

Step 1 Compute Tax + SC
Step 2 Marginal Relief = [Difference in Tax – Difference in Income]
Step 3 Deduct marginal relief computed above [if positive] from Tax + Surcharge on actual
income
Step 4 Add: H&EC
Key Note:
When increase in income is more than increase in tax Marginal relief shall not be given. [when step
2 is negative]

20)

Surcharge
Particulars Tax Rate Income between 1 cr to 10 cr Above 10 cr Cess
If turnover of or gross receipt during 25% 7% 12% 4%
PY 22-23 dose not exceeds 400 cr [FA AY 25-26
2024]
Otherwise 30% 7% 12% 4%

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21)

Assesse Rate of tax TI <Rs. 1 Crore TI > Rs.1 Crore, but TI ≤ TI > Rs.10 Rate of EC
Rs.10 Crores crores + H & EC
Foreign Companies 35% [FA 2024] 2% 5% 4%

22)

Surcharge
Assesse Rate of tax TI <Rs. TI > Rs.1 Crore, but TI > Rs.10 Rate of EC
1 Crore TI ≤ Rs.10 Crores crores + H & EC
Firms and LLP 30% 12% 12% 4%
Local Authorities 30% 12% 12% 4%
Co – operative Societies - -
For First Rs.10,000 10% - -
For Next Rs.10,000 20%
For the Balance 30% 7% 12% 4%

23)

Individual / HUF / BOI / AOP / artificial juridical person 42.744%

Firm (including limited liability partnership) 34.944%
Co – operative society 34944%
Domestic company (25% + 12%+ 4%) (30% + 12%+ 4%) 29.12%, 34.944%
Foreign company 38.22%

24)

A) Income of individuals and Hindu Undivided Family

• Currently, individuals / HUFs are taxable as per progressive tax slabs and the highest tax
slab rate is 30 per cent which is applicable if income exceeds Rs.10 lakh.
B) Rate of income tax under the alternative tax regime (Section 115BAC)
• Under the alternative tax regime income tax shall be computed at the option of the
assessee as per the rate given in the following table:
• Under the alternative tax regime income tax shall be computed as per the rates given in
the following table:

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Sec. 115BAC (1) – For the assessment Sec. 115BAC(1A) – From the assessment
years 2021 – 22 to 2023 - 24 year 2024 – 25 [FA 2024]
Total income Rate of Tax Total income Rate of Tax
Up to Rs. 3,00,000 Nil Up to Rs. 3,00,000 Nil
From Rs. 3,00,001 to Rs. 6,00,000 5% From Rs. 3,00,001 to Rs. 7,00,000 5%
From Rs. 6,00,001 to Rs. 9,00,000 10% From Rs. 7,00,001 to Rs. 10,00,000 10%
From Rs. 9,00,001 to Rs. 12,00,000 15% From Rs. 10,00,001 to Rs. 12,00,000 15%
From 12,00,001 to Rs. 15,00,000 20% From Rs. 12,00,001 to Rs. 15,00,000 20%
Above Rs. 15,00,000 30% Above Rs. 15,00,000 30%

A) Exemption limit
• Exemption limit is Rs. 2,50,000 (Rs. 3,00,000 for the assessment year 2025 - 26. It is
applicable even in the case of senior citizen and super senior citizen.
B) Rebate under section 87A
• A resident individual (paying tax under the alternative tax regime) can claim rebate u/s
87A as follows -
Different assessment Total income should not exceed Amount of rebate u/s 87A
years the amount given below
2021–22 to 2023–24 Rs. 5,00,000 100% of income tax or Rs. 12,500.
Whichever is less
2024 – 25 onwards Rs. 7,00,000 100% of income tax or Rs. 25,000.
Whichever is less
C) Tax on other incomes
• Special tax rates applicable on income covered u/s 110 to 115BBG except 115BAC
D) Marginal Relief
• Marginal relief-Rebate under section 87A is subject to marginal relief from the assessment
year 2024-25. If net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770,
income-tax on such income cannot exceed the amount by which the net income exceeds Rs.
7,00,000.
E) Surcharge & education cess
• Surcharge applicable under regular tax regime is also applicable in new scheme except from
AY 24-25 for income above 5 crore surcharge rate is 25% instead of 37%.

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F) Restrictions on deductions/ exemptions (Section 115BAC (2))

• Leave travel concession or assistance [sec 10(5)] [Refer chapter 4]
• House rent allowance (section 10(13A)) [Refer chapter 4]
• Special allowance(s) (other than those as may be prescribed) (Section 10(14)) [Refer
chapter 4]
• Allowance to MPs / MLAs (Section 10(17)) [Refer chapter 4]
• Exemption up to Rs.1,500 available in the case of clubbed income of a minor child (section
10(32)) [Refer chapter 3]
• Special economic zone (section 10AA) [Refer chapter 3]
• Exemption of perquisite in respect of free food and non-alcoholic beverage (ie., Rs. 50 per
meal) provided through paid voucher [sec. 17(2) read with rule 3(7)(iii)] [Refer chapter 4]
• Entertainment allowance deduction (section 16(ii)) [Refer chapter 4]
• Professional tax deduction (section 16(iii)) [Refer chapter 4]
• Interest on housing loan in the case of one or two self – occupied properties (section 24(b))
[Refer chapter 5]
• Additional depreciation (section 32(1) (iia)) [Refer chapter 6]
• Tea / coffee / rubber development account (section 33AB) [Refer chapter 6]
• Site restoration fund (section 33ABA) [Refer chapter 6]
• Deduction for scientific research (section 35(1)(iia)/(iii), 35(2AA)) [Refer chapter 5]
• Capital expenditure pertaining to specified business (section 35AD) [Refer chapter 5]
• Agriculture extension project (section 35CCC) [Refer chapter 5]
• Deduction under sections 80C to 80U (except employer’s contribution towards NPS under
section 80CCD(2), central government contribution towards Agnniveer corpus fund under
section 80CCH(2), deduction under section 80JJAA and deduction under section
80LA(1A)). [Refer chapter 11]

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G) Exemptions Available [Refer chapter 3]

• Interest on public provident fund (as well as final payment at the time of maturity) will
remain exempt under section 10(11) even if a person opts for the alternative tax regime
under section 115BAC.
• Interest on Sukanya Samriddhi Account (as well as withdrawal or final payment from such
account) will enjoy exemption under section 10(11A) even of the concerned person has
opted for the lower tax regime of section 115BAC).
• Exemption under section 10(10) pertaining to gratuity
• Exemption under section 10(10A) pertaining to commutation of pension
• Exemption under section 10(10AA) pertaining to leave encashment
• Exemption under section 10(10B) pertaining to retrenchment compensation
• Exemption under section 10(10C) pertaining to compensation on voluntary retirement
separation
• Exemption under section 10(10CC) pertaining to tax on non-monetary perquisites paid by
employer
• Exemption under section 10(D) pertaining to sum received under a life insurance policy
• Exemption under section 10(12) pertaining to interest and withdrawal from recognized
provident fund
• Exemption under section 10(12A) / (12B) pertaining to payment (including withdrawal) from
NPS
• Exemption under section 10(13) pertaining to payment from approved superannuation fund.

H) Adjustment of losses
• The total income of the individual / HUF is calculated without adjusting brought forward
loss (and / or additional depreciation) from any earlier year (if such loss / additional
depreciation pertains to any deduction under the aforesaid sections). Moreover, any loss
under the head “Income from house property” cannot be set off with any other income
under any other head of income.
I) Depreciation on prescribed mode
• Total income of the individual / HUF is calculated after claiming depreciation (other than
additional depreciation) in such manner as may be prescribed.
J) Alternative minimum tax not applicable
• Alternate minimum tax (AMT) under section 115JC is not applicable. Consequently, AMT
tax credit of earlier years cannot be adjusted against the tax liability which is computed
under section 115BAC.

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K) Option (section 115BAC (5))

1) Assesse does not have business / profession income
• If the assesse does not have business / profession income, the option must be
exercised along with the return of income for every previous year.
2) Assesse has business / profession income
• This option can be exercised for any previous year relevant to the assessment year by
uploading Form No. 10-IE on or before the due date of submission of return of income
under section 139(1). Once the individual/HUF has exercised it will remain valid for
subsequent years as well (up to the assessment year 2023- 24). However, the option
can be withdrawn only once for a previous year (other than the year in which it was
exercised) and thereafter, the person shall never be eligible to exercise option of
alternative tax regime (except where such person ceases to have any income from
business or profession).

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RESIDENTIAL STATUS

CHAPTER 2 RESIDENTIAL STATUS

1.

• To decide where to pay tax in India or Outside India.

2.

Person Criteria
Individual Period of stay in India
HUF Place of control and Management
Company Place of effective management
Other assessee Place of control and Management

3.

A) Citizenship of a country and residential status of that country are different concepts.
B) If person is resident in India in the P.Y. relevant to an A.Y. in respect of any source of income,
he shall be deemed to be resident in India for his other source of income.
C) If an individual stays on a ship, which is in the territorial waters of India, then it shall be
treated as his presence in India.
D) Counting of number of days: If nothing is mentioned about the time of arrival and
departure than the day of arrival and the day of departure both shall be include for
determining residential status of an Individual

4.

A) An individual is said to be resident in India if he satisfies any one of the following two conditions. If
he does not satisfy any conditions, he becomes Non-resident in India.
• Condition 1 - He is in India for a period of 182 days or more in the relevant previous
year. Sec. 6 (1)(a)
• Condition 2 - He is in India for 60 days or more during the relevant previous year and
has been in India for 365 days or more during four previous years immediately preceding
the relevant previous year. Sec. 6(1) (C).
B) Exceptions to Condition 2 above
The period of 60 days replace by 182 days for
A) An Indian citizen who leaves India during the previous year for the purpose of employment
outside India. OR An Indian citizen who leaves India during the previous year as a member of
the crew of an Indian ship. [182 Days in PY and 365 Days in last 4 PY]
B) Indian citizen or a person of Indian origin who comes on a visit to India during the previous
year. [ 182 Days in PY and 365 Days in last 4 PY]

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RESIDENTIAL STATUS

• Explanation 1 - And in case of the citizen or person of Indian origin having total income
other than income from foreign sources exceeding 15 lakhs rupees during previous year the
period of 182 days shall be replaced by 120 days. [120 Days in PY and 365 Days in last 4 PY]
[RI + RNOR]
a) Person of Indian origin - A person is said to be of Indian origin if he or either of his
Key Note

parents or any of his grandparents (maternal & paternal) were born in undivided India.
b) Income from foreign source - It means income which accrues or arise outside India
(except income derived from a business controlled in or a professional set up in India)
C) Determination of Residential Status of Crew Member of a Ship
For determining the period of Stay in India, the following period shall not be included
A) Period beginning from - Date entered into the Continuous Discharge Certificate in respect
of joining the ship by the said individual for the eligible voyage
B) Period ending to - Date entered into Continuous Discharge Certificate in respect of the
signing off by that individual from the ship in respect of such voyage.

DEEMED RESIDENT 6(1A)]

(1A) notwithstanding anything contained in clause (1)
An individual shall be deemed to be Resident in India if he/she fulfils following 3 conditions
A) The assessee is an Indian citizen
B) His total income (other than the income from foreign sources) exceeds Rs.15,00,000 during
the relevant previous year, and
C) He is not liable to tax in any other country or territory by reason of his domicile or
residence or any other criteria of similar nature.
If these 3 conditions are satisfied, the individual would be resident but not ordinarily resident
in India. [RI + RNOR]

ADDITIONAL CONDITIONS TO TEST AS TO WHEN A RESIDENT INDIVIDUAL IS ROR & RNOR

[SEC. 6(6)]
• Condition A - He has been resident in India in at least 2 out of 10 previous years
immediately preceding the relevant previous year.
• Condition B - He has been in India for a period of 730 days or more during 7 years
immediately preceding the relevant previous year.
• Condition C - a citizen of India, or a person of India origin, having total income, other than
the income from foreign sources, exceeding fifteen lakh rupees during the previous year, as
referred to in clause (b) of Explanation 1 to clause (1), who has been in India for a period or
periods amounting in all to one hundred and twenty days or more but less than one hundred
and eighty – two days; or
• Condition D - a citizen of India who is deemed to be resident in India under clause (1A).

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RESIDENTIAL STATUS

If assessee fulfils both of the above conditions (a and b) then he becomes ROR otherwise
RNOR.

5.

Place of Control & Management Residential status

Fully in India Resident
Partly in India Resident
Fully outside India Non-Resident
ADDITIONAL CONDITIONS TO TEST AS TO WHEN A HUF IS ROR & RNOR
• Condition 1 - Karta has been resident in India in at least 2 out of 10 previous years
immediately preceding the relevant previous year.
• Condition 2 - Karta has been in India for a period of 730 days or more during 7 years
immediately preceding the relevant previous year.

6.

INDIAN INCOME
A) If income is received or deemed to be received in India but accrues or arises or is deemed
to accrue or arise in India
B) If income is received or deemed to be received in India but accrues or arises outside India
during the previous year
C) If income is received outside India but accrues or arises in India during the previous year.

FOREIGN INCOME
A) Income is not received or not deemed to be received in India
B) Income which does not accrue or arise in India.

INCIDENCE OF TAX FOR INDIVIDUAL AND HUF [SEC. 5]

Nature of Income Ordinarily Not ordinarily Non-resident
resident resident
Income received in India (no matter where it is earned) Taxable Taxable Taxable
Income earned in India (no matter where it is received) Taxable Taxable Taxable
Income earned and received outside India from a source Taxable Taxable Not Taxable
controlled from India
Income earned and received outside India from a source Taxable Not Taxable Not Taxable
not controlled from India
Note:

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RESIDENTIAL STATUS

A) Remittance v/s Receipt: Receipt is different from remittance. The receipt of income refers
to the first occasion when the recipient gets the money under his control. Once amount is
received as income any subsequent remittance of amount to India dose not result income in
India.
B) If income is accrued and received outside India in any year preceeding the previous year
and later on remitted to India in current financial year is not taxable.

7.

Section Company Residential Status

6(3)(i) Indian company Always resident in India
6(3)(ii) A foreign company (whose turnover/ It will be resident in India if its place of
gross receipt in the previous year is more effective management (POEM), during
than Rs. 50 crore) the relevant previous year, is in India
6(3)(ii) A foreign company (whose turnover/ Always non-resident in India
gross receipt in the previous year is Rs.
50 crore or less)

Place of Control Indian Company Foreign Company

Place of Effective Management (POEM)
Wholly in India Resident Resident
Wholly outside India Resident Non – Resident
Partly in India and partly outside India Resident Resident

A) PLACE OF EFFECTIVE MANAGEMENT

1. Meaning
• "Place Of effective management" (POEM) is an internationally recognised test for
determination of residence of a company incorporated in a foreign jurisdiction. Any
determination of the POEM will depend upon the facts and circumstances of a given case
2. Criteria
• The process of determination of would be primarily based on the fact as to whether or
not the company is engaged in active business outside India

8.
Place of Control and Management situated Status
Fully in India Resident in India
Partly in India Resident in India
Fully outside India Non-Resident

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RESIDENTIAL STATUS

9.

Nature of income Resident Non – resident

Income received in India (no matter where it is earned) Taxable Taxable
Income earned in India (no matter where it is received) Taxable Taxable
Income earned and received outside India from a source controlled Taxable Not Taxable
from India
Income earned and received outside India from a source not Taxable Not Taxable
controlled from India

10.

What is received in India?

What is accrued in India?

Received In India Accrued In India

Sec. 7 Sec. 9

Received In Deemed to be Accrue in Deemed to

India received in India India accrued in India

Any income a) Contribution made by the employer to the a) Income from connection in India
received in recognised provident fund in excess of 12% b) Salary earned in India
India during of the salary of the employee. c) Salary from Govt., by an Indian
PY, by any b) Interest credited to the RPF of the employee citizen for services rendered
assessee which is in excess of 9.5% p.a. outside India
chargeable c) Transfer balance from the unrecognised fund d) Income from dividend paid by
to tax to a Recognised Provident fund (It has been an Indian Company
discussed in the Chapter on Income from e) Income from interest payable
salaries). by specified person
d) The contribution made, by the Central f) Income from royalty
Government or any other employer in the g) Income from technical services
previous year, to the account of an h) Income from property/assets or
source of income in India
employee under a notified contributory
i) Income on transfer of a capital
pension scheme referred to in section asset situated in India.
80CCD.

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RESIDENTIAL STATUS

INCOME FROM BUSINESS CONNECTION IN INDIA

It includes a profession connection. It includes a person acting on behalf of a non-resident and
who performs any one or more the following –
A) He exercises in India an authority to conclude contracts on behalf of the non-resident (it
does not cover the activity of only the purchase of goods or merchandise for the non-resident)
B) He has no such authority but habitually maintains in India a stock of goods or merchandise
from which he regularly delivers goods or merchandise on behalf of the non-resident.
C) He habitually secures order in India (mainly or wholly) for the non-resident or for non-
residents under the same management.
D) He habitually plays the principal role leading to conclusion of contracts by the non-resident
and the contracts are
• In the name of the non-resident; or
• For the transfer of the ownership of (or for the granting of the right to use) property
owned (or the non-resident has right to use) by the non-resident; or
• For the provisions of services by the non-resident.
E) Economic Presence Of NR
a. Transaction in respect of any goods, services or property carry out by a non-resident in India
(including provisions of download of data or software in India) if the aggregate of payments
arising from such transactions during the previous year exceeds such amount as may be
prescribed; or (Exceeds 2 Cr)
b. Systematic and continuous soliciting of business activities or engaging in interaction with such
number of users as may be prescribed, in India through digital means (No of users at least
3 lakhs)
Does not include
A) In the case of a business, in respect of which all the operations are not carried out in India
[Explanation 1(a) to section 9(1) (i)]
B) Purchase of goods in India for export [Explanation 1(b) to section 9(1)(i)]
C) Collection of news and views in India for transmission out of India [Explanation 1(c) to
section 9(1) (i)]
D) Shooting of cinematograph films in India [Explanation 1(d) to section 9(1)(i)]
E) Activities confined to display of rough diamonds in SNZs [Explanation 1(e) to section 9(1)(i)

INCOME FROM PROPERTY IN INDIA 9(1) (i)

Income arising through or from any property or any asset or source of income in India

INCOME FROM TRANSFER OF PROPERTY IN INDIA

Income arising through or from the transfer of a capital asset situated in India

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RESIDENTIAL STATUS

SALARY INCOME [SEC 9(1) (ii)]

Salary income shall be deemed to be earned in India if services are rendered in India.

EXCEPTION TO THE ABOVE RULE

If salary is payable to-
a. Government employee
b. who is a citizen of India;
c. for services rendered outside India
-then such salary (even service rendered outside India) shall be deemed to be earned in India.
Key Note: Any allowances or perquisites paid to above employee shall be exempted u/s 10(7).
Pension received in India by abroad: If an assessee, residing in India, receives pension from
abroad from past services rendered in foreign country, then such income shall be treated as
income accruing abroad, and shall not be liable to tax in India.

DIVIDEND INCOME [SEC 9(1) (iii)]

Any dividend Paid by an Indian company outside India shall be deemed to accrue to arise in India.
Dividend income paid to a non- resident by Indian company is deemed to accrue or arise in India
only on payment and not on declaration.

INTEREST, ROYALTY & FEES FOR TECH. SERVICE-WHEN DEEMED TO ACCRUE OR ARISE IN INDIA

11.

Payer Purpose of Payment Is the payment Taxability in the hands of

deemed to accrue receiver
or arise in India
Government Any purpose Yes All Assessee
Resident For carrying on Business or No ROR – Taxable NOR – Not
profession outside India or Taxable NR – Not Taxable
earning income outside [For NOR or NR – assumed
India first receipt not in India]
Resident For any other purpose Yes All Assessee
Non- For carrying on business or Yes All Assessee
Resident profession in India
Non- For any other Purpose No ROR – Taxable NOR –Not
Resident Taxable NR – Not Taxable

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RESIDENTIAL STATUS

[for NOR or NR – assumed

first receipt not in India]

12.

Payer Purpose of Payment Is the payment Taxability in the hands of

deemed to accrue receiver
or arise in India
Government Any purpose Yes All Assessee
Resident For carrying on Business or No ROR – Taxable NOR – Not
profession outside India or Taxable NR – Not Taxable
earning income outside India [For NOR or NR – assumed
first receipt not in India]
Resident For any other purpose Yes All Assessee
Non- For carrying on business or Yes All Assessee
Resident profession in India or any
Other source in India
Non- For any other Purpose No ROR – Taxable NOR –Not
Resident Taxable NR – Not Taxable
[for NOR or NR – assumed
first receipt not in India]

13.

To extend this deeming provision to sum of money (exceeding Rs. 50,000) received by a not
ordinarily resident without consideration from a person resident in India.

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INCOMES EXEMPT FROM TAX

CHAPTER 3 INCOMES EXEMPT FROM TAX

AGRICULTURAL INCOME

1.

Conditions to treat Income as agricultural income

a. Land must be situated in India. (Urban or Rural)
b. Used for Agri purpose. (Basic & subsequent operations)
Note: Income from only subsequent operations shall not be treated as Agricultural income.

2.

A) Any rent or revenue derived from a land, which is situated in India & is used for agricultural
purposes.
• Rent may be in cash or in kind.
• Assessee may be the owner or tenant of such land.
B) Any income derived from such land on sale made by
• The cultivator of the agricultural produce raised;
The receiver of rent in kind of the agricultural produce received. Without carrying on
• any process, other than the process required to render it fit for the market.
C) Any income derived from a building subject to fulfilment of the following conditions
• The building should be occupied by the cultivator or receiver of rent in kind.
The building should be on or in the immediate vicinity of the land, being situated in India
• and used for agricultural purposes.
• The building should be used as dwelling house or store-house or other out building.
• The land is assessed to land revenue or situated in rural area.
Examples of Agricultural incomes
• Income from sale of Jute, cotton,
• flowers plants sold in pots
• Remuneration & interest on loan / capital to partner.
• Saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
• Compensation from insurance company
Examples of Non-Agriculture Incomes
• Salary to employees
• poultry, dairy, fisheries
• Rearing of live stock
• Interest to moneylender
• Salary to Director of company

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INCOMES EXEMPT FROM TAX

• Dividend received from company engaged in Agri activity.

• Agriculture income earned outside India.
• Sale of trees and grasses grown spontaneously (without any human effort).
• Profit on sale of standing crops
• Film shooting

3.
Rule Particulars Business Income Agricultural Income
7A Income from growing and manufacturing of rubber 35% of profit 65% of profit
7B(a) Coffee grown and cured 25% of profit 75% of profit
7B(b) Coffee grown, cured, roasted and grounded. 40% of profit 60% of profit
8 Tea 40% of profit 60% of profit

4.

A) Where the result of the computation for the previous year in respect of any source of
agricultural income is loss, such loss shall be set off against the income of the assessee, if
any, for that previous year from any other source of agricultural income.
B) If such loss could not be set off in that previous year, it shall be carried forward and set
off in the following Assessment Years for not more than 8 A.Ys only against Agricultural
Income.

5.

• In determining that part which is chargeable to income tax the market value of any
agricultural produce which has been raised by the assesse or received by him as rent in kind
and which has been utilized as a raw material in such business shall be deducted and no
further deduction shall be made in respect of any expenditure by the assesee as cultivator
or receiver of rent in kind

6.

Conditions
A) The assessee is an Individual, HUF/BOI/ an association of person or an artificial juridical
person.
B) The assessee has non-agricultural income exceeding the maximum amount of exemption
C) The agricultural income of the assessee exceeds Rs.5000
Treatment
Step 1: Compute income tax on total income of assessee including Agro-income.

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INCOMES EXEMPT FROM TAX

Step 2: Compute income tax on (Agro-income + Maximum exempted limit)

Step 3: Tax liability before cess = (Tax as per step 1) - (Tax as per step 2)
Note: Consider rebate u/s87A or surcharge if applicable and cess also.

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INCOMES EXEMPT FROM TAX

OTHER INCOMES EXEMPT FROM TAX

1) Sec. 10(1) - Agricultural Income: Refer chapter Agricultural Income.

2) Sec. 10(2) - Member’s share in income of HUF [Sec. 10(2)]

Any sum received by an individual as a member of a Hindu Undivided Family:
A) Where such sum has been received out of the income of the family; or
B) Where such sum has been received out of the income of an impartible estate belonging to the
family.

3) Sec. 10(2A) - Share in Profit of firm Exempt in the hands of partner.

4) Sec. 10(6) - Remuneration of foreign citizens

• Remuneration received by an official of an embassy, high commission, legation commission,
consulate, trade representation of a Foreign State, or as a member of the staff of any of
these officials, of services in such capacity, subject to the following conditions:
A) Remuneration of the corresponding officials or member of staff of the Indian government
resident for similar purposes in that country shall be exempt in that country. Members of
such staff are not engaged in any business or profession or employment in Indian otherwise
than as members of such staff.
B) Remuneration received by him as an employee of a foreign enterprises (which doesn’t carry
any business in India) for services rendered by him during his stay in India = < 90 days.
C) In case he is a non-resident, any remuneration due to his employment on a foreign ship provided
his total stay in India = < 90 days in the PY.
D) Any remuneration received by an employee of the foreign government in connection with his
training in any specified establishment or office, to the extent of his stay in India.

5) Sec. 10(7) - Allowance or perquisite paid outside India

• Any allowance or perquisite paid outside India by the Government to a citizen of India for
rendering services outside India.

6) Sec. 10(10BC) - Compensation on account of any DISASTER

• Any amount received or receivable from the Central Government or a State Government or
a local authority by an individual or his legal heir by way of compensation on account of any
disaster.

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INCOMES EXEMPT FROM TAX

However, of the individual or his legal heir has been allowed any deduction under this act on
account of any loss or damage by such disaster, then compensation received will be taxable to
the extent of such deduction and excess, if any, will be exempt.

7) Sec. 10(10D) - Any sum received under the life insurance policy, including bonus on such
policy. However, the following sums are not exempt:
A) Sum received from a policy u/s 80DD (Handicap policy); or
B) Sum received under a Keyman insurance policy; or
C) Any sum received under an insurance policy issued before 31-03-2012 in respect of which
the premium payable for any year > 20% of the actual capital sum assured;
Exception: any sum received on the death of a person is not taxable
D) Any sum received under an insurance policy issued on or after 01/04/2012 till 31/01/13 in
respect of which the premium payable for any of the years > 10% of the actual capital sum
assured:
Exception: any sum received on the death of a person is not taxable
E) In case of policy issued on or after 1/4/2013, on life of following persons, 10% shall be taken
as 15%
i. A person with disability or severe disability as referred to u/s 80U; or
ii. Suffering from disease or ailment as specified in the rules made u/s 80DDB
Exception: any sum received on the death of a person is not taxable
F) ULIP policy issued on or after 1/02/2021 when amount of premium > 2,50,000 (in aggregate
or single policy)
Exception: Any sum received on the death of a person is not taxable
G) Policy used after 01/04/23 if premium > 5 lakhs (Single or aggregate) or 10% or 15% of SA.
Exception: Any sum received on the death of a person is not taxable

8) Sec. 10 (11A) - The following are the tax benefits envisaged in the Sukanya Samriddhi
Account Scheme: -
A) The investments made in the scheme will be eligible for deduction under section 80C.
B) The interest accruing on deposits in such account will be exempt from income tax.
C) The withdrawal from the said scheme in accordance with the rules of the said scheme will
be exempt from tax.

9) Sec. 10(12A) - Payment from NPS Trust to an employee on closure of his account or on
his opting out of the pension scheme.
• Any payment from National Pension System Trust to an employee/ non-employee on account
of closure or his opting out of the pension scheme referred to in section 80CCD, to the extent

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INCOMES EXEMPT FROM TAX

it does not exceed 60% of the total amount payable to him at the time of closure or his
opting out of the scheme, shall be exempt from tax.

10) Sec. 10(12B) - Payment to employee on partial withdrawal from NPS.

• Any payment from the National Pension System Trust to an employee under the pension
scheme referred to in section 80CCD, on partial withdrawal made out of his account in
accordance with the terms and conditions, specified under the Pension Fund Regulatory and
Development Authority Act, 2013 and the regulations made thereunder, to the extent it does
not exceed 25% of the amount of contributions made by him

11) Sec. 10(12C) - Sum received from Agniveer Corpus Fund

• Any payment from the Agniveer Corpus Fund under the Agnipath Scheme to a person enrolled
under the said Scheme (or to his nominee) shall be exempt from tax. Exemption shall be
available even if the recipient pays tax within the parameters of alternative tax regime under
section 115BAC.

12) Sec. 10(15) - Income Exempt u/s 10(15)

• Post office savings bank account to an extent of interest of Rs. 3,500 for an individual account
& Rs. 7,000 for a joint account

13) Sec. 10(16) - Scholarships granted to meet the cost of education. Even if some amount
is left still not taxable.

14) Sec. 10(17) - Daily Allowance, etc. to MP and MLA [Sec. 10(17)
• Any income by way of
1. Daily allowance received by any person by reason of his membership of parliament or of any
State Legislature or of any Committee thereof.
2. Any allowance received by any person by reason of his membership of Parliament.
3. Constituency Allowance received by any person by reason of his membership of State
legislature.

15) Sec. 10(17A) - Awards and rewards [Sec. 10(17A)]

• Any payment made, whether in cash or in kind
1. In pursuance of any award instituted in the public interest by the Central Government or any
State Government or by any other approved body; or
2. As a reward by the Central Government or any State Government for approved purposes.

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INCOMES EXEMPT FROM TAX

16) Sec. 10(18) - Pensions to gallantry award winners

• Any pension received by an individual who has been awarded “Paramvir Chakra” or “Mahavir
Chakra” or “Vir Chakra” or such other gallantry award as notified by the government. It
includes family pension.

17) Sec. 10(19) - Family pension to widow or children of armed force

• Family pension received by the widow or children or nominated heirs, of a member of the
armed forces (including para-military forces) of the Union, where the death of such
member has occurred in the course of operational duties, in such circumstances and subject
to such conditions, as may be prescribed.

18) Sec. 10(20) - Income of local authority

• Following income of a local authority is exempt
a. Income chargeable under the head income from House Property. Capital Gains or Income
from other Sources.
b. Income from the supply of commodities (other than water or electricity) or services,
within its own jurisdiction.
c. Income from the supply of water services or electricity within or outside its jurisdiction.

19) Sec. 10(23A) - Income of professional institutions

• Any income (other than ‘Income from House Property’ or any income received for rendering
any specific services or income by way of interest from its investments) shall be exempt
from tax provided the following conditions are satisfied:
a. It is established in India with the object of control, supervision, regulation or encouragement
of the profession of law, medicine, accountancy, engineering, architecture, or any other
notified profession;
b. It applies its income, or accumulates it for application, wholly and exclusively for the objects
for which it was established

20) Sec 10(26AAA) income of Sikkimese

1. The following income, which accrues or arises to a Sikkim’s individual, would be exempt from
income tax –
a) Income from any source in the State of Sikkim; or
b) Income by way of dividend or interest on securities
2. However, this exemption will not be available to a Sikkim’s woman who, on or after 1st April,
2008, marries a non-Sikkim’s individual.

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INCOMES EXEMPT FROM TAX

21) 10(32) - Income of Minor

• Income upto Rs. 1500 is exempt in respect of each minor child whose income is clubbed u/s.
64(1A)

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INCOME FROM SALARY

CHAPTER 4 INCOME FROM SALARY

1) Impact of Section 115bac Under the Head Salary

The below exemptions / deduction will not be allowed to the assessee (i.e. individual or Hindu
undivided family or association of persons (other than a co-operative society), or body of individuals,
whether incorporated or not, or an artificial juridical person) paying tax as per section 115BAC of
the Income tax Act, 1961.
SN Nature of Exemption/Deduction Relating to Salaries New System of Existing
Tax u/s 115BAC System of Tax
A RETIREMENT BENEFIT EXEMPTIONS
Leave Salary u/s 10(10AA) Allowed Allowed
Gratuity u/s 10(10) Allowed Allowed
Commutation of Pension u/s 10(10A) Allowed Allowed
Retrenchment Compensation u/s 10(10B) Allowed Allowed
VRS Compensation u/s 10(10C) Allowed Allowed
Leave Travel Concession u/s 10(5) Not Allowed Allowed
B ALLOWANCES
House Rent Allowance Not Allowed Allowed
Travelling Allowance Allowed Allowed
Conveyance Allowance Allowed Allowed
Daily Allowance Allowed Allowed
Helper Allowance Not Allowed Allowed
Any allowance granted for encouraging the academic, Not Allowed Allowed
research and training pursuits in educational and research
institutions
Uniform Allowance Not Allowed Allowed
Children Education Allowance Not Allowed Allowed
Hostel Expenditure Allowance Not Allowed Allowed
Tribal Area Allowance Not Allowed Allowed
Transport Allowance to Handicapped/ Deaf/ Dumb/ Blind Allowed Allowed
employee
C PERQUISITES
Free food and beverage through vouchers provided to the Not Allowed Allowed
employee upto Rs. 50/meal/Tea & snacks
Other exemptions from perquisites e.g. use of Computers, Allowed Allowed
laptops etc
D DEDUCTIONS U/S 16
Standard Deduction u/s 16(ia) Allowed Allowed

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INCOME FROM SALARY

Entertainment Allowance u/s 16(ii) Not Allowed Allowed

Professional Tax u/s 16(iii) Not Allowed Allowed

2) Salary
Means any payment by the employer to employee.

3) Basis of Charge
• Salary is chargeable to tax either on 'due' basis or on 'receipt' basis, whichever is earlier.
• Advance Salary: Taxable on Receipt basis.
• Arrears of salary: Taxable on Receipt basis.
• Advance Against salary: Treated as loan hence not table.
Illustration 1
Mr. Kadappa is getting salary of Rs. 12,000 pm since 01/06/21 & got increment of Rs. 1,000 on
01/04/24. Calculate his annual salary if:
a. Salary becomes due on the last day of month
b. Salary becomes due on the 1st day of next month

4) Basic Salary

Fully taxable in all cases.

5) Fees

Fully taxable in all cases.

6) Commission

Fully Taxable. in all cases (Fixed / Based on T/O / Based on Profit)

7) Bonus

Contractual bonus is taxable as bonus whereas voluntary bonus is taxable as perquisite.

8) Pay scale

It is a system of payment where increment scale is pre-known to employee, e.g. Basic salary is
given Rs. 6000-2000-12000. This is called as increment schedule. As per this initial payment is
Rs. 6000 which increases by Rs. 2000 per year till salary reaches Rs. 12,000.
Illustration 2
Mr Badlapur joins Tony Ltd. on 1/10/2020
Salary scale = 16,000 – 2,000 – 30,000

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM SALARY

Compute salary of Badlapur for PY 2024 – 25

9) Salary received in lieu of notice period

Fully taxable.

10) Profits in lieu of salary [Sec. 17(3)]

Fully taxable.

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INCOME FROM SALARY

ALLOWANCES
Allowance can be defined as a fixed amount either in the form of money or otherwise, given
regularly in addition to salary for the purpose of meeting a particular requirement connected
with the services rendered by the employee or as a compensation for unusual / peculiar
conditions of that service. Following are some allowances paid to employees.
Allowances
Fully taxable under both Fully taxable under Fully exempt only under
regimes default tax regime/ the optional tax regime
partly exempt under the
optional tax regime
i. Entertainment Allowances i. House Rent Allowance i. Allowances to High Court
[u/s 10(13A)] Judges
ii. Dearness Allowances ii. Special Allowances [u/s ii. Salary and Allowances paid
10(14)] by the United Nations
Except Organization
iii. Overtime Allowance iii. Sumptuary Allowance
granted to high Court or
Supreme Courte Judge.
iv. Fixed Medical Allowance a. Travelling Allowance Note: In case (i) and (iii)
v. City compensatory b. Daily Allowance above, the respective Acts
Allowance (to meet provide for such
increased cost of living in exemptions,
cities) notwithstanding anything
vi. Interim Allowance c. Conveyance contained in the income
Allowance tax Act, 1961. In case (ii),
vii. Servant Allowance d. Transport allowance exemption is provided
to blind/ deaf and under the respective Act,
dumb/ notwithstanding anything
orthopedically to the contrary contained
handicapped in any other law.
employee
viii. Project Allowance Note: The exceptions in
ix. Tiffin/ Lunch/ Dinner (a) to (d) above are
Allowance partly exempt under
x. Any other cash Allowance both the tax regime.
xi. Transport Allowance to Fully Exempt under both
employee other than tax regimes
blind/deaf and dumb/ Allowance granted to
orthopedically handicapped Government employees

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INCOME FROM SALARY

employee. outside India [Section

10(7)]

1. House rent allowance (HRA) Minimum of the following is exempt from tax.
1. Actual HRA received
2. 50% / 40% of salary
3. Rent Paid - 10% of Salary.
Note:
• Salary = Basic + DA(app) + comm. ( TO)
• Advance salary to be ignored for the
calculation of HRA.
• Basis of deduction is place of
accommodation.
• 50% for Mumbai, Delhi, Kolkata and
Madras and other cities 40%
• Fully taxable if rent is not paid
2. Children Education Allowance Minimum of the following is exempted –
1. Rs.100 per month per child (to the

maximum of two children)

2. Actual amount received.
• Deduction is available even if amount in
not spent.
• Child includes adopted child, step child.
3. Hostel Allowance Minimum of the following is exempted
1. Rs. 300 per month per child (to the
maximum of two children)
2. Actual amount received.
• Deduction is available even if amount in
not spent.
• Child includes adopted child, step child.
4. Truck Driver’s Allowance / daily allowance • Minimum of the following shall be
exempted
not receiving any daily allowance
70% of allowance or Rs. 10,000 p.m.
whichever is less
5. Transport Allowance Minimum of the following shall be exempted
• Actual amount received; or
• Rs. 3200 in case of blind and
orthopedically handicapped employee.

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INCOME FROM SALARY

PERQUISITES [SEC 17(2)]

1) Meaning
Benefits given in cash or Kind.

2) Specified Employee [Sec. 17 (2) (iii)]

The following categories are treated as specified employees.
A) A director employee in a company.
B) An employee who has substantial interest in the employer company (i.e. holding beneficial
interest in voting power of 20% or more at any time during the previous year).
C) An employee (not covered above) whose income chargeable under the head ‘Salaries’
(excluding all amenities and benefits), by way of monetary – payments exceeds Rs.
50,000. For the purpose of calculating monetary payment of Rs. 50,000,
D) the following are to be excluded/ deducted.
a) All non-monetary benefits.
b) Monetary benefits which are not taxable under Section 10C,
c) Deductions under Section 16 i.e.
i) Standard deduction,
ii) Entertainment allowance and
iii) Tax on employment (professional tax).
Note: Where salary is received from more than one employer during the relevant previous year,
the aggregate of salaries received from these employees will have to be considered for
determining the status.

3) Non-Specified Treated
Any employee other than specified employee is employee as non-specifies employee.

4) Members of Household Includes

A) Spouse (whether dependent or not).
B) Children and their Spouse (whether dependent or not)
C) Parents (whether dependent or not)
D) Servants and Dependents.

5) How to Find Out Value of Perquisite?

Step 1: Find out cost to the Employer

Step 2: (Less) Amount recovered from employee if any.
Step 3: (Less) Amount exempt if any

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INCOME FROM SALARY

Step 4: Value of Taxable Perquisite (if positive)

TAX FREE PERQUISITES FOR ALL EMPLOYEE

1) Medical facility in employer's hospital
Medical facility in Government's hospital
2) Refreshment provided by an employer to all employees during working hours in office
premises.
3) Subsidized lunch or dinner provided by employer to his employee. (Upto Rs. 50 per Lunch/
Dinner)
4) Recreational facilities.
5) Amount spent on training of employees.
6) Accommodation provided in remote area & 15days in hotel
7) Computer or laptop provided whether to use at office or at home.
8) Any perquisite allowed outside India by Govt. to a citizen of India for rendering services
outside India.
9) Employer's contribution to staff group insurance scheme
10) Loan given to employee at concessional rate or nil rate of interest provided the aggregate
amount of loan does not exceed Rs 20,000 & interest free loan for medical treatment of
diseases specified in rule 3A
11) Sale or gift of movable asset other than car and electronic items to employee after being
used for 10 or more yrs.
12) Periodicals and Journals required for performing official duties
13) Telephone, Mobile phones: Expenses for telephone, mobile phones actually incurred on
behalf of employee by the employer whether by way of direct payment or reimbursement
14) Rent free accommodation
• Rent free official residence provided to a judge of a High Court or the Supreme Court
• Rent free furnished residence (including maintenance thereof) to Official of Parliament, a
Union Minister or a Leader of opposition in Parliament.

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INCOME FROM SALARY

TAXABLE PERQUISITE

1) Rent-Free Accommodation

A) In hands of Government employee is taxable to the extent of licence fee. [Central/ State]
B) Other Employee
i. Where accommodation is hired by the employer: 10% of salary or hire charges,
whichever is lower.
ii. Where accommodation is owned by the employer: 10% / 7.5% / 5% of salary,
depending on population of city in which accommodation is provided. [ population
exceeding 40 lakhs/ 15 lakhs to 40 lakhs/ below 15 lakhs]
C) Valuation of rent-free furnished accommodation
Value of accommodation + Value of furniture being (10% of original cost (if owned by
employer) or Hire charge paid by employer)].
D) Valuation of accommodation provided at concessional rent.
Value of Rent-free accommodation as usual (-) Rent payable by employee to employer for the
above facility.
E) Valuation of accommodation in case of employees on transfer
i. For the first 90 days of transfer: Where accommodation is provided both at existing
place of work and in new place, the accommodation, which has lower value, shall be taxable.
ii. After 90 days: Both accommodations shall be taxable.
Meaning of salary for valuation of accommodation facilities
Salary includes Salary excludes
Basic Salary D.A. not applicable
D.A., if considered for retirement benefits Employer’s Contribution to PF
All Taxable Allowances Exempted Allowances
Bonus, Commission, fees Value of perquisites
Any other Monetary Payment

2) Obligation of Employee paid by Employer

• Fully taxable in the hands of employee

3) Sweat Equity Shares

The difference between fair market value of the specified securities or sweat equity shares
and amount paid by the employee shall be considered as taxable perquisite.

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INCOME FROM SALARY

4) Motor-Car Facility

Car is Car is Used by employee Taxable value

owned by Maintained by for
Personal purpose Maintenance + Depreciation (Note 1)

Employer Employer
Both purpose Rs.1800 or Rs.2400 pm depending upon
capacity of car (Note 2 & 3)
Personal purpose Depreciation
Employer Employee Both purpose Rs. 600/Rs. 900 pm depending upon
capacity of car (Note 2 & 3)
Personal purpose Maintenance
Both purpose Actual expenditure incurred by the
employer as reduced by Rs. 1800/2400
Employee Employer
pm. Depending upon capacity of car or a
higher deduction if prescribed conditions
are satisfied.
Note:
1. Maintenance cost includes repairs, petrol, driver salary Depreciation @ 10% of actual cost
of the car. However, if the car is not owned by employer then actual hire charge incurred
by employer shall be considered.
2. 600/ 1800 for lower capacity & 900/ 2400 for higher capacity car
3. Above 1600 CC higher capacity car and up to 1600 CC lower capacity car
4. Driver, add salary of driver (used for personal purpose) or Rs. 900 p.m. (partly used for
Personal purpose)
5. When car is used for both purpose amount recovered from employee shall not be deducted.
6. The word month denotes completed month. Any part of the month shall be ignored.
7. Further reminded, conveyance facility to the judges of High Court or Supreme Court is not
taxable.

5) Credit Card

• Expenditure incurred by employer in respect of credit card facility to employee shall be

taxable unless the card is wholly used for office purpose.

6) Gift, Voucher or Token Given by Employer

• Cash gift is fully taxable. However, non-cash gift in excess of Rs. 5000 fully taxable.

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INCOME FROM SALARY

7) Club Expenditure

i. Expenditure incurred by employer in respect of club facility to employee shall be taxable.

ii. Where such expenses are incurred wholly and exclusively for office purpose and specified
conditions are satisfied then nothing shall be taxable.
iii. Health club, sports and similar facilities are not taxable.
iv. Entrance fee of corporate membership is not taxable.

8) Manufacturing Cost or Hire Charge of Gas, Electricity or Water

a) Fully taxable.
b) If facility is in the name of employee, then taxable in the hands of all employee.
c) If facility is in the name of employer, then taxable in the hands of specified employee only.

9) Free Education to Family of Employee

a) Children Education Allowance – already discussed

b) Facility to Employee - Fully Exempt
c) Facility to Family member (other than child) - Fully Taxable
d) Facility to Child
i. Provided in an institution owned by employer /Provided by virtue of employment in an
institution not owned by employer is exempt up to Rs 1000 per child per month
irrespective of number of children. (-) amount recovered from employee
ii. Reimbursement: Fully Taxable.
Child includes adopted child, stepchild of the assessee, but does not include grandchild or
illegitimate child

10) Interest Free Loan / Loan at a Concessional Rate of Interest

i. Interest charged by employer > SBI Rates: Not a Perquisite.

ii. Interest charged is lower than SBI rates:
Value of Perquisite = Interest at SBI rates on maximum outstanding balance
Less: Interest paid by the Employee.
Exceptions
a. Medical Loan for treatment of diseases specified in Rule 3A except Loan reimbursed by
Medical Insurance
b. Loan not exceeding Rs. 20,000 in aggregate.

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11) Use of Movable Asset: (Other Than Motor Car, Laptop and Computers)

Valuation of perquisite in respect of use of movable assets shall be 10% of the original
cost of such asset (if asset is owned by the employer) or charges paid or payable by the
employer (if asset is hired).

12) Valuation of the Perquisite in Respect of Transfer of Movable Asset

• Value of perquisite 'the written down value - sale price". (if positive)
• The written down value shall be calculated considering the rate of depreciation for
Electronic items 50% (WDV). Motor-car 20% (WDV) and for other items 10 %(SLM)
for the completed years
i. Electronic gadgets include Computer, Digital Diaries and Printers, but exclude washing
machines, Microwave ovens, Mixers, Hot Plates, Ovens etc.
ii. Sale or gift of movable asset other than car and electronic items to employee after
being used for 10 or more years is a tax free perquisite
iii. Completed year means actual completed year from the date of acquisition of asset to
the date of transfer of such asset to Employees.

13) Medical Facility in India

i. Medical facility in a Government hospital or hospital maintained by the employer is

exempted.
ii. Reimbursement of medical expenses in hospital, which is approved by the CCIT, for the
prescribed diseases is fully exempted.
iii. Group medical insurance obtained by the employer for his employees is fully exempted.
iv. Reimbursement of any insurance premium paid by the employee is fully exempted.
Medical facility provided outside India
i. Medical expenditure, cost of stay abroad (for patient + one caretaker) is exempted to
the extent permitted by the RBI.
ii. Cost of travel (for patient + one care taker) is exempted only when GTI of the employee
does not exceed Rs. 200000 p.a.

14) Leave Travel Concession

• If an employee goes on travel in India (on leave) with his family and traveling cost is
reimbursed by the employer, then such reimbursement is fully exempted for 2 journeys in
a block of 4 years.
a) Carry-forward facility: Where concession is not availed during the preceding block
(whether on one occasion or both), then any one journeys performed in the first

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INCOME FROM SALARY

calendar year of the immediately succeeding block will be additionally exempted (i.e. not
counted in two journey limit)
b) Restriction on number of children: Exemption can be claimed for any number of
children born on or before 30/9/98. In addition, exemption is available only for 2
surviving children born on or after 1/10/98.
• However, children born out of multiple birth, after the first child, will be treated as one
child only. Leave travel allowance is fully taxable.

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INCOME FROM SALARY

RETIREMENT BENEFITS

1) Gratuity
i) Gratuity received during continuation of service is fully taxable in the hands of all
employees.
ii) Gratuity received at the time of termination of service by Government employee is fully
exempted. [ Central / State / Local]
iii) Gratuity received at the time of termination of service by non-government employee,
covered by the Payment of Gratuity Act shall be exempted to the minimum of the
following:
a) Actual Gratuity received
b) Rs. 2000000
c) 15/26 *Completed year of service * Salary p.m. at the time of retirement
Notes
• Completed year of service consider any fraction in excess of 6 months
• Salary = Basic + DA
iv) Gratuity received at the time of termination of service by non-government employee not
covered under the Payment of Gratuity Act shall be exempted to the minimum of the
following.
a) Actual Gratuity received;
b) Rs. 2000000, and
c) ½ * Completed year of service * Average salary p.m. at the time of retirement
Notes
• Completed year of service ignores any fraction of the year.
• Salary = Basic + DA (if app) + comm. (T.O)
• Salary drawn during last 10 months immediately preceding the month of retirement shall be
considered.
v) Gratuity received after death of employee is exempt.

2) Leave Salary

a) Leave Salary during continuation of service is fully taxable in hands of all employees.
b) Leave salary received by Government employees at the time of Termination/Retirement
fully exempted. [central /state]
c) Leave salary received by non-Government employee at the time of
Termination/Retirement shall be exempted to the minimum of the following
• Actual amount received as leave salary.
• Rs. 2500000

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INCOME FROM SALARY

• 10 * Average salary p.m.

• Average monthly salary X period of leave unveiled (in months)
Notes
• Salary = Basic + DA (if app) + comm. (T.O)
• Completed year of service ignores any fraction of the year.
• Salary drawn during last 10 months immediately preceding the retirement shall be
considered.
• Leave salary paid to the legal heir of deceased employee is not taxable as salary.
How to find out period of leave earned:
Step 1: Find out duration of service without any fraction.
Step 2: Step 1 X leaves allowed by employer or 30 days whichever is less
Step 3: Step 2 minus leaves taken plus leaves encased
Step 4: Leaves Unavailed = Step 3 / 30 days

3) Pension [Sec. 17(1)(ii)]

a) Uncommuted (Monthly) pension is fully taxable in the hands of all employees.

b) Commuted pension (Lumpsum) received by a Government employee is fully exempt from tax.
[ Central /State/ Local Authority/Statutory Corporation]
c) Commuted pension received by an employee who also received gratuity: 1/3 of total pension
shall be exempted.
d) Commuted pension received by an employee who does not receive gratuity: ½ of total
pension shall be exempted.
𝐀𝐦𝐨𝐮𝐧𝐭 𝐑𝐞𝐜𝐞𝐢𝐯𝐞𝐝 𝐨𝐧 𝐂𝐨𝐦𝐦𝐮𝐭𝐚𝐭𝐢𝐨𝐧
Total Pension =
𝐑𝐚𝐭𝐢𝐨 𝐨𝐫 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞 𝐨𝐟 𝐂𝐨𝐦𝐦𝐮𝐭𝐚𝐭𝐢𝐨𝐧
Notes
• Uncommuted Pension received by employee of UNO is exempt.
• Refer Sec 10 (18) & (19) for further exemptions.

4) Employer Contribution to NPS

Treated as income from salary to the extent of deduction allowed to employer [Refer Chapter
PGBP]

5) VRS COMPENSATION SEC. 10 (10C)

Compensation received is exempt to the minimum of the following:

a) Actual amount received as per guidelines; or
b) Rs. 500000.

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6) Annuity [Sec. 17(1) (ii)]

Fully taxable.

7) Retrenchment Compensation

Minimum of the following is exempt

a) Actual amount received.
b) Rs. 5,00,000
c) Amount calculated as per provisions of Industrial dispute Act 1947 = 15/30 X Average salary
for last 3 months X completed years of service
Notes
Salary = Basic + DA
Number of completed years in excess of 6 moths shall be taken as full month.

8) Approved Superannuation Fund

a) The employer’s contribution: It is exempt from tax. However, contribution exceeding Rs.
1.5 lakh will be taxable as perquisite
b) The employee’s contribution: It qualifies for deduction u/s 80C.
c) Interest on accumulated balance: It is exempt from tax
d) Payment from the tax: Section 10(13) grants exemption in respect of payment from the
fund

9) Provident Fund

Particulars SPF RPF URPF PPF

Employer's Not taxable Exempted up to Not taxable NA
contribution 12% of Salary
Employee's Eligible for Eligible for Not eligible for Eligible for
contribution deduction u/s.80C deduction u/s 80C deduction u/s 80C Deduction/s 80C
Interest Not Taxable Exempted @ 9.5% Not Taxable Not Taxable
p.a.
Lump sum Not Taxable Not Taxable if Employer's Not Taxable.
employee retires Contribution or
after 5 years of interest thereon is
service or due to taxable as salary.
inability to work. Interest on
Otherwise, it shall employee's
be taxable as URPF Contribution
taxable as income

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INCOME FROM SALARY

from other
sources.
Salary = Basic plus DA (if applicable) plus commission based on turnover

EMPLOYERS CONTRIBUTION TO RECOGNISED PROVIDENT FUND, SUPERANNUATION FUND AND NPS

[SEC. 17(2)(VII)]
• Sub-clause (vii) of section 17(2) has been substituted provides that the aggregate amount
of contribution made by the employer to the following retirement schemes, in excess of Rs.
7,50,000 per year, is taxable as perquisite –
a) Recognised provident fund
b) Scheme of NPS, and
c) Approved superannuation fund
• Further, a new clause (viia) of section 17(2) has been inserted to provided that annual
accretion by way of interest, dividend or any other amount of similar nature during the
previous year to the balance at the credit of the fund or scheme referred to above shall be
treat as perquisite to the extent it relates to the contribution referred to above (i.e., in
excess of Rs. 7,50,000). Such interest/ dividend/ similar amount shall be included in total
income and shall be computed in the prescribed manner.

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DEDUCTION U/S 16

1. Sec 16(i)

Gross Salary or Rs 75,000 whichever is less [FA 2024] if opted for ATR else Rs. 50,000

2. Entertainment Allowance Sec 16(ii)

Is allowed as deduction u/s 16(ii) in hands of Government employee to the minimum of following
-
a. Actual entertainment allowance
b. Rs. 5000
c. 20% of Basic Salary.

3. Tax on Employment or Professional Sec 16(iiii)

• Tax shall be allowed as deduction u/s 16(iii) on cash basis, whether paid by employee or by
employer (on behalf of employee) from gross taxable salary.
• If Professional Tax paid by employer, then it is added in salary as perquisites.

4. Salary for Different Purpose

Payment of Gratuity Act 1972 Basic + DA

Other than Gratuity Act Basic + DA (if applicable) + Commission (based on turn over)
Leave Encashment Basic + DA (if applicable) + Commission (based on turn over)
Provident Fund Basic + DA (if applicable) + Commission (based on turn over)
House Rent Allowance Basic + DA (if applicable) + Commission (based on turn over)
Rent Free Accommodation Basic salary + Dearness allowance / pay, if terms of
employment so provide + Bonus + commission + fees + All
other taxable allowances (excluding amount not taxable) +
Any monetary payment (lump-sum payment received at the
time of termination like gratuity, leave encashment, VRS
benefits and commuted pension)
Entertainment Allowance Basic Salary

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INCOME FROM HOUSE PROPERTY

CHAPTER 5 INCOME FROM HOUSE PROPERTY

1.

The below exemptions/ deduction will not be allowed to the assessee (i.e., individual or Hindu
undivided family or association of persons (other than a co-operative society), or body of
individuals, whether incorporated or not, or an artificial juridical person) paying tax as per
section 115BAC of the Income tax Act, 1961.
S N Nature of Exemption/Deduction Relating New System of Tax Existing System
to House Property Section 115BAC of Tax
1 Deduction of Municipal Tax from GAV Allowed Allowed
2 Standard Deduction u/s 24(a) from NAV Allowed Allowed
3 Interest Deduction u/s 24(b) from NAV
a Let out properties u/s 23(1) Allowed Allowed
b Self-Occupied Property u/s 23(2) Not Allowed Allowed
c Property which is stock in trade u/s Allowed Allowed
23(5)
4 Set off of brought forward House Property Not Allowed if Allowed
losses & brought forward Depreciation related to disallowed
from Current year House Property Income deduction &
exemptions
5 Set off current year House Property loss Not Allowed Allowed
from other Heads

2.

• Annual value of a property shall be taxable under the head "Income from house property"
subject to fulfilment of the following conditions:
i. There must be a property consisting of any building or land appurtenant thereto.
ii. Assessee is the owner (including deemed owner).
iii. Such property is not used in any assessable business or profession carried on by the
assessee.

3.

• Annual value of a property is assessed to tax only in the hands of the owner. Sub-letting is
taxable as business income or as income from other sources. Owner includes legal owner,
beneficial owner and deemed owner.

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INCOME FROM HOUSE PROPERTY

4.

i. Transfer of property to spouse or minor child (not being a married daughter) without
adequate consideration;
ii. The holder of an impartible estate;
iii. Property held by a member of a housing co-operative society; company, etc.
iv. A person who acquired a property u/s 53A of the Transfer of Property Act against part
performance of contract;
v. Lessee of a building for more than 12 years u/s 269UA (f).

5.

i. Income from vacate plot treated as income from other source

ii. When HP is provided by employer to his employees in the interest of his business then rent
received from such HP is treated as business income & not HP income.
iii. Even if HP is located outside Indian such income is taxable in India on the basis of Residential
status of Assessee.

6.

Composite Rent = Rent for building for assets (+) Charges for various services.

A) If let out building and other assets are inseparable

a) Where composite rent is received from letting out of building and other assets
(like furniture) and the two lettings are not separable i.e. the other party does
not accept letting out of building without other assets, then the rent is taxable
either as business income or income from other sources, the case may be.
b) This is applicable even if sum receivable for the two lettings is fixed separately.
B) If let out building and other assets are separable
a) Income from letting out of building is taxable under “Income from house
property”;
b) Income from letting out of other assets is taxable under “Profits and gains of
business or profession” or “Income from other sources”, as the case may be.
This is applicable even if a composite rent is received by the assessee from his
tenant for the two lettings.

7.

• The annual value of TWO house or part of the house shall be nil. If an assessee occupies
more than TWO house properties as self-occupied, he is allowed to treat only TWO house

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INCOME FROM HOUSE PROPERTY

as self- occupied at his option. The remaining self-occupied properties shall be treated as
'Deemed to be let out'. Interest on loan u/s 24(b) shall be allowed as under.

8.

• Where an assessee has a residential house (kept for self-occupation) and it cannot actually
be occupied by him owing to his employment, business or profession and he has to reside at
a place not belonging to him, then such house shall be termed as unoccupied property. It
shall be treated at par with self-occupied property. (Max. 2 Properties)

9.

• Where the assessee occupies more than two house property as self-occupied or has more
than two unoccupied property, then for any two of them, benefit u/s 23(2) can be claimed
(at the choice of the assessee) and remaining property or properties shall be treated as
'deemed to be let out' and shall be treated same as let out house property.

10.

• Where the building or land appurtenant thereto is held as stock in trade and the property
or any part of the property is not let during the whole or any part of the previous year,
the annual value of such property or part of the property, for the period up to TWO year
from the end of the financial year in which the certificate of completion of construction
of the property is obtained from the competent authority, shall be taken to be NIL.

11.

Steps Particulars Amount

st
1 FIND OUT EXPECTED RENT [RER]
Gross Municipal Value (a) xxx
Fair Rent (b) xxx
Higher of the [(a) and (b)] [A] xxx
Standard Rent as per Rent Control Act [B] xxx
Reasonable Expected Rent [Lower of [(A) and (B)] xxx
2nd ACTUAL RENT RECEIVED / RECEIVABLE [ARR]
Rent received /Receivable – unrealised Rent
rd
3 GAV = HIGHER OF 1 OR 2 xxx
th
4 IF GAV IS LOWER DUE TO VACANCY ALLOWANCE THEN GAV SHALL BE ARR

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• Conditions to claim deduction on account of unrealized rent

i) The tenancy is bona fide.
Condition

ii) The defaulting tenant has vacated or steps have been taken to compel him to vacate
the property.
iii) The defaulting tenant is not in occupation of any other property of the assessee.
iv) The assessee has taken all reasonable steps to institute legal proceedings for the
recovery of the unpaid rent.
Illustration 1
Find out the gross annual value in case of the following properties.
(Rs. in thousand)
Particulars H1 H2 H3 H4 H5 H6
Gross Municipal Value p.a. 200 300 400 500 300 300
Fair rent p.a. 300 600 750 180 200 400
Standard rent under the Rent Control 300 180 280 225 250 240
Act p.a.
Actual rent p.a. 600 900 300 240 216 240
Property remains vacant (in number of 1 3 2 1 2 1
month)

12.

A) Area wise Division: In this case, a house property consists of two or more independent
units and one or more of which are self-occupied and remaining units are let out.
• Treatment: Self-occupied portion & let out portion shall be treated as two separate houses
(i.e. Unit A & Unit B). Income of both units shall be computed accordingly.
B) Time wise division: In such case, the house property is self-occupied by the assessee for
a part of the year and let out for remaining part of the year.
• Treatment: In such case assessee will not get deduction for the self-occupied period and
income will be computed as if the property is let out throughout the year. Reasonable
expected rent (RER) shall be taken for the full year but the actual rent receivable (ARR)
shall be taken only for the let-out period.

13.

i. Allowed as deduction to Landlord on paid basis including Advance M. Tax.

ii. Interest, penalty and fine is not allowed as deduction.

14.

• 30% of net annual value are allowed irrespective of the actual expenditure incurred.

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INCOME FROM HOUSE PROPERTY

15.

INTEREST ON HOUSING LOAN

Loan for construction / Purchase Loan for reconstruction / renewal /

(Pre-construction / Post construction) repairs

Self- Self-
Let out Let out
occupied occupied

Interest Maximum Interest

paid 30,000 paid

Loan taken Loan taken on

before 1.4.99 or after 1.4.99

Amount of Acquisition or construction

deduction completed within 5 years from the
interest paid or end of the FY in which the capital was
30,000 borrowed
whichever is +
less Certificate from lender specifying
interest payable

No Yes

Maximum Rs. 30,000 for one or Maximum Rs. 2,00,000 for one or
two self-occupied properties two self-occupied properties

PRE-CONSTRUCTION PERIOD
• It is a period commencing on
• The date of commencement of construction or the day of borrowing whichever is later and
ending on (a) 31st March immediately prior to the date of completion of construction or (b)
date of repayment of loan whichever is earlier.
• Pre-construction interest is deductible in 5 equal instalments commencing from the
previous year in which the house is acquired or constructed.

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Illustration 2
Compute period of five years.
Completion of 1st year 2nd year 3rd year 4th year 5th year Is deduction available in
construction PY 24 – 25
20-21 20-21 21-22 22-23 24-25 25-26 Yes
24-25 24-25 25-26 26-27 27-28 28-29 Yes
17-18 17-18 18-19 19-20 20-21 21-22 No
KEY NOTES
• Interest is allowed as deduction on accrual basis.
• Interest on unpaid interest is not deductible.
• No deduction is allowed for any brokerage for arranging loan.
• Interest on afresh loan, taken to pay the original loan is allowed a deduction.
• Interest payable out of India is allowed as deduction if tax is deducted at source.
• If loan is taken by mortgaging one house property for the construction for another house
property, then the interest on such loan shall be eligible for deduction from the income of
the second house, since the purpose for which the loan amount is used is taken into
consideration.
Illustration 3
Calculate pre-construction period from the following information
Date of loan Constructed Pre-construction
Date of repayment
taken completion period
01/06/2016 14/10/2018 10/01/2025
01/06/2016 27/01/2018 20/04/2026
01/06/2018 31/03/2020 10/12/2018
01/04/2024 28/03/2025 28/02/2025

16. Recovery Recovery

• Meaning
Where any Unrealized rent is subsequently realized, and then such recovery shall be
taxable under the head ‘income from house property’.
Where the rent is increased by landlord (either suo-motu or due to the court instruction)
retrospectively, then the increased rent shall be treated as Arrear rent.
• Tax treatment
Recovery shall be taxable after a standard deduction of 30%
• Features
i. It shall be taxable on cash basis

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INCOME FROM HOUSE PROPERTY

ii. It shall be taxable under the head ‘Income from house property’ whether assessee
owns such house in the year of recovery or not.

17.

• Meaning
If a house is owned by more than one owner than they are known as Co-Owners.
• Tax treatment
Each Co-Owner shall be taxable separately for his share of income from house property.
Where the house property is used for self-occupation by co-owners then all of them can
claim benefit u/s 23(2) and interest on loan u/s 24(b) shall be to all the co-owner to the
extent of Rs. 30000/ Rs. 2, 00,000 Separately.

18.

If an assessee allots his property to his firm then treatment shall be as under:
Property has been allotted without rent Such property shall be taxable under the head
but as his share of contribution “Profit & gains of business or profession”. CIT vs
Narain & Rabindranath bhol
Property has been let out to the firm for a Annual value of a property shall be taxable under
rent the head “Income from house property”. Ram
Narain & Bros vs CIT

19. Outside
Status of Individual Taxability
Resident Ordinarily Resident Taxable in India
Not Ordinarily Resident / Non – Resident If the Rent is first received in India, then
Income shall be taxable in India
• Income accruing or received in Foreign Currency should be converted into India Rupees in
TT Buying Rate on the last day of the previous year. (Rule 115)
• Any tax or expenditure incurred towards earning such income shall be allowed as a deduction

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INCOME FROM BUSINESS OR PROFESSION

CHAPTER 6 INCOME FROM BUSINESS OR PROFESSION

1)
The below exemptions / deduction will not be allowed to the assessee (i.e. individual or Hindu
undivided family or association of persons (other than a co-operative society), or body of individuals,
whether incorporated or not, or an artificial juridical person) paying tax as per section 115BAC of
the Income tax Act, 1961.
S N Nature of Exemption/ Deduction New System Existing
of Tax u/s System of
115BAC Tax
1 Additional depreciation (section 32(1)(iia)) Not allowed Allowed
2 Tea / coffee / rubber development account (section 33AB) Not allowed Allowed
3 Site restoration fund (section 33ABA) Not allowed Allowed
4 Deduction for scientific research (section 35(1)(iia)/(iii), Not allowed Allowed
35(2AA))
5 Capital expenditure pertaining to specified business (section Not allowed Allowed
35AD)
6 Agriculture extension project (section 35CCC) Not allowed Allowed

2)

Income chargeable under the head Profits & gains of business or profession.
i. Profits & gains of any business or profession
ii. Compensation to Management agency
iii. Income of trade or professional associations
iv. Export incentive,
v. Perquisite from business or profession
vi. Remuneration to partner,
vii. Amount received or receivable for certain agreement
viii. Key man Insurance Policy,
ix. Recovery against any capital asset being covered by sec. 35AD.
x. Amount received or receivable for certain agreement not carrying out any activity in relation
to any business; or profession.

Income not taxable under the head "Profits and gains of business or profession are
1) Rent of house property
2) Dividend on shares even though the assessee deals in shares
3) Winning from lotteries, races etc.

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INCOME FROM BUSINESS OR PROFESSION

4) Exempted income,
5) Sum taxable under the head ‘Capital Gains'.

3)

• It means a transaction in a contract for the purchase or sale of any commodity, including
stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery
or transfer of the commodity or scrip: [Sec. 43(5)]

4)

• Rent, rates, taxes, current repairs & insurance for premises used for the purpose of business
or profession shall be allowed.

5)

• Current repairs & insurance of plant, machinery & furniture are allowed as deduction.

6)

A) Conditions
• Assessee must be the owner of the asset (Hire purchase, Co-owner, beneficial owner)

B) Active v/s Passive use

• Asset should be ready to use (Passive Use) actual use not necessary.
• Significance of date of purchase: Where an asset is acquired by the assessee during the
previous year and is put to use in the same previous year for less than 180 days, the
depreciation in respect of such asset is restricted to 50% of the normal depreciation

C) Method of Depreciation

STRAIGHT LINE METHOD

• Applicable to assessee engaged in generation or generation and distribution of power

and distribution of power can charge depreciation on their assets under Straight-Line
Method of depreciation.
• Power Sector Units can claim depreciation on SLM method only on Tangible Assets. For
Intangible Assets, only WDV Method shall be applicable.
• They have to exercise such option before the due date of furnishing the Return u/s 139(1)
relevant to the previous year in which they begin to generate power.
• Terminal Depreciation under section 32 = WDV Less Net Consideration

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INCOME FROM BUSINESS OR PROFESSION

• Balancing Charge under section 41(2) = Net Consideration Less WDV

• Capital Gain = Net Consideration Less Original Cost

REDUCING BALANCE METHOD

• Block of asset sec 2(11): Block of assets means group of assets falling within a class of
asset
A) Determination of Written Down Value (WDV) [Sec. 43(6)]
Situation WDV
Asset acquired during the Previous Year Actual cost to the assesse
Asset acquired in earlier Previous Year(s) Actual cost to the Assessee Less All
depreciation allowed under IT Act.
In case of Succession, Amalgamation or Demerger WDV of the Predecessor Company or
Transferor Company or Demerged Company

B) Actual cost of asset Sec 43 (1)

Mode of acquisition Actual cost
Where assessee Purchase Price
himself acquires Add:
the asset. a. Interest on loan for the period upto the date of usage of the asset
b. Freight and Insurance
c. Loading, Unloading Charges
d. Installation and Erection Charges
Less:
a. Any amount met by an Authority or any other person by way of
subsidy or Grant,
b. GST
Assets received Actual cost to the previous owner – depreciation (if used by previous
under Gift, Will or owner in the business)
Inheritance. Actual cost to the previous owner - (if used by previous owner for
personal purpose)
Note:
Provided further that where the assessee incurs any expenditure for acquisition of any asset or
part thereof in respect of which a payment or aggregate of payment bank or an account payee
bank draft or use of electronic clearing system through a bank account, > Rs. 10,000/-, such
expenditure shall be ignored for the purposes of determination of such cost in order to promote
digital transactions, the payments or receipts through other notified electronic modes. Have
been proposed to be included in the list of acceptable mode of payment.

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INCOME FROM BUSINESS OR PROFESSION

C) Calculation of depreciation (at a glance)

Particulars Amount Rs.
W.D.V. of the block at the beginning of the previous year X
Add: Purchase during the previous year X
X
Less: Net Sale consideration of assets sold during the previous year Value of block
X
before depreciation
Less: Depreciation X
WDV of the block at the end of the year X
When depreciation is not charged:
1) When WDV is reduced to zero. The negative value is to be treated as short term capital
gain.
2) When entire block is empty. In such case, the positive value shall be treated as short term
capital loss & negative value is treated as STCG.

D) Block Rates
PART A - TANGIBLE ASSETS
I Buildings
Block 1 Buildings which are used mainly for residential purposes except hotels 5%
and boarding houses
Block 2 Buildings which are not used mainly for residential purposes 10%
Block 4 Purely temporary erections such as wooden structures 40%
II Furniture and Fittings
Block 1 Furniture and fittings including electrical fittings [“Electrical fittings” 10%
include electrical wiring, switches, sockets, other fittings and fans, etc.]
III Plant & Machinery
Block 1 i Motor cars other than those used in a business of running them on 15%
hire, acquired or put to use on or after 1-4-1990
Block 2 ii Motors buses, motor lorries, motor taxis used in the business of 30%
running them on hire
Block 5 Computer including computer software Air or water pollution control 40%
equipment
Block 11 Books (annual publications or other than annual publications) owned by 40%
assessees carrying on a profession
Block 12 Books owned by assessees carrying on business in running lending 40%
libraries

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INCOME FROM BUSINESS OR PROFESSION

Block 13 Plant & machinery (General rate) 15%

IV Ships
Block 1 Ocean-going ships 20%
PART B - INTANGIBLE ASSETS
Know-how, patents, copyrights, trademarks, licences, franchises or any other 25%
business or commercial rights of similar nature, not being goodwill of a business or
profession.
Note: Students should refer to Income-tax Rules, 1962 for the detailed classification of assets
under Rule 5(1) and the rates applicable thereto.

7)

Mode of Acquisition Cost of acquisition

Building used for private Cost of Acquisition or Construction, as reduced by the Notional/
purpose and subsequently Deemed Depreciation for the period of personal use.
put into use for the purpose Notional/ Deemed Depreciation: Total Depreciation that would
of business. have been allowable had the Building been used for Business since
its acquisition.

8)

A) Conditions
Applicable to Assessee engaged in the business of manufacture / production of any article /
thing or in the business of Generation or Transmission or distribution of power.
B) Rate of Depreciation
Asset is put to use for more than 180 days – 20% on actual cost
Asset is put to use for less than 180 days – 10% on actual cost & balance 50% can be claimed
in succeeding PY
Additional depreciation shall be allowed even if the block has nil or negative
•
value.
Additional depreciation is available only in the year of acquisition and
KEY NOTES

•
installation of plant or machinery and not afterwards.
Additional deprecation shall be subtracted while computing the closing WDV of the
•
respective block.
Additional depreciation is not available if the new plant or machinery is sold in the
•
year of acquisition.

9)

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INCOME FROM BUSINESS OR PROFESSION

Depreciation remaining unabsorbed can be carried forward for indefinite period and can
be set off against any income of the assessee. (Except salary and casual income)

10)

• Applicable to all assessee carrying on business of growing and manufacturing Tea; Coffee; or
Rubber in India.
• Assessee must deposit an amount in an account with NABARD or in any other account in
accordance with and for the purpose specified in a scheme approved by Tea Board or Coffee
Board or Rubber Board within 6 months from the end of the previous year or before the due
date of furnishing the return of income.
• Deduction: Minimum of - Amount so deposited or 40% of the profit.
• Withdrawal of Deduction: Any amount released during any PY is not utilized. Such amount
shall be treated as business income of the PY Any amount released during any PY or
withdrawn by the assessee and utilized for the purchase of buying specific asset.
• Period of holding of new asset: 8 yrs from the date acquisition.

11)

• Applicable to all assessee engaged in the business of

a) Prospecting for petroleum or natural gas in India; or
b) Extraction or production of petroleum or natural gas in India; or Both.
• The Central Government has entered into an agreement with the assessee for such
business.
• Assessee must deposit an amount with the State Bank of India or in an account maintained
in accordance with and for the purposes specified in a scheme approved by the Government
of India in the Ministry of Petroleum & Natural Gas. Such amount must be deposited before
the end of the previous year. Accounts must be audited.
• Deduction: Minimum of - Amount so deposited or 20% of the profit.

12)

Applicable to all assessee in house research related to business of the assesse

A)

• Before commencement of business

Specific revenue expenditure (i.e. Material or salary excluding perquisite) incurred during 3
years immediately preceding the date of commencement of business, shall be allowed as
deduction in the year of commencement of business.

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INCOME FROM BUSINESS OR PROFESSION

• After commencement of business all revenue expenses allowed

B)

• Before commencement of business

Any capital expenditure incurred (excluding land) during 3 years immediately preceding the
date of commencement of business shall be 100% allowed in the year of commencement in
the business.
• After commencement of business any except land

C)
1. Assessee: company only engaged in Bio-technology or any business of manufacture or
production of any article or thing.
2. Expenditure: Capital or revenue expenditure excluding cost of any land and building.
3. Deduction: 100% of revenue and capital expenditure except cost of land & building.
4. Cost of building is not entitled for weighted deduction but eligible for 100% deduction u/s
35(1)(i).
• Note: Pre-commencement expenses and cost of building is not allowed under section
35(2AB). Hence they shall be entitled for 100% deduction u/s 35(1).

D) Research through outside agency (even if not related to business)

Payment made to Deduction %
Any Research Association (or) University/ College, etc. for Scientific Research 100%
Company approved by Prescribed Authority for Scientific R&D 100%
Any Research Association (or) University/ College, etc. for social science or
statistical research 100%
National Laboratory/ University/ IIT/ Specified Person 100%

E) Section 41(3) Sale of asset used for scientific research

• Without having been used for other purpose, sale consideration to the extent of cost of
such asset shall be taxable as business income in the year of sale. The excess of sale
consideration over original cost (or indexed cost of acquisition) is taxable as capital gain u/s
45.

13) of telecom-licence fee

• If any assessee has incurred capital expenditure for acquiring any right to operate
telecommunication services and has actually made the payment, then actual expenditure

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INCOME FROM BUSINESS OR PROFESSION

incurred and paid shall be allowed as deduction in equal instalments over the period for
which the license remains in force.
Deduction = Amount paid / no of years left for licence to expire.

A)

1. Loss on sale shall be deductible as business loss in the year of sale

2. Profit on sale, to the extent of aggregate of deduction allowed in preceding year(s) shall
be treated as business income.
3. Capital gain treatment: The excess of sale consideration over original cost (or indexed
cost of acquisition) is taxable as capital gain under section 45.

14)

• If any assessee incurs any expenditure by way of payment of a sum to a public sector
company, local authority, an association or institution approved by the National Committee
for carrying out any eligible project or scheme, [directly in respect of eligible project
(applicable in case of company assessee only)] then such expenditure shall be fully allowed
as deduction.

15)

Deduction = 100% of capital expenditure

Ineligible Expenditure
1. Any Capital expenditure in respect of which the payment or aggregate of payments made
to a person in a day, otherwise than by an account payee cheque drawn on a bank or an
account payee bank draft or use of electronic clearing system through a bank account, > Rs.
10,000,
2. Any expenditure incurred on the acquisition of any asset except Land, or Goodwill, or
Financial Instrument.
Nature of business
1. Setting up and operating a cold chain facility or
2. Setting up and operating a warehousing facility for storage of agricultural produce or,
3. Laying and operating a cross-country natural gas or crude or petroleum oil pipeline or
4. Building and operating, anywhere in India, a hospital with at least 100 beds for patients or
5. Building and operating, anywhere in India, a hotel of two-star or above Category or
6. Developing and building a housing project under a scheme for slum redevelopment or
rehabilitation or.
7. Developing and building a housing project under a scheme for affordable Housing.

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INCOME FROM BUSINESS OR PROFESSION

8. Production of fertilizer in India shall be allowed as deduction. The deduction is subject to

certain conditions.
9. Setting up and operating an inland container depot or a container freight station notified
or approved under the Customs Act, 1962;
10. Bee keeping and production of honey and beeswax;
11. Setting up and operating a warehousing facility for storage of sugar in India shall be allowed
as deduction.
12. Laying and operating a Slurry Pipeline for the transportation of Iron Ore.
13. Setting up and operating semi-conductor Wafer Fabrication Manufacturing Unit notified
by CBDT.
14. w.e.f 1/4/2018 Business of developing or maintaining or operating or developing, maintaining
and operating a New Infrastructure Facility.

16)
• Payment to associations and institutions for carrying out rural development programmes shall
be fully allowed as deduction.

17)

• Expenditure incurred on notified agricultural extension project is eligible for deduction @

100% of such expenditure.
• Conditions to claim deduction
a) Investment > 25 lakhs except land and building
b) Approved by Ministry of Agriculture

18)

• Any expenditure incurred by company on notified skill development project is eligible for
deduction @ 100% of such expenditure.

19)

• An Indian company or a resident non-corporate assessee, who has incurred certain

amount as preliminary expenditure, can claim the total
• Eligible preliminary expenditure as deduction in 5 equal installments. The total eligible
preliminary expenditure cannot exceed 5% of cost of project (in case of company, 5% of
cost of project or capital employed, whichever is higher). In the first year, audit report
must be submitted along with the return.

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INCOME FROM BUSINESS OR PROFESSION

20)

• If an Indian company has incurred certain expenditure wholly & exclusively for the purpose
of amalgamation or demerger, 1/5th of expenses so incurred shall be allowed for a period
of 5 years commencing from the year in which amalgamation or demerger takes places.

21)

• Voluntary retirement compensation shall be allowed to all assessee in 5 equal installments

commencing from the year in which such expenditure was paid.

22)

A) Section 36(1)(b)
• Insurance premium for health of employees is allowed as deduction if the payment has
been made by any mode other than cash.

B) Section 36(1)(ii)
• Bonus or commission to employees is allowed as deduction subject to sec. 43B.

C) Section 36(1)(iii)
• Amount of interest paid in respect of capital borrowed for the purposes of business or
profession shall be allowed as deduction.

D) Section 36(1)(iiia)
Discount on Zero Coupon Bonds
• Application for infrastructure Capital Co. / Fund, Public Sector Co & Scheduled Bank.
• Written of over the period of the Bond.

E) Section 36(1)(iv)
• Any sum paid Subject to sec. 43B, by the employer towards RPF & Approved superannuation
fund is allowed as deduction.

F) Section 36(1)(iva)
• Contribution (subject to max, of 14% [FA 24] of salary of an employee) by an employer
towards notified pension scheme u/s 80CCD is allowed as deduction. [Salary = Basic + DA (if
App)]

G) Section 36(1)(v)

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INCOME FROM BUSINESS OR PROFESSION

• Employer’s Contribution to an Approved Gratuity Fund allowed when paid before due date of
filling return [Sec. 43B]

H) Section 36(1)(vi)
• Allowance in any respect of dead or permanently unless animals Cost of Animal Less
Insurance Claim or any other receipt. no amortization of cost is allowed.

I) Section (36)(1)(Va) Any sum received by an employer from his employees as contribution
towards –
• Provident Fund; or
• Superannuation Fund; or
• Any other fund set up under the provision of the Employee’s State Insurance Act, 1948;
or
• Any other fund for the welfare of such employees
Is treated as an income of the employer. Subsequently, when such sum is credited by the
employer to the employee’s account in the relevant fund on or before the due date of
crediting such contribution prescribed under the relevant Act, then deduction is allowed.

J) Section 36(1)(vii)
a) Bad Debts
• Any debt or part thereof, which becomes bad shall be allowed as deduction subject
to following conditions –
i. Debt must be incidental to the business or profession
ii. The debt has been considered as income of the assessee
iii. It must have been written off in the accounts of the assessee
iv. Business must be carried on during the previous year or any part of the previous year
v. It must be of a revenue nature.
b) Section 41(4)
• Bad debt recovery: Taxable amount shall be [Amount recovered (-) (Bad debt claimed (-)
Bad debt earlier allowed as deduction)]
• Taxable in the year of Receipt under the head PGBP.

K) Section 36(1)(ix)
• Any expenditure incurred by a company for promotion of family planning among its
employees shall be allowed as deduction as under.
• Revenue Expenditure: the Year in which amount is spent.
• Capital Expenditure: in 5 equal instalments.
• Unabsorbed capital expenditure shall be treated same as unabsorbed depreciation.

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INCOME FROM BUSINESS OR PROFESSION

• Unabsorbed revenue expenditure shall be treated as business loss

L) Section 36(1)(xv) Securities Transaction Tax Paid

• Fully allowed as deduction only when paid if Income from such transaction is included as
PGBP.

M) Section 36(1)(xvi) Commodities Transaction Tax paid

• Fully allowed as deduction only when paid if Income from such transaction is included as
PGBP.

23)

1) Interest on loan paid to proprietor is disallowed.

2) Salary paid to proprietor is disallowed.
3) Anticipated future expenditure or loss (e.g. incurred in the previous provision for bad debt)
is disallowed.
4) Professional tax is allowed expenditure.
5) Litigation expenditure incurred in order to expenditure. Defend or maintain an existing title
to the assets is allowed.
• Tax point: Litigation expenditure incurred for curing any defect in the title of asset shall
not be allowed (as because it is of capital nature).
6) Legal expenditure incurred to alter the Articles of Association of the company, in conformity
with the amendments in the law is allowed.
• Tax point: Fee paid to ROC (Registrar of Companies) for alteration of MOA is disallowed
(being a capital expenditure)
7) Expenses on registration of trademark are allowed.
8) Compensation paid to a worker in order to dismiss him is allowed.
9) Annual listing fees paid to stock exchanges is allowed.
10) Fees paid for increase of authorized capital is disallowed.
11) Expenditure on raising equity and preference share capital is disallowed.
12) Penalty and damages paid in connection with infringement of law is disallowed.
13) settlement amounts should not be allowed as business expenses.
[Amendment FA 24]

24)

• Expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract,

pamphlet or like, published by a political party is disallowed.

25)

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INCOME FROM BUSINESS OR PROFESSION

A) Section 40(a)(i)
• Interest royalty, fees for technical services payable to non-resident or outside India
or in India to a non-resident or to a foreign company on which tax is deductible but not
deducted or after deduction not deposited before the time limit (before Due Date of
ROI) shall be 100 % disallowed.
Note:
Relief shall be given only in case of non-deduction if recipient has declared such income in ROI
and paid tax on it.
B) Section 40(a)(ia)
• Any payment made to a Resident, on which Tax is deductible/ after deduction, tax has
not been paid before the due date of furnishing Return u/s 139(1).
i. 30% of the Expense will not be allowed.
ii. Allowable in the year of remittance of TDS.
Note: Relief shall be given only in case of non-deduction if recipient has declared such income in
ROI and paid tax on IT
C) Section 40(a)(ii)
• Any sum paid on account of tax or cess levied on profits on the basis of or in proportion
to the profits & gains of any business or profession.
D) Section 40(a)(iii)
• Salary paid outside India without TDA shall be 100% disallowed.

26)

Relatives
1) An Individual
• Relative
• A person in whose business or profession the individual has substantial interest.
2) A Company
• Director of the company or any relative of the director
3) A Firm
• Partner of the firm or relative of partner
4) An AOP
• A member of the Association or a relative of the member.
5) An HUF
• A member of the family or relative of such person
6) Any assessee
• An individual who has a substantial interest in the business or profession of the assessee
or the relative of such individual.

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INCOME FROM BUSINESS OR PROFESSION

27)

• Applicable to expenses covered by sec 30 to 37 [Revenue in Nature]

• Such expenditure should not be disallowed under any other section.
• Where an assessee incurs any expenditure, for, which payment or aggregate of payment is
made to a person in a day is in excess of Rs. 10,000 (Rs. 35,000 in case of payment made for
plying, hiring or leasing goods carriages), Otherwise than by an Account Payee Cheque drawn
on a Bank or an Account Payee Bank Draft, the whole of such expenditure shall not be allowed
as a deduction.
• Exceptions - Government taxes; Payment financial institutes; Payment to cultivator, bank
holiday/ strike,

28)

• In general provision or reserve is not allowed. However, provision for Gratuity is allowed
provided the amount has become due for payment.

29)

Following expenses are allowed as deduction in PY if paid before the date of filing return (31July or
31th Oct)
1. Any sum payable by way of duty, tax, cess
2. Bonus, commission
3. Interest on loan from public financial institutions
4. Interest on loan from NBFC
5. Leave encashment
6. Employers contribution to SPR, RPF, gratuity fund etc
7. any sum payable by Assessee to the Indian Railways for use of Railway Assets.
8. Any sum payable to assessee to MSE beyond time limit

30)

• Full value of consideration for sale of land or building or both shall be higher of 110%
of value adopted by authority or actual value whichever is higher.
Where the date of agreement fixing the value of consideration for transfer of the asset
and the date of registration of such transfer of asset are not the same, the value referred
to in above para may be taken as the value assessable by any authority of a State Government
for the purpose of payment of stamp duty in respect of such transfer on the date of the
agreement.

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INCOME FROM BUSINESS OR PROFESSION

However, this benefit is available only in a case where the amount of consideration or a part
thereof has been received by any mode other than cash on or before the date of agreement
for transfer of the asset.

31)

• Person carrying on specified business

i) Gross receipts >Rs 150000 in all 3 yrs immediately preceding the previous year: Maintain
accounts as per rule 6F
ii) In any other case: Such records which will enable the AO to compute income
• Person carrying on non- specified business
i) Profit > Rs 120000 (Rs 250000 in case of Individual or HUF) or total sales >Rs 1000000 (Rs
2500000 in case of Individual or HUF in any of the 3 yrs immediately preceding the previous
year: Such records which will enable the AO to compute income
ii) In any other case: Not required to maintain any books of accounts.
Period of maintenance: 6 years from the end of relevant AY
Penalty for Non-maintenance: Rs 25,000

32)

• Audit is compulsory if turnover exceeds Rs 1CR and in case of profession gross receipts
exceeds Rs 50L.
• In order to reduce compliance burden on small and medium enterprises, the threshold limit
has been revised to increase it for a person carrying on business from Rs.1 crore to Rs.10
crore if the following two conditions are satisfied:
Condition 1 – His aggregate of all receipts in cash during the previous year does not exceed
5 per cent of such receipt.
Condition 2 – His aggregate of all payments in cash during the previous year does not exceed
5 per cent of such payment.

PRESUMPTIVE TAXATION SCHEME FOR ASSESSEES ENGAGED IN ELIGIBLE PROFESSION

SPECIAL PROVISIONS FOR COMPUTING INCOME ON ESTIMATED BASIS
44AD 44ADA 44AE
Nature of Business Any business except Specified Professions Plying, Leasing or Hiring
the business referred u/s 44AA goods carriages. (Goods
to in section 44AE. carriages may be owned
by the assessee or taken
on hire purchase or
instalment scheme).

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INCOME FROM BUSINESS OR PROFESSION

Assessee Resident Individual, Resident Assessee Any Assessee

HUF or a partnership
firm, but not a LLP
firm;
Restriction Where an eligible
assessee declares
profit for any PY in
accordance with this
section and he declares
profit for any of the
next 5 AY’s not in
accordance with this
section, he shall not be
eligible to claim the
benefit of this section
for next 5 AY’s
[44AD(4)]
Restriction on Gross receipts Gross receipts Own not more than 10
applicability =< Rs. 200 Lakhs/ =< Rs. 50 Lakhs. / goods carriages,
Rs. 300 Lakhs Rs. 75 Lakhs in the anytime during the PY.
If the amount (or case of an assessee
aggregate of amounts) where the amount (or
receive during the aggregate of amounts)
previous year in cash/ received during the
bearer or crossed previous year in cash/
cheque/ draft does not bearer or crossed
exceed 5 percent of cheque/ draft does
the total turnover/ not exceed 5 per cent
gross receipts of the of the gross receipts
previous year of the previous year.
Estimated Income 8% of Gross Receipts 50% Gross Other
of than Heavy
Received or receivable Receipts received or Vehicle
during the PY, or receivable during the Rs. 7,500 pm or part
higher sum claimed to PY, or higher sum during which the
have been earned by claimed to have been carriage is owned, or
the assessee 6% of earned by the assesse. Actual income earned
total turnover or gross whichever is more
receipts which is [Vehicles owned includes
received by an account vehicles purchased on

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM BUSINESS OR PROFESSION

payee cheque or an Hire purchase or

account payee bank Instalment]
draft or use of In case of Heavy
electronic clearing Vehicle Rs 1000 per
system through a bank month per ton. Or
account during the actual w.e.h
previous year or Heavy Vehicle
before the due date Heavy vehicle means
u/s 139(1). Gross weight >
Payment through 12000kg
digital wallets is also
allowed.
Deductions All deductions u/s 30 to 38 including depreciation are deemed to have
u/s 30 to 38 been allowed.
Depreciation Is deemed to have been claimed and allowed. WDV shall be calculated
Accordingly.
Set of other Losses The income from these businesses will be aggregated with other incomes
of the assessee, and loss from any other activity can be set off against the
estimated income in accordance with section 70, 71 or 72.
Chapter VI-A Deductions under chapter VI-A will be available to the assessee, from the
Deductions estimated incomes under these sections.
Advance Tax 100% payable by 15th 100% payable by 15th Required to be paid
March March on relevant dates
Books of Accounts The assessee, who files the return, estimating income at prescribed rate
and Audit thereof or a higher income, will not be required to maintain books of account u/s
44AA, nor required to get them audited u/s 44AB, in respect of such
businesses.
Can lesser income be If 44AD(4) applies Assessee may declare an income lower than the
shown? then he shall have to specified amount. In such case he shall have to
maintain books of maintain books of accounts u/s 44AA and get
accounts u/s 44AA and them audited by a CA u/s 44AB, irrespective of
get them audited by a the turnover -
CA u/s 44AB for that
PY + next 5 PY’s
If his TI > basic If his TI > basic Even if TI < = basic
exemption limit exemption limit exemption limit

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM BUSINESS OR PROFESSION

SECTION 40(b) ASSESMENT OF FIRM

A) Interest on Capital or Loan
a) Conditions
i. Authorized by the partnership deed
ii. Not pertaining to period prior to partner
Deduction
• Actual interest paid to partner or 12% max whichever is less.
B) Remuneration to partner
b) Conditions
i. Paid only to a working partner
ii. Authorized by the partnership deed
iii. Not pertaining to period prior to partner
Deduction
• Actual paid or max the permissible limit whichever is less [FA 24]
Book profit Maximum amount deductible in respect of
remuneration to partners
1. Book profit is negative Rs. 3,00,000
2. Book profit is positive —
• On first Rs. 6 lakh of book profit Rs. 3,00,000 or 90 per cent of book profit –
whichever is more
• On the balance of the book profit 60 per cent of book profit

COMPUTATION OF BOOK PROFIT

STEP 1 Find out the net profit of the firm as per Profit and Loss A/c.
STEP 2 Make adjustment as per Sec. 28 to 44DB (including adjustment for interest on
partner’s capital)
STEP 3 Add remuneration to partner, if debited to the Profit & Loss A/c.
STEP 4 Subtract unabsorbed depreciation but do not subtract brought forward business
losses. The resultant figure is book profit
Note: Income from house property, Income from other sources and Capital gains do not
form part of book profit. Deduction under chapter VIA (i.e. 80C to 80U) shall be
ignored for this purpose

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 6.18
 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

CHAPTER 7 CAPITAL GAIN (SEC 45 TO 55)

1.

• Profits or gains arising on transfer of a capital asset shall be treated as capital gain.

2.

• Capital asset means any kind of property securities held by FII/ ULIP issued on or after
01/02/2021 (premium > 2,50,000) except
1) Stock in trade,
2) Personal effect but excludes.
a) Jewellery
b) Archaeological Collection
c) Drawings
d) Paintings
e) Sculptures
f) Any work of art.
Note: Any immovable property is not personal effects hence are capital assets.
3) Agricultural land in rural area, (used for Agri purpose)
4) 6.5% Gold Bond, 1977,
5) 7% Gold Bonds, 1980,
6) National Defence Gold Bond, 1980,
7) Special Bearer Bond, 1991 and

3.

This distinguishment depends upon the period of holding (POH) of the asset, as summarized
below – [FA 24]
No. Nature of asset STCA LTCA
1. Security listed in the recognised stock exchange in India.
Units of UTI (listed or unlisted) POH <= 12 POH > 12
Units of equity-oriented funds (listed or unlisted) months months
Zero coupon bond (listed or unlisted)
2. Unlisted shares Immovable property being land or building POH <= 24 POH > 24
or both months months
3. Other assets POH <= 24 POH > 24
months months
before before

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

22/7/2024 22/7/2024
36m 36m

4.

Transfer in relation to a capital asset includes:

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

5.

1) It is a full value of consideration received or receivable by the transferor.

2) If consideration received in kind them fair market value of asset is considered as full value of
consideration.
3) Even if a consideration received in instalments in different years full value of consideration
is important.

6.

• Any expenditure incurred on transfer Shall be allowed as deduction. (except STT/ CTT)

7.

1) Purchase Price of Asset + Expenditure incurred to purchase the asset

2) Indexed cost of Acquisition: Inflation adjusted cost only for LTCA (Acquired prior to 23/7/24)
Cost Inflation Index for different financial years is as follows
Financial year Index Financial year Index
2001 – 02 100 2012 – 13 200
2002 – 03 105 2013 – 14 220
2003 – 04 109 2014 – 15 240
2004 – 05 113 2015 – 16 254
2005 – 06 117 2016 – 17 264

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

2006 – 07 122 2017 - 18 272

2007 – 08 129 2018 – 19 280
2008 – 09 137 2019-20 289
2009 – 10 148 2020-21 301
2010 – 11 167 2022-23 331
2021 – 22 317 2023-24 348
2011 – 12 184 2024-25 363

TO CLACULATE INDEXED COST OF ACQUISITION PRIOR TO 23/07/24

Indexed cost of acquisition [Explanation (iii) to Section 48)
Cost of acquisition X Cost inflation index for the year in which the asset is transferred
Cost inflation index for the PY in which the asset was 1st held by the assessee

3) Deemed cost of Acquisition: Cost to Previsions owner (Refer sec 49(1))

Cost of acquisition to previous owner X Cost inflation index for the year in which the asset is transferred
Cost inflation index for the PY in which the asset was 1st held by previous owner

4) Computational Notes
1) If an asset is acquired before 1/4/2001 then its cost of acquisition will be higher of
a) Actual cost of acquisition; or
b) Fair market value of the asset as on 1/4/01.
In such case, indexation benefit shall be available from the year 2001-02.
Exception: The option is not available in case of –
• Asset on which depreciation is allowed u/s 32(1)(ii)
• Self generated assets (other than bonus share)
• The above provision has been modified with effect from the Assessment Year 2021 – 22. The
modified version provides that in case of a capital asset (being land or building or both),
the fair market value of such an asset on April 1, 2001 shall not exceed the stamp duty value of
such asset as on April 1, 2001 where such stamp duty value is available.

5) Indexation of benefit is not Allowed in Certain Cases

i. Debenture or Bonds
ii. Slump Sale: Transfer of an undertaking or division in a slump sale
iii. Virtual Digital Asset
iv. Equity shares and equity-oriented fund referred to in sec. 112A
v. Certain transactions by a non-resident
vi. Transfer of Global Depository Receipt
vii. Transfer of land/ building: on or after 23/07/24 u/s 112 subject to certain conditions (FA 24)
[New regime]

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

8.

1) Cost of improvement means expenditure incurred to increase the productive quality of the asset.
It includes all expenditure of a capital nature incurred in making any additions or alteration to
the capital asset.
2) Deemed cost of Improvement: Cost to Previsions owner
3) Indexed cost of Improvement: Inflation adjusted cost
Notes:
• Any improvement expenditure incurred before 1/4/2001 shall be ignored.
• Improvement expenditure incurred by Assessee and previous owner after 1/4/01 shall be
allowed

Indexed cost of improvement [Explanation (iv) to Section 48] before 23/7/24 [FA 24]
Cost of improvement X Cost inflation index for the year in which the asset is transferred
Cost inflation index for the year in which the improvement to the asset took place

9.

CAPITAL GAIN IN CASE OF INSURANCE CLAIM RECEIVED ON DAMAGE OR DESTRUCTION OF

CAPITAL ASSETS SEC 45 (1A)
Compensation received from an insurance company for the specified damages is treated as
transfer.
• Specified Damage
Here specified damages mean flood, cyclone, earthquake, riot, civil disturbance, accidental fire,
enemy action etc.
• Sale consideration If compensation received is in cash: Compensation so received
If compensation received is in kind: Fair Market value
(As on date of receipt) of assets received as Compensation
• Indexation benefit available Till year of destruction
• Taxable In the year of receipt of compensation
• Other Points
1) Compensation received for any damages to capital asset shall be treated as capital receipt and
shall not be taxable.
2) Compensation received for any damages to non-capital asset may be chargeable u/s 28 or 56.
E.g. Compensation received on theft of stock in trade shall be treated as business income.

CAPITAL GAIN ON CONVERSION OF CAPITAL ASSETS INTO STOCK IN TRADE SEC 45(2)
Conversion of capital assets into stock shall be treated as transfer.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Sale consideration Fair Market value as on date of such conversion.

Indexation benefit available (if any) Till year of conversion
Taxable In the year in which such stock is actually sold
Tax rate As applicable in the year of actual sale of such Converted
stock.
Treatment of difference of actual It shall be treated as business Income.
sale value and Fair market value as
on date of conversion

TRANSFER OF SECURITIES BY DEPOSITORY [SECTION 45(2A)]

Sale consideration Value at which shares sold
Cost of acquisition Cost of acquisition & period of holding of any securities, shall be
determined on the basis of the FIFO method. This method is applicable
to dematerialized form. Securities held in physical forms shall be dealt
separately.
Indexation benefit As usual
Taxable In the year in which asset is sold
Expenses on transfer As usual

CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS BY A PARTNER/MEMBER TO

FIRM/AOP/BOL AS CAPITAL CONTRIBUTION SEC 45(3)
Sale consideration The amount recorded in books of account of the firm.
Cost of acquisition/ improvement As usual
Taxable In the year of such transfer
Indexation benefit As usual

CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS BY A FIRM/AOP/BOL TO PARTNER/

MEMBER BY WAY OF DISTRIBUTION ON ITS DISSOLUTION [SEC 45(4)]
Sale consideration Fair market value as on date of transfer
Cost of acquisition / Cost of improvement /
Expenditure on transfer and Indexation As usual
Taxable In the year of such transfer

CAPITAL GAIN ON TRANSFER BY WAY OF COMPULSORY ACQUISITION [SEC 45(5)]

Tax treatment of initial compensation received.
Sale consideration Total compensation or consideration received or receivable
Taxable In the year when such compensation is first received.
Indexation benefit available Till the year of compulsory acquisition.
Tax treatment of enhanced compensation

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Sale consideration Total enhance compensation / consideration received /

receivable
Expenditure on transfer Litigation expenses for getting the enhanced Compensation
Cost of acquisition/ Improvement Nil
Taxable In year when enhanced compensation is first received.
Nature of gain As in case of initial compensation or consideration.

W.e.f. ASSESSMENT YEAR 2005 – 06 SECTION 10(37) HAS BEEN INSERTED, WHICH
PROVIDES AS UNDER
Applicable: An individual or an HUF.
Conditions:
1) Assessee has transferred urban agricultural land (being a capital asset).
2) Such land was used for agricultural purposes by such HUF or individual or his parents during
the period of 2 years immediately preceding the date of transfer.
3) Such land is transferred:
a) By way of compulsory acquisition under any law, or
b) For a consideration to be determined or approved by the Central Government or the RBI.
4) The compensation or consideration for such transfer is received by such assessee on or after
1.1.04.
• Treatment: Income on such transfer shall be exempted.

BUY BACK OF SHARES SEC 46A

Transfer Where a shareholder receives any consideration from the
company for purchase of its own shares or other specified
securities, it is a transfer chargeable under the head Capital
Year of taxability Such Capital Gain is chargeable to tax in the previous year in which
the shares or securities are purchased by the Company.
Capital Gain Value of consideration received Less Cost of Acquisition or
Indexed cost of Acquisition.
Capital Gain in case of buy Taxable in the hands of company
back of shares effected
before 1.10.2024 by
domestic companies [FA 24]
Capital Gain in case of buy the sum paid by a domestic company for purchase of its own shares
back of shares effected would be treated as dividend and taxable under the head “Income
after 1.10.2024 by from other sources” in the hands of shareholders. No deduction
domestic companies [FA 24] for expenses would be available against such dividend income.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

CAPITAL GAINS IN THE CASE OF SLUMP SALE SEC 50B

Sale consideration As usual
Cost of Acquisition / Improvement Net worth of the undertaking (total assets – total liabilities)
Indexation Benefit Not available
Nature of gain weather. short term If undertaking is owned & held for not more than 36 months,
or long term then capital gain shall deemed to be short-term capital gain
Value of asset • For depreciable asset = WDV
• Self-generated goodwill = Nil
• Asset for which deduction claimed u/s 35AD = Nil
• Other asset = book value

VALUATION OF CONSIDERATION IN CASE OF LAND OR BUILDING OR BOTH SEC 50C

• In case of transfer of immovable capital asset being lane building or both, sale consideration
shall be higher of the following:
1) Actual consideration received or accrued on such transfer; of
110% of the value adopted or assessed or assessable by Stamp Valuation authority for payment
2) of stamp duty
Where valuation is referred to the Valuation Officer, sale consideration of the asset shall
be taken as minimum value adopted or assessed or assessable for purpose of stamp duty or
3) value determined by Valuation Officer.

TREATMENT OF ADVANCE MONEY RECEIVED & FORFEITED SECTION 51

• Where any capital asset, was on any previous occasion, the subject of negotiations transfer,
any advance or other money received and retained by the assessee in respect of such
negotiations, shall be deducted from the cost for which the asset was acquired or the written
down value or the fair market value, as the case may be, in computing the cost of acquisition.
1) If advance money is received before 31-3-14 then it is to be reduced from the cost of
acquisition and if it is received on or after 1-4-14 then it shall be taxable as income from
other source.

CAPITAL GAIN IN THE CASE OF SELF-GENERATED ASSETS

Goodwill of a business or profession, right to carry on a business, right to manufacture or
process any article
Sale Consideration Actual
Cost of acquisition Nil
Cost of improvement Nil
Expenditure on transfer Actual
Capital gain Sale consideration less expenditure on transfer

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Tenancy right, route permits, loom hours, trade-mark & brand name associated with the
business.
Sale Consideration Actual
Cost of acquisition Nil
Cost of improvement Nil
Expenditure on transfer Actual
Capital gain Sale consideration less cost (or indexed cost) of improvement less
expenditure on transfer.

COST OF ACQUISITION OF BONUS SHARES OR ANY OTHER FINANCIAL ASSET ALLOTTED WITHOUT
PAYMENT [SECTION, 55(aa) (iiia)]
Situations Cost of Acquisition
Bonus shares allotted before April 1, 2001 FMV as on April 1, 2001
Bonus shares allotted on or after April 1, 2001 Nil
Bonus shares allotted before 1.2.2018, on which STT has been paid at the time of transfer
In case of transfer of bonus shares allotted before 1.2.2018 on which STT has been paid at the
time of transfer, the cost would be the higher of
1 Actual cost of acquisition (i.e., Nil, in case of bonus shares allotted on or after 1.4.2001; and
FMV on 1.4.2001, in case of business shares allotted before 1.4.2001)
2 Lower of –
a FMV as on 31.1.2018; and
b Actual sale consideration
Sale consideration As usual
Expenditure on transfer As usual
Period of holding The period of holding will be considered
from the date of allotment of bonus shares

CAPITAL GAIN IN CASE OF TRANSFER OF RIGHT SHARE AND RIGHT ENTITLEMENT

Case Right shares Right Entitlement Shares acquired by
Right Renounce
Cost of Right issue price Nil Amount paid for right entitlement
Acquisition + Amount paid to company
Period of Date of allotment The date of declaration The date of allotment of such
holding starts of such shares of such right by the shares
from
company

10.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

1) Sec. 46(1) Distribution of capital assets on liquidation of a company to its shareholders

in the hands of company.
Key note: Sale of asset at the time of liquidation of company shall be taxable
transfer.
2) Sec. 47(i) Distribution of capital assets on the partition of an HUF.
3) Sec. 47(iii) Gift, will or creation of irrevocable trust. BY AN Individual or HUF (FA. 24)
However, gift of shares acquired through ESOP is not exempted.
4) Sec. 47(iv) Any transfer of a capital asset by a holding company to its100% subsidiary
company, if the subsidiary company is an Indian company.
a) Within 8 years from the date of the transfer, the capital asset to
transferred is converted by transferee-company into stock; or
b) Within 8 years from the date of the transfer, the 100% relationship
between holding and subsidiary company reduces or cases to exist.
c) Note: Exemption so withdrawn shall lead to reassessment.
5) Sec. 47(vi) Capital asset transferred in a scheme of amalgamation, by the amalgamating
company to the amalgamated Indian company.
6) Sec.47 (viab) Any transfer, in a scheme of amalgamation, of a capital asset, being a share
of a foreign company, referred to in Explanation 5 to Sec. 9(1)(i), which
derives, directly or indirectly, its value substantially from the share or shares
of an Indian company, held by the amalgamating foreign company to the
amalgamated foreign company; and
a) At least 25% of the shareholder of the amalgamating foreign company
continue to remain
b) Such transfer does not attract tax on capital gains in the country in which
the amalgamating company is incorporated.
7) Sec. 47 (vicc) Any transfer in demerger, of a capital asset, being a share of a foreign
company, referred to in Explanation 5 to Sec. 9(1)(i), which drives, directly or
indirectly, its value substantially from the share or shares of an Indian
company, held by a demerged foreign company to the resulting
8) Sec. 47(vib) Transfer of asset on a demerger by the demerged company to the resulting
company, if the transferee company is an Indian company
9) Sec.47 (vid) Transfer of shares in a scheme of demerger to the shareholder if the
transfer or issue is made is consideration of demerger of the undertaking.
10) Sec.47 (viic) Any redemption of Sovereign Gold Bond issued by RBI under the Sovereign
Gold Bold Scheme 2015 by an Individual shall not be considered as transfer
However of transfer of Sovereign Gold Bond shall be taxable and indexation
benefit is available on transfer of long term of Sovereign Gold Bond.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Particulars Sovereign Gold Bonds, 2015 Monetization

Owned by an individual Owned by others
Interest Taxable Taxable Not taxable u/s
10(15)(vi)
It is capital asset Yes Yes No
Capital gains arising on time Not Taxable u/s Taxable Indexation Not taxable
of redemption 47(viic) available (as not an asset)
Capital gains arising on time Taxable Indexation Taxable Indexation Not taxable
of transfer available available (as not an asset)

11) Sec. 47(ix) Any transfer of a work of art, archaeological, scientific or art collection,
book, manuscript, drawing, painting, photograph or print, to the Government
or a University for the National, Museum, National art Gallery, National
Archives or any such other public museum or institution as may be notified by
the Central Government.
12) Sec. 49(2A) Conversion of Debenture into Shares
Cost of acquisition Cost of old asset (convertible debentures) shall be taken
of new asset as cost of acquisition of new asset (converted share).
Holding Period Starts from the date of allotment of new asset.
Indexation benefit Benefit of indexation shall be available from the date of
allotment of new asset.
13) Sec. 47(xvi) Any transfer of a capital asset by way of reverse mortgage under a notified
scheme shall not be treated as transfer.
Theme of Reserve mortgage
a) An old aged borrower
b) Who does not have a regular source of income
c) Can mortgage in house property
d) With scheduled bank of housing finance company
e) The lender will give the fixed regular instalments during the life time of
borrower as per the scheme.
f) After death of borrower the money will be recovered by selling such
property by lender,
g) If any surplus remains then it is returned to the legal heir of the
borrower.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

13.
Sec. Nature Applicable New Asset Time limit for Exemption
Deposit Revocation of benefit
investment scheme
54 Long term Individual or One / two Within 1 year Capital gains or Yes If new asset is sold within 3
Residential House HUF Residential before or 2 years amount invested, years, then benefit availed
House in India after the date of whichever is less earlier will be revoked and shall
provided LTCG transfer in case be reduced from cost of new
does not of purchase, or asset.
exceed Rs 2 cr. within 3 years
Max investment after the date of
10 crore transfer, in case
of new
construction.
54B Agricultural land Individual Agricultural Within 2 years Capital gains or Yes If new asset is sold within 3
used for agro Land after transfer amount invested. years, then benefit availed
purpose for 2 Whichever is earlier will be revoked and shall
years by him or his less? be reduced from cost of new
parents. (LTCA or asset.
STCA)
54D Land and building Any assessee Land and Within 3 years Capital gains or Yes If new asset is sold within 3
used for industrial building for after receipt of amount invested, years, then benefit availed
undertaking for 2 industrial initial whichever is earlier will be revoked and shall
years. (LTCA or undertaking. compensation. less. be reduced from cost of new
STCA) asset.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Sec. Nature Applicable New Asset Time limit for Exemption

Deposit Revocation of benefit
investment scheme
54G Plant & machinery Any assessee. Plant and Within 1 year Capital gain or Yes If new asset is sold within 3
or land & building machinery or before or 3 year amount invested years then capital gain will be
for industrial land and building after the date of whichever is revoked and shall be reduced
under taking used for transfer. lower. from cost of new asset.
in urban area industrial under
(LTCA or STCA) taking in non-
urban area or
meeting
expenses of
shifting.
54GA Plant & machinery Any assessee. Plant and Within one year Capital gain or Yes If new asset is sold within 3
or land & building machinery or before or 3 year amount invested years then capital gain will be
for industrial land and building after the date of whichever is revoked and shall be reduced
under taking in used for transfer. lower. from cost of new asset.
urban area (LTCA industrial under
or STCA) taking in SEZ
area or meeting
expenses of
shifting.
54EC Land or building or Any assessee Specified bonds Within 6 months Capital gains or No. If bonds are redeemed in 5
both (LTCA) redeemable from the date of amount invested. years from the date of acquis
after 5 years in transfer Whichever is ion then benefit availed earlier
National less. shall be revoked and deemed to
Highways

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

Authority or Max. Rs. 50 be LTCG in the year of

Rural Lacs redemption.
Electrification
Corp. Ltd.

Sec. Nature Applicable New Asset Time limit for Exemption

Deposit Revocation of benefit
investment scheme
54EE Any long-term Any assessee Long term Within 6 months Capital gain or NO If specified assets is
capital asset specified assets from the date of amount invested transferred/loan taken in 3 yrs
(LTCA) transfer whichever is from the date of acquis ion then
lower benefit availed earlier shall be
revoked and deemed to be LTCG
in the year of redemption.
54F Any LTCA other Individual or Residential Within 1 year (Capital Yes If new asset is sold within 3
than residential HUF house Assessee before or two Gain/Net years, or new asset acquired
house. should not own years after consideration) * within 3 years, then earlier
more than one transfer in case Amount invested exemption shall be revoked and
house. of purchase or 3 [Max will be deemed to be LTCG.
years after Investment 10
transfer in case Cr]
of construction.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

14.

Long-term capital gain Taxable under section 112

(if securities transaction tax is not applicable)
Long-term capital gain Taxable under section 112A, if a few conditions specified therein are satisfied. If
(if securities transaction tax is applicable) these conditions are not satisfied, such gain will be taxable under section 112.
Short-term capital gain Taxable like any other income (no special rate)
(if securities transaction tax is not applicable)
Short-term capital gain Taxable under section 111A
(if securities transaction tax is applicable)

SPECIAL RATES OF TAX (FA 24)

Sec. Natures of Income Tax Rate Basic exemption Chapter VI-A
Ded
111A STCG on 15% if transfer takes Allowed to Resident Not Allowed
1 Equity shares or place before 23.7.2024 & Individual / HUF
2 Units of equity-oriented fund 20% if transfer takes
3 Unit of business trust on which STT is paid at the time of place on or after
transfer. 23.7.2024
Note: In case of sale on a RSE in International Financial Service
Centre in SEZ, payment of STT is not required, if consideration
is in foreign currency.
Note: Asset which is not covered u/s 111A would be chargeable Normal As per the assessee Allowed
at normal rates of tax. applicable

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

112 a. Long term capital gains (other than LTCG taxable as per
section 112A and mentioned in below) arising -
i from transfer of capital asset which takes place before 20% with indexation Allowed to Resident Not Allowed
23.7.2024 Individual / HUF
ii Shares (STT not paid)/ ZCB 20% with index 10%
without indexation
whichever is more
beneficial to assessee
iii from transfer of capital asset which takes place on or
after 23.7.2024
• from transfer of any land or building Lower of 20% with Allowed to Resident Not Allowed
(residential or commercial) or both by an individual indexation or 12.5% Individual / HUF
or a HUF, being a resident acquired before without indexation
23.7.2024
• Other assessee 12.5% without indexation N/A Not Allowed
• Other assets 12.5% without indexation Allowed to Resident Not Allowed
Individual / HUF

15.

The cost of acquisition in relation to the long-term capital assets being

• Equity shares in a company on which STT is paid both at the time of purchase and transfer or
• Unit of equity-oriented fund or unit of business trust on which STT is paid at the time of transfer.
Acquired before 1st February, 2018 shall be the higher of
i. Cost of acquisition of such asset; and

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CAPITAL GAIN (SEC 45 TO 55)

ii. Lower of
a. The fair market value of such asset as on 31/01/18; and
b. The full value of consideration received or accruing as a result of the transfer of the capital asset.
• Benefit of Indexation not available
Notes

• Deduction u/s 80C to 80U is not available

• Rebate u/s 87A is not available

Sec. Natures of Income Tax Rate Basic exemption Chapter VI-A

Ded
112A Long term capital gains on transfer of – 10% on LTCG > 1.25 lakhs if Allowed to Not Allowed
• Equity share in a company transfer takes place Resident
• Unit of an equity oriented fund before 23.7.2024 12.5% Individual / HUF
• Unit of business trust on LTCG > 1.25 lakhs if
Condition for availing the benefit of this concessional rate is that transfer takes place on or
securities transaction tax (STT) should have been paid – after 23.7.2024
In case of Time of payment of STT Note: Total exemption in a
Equity shares both at the time of acquisition P.Y. cannot exceed 1.25
and transfer lakhs.
Unit of equity oriented fund at the time of transfer Note: Rebate u/s 87A is
or unit of business trust not available
Note: In case of sale on a RSE in International Financial Service Centre in SEZ, payment of STT is not required, if consideration is in foreign
currency

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 7.17
 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM OTHER SOURCE

CHAPTER 8 INCOME FROM OTHER SOURCE

1.

As per Section 56(1), any income, which is not specifically exempted and not chargeable under any
other heads of income, shall be chargeable under the head “Income from other source”.

2.

Case Tax Treatment

a) Dividend from a domestic company including Taxable in the hands of shareholder.
dividend u/s. 2(22)(e)
b) Dividend from a non-domestic company. Taxable in the hands of shareholder.
c) Dividend from a co-operative society Taxable in the hands of shareholder.
Deemed Dividend
Sec 2(22)(a) Distribution of assets to the extent of accumulated profit.
Sec 2(22)(b) Distribution of debentures stock & bonus shares to preference share holder to
the extent of accumulated profit.
Sec 2(22)(c) Distribution on liquidation of company to the extent of accumulated profit.
Sec 2(22)(d) Distribution of reduction of capital to the extent of accumulated profit.
Sec 2(22)(e) Loan and advances by closely held company to share holder holding substantial
interest.
Sec 2(22)(e) Amount received by a shareholder on account of buy-back will be deemed as
[FA 24] dividend under section 2(22)(f) regardless of the quantum of “accumulated
profits” of the distributing company.

3.

• Winning from lotteries, crossword puzzles, online games etc. are taxable under this head.
Notes
a) Any expenditure incurred to earn above income is not allowed as deduction.
b) Deductions u/s 80C to 80U not available.
c) Such loss can be set off & carry forward.
d) Any other loss cannot be set off against this income.
e) Rebate u/s 87A is available.

4.

a) Interest on any security of the Central Government or a state Government.

b) Interest on debentures or other securities issued by or on behalf of:
i. A local authority.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM OTHER SOURCE

ii. A company.
iii. A corporation established by a central or state government
Expenditure allowed as deduction
• Collection expenditure
• Interest on loan.

5.

• Is charged to tax under this head, if such income is not chargeable under the head "Profits
and gains of business or profession".

6.

• If letting of building is inseparable from letting of machinery, furniture, etc. then income from
such letting is charged to tax under the head "Income from other sources" otherwise Income
from house property.

7.

• Any sum received under a Keyman Insurance Policy including bonus, if not chargeable under
the head “PGBP” or “Salary”; [Amount received by Legal heir]

8.

Applicable to All person

Property includes –
a) Immovable property being land or building or both;
b) Share and securities
c) Jewellery
d) Archaeological collections;
e) Drawings
f) Paintings
g) Sculptures;
h) Any work of art; or Bullion
i) Virtual Digital Asset

Category of gift Taxable if exceed Rs 50,000

Any sum of money (cash, cheque, draft, etc.) The whole of the aggregate value of such sum
from one or more persons. The aggregate value of shall be considered as income of that previous
year

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM OTHER SOURCE

such receipt during the previous year exceeds Rs

50,000
Immovable property is received without The stamp duty value of such property shall
consideration. The stamp duty value of such be considered as income of that previous year
property exceeds Rs. 50000.
Immovable property is received for Difference between SDV and the
inadequate consideration. Which is less than consideration shall be taxable only if such
stamp duty value by an amount exceeding Rs. difference is greater than Rs 50,000 plus 10%
50,000 of the consideration.
Movable property is received without The whole of the aggregate fair market
consideration. value of such property shall be considered as
The aggregate fair market value of such receipts Income of the previous year
during the previous year exceeds Rs. 50000.
Movable property is received for a inadequate The aggregate fair market value of such
consideration. Such consideration is less than the property Less consideration paid shall be
aggregate fair market value of the property by an considered as income of the previous year.
amount exceeding Rs. 50000.
Exceptions:
a) Gift received from any relative,
b) Gift received on the occasion of the marriage of the individual,
c) Any sum of money which is received under a will or by way of inheritance,
d) Any sum of money which is received in contemplation of death of the payer
e) Any sum of money which is received from - local authority, any fund or foundation or university or
other educational institutions or hospital or other medical institutions or any trust or institution
referred u/s 10(23C) or a registered trust.
f) By way of transaction not regarded as transfer under clauses (i)/ (vi)/ (via)/ (viaa)/ (vib)/ (vic)/
(vica)/ (vicb)/ (vid) or (vii) of section 47
g) Received by an Individual, from any person, for medical treatment or treatment of any member of
his family, for any illness related to COVID-19 subject to such conditions, as CG may Notify.
h) Received By a member of the family of a deceased person
a) from the employer of the deceased person; or
b) from any other person or persons to the extent that such sum or aggregate of such sums does
not exceed 10 lakh rupees,

9.

• Any compensation or any other payment, due to or received by any person, by whatever name
called, in connection with the termination of his employment or the modification of the terms
and conditions relating to thereto shall be chargeable to tax under this head.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
INCOME FROM OTHER SOURCE

10.

• Any sum forfeited against capital asset on or after 31-3-14 shall be treated as Income from
Other Source.

11.

The following expenditures are allowed as deductions from income chargeable to tax under
the head ‘Income from Other Sources’:
S N Sections Nature of Income Deductions allowed
1. 57(i) Dividend or Interest on Deduction on account of interest expense and
securities in any previous year such deductions shall not
exceed 20% of the dividend income for income
from units included in the total income for that
Year Without deduction under section 57.
2. 57(ia) Employee’s contribution If employees’ contribution is credited to their
towards Provident Fund, account in relevant fund on or before the due
Superannuation Fund, ESI date
Fund or any other fund setup
for the welfare of such
employees
3. 57(ii) Rental income letting of plant, Rent, rates, taxes, repairs, insurance and
machinery, furniture or depreciation etc.
building
4. 57(iia) Family Pension 1/3rd of family pension subject to maximum of
Rs. 25,000. [FA 24]
5. 57(iii) Any other income Any other expenditure (not being capital
expenditure) expended wholly and exclusively
for earning such income
6. 57(iv) Interest on compensation or 50% of such interest (subject to certain
enhanced compensation conditions)
7. 58(4) Income from activity of All expenditure relating to such activity
Proviso owning and maintaining race
horses

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 8.4
 DIRECT TAX REVISION PY 24-25 & AY 25-26
CLUBBING OF INCOME

CHAPTER 9 CLUBBING OF INCOME

Key Notes
1) Clubbing of income includes clubbing of negative income
2) The credit of TDS shall be given to the person in whose hands the income is taxable.
3) Income shall be clubbed even when form of the transferred asset is subsequently changed
4) Income arising from the accretion of such property is not to be clubbed.
5) Income on income is not to be clubbed.
6) Income shall be, first, computed in hands of recipient and then clubbing shall be made head
wise.
• If the clubbed income is eligible for deduction u/s 80C to 80U, then such deduction shall be
allowed to the assessee in whose hands such income is clubbed.

1.

• Where an income is transferred without transferring the asset yielding such income, then
income so transferred shall be clubbed in the hands of the transferor.
• The above provision holds good: -
1) Whether the transfer is revocable or not, or
2) Whether the transaction is effected before or after the commencement of this Act.

2.

• If an assessee transfers an asset under a revocable transfer, then income generated from
such asset, shall be clubbed in the hands of the transferor.
• Revocable transfer means, there is any provision for the retransfer of any part or whole of
the income/assets to the transferor or gives the transferor a right to re-assume power over
any part or whole of the income/ assets.
• Exceptions
A transfer by way of creation of a trust which is irrevocable during the lifetime of the
beneficiary;
Any transfer which is irrevocable during the lifetime of the transferee;

3.

• The total income of an individual shall include income arising (directly or indirectly) to the
spouse by way of salary, commission, fees or any other remuneration (whether in cash or in
kind) from a concern in which such individual has substantial interest.
• Note

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CLUBBING OF INCOME

Any other income, which is not specified above, even if it accrues to spouse from the concern
in which the assessee has substantial interest, shall not be clubbed
• No clubbing
Income generated through technical / professional qualification of the spouse is not to be
clubbed in the total income of the individual.

4.

• In computing the total income of an individual [subject to the provisions of sec. 27(i)]. Income
arising from assets transferred to spouse without adequate consideration, shall be included
in the income of that individual.
• Marital Relationship: The relationship of husband and wife must subsist on the date of
transfer of assets as well as on the date of accrual of income i.e.
• No clubbing provision shall be attracted if
a) When such transfer is for adequate consideration; or
b) The transfer is under an agreement to live apart; or
c) Where the asset transferred is house property (as such transfer will be governed by Sec. 27)
d) Where the asset is transferred before marriage.
e) If on the date of accrual of income, transferee is not spouse of the transferor.

5.

• If asset is transferred to other person or an AOP, for inadequate consideration, for

immediate or deferred benefit of spouse, then income on asset so transferred shall be clubbed
in the hands of the transferor.
• Note
Any other income, which is not specified above, even if it accrues to spouse from the concern
in which the assessee has substantial interest, shall not be clubbed
• No clubbing
Income generated through technical / professional qualification of the spouse is not to be
clubbed in the total income of the individual.

6.

• In computing the total income of an individual, income arising (directly or indirectly) from
assets transferred to son’s wife, without adequate consideration, shall be included in income
of that individual. Afore said relationship must subsist on the date of transfer of assets as
well as on the date of accrual of income.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
CLUBBING OF INCOME

7.

• Such income shall be clubbed with the income of Individual who has transferred asset without
consideration.

8.

• Shall be clubbed with income of the parent whose total income (excluding this income) is
higher. Once clubbing is made with either parent, then in any subsequent years clubbing shall
be made with the same parent, unless the AO is satisfied. If marital relationship does not
subsist, income shall be clubbed with that parent who maintains the minor child.
Parents can claim exemption u/s 10(32) as below
lower of a) Rs.1500; or b) Income so clubbed. (per child)
Exceptions:
a) Income arises or accrues to the minor child due to any manual work, his skill, talent; or
b) The minor child is suffering from any disability of nature specified u/s 80U.

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 9.3
 DIRECT TAX REVISION PY 24-25 & AY 25-26
SET OFF AND CARRY FORWARD

CHAPTER 10 SET OFF AND CARRY FORWARD OF LOSSES

1. WHEN SET OFF IS AVAILABLE?

• When these is a loss in one or more sources under one or more heads of income, the provisions
of set off and carry forward are applicable as under.
i. Inter Source Adjustment (Sec 70)
ii. Inter head Adjustment (Sec 71)
iii. Carry forward of losses.

1) Inter source adjustment (sec 70): Under this section loss from any source of income can be
set off against same head of income for the same assessment year.
NOTE: Assessee does not have any option to set off or not to set off.
SR. NATURE OF LOSS SET OFF AVAILABLE U/S. 70
1 House property loss House property income
2 Speculation business loss Profit from speculation business
2A Non-speculation business loss Profit from speculative, non-speculative &
specified business
2B Loss of Specified Business u/s 35AD Income of Specified Business Sec. 35AD.
3 Short term capital loss Long term & short-term capital gain
4 Long term capital loss Long term capital gain
5A Losses from activity of maintaining race Income from such business.
Horses
5B Winning from lotteries. Crossword Cannot be set off against any income.
puzzles, card games, gambling or betting.
5C Any other income except 5A & 5B Income from other source except casual income.
6 Loss from income which is exempt u/s. 10 Cannot be set off against any income.

2) Inter head adjustment (Sec 71): Sec. 71 is appliance if loss cannot be set off against Sec.
70.
SR. NATURE OF LOSS SET OFF AVAILABLE U/S. 71.
1 House property loss (max 2 lakhs) Any income other than lottery, card games,
crossword puzzles, gambling or betting.
2 Non-speculation loss Any income other than salary, lottery, card
games, crossword puzzles, gambling or betting.
3 Loss from other source except casual Income from other source except casual income.
income and income from owning and
maintaining race horse
4 Loss from income which is exempt u/s. 10 Cannot be set off against any income.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
SET OFF AND CARRY FORWARD

2. CARRY FORWARD OF LOSSES

• If loss cannot be set off as per provision of sec. 70 & sec. 71 then it is to be carry forward
under the act. The following losses can be carried forward.
a. Business Loss (Non-Speculative)
b. Business Loss (speculative)
c. Loss under Capital Gain (Short term and Long term)
d. Losses from the activity of owning and maintaining race horses.
e. HP loss.
The table given below highlights the rule of carry forward of loss –
Type of loss to be Income against which For how many Should the Is it necessary
carried forward & carried forward loss can be years loss can be source be to submit return of
set off set off in next year(s) carried forward continued loss of loss in time
Sec. 71B House Income under the head 8 years No No
property loss w.e.f. "Income from house
A.Y. 1999-2000] property"
Sec. 72 Non Any income under the head 8 years No Yes
speculation 'Profits & gains of
business loss business or profession'
Business losses (whether from speculation
(other than or otherwise)
depreciation etc.)
Sec. 32(2) On Any income other than Indefinite years No No
account of Income under the head
unabsorbed Salaries and winning from
depreciation, lotteries, etc.
capital expenditure
on scientific
research and family
planning
Sec. 73 Speculation Income from speculation 4 years No Yes
loss Transaction.
Sec. 73A Loss of Income from any specified Indefinite years No Yes
specified business business.
covered u/s 35AD
Sec. 74 Capital loss Income under the head 8 years No Yes
Short Term Long "Capital gains “Long term
Term capital gain”
Sec. 74A Loss from Income from the activity of 4 years Yes Yes
activity of owing owing and maintaining race
and maintaining horses
race horses

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
SET OFF AND CARRY FORWARD

Summary
Nature of loss Section 70 Section 71 Carry forward
House Property Yes Yes Yes
Speculation Loss Yes No Yes
Non-Speculation Loss Yes Yes Yes
Loss of Specified Business Yes No Yes
Capital Gain Yes No Yes
Casual Income No No No
Income from Owning & Maintaining Race Horse Yes No Yes
Other than casual Income Yes Yes No

CARRY FORWARD AND SET OFF OF LOSSES IN CASE OF CHANGE IN CONSTITUTION OF FIRM OR ON
3.
SUCCESSION [SEC. 78]
• Where a change occurred in the constitution of a firm, nothing in this chapter shall entitle
the firm to have carried forward and set off so much of the loss proportionate to the share
of a retired or deceased partner are exceeds his share of profits, if any, in the firm in respect
of the previous year.
• As per Sec. 78(1), in case of death or retirement of partner (e.g. change in the constitution
of a firm), share of losses of the outgoing partner cannot be carry forward.

28. Previous Year For Undisclosed Income

1. Cash Credits [Sec. 68]
2. Unexplained Investments [Sec. 69]
3. Unexplained money, Bullion, Jewel or valuable article etc. [Sec. 69A]
4. Investments, etc. not fully disclosed in books of account [Sec. 69B]
5. Unexplained Expenditure, etc. [Sec. 69C]
6. Amount borrowed / repaid on Hundi expected by A/c Payee Cheque [Sec. 69D]
7. Tax rates
Income is chargeable under the head “Other Sources” at 60% + 25% SC + 4% Cess = 78% No
deduction in respect of any expenditure/ allowance or any set-off of any loss shall be allowed.
(Sec. 115BBE).

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 10.3
 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION SEC 80 C TO 80U

CHAPTER 11 DEDUCTION SEC 80C TO 80U

DIFFERENCE BETWEEN DEDUCTION UNDER CHAPTER VI-A & SECTION 10AA AND EXEMPTION UNDER
SECTION 10
Particulars Deduction Exemption (contained in
(in relation to Chapter VI-A and section 10AA) section 10)
Meaning Investments/ contributions in certain The incomes which are
instruments (as prescribed under the Income- exempt under section 10 will
tax Act). Payments made for certain purposes. not be included in computing
gross total income.
Relevant Sections 80C to 80U in Chapter VI-A and section Section 10 of the Income-
Sections 10AA of the Income-tax Act. tax Act.
Manner of First included in the Gross Total Income and then Not included in the Gross
treatment deductions will be allowed from Gross Total Total Income.
Income.

DEDUCTIONS AVAILABLE UNDER ALTERNATE TAX REGIME [SEC 115 BAC(1A)]

Sec Details
80CCD (2) employer contribution to NPS
80CCH (2) Contribution by central Gov to Agniveer Corpus fund
80JJAA employment of new workmen
80LA(1A) Certain income of offshore banking units

SECTION 80C
Applicable to Individual & HUF whether resident or non-resident
a) The payments need not necessarily be made out of income chargeable to tax.
b) Deduction shall be allowed only on payment basis not on accrual basis.
1) Life Insurance Premium including payment made by Govt. employee to the central Govt.
employees' insurance scheme.
a) Paid on his own life policy, life of the spouse or any child (child may be dependent/
independent, male/ female, major/ minor or married/ unmarried)
b) Deduction allowed is given below
Policy holder suffering from
Date of issue of policy Any other
disability/ disease
Before 1st April 2012 20% of sum assured 20% of sum assured
During 2012-13 10% of sum assured 10% of sum assured
On or after 1st April 2013 15% of sum assured 10% of sum assured
• Lock in period 2 yrs

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION SEC 80 C TO 80U

2) Contribution to Statutory provident fund and Recognized provident Fund

3) Contribution towards Public provident fund (PPF) maximum 1, 50,000 per year.
Subscription should be in the name of such individual, his spouse and child whether major or
minor & in case of HUF any member of the family.
Accrued interest which is deemed as reinvested is also qualified for deduction except all
last year.
4) Contribution to Unit linked insurance plan. Subscription should be in the name of such
individual, his spouse and child whether major or minor & in case of HUF any member of the
family Lock in period 5yrs.
5) Contribution to National saving certificates including interest on NSC.
6) Contribution to notified Mutual funds Tax Saver (lock in period 3 Years).
7) Any sum paid as tuition fees to any university/college/ educational institution/play
school/pre nursery [Institute situated in India for full time education for max. 2 children].
8) Repayment of housing loan (principal amount).
9) Amount deposited under Senior citizen saving scheme.
10) Amount deposited as term deposit for a period of 5 yrs or more in accordance with a scheme
framed by central government.
11) Subscription to any notified bonds of NABARD.
12) Stamp duty, registration fee and other expenses for the purpose of transfer of house
property.
13) Amount invested in approved debentures of and equity shares in a public company engaged
in infrastructure. (Lock in period 3 years).
14) Amount deposited for the girl child under the Sukanya Samriddhi Account Scheme to in
shall be eligible for deduction for: (i) individual, or (ii) any girl child of that individual, or (iii)
any girl child for whom such person is the legal guardian, if the scheme so specifies.
15) Contribution by a Central Government employee to additional account under NPS [specified
account- Tier II] referred to in section 80CCD for a fixed period of not less than 3 years
Note: max deduction = Amount Invested or Rs. 1,50,000 which ever is less.

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 11.2
 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Deduction - Amount invested or Rs 150000 whichever is less

Sec. Applicable to Condition(s) Deduction
80CCC Individual Deposit in LIC or other Maximum Rs. 1,50,000
Pension insurer’s annuity plan. Note:
fund
• Pension or surrender value received from such pension scheme shall be
taxable in the hands of recipient on cash basis.
• Interest or bonus accrued as per the scheme shall not be eligible for
deduction but shall be liable to tax.
80CCD An individual. Assessee has in the previous In case of salaried individual: Lower of the following
Specified year paid or deposited any The whole of the amount so paid or deposited or
Pension amount in his account under a Maximum of 10% of his salary in the previous year whichever is less
Fund
pension scheme notified by Plus
the Central Government. Employers contribution to the extent of 10% & 14% if assessee opt for ATR
[FA 24] of salary & 14% in case of contribution made by central government.
Salary means Basic + DA, if the terms of employment so provide.
Other than salaried: 20% of GTl or Amount Deposited whichever is Less.
Plus, additional deduction of Rs 50,000 shall be allowed. (For salaried + Others)
Deduction Aggregate deduction under Sec. 80C, 80CCC and 80CCD cannot exceed Rs. 1,50,000. (Excluding employers contribution to NPS &
u/s 80CCE additional Contribution of Rs. 50,000)
Particulars Amount
Deduction u/s 80C ****
Deduction u/s 80CCC ****
Deduction u/s 80CCD [other than deduction in respect of Employer’s Contribution] ****
Total [Restricted to maximum of Rs. 1,50,000 u/s 80CCE] *****
Add: contribution of NPS by any individual allowable u/s 80CCD(1B) [sub. To maximum of Rs. 50,000/-] ****
Add: Employer’s contribution to New Pension System referred to in Sec. 80CCD [Subject to max. of 10% / 14% of salary] ****

CMA VIPUL SHAH 9881 236 536 11.3

 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Deduction available u/s 80C, 80CCC & 80CCD *****

Sec. Applicable to Condition(s) Deduction

80CCH Individual 1) The assessee is an individual enrolled in the Agnipath Scheme.
deduction in 2) He subscribes to the Agniveer Corpus Fund on or after November 1, 2022.
respect of
• Deduction pertaining to contribution by the assessee [Sec. 80CCH(1)]-
contribution
to Agnipath Entire amount contributed by employee
Scheme • Deduction pertaining to contribution by the Central Government [Sec. 80CCH(2)]-
• Contribution by the Central Government to the Agniveer Corpus Fund shall be first
included in the income of the assessee under the head "Salaries".
• The whole of such contribution shall be deducted under section 80CCH(2).
• Deduction under section 80CCH(2) is available irrespective of the fact whether (or
not) the assessee has opted for regular tax regime by exercising the option under
section 115BAC(6).
80D Individual 1) Amount paid by individual towards Maximum Rs. 25,000 /Rs.50,000 (in case
Mediclaim (Himself/herself, spouse or • Mediclaim insured is a senior citizen)
dependent children and • Central Government Health Scheme Above amount includes Rs.5,000 for
parents) • preventive health checkup preventive health check for entire family.
HUF 2) Amount paid by individual for parents Note:
Any member of the family towards • Premium must be paid by any mode other
• Mediclaim than cash except preventive health
• preventive health checkup checkup.
3) Amount paid by HUF • If senior citizen is NR then maximum
• Mediclaim deduction is Rs. 25,000/-

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Sec. Applicable to Condition(s) Deduction

80DD Family member of individual 1) Assessee has disable dependent Rs. 125000 for severe disability. (80% or
Disability Spouse, children, parents, relative. more)
brothers and sisters of the
individual. 2) Assesse has incurred any expenditure for
Resident HUF medical treatment or Paid or deposited Rs. 75000 for non-severe disability
Any member of the Hindu any amount in an approved scheme Note:
Undivided Family. • Deduction is statutory is nature
• If assesse is disable then deduction is
available u/s 80U
80DDB Individual 1) Assessee himself or his relative is Quantum of deduction
Specified Spouse, children, parents, suffering from specified diseases Actual expenditure on medical treatment or
Disease brothers and sisters of the Rs. 40,000 (in case of senior citizen & Super
individual. senior citizen Rs. 1,00,000) whichever is
Resident HUF less, is deductible.
Any member of the Hindu 2) Assessee deposited medical certificate Deduction under this section shall be
Undivided Family. along with return. Where the patient is a reduced by the amount received, if any under
senior citizen insurance from an insurer or reimbursed by
the employer for the medical treatment of
the person referred to above.
80E Individual/ Spouse/ Child/ Assessee is repaying the interest on loan • Interest paid during the year for a
Interest on Adopted child (taken for higher education). maximum period of 8 years
Education
• Such amount is paid out of income
Loan
chargeable to tax.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Sec. Applicable to Condition(s) Deduction

80EE Individual 1) Payment of Interest on loan taken by 1. Conditions
Housing Loan Assessee from any Financial Institutional a) Amount of Deduction: deduction shall
for the purpose of acquisition of a
not exceed Rs. 50,000
Residential Property.
b) Period: Beginning from AY 2017-18
and subsequent AY’s
c) Loan section period: 1/4/2016 to
31/3/2017.
d) Maximum Loan Amount: 35 lakhs
e) HP Value: Value of Residential House
Property does not exceed Rs. 50
Lakhs.
f) No other house: The assessee should
not own any Residential House
Property on the date of sanction of
loan.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Sec. Applicable to Condition(s) Deduction

80EEA Individual 1) Payment of Interest on loan taken by Conditions
Housing Loan Assessee from any Financial Institutional a) Amount of Deduction: deduction shall not
for the purpose of acquisition of a
exceed Rs. 1,50,000
Residential Property.
b) Loan section period: 1/4/2019 to
31/3/2022.
c) HP Value: Value of Residential House
Property does not exceed Rs. 45 Lakhs.
d) No other house: The assessee should not
own any Residential House Property on the
date of sanction of loan.
80EEB In Individual Loan for purchase of an electric vehicle. • Loan Taken from Financial institution.
Electrical • Interest payable, subject to a maximum of
vehicle Loan
Rs. 1,50,000.
• No deduction under any other section.
• Loan sanction during 1/4/19 to 31/3/23

CMA VIPUL SHAH 9881 236 536 11.7

 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

Sec. Applicable to Condition(s) Deduction

80G All assessee • Donation in kind is not allowed as 1. Category A: 100% of donation made.
Donation deduction.
2. Category B: 50% of donation made.
• Donation for a particular community is
3. Category C: 100% of donation made
not allowed as deduction. subject to qualifying limit
• Proof of donation in original should be
4. Category D: 50% of donation made
attached with the return of income.
subject to qualifying limit
• Donation in excess of Rs. 2,000 must be
Steps for computation of qualifying limit
paid by Account Payee Cheque.
Step 1
Compute adjusted total income i.e., the AGTI
as reduced by the following:
i. Deductions under Chapter VI-A, except
under section 80G
ii. Short-term capital gain taxable under
section 111A
iii. Long-term capital gains taxable under
sections 112 & 112A
Step 2
Qualifying limit = 10% of AGTI
80GG Individual 1) Assessee is paying rent. Minimum of the following-
Rent Paid 2) He or his relative has no house at the i. Rs. 5,000 p.m.
place of employment of the assessee.
3) ii. 25% of Adjusted GTl

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

He is neither receiving HRA nor has iii. Rent paid - 10% of adjusted GTl
claimed any benefit for self-occupied
property.
Sec. Applicable to Condition(s) Deduction
80GGA Any assessee not having income Assessee has contributed certain i. 100% of Amount Contributed.
Rural under the head “Profits & gains of amount for rural development,
Development business or profession". scientific research, etc. ii. No deduction shall be allowed under this section
in respect of any sum exceeding Rs. 2,000 unless
such sum is paid by any mode other than cash.
80GGB Indian Company Assessee contributed an amount to Amount so contributed.
Political party political party or an electoral trust.
80GGC All assessee except Assessee contributed an amount to Amount so contributed.
Political party
• Local authority and political party or an electoral trust.
• Every artificial juridical person
wholly or partly funded the
Government.
80JJA Any assessee Business of collecting & processing 100% of profits for first 5 yrs.
of Bio-degradable waste.
80JJAA Any assessee subject to tax audit Employment of new workmen. Deduction respect of employment of new workmen
Employment Applicable to
of new
All assessee who has income from business and is
workmen
subject to tax audit u/s 44AB.
Deduction
An amount equivalent to 30% of Additional
Employee Cost (incurred in the course of such

CMA VIPUL SHAH 9881 236 536 11.9

 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

business in the PY) is deduction u/s 80JJAA for 3

assessment years including the AY relevant to the PY
in which such employment is provided.

Sec. Applicable to Condition(s) Deduction

80M Assessee is a domestic Income of the assessee includes dividend Dividend paid or aggregate amount of
Dividend company from domestic companies, foreign companies dividend received whichever is less.
or business trusts.
80QQB Resident individual • Assessee is author of the specified book. Minimum of the following (as the case may
Royalty being a work of literary, artistic or be)
scientist nature. i. Royalty fee (to the maximum of 15% of
the value of the book sold; or
• He earned royalty income (whether ii. Lump sum fee;
received in lump sum or otherwise). iii. RS.3,00,000
80 TTA Individual & HUF Interest from saving account in bank, post i. Max Rs. 10,000
Interest on office or cooperative society ii. Assessee claiming deduction u/s 80TTB
Saving
cannot claim deduction under this section.
iii. No deduction if assessee opt for
alternate tax regime.
80TTB Resident Senor citizen Interest on deposits i. Max Rs 50,000.
Interest on [Savings + Recurring + Fixed] ii. Cannot claim deduction again under Sec
deposits
80TTA.
80U Resident Individual i. Assessee himself suffering from Severe disability Rs.1,25,000.
Disability disabilities.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
DEDUCTION UNDER SEC 80C TO 80 U

ii. Medical certificate submitted along with Non-Severe disabilities. 75,000.

return

CMA VIPUL SHAH 9881 236 536 11.11

 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

CHAPTER 12 TDS & TCS

1. TAX DEDUCTED AT SOURCE

1) TDS means pay tax as you earn.
2) The main objective of introducing TDS/TCS is quicker realization of tax and effective
realization tax.
3) In few cases an individual or HUF cannot deduct TDS if their books of accounts are not
required to be audited.
4) Surcharge on TDS for FY 24 - 25 shall be added in following cases:

Applicability of surcharge and education cess while computing TDS

1) On salary resident or non-
resident Surcharge, E CESS and SHEC shall be considered.
2) Any other payment to resident No. S.C., E. CESS and SHEC
3) Any other payment to non-
resident
4) Where amount of such payment
be exceeds Rs. 10 crore Surcharge (5%) E CESS and SHEC shall consider.
5) Where amount of such payment Surcharge (2%) education cess & SHEC shall be
exceeds Rs. 1 crore considered
6) Where amount of such payment
does not exceed Rs. 1 crore Education cess & SHEC shall be considered.

Note: No TDS on GST Amount

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

Sec. Nature of Person Recipient Time of Rate of Maximum

payment responsible to deduction TDS payment up
deduct tax to which tax
shall not be
deducted
192 Salary Employer Employee At the time of Average Basic
payment rate of tax exemption
Limit
Salary Employer is allots any within 14 days –
start up specified from
security/ a expiry of 48
sweat month from
equity the end of
shares/ relevant AY
ESOP to b from the
its date of sale
employees c from the
, date of
leaving
organisation
192A RPF The Trustees Any At the time of 10% of Rs 50,000
of the EPF Employee payment amount
Scheme withdrawn
within 5
years (on
employer
contributio
n)
193 Interest on Payer of Resident At the time of 10% 1 Central
securities interest on person payment or Govt 8% &
securities crediting the 7.75%
issued by payee, whichever bonds,
(Central or is earlier floating
state rate saving
government, bonds >
Local 10,000
Authority, 2 Int to Ind/
Company or HUF up to
Corporation 5,000 by
established account
under the payee

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

central or cheque on
State Act) listed
debentures
194 Dividend Domestic Resident At the time of 10% Rs. 5,000
Company person payment Amount paid
to Individual
by any mode
and if
recipient is
LIC, GIC etc
194A Interest Any person Resident At the time of @10% 1 Rs. 40,000
other than other than person payment or in case of
interest on individual and crediting the Bank FD &
securities HUF whose payee, whichever Recurring
accounts are is earlier. Rs 50,000
not required to in case of
be audited senior
during citizen
immediately 2 In any
preceding other case
previous year Rs. 5000
(limit as per
core
banking
solution)
194C Contract Any specified Resident At the time of Payee is a Rs.30,000
work person including person payment or Individual (provided
individual and crediting the or HUF 1% aggregate
HUF whose payee, whichever other amount paid
accounts are is earlier payee 2%. during the
required to be financial
audited during year does
immediately not exceed
preceding Rs.
previous year 1,00,000).
b No TDS for
any sum
credited or
paid to
contractor
owns 10 or

CMA VIPUL SHAH 9881 236 536 YES ACADEMY 8888 235 235 12.3
 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

less goods
carriage at
any time
during PY &
providing
PAN.
c contract of
personal
nature
194E Sports Any person Non- At the time of 20% Nil
person or paying resident payment or
entertainer specified foreign crediting the
or NR income citizen payee, whichever
sports sportsman is earlier.
association or sports
associatio
n or
entertain
er
194EE Deposit in Post Office Any At the time of 10% Rs. 2,500
NSC person payment
194G Commission Any person Any At the time of 5% upto Rs. 15,000
th
on sale of paying person payment or 30
lottery commission on crediting the Septembe
tickets sale of lottery payee, whichever r 24 & 2%
tickets is earlier from 1st
October
24 [FA
24]
194H Other Any person Resident At the time of 5% upto Rs. 15,000
th
commission other than person payment or 30
individual and crediting the Septembe
HUF whose payee, whichever r 24 & 2%
accounts are is earlier from 1st
not required to October
be audited 24 [FA
during 24]
preceding P.Y.
194I Rent Any person Resident At the time of Plant & Rs. 2,40,000
(commercia other than payment or machinery
l) individual and crediting the

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

HUF whose payee, whichever 2% Other

accounts are is earlier asset 10%
not required to
be audited
during
preceding P.Y.
194IA Acquisition Any person who Resident At the time of 1% of Rs. 50,00,000
of is acquiring payment or considera
immovable such property crediting the tion
property payee, whichever
other than is earlier
rural agro
land.
194IB Rent Individual or Resident At the time of 5% upto Rent < 50,000
th
HUF credit of rent 30 pm or part
for last month of Septembe thereof
previous year or r 24 & 2%
last month of from 1st
tenancy or date October
of payment 24 [FA
whichever 24]
earlier
194IC Amount Any Person Resident At the time of 10%. Nil
payable payment or
under crediting the
agreement payee, whichever
specified is earlier
under Sec
45(1A)
194J 1. Prof or Any person Resident At the time of 10% & 2% Aggregate of
technical other than person payment or for payment does
service individual and crediting the payment not exceed Rs.
or HUF whose payee, whichever being 30,000 in a FY
2. director accounts are is earlier person for each of
fees (not not required to engaged in nature except
covered be audited business for director
u/s. 192), during of call fees. (any
3. Royalty, preceding P.Y. centre & amount)
4. Any Sum Royalty
received related to
for not films.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

carrying
out any
activity
Sec
28(va)
194K Income Any person Resident At the time of Tax shall Rs. 5000
from units person payment or be
crediting the deducted
payee, whichever at the
is earlier rate of
10%
194M For It may be noted Resident At the time of 5% upto No tax is
th
carrying that only payment or 30 required to be
out any individuals and crediting the Septembe deducted
work, By HUFs [other payee, whichever r 24 & 2% where such
st
way of than those who is earlier from 1 sum or, as the
commission, are required to October case may be,
By way of deduct income- 24 [FA aggregate
fees for tax as per the 24] amount of
professiona provisions of such sums
l services section 194C or credited or
194H or 194J] paid to a
are required to resident
deduct tax in during the
respect of the financial year
above sums does not
payable during exceed Rs.
the financial 50,00,000.
year to a
resident
194N Cash Banking Account At the time of Case 1: The
withdrawal company, holder payment If no ITR government,
Cooperative is file 20 Banking
society, and lacks to company,
Post office 1cr 2% Cooperative
and above society, and
1cr 5% Post office,
Case 2: white label
If ITR is ATM
filed 2% operator, RBI
of sum

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

exceeding
1cr
Note:
For co-
operative
society
limit is
3cr
instead of
1 cr
194LA Compensati Any person Resident At the time of 10% Rs. 2,50,000
on for responsible for payment in cash
compulsory such payment or by cheque or
acquisition draft or by other
of mode, whichever
immovable is earlier
property
(other than
agro land)
194O Payment by ECO E- Tax is deductible 1% upto 1 An
th
ECO Commerce by E - commerce 30 Individual
participan operator at the Septembe or HUF
ts time of credit of r 24
& 2 Gross
amount of sale of 0.1% from amount up
st
goods / services 1 to 5 lakhs
to the account of October 3 submission
an E-Commerce 24 [FA of PAN or
participants or 24] Aadhar
at the time of card to ECO
payment thereof
o such e-
Commerce
participants buy
any mode,
whichever is
earlier
194P No other "Specified Deduction It is not
income bank" of Tax in given in
except Case of section
interest Specified 194P.
and pension Senior

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

in same Citizen
bank (Age
Above 75)
194Q Purchase of Buyer whose Seller At the time of 0.1 % 50 Lakhs
Goods turnover ≥ 10 payment or
Cr. in last crediting the
financial year payee, whichever
is earlier
194R Any any person Any Before releasing 10% 20,000
Benefit/ resident the benefits
Perquisite
whether in
cash or in
kind or
partly in
cash &
partly in
kind
Pertaining
to
Business/
Profession
194S Transfer of Any person Any At the time of 10% 50,000 for
virtual resident payment or specified
digital person crediting the person &
asset payee, whichever other than
is earlier specified
person 10,000
during
Financial Year
194T Payment of Partnership Partner At the time of 10% 20,000
[FA 24] remunerati firm payment or
on or crediting the
interest to payee, whichever
partner is earlier

2. DUE DATE FOR PAYMENT OF TDS [SEC. 200 READ WITH RULE 30]
Due date for deposit of TDS or Amount Sec. 192(1A)
S No Deductor Cases Due Date
1 Government Tax paid without production of an income-tax Same day
challan

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

2 Tax paid accompanied by an income- tax challan 7 days from end of

month
3 Any other 7 days from end of
Deduction made in the months of April to Feb
person month
4 If income is credited or paid in the month of March 30th April

3. TABLE B: DUE DATE OF FILING QUARTERLY STATEMENT [RULE 31A (2)]

S.No. Date of ending of the Due date
quarter of the financial year
1. 30th June 31th July of the financial year.
2. 30th September 31th October of the financial year
3. 31st December 31th January of the financial year
4. 31st March 31th May of the financial year immediately following the
financial year in which deduction is made.

4. TABLE C: TIME LIMITS FOR ISSUE OF CERTIFICATE [RULE 31(3)]

S.No. Form No. Periodicity Due date
1 16 & 12BA Annual By 31st day of May of the financial year immediately
following the financial year in which the income was
paid and tax deducted.
2 16A Quarterly Within 15 days from the due date for furnishing the
statement of tax deducted as source under rule 31A.
3 16 B Within 15 days from the due date for furnishing the
(Sec 194 – IA) challan – cum statement in Form No. 26QB
4 16 C Within 15 days from the due date for furnishing the
(Sec 194 – IB) challan – cum statement in Form No. 26QC
5 16D (Sec 194M) Within 15 days from the due date for furnishing the
challan – cum statement in Form No. 26QD

5. INTEREST FOR FAILURE TO DEDUCT AND PAY TAX AT SOURCE [SEC. 201(1A)]
• Condition: Where a person, responsible for deducting tax at source, fails to:
a. Deduct tax at source; or
b. Deposit such tax after deducting the same.
• Amount on which interest is to be charged: On the amount of such tax.

6. FEE FOR DEFAULTS IN FURNISHING STATEMENTS (SECTION 234E)

• Condition: Where a person fails to deliver a quarterly TDS / TCS return within the
prescribed time.

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

• Amount of fee: Rs.200 for every day during which the failure continues subject to maximum
of amount of TDS / TCS.
• Key Note
• The fee shall be paid before delivering a statement.
• The fee is in addition to other consequences of non – delivering such return.

7. TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER (SECTION 203A)

• Every person, deducting tax or collecting tax, who has not been allotted a tax – deduction
account number or tax collection account number, shall within specified time, apply to the
Assessing Officer for the allotment of a “tax deduction and collection – account number” in
Form 49B.

8. REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER SEC. 206AA

• Any person entitled to receive any sum or income or amount, on which tax is deductible shall
furnish his PAN to the person responsible for deducting such tax, failing which tax shall be
deducted at the higher of the following rates, namely:
a. At the rate specified in the relevant provision of this Act; or
b. At the rate of rates in force; or
c. AT the rate of 20%.

9. TAX COLLECTION AT SOURCE

• Meaning of important terms
1) “Seller” means –
a) The Central Government; or
b) State Government; or
c) Local authority; or
d) Statutory corporation; or
e) Authority established by or under a Central, State or Provincial Act; or
f) Company; or
g) Firm; or
h) Co – operative society; or
i) An individual or HUF, whose books of account are required to be audited under section
44AB during the financial year immediately preceding the financial year in which such goods
are sold.
2) “Buyer” means a person who obtains in any sale (by way of auction, tender or any other mode)
other than
a) A public sector company, the Central Government, a State Government and an embassy, a
High Commission, legation, Commission, consulate and the trade representation, of a foreign
state and a club; or

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
TDS & TCS

b) A buyer in the retail sale of such goods purchased by him for personal consumption.
3) “Specified goods” includes:
Particulars Rate as a % of the amount
payable by the buyer or
licensee or lessee*
A1 Alcoholic liquor for human consumption 1%
A2 Tendu leaves 5%
A3 Timber obtained under a forest lease 2.5%
A4 Timber obtained by any mode other than under a forest 2.5%
lease
A5 Any other forest produce (not being timber or tend leaves) 2.5%
A6 Scrap 1%
A7 Specified minerals 1%
2 Lease or a licence of parking lot, toll plaza or mine or a 2%
quarry
3 Sale of motor vehicle of value exceeding ₹ 10 lakhs 1%
4 Remittance under LRS of RBI through an authorized dealer Refer table given below
or purchase of an overseas tour package
Rate of TCS in case of collection by an authorized dealer/ seller of an overseas tour programme
package
Amount and purpose of remittance Rate of TCS
Where the amount is for purchase of an overseas tour 5% till ₹ 7 lakhs, 20%
programme package thereafter
Where the amount is remitted outside India - No TCS upto ₹ 7 lakhs
a) for the purpose of education or medical treatment 5% of the amt or agg. of
amts in excess of ₹ 7 lakh
If amount remitted is out of a loan obtained from any 0.5% of the amt or agg. of
financial institution as defined in section 80E, for the amts in excess of ₹ 7 lakh
purpose of pursuing any education
b) where the amount is remitted for the purpose other than 20% of the amt or agg. of
mentioned in (a) above amts in excess of ₹ 7 lakh
5 Sale of goods of value exceeding ₹ 50 lakh 0.1%

10. REQUIRED TO FURNISH PAN BY COLLECTEE. SEC 206CC

• Notwithstanding anything contained in any other provisions of this Act, any collected shall
furnish his PAN to the collector, failing which tax shall be collected at the higher of the
following rates, namely: -
a) At twice the rate specified in the relevant provision of this Act; or
b) At the rate of 5%

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
ADVANCE TAX

CHAPTER 13 ADVANCE TAX

1. SCHEME OF ADVANCE TAX [SEC. 208]

Where the advance tax liability of the assessee is Rs. 10000 or more, the assessee should pay
such tax in the previous year itself within the due date.

2. ADVANCE TAX LIABILITY [SEC. 209]

Particulars Amount Rs.
Estimated Gross Total Income xxx
Less: Deduction under chapter VIA xxxx
Estimated Total Income xxxx
Gross tax liability on Estimated Total Income xxxx
Add: Surcharge (if applicable) xxxx
Total and surcharge payable xxxx
Add: Education cess & SHEC xxxx
Total liability after education case xxxx
Less: Tax deducted or collected at source. xxxx
Advance Tax Liability Xxxx
If Advance tax is payable by Resident Individual Then Relief u/s.
87 A should be considered.

3. INSTALLMENTS OF ADVANCE TAX AND DUE DATES [SECTION 211]

Due date of Instalment in the Other than 44AD or 44ADA Eligible assessees carrying on
relevant previous year eligible business u/s 44AD or
44ADA
On or before June 15 15 % of such advance tax
On or before September 15 45% of Advance Tax Payable
On or before December 15 75% of Advance Tax Payable
On or before March 15 100% of Advance Tax Payable 100% of Advance Tax Payable
• Key Notes
a. Any amount paid under section 211 on or before 31st March of the previous year, shall be
treated as advance tax paid during the financial year.
b. Provisions of advance tax is not applicable in the following cases:
Where an assessee is a senior citizen and does not have any income chargeable under the
head “Profits and gains of business or profession”. In other words, senior citizen not having
business income is not liable to pay advance tax.
Every income including capital gain, winning from lotteries, dividend etc. is subject to
advance tax. However, it is not possible to estimate capital gain or casual gain, therefore,

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
ADVANCE TAX

where the assessee has paid the whole of the amount of tax payable in respect of such
income:
1) As part of the remaining instalments of advance tax which were due; or
2) Where no instalments were due, by March 15 of the financial year immediately preceding the
assessment year,
• Then it is deemed that all the provisions are complied.
c. If the last day for payment of any instalment of advance tax is a day on which the receiving
bank is closed the assessee can make the payment on the next working day. In such case, the
mandatory interest leviable under section 234B and 234C would not be charged
d. While calculating advance tax, net agricultural income shall also be taken into consideration
for computing tax liability.
e. If any assessee does not pay any instalment within due date he shall be deemed to be an
assessee in default in respect of such instalment (Section 218).

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 DIRECT TAX REVISION PY 24-25 & AY 25-26
ASSESSMENT OF VARIOUS PERSON

CHAPTER 14 ASSESSMENT OF VARIOUS PERSON

ASSESSMENT OF INDIVIDUAL
1) Applicability
The provisions shall be applicable to a person, other than a company, whose regular Income
Tax payable for a previous year is less than the alternate minimum tax payable.
2) Adjusted total income to be deemed income
If regular income tax payable for a previous year is less than the alternate minimum tax
payable then the adjusted total income shall be deemed to be the total income of that person
for such previous year and he shall be liable to pay tax on such income @ 18.5% of adjusted
total income.
In case of a unit located in an International Financial Service Centre, the alternate minimum
tax shall be calculated at the rate of 9 per cent.
3) Meaning of Adjusted Total Income
Total income Adjusted total income
Salary XX Total income XX
House Property XX (+) Deduction u/s 80IA to 80RRB XX
Profits & Gains of Business or XX (+) Deduction u/s 80AA XX
Profession
Capital Gain XX (+) Deduction u/s 35AD XX
Income from other sources XX XX
(-) Set Off & Carry Forward of (XX) (-) Depreciation on asset 35AD XX
Losses
= Gross Total Income XX = Adjusted total income XX
Deduction u/s 80 (XX)
= Total income/ Net Income XX
Taxable income
Tax on income XX Tax on ATI XX

Whichever is higher

4) Provisions applicable when adjusted total income exceeds Rs.20 lakhs

The above provisions shall not apply to an individual or HUF or an AOP / BOI, whether
incorporated or not, or an artificial juridical person, if the adjusted total income of such
person does not exceed Rs.20 lakhs.
5) Tax credit for alternate minimum tax (Section 115JD)
a) Tax credit to be allowed = Alternate minimum tax paid – regular income tax payable.
b) No interest shall be payable on tax credit so allowed.

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c) The tax credit so allowed shall be credited forward and set – off during 15 subsequent
assessment years.
d) If the regular income tax exceeds the alternate minimum tax, the tax credit shall be allowed
to be set off to the extent of the excess of regular income tax over the alternate minimum
tax and the balance of the tax credit, if any, shall be carried forward.

HOW TO CALCULATE TAX ON TOTAL INCOME?

Steps Particulars
1 Compute GTI without taking exempt income.
2 Apply deductions u/s 80C to 80U as per regular scheme/ ATR.
3 Resulting amount is taxable income/total income/net income.
4 Calculate tax on special category of income (capital gain u/s 111A/112/112A & casual
income)
Note: apply shifting provision for capital gain if applicable
5 Compute tax on balance income as per the rates applicable to assesse
6 Add: Surcharge if applicable
7 Claim relief u/s 87A if applicable
8 Add: Health & Education Cess
9 Deduct advance tax/ TDS
10 = Tax payable/ (refund)

ASSESSMENT OF HUF
• There is no specific provision in income-tax Act for computation of total income of HUF.
Total income and tax liability of HUF shall be computed in same manner as in case of
an individual.
• Tax point:
H & EC As in case of an individual
Residential Status Refer chapter “Residential Status”
Computation of income under As usual, however, HUF cannot have any income under the
various heads head ‘Salaries’
Clubbing of income As usual:
Sec. 64(1) & (1A) are not applicable in case of HUF as it is
specifically applicable to individual Specially refer Sec. 64
Setoff & Carry forward of losses As usual
Deductions Refer chapter “Deductions & Relief”
Return and Assessment As usual
Advance tax As in case of an individual.
• Following Points shall be considered

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1) Remuneration to Karta: Any genuine (not excessive) remuneration paid to the Karta for
conducting business of the HUF is allowed expenditure in the
hands of the HUF provided such remuneration is paid under a
Bonafide agreement and is in the interest of the family business.
2) Personal income of the Income of the member of HUF acquired in his personal capacity
members: shall not be taxable in the hands of HUF.
Tax point: ‘Stridhan’ is an absolute property of a women, income
there from is not taxable in the hand of HUF.

ASSESSMENT OF CO-OPERATIVE SOCIETY

1. Quantum of Deduction
Income derived from Deduction
Specified Activities 100% of income from such activities
Activity other than specified activities Assessee is a consumers’ co-operative
Society Rs. 100000
In any other case Rs. 50000
• Following income of any co-operative society is also exempt:
Interest or dividends from its investments with any other co-operative society.
Letting of godowns or warehouses for storage, processing of facilitating the marketing of
commodities, and
Interest on securities or any income from house property, provided certain conditions are
satisfied.
Tax point: The deduction u/s. 80P shall be allowed only if such deduction is claimed in the
return of income.

ASSESSMENT OF AOP/BOI
• In case of AOP/BOI income will be determined as under
1) If any, salary, bonus, commission or remuneration is paid by AOP/BOI to its members, it will
not be deductible [Sec. 40(ba)]
2) Similarly any interest paid by AOP/BOI to its members on loan, capital or borrowings by
whatever name called is not deductible. [Sec. 40(ba)]
3) Total income of the AOP/BOI is taxable either.
a) At the rate applicable to an Individual or
b) At the maximum marginal rate or (30% + SC + H & EC)
c) At the rate higher than maximum marginal rate. (40% + SC + H & EC)

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1. AN AOP CONSISTING OF ONLY COMPANIES AS MEMBERS

a. In case of an AOP consisting of only companies as members, whose total income > ₹ 50 lakhs
but is ≤ ₹ 1 crore Where the total income exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore,
surcharge is payable at the rate of 10%.
b. In case of an AOP consisting of only companies as members, whose total income > ₹ 1 crore
Where the total income exceeds ₹ 1 crore, surcharge is payable at the rate of 15% (FA.22).
c. In case of AOP (consisting of only companies as its member), the maximum of rate of
surcharge is 15% for AY 2023 & 24 (FA 22).

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2. COMPUTATION OF TAX OF AOP/BOI:

AOP/BOI When none of the members is a When one or more partners is a
foreign company foreign company
Tax incidence Tax incidence on Tax incidence on Tax incidence on
on AOP/BOI members AOP/BOI members
A) When
shares of
members are
determinates
A1) When Income is Share of Share of foreign Share of member is
none of the taxable as if members shall be company Shall be not taxable.
members has AOP/BOI is Included in taxable at the
income An Individual taxable income of rate applicable to
exceeding the members and if the company
maximum AOP/BOI has (40%) & the
amount paid tax then the remaining income
chargeable to members can is taxable at the
tax claim rebate maximum
under section 86. marginal rate
A2) When one Income will be Share of member As given above. As given above.
or more taxed at the is not taxable.
members has maximum
income marginal rate.
exceeding the
maximum
amount
chargeable to
tax
B) When As given above As given above At the rate As given above.
shares of applicable to the
members are foreign company
indeterminate

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CHAPTER 15 RETURN, ASSESSMENT PROCEDURE AND INTERST

Sec 139 Filling of return: Following person need to file a return of income.
Assessee Size of income
A company or a firm or any Irrespective of size of income
University/College/ other institution
referred to on Sec.35(1)(ii) or (iii)
Individual, HUF Every individual, HUF, etc. must file return of income
of its Gross Total Income before claiming deduction
u/s 10AA, 10(38), 80C to 80U & Sec 54

1. MANDATORY FURNISHING OF RETURN OF INCOMES BY CERTAIN PERSONS [SEC.139]

• Under the amended version, a person (other than a company or firm) shall be mandatorily
require to file is return of income, if during the previous year -
a) He has deposited an amount (or aggregate of the amount) exceeding Rs. 1 Crore is one or
more current account maintained with a banking company or a co-operative bank; or
b) Has encored expenditure of an amount (or aggregate of the amount) exceeding of 2 lakhs

for himself or any other person for travel to the foreign country; or
c) has incurred expenditure of an amount (or aggregate of the amount) exceeding Rs. 1 Lakh

towards consumption of electricity or,

2. TIME LIMIT FOR FILING RETURN OF INCOME [EXPLANATION 2 TO SEC. 139(1)]

• Return should be filed on or before the following due date (of respective assessment year)
Assessee Company Due date
Where the company is required to furnish a report in Form 3CEB u/s. 30th November.
92E pertaining to international transaction(s)
In case of any other company. 31st October
Any other assesse
Where accounts of the assessee are required to be audited under any Law. 31st October
Where the assessee is a working partner in a firm and the accounts of the 31st October
firm are required to be audited under any law In any other case.
Any case other than above (salaried & non-audit cases etc.) 31st July.

3. RETURN OF LOSS SEC 139(3)

• A Company/Firm must file its return of income even when there is loss to the company. Other
assessee must file their loss-return within time if they want to claim the loss to be carried
forward.
• However, the following losses cannot be carried forward if the return of loss is not submitted

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within the time allowed u/s. 139(1).

Notes:
1) Loss declared in belated return cannot be carried forward. However, set-off of losses
of current year is not prohibited while computing the total income, even if the return of loss
is filed after the due date.
2) Delay in filing the return of loss may be condoned in certain cases.
3) Unabsorbed depreciation u/s. 32 and loss under the head “Income from House
Property” can be carried forward even if the loss return is filed after the due date u/s.
139(1).
4) Although the loss of the current year cannot be carried forward unless the return of loss is
submitted before the due date but the loss of earlier years can be carried forward if the
return of loss of that year was submitted within the due date.

4. BELATED RETURN: SEC 139(4)

• A return which is filed after due date of filing return
• Time Limit: Earlier of the following.
i. Dec 31st of relevant AY or
ii. Before the completion of assessment (u/s. 144).
• However, if an assessee files a belated return, he would be liable to penal interest u/s. 234A.

5. REVISED RETURN SEC 139 (5)

• If an assessee discovers any omission or wrong statement (Bonafide in nature) in
return originally filed, he can revise his return u/s. 139(5).
• Conditions to file a revised return:
a) Only return filed u/s. 139(1) or in pursuance of a notice u/s. 142(1) can be revised.
b) Revised return can be filed only if the assessee discovers any omission or wrong statement
in return originally file in other words, an assessee cannot revise a return if the omission or
error in the original return was pre-known to him.
c) Time Limit: Earlier of the following.
i. Dec 31st of relevant AY or
ii. Before completion of regular assessment.

6. SEC 139(8) UPDATED RETURN

Any person may furnish an updated return of his income (or the income of any other person
in respect of which he is assessable under the Act) for the previous year relevant to such
assessment year. The provisions given below pertaining to updated return are applicable from
April 1, 2024 -
1 Time limit -

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Updated return under section 139(8A) can be submitted at any time within 24 months
from the end of the relevant assessment year. For instance, updated return for the
assessment year 2024-25 can be submitted on or before March 31, 2026.
2 Who can submit updated return -
Updated return can be submitted by any person whether (or not) he has furnished a
return under section 139(1)/(4)/(5) for an assessment year (herein referred to as the
relevant assessment year).
3 Computation of additional tax-The additional tax payable at the time of furnishing
updated return shall be calculated as follows -
If updated return is furnished after expiry 25 per cent aggregate of tax (+ SC + HEC)
of time available under section 139(4)/(5) but and interest as computed above
before completion of 12 months from the
end of the relevant assessment year
If updated return is furnished after the 50 per cent of aggregate of tax (+SC+
expiry of 12 months but before completion of HEC) and interest as computed above
24 months from the end of the relevant
assessment year

7. DEFECTIVE RETURN SEC 139 (9)

• Meaning of defective return
A return of Income shall be regarded as defective, in the following cases–
a The Annexures, Statements and Columns in the return of Income have not been duty
filed in.
b The return is not accompanied by the general Details and Specific Details)

8. SIGNING OF RETURN SEC 140

Assessee Case Signed and verified by
Individual In general Individual himself.
Where the individual concerned is Individual himself or by the duly
absent from India. authorized person of such individual.
Where the individual is mentally Guardian of such individual or any
incapacitated. other person competent to act on his
behalf.
Where by any other reason it is not Any person duly authorized by him.
possible for the individual to sign the
return.
Note: When return is signed by any authorized person in that case the return
should be accompanied with power of attorney.

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HUF In General Karta

Where the ‘Karta’ is absent from India Any adult member of the family
or is mentally incapacitated.
Firm In general Meaning partner
If due to any reason it is not possible Any adult partner.
for meaning partner to sign or where
there is no managing partner.
Limited liability In general Designated partner.
partnership
If due to an unavoidable reason such Any partner.
designated partner is not able to sign
and verify the return, or where there
is no designated partner as such.
Local authority Principal officer
Political Party Chief Executive Officer In general
Company If due to any reason it is not possible Managing Director (MD)
for MD to sign or where there is no Any Director
MD Non-resident company. A person holding a valid power of
Company in process of winding up. attorney.
Where the management of the Copy of such power of attorney must
company has been taken over by the be attached with the return.
Central or State Government. Liquidator of the company.
Any other Any other person
association Principal Officer.
Any other Such person or any other person
competent to act on its behalf.

9. PAN
It’s a 10-digit alpha numeric code assign by Income tax department.
• Who need to apply of PAN
• A person whose total income exceeds exempted limit.
• A person whose turnover / gross receipts is expected to exceed Rs. 5 lac during the
previous year.
• Every person, being a resident, other than an individual, which enters into a financial
transaction of an amount aggregate to Rs. 2,50,000 or more in a financial year.
• Every person who is the managing director, director, partner, trustee, author,
founder, Karta, chief executive officer, principal officer or office bearer of the
person mentioned in (iii) above or any person competent to act on behalf of such
person.

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• Time limit for making application

Person whose total income exceeds maximum exempted Till 31st May of A.Y.
limit
Person whose turnover is expected to exceed Rs. 500000 Till the end of accounting year
• Penalty
If a person fails to apply for PAN or quotes wrong PAN then they shall be liable for a
penalty of Rs. 10000.

10. QUOTING OF AADHAAR NUMBER SEC. 139AA

A. Every person who is eligible to obtain number shall, on or after the 1st day of July, 2017,
quote Adhaar number –
i. In the application form for allotment of PAN
ii. In the RIO:
• Provided that where the person does not possess the Aadhar Number, the Enrolment ID of
Aadhar application form issued to him at the time of enrolment shall be quoted in the
application for PAN or, as the case may be, in the RIO furnished by him.
B. Every person who has been allotted PAN as on the 1st day of July, 2017 and who is eligible
to obtain Aadhar number, shall intimate his Aadhar number to such authority in such form
and manner as may be prescribed, on or before a date of to be notified by the Central
Government in the Official Gazette:
Provided that in case of failure to intimate the Aadhar number, the PAN allotted to the
person shall be deemed to be invalid and the other provisions of this Act shall apply, as if
the person had not applied for allotment of PAN.

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INTEREST U/S 234A, 234B AND 234C

Points 234A 234B 234C
Condition a. Fails to furnish return a. Advanced tax not paid at a. Failure to pay the
all amount or lesser
amount as required
b. Furnishes it after the c. Advanced tax paid less by the schedule.
due date specified u/s than 90% of assessed tax
139 (1)
Amount on Tax on Assessed income Tax on assessed income Tax on Declared income
which (-) TDS / TCS Advanced (-) TDS / TCS (-) TDS / TCS
interest is Tax (-) MAT (-) Advanced Tax (-) Advanced Tax
to be
calculated
When After the last date of From the first day of During previous year
period of filing return assessment year when required amount
default will instalment is not paid
begin?
How to a. If return is not filed - a. From the first day of a. Period 3 months (1
Calculate up to date of assessment year till the month for last
period of assessment date of assessment. Instalment)
default? b. If return is filed after
the due date - up to
date of filing return
Rate of 1% per month or part 1% per month or part thereof 1% per month or part
Interest there of there of

INTEREST FOR EXCESS REFUND GRANTED TO ASSESSEE SEC 234D

• Condition: Where any refund is granted to the assessee under section 143(1) and:
a) No refund is due on regular assessment; or
b) The amount refunded exceeds the amount refundable on regular assessment;
• Rate of interest: Simple interest @ ½ % for every month or part of the month.
• Amount on which interest is to be charged: On the whole or excess amount refunded.
• Period: From the date of grant of refund to the date of such regular assessment.

FEE FOR DIFFICULT IN FURNISHING RETURN OF INCOME 234F

• Without prejudice to the provisions of this Act, where a person required to furnish a return
of income u/s 139, fails to do so within the time prescribed in section 139(1), he shall pay, by
way of fee, a sum of, -
a) Rs. 5,000/-,

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• Provided that if the total income of the person does not exceed Rs. 5 lakh, the fee payable
under this section shall not exceed Rs. 1,000/-.

FEE FOR DEFAULT RELATING TO STATEMENT/ CERTIFICATE OF DONATION [SEC.234G, APPLICABLE

FROM OCTOBER 1, 2020]
• With effect from October 1, 2020 sections 35 and 80G have been amended to provide that
deduction under these sections will be available to the entity covered by these sections only
if these entities deliver the statement of donations, as prescribed by the board, and also
furnishes a certificate of donation to the donors.
• In order to ensure compliance of these provisions, section 234G has been inserted with
effect from October 1, 2020. It provides for leavy of Fee of Rs. 200 per day if these entities
fail to submit such statement of donation and / or certificate of donation within the
prescribed time. However the fee, shall not exceed the amount in respect of which the
failure has occurred. Such fees shall be paid before submitting such statement of donation
or before furnishing of certificate of donation.

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