INDEX

Direct Taxes & International Taxation

Chapter No. Page No.

01 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates
1.1 - 1.17

02 Income from Capital Gain

2.18 - 2.50

03 Income From Other Sources (Including Deemed Dividend)

3.51 - 3.57

04 Profit & Gain from Business & Profession (PGBP)

4.58 - 4.91

05 Income Computation & Disclosure Standards (ICDS)

5.92 - 5.97

06 Clubbing of Income
6.98 - 6.100

07 Set Off & Carry Forward of losses

7.101 - 7.105
Deductions From Gross Total Income & Exempt Income
08 (Chapter VI A, IOAA & Exempt Income)
8.106 - 8.123
Assessment of various Entities
09 (Firm, AOP/BOI, Local Authority, MAT, AMT, Buyback, Tonnage, Business Trust,
Investment fund, Securitisation Trust, Life Insurance Companies)
9.124 - 9.146

10 Taxation of Charitable Trust & Political Parties

10.147 - 10.162

11 TDS, TCS, Advance Tax & Refunds

11.163 - 11.189

12 Income Tax Authorities, Return filing & Assessment Procedure

12.190 - 12.224

13 Appeals & Revisions

13.225 - 13.231

14 Tax Planning, Tax Avoidance & GAAR

14.232 - 14.234
 INDEX
Direct Taxes & International Taxation
Chapter No. Page No.

15 Dispute Resolution Committee (DRC)

15.235 - 15.237

16 Penalties & Prosecutions

16.238 - 16.243

17 Miscellaneous Provision (cash loans, SFT'S, undisclosed Incomes etc's)

17.244 - 17.251

18 Tax Audit & Ethical Compliances

18.252 - 18.258

19 Black Money Law

19.259 - 16.263

20 Non Resident Taxation

20.264 - 20.292

21 Double Taxation Avoidance Agreement (DTAA)

21.293 - 21.296

22 Transfer Pricing
22.297 - 22.315

23 Equalisation levy
23.316 - 23.318

24 Advance Ruling
24.319 - 24.321

25 Fundamental of BEPS
25.322 - 25.328

26 Application & Interpretation of Tax Treaties

26.329 - 26.334

27 Overview of Model Tax Convention

27.335 - 27.339

28 Latest Developments in International Taxation

28.340 - 28.342

14 Tax Planning,
Annexure: Tax Avoidance
Convernsion & GAAR
of Foreign Currency
343
 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates

Chapter
BASICS, NORMAL TAX RATES, ALTERNATE
01 TAX REGIMES & SPECIAL TAX RATES

Part 1 Overview of Direct Taxes

1. Taxes means unilateral payment in the form of compulsory finance charge to Govt &
Direct Taxes means taxes on Income on the person who earns such income.
2. Constitutional Right to Tax

As per union list As per States list

 
Entry 82 Entry 46
 
Tax on Income Tax on agriculture
[except agriculture Income] In come

3. Source of Income Tax laws.

1. Income Tax Act 1961.
2. Income Tax Rules, 1962
3. Annual finance Act, [Finance Act 1, 2024, Finance Act 2, 2024]
4. Circulars by CBDT (Binding to AO]
5. Notifications by CBDT [due date extention, forms]
6. Supreme Court, High Court Judgments

4. Basic Definition
A. Person [sec 2(31)]

association of Local Artificial

Individual  Firm Authority
Person/Body Juridical Person
Natural Hindu Company
- Partnership of Individuals  - Court
person such Undivided - Indian - municipality
firm [like - Temples
a Man, family - Foreign - Gram
- LLP's unregistered - Political
women Panchayat
Trust] Parties

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B. Assessee
It means any person who is liable to pay any tax or any other sum under
IT Act, 1961. It includes person in respect of which any proceeding initiated,
deemed assessee or assessee in default.
C. Assessment Year.
Year of tax payment, stearing from 1 April to 31 march following the Previous
year.
D. Previous year.
year in which income is earned is previous Year. It is preceding to Assessment
Year. It generally starts with 1st April & ends with 31st March. But in case of
new established business, PY will commence from date of establishment of
such business
E. Certain cases where income is taxed in Previous Year Itself.
1. Shipping Business of Non Resident
2. Income of person leaving for long duration without any intention of
returning (marriage)
3. AOP / BOI / AJP formed for particular event / purpose
4. person trying to escape taxes by transferring assets.
5. Income of discontinued Business
5. Steps to Calculate Total Income.
PY xx AY xx
Particulars ` `
Income from Salary. xx
Income from House Property xx
Income from Business & profession. xx
Income from Capital Gain xx
Income from other sources xx

Clubbing of Income
Set off & Carry forward of loss
gross total Income xx xx

(-) Deduction U/C VI A (xx)

Net Total Income / Total Income xx xx

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 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates

Tax payable on such Income xx

Add Surcharge [on Tax payable] xx
Add Health & Education cess [4% of (Tax + Sc)] xx

Total Tax liability xx
(-) TDs/TCS Credit (xx)
(-) Advance Tax (xx)
(-) Releif U/S 89/90/91 (xx)
Net Tax payable / Refundable. xx

This rounded of to nearest 10

Part 2 General Tax Rates for Assesment Year 2025-26

1. for Individual, Huf, AOP, BOI, Artificial Juridical Person
(Resident or Non Resident)
If Total Income (NTI) Rate
Upto ` 2,50,000 (Basic exemption limit) Nil
from ` 2,50,000 upto ` 5,00,000 5%
from ` 5,00,000 upto ` 10,00,000 20%
above ` 10,00,000 30%

2. for Senior citizen who is 60 years of age but less than 80 years.
[Birthday on 1 April 2025. means 60 age completed on 31 march ] [only Resident]
It total income (NTI) Rate
Upto ` 3,00,000 [Basic exemption limit] Nil
from ` 3,00,000 upto ` 5,00,000 5%
from ` 5,00,000 upto ` 10,00,000 20%
above ` 10,00,000 30%

3. Senior Citizen of 80 years of age or above [Resident]

If Total Income (NTI) Rate
Upto ` 5,00,000 [Basic exemption limit] Nil
From ` 5,00,000 upto ` 10,00,000 20%
Above ` 10,00,000 30%

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CHAPTER 1
Common Point for 1,2,3
Surcharge for Assessee being Individual, HUF, AOP, BOI, AJP
S NO. Total Income Surcharge
(i) Total Income upto & so lacks Nil
(ii) Total Income more than 50 lakh upto 1 crores. 10%
(iii) Total Income more than 1 crores upto 2 crores. 15%
(iv) Total Income more than 2Cr. upto 5 Crore.
(V) Total Income is more than 5 crore

Bifurcate Total Income

Dividend + LTCG + Other Income

LTCG 112A + STCG111A
 upto 2Cr more than more than 5Cr
15% only  2Cr upto 5Cr 
15%  37%
25%

Crux:- Once Total Income of 2 Cr is crossed remove dividend, LTCG 112A, LTCG STCG
111 A & then check whether exceeds 2 Cr or 5 Cr limit]

Example Mr. Rahul

Case CG & Other Total Surcharge Rate Surcharge Rate

Dividend Income Income on Tax on CG & on Tax on other
Income Dividend Income
1. 15 Lacs 25 Lacs 4० lacs - -
2. 45 Lacs 50 Lacs 95 lacs 10% 10%
3. 55 Lacs 65 Lacs 120 lacs 15% 15%
4. 2.3 Cr 25 Lacs 2.55 Cr 15% 15%
5. 1 Cr 2.6 Cr 3.6 Cr 15% 25%.
6. 4 Cr 3 Cr 7 Cr 15% 25%
7. 4 CR 6 Cr 10 Cr 15% 37%
8. 10 Cr 10 Cr 20 Cr 15% 37%

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 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates

4. firm / Local Authority / LLP

Flat Rate = 30%
Surcharge

Upto 1 Cr more than 1 Cr
 
Nil 12%

5. Company
a. Domestic company [having Turnover of PY 2022-23 upto 400 Cr] 25%
b. Domestic company other than above 30%
c. Foreign company 35%
Surcharge in case of Company
Domestic co foreign co.
Total Income > 1 Crore upto 10 Cr 7% 2%
Total Income > 10 Crores 12% 5%

6. Cooperative Society
Total Income Tax Rate
Upto 10,000 10%
> 10,000 upto 20,000 20%
>20,000 30%

Surcharge
Total Income > 1 crore upto 10 Cr 7%
Total Income > 10 crores. 12 %

7. In all cases Health & education less @ 4%. shall be added to Tax including Surcharge.
Example Mr. Rahul Age 30. Total income for PY 2024-25 in as follows
i) Capital Gain U/S 112A 1.2Cr
ii) Capital Gain U/S 112 40 lakhs
iii) Capital Gain U/S 111A 3 Cr
iv) Dividend Income 20 lakhs
v) Other Income 3 Crores

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CHAPTER 1
(asset transferred before 23-7-2024)
computation of Tax liability for AY 2025-26 [ Normal Provision]
Solution :-

Particular Tax Rate Income Tax

LTCG 112A 10 % 1.2 Cr 11,87,500
LTCG 112 20 % 40L 8,00,000
STCG 111A 15 % 3 Cr 45,00,000
Other Income [3 Cr + 20 L] slab Rate 3.2 Cr 94,12,500
7.8 Cr
Total Tax 1,59,00,000
Surcharge @ 15%. on LTCG/STCG
[11,87,500 + 8,00,000 + 45,00,000] X15%. 9,73,125
Surcharge @ 15% on Dividend Income
588281 x 15%. 88242
[ 201/3.2Cr x 94,12,500]
Surcharge @ 25%. On Balance Income 22,06,054
88,24,219 x 25%
[ 9412500 - 588281]
1,91,67,421
Add education Cess @4% 7,66,696
Net Tax liability 1,99,34,117
Or 1,99,34,120

Marginal Relief in Surcharge.

1. This relief Is given in case where there is significant rise to total taxes due change
In surcharge Bracket with little increase in Income.
Eg. person earning 4.99 Cr pays 25% Surcharge
person earning 5.01 Cr Pays 37% Surcharge
2. calculation of Marginal Relief
Step 1: Calculate Tax on Original Total Income [without cess]
Step 2: Calculate Tax on
¶ ` 50 lacs/1 cr./2 cr./5 cr. [Individual etc.]
¶ ` 1 cr. [Firm etc.] as per case [without Cess]
¶ ` 1 cr./10 cr. [Company]

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 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates

Step 3: Tax to be paid = Step 2 + Extra Income

Step 4: Marginal Relief = Step 1 - Step 3 [Original Tax - Tax to be paid]

3. Eg. total Income of Mr. Lavish [Age 33] Is ` 5,01,00,000/- calculate Tax liability
Calculation of tax liability
Tax on Total Income `
Upto 2,50,000 -
from 2,50,000 to 5,00,000 @ 5% 12,500
from 5,00,000 to 10,00,000 @ 20% 1,00,000
from 10,00,000 to 5,01,00,000 @ 30%. 1,47,30,000
1,48,42,500
Add Surcharge @ 37% 54,91,725
2,03,34,225
Above amount shall be restricted to 1,86,15,625
Tax on 5,00,00,000 & [Total Income – 5 Cr]
= 1,85,15,625 + 1,00,000
[Surcharge @ 25% will still be applicable]
Marginal relief 17,18,600

Tax payable = 1,86,15,625

Add Education cess @ 4% 7,44,625
Total tax liability 1,93,60,250

Sec 87A:- Tax Rebate

For Resident Individuals whose Total Income is upto `5,00,000 Tax rebate of
i) 100% of tax payable or
Whichever is lower
ii) 12500
Notes
1) Rebate shall be calculated on Gross tax liability ie Tax +
2) Rebate U/S 87A is available against all income except (LTCG U/S 112A)
3) If Income exceeds even by 1 rupee from 5 lakhs then rebate u/s 87A not allowed.

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CHAPTER 1
Part 3 Alternate Tax Regimes

11SBAA 11SBAB 115 BAC 11SBAD 115BAE

Income of Income of new Individual, Resident Income of new

domestic manufaturing HUF, AOP, Cooperative manufacturing Res-
company co BoI, AJP Society ident Co-op Society

1. Optional Optional By default Optional Optional

2. Form 10IC 10ID 10IEA 10IF 10IFA

Sec 11SBAA :- Tax on Income of Certain Domestic Companies

1. Tax Rate = 22%

Surcharge = 10% [Compulsory]
Education cess = 4%
Effectively = 25.168
2) Income like LTCG 112, STCG 111A, LTCG 112A. shall continue to be taxed as per their
respective rates [special rate + 10%. Surcharge +4%. HEC]

Sec 115 BAB:- Tax on Income of certain new domestic manufacturing

[company setup & registored on or after 1 Oct 2019 & commences manufacturing on
or before 31 march 2024].
1. Tax Rate on manufacturing Income = 15%
Surcharge = 10% [compulsory]
HEC = 4%
Effectively = 17.16%
2. Income like LTCG 112, STCG 111A, LTCG 112A shall continue to be taxed as per their
respective rates [special rate + 10%. Surcharge +4%. HEC]
3. If Income compute by AO on account of profit shifting from high tax paying entity
to this entity then tax rate shall be [30+10+4] = 34.32%.
4. Income of Transfer of Non Depreciable STCG shall be taxed [22+10+4] = 25.168%
5. Other Income like Ifos, HP, non manufacturing Income etc shall be taxed @
[22+10+4] = 25.168%.
[In short 15% benefit is available to manufacturing Business Income]

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 Basics, Normal Tax Rates, Alternate Tax Regimes & Special Tax Rates

Other conditions
a. Company should not be formed by splitting up or reconstruction of an existing business.
20% second hand allowed
b. P&M should be New.
Imported shall be treated as new
c. Does not use any building previously used as a Hotel.
d. Not engaged in any business other than manufacturing and research relating to, or
distribution of such article manufactured by it.

# Business of Manufacture does not include business of:

 Development of Computer software
 Mining
 Conversion of marble block into slabs
 Bottling of gas into cylinder
 Printing books or production of film
 Note: Business of power generation shall be treated as manufacturing business.

e. Benefit of this section shall be allowed only of form 10ID furnished before 1St Return
of Income.
f. If transaction > 20 Cr with AE, it shall be specified domestic Transaction & transfer
pricing provisions will apply.

Sec 115 BAD Tax On Resident Co-operative Societies

1. Tax Rate = 22%
Surcharge = 10% [Compulsory]
Education Cess = 4%.
Effectively = 25.168%
2. Income like LTCG 112, STCG 111A, LTCG 112A. shall continue to be taxed as per their
respective rates [special rate + 10%. Surcharge +4% HEC]

Sec 115BAE [Completely similar to 115BAB] (Amendment)

Tax on new manufacturing Co-operative societies

[Co-ops. setup & registered on or after 1-April-2023. & Commences manufacturing
on or before 31 march 2024].

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 CHAPTER 1
1. tax Rate on manufacturing Income = 15%
Surcharge = 10% [compulsory]
HEC = 4%
Effectively = 17.16%
2. Income like LTCG 112, STCGIIIA, LTCG 112A shall continue to be taxed as per their
respective rates [special rate + 10%. Surcharge +4%. HEC]
3. If Income compact by AO, on account of profit shifting from high tax payent entity
to this entity then tax rate shall be [30+10+4] = 34.32%
4. Income of Transfer of Non Depreciable STCG shall be taxed [22+10+4] = 25.168%
5. Other Income like IFOS, HP, mon manufacturing Income ete shall be taxed @
[22+10+4] = 25-1681%.
[In short 15%. benefit is available to manufacturing Business Income]

Other Conditions
a. Should not be formed by splitting up or reconstruction of an existing business.
20% second hand allowed.
b. P&M should be New.
Imported shall be treated as new
c. Does not use any building previously used as a Hotel
d. Not engaged in any business other than manufacturing and research relating to, or
distribution of such article manufactured by it.

# Business of Manufacture does not include business of:

 Development of Computer software
 Mining
 Conversion of marble block
 Bottling of gas into cylinder
 Printing books or production of film
 Note: Business of power generation shall be treated as manufacturing business.

e. Benefit of this Section shall be allowed only if form 10 IFA furnished before 1St
Return of Income.
f. If transaction > 20Cr with AE, it shall be specified domestic Transaction & transfer
pricing provisions will apply.

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