Income Tax Amendment - 2021 by CA Rajat Mogha

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Contents
AMENDMENTS FOR CA INTER........................................................................................................................................................................... 1
1. RESIDENTIAL STATUS ..................................................................................................................................................................................3
2. INCOME NOT FORMING PART OF TOTAL INCOME – EXEMPT INCOME ...................................................................................................9
3. INCOME UNDER THE HEAD SALARY ..........................................................................................................................................................12
4. PROFITS & GAINS FROM BUSINESS OR PROFESSION .......................................................................................................................... 16
5. INCOME UNDER THE HEAD CAPITAL GAINS ........................................................................................................................................... 20
6. INCOME FROM OTHER SOURCES ............................................................................................................................................................ 22
7. DEDUCTIONS FROM GTI ............................................................................................................................................................................ 24
8. TAX DEDUCTED AT SOURCE – TDS ......................................................................................................................................................... 25
9. TAX COLLECTED AT SOURCE – TCS........................................................................................................................................................ 32
10. RETURN OF INCOME................................................................................................................................................................................. 35
11. SURCHARGE ............................................................................................................................................................................................... 36
12. ALTERNATIVE TAX REGIME FOR INDIVIDUAL & HUF- SECTION 115BAC............................................................................................. 42
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RESIDENTIAL STATUS
There are two important amendments made by Finance Act, 2020 to curb tax evasion by High Net worth
individuals.
Let’s discuss the background first
Ordinary resident Not ordinary Non-resident

resident
1 Income arise or deemed to arise in
India Taxable Taxable Taxable
2 Income received or deemed to be

received in India Taxable Taxable Taxable
3 Income which accrues or arises

outside India being derived from a Taxable Taxable Non – Taxable
business controlled from or
profession set up in India
4 Income which accrues or arises Taxable Non – Taxable Non – Taxable

outside India
RESIDENTIAL STATUS OF INDIVIDUALS

Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one
of the following conditions:
(a) He has been in India during the previous year for a total period of 182 days or more
OR
(b) He has been in India for at least 60 days in the previous year & 365 days or more during
the 4 years immediately preceding the previous year.
If the individual satisfies any one of the conditions mentioned above, he is a resident, otherwise the
individual is a non-resident.
Exceptions:
The following categories of individuals will be treated as residents only if the period of their stay during
the relevant previous year amounts to 182 days. In other words even if such persons were in India for
365 days during the 4 preceding years and 60 days in the relevant previous year, they will not be treated
as resident.
(1) Indian citizens, who leave India in any previous year

 as a member of the crew of an Indian ship or
 for purposes of employment outside India, or
(2) Indian citizen or person of Indian origin* engaged outside India in an employment or a
business or profession or in any other vocation, who comes on a visit to India in any
previous year
* A person is said to be of Indian origin if he or either of his parents or either of his

grandparents were born in undivided India.
Example 1 (as per old provision)

Mr. A is an Indian citizen and has a taxi operating business in Mauritius. His income
from Mauritius business is `2.5 cr. during PY 2020-21. He stay in India in PY 20-21 is
181 days and during his stay in India, he controls Mauritius business from Delhi.
Compute his residential status and taxability of Mauritius business income in India.
Solution (as per old provision)

Since Mr. A is an Indian citizen who is engaged outside India in a business and his stay is less than 182
days during PY 20-21, he is a non-resident and therefore the Mauritius income will not be taxable in
India, although it is controlled from India.
AMENDMENT BY FA,2020
In order to tax such income in India, Section 6 has been amended
AMENDMENT BY FINANCE ACT, 2020
Having total income, other

than the income from
Indian citizen or person of
Who visits India foreign sources, exceeding
Indian Origin
Rs. 15 lacs (i.e. Indian
Income)
SPECIAL PROVISION
In case of a citizen of India, or a person of Indian origin whose total income, other than the
income from foreign sources, exceeding ` 15 lacs during the previous year

(a) He has been in India during the previous year for a total period of 182 days or more
OR
(b) He has been in India for at least 120 days in the previous year & 365 days or
more during the 4 years immediately preceding the previous year.
If such individual satisfies any one of the conditions mentioned above, he is a resident,
otherwise the individual is a non-resident.
If such person are resident, whether they are ordinary resident or not ordinary
resident?
A citizen of India, or a person of Indian origin, having total income, other than the income from
foreign sources, exceeding `15 lacs during the previous year, as referred above, who has been
in India for a period or periods amounting in all to 120 days or more but less than 182 days
during the previous year
INCOME FROM FOREIGN SOURCES

For the purposes of this section, the expression "income from foreign sources" means
income which accrues or arises outside India
Note : Income derived from a business controlled in or a profession set up in India

is not regarded as foreign source income.
Example 2 (as per new provision)

Mr. B is an Indian citizen and living in Singapore. He comes to visit India during PY 20-21 for 130 days.
Compute his residential status and taxability income. His stay during four preceding previous year is
400 days.
Particulars Amount(`)
Income arising in India – received in Singapore 4 lacs
Income deemed to arise in India 10 lacs
Income arising in Singapore 44 lacs
Income arising in Singapore from a business 16 lacs
controlled from India
Solution (as per amended provision)

Computation of Mr. B’s total income – other than foreign sources
Income arising in Singapore -

Total income – other than foreign sources 30 lacs
Since his total income other than foreign sources exceeds `15 lacs, he will be covered under amended
provisions and his number of days of stay in India is 120 days or more and of preceding 4 years 365 days
or more. He will become resident in India during PY20-21.
Also, he will be resident but not ordinary as his stay in PY is less than 182 days.
Taxable Income = `30 lacs
Example 3 (as per new provision)

Mr. C is an Indian citizen and living in Singapore. He comes to visit India during PY 20-21 for 130 days.
400 days.
Solution (as per amended provision)
Computation of Mr. C’s total income – other than foreign sources
Total income – other than foreign sources 11 lacs
Since his total income other than foreign sources does not exceeds `15 lacs, he will not be covered under
amended provisions and his number of days of stay in India is less than 182 days. He will become non
resident in India during PY20-21.
Taxable Income = `10 lacs (2 lacs + 8 lacs)

Example 4
Mr. D is a US citizen and living in Singapore. He comes to visit India during PY 20-21 for 90 days.
400 days.
Solution
Since Mr. D is a US citizen, he is neither covered under exceptions nor under new amendment.
His number of days of stay in India is 60 days or more and of preceding 4 years 365 days or more. He
will become resident in India during PY20-21.
Also, he will be resident but not ordinary as his stay in preceding 7 years is less than 730 days.
Computation of Mr. D’s total income

Total income 35 lacs
NEW SECTION 6(1A)

AMENDMENT BY FINANCE ACT, 2020
TAX ON STATELESS PERSONS (ANTI ABUSE PROVISIONS)
Having total
income, other
Not liable to
than the income
tax in any
Indian citizen from foreign
country
sources,
exceeding Rs. 15
lacs (i.e. Indian
Income)
 In case of an individual
 being a citizen of India
 whose total income, other than the income from foreign sources, exceeds ` 15 lacs
during the previous year
 shall be deemed to be resident in India in that previous year,
 if 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.
Note: This clause will not be applicable in case of individual who is said to be resident in
India as per section 6(1)
If such person are resident, whether they are ordinary resident or not ordinary
resident?
Such individuals are always not ordinary resident.
INCOME FROM FOREIGN SOURCES

For the purposes of this section, the expression "income from foreign sources" means
income which accrues or arises outside India (except income derived from a business
controlled in or a profession set up in India).

INCOME NOT FORMING PART OF TOTAL INCOME – EXEMPT INCOME
Income of member of a Scheduled Tribe [Section 10(26)]

A member of a Scheduled Tribe residing in -
(i) any area specified in the Constitution i.e., The North Cachar Hills District, The Karbi Anglong District,
The Bodoland Territorial Areas District, Khasi Hills District, Jaintia Hills District or The Garo Hills District
or
(ii) in the States of Manipur, Tripura, Arunachal Pradesh, Mizoram and Nagaland, or
(iii) in Ladakh region of Jammu & Kashmir
is exempt from tax on his income arising or accruing –
(a) from any source in the areas or States aforesaid.
(b) by way of dividend or interest on securities.
Dividend income [Section 10(34)]

Dividend from domestic company including deemed dividend is taxable in the hands of shareholder. Therefore
section 10(34) is now inoperative.
Income from units from the Administrator of specified undertaking/ specified company/
Mutual Fund [Section 10(35)]
OLD PROVISION: NEW PROVISION
This clause provides that any income received in Such income is now taxable in the hands of unit
respect of units from the Administrator of the holder and now section 10(35) is now inoperative
specified undertaking/specified company/
Mutual Fund shall be exempt.
Now a new section 194K has also been inserted
by FA 2020 which deals with deduction of TDS on
such income
Example 5
Compute the total income of Mr. A from the following information
Salary income `500,000 (computed)
Dividend from domestic companies `200,000
Dividend from foreign companies `100,000
Income from mutual fund units `350,000
Solution
Computation of Total income of Mr. A
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Particulars Solution as per old As per new provision

provision
Salary 500,000 500,000
Dividend from domestic companies Earlier exempt u/s 10(34) 200,000
Dividend from foreign companies 100,000 100,000
Income from mutual fund units Earlier exempt u/s 10(35) 350,000
Total income 600,000 11,50,000
TAX HOLIDAY FOR UNITS ESTABLISHED IN SPECIAL ECONOMIC ZONES - SECTION 10AA
One of the condition to claim exemption under section 10AA is that the undertaking should begin
 to manufacture or produce articles or things
or
 provide any service
in any SEZ during the previous year relevant to A.Y.2006-07 or any subsequent assessment
year but not later than A.Y.2020-21 (i.e. upto 31st March 2020)
However, in case where letter of approval, required to be issued in accordance with the provisions
of the SEZ Act, 2005, has been issued on or before 31st March, 2020 and the manufacture or
production of articles or things or providing services has not begun on or before 31st March, 2020
then, the date for manufacture or production of articles or things or providing services has been
extended to 31st March, 2021 or such other date after 31st March, 2021, as notified by the Central
Government.
Example: If the SEZ unit has received the necessary approval by 31.3.2020 and begins manufacture
or production of articles or things or providing services on or before 31st March, 2021, then it would
be deemed to have begun manufacture or production of articles or things or providing services
during the A.Y. 2020-21 and would be eligible for exemption under section 10AA. [The Taxation
and Other Laws (Relaxation of Certain Provisions) Act, 2020]
Example 6
Y Ltd. furnishes you the following information for the year ended 31.3.2021:
Particulars ` (in lacs)
Total turnover of Unit A located in Special Economic Zone 100
Profit of the business of Unit A 30
Export turnover of Unit A 50
Total turnover of Unit B located in Domestic Tariff Area (DTA) 200
Profit of the business of Unit B 20
Compute deduction under section 10AA for the A.Y. 2021-22, assuming that Y Ltd. commenced
operations in SEZ and DTA in the year 2017-18.
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Solution
100% of the profit derived from export of articles or things or services is eligible for deduction under
section 10AA, as F.Y. 2020-21 falls within the first 5 years period commencing from the year of
manufacture or production of articles or things or provision of services by the Unit in SEZ.
As per section 10AA, the profit derived from export of articles or things or services shall be the
amount which bears to the profits of the business of the undertaking, being the Unit, the same
proportion as the export turnover in respect of articles or things or services bears to the total
turnover of the business carried on by the undertaking.
Deduction under section 10AA

Export Turnover of Unit A
= Profit of the business of Unit A x
Total Turnover of Unit A
= ` 30 lakhs x = ` 15 lakhs
Note – No deduction under section 10AA is allowable in respect of profits of business of Unit B
located in DTA.
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INCOME UNDER THE HEAD SALARY
Perquisite – 17(2)(vii) Employer’s Contribution to APPROVED Superannuation Fund

Old provision Amended provision
Old section 17(2)(vii) New section 17(2)(vii)
The amount or aggregate of amounts of any contribution made
Employer contribution to - in a recognised provident fund
approved superannuation - in NPS referred to in section 80CCD(1)
fund is taxable in excess - in an approved superannuation fund
of `150,000 by the employer to the account of the assessee, to the extent it exceeds ` 7,50,000
[Section 17(2)(vii)].
New section 17(2)(viia)

Any 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 recognized
provident fund or NPS or approved superannuation fund to the extent it relates to
the employer’s contribution which is included in total income in any previous year
under section 17(2)(vii) computed in prescribed manner
Example 7
Mr. Somesh has receives the following during PY20-21 from his employer
Basic Salary `500,000 pm
DA `200,000 pm (20% forming part of retirement)
Cash allowance `100,000 pm
Employer contribution to recognized provident fund 11% of basic salary
Mr. Somesh also contributes 11% to RPF
Employer also contributes `1.5 lac to approved superannuation fund
Compute Mr. Somesh’s total income for AY 21-22
Solution
Computation of Total income of Mr. Somesh AY 2021-22
Particulars Amount(`) Amount(`)
Basic salary 60,00,000
DA 24,00,000
Cash allowance 12,00,000
Employer contribution to RPF 6,60,000
Employer contribution to approved superannuation fund 1,50,000
8,10,000
Restricted to 7,50,000 7,50,000 60,000
Gross salary 96,60,000
Less: Standard deduction (50,000)

Salary Income 96,10,000

Less: 80 C – Employee contribution `6.6 lacs (11% of basic salary) (150,000)
(restricted to `150,000)
Total income 94,60,000
Perquisite – 17(2)(vi) Valuation of specified security or sweat equity shares

Tax on perquisite of EXCEPTION TO THE OLD PROVISION IS ADDED BY FINANCE ACT, 2020
specified securities and IF EMPLOYER BEING –ELIGIBLE START UP
sweat equity shares is
required to be paid in However, where such shares or securities are allotted by the current
the year of allotment. employer, being an eligible start-up, the perquisite is taxable in the year
- after the expiry of 48 months from the end of the relevant assessment
year
- in which sale of such security or share are made by the assessee
- in which the assessee ceases to be the employee of the employer
whichever is earlier.
Eligible start up – As referred in Section 80IAC
Consequential amendment in TDS sections – Sec 192 & also Sec 191
Example 8
Mr. Vivaan, an employee of X Ltd. (an eligible startup) provides the following information
Salary income ` 400,000 pm
In Nov 2019, the company granted option to Vivaan to take 10,000 shares @ `15 each.
He exercised the option on 15th Feb 2020, FMV on this date is `120 each.
The shares were allotted on 5th Apr 2020, FMV on this date is `140 each.
Compute the tax liability of Mr. Vivaan for AY 21-22
Solution
Computation of Total income of Mr. Vivaan AY 2021-22
Perquisite – Sweat equity shares of eligible start up
10,000 shares x (120-15) = ` 10,50,000 10,50,000
The tax on above perquisite will be deferred upto earliest of the
following dates:
- after the expiry of 48 months from the end of the relevant
assessment year
- in which sale of such security or share are made by the
assessee

- in which the assessee ceases to be the employee of the

employer

Tax on above A 17,76,060
Average rate of tax (17,76,060/58,00,000) x 100 30.62%
Tax on perquisite `10,50,000 x 30.62% = B 3,21,510
Tax liability C = A-B 14,54,550
Example 9
Suppose in example 8 above, Vivaan sold 5,000 of his shares on 15-12-2022 for `250 each. What will
be the tax implications
Solution
Tax consequences of Mr. Vivaan AY 2021-22
Particulars Amount (`) Amount (`)
Capital Gains
Full value of consideration (5,000 x 250) 12,50,000
Less: Cost of acquisition (being the FMV while computing the (600,000)
perquisite value) 5,000 x 120
LTCG 6,50,000
Also, tax on perquisite which was deferred earlier will now be

taxable (BUT PROPORTIONATELY – as all the shares are not sold)
3,21,510 x (5000 shares /10,000 shares) 160,755
Let’s also discuss TDS implications in case of specified security/sweat equity shares in case of
eligible startup u/s 192 with the help on an example
Example 10
Mr. Ayush, an employee of Y Ltd. (an eligible startup) provides the following information
Salary income ` 100,000 pm
In Nov 2020, the company granted option to Ayush to take 20,000 shares @ ` 50 each.
He exercised the option on 5th Feb 2021, FMV on this date is ` 200 each.
The shares were allotted on 15th March 2021, FMV on this date is `250 each.
Compute the amount of TDS required to be deducted by Y Ltd. u/s 192

Solution
Computation of Total income of Mr. Ayush AY 2021-22
Perquisite – Sweat equity shares of eligible start up
20,000 shares x (200-50) = ` 10,50,000 30,00,000
The tax on above perquisite will be deferred upto earliest of the
following dates:
- after the expiry of 48 months from the end of the relevant
assessment year
- in which sale of such security or share are made by the
assessee
- in which the assessee ceases to be the employee of the
employer

Tax on above A 10,99,800
Average rate of tax (10,99,800/41,50,000) x 100 26.50%
Tax on perquisite `30,00,000 x 26.50% = B 7,95,000
TDS to be deducted u/s 192 C = A-B 3,04,800

PROFITS & GAINS FROM BUSINESS OR PROFESSION
Section 32AD – INVESTMENT ALLOWANCE

Manufacturing industries set up in the notified backward areas of specified States to be eligible for a deduction
@15% of the actual cost of new plant & machinery acquired and installed during the previous year.
The assessee acquires and installs new plant and machinery for the purposes of the said undertaking or enterprise
during the period between 1st April, 2015 and 31st March, 2020 in the said backward areas. (Andhra Pradesh,
Bihar, Telangana and West Bengal)
OLD PROVISION w.e.f. AY 2021-22 onwards
15% of investment allowance Now no deduction
Also, additional depreciation was 35% Now additional depreciation will be like others i.e.
20%
Section 35 – SCIENTIFIC RESEARCH

Amount contributed or paid to Notified approved research association, university, college or other institution –
Section 35(1)(ii)
150% of amount contributed 100% of amount contributed
Section 35(2AA) – SCIENTIFIC RESEARCH

Section 35(2AA) provides that any sum paid by an assessee to a National Laboratory or University or Indian
Institute of Technology or a specified person for carrying out approved programmes of scientific research
approved by the prescribed authority will be eligible
Section 35(2AB) – COMPANY ENGAGED IN BUSINESS OF BIO-TECHNOLOGY OR

MANUFACTURING OF ARTICLE OR THING ETC.
Where a company engaged in the business of bio-technology or in any business of manufacture or production of
any article or thing, not being an article or thing specified in the list of the Eleventh Schedule

Example 11
Mr. A, furnishes the following particulars for the P.Y.2020-21. Compute the deduction allowable
under section 35 for A.Y.2021-22, while computing his income under the head “Profits and gains of
business or profession
Particulars `
1. Amount paid to notified approved Indian Institute of Science, Bangalore, for 1,00,000
scientific research
2. Amount paid to IIT, Delhi for an approved scientific research programme 250,000
3. Amount paid to X Ltd., a company registered in India which has as its main 4,00,000
object scientific research and development, as is approved by the prescribed
authority
4 Expenditure incurred on in-house research and development facility as
approved by the prescribed authority
(a) Revenue expenditure on scientific research 3,00,000
(b) Capital expenditure (including cost of acquisition of land ` 5,00,000) on 7,50,000
scientific research
Solution
Computation of deduction under section 35 for the A.Y.2021-22
 Indian Institute of Science 100% 100,000
 IIT, Delhi 100% 2,50,000
 X Ltd. 100% 4,00,000
Expenditure incurred on in-house research and development facility

 Revenue expenditure 100% 3,00,000
 Capital expenditure (excluding cost of acquisition of land 100% 2,50,000
`5,00,000)
Deduction allowable under section 35 13,00,000
Section 35CCC – EXPENDITURE ON AGRICULTURE EXTENSION PROJECTS

Section 35CCD – EXPENDITURE ON SKILL DEVELOPMENT PROJECT – COMPANY ASSESSEE


Section 35AD – CAPITAL EXPENDITURE OF SPECIFIED BUSINESS

INTERPRETATION: It was mandatory to claim Now Optional – Specifically mentioned in this
35AD in subsequent year also section
Section 40A(3) – CASH PAYMENT MORE THAN ` 10,000 IN A SINGLE DAY

According to section 40A(3), where the Now modes are prescribed by CBDT Notification
assessee incurs any expenditure, in respect of No. 8/2020 dated 29.01.2020
which payment or aggregate of payments
made to a person in a day otherwise than by an The prescribed electronic modes are
account payee cheque drawn on a bank or by  credit card
an account payee bank draft or use of  debit card
electronic system through bank account or  net banking
through such other prescribed electronic  IMPS (Immediate payment Service)
modes exceeds ` 10,000, such expenditure  UPI (Unified Payment Interface)
shall not be allowed as a deduction.  RTGS (Real Time Gross Settlement)
 NEFT (National Electronic Funds Transfer)
 BHIM (Bharat Interface for Money)
 Aadhar Pay
Section 43CA – STAMP DUTY VALUE OF LAND AND BUILDING TO BE TAKEN AS THE FULL
VALUE OF CONSIDERATION IN RESPECT OF TRANSFER, EVEN IF THE SAME ARE HELD BY THE
TRANSFEROR AS STOCK-IN- TRADE
If the stamp duty value does not exceed 105% If the stamp duty value does not exceed 110% of
of the consideration received or accruing then, the consideration received or accruing then, such
such consideration shall be deemed to be the consideration shall be deemed to be the full value of
full value of consideration for the purpose of consideration for the purpose of computing profits
computing profits and gains from transfer of and gains from transfer of such asset.
such asset.

Section 44AB – TAX AUDIT

For business assesse- In the conditions are satisfied then the limit shall be
Total Sales/Turnover/Gross Receipts of ` 500 Lacs instead of ` 100 Lacs
BUSINESS EXCEED ` 100 Lacs in any PY. [If BOTH of the following are satisfied]
 AGGREGATE of all amounts received, in

CASH - does NOT exceed 5% of Total
Receipts
AND
 AGGREGATE of all amounts paid, during the
year, in CASH does not exceed 5% of Total
Payments
Please note – There is no change for professionals – The turnover limit is still ` 50 lacs
TAX AUDIT REPORT SUBMISSION
Earlier tax audit report was required to be Now Audit report must be furnished atleast 1
furnished with the ROI
month prior to the due date of ROI.
For example – If due date of ROI is 31st Oct 2021, then
audit report must be submitted on or before 30th Sept
2021.
Therefore, in all the sections of Income tax Act,

where audit report must be submitted, the due date
of furnishing audit report is one month prior to the
due date of ROI
For eg. Section 10AA, Section 35AD capital exp. For

specified business, Section 35D Preliminary
expenses, Section 50B slump sale, etc.

INCOME UNDER THE HEAD CAPITAL GAINS
COST INFLATION INDEX – CII

CII of FY 20-21 = 301
COST OF ACQUISITION – IN CASE OF LAND OR BUILDING

In case of Capital Asset, being Land OR Building
In case of Capital Asset, being Land OR Building OR
OR Both, which is acquired before 1st April Both, which is acquired before 1st April 2000, the
2001, the COA will be COA will be
 Actual cost, or  Actual cost, or
 FMV as on 1-4-2001  FMV as on 1-4-2001 (But FMV should not
Whichever is higher exceed stamp value as on 1-4-2001,
provided such stamp value is available)
Whichever is higher
Please note – This amendment in only with respect to Land or building or both. This is not for other
capital assets
Example 12
Mr A has acquired a house property on 1/7/97 for ` 5 lacs. On 1/8/1999, he constructed first floor
incurring `2 lacs. On 1/11/2002, he constructed second floor incurring ` 6 lacs. On 1/12/2020, he
constructed third floor incurring `10 lacs. He sold this house on 14/2/2021 for `90 lacs. Fair market
value on 1/4/2001 was `7 lacs and stamp value was `6.9 lacs. Calculate Capital Gains.
Solution
Computation of capital gains of Mr. A - AY 2021-22
Particulars Amount (`)
Full value of consideration 90,00,000
Less: Indexed cost of acquisition (20,76,900)
690,000 x (301/100)
Less: Indexed cost of improvement (17,20,000)
600,000 x (301/105)
Less: Indexed cost of improvement (10,00,000)
10,00,000 x (301/301)
LTCG 42,03,100
Note:
1. FMV as on 1-4-2001 was `7 lacs but it should not exceed the stamp valuation i.e. `6.9 lacs
2. Expenses before 1-4-2001 shall be ignored

Section 50C – STAMP DUTY VALUE OF LAND AND BUILDING TO BE TAKEN AS THE FULL VALUE
OF CONSIDERATION IN RESPECT OF TRANSFER
If the stamp duty value does not exceed 105% If the stamp duty value does not exceed 110% of
of the consideration received or accruing then, the consideration received or accruing then, such
such consideration shall be deemed to be the consideration shall be deemed to be the full value of
full value of consideration for the purpose of consideration for the purpose of computing capital
computing capital gains from transfer of such gains from transfer of such asset.
asset.
Example 13
Mr. Roy, aged 55 years owned a Residential House in Lucknow. It was acquired by Mr. Roy on 10-10-
2006 for ` 6,00,000. He sold it for ` 72,00,000 on 4-11-2020. The stamp valuation authority of the State
fixed value of the property at ` 77,00,000. The assessee paid 2% of the sale consideration as brokerage
on the sale of the said property.
Compute the Capital Gain chargeable to tax for the Assessment Year 2021-22.
CII FY 2006-07 – 122
Solution
Computation of capital gains of Mr. Roy AY 2021-21
Full Value of consideration 72,00,000
Less: ICOA 6 lacs x 301/122 14,80,329
Expenses on transfer 2% of 72 lacs (144,000)
LTCG 55,75,671
Note :
1. Since the sale consideration is less than the stamp value, then the stamp value can be taken as
FVC. But the stamp value does not exceed 110% of the consideration i.e. 110% x 72 lacs = `79.2.
NEW SECTIONS 49(2AG) & 49(2AH) – INSERTED BY FA,2020 – SIDE POCKETING

Section Provisions
The cost of acquisition of a unit or
The cost of acquisition of a unit or units in the segregated
units in the segregated portfolio portfolio shall be the amount which bears, to the cost of
Section 49(2AG), Inserted by acquisition of a unit or units held by the assessee in the total
FA,2020 portfolio, the same proportion as the net asset value of the asset
transferred to the segregated portfolio bears to the net asset
value of the total portfolio immediately before the segregation
of portfolios.
The cost of the acquisition of the The cost of the acquisition of the original units held by the unit
original units held by the unit holder in the main portfolio shall be deemed to have been
holder in the main portfolio reduced by the amount as so arrived at under sub-section (2AG).
Section 49(2AH), Inserted by
FA,2020

INCOME FROM OTHER SOURCES
Section 56 – DIVIDEND INCOME

Dividend from Foreign Taxable in the hands of Taxable in the hands of
company shareholders shareholders
Dividend from Domestic Exempt in the hand of Now fully taxable in the hands of
company shareholder upto `10 lacs shareholder (including deemed
dividend) – Section 10(34) is
withdrawn
NOTE 1:
Any income by way of dividends received from a company, whether domestic or foreign, is taxable in
the hands of shareholder at normal rates of tax. However, dividend distributed by a domestic company
before 1.4.2020 and received by the shareholders on or after 1.4.2020 and on which tax under section
115-O, if applicable, has been paid would be exempt in the hands of the shareholders.
NOTE 2:
 Final dividend is taxable in the year when it is declared.
 Interim dividend is taxable in the year when it is received.
 Deemed dividend is taxable in the year when it is so distributed or paid by the company.
NOTE 3:
Section 57 which is related to deduction is also amended
While computing dividend income, a deduction on account of interest expense is allowed subject to
maximum limit of 20% of the gross dividend income.
NO OTHER EXPENSE APART FROM THIS INTEREST IS ALLOWED WHILE COMPUTING DIVIDEND
INCOME.
NOTE 4:
Dividend income is always assessable under IFOS.
Note 5:
Income from units of mutual funds as specified in section 10(23D) is also computed as per above
provisions

Example 14
Mrs. Shweta is getting family pension of `7,000 p.m. and has incurred `50 p.m. as bank collection
charges. She also has dividend income from domestic company of `7,00,000 and bank collection
charges are `1,000. She has long term capital gain of `3,89,000.
Compute her tax liability for assessment year 2021-22.

Solution: `
Family Pension 84,000
(7,000 x 12)
Less: Deduction u/s 57 15,000 69,000
1/3 of `84,000 or `15,000 whichever is less
Dividend income 700,000
Income under the head other sources 7,69,000
Income under the head Capital Gains
Long term capital gain 3,89,000
Total Income 11,58,000
Tax on above (77,800 + 66,300) + 4% cess 149,864
Tax on above (rounded off u/s 288B) 149,860
Note:
Bank collection charges are not allowed from family pension and dividend income
Section 56 – TAXABILITY OF GIFTS – IMMOVABLE PROPERTY

Without consideration: Inadequate consideration:
The stamp value of the property, if it exceeds ` The difference between the stamp duty value and the
50,000. consideration, if such difference is more than the
higher of ` 50,000 and 5% of consideration 10% of
consideration.

DEDUCTIONS FROM GTI
Section 80EEA – Deduction in respect of interest payable on loan taken for acquisition of
residential house property
Eligible assesse – Individual only – Resident or Non resident
Conditions for availment of deduction:
1. Housing loan must be taken from a financial institution or a housing finance company for
buying a residential house property.
2. Stamp duty value of the house property should be ` 45 lakhs or less.
3. The taxpayer should be a first-time home buyer. The taxpayer should not own any residential
house property as on the date of sanction of the loan
4. Maximum deduction – ` 150,000.
Loan sanction between 1.4.19 to 31.3.20 by a Loan sanction between 1.4.19 to 31.3.21 by a
Financial Institution Financial Institution
Section 80G – Donation in respect of certain funds

Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM Cares Fund) is added
in the list of 100% deduction
Section 80GGA – DONATION FOR SCIENTIFIC RESEARCH AND RURAL DEVELOPMENT

Any assesse who does not have income of PGBP can claim this deduction.
Quantum of deduction: 100% of donation
No deduction shall be allowed in respect of No deduction shall be allowed in respect of donation
donation of any sum exceeding ` 10,000 unless of any sum exceeding ` 2,000 unless such sum is paid
such sum is paid by any mode other than cash. by any mode other than cash.

TAX DEDUCTED AT SOURCE – TDS
Section 191(2) – Direct payment of tax, where income of the assessee includes value of
specified security or sweat equity shares allotted or transferred free of cost or at a
concessional rate to the assessee by an employer being an eligible start up
In a case where the income of the assessee includes the value of any specified security or sweat equity
shares allotted or transferred by the current employer, being an eligible start-up, free of cost or at
concessional rate to the assessee, the income-tax on such income has to be paid by the assessee within
14 days from the earliest of the following dates -
- after the expiry of 48 months from the end of the relevant assessment year; or
- from the date of the sale of such specified security or sweat equity share by the assessee; or
- from the date of the assessee ceasing to be the employee of the employer
who allotted or transferred him such specified security or sweat equity shares.
Section 192 – TDS on Salary

An employer, being an eligible start up, responsible for paying any income to the assessee by way of
perquisite being any specified security or sweat equity shares allotted or transferred free of cost or at
concessional rate to the assessee, has to deduct or pay, as the case may be, tax on the value of such
perquisite provided to its employee within 14 days from the earliest of the following dates -
- after the expiry of 48 months from the end of the relevant assessment year, or
- from the date of the sale of such specified security or sweat equity share by the assesse, or
- from the date of the assessee ceasing to be the employee of the employer who allotted such
shares
Such tax has to deducted or paid on the basis of rates in force for the financial year in which said
specified security or sweat equity share is allotted or transferred.
Section 194 – TDS on Dividend

(1) Applicability of TDS under section 194
The principal officer of a domestic company is required to deduct tax on dividend distributed or paid
by it to its resident shareholders.
The provisions of tax deduction at source under section 194, therefore, applies only to dividend
distributed or paid to resident shareholders.
(2) Rate of TDS

The rate of deduction of tax in respect of such dividend is 10%.
In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation
arising out of COVID-19 pandemic, the rate of TDS u/s 194 has been reduced from 10% to 7.5% (i.e.,
¾th of the specified rate) for the period from 14th May, 2020 to 31st March, 2021 [Section 197B].
(3) Time of tax deduction at source

The deduction of tax has to be made before making any payment by any mode in respect of any
dividend or before making any distribution or payment to a resident shareholder of any amount
deemed as dividend under section 2(22)(a)/ (b)/(c)/(d)/(e).
(4) Non-applicability of TDS under section194

(i) No tax is to deducted in case of a shareholder, being an individual, where -
(a) the dividend is paid by any mode other than cash; and
(b) the amount of such dividend or aggregate of dividend distributed or paid or likely to be
distributed or paid during the financial year by the company to such shareholder does not exceed
` 5,000.
(ii) The TDS provisions will not apply to such dividend credited or paid to LIC, GIC, subsidiaries of GIC or
any other insurer provided the shares are owned by them, or they have full beneficial interest in such
shares
Section 194A – INTEREST OTHER THAN INTEREST ON SECURITIES

Earlier the following Co-operative societies were However, a cooperative society referred to in (1)
not liable to deduct TDS to (3) is liable to deduct tax if –
1. Income paid or credited by a co-operative (i) the total sales, gross receipts or
society (other than a co-operative bank) turnover of the co-operative society
to a member thereof or to such income exceeds ` 50 crore during the
credited or paid by a co-operative society financial year immediately preceding
to any other co-operative society the financial year in which interest is
2. Interest income credited or paid in respect credited or paid; and
of deposits with primary agricultural (ii) the amount of interest or the
credit society or a primary credit society aggregate amount of interest
or a co-operative land mortgage bank or a credited or paid, or is likely to be
co-operative land development bank credited or paid, during the financial
3. Interest income credited or paid in respect year is more than ` 50,000 in case of
of deposit (other than time deposits made payee being a senior citizen and `
on or after 1.7.1995) with a co-operative 40,000, in any other case.
society engaged in carrying on the
business of banking.
INDIVIDUAL OR HUF AS TDS DEDUCTOR – common provisions

Individual or HUF are liable to deduct TDS if they Individual or HUF are liable to deduct TDS if their
are liable for Tax audit in the preceding year turnover in the preceding year exceeds `100 lacs
in case of business or `50 lacs in case of
profession.
These provisions can be referred in section 194A,

194C, 194H, 194I & 194J
Please note : These provisions will not impact section 194IA, 194IB & 194M (here is no requirement
of turnover)

194C – Minor amendment in the definition of WORK

Definition of work
Work includes –
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadcasting or
telecasting;
(c) carriage of goods or passengers by any mode of transport other than by railways;
(d) catering
(e) manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer or its associate, being a person
related to the customer in such manner as defined u/s 40A(2)(b), (i.e., the customer would be
in the place of assessee; and the associate would be the related person(s) mentioned in that
section).
It may be noted that the term “work” would include manufacturing or supplying a product according
to the requirement or specification of a customer by using material purchased from such customer or
its associate. In such a case, tax shall be deducted on the invoice value excluding the value of material
purchased from such customer or its associate, if such value is mentioned separately in the invoice.
Where the material component has not been separately mentioned in the invoice, tax shall be deducted
on the whole of the invoice value.
194J – Fees for Professional Services/ Technical Services / Royalty / Non competing fees /
Director Fees
Changes in TDS rate
Nature of payment TDS rate

Technical services (not professional services) 2%
Royalty in the nature of consideration for sale, distribution or exhibition of 2%
cinematographic films (other royalty- 10%)
Where the PAYEE is engaged only in the business of Operation of Call Centre 2%
All other cases 10%

SECTION 194K - Income in respect of units

(1) Applicability and rate of tax
Section 194K provides for deduction of tax at source @10% by any person responsible for paying to a
resident any income in respect of –
(i) units of a Mutual fund
(ii) units from Administrator of the specified undertaking
(iii) units from the specified company
In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation
arising out of COVID-19 pandemic, the rate of TDS u/s 194K has been reduced from 10% to 7.5% (i.e.,
¾th of the specified rate) for the period from 14th May, 2020 to 31st March, 2021[Section 197B].
(2) Time of deduction

The deduction is to be made at the time of credit of such sum to the account of the payee or at the time
of payment by any mode, whichever is earlier.
(3) Non-applicability of section 194K

No tax is required to be deducted if -
 the amount of such income or the aggregate of the amounts of such income credited or paid or
likely to be credited or paid during a financial year does not exceed ` 5,000
SECTION 194N - TDS on cash withdrawal

(1) Applicability and rate of TDS
Section 194N, provides that every person, being
- a banking company to which the Banking Regulation Act, 1949 applies (including any bank or
banking institution referred under section 51 of that Act)
- a co-operative society engaged in carrying on the business of banking or
- a post office
who is responsible for paying, in cash, any sum or aggregate of sums exceeding ` 1 crore during the
previous year to any person from one or more accounts maintained by such recipient-person with it,
shall deduct tax at source @2% of sum

This deduction is to be made at the time of payment of such sum.
(3) Modification in rate of TDS and threshold limit of withdrawal for recipient
who has not furnished return of income for last 3 years (w.e.f., 1st July, 2020)
If the recipient has not furnished the returns of income for all the three assessment years relevant to
the three previous years, for which the time limit of file return of income under section 139(1) has
expired, immediately preceding the previous year in which the payment of the sum is made, the sum

shall mean the amount or the aggregate of amounts, as the case may be, in cash > ` 20 lakhs
during the previous year, and the tax shall be deducted at the rate of –
- 2% of the sum, where the amount or aggregate of amounts, as the case may be, being paid in
cash > ` 20 lakhs but ≤ ` 1 crore
- 5% of the sum, where the amount or aggregate of amounts, as the case may be, being paid in
cash > ` 1 crore.
However, the Central Government is empowered to specify, with the consultation of RBI, by notification,
the recipient in whose case this provision shall not apply or apply at reduced rate, subject to the
satisfaction of the conditions specified in such notification.
(4) Non-applicability of TDS under section 194N

Liability to deduct tax at source under section 194N shall not be applicable to any payment made to –
- the Government
- any banking company or co-operative society engaged in carrying on the business of banking or a
post-office
- any business correspondent of a banking company or co-operative society engaged in
carrying on the business of banking, in accordance with the RBI guidelines
- any white label ATM operator of a banking company or co-operative society engaged in carrying
on the business of banking, in accordance with the authorisation issued by the RBI under the
Payment and Settlement Systems Act, 2007
- such other person or class of persons notified by the Central Government in consultation
with the RBI. Accordingly, the Central Government has, after consultation with the
Reserve Bank of India (RBI), specified –
a. Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated
Teller Machine Operators (WLATMO’s)
b. Commission agent or trader, operating under Agriculture Produce Market Committee
(APMC), and registered under any Law relating to Agriculture Produce Market
c. Full-Fledged Money Changer (FFMC) licensed by the RBI and its franchise agent
SECTION 194O
Certain payment by e-commerce operator to e-commerce
participant
(1) Applicability and rate of TDS
Notwithstanding anything to the contrary contained in any of the provisions of this Chapter,
section 194-O provides that where sale of goods or provision of services of an e-commerce
participant is facilitated by an e-commerce operator through its digital or electronic facility or
platform, such e-commerce operator is liable to deduct tax at source @1% of the gross amount
of such sales or services or both.
In order to provide more funds at the disposal of the taxpayers for dealing with the economic
situation arising out of COVID-19 pandemic, the rate of TDS u/s 194-O for the period upto
31.3.2021 has been reduced from 1% to 0.75% (i.e., ¾th of the specified rate) [Section 197B].

The deduction is to be made at the time of credit of amount of such sale or services or both to
the account an e-commerce participant or at the time of payment thereof to such e-commerce
participant by any mode, whichever is earlier.
(3) Deemed credit

Any payment made by a purchaser of goods or recipient of services directly to an e-commerce
participant for the sale of goods or provision of services or both, facilitated by an e-commerce
operator, would be deemed to be amount credited or paid by the e-commerce operator to the e-
commerce participant. Accordingly, such payment would be included in the gross amount of such
sales or services for the purpose of deduction of income-tax under this section.
(4) Non-applicability of TDS under section 194-O

No tax is required to be deducted under section 194-O in case of any sum credited or paid to an
e-commerce participant, being an individual or HUF, where the gross amount of such sale or
services or both during the previous year does not exceed ` 5 lakh and such e-commerce
participant has furnished his PAN/ Aadhaar number to e-commerce operator.
(5) Non-applicability of TDS under any other section

A transaction in respect of which tax has been deducted by the e-commerce operator under this
section or which is not liable to tax deduction under this section on account of the exemption
discussed in point (4) above, would not be liable to tax deduction at source under any other
provision of Chapter XVII-B of the Act.
However, this exemption from TDS under Chapter XVII-B would not apply to any amount or
aggregate of amounts received or receivable by an e-commerce operator for hosting
advertisements or providing any other services which are not in connection with the sale of
goods or services referred to in point (1) above.
(6) Power of CBDT to issue guidelines

In case any difficulty arises in giving effect to the provisions of this section, the CBDT may issue
guidelines for the purpose of removing the difficulty with the approval of the Central
Government.
Every guideline issued by the CBDT shall be laid before each House of Parliament, and shall be
binding on the income-tax authorities and on the e-commerce operator.
(7) Person responsible for paying

For the purpose of this section, e-commerce operator shall be deemed to be the person
responsible for paying to e-commerce participant.
As per section 206AA, if the person receiving the payment has not submitted PAN, TDS shall be at the
applicable rate or 5%, whichever is higher. (ONLY IN CASE OF 194O)

197B – Lower deduction in certain cases for a limited period

In case the provisions of sections
 193
 194,
 194A
 194C
 194D
 194DA
 194EE
 194G
 194H
 194-I
 194-IA
 194-IB
 194-IC
 194J
 194K
 194LA
 194M
 194-O
require deduction of tax at source during the period commencing from the 14th day of May, 2020 to the 31st day of
March, 2021, then notwithstanding anything contained in these sections the deduction of tax shall be made at the rate
being the three-fourth of the rate specified in these sections

TAX COLLECTED AT SOURCE – TCS
The specified percentage for collection of tax at source is as follows:

GOODS TCS RATE(%) From 14.5.2020
to 31.3.2021
a. Alcoholic liquor for Human Consumption 1% 1%
b. Scrap 1% 0.75%
c. Minerals, being coal, lignite or iron ore 1% 0.75%
d. Timber 2.5% 1.875%

e. Any forest produce, not being timber or 2.5% 1.875%
Tendu Leaves
f. Tendu Leaves 5% 3.75%
Collection of tax by every person who grants a lease or a licence or
2%
enters into a contract or otherwise, transfers any right or interest in
any
-parking lot or
-toll plaza or
-a mine or a quarry
to another person (other than a public sector company) for the use
of such parking lot or toll plaza or mine or quarry for the
1.5%
purposes of business.

Overseas remittance or an overseas tour package
[w.e.f. 1.10.2020]
Section 206C(IG) provides for collection of tax by every person,
- being an authorized dealer, who receives amount, under the Liberalised Remittance
Scheme of the RBI, for overseas remittance from a buyer, being a person remitting such
amount out of India;
- being a seller of an overseas tour programme package who receives any amount
from the buyer who purchases the package
at the rate of 5% of such amount.
Tax has to be collected at the time of debiting the amount payable by the buyer or at the time of receipt
of such amount from the said buyer, by any mode, whichever is earlier.
Rate of TCS in case of collection by an authorized dealer

Amount and purpose of remittance Rate of TCS
1. (a) Where the amount is remitted for a purpose other than purchase Nil
of overseas tour programme package; and (No tax to be
(b) the amount or aggregate of the amounts being remitted by a buyer collected at source)
is less than ` 7 lakhs in a financial year
2. (a) where the amount is remitted for a purpose other than purchase of 5% of the amt or
overseas tour programme package; and agg. of amts in
(b) the amount or aggregate of the amounts in excess of ` 7 lakhs is excess of ` 7 lakh
remitted by the buyer in a financial year
3. (a) where the amount being remitted out is a loan obtained from any 0.5% of the amt or
financial institution, for the purpose of pursuing any education; and agg. of amts in
(b) the amount or aggregate of the amounts in excess of ` 7 lakhs is excess of ` 7 lakh
remitted by the buyer in a financial year
Cases where no tax is to be collected

 No TCS by the authorized dealer on an amount in respect of which the sum has been
collected by the seller
 No TCS, if the buyer is liable to deduct tax at source under any other provision of the Act
and has deducted such tax
 No TCS, if the buyer is the Central Government, a State Government, an embassy, a High
Commission, a legation, a commission, a consulate, the trade representation of a foreign
State, a local authority or any other person notified by the Central Government, subject to
fulfillment of conditions stipulated thereunder
Overseas tour program package

Any tour package which offers visit to a country/(ies) or territory/(ies) outside India. It
includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of
similar nature or in relation thereto.

Sale of goods of value exceeding ` 50 lakh
[w.e.f. 1.10.2020]
(a) As per section 206C(1H), tax is also required to be collected by a seller, who receives any
amount as consideration for sale of goods of the value or aggregate of such value exceeding
` 50 lakhs in a previous year [other than exported goods or goods covered under sub-
sections (1)/(1F)/(1G) i.e. alcohol, tendu leaves, timber, scrap, minerals, motor cars and
overseas remittance]
(b) Tax is to be collected at source @0.1% u/s 206C(1H) of the sale consideration exceeding `
50 lakhs, at the time of receipt of consideration.
In order to provide more funds at the disposal of the taxpayers for dealing with the economic
situation arising out of COVID-19 pandemic, the rate of TCS u/s 206C(1H) has been reduced
from 0.1% to 0.075% (i.e., ¾th of the specified rate) for the period upto 31st March, 2021
(c) Tax is, however, not required to be collected if the buyer is liable to deduct tax at source
under any other provision of the Act on the goods purchased by him from the seller and has
deducted such tax.
(d) In case of non-furnishing of PAN or Aadhar number by the buyer to the seller, tax is required
to be collected at the higher of –
(i) twice the rate specified in this sub-section; and
(ii) 1%.
Meaning of seller Meaning of buyer

A person whose total sales, gross receipts or A person who purchases any goods but does not
turnover from the business carried on by him include –
exceed ` 10 crores during the financial year (A) the Central Government, a State
immediately preceding the financial year in Government, an embassy, a High
which sale of goods is carried out. Commission, legation, commission,
consulate and the trade representation
However, seller does not include a person as of a foreign State, or
notified by the Central Government for this
purpose, subject to fulfillment of conditions (B) a local authority or
stipulated
(C) a person importing goods into India or
[Clause (b) of Explanation to section 206C(1H)] any other person as the Central
Government may, by notification in the
Official Gazette, specify for this purpose,
subject to stipulated conditions.

RETURN OF INCOME
Section 139(1) COMPULSORY FILING OF RETURN OF INCOME

ROI under this section must be filed on or before the due date
‘Due date’ means -
(i) 31st October of the assessment year, where the assessee, other than an assessee referred
to in (ii) below, is -
(a) a company,
(b) a person (other than a company) whose accounts are required to be audited under the
Income-tax Act, 1961 or any other law for the time being in force; or
(c) a partner of a firm whose accounts are required to be audited under the Income-tax
Act, 1961 or any other law for the time being in force.
(ii) 30th November of the assessment year, in the case of an assessee who is required to
furnish a report referred to in section 92E.
(iii) 31st July of the assessment year, in the case of any other assessee.
Section 139AA QUOTING OF AADHAR NUMBER

Every person who is eligible to obtain Aadhar Number is required to mandatorily quote Aadhar
Number, on or after 1st July, 2017:
(a) in the application form for allotment of Permanent Account Number (PAN)
(b) in the return of income
Consequences of failure to intimate Aadhar Number
If a person fails to intimate the Aadhar Number, the permanent account Number (PAN) allotted to such
person shall be made inoperative after the date so notified in the prescribed manner.
Accordingly, Rule 114AAA specifies the manner of making permanent account number inoperative.
I) on failure to intimate aadhaar number by 31st March 2021, PAN of such person will be
inoperative immediately after the said date for furnishing/intimating/quoting under the
income tax act
II) accordingly, where such person, whose PAN has become inoperative, is required to
furnish/intimate/ quote his PAN under this Act, he will be deemed to have defaulted and
will have to bear the consequences
III) subsequently, when such person furnishes his Aadhar number, his PAN will become
operative from such date of intimation.
IV) the Principal DGIT(systems) or DGIT(systems) has to specify the formats and standards
along with the procedure for verifying the operational status of pan under rule 114AAA.

SURCHARGE
Individual/HUF/AOP/BOI/Artificial juridical person

Particulars Rate of Remarks
surcharge
If Total income is more than `50 lacs but upto `1 cr 10% Surcharge on dividend
income/111A/112A is 10%
If Total income is more than `1 cr but upto `2 cr 15% Surcharge on dividend
income/111A/112A is 15%
If Total income (excluding Dividend/111A/112A) is 25% Surcharge on dividend
more than `2 cr but upto `5 cr income/111A/112A is 15%
If Total income (excluding Dividend/111A/112A) is 37% Surcharge on dividend
more than `5 cr income/111A/112A is 15%
Note : Where total income (including dividend income and capital gains chargeable to tax u/s
111A and 112A) is more than ` 2 crore in cases not covered above – Surcharge rate will be
15%.
For eg. Mr. Amit has the following income during the PY
PGBP - `1 cr
111A - `2 cr
112A – `5 cr
Dividend - `6 cr
Total income `14 cr
Applicable rate of surcharge will be 15%
Illustration 1
Mr. A has the following income during the previous year. Compute the tax liability
Particulars Amount
PGBP ` 90 lacs
Solution
Total income `90 lacs
Tax at slab rates on `90 lacs 25,12,500
Add: Surcharge @ 10% 2,51,250
27,63,750
Add: 4% Cess 1,10,550

28,74,300
Illustration 2
Mr. B has the following income during the previous year. Compute the tax liability
Particulars Amount
PGBP ` 80 lacs
LTCG ` 60 lacs (including `25 lacs from 112A)
Solution
Tax on LTCG (other than 112A) `35 lacs @ 20% 7,00,000
Tax on LTCG -112A ( `25-1) lacs @ 10% 2,40,000
31,52,500
36,25,375
Add: 4% Cess 1,45,015
Tax liability 37,70,390
Illustration 3
Mr. C has the following income during the previous year. Compute the tax liability
Particulars Amount
PGBP ` 80 lacs
STCG – 111A `400 lacs
Solution
Tax on LTCG -112A ( `25-1) lacs @ 10% 2,40,000
Tax on 111A `400 lacs @15% 60,00,000
91,52,500
Add: Surcharge @ 15% (Although total income is more than ` 5 crore, but 13,72,875
income other than dividend, 111A & 112A is less than `2 cr.
105,25,375
Add: 4% Cess 4,21,015

Illustration 4
Mr. D has the following income during the previous year. Compute the tax liability
Particulars Amount
PGBP ` 400 lacs
STCG – 111A `400 lacs
Solution
Tax at slab rates on `400 lacs 1,18,12,500
Tax on LTCG -112A ( `25-1) lacs @ 10% 2,40,000
Tax on 111A `400 lacs @15% 60,00,000
187,52,500
Add: Surcharge @ 25% on (1,18,12,500 + 700,000) = ` 31,28,125
@ 15% on (240,000 + 60,00,000) = ` 936,000 40,64,125
228,16,625
Add: 4% Cess 9,12,665
Marginal relief
The purpose of marginal relief is to ensure that the increase in amount of tax payable (including
surcharge) due to increase in total income of an assessee beyond the prescribed limit should not exceed
the amount of increase in total income.
Illustration 5
Compute the tax liability of Mr. E (aged 42), having total income of ` 51 lakhs for the Assessment Year
2021-22.
Solution
Total income ` 51 lacs
14,76,750
Less: Marginal relief (if any)

Tax on `50 lacs `13,12,500

Add: Excess income above `50 lacs 100,000
14,12,500
Excess tax will be the marginal relief (14,76,750 –14,12,500) (64,250)
14,12,500
Add: 4% Cess 56,500
Illustration 6
Compute the tax liability of Mr. F (aged 42), having total income of ` 101 lakhs for the Assessment
Year 2021-22.
Solution
32,68,875
Tax on `100 lacs plus 10% surcharge `30,93,750
31,93,750
Excess tax will be the marginal relief (32,68,875 –31,93,750) 75,125
31,93,750
Add: 4% Cess 127,750
Illustration 7
Compute the tax liability of Mr. G (aged 55), having total income of ` 108 lakhs for the Assessment
Year 2021-22.
Solution
35,10,375
38,93,750
Since there is no excess tax, there will be no marginal relief -
35,10,375

Add: 4% Cess 140,415

Illustration 8
Compute the tax liability of Mr. H (aged 41), having total income of ` 201 lakhs for the Assessment
Year 2021-22.
Solution
73,03,125
67,84,375
Excess tax will be the marginal relief (73,03,125 - 67,84,375) 5,18,750
67,84,375
Add: 4% Cess 2,71,375
Illustration 9
Compute the tax liability of Mr. I (aged 55), having total income of ` 210 lakhs for the Assessment
Year 2021-22.
Solution
76,40,625
Add: Excess income above `200 lacs 10,00,000
76,84,375
Since there is no excess tax, there will be no marginal relief -
76,40,625
Add: 4% Cess 3,05,625

Firm/Limited Liability Partnership/Local Authority/Co-operative society

Particulars Rate of surcharge
If total income is upto `1 cr Nil
If total income is more than `1 cr 10%
Marginal relief is also applicable, if any
Domestic company
Domestic companies
 Flat Tax rate = 30% (25% where the turnover is not more than `400 cr in PY 18-19
 Surcharge rates
If the total income is upto `1 cr If the total income is more than If the total income is more than
`1 cr but upto `10 cr `10 cr
Nil 7% 12%
* Domestic companies opting for Section 115BAA

 Flat Tax rate = 22%
 Surcharge rates = 10% irrespective of income i.e. surcharge is mandatory, hence no marginal
relief
*Domestic manufacturing companies opting for Section 115BAB

 Surcharge rates = 10% irrespective of income i.e. surcharge is mandatory, hence no marginal
relief
Domestic company can opt for section 115BAA or section 115BAB, as the case may be, subject to certain
conditions. The total income of such companies would be computed without giving effect to deductions
under section 10AA, 32AD, 33AB, 33ABA, 35AD, 35CCC, 35CCD, 80-IA to 80RRB (except section 80JJAA or
section 80M), additional depreciation under section 32(1)(iia) etc. and without set-off of brought
forward loss and unabsorbed depreciation attributable to such deductions.
Foreign company
 Surcharge rates
If the total income is upto `1 cr If the total income is more than If the total income is more than
`1 cr but upto `10 cr `10 cr
Nil 2% 5%

ALTERNATIVE TAX REGIME FOR INDIVIDUAL & HUF- SECTION 115BAC

1. Optional scheme: It is an optional method to pay tax (only on normal income) PLEASE NOTE SPECIAL INCOME IS
TAXABLE AT RESPECTIVE SPECIAL RATES ONLY I.E. LTCG – 20% | 111A – 15% | 112A – 10% | CASUAL INCOME – 30%
2. Eligible assesse : Individual or HUF
3. Alternative rate of tax is as follows:

Income Rate of tax
Upto ` 2.5 lacs Nil
` 2.5 lacs to ` 5 lacs 5%
` 5 lacs to ` 7.5 lacs 10%
` 7.5 lacs to ` 10 lacs 15%
` 10 lacs to ` 12.5 lacs 20%
` 12.5 lacs to ` 15 lacs 25%
More than ` 15 lacs 30%
4. Conditions to be satisfied to opt this scheme – The individual or HUF has to fulfill broadly these 3
conditions
a. Certain deductions/ exemptions will not be available
b. Certain losses are not allowed to be set-off or carry forward
c. Restriction on depreciation
5. Time limit for exercise of option
In case of an individual or HUF having no income In case of an individual or HUF having income
from business or profession from business or profession
Where such individual or HUF has no business The option has to be exercised on or before the
income, the option has to be exercised along with due date specified under section 139(1) for
the return of income to be furnished under section furnishing the return of income for any previous
139(1) for a previous year relevant to the year relevant to assessment year 2021-22 or any
assessment year. In effect, such individual or HUF later assessment year and once such option is
can choose whether or not to exercise the option exercised, it would apply to subsequent
in each previous year. He may choose to exercise assessment years.
the option in one year and not to exercise the
option in another year. The option can be withdrawn only once where it
was exercised by the individual or HUF having
business income for a previous year other than the
year in which it was exercised. Thereafter, the
individual or HUF shall never be eligible to exercise
option under this section, except where such
individual or HUF ceases to have any business
income.

6. Consequences for failure to satisfy conditions mentioned in section 115BAC(2): The following
are the consequences for failure to satisfy the conditions mentioned above
In case of an individual or HUF having no income In case of an individual or HUF having income
from business or profession from business or profession
On failure to satisfy the conditions mentioned in On failure to satisfy the conditions mentioned in
point no.4 above in any previous year, the option point no. 4 above in any previous year, the option
exercised would be invalid in respect of the exercised would be invalid in respect of the
assessment year relevant to that previous year. assessment year relevant to that previous year
Consequently, the other provisions of the Income- and subsequent assessment years.
tax Act, 1961 would apply as if the option had not
been exercised for the assessment year relevant Consequently, the other provisions of the Income-
to that previous year. tax Act, 1961 would apply to the person as if the
option had not been exercised for the assessment
year relevant to that previous year and
subsequent assessment years
7. AMT liability not attracted: Individuals or HUFs exercising option u/s 115BAC are not liable to
alternate minimum tax u/s 115JC.
8. Rebate, surcharge & cess will be apply as per normal provision
DEDUCTIONS NOT ALLOWED WHILE COMPUTING TAX AS PER NEW SCHEME

S.No. Particulars
a. Certain deductions/exemptions not allowable: Section 115BAC(2) provides that while
computing total income, the following deductions/exemptions would not be allowed, if an
individual or HUF opts for concessional rates of taxes under section 115BAC(1):
Section Exemption/Deduction
10(5) Leave travel concession
10(13A) House rent allowance
10(14) Exemption in respect of special allowances or benefit to meet expenses
relating to duties or personal expenses (other than those as may be
prescribed for this purpose)
Only the following allowances will be exempt
 Transport allowance for physically handicapped
 Conveyance allowance & Travelling allowance for official purpose
 Daily allowance provided to the employee to meet his routine expenses,
while he is away from his normal place of duty.
10(17) Daily allowance or constituency allowance of MPs and MLAs
10(32) Exemption in respect of income of minor child included in the income of
parent
10AA Tax holiday for units established in SEZ
16 (i) Standard deduction under the head “Salaries”
(ii) Entertainment allowance

(iii) Professional tax

24(b) Interest on loan in respect of self-occupied property
32(1)(iia) Additional depreciation
35(1)(ii),(iia),(iii) Deduction in respect of contribution to
or 35(2AA) - notified approved research association/ university/college/other
institutions for scientific research [Section 35(1)(ii)]
- approved Indian company for scientific research [Section 35(1)(iia)]
- notified approved research association/ university/college/other
institutions for research in social science or statistical research [Section
35(1)(iii)]
- An approved National laboratory/university/ IIT/ specified person for
scientific research undertaken under an approved programme [Section
35(2AA)]
35AD Investment linked tax incentives for specified businesses
35CCC Deduction in respect of expenditure incurred on notified agricultural
project
57(iia) Deduction in respect of family pension
80C to 80U Deductions under Chapter VI-A (other than employers contribution
towards NPS under section 80CCD(2) and deduction in respect of
employment of new employees under section 80JJAA).
b. Certain losses not allowed to be set-off: While computing total income, set-off of any loss
–
(i) carried forward or depreciation from any earlier assessment year, if such loss or
depreciation is attributable to any of the deductions referred to in (a) above; or
(ii) under the head house property with any other head of income; would not be allowed.
c. Depreciation or additional depreciation: Depreciation u/s 32 is to be determined in the

prescribed manner. Depreciation in respect of any block of assets entitled to more than 40%,
would be restricted to 40% on the written down value of such block of assets.
Additional depreciation u/s 32(1)(iia), however, cannot be claimed
Additional points:
1. In case of an individual or HUF opting for section 115BAC, total income should be computed without
set-off of any loss brought forward or depreciation from any earlier assessment year, where such
loss or depreciation is attributable to any of the deductions listed in (a) above [Such loss and
depreciation would be deemed to have been already given effect to and no further deduction
for such loss or depreciation shall be allowed for any subsequent year]
2. Where there is a depreciation allowance in respect of a block of asset from an earlier assessment
year attributable to additional depreciation u/s 32(1)(iia), which has not been given full effect to
prior to A.Y. 2021-22 and which is not allowed to be set-off in the A.Y.2021-22 due to exercise of
option u/s 115BAC from that year, corresponding adjustment shall be made to the WDV of such
block of assets as on 1.4.2020 in the prescribed manner i.e., the WDV as on 1.4.2020 will be
increased by the unabsorbed additional depreciation not allowed to be set-off.

Example
Compute the tax liability of Mr. Somesh for AY20-21 as per both the provisions i.e. normal and 115BAC
from the following particulars:
1. Amount received from his employer
Basic salary `250,000 pm
DA 10% of basic salary
Daily allowance `5,000 pm
Children education allowance `500 pm per child for 1 child
Leave travel concession `250,000
 He and his employer both contributes ` 30,000 pm each under New pension scheme.
 Somesh paid `1500 as professional tax to the state government
 Leave travel concession is exempt upto `150,000 u/s 10(5)
2. He also furnishes the following information regarding his house property income
House property Amount in `
House in Delhi (self occupied) (`150,000)
House in Agra (let out) `220,000
House in Mathura(let out) (`250,000)
3. His PGBP income is ` 15 lacs (after additional depn `1 lacs and contribution to IIT - `2 lac)
4. His minor child income from investment is `4,000
5. Somesh paid `60,000 as tution fess of his child
6. He also donated `50,000 in PM Cares Fund
Solution
Computation of total income & tax liability of Mr. Somesh for AY2021-22
As per normal provisions As per new system – Sec 115BAC
Basic salary (2.5 lacs x 12) 30,00,000 30,00,000
DA 300,000 300,000
Daily allowance Exempt Exempt
Children education (500-100) x 12 4,800 500 x 12 6,000
allowance
Leave travel concession (250,000-150,000) 100,000 Taxable 250,000
Employer contribution to 30,000 x 12 360,000 360,000
NPS
Gross salary 37,64,800 39,16,000
Less: Deduction u/s 16
Standard deduction (50,000) N.A.
Professional tax (1,500) N.A.
Income under the head 37,13,300 39,16,000
salary
Income under the head 2.2lacs – 2.5 lacs - (1,80,000) Loss of Delhi house will Nil
House property 1.5 lacs = 1.8 lacs not be allowed.
loss
Let out HP 2.2 lacs -2.5
lacs = 30,000 loss will

not be set off from

other head
PGBP income 15,00,000 15lacs +1 lac +2 lacs 18,00,000
IFOS
Minor child income `4,000 – 1,500 `2,500 4,000
Gross total income 50,35,800 57,20,000

Less: Deduction u/s 80C to
80U
80C Tuition fees 60,000 N.A.
80CCD(1) `360,000 but 90,000 N.A.
restricted to
(`150,000-60,000)
80CCD(1B) `360,000-90,000 = 50,000 N.A.
270,000 but limited
to `50,000
80CCD(2) `360,000 but limited 300,000 300,000
to 10% of salary
80G 50,000 N.A.
Total income 44,85,800 54,20,000

Tax on total income
Upto `250,000 Nil Upto `250,000 Nil
Next `250,000 12,500 Next `250,000 @5% 12,500
Next `50,0000@20% 100,000 Next `250,000 @10% 25,000
Next `34,85,800@30% 10,45,740 Next `250,000 @15% 37,500
Next `250,000 @20% 50,000
Next `250,000 @25% 62,500
Next 39,20,000@30% 11,76,000
11,58,240 13,63,500
Add: Surcharge N.A. Surcharge@ 10% 136,350
11,58,240 14,99,850
Less: Marginal relief, if
any
Tax on `50 lacs = N.A.
12,37,500
+ Excess income over `50
lacs i.e. 420,000 =
16,57,500
14,99,850
Add: 4% Health & 46,329.6 59,994
education cess
12,04,569.60 15,59,844
Tax liability (rounded u/s 12,04,570.00 15,59,840.00
288B)
Conclusion : Normal provision are more beneficial to Mr. Somesh

Income Tax Amendment - 2021 by CA Rajat Mogha

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CA RAJAT MOGHA AMENDMENTS FOR 2021 EXAMS P a g e |1

2|P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Ordinary resident Not ordinary Non-resident

2 Income received or deemed to be

3 Income which accrues or arises

4 Income which accrues or arises Taxable Non – Taxable Non – Taxable

RESIDENTIAL STATUS OF INDIVIDUALS

(1) Indian citizens, who leave India in any previous year

* A person is said to be of Indian origin if he or either of his parents or either of his

Example 1 (as per old provision)

Solution (as per old provision)

AMENDMENT BY FINANCE ACT, 2020

Having total income, other

4|P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

INCOME FROM FOREIGN SOURCES

Note : Income derived from a business controlled in or a profession set up in India

Example 2 (as per new provision)

Solution (as per amended provision)

Income arising in Singapore -

Example 3 (as per new provision)

6|P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Computation of Mr. D’s total income

NEW SECTION 6(1A)

INCOME FROM FOREIGN SOURCES

8|P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

INCOME NOT FORMING PART OF TOTAL INCOME – EXEMPT INCOME

Income of member of a Scheduled Tribe [Section 10(26)]

Dividend income [Section 10(34)]

Particulars Solution as per old As per new provision

10 | P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Deduction under section 10AA

rajatmogha.com 96906 91957 AMENDMENTS FOR CA INTER- FOR 2021 EXAMS 11 | P a g e

INCOME UNDER THE HEAD SALARY

Perquisite – 17(2)(vii) Employer’s Contribution to APPROVED Superannuation Fund

New section 17(2)(viia)

12 | P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Salary Income 96,10,000

Perquisite – 17(2)(vi) Valuation of specified security or sweat equity shares

Eligible start up – As referred in Section 80IAC

rajatmogha.com 96906 91957 AMENDMENTS FOR CA INTER- FOR 2021 EXAMS 13 | P a g e

- in which the assessee ceases to be the employee of the

Gross salary 58,50,000

Also, tax on perquisite which was deferred earlier will now be

14 | P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Gross salary 42,00,000

rajatmogha.com 96906 91957 AMENDMENTS FOR CA INTER- FOR 2021 EXAMS 15 | P a g e

PROFITS & GAINS FROM BUSINESS OR PROFESSION

Section 32AD – INVESTMENT ALLOWANCE

Section 35 – SCIENTIFIC RESEARCH

Section 35(2AA) – SCIENTIFIC RESEARCH

Section 35(2AB) – COMPANY ENGAGED IN BUSINESS OF BIO-TECHNOLOGY OR

16 | P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Expenditure incurred on in-house research and development facility

Section 35CCC – EXPENDITURE ON AGRICULTURE EXTENSION PROJECTS

Section 35CCD – EXPENDITURE ON SKILL DEVELOPMENT PROJECT – COMPANY ASSESSEE

rajatmogha.com 96906 91957 AMENDMENTS FOR CA INTER- FOR 2021 EXAMS 17 | P a g e

Section 35AD – CAPITAL EXPENDITURE OF SPECIFIED BUSINESS

Section 40A(3) – CASH PAYMENT MORE THAN ` 10,000 IN A SINGLE DAY

18 | P a g e rajatmogha.com 96906 91957 AMENDMENTS FOR 2021 EXAMS

Section 44AB – TAX AUDIT

 AGGREGATE of all amounts received, in

Therefore, in all the sections of Income tax Act,