Income from profession and Business

Profession which is approved by the Income Tax officer like CA, doctor, Lawyer, architect etc

Q1;

Professional Receipts
Audit fees 200000
Prof work 100000 300000

Less: Professional Payments

Office expenses 18000
Membership fees 500
Motor car expen 10200*20% 2040
Depreciation 27000*20% 5400 25940
Income from profession 274060

Q2: Dr. Anilkumar, who maintains books of accounts under cash system furnishes the following receipt
and payments account for the year ended 31st March 2019.

Compute his taxable income from profession.

Receipts Rs Payments Rs.

To balance b/d 14000 Rent of clinic 37500

Electricity and water charges

Consultation fee 60000 3500
of clinic

Visiting fee 56000 Purchase of medicine 40000

Loan from bank 25000 General expenses 45000

Sale of medicines 60000 Surgical equipment 40000

Remuneration from article published in

6000 Salary to staff 36000
professional journal

Dividend-gross 10,000 Telephone charges 12000

Interest on post office SB Account 7000 Interest on loan 2000

Closing balance of cash 24000

Other information

1General expense includes purchase of professional books Rs. 3600/- and car maintenance expense Rs.
16000/- Half of the use of car is for personal purpose.

2 Depreciation is charged on surgical equipment @25%

3 Loan was taken for professional purpose.

4 Rent of clinic includes Rs.7500/-advance for next year.

5 Closing stock of medicine Rs. 6000/-

6 During the year he paid Rs.6000/-to a poor boy for his higher education .

7. Visiting fees due but not received from a hospital Rs. 30000/-

In case of accrual basis of accounting

sale of medicines=op stock+ purchases-cl stock

Q3 Anilkumar, Lawyer who maintains books of accounts under cash system furnishes the following
receipt and payments account for the year ended 31st March 2019.

Compute his taxable income from profession.

Receipts Rs Payments Rs.

To balance b/d 14000 Rent of office 37500

Electricity and water charges

Consultation fee 60000 3500
of office

Visiting fee 56000 Purchase of legal books 4000

Presents from clients 5000 Travelling expenses 10000

Purchase of stamp duty and

Gits from relatives 7000 3000
court fee

Loan from bank for profession 25000 General expenses 45000

Practicing fees 45000 Furniture purchased 40000

Remuneration from article published in

6000 Salary to staff 36000
professional journal

Dividend-gross 10,000 Telephone charges office 12000

Interest on post office SB Account 7000 Interest on loan 2000

Closing balance of cash 24000

1) Travelling expense include Rs 2000 spent on personal travel

2) Deprecation on furniture is at 10%
3) Rent of office includes Rs.7500/-advance for next year.
http://incometaxmanagement.com/pages/gross-total-income/Business-Profession/Chat-Showing-
Computation-of-Business-and-Professions.html

Q1: from the following particulars of Mr A for the year ending 31 march 2020, find out the income from
business.

Particulars Amount Particulars Amount

To opening stock 120000 By sales 21420000
To purchases 210000 By profit from sale of 5000
import license
To salaries 25000 By gift received 24000
To legal expenses 10000 By closing stock 200000
To bad debts 5000
To rent 50000
To interest on loan 2500
To depreciation 15000
To IT paid 2000
To o/s customs duty 25000
To advertisement 2000
To general expenses 12000
To contribution to 5000
URPF
To net profit c/d 258000
 Interest on loan is paid to the brother of Mr A for loan taken for payment of
advance income tax 
 during the previous year 15-16 assessee has claimed ₹45,000 as bad debts of which
35,000 was allowed. 10000 Rs is income
 contribution towards unrecognized Provident fund was paid within time 
 legal expenses included ₹2000 paid for preparation of income tax return  

 gift received was given by a supplier for achieving sales targets 

 outstanding customs duty has been paid on 31st December 2020
 during the previous years he comes to know that his former
employee has misappropriated cash of rupees 5000 which was not accounted for. 
 traveling expenses included ₹50,000 being cost of a trip to Singapore by an
employee for 10 days however 8 days of the trip was for business and 2 two days
was allowed as a holiday to employee 
 rent includes expenditure on extension of shed on rented building
26,000. however, such extension was completed on 1/5/2020 with a total cost of
₹50,000. 
 general expenses included salary of rupees 1200 paid to domestic servant and
compensation of 2000 paid for retrenchment of an employee  
compute the Income from business for assessment year 20-21 

Particulars Amount Amount

Net profit 258000
Add: disallowed expenses but
debited to p/l a/c
Interest on loan 2500
IT paid 2000
o/s customs duty 25000
Contri to URPF 5000
Rent towards shed 26000
Salary to domestic servant 1200 61700
Add: income taxable but not
credited to p/l a/c
Bad recovered 10000 10000
Less: expenses that are
allowed not debited to p/l a/c

Misapprp of cash 5000 5000

Income from business 324700

Q2: From the profit & loss account of Mr. K. C. Saha, a manufacturer, Calculate the taxable income from
business for the year ending 31st March 2020.

Profit and Loss Account

Salary to employees 95,000 Gross profit 3,00,000

Advertisement expenses in
24,000 Interest on securities 14,000
cash

General Expenses 16,000 Income from House property 25,000

Bad debts recovered(allowed earlier by

Entertainment Expenses 22,000 12,000
Income - tax authority)

Bad debts 1,500 Profit on sales of import license 80,000

Drawing by proprietor 24,000

Sales tax ( due and paid on

6,000
1-7-2019)

Interest on proprietor
7,000
capital
Repairs 2,500

Rent 21,000

Legal expenses 5,000

Depreciation 15,000

Bonus (due) 6,000

Bonus to proprietor 4,000

Motor car purchased 72,000

Expenses on car during the

12,000
year

Donations 2,000

Provision for bad debts 6,000

Net profit 90,000

4,31,000 4,31,000

He gives you the following additional information:

a) Rs. 3,000 was spent on the purchase of land and is included in legal expenses.

b) Half of repair expenses were on let-out building.

c) Depreciation allowable on all assets including motor car is Rs. 14,400.

d) Bonus was paid to employees on 30-6-2018 and Mr. K.C. Saha filed his returns on 31-7-2020.

Q3: From the below-given profit & loss account and additional information of Mr. David. Compute his
taxable business income for the A.Y.

Profit and Loss Account for the year ended 31 - 03 -2020

Particulars Rs. Particulars Rs.

Opening Stock 40,000 Sales 5,00,000

Purchase 2,20,000 Closing Stock 50,000

Wages 15,000

Freight 10,000

gross Proft 2,65,000

 5,50,000 5,50,000

Establishment expenses 15,000 Gross profit 2,65,000

Salaries 25,000 Dividend on shares (gross) 6,000

Rent and Taxes 12,000 Rent from house property 15,000

Income tax 10,000 Refund of Income Tax 2,000

House hold expenses 14,000 Interest on Govt. Securities 1,000

Reserve for bad debts 5,000 Bad debts recovered 5,000

Advertisement 15,000 Profit on sale of machinery 3,000

Donation 6,000 Miscellaneous income 9,000

Sales Tax 20,000

Provision for income tax 8,000

Carriage outwards 11,000

Drawings 4,000

General Expenses 16,000

Interest on Capital 9,000

Bad debts 7,000

Repairs 7,500

Taxes and insurance 2,500

Car expenses 11,000

Audit fees 12,500

Depreciation 20,500

Net profit 75,000

3,06,000 3,06,000

Additional Information:

a) Salaries include payment to a relative employee, which is considered to be unreasonable upto Rs.
6,000.

b) Purchases include two payments of Rs. 30,000 and Rs. 10,000 paid in cash to a supplier.

c) Opening stock is valued at 10% above the cost.

d) Allowable depreciation is Rs. 22,500.

e) 60% of car expenses are for business purpose.

IMP POINTS YAAD RAKHNA

 Whenever General Expenses is given in adjustments, take only those items related to
profession, if not given in adjustment, take the entire amount as it is
 See the first line of the question, if it says cash basis- ignore the closing stock of medicines. If it
says accrual basis- sale of medicine= opening stock+ purchases- closing stock
 For calculating income from business, follow the 4 points I made you write in the notebook
 For calculating income from profession, take those receipts and payments jo uske profession ki
wajah se hai
 Asset would not be considered, only dep on that asset would be
 Dep on professional books will always be 60%. If given in adjustment, full amount of books will
be taken
 Advance and Outstanding ki adjustment ko ignore. Income tax is calculated on the amount
received or payed, whether for this year, or next year or previous year
 In case the loan is taken for professional purpose, int on loan will be shown. If not taken for
professional purpose, nothing would be shown
 For calculating the value of stock in income from business follow the format sent on the
whatsapp

Income from Capital Gain

Capital gain
Profit arising on the transfer of a capital asset is the capital gain.
Capital Asset
Capital asset means property of any kind held by an assessee whether or not
connected with his business or profession. They may be movable or immovable, fixed
or circulating, tangible or intangible. Land, building, machinery, Goodwill, licence,
patent, Shares, debentures and other securities, jewellery, drawings, paintings etc; are
capital assets.
The following assets are excluded from the list of capital assets.
1) Stock in trade,
2) Personal effects( wearing apparel, household furniture, other household items,
car used for personal purpose), and
3) Agricultural land in rural area.
Short term Capital asset
Capital asset held by an assessee for not more than 36 months, immediately prior to
its date of transfer is short term capital asset.
( 12 months in the case of shares, debentures and other securities and 24 months in
the case of land, building or both).
Profit arising on the transfer of short term capital asset is short term capital gain.
( if loss, short term capital loss).
Long term capital asset
Capital asset held by an assessee for more than 36 months immediately prior to its
date of transfer is long term capital asset.(12 months in the case of shares,
debentures and other securities and 24 months in case of land, building or both).
Profit arising on the transfer of long term capital asset is called long term capital
gain.( If loss, long term capital loss).
Computation of income from capital gain.
1) Short term capital assets.
Sale price of the asset xxxx
Less expenses on transfer xx
Net consideration xxxx
Less; (1) Cost of acquisition xxx
(2) Cost of improvement xx
xxx
Short term capital gain xxxx
Q1: Mr Kumar purchased a piece of land in Bangalore in 15 July 2018 for Rs 50
lakhs with a brokerage of 1 lakh. He sold this land on 15 December 2019 for Rs 65
lakhs paying a brokerage of 2 lakhs. Compute the CG.

SALE CONSDERATION: 65000000

Less: brokerage: 200000
Net consideration 6300000
Less: COA 500000
Less: COI -----
STCG 1300000

Conditions to look for

1. No of months
2. Is the transfer a capital asset or not?
3. STCG or LTCG?
4. The transfer must be during 19-20

Long term capital assets.

Sale price of the asset xxxxx
Less expenses on transfer xx
xxxx
Less:(1) Indexed cost of acquisition xxx
(2) Indexed cost of improvement xx
xxx
Long term capital gain xxx

Note: Indexation is not available for long term debentures.

Indexed cost of acquisition.

= Cost of acquisition x C I I for the year in which asset is transferred/
C I I for the year in which the asset was first held by the
assessee* or 2001-02, whichever is later.

* or the previous owner in case the asset is inherited by the

assessee.

Indexed cost of improvement.

 = Cost of improvement x C I I for the year in which asset is
transferred/ C I I for the year in which improvement is made.
Note: Improvement made before 1st April 2001 should not be
considered.
Eg: COA is 25 lakhs, purchased on 5 th July 2008 and sold on 12 December 2019. A
sum of Rs 2 lakhs was spent on renovation of the house on 2 November 2015.
Indexed COA=2500000*289/132=5473484.
Indexed COI=200000*289/156=370512.
CII=cost inflation index
2001-02=100
Eg: COA is 25 lakhs, purchased on 5th July 2000 and sold on 12 December 2019. A
sum of Rs 2 lakhs was spent on renovation of the house on 2 November 2015. The
fair market value of this house as on 2001-02 was 30 lakhs. 80 lakhs
Indexed COA=COA or FMV (weh)* CII for the year of sale/CII for the year 2001-
02 i.e 100
Indexed COA= 2500000 or 300000(weh)
3000000*289/100= 8670000
Indexed COI=200000*289/156=370512.

Cost of acquisition in different cases.

1) Asset acquired by the assessee - The amount at which the asset was
purchased by him.
2) Asset acquired by the assessee before 1 st April 2001 - The original cost or the F M
V as on 1st April 2001, whichever is more.
3) Assets which are inherited by the assessee – The cost to the previous owner.
4) Depreciable assets – W D V as on the beginning of the previous year.
Note: Depreciable assets are considered as short term capital assets.
5)Bonus shares.
i) Issued before 1st April 2001, F M V as on 1st April 2001 is the cost of
acquisition.
ii) Issued on or after 1st April 2001- cost of acquisition is nil.
6) Self generated capital assets like Goodwill – cost of acquisition is nil.

Tax on short term capital gain.

1) Short term capital gain on shares, debentures and other securities,
if security transaction tax is paid = at 15% + SC + HEC.
2) Short term capital gain in all other cases will be taxed along with other income at
the usual rate.
Tax on long term capital gain.
1) Long term capital gain on equity shares or a unit of an equity-oriented fund and
for which S T T is paid;
a) Capital gain up to Rs 1 lakh is exempted from tax.
b) In excess of Rs 1 lakh is taxable at 10%+ SC+HEC.
2) In all other cases long term capital gain is taxable at 20% + SC+HEC.

Q2: Mr. Ganesh of Bangalore, sold the following properties during the year ending
31st March 2020.
1) A residential house sold for Rs 970000 in October 2019, which was purchased for
Rs 200000 in 2001-02. Expenses in connection with sale was Rs 20000.
2) He had inherited few shares of a company from his father in May 2007, which his
father had purchased in January 2003 for Rs 80000. He sold these shares in
February 2020 for Rs1065000 and the selling expenses were Rs 10650.
In case of inheritance, the date of inheritance is not considered.
3) He sold jewellery for Rs 720000 in December 2019, which was purchased in
September 2010 for Rs 280000.Expenses on sale amounted to Rs3600.
4) He sold household furniture in May 2019 for Rs 75000, which was purchased in
June 2010 for Rs 120000.
5) He sold an agricultural land(rural area) in March 2020 for Rs 1200000 which was
purchased in July 2003 for Rs 140000.
Compute the income from capital gain for the A Y 20-21.
C I I = 2001-2002, 100. 2002-2003, 105. 2007-2008,129. 2010-2011,167. 2019-2020,
289.

1. Residential house
Sale Price 970000
Less: brokerage 20000
Net sale consideration 950000
Less: Indexed COA 200000*289/100=5780000 578000
Less: indexed COI ---
Income from LT capital 372000
gain
2. SHARES
Sale Price 1065000
Less: brokerage 10650
Net sale 1054350
consideration
Less: Indexed 80000*289/105=220190 220190
COA
Less: indexed COI ---
LTCG 834160
3. Jewellery
Sale Price 720000
Less: brokerage 3600
Net sale
consideration
Less: Indexed 280000*289/167
COA
Less: indexed COI ----
LTCG
4. household -----
furniture
5. agricultural ----
land(rural area)
TOTAL LTCG
Q3: Mr. Sidharth sold the following properties during the year 19-20.

1) Residential building sold in May 2019 for Rs 6200000 which was constructed
in January 1997 at a cost of 220000 and the FMV as on 1 st April 2001 was Rs
520000. Cost of improvement made in 99-2000 was Rs 40000 and in 2008- 2009, Rs
240000.
2) Commercial building sold in December 2019 for Rs 4800000 which was
purchased in February 2018 at Rs 3300000.
3) Debentures of ABLtd; sold in March 2020 for Rs 250000 which were
purchased in March 2015 for Rs 190000.
4) Sold 550 equity shares of Reliance Ltd; at Rs 1400 each in November 2019
which were purchased in October 2018 at Rs 950 per share.
Machinery sold in April 2019 for Rs 180000 and the W D V as on 1 st April 2019
was Rs 120000. Machinery was purchased in June 2014 at Rs 1200000.
6) Sold his personal car for Rs 440000 in August 2019 which was purchased in
May 2010 for Rs 700000.
7) In July 2011 he was allotted 120 Bonus shares which were sold in March 2020
for Rs 650 per share.The FMV of these shares in 2011 was Rs 90 per share.
8) Sold jewellery in November 2019 for Rs 540000 which was purchased in
December 2016 for Rs 410000. Expenses on transfer Rs 2700.
Compute the income from capital gain for the A Y 20-21.
C I I; 2001 - 2002, 100. 2008-2009, 137. 2016-2017, 264. 2017-2018, 272.
2018-2019, 280. 2019-2020, 289.

Q4: Mr. Jeevan sold the following assets during the year 19-20. Compute the income
from capital gain for the A Y 20-21.

1) Sold a residential house , inherited by him in June 2015 for Rs 6500000, selling
expenses Rs 50000. It was purchased by his father in September,2004 for Rs
2200000. Extension made by his father in October 2008 for Rs 500000.
Improvement made by Jeevan in December 2016 for Rs 900000.
 2) Sold a residential site for Rs 8400000 in January 2020, which was acquired in 1996
for Rs 450000 and the F M V as on 1st April 2001 was Rs 900000.
3) Sold machinery for Rs 80000 in March 2020, which was purchased in July 2015
for Rs 300000 and the WD V as on 1st April 2019 was Rs 60000.
4) Sold Debentures of a company for Rs 310000 in June 2019 which was purchased
in February 2006 for Rs 33000.
5) Sold household furniture for Rs 74000 in August 2019 which was purchased in
September 2012 for 140000
C I I = 2001-02, 100. 2004 - 05, 113. 2008 – 09,137. 2016 – 17, 264. 2019 – 20,
289.

IMP POINTS TO BE NOTED

 Check if the transfer is in 2019-20

 See whether short term or long term
 If inherited, then take the date on which the person from whom you
inherited first purchased the asset.
 PRACTICE INDEXED COST OF ACQUISITION- YOU NEED PRACTICE
IN THIS
 See which items are considered as a capital gain and which are not
 Make sure that while calculating indexed cost, the year does not precede
2001-2002
 Always remember, CII for 2019-20 is 289 and 2001-02 is 100

Income from other sources

Any income which does not fall under the first four heads is computed under Income
from other sources.
The following incomes are chargeable under this head;
1) Dividend,
2) Interest on securities, deposits and loans,
3) Casual incomes,
 4) Rental income from plant,machinery and furniture if not falling under business,
5) Gift,
6) Income from subletting of building,
7) Directors fee,
8) Rent of vacant land,
9) Examination fee from university,
10) Salaries of MPs MLAs MLCs,
11) Family pension received,
12) Annuities under a will.

Dividend
Dividend from Indian companies up to Rs 10 lakh is exempted from tax, in excess of
Rs 10 lakh is taxable.
2) Gift
i) Gift from relatives is exempted from tax.
ii) Gift received on the occasion of wedding, is exempted from tax.
iii) Gift from non relatives – the aggregate amount of gift received during the
previous year is not exceeding Rs 50000, then it is exempted. If the aggregate
amount exceeds Rs 50000, then the entire amount is taxable.

Casual income
Winnings from lotteries, crossword puzzles, races, card games and betting fall
under casual income. These incomes are taxed at 30%. Tax will be deducted at
source and only net amount will be given if the wining is above Rs 10000
( winnings from horse races Rs 5000). If the amount received or net amount is
given, it is to be grossed up to find out the gross amount.
Grossing up = Amount received x 100/ 100 – 30.
Eg: Kumar won a lottery of Rs 5 lakhs.
Kumar was credited Rs 3 lakhs as a sum received by wining lottery.
300000*100/100-30=428571 Rs
 Note. Expenses and losses relating to these are not deductible.

Interest on securities
i) Interest on tax free central govt.securities are exempted from tax.
ii) In the case of other securities, if the interest amount received is
given, it has to be grossed up to find out the taxable amount.
Grossing up = Amount received x 100/ 100 – Rate of tax .
Note. No T D S with respect to following;
i) Interest on govt.securities.( both central and state)
ii) Interest on debentures issued by co operative societies,
iii) Interest on term deposit with bank not exceeding Rs 10000,
iv) Interest on debentures issued by companies if the interest amount does
exceed Rs 2500 p.,a.

Deductions
Following deductions can be made while computing the income from other
sources.
i) Collection charges of interest and dividend.
ii) Interest on loan taken to purchase the securities.
iii) Depreciation, repairs and insurance of plant, machinery, furniture let on hire.
iv) Standard deduction for family pension received- 1/3 rd of such amount or Rs
15000 w e l.
v) Any expenditure incurred exclusively for earning such income.
Illustration 1
From the following details compute the income from other sources for the A Y 20-21.
1) Dividend from an Indian company Rs 40000. Exempted
2) Interest on debentures of a company Rs 24000(gross).
 3) Interest on bank deposit Rs 27000(net, TDS at 10%)
4) Winning from lottery, amount received Rs 70000 (TDS at 30%).
5) Winning from lottery Rs 100000.
6) Interest received from Central govt.security Rs 12000 (tax free).
7) Interest received from Karnataka govt.security Rs 18000.
8) Interest on post office saving bank deposit Rs 5000-3500
9) Family pension received Rs 48000.
Actual amt recievd: 48000
Less: 1/3rd of pension or 15000 (wel)
16000 or 15000 wel 15000 33000
10) Gift from friends on birth day Rs 75000.
11) Gift from father Rs 500000.
12) He spent Rs 5000 to buy lottery tickets.
13) Interest collection charges Rs 3000.
14) Dividend collection charges Rs 1000.

Dividend from an Indian company Exempted

Interest on debentures of a company 24000
Interest on bank deposit 30000
27000*100/100-10
Winning from lottery, amount received 100000
70000*100/100-30
Winning from lottery 100000.

Interest received from Central ----

govt.security
Interest received from state 18000
govt.security
Interest on post office saving bank 1500
deposit 5000-3500
Family pension3 33000
Gift 75000
Less deductions 4000
1) Interest collection charges Rs
3000.
2) Dividend collection charges Rs
 1000.

Income from other sources 377500

Q2: From the following details compute the income from other sources for the A Y 20-
21.
1) Dividend from an Indian company Rs 60000
2) Interest on debentures of a company Rs 24000(net).
3) Interest on bank deposit Rs 27000(gross, TDS at 10%)
4) Winning from lottery, amount received Rs 90000 (TDS at 30%).
5) Winning from lottery Rs 100000.
6) Interest received from Central govt.security Rs 12000 (tax free).
7) Interest received from Karnataka govt.security Rs 20000.
8) Interest on post office saving bank deposit(joint account) Rs 9000
9) Family pension received Rs 68000.
10) Gift from friends on birth day Rs 45000.
11) Gift from father Rs 500000.
12) He spent Rs 5000 to buy lottery tickets.
13) Interest collection charges Rs 3000.
14) Dividend collection charges Rs 4000.

Q3: Mr. Jai furnishes the following particulars of his income for the P.Y.
a) Rs. 40,000 – 10% tax – free debentures of a company listed on a recognized stock exchange in
India.
b) Interests on P.O.S.B account Rs. 2,000.
c) Rs. 16,000 - 9% Tax – free commercial securities .(unlisted)
d) Dividend Rs. 7,000(Gross) from a Tea Co., 60% of the income of the company is agricultural
income.
e) Rs.30,000 – 8% port Trust Bonds.
f) Dividend from a foreign company Rs. 4,000. The company deducted tax at source Rs. 1,000.
g) Rs. 15,000 – 9% Municipal debentures.
h) Winning from lottery, net amount received Rs. 18,920.
i) Rs. 2,00,000 – 10% debentures of a public limited co., (Not listed)
j) 12,000, 5% debentures of Delhi Development Authority.
IMP POINTS TO BE NOTED

 If given in net, gross up. Standard rate for grossing up of debentures is 10% and
for casual incomes like lottery is 30%. Upar mentioned hai kin cases mein gross
up nahi karte. Remember those, ok? Also debentures mein first find interest - eg.
200000 10% Debentures of Airtel.- Pehle iska int niklega: 200000*10%= 20000
Ab ye amount gross amount hi hai toh isko le lengey
Agar Govt Debentures hote ye, toh 20000 - 20000*10%= 18000 would be taxable.
This is because this is the net amount. Agar samjh na aaye toh call me
 Expenses and losses immediately related to casual incomes, like purchase of
lottery tickets, etc cannot be deducted

DEDUCTIONS

DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME.

Deductions are not allowed against short term capital gains u/s 111A , ( Short
term capital gain on Equity shares) long term capital gain and Casual incomes.
1) Section 80C - Deduction in respect of savings in life insurance ,Provident fund
etc,.
a) Life insurance premium paid- on the life of the assessee, spouse and
children,minor , major,married .
Qualified amount of deduction is-
Actual premium paid or 10% of the policy amount,whichever
is less.
b) Contribution to provident fund-SPF,RPF,PPF-
c) Subscription to National Saving certificate,
d) Interest accrued on NSE,
e) Contribution to the Unit Linked Insurance Plan of UTI, LIC.
f) Contribution to the annuity plan of LiC
g) Subscription to any mutual fund,
h) Contribution to the pension fund set up by any Mutual fund,
I) Deposit with National Housing Bank under the Home loan Account
Scheme,
J) Fixed Deposit with Bank and Post offices,not less than 5 years,
k) Repayment of House building loan, principal amount only,
L) School and College fee for two children.
Qualified amount of deduction U/S 80 C is,
The sum total of, a to l, or Rs 150000, whichever is less.

2) Under section 80ccc - Contribution to the annuity plan of LIC or any other
insurer for receiving pension.
Q A is, amount deposited or Rs.150000, whichever is less.
3) Section 80ccd- contribution to pension scheme of Central Govt.
 Q A= Amount deposited by the employee or 10%of his salary, whichever
is less.
In case of other individual, up to 20% of his gross total income.
Also the amount contributed by the employer, or 10% of salary,
whichever is less.
Note. The aggregate amount of deduction u/s 80c, 80ccc and 80ccd is limited to
Rs 150000.
4) Section 80D- Deduction in respect of Medical Insurance Premia.
a) For the assessee, spouse and dependent children- up to Rs. 25000.
b) For parents- additional up to Rs 25000,
For senior citizen-up to Rs 30000.
Note. Payment should be made by any mode of payment other than cash.
5) Section 80DD-Deduction with respect of maintenance including medical
treatment of a dependent with disability.
Rs 75000 and in case of severe disability Rs 125000.
6) Section DDB- Deduction in respect of Medical treatment.
For the treatment of the assessee,Spouse, and dependants, actual amount
spent or Rs 40000, whichever is less.
For senior citizens Rs 60000 and for very senior citizen Rs 80000.
Dependant means assessee, spouse, children,parents brothers and
sisters of the assessee.

7) Section 80E- Deduction in respect of interest on loan taken for higher education.
Interest paid during the previous year on the loan for the Higher education
of the assessee, spouse and children is deductible.
8) Section 80G- Deduction in respect of Donations.
 A- No limit donations- amount donated is fully qualified for deduction.
1) to National Defence fund-100%
2) to PMs National Relief fund-100%
3) National foundation for Communal Harmony-100%
4) university or educational institution of national eminence-100%
5)Chief Ministers Relief fund -100%
6) any fund set up by state govt. to provide medical relief to the poor-100%
7) the national trust for the welfare of persons with Autism,Cerebral
palsy,Mental Retardation and Multiple Disabilities-100%
8) National Children's fund-100%
9) Jawaharlal Nehru Memorial Fund-50%
10)Prime Ministers Drought Relief Fund-50%
11)Indira Gandhi Memorial Trust-50%
12)Rajeev Gandhi Foundation-50%.
B- With limit Donation.
a) to govt. or any authority for the purpose of promoting family planning-100%
b) to govt. or any authority for any charitable purpose-50%
c) to any corporation established by any govt. for promoting the interests of the
members of the minority community-50%

d) donation for the renovation, repair of any religious centres renown throughout
any state or states or any other place which is notified by the central govt.as
historic, archaeological or artistic importance – 50%.
Qualified amount for deduction U/S 80G.
The sum total of 1to 12,
+
the sum total of a to d,or 10% of Total Income, whichever is
 less.
Rate of Deduction.
At the rate mentioned against each item.
Note.
Donation in Kind is not eligible for deduction.
Amount exceeding Rs.2000, must be paid by any mode other than cash.
9)Section 80GGA- Deduction in respect of donations for scientific research or
rural development to a college, University,or institution approved for the purpose.
Full amount is deductible.
10) Section 80U-Deduction in the case of a person with disability.
a) Rs 75000,
b) Rs 125000, in case of severe disability.
80TTA For normal citizens: interest from bank deposits, cooperative societies and
post office. Exempt upto 10000 p.a
80 TTB For senior citizens: interest from bank deposits, cooperative societies and
post office. Exempt upto 50000 p.a

Rate of Tax applicable.

For the general income.
a) Senior Citizens; b) other Individuals;
up to Rs 300000- nil up to 2.5 lakh -nil
3 to 5 lakh at 5% 2.5 to 5 lakh at 5%
 5 to 10lakh at 20% 5 to 10 lakh at20%
Above 10 lakh at 30%. Above 10 lakh at30%.
Short term capital gain u/s 111A at 15% (Equity shares and equity oriented
Mutual Fund.
STC gain on other assets - added to general income and taxed at the normal
rate.
LTC gain on equity shares and equity oriented mutual fund up to Rs 100000 –
nil. Above Rs 100000 at 10%.
LTC gain on other assets at 20%.
Casual Incomes at 30%.

ALL ARE VERY SIMPLE HRIDS, BUT JUST MAKE SURE YOU PUT
THE CORRECT AMOUNT. AND THE TOTAL AMOUNT OF
DEDUCTIONS FROM 80 C TO 80 CCD SHOULD NOT CROSS 150000.

MASTER QUESTIONS
Steps to Compute the Tax Liability.
1) Compute the GTI (ye gross total income hai, which means incomes from all
heads- salary, house property, etc) after adjusting set off and c/f of lossess,
2) Claim deductions U/S 80C to 80U.
3) Calculate tax on the general income at the normal rate. (jab hum short term
capital gain and long term capital gain wale amount minus karke tax slabs mein
daalte hai)
4)Calculate tax on STC u/s 111A,LTC on Equity shares and Casual Incomes at the
special rate. (Alag se tax on items jo upar wale step mein minus ki)
5)To the total of 3 and 4, deduct TDS
6)From this total amount, deduct 4% cess and if the gross total income is more
than 50L then 10% surcharge also, and if more them 1 cr, 15% surcharge.
Tax slabs are given up.

Q1: Following are the details of income of Mr.Vijay,( Age-45) for the financial
year 19-20.
1) Income from Salary Rs 1800000 (TDS made by the employer Rs 180000).
2)Income from House property;
a)Let out house (Computed) Rs 84000.
b) He has a self occupied house for which the annual loan repayment is
Rs 144000,of which interest is amounted to Rs.96000.
3)Sold 200 equity shares of Reliance Ltd; at Rs 1050 each, after holding them for 9
months.Purchased at Rs 950 per share.
4) Sold a residential site for Rs 5200000, and the indexed cost of acquisition
is Rs 4400000.
5) Dividend from Reliance Ltd; Rs 3000.
6) Interest on Bank deposit Rs 20000 (TDS-Rs 2000).
7) Interest on Debentures of Airtel Ltd; Rs 4500(net)
8) Interest on post office savings a/c in the name of Mrs.&Mr. Vijay, Rs 6500.
9) Winnings from lottery, amount received, Rs 35000.He spent Rs 12000 during
the last two years for purchasing lottery tickets, of which Rs 9000 is of 2017-18.
Bank charged Rs 350 for collecting this amount.
10) His income from agriculture is Rs 280000.Expenditure relating to this is
Rs 130000.
Step 1: To calculate GTI
Income from salary 1800000
HP (12000)
i)let out:84000
ii)self occupied:
NAV-NIL
LESS: INT ON LOAN U/S 24(B)
96000
Loss from self occupied: (96000)

CAPT GAINS 20000

STCG on shares: 210000-
190000=20000
LTCG on land=5200000-
4400000=800000 800000
BUS/PROFESSION ----
OS 76650
Dividend: nil
Int on bank deposits:22000
Debenture int=4500*100/100-10%
5000
POS:NIL
LOTTERY: 35000*100/100-30
50000

Less: bank charges:350

GTI 2684650
Step 2: claim deductions u/s 80c to -----
80u:

Total income 2684650

STCG on shares 15% 20000 3000
Lottery 50000*30% 15000
Balance TI 2684650-20000-50000 2614650
STCG ON SHARES:15%
LTCG IN SHARES:10%
CASUAL INCOMES: 30%

Tax slabs
0-2.5 l- nil
250000-500000-250000*5%-12500
500000-1000000-500000*20%-100000
Above 1000000-1614500*30%=484395
Total tax liability: 596895+3000+15000=614895
STEP 5: Less: TDS 180000
Less: TDS on lottery:15000
Less: TDS on debt:500
Net tax payable: 419395+4% cess =16775+419395=436170

Q2: Compute his total income and tax liability for the assessment year 18-19,
after considering the following;
1) Life Insurance premium paid,
On the life of Mrs.&Mr.Vijay and his daughter Rs48000,

on the life of his senior citizen parents Rs30000.

2) His contribution to R P F Rs36000.
3) His daughter's college fee Rs30000.
4) Deposited Rs 50000 in SBI as fixed deposit for 6years.
5) Deposited Rs 30000 in SIB as fixed deposit for 4years and 6 months.
6) Medical insurance premium ,
a) for himself ,spouse and daughter Rs28000
 b) on his parents Rs32000(Senior citizens).
7) Donated Rs 20000 to Christ university.
8) Donated Rs 20000 to PMs National relief fund
9) Donated Rs 10000 to Sabarimala Temple.
10)Donated Rs 10000 to State govt. for promoting family planning.
11)Donated Rs 50000 worth Cloth,Medicines,food items to Kerala govt. to be
used for the flood victims.
12) His wife is doing Fulltime MBA in a leading Business School and he took a
loan for interest paid during the year is Rs 40000.
Q1: From the following details compute the total income and tax liability
Income from salary(Gross) 230000, TDS 23000
Income from house property 540000
STCG on shares 250000
LTCG on land 2000000
Life insurance premium paid on self 20000, on wife 20000, on son 30000.
ELSS 18000
Balanced mutual fund 10000
Interest on bank deposits 7000
Donations to prime ministers relief fund 5000
Medical insurance premium paid by cheque 35000
Winnings from lottery(Gross) 35000

Gross total income 2684650

Less: deductions u/s 80c
to 80u
80C: 150000 150000
Lic 48000+30000=78000
RPF: 36000
College fee:30000
FD for 5 years:50000

80D: 28000+32000 55000 55000

25000+30000
80G: 20000 30000
8) Donated Rs 20000 to
PMs National relief fund
9) Donated Rs 10000 to 5000
Sabarimala Temple.
10)Donated Rs 10000 to 5000
State govt. for promoting
family planning.
11)Donated Rs 50000
worth
Cloth,Medicines,food Nil
items to Kerala govt. to
be
used for the flood
victims.

80GGA: Donated Rs 20000 20000

20000 to Christ
university.

80E:INT ON 40000 40000

EDUCATION LOAN
Total income 2389650
STCG on shares
Lottery

Q3: From the following details compute the total income and tax liability
 of Mr Narayan for the A Y 20 – 21.
1) Income from salary Rs 2200000(computed). T D S Rs 280000.

2) Rent from let out building Rs 300000.

3) Repayment of loan for the SOP Rs 120000, of which principal amount is Rs

46000.

4) Interest on company deposit Rs 54000(net).

5) LTC loss on shares Rs 120000.

6) STC gain on building Rs 520000.

8) STC loss on residential site Rs 380000.

9) Winning from lottery,net Rs 35000.
9) Life insurance premium paid on on his policy Rs 30000 and on the
policy in his parents name Rs 22000.
10) Health insurance premium for his parents Rs 26000.
11) Mutual fund units purchased Rs 15000.
12) Fixed deposit with SBI for 6 years Rs 100000.
13) Donated Rs 30000 to a recognized NGO for charitable purpose.

PRACTICE A LOT
I KNOW YOU CAN DO IT
ALL THE BEST!!!!!

THEORY END MEIN DAAL RAHI CUZ NOT IMP AND IK TUM
PADHOGEY BHI NAHI
Set off and Carry forward of Losses
While computing the gross total Income during the previous year, an assessee can
set off any losses under various heads of the current year or the c/f losses of the
preceding years, against the income of the current year, and this process is called
set of off losses.
First, the loss in one source of income should be set of against the income from
another source under the same head.This is called Intra head set off. (with in the
same head)The loss under one head can be set off against the income from another
head. This is called Inter head set off.
1) House property loss.
a) Loss on one house can be set off to income from other house.
b) Loss under house property can be set off against other heads of
income up to a maximum of Rs two lakhs,
c) loss which could not set off, Can be carried forward for the next eight
assessment years, to be set off against house property income only.
2) Loss from Business and profession.
a) Loss in one business can be set off to income from another business,
including speculation profit.
b) Loss under the head Business can be set off to other Heads of income,
except against salary income.
c) Loss which could not be set off, can be carried forward for eight years,
to be set of against business Income only.
3) Speculation Loss.
a) Speculation loss can be set off only against speculation profit.
b) Loss which could not set off, can be carried forward for Four years,to
be set off against speculation profit.
 4) Capital losses.

1) Short term capital loss- a) Can be set off against short term or long term
gain only.
b) Loss which could not set off, can be carried forward for Eight years
to be set off against capital gains only.
2) Long term capital loss.
a) Can be set off against long term capital gain only.
b) Loss which could not set off, can be carried forward for Eight years,
to be set off against long term capital gain only.
5) Loss of lottery, betting, gambling, - this losses cannot be set off against
any income.
6) Loss from the activity of owning and maintaining race horses,
a) can be set off only against income from this source only.
b) Can be carried forward for Four years, to be set off against income
this source only.
7) Loss under the head Income from other source can be set off against any
other head of income. If not possible can be carried forward for Eight
years to be set off against Income from other sources.
Note.
1) Loss on capital gain can be set off against capital gains only.Similerly
loss under any other head cannot be set off against capital gains.
2) No losses can be set off against Casual Incomes.