Chapter 1

CHAPTER 1
COMPUTATION OF
TOTAL INCOME &
TAX LIABILITY
Section Subject Matter
Section 2(7) Definition of ‘Assessee’
Section 2(9) Definition of ‘Assessment Year’
Section 2(24)(ix) Meaning of ‘Casual Income’
Section 2(31) Definition of ‘Person’
Section 3 Concept of ‘Previous Year’
Section 87A Rebate of maximum Rs 12,500 to a resident individual
Section 111A STCG taxable @ 15% where STT has been paid
Section 112 LTCG taxable @ 20%
Section 112A LTCG taxable @ 10% where STT has been paid
Section 115BB Casual income taxable @ 30%
Section 288A Rounding off of total income
Section 288B Rounding off of tax liability

COMPUTATION OF TAX LIABILITY By: CA Vijender Aggarwal 1.1
COMPUTATION OF
CHAPTER 1 TOTAL INCOME AND
TAX LIABILITY
BASIC CONCEPTS OF INCOME TAX

Constitutional • The power to levy income tax is available with the Central Government vide Entry 82
Provisions of the Union List of the Seventh Schedule to the Constitution of India.
• Entry 82 reads as “Taxes on income other than agricultural income”.
Sources of An understanding of the income tax law requires a combined study of the following:
Income Tax
1) The Income Tax Act, 1961:
Law
The provisions of income tax are contained in the Income Tax Act, 1961 which extends
to the whole of India. The Income Tax Act contains the provisions for determination
of taxable income, determination of tax liability, procedure for assessment, appeals,
penalties and prosecutions.
2) Annual Finance Act:

The Finance Minister of India annually presents the Budget (ie the Finance Bill) for
the next financial year before the Parliament of India. The Finance Bill ultimately
becomes the Finance Act after being passed by both the Houses of the Parliament and
after receiving the assent of the President of India. The Annual Finance Act contains
the tax rates in respect of each assessment year.
3) The Income Tax Rules, 1962:

Rules are framed by the Central Government for carrying out the provisions of the
Act. Rules cannot override the provisions contained in the Act.
4) Notifications:
Notifications are issued by the Central Government or the Central Board of Direct
Taxes (‘CBDT’) to deal with any other matter which the Central Government may think
would facilitate the governance of income tax in India.
5) Circulars & Clarifications:

The CBDT has been issuing certain circulars and clarifications from time to time,
which have to be followed and applied by the income tax authorities. A circular or
clarification is issued by the CBDT to serve as a guideline for the officials to
implement the provisions of the income tax law.
6) Judgements given by Courts:

It is not possible for the lawmakers to conceive and provide for all possible issues that
may arise in the implementation of any Act. Hence, the judiciary hears the disputes
between the assessees and the Department and gives decisions on various issues. The
Supreme Court is the Apex Court of the country and the law laid down by the Supreme
Court becomes the law of the land. The decisions given by various High Courts apply in
the respective States in which such High Courts have jurisdiction.
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DEFINITIONS/MEANING OF VARIOUS TERMS
Assessee – General Meaning: Assessee means a person by whom any tax or any other sum is payable
Section 2(7) under the Income Tax Act, 1961. (Any other sum would normally include interest, penalty,
fines, etc)
Specific Inclusions: The followings persons have also been specifically included under the
definition of ‘assessee’:
• Every person in respect of whom any proceeding has been taken under the Income Tax
Act, 1961 for the assessment of:
❑ his income; or
❑ the income of any other person in respect of which he is assessable; or
❑ the loss sustained by him or by such other person; or
❑ the amount of refund due to him or such other person.
• Every person who is deemed to be an assessee under the Income Tax Act, 1961.
Example: Representative assessee, legal representative, executor, administrator, etc
• Every person who is deemed to be an assessee in default under any provision of the
Income Tax Act. Example: Failure of a person to deduct TDS/collect TCS.
Person – Person includes:

Section 2(31) (i) an individual (ie a natural human being);
(ii) a Hindu Undivided Family (‘HUF’) (The meaning of HUF has not been given under
the tax laws. As per the Hindu law, it means a family which consists of all persons
lineally descended from a common ancestor including their wives and daughters.
Married daughters are no longer treated as members of HUF after they get
married in other families);
(iii) a company;
(iv) a partnership firm, including limited liability partnership firm;
(v) an association of persons (AOP), whether incorporated or not (an AOP refers to a
situation where two or more persons join hands to carry on any business);
(vi) a body of individuals (BOI), whether incorporated or not (a BOI is similar to AOP;
however all the participants of BOI are only individuals whereas in case of AOP, one
or more participant is a non-individual);
(vii) a local authority (ie panchayat, municipality, cantonment board, etc); and
(viii) every artificial juridical person not covered above (artificial juridical persons are
entities which are not natural persons but are separate entities in the eyes of law.
Though they may not be sued directly in a court of law, but they can be sued
through persons managing them. Examples are universities, ICAI, ICSI, etc)
Assessment • Assessment Year means the period of 12 months commencing on the first day of April
Year – every year.
Section 2(9) • Previous Year means the financial year immediately preceding the Assessment Year.
Previous Year For May 2022 & November 2022 Examination, Previous Year 2021-22
– Section 3 (ie, Assessment Year 2022-23) is applicable.
Note 1: Financial Year means a year starting on 1 st April and ending on 31st March.
Note 2: Income tax is payable on the income earned during the previous year and it is
assessed in the immediately succeeding financial year which is called assessment year.
Therefore, the income earned during PY 2021-22 (ie April 1, 2021 to March 31, 2022) will
be assessed or charged to tax in AY 2022-23.

Note 3: All assessees are required to follow a uniform financial year as their previous
year (ie each block of 12 months starting from 1 st April and ending on next 31st March shall
be treated as one previous year).
Cases Where Income of Previous Year is Assessed in the Same Year

As a normal rule, the income earned during any previous year is assessed or charged to tax in the succeeding
assessment year. However, in the following circumstances, the income is taxed in the same year in
which it is earned. Therefore, the assessment year and the previous year in these exceptional
circumstances will be the same. These exceptions have been provided to safeguard the collection of taxes
in respect of those assessees who may not be traceable later on. The exceptions are:
1) Shipping Business of Non-Residents (Section 172):

A non-resident who is carrying on a shipping business and earns income from carrying passengers/
livestock/goods from a port in India, will be charged to income-tax before the ship is allowed to leave
the Indian port. Therefore, in this case, the tax is chargeable on the income in the same year in which
it is earned.
2) Assessment of Persons Leaving India (Section 174):

When it appears to the Assessing Officer that any individual may leave India during the current year
or shortly after its expiry, and such individual has no present intention of returning to India, the total
income of such individual for the current year shall be charged to tax in the current year itself.
Example: R wishes to migrate to USA permanently and plans to leave India on 15.11.2021. He submitted
his return for AY 2021-22 on 31.07.2021, the assessment of which is still pending. In this case, the
Assessing Officer will make two assessments:
(a) regular assessment for AY 2021-22; and
(b) assessment of income of the period 1.4.2021 to 15.11.2021 (on either actual basis or on estimated
basis) during AY 2021-22 itself.
3) Assessment of AOP or BOI or Artificial Juridical Person Formed for a Particular Event
or Purpose (Section 174A):
Where it appears to the Assessing Officer that any AOP or BOI or an artificial juridical person
formed/established/incorporated for a particular event or purpose is likely to be dissolved
• in the previous year in which such AOP or BOI or artificial juridical person was formed or
established or incorporated; or
• immediately after such previous year,
the total income of such AOP or BOI or artificial juridical person for the current previous year shall be
chargeable to tax in the same previous year itself.
Example: If an AOP is formed during PY 2021-22 and it is going to be dissolved during PY 2021-22
itself, then the Assessing Officer can assess the income of the AOP for PY 2021-22 during AY 2021-22
itself. Therefore, in this case, the assessment year is same as the previous year.
4) Assessment of Persons Likely to Transfer Property to Avoid Tax (Section 175):

If it appears to the Assessing Officer during any current previous year, that any person is likely to
charge, sell, transfer, dispose of or otherwise part with any of his assets with a view to avoiding any
payment of his tax liability, then the total income of such person shall be chargeable to tax in the same
assessment year.
5) Discontinued Business (Section 176):

Where any business or profession is discontinued during any previous year, the income from the
commencement of the previous year till the date of such discontinuance may, at the discretion of the
assessing officer, be charged to tax during the year of discontinuance.
Example: If a business is discontinued on 16.07.2021, then the income for the period from 01.04.2021
to 16.07.2021 may be assessed during AY 2021-22 itself.

COMPUTATION OF GROSS TOTAL INCOME & TOTAL INCOME
Gross Total Under the Income Tax Act, 1961, income is computed under five different heads which
Income have been explained below. Gross Total Income (‘GTI’) is the aggregate of the income
falling under the following five heads:
Heads of Income Legislative Provisions

Salary • Salary is a periodic payment made by an employer to an employee as
(Sections 15-17) per the terms specified in the employment contract signed by both
the parties.
• Income is taxable u/h ‘salary’ only where there exists an employer-

employee relationship b/w the payer and the payee.
• Salary income is treated as normal income which is taxable at

the normal rates.
House Property • Income from letting out of any house property is taxable u/h
(Sections 22- 27) ‘house property’.
• Income from house property is treated as normal income which

is taxable at the normal rates.
Business/Profession • Where a person carries on any business/profession, such person is
(Sections 28-44) required to compute his income from such business/profession by
preparing a Profit & Loss A/c.
• Expenses incurred in relation to such business/profession shall be

debited to the Profit & Loss A/c in the manner and to the extent
specified under the Income Tax Act, 1961.
• Income from business/profession is treated as normal income

which is taxable at the normal rates.
Capital Gains • Income arising on transfer of any capital asset is commonly known
(Sections 45-55A) as ‘capital gains’.
• Income from transfer of short-term capital asset is known as

‘short-term capital gains’ and income from transfer of long-term
capital asset is known as ‘long-term capital gains’.
• LTCG (other than Section 112A) are taxable @ 20% in case of

all assessees as per Section 112. However, LTCG u/s 112A are
taxable @ 10% in case of all assessees.
(LTCG u/s 112A covers situations where long-term equity shares or
long-term units of equity oriented mutual fund have been sold and
Securities Transaction Tax has been paid on their sale)
• STCG (other than Section 111A) are treated as normal income

and taxable at the normal rates. However, STCG u/s 111A are
taxable @ 15% in case of all assessees.
(STCG u/s 111A covers situations where short-term equity shares
or short-term units of equity oriented mutual fund have been sold
and Securities Transaction Tax has been paid on their sale)
Other Sources • If any income does not get covered under the first four heads,
(Sections 56-59) such income would be taxable u/h ‘other sources’.
Example: Gift, dividends, interest, casual income, etc
• Income u/h other sources (other than casual income) is treated

as normal income which is taxable at the normal rates.

• Casual income is taxable @ 30% in case of all assessees.
• Meaning of Casual Income: Income in the nature of winnings

from lotteries, crossword puzzles, races including horse races, card
games and other games of any sort, gambling or betting of any
form or nature is referred to as casual income.
Deductions • Certain concessions are allowed to be deducted from Gross Total Income u/s 80C – 80U
u/s 80C-80U to arrive at the Total Income. Deductions u/s 80C – 80U are also commonly referred to
as ‘Deductions under Chapter VI-A’.
• Deductions are never allowed from income taxable at special rates. In other
words, deductions u/s 80C – 80U are not allowed from LTCG, STCG u/s 111A and
casual income.
• Example: Mr X has earned PGBP income of Rs 1,00,000, LTCG of Rs 2,00,000, STCG u/s
111A of Rs 1,50,000 and casual income of Rs 3,00,000. Eligible deductions u/s 80C–80U
come out to Rs 2,70,000. Mr X’s gross total income would come out to Rs 7,50,000 out
of which normal income is Rs 1,00,000 and special income is Rs 6,50,000. In this case,
deduction of only Rs 1,00,000 would be available and the balance Rs 1,70,000 cannot be
deducted because deductions are never available from income taxable at special rates.
• Example: Mr X has earned PGBP income of Rs 1,00,000, LTCG of Rs 2,00,000, STCG of
Rs 1,50,000 and casual income of Rs 3,00,000. Eligible deductions u/s 80C – 80U come
out to Rs 2,20,000. Mr X’s gross total income would come out to Rs 7,50,000 out of
which normal income is Rs 2,50,000 and special income is Rs 5,00,000. In this case, the
entire amount of Rs 2,20,000 can be deducted from GTI.
Total Income Deductions u/s 80C – 80U are deducted from the Gross Total Income and the resultant
figure so obtained is known as Total Income.
COMPUTATION OF “TOTAL INCOME”

Income under the head ‘Salary’ XXXX
Income under the head ‘House Property’ XXXX
Income under the head ‘Business/Profession’ XXXX
Income under the head ‘Capital Gains’ XXXX
Income under the head ‘Other Sources’ XXXX
GROSS TOTAL INCOME XXXX
Less: Deductions u/s 80C – 80U (XXXX)
TOTAL INCOME XXXX
(To be rounded off in nearest multiple of Rs 10 as per Sec 288A)
Section 288A: Rounding-Off of Total Income

The total income shall be rounded off to the nearest multiple of Rs 10. For this
purpose, any paise shall be ignored and if the last digit is 5 or more, such amount will
be rounded off to the higher multiple. If the last digit is less than 5, such amount will
be rounded off to the lower multiple.
Example: Total income of Rs 1,00,005.60 shall be rounded off to Rs 1,00,010 whereas
total income of Rs 1,00,004.99 shall be rounded off to Rs 1,00,000.

COMPUTATION OF TAX LIABILITY OF INDIVIDUALS
• Tax On Special Income At Special Rates (LTCG @ 20% u/s 112, LTCG u/s 112A XXXX
@ 10%, STCG u/s 111A @ 15%, Casual Income @ 30% u/s 115BB)
• Tax On Normal Income (as per the applicable slab rates) XXXX
Total Tax (Before Surcharge/Rebate/Cess) XXXX

Add: Surcharge (10%, 15%, 25% or 37%, as the case maybe) XXXX
Less: Marginal Relief (if any) (XXXX)
Less: Rebate u/s 87A (only for residents if total income does not exceed Rs 5,00,000) (XXXX)
Tax Liability Before Cess XXXX
Add: Health & Education Cess @ 4% XXXX
Tax Liability XXXX
OPTION TO PAY TAX ON NORMAL INCOME AT CONCESSIONAL SLAB RATES {Sec 115BAC}:
Section 115BAC, inserted vide the Finance Act, 2020, provides Individuals & HUFs an option to pay tax in respect
of their normal income at following concessional rates, if they do not avail certain exemptions/deductions like
Leave Travel Concession, standard deduction u/h salary, interest on housing loan on self-occupied property,
specified deductions under Chapter VI-A, etc:
Normal Income Tax Rates
First Rs 2,50,000 Nil
Next Rs 2,50,000 (Rs 2.5L – Rs 5L) 5% on amount in excess of Rs 2,50,000
Next Rs 2,50,000 (Rs 5L – Rs 7.5L) 10% on amount in excess of Rs 5,00,000
Next Rs 2,50,000 (Rs 10L – Rs 12.5L) 20% on amount in excess of Rs 10,00,000
Balance income in excess of Rs 15,00,000 30% on amount in excess of Rs 15,00,000
Note: Section 115BAC has been taken up for detailed discussion under ‘Chapter 17 – Miscellaneous Topics’.
COMPUTATION OF TAX LIABILITY OF INDIVIDUALS
• Special Incomes: Taxable at special rates.

Type of Income Tax Rates
Long Term Capital Gains Tax @ 10% u/s 112A; Tax @ 20% u/s 112
STCG u/s 111A Tax @ 15% u/s 111A
Casual Income Tax @ 30% u/s 115BB
• Normal Income: Taxable at slab rates.

Category 1:
➢ Non-residents (any age) Normal Income Tax Rates
➢ Residents below the age First Rs 2,50,000 Nil
of 60 years throughout
Next Rs 2,50,000 5% on amount in excess of Rs 2,50,000
the relevant previous
year Next Rs 5,00,000 20% on amount in excess of Rs 5,00,000
Balance income in excess
30% on amount in excess of Rs 10,00,000
of Rs 10,00,000
Category 2 (Senior Citizens):

Residents who are of the age Normal Income Tax Rates
of 60 years or more but First Rs 3,00,000 Nil
below the age of 80 years at
any time during the relevant
previous year Next Rs 5,00,000 20% on amount in excess of Rs 5,00,000
Balance income in excess
of Rs 10,00,000
Category 3 (Very Senior

Citizens): Normal Income Tax Rates
Residents who are of the age First Rs 5,00,000 Nil
of 80 years or more at any
time during the relevant
previous year Balance income in excess
of Rs 10,00,000
CLARIFICATION REGARDING ATTAINING PRESCRIBED AGE OF 60 YEARS / 80 YEARS

WHERE DATE OF BIRTH OF ASSESSEE FALLS ON 1ST APRIL
• An individual who is resident in India and of the age of 60 years or more (senior citizen) and 80 years or
more (very senior citizen) is eligible for a higher basic exemption limit of Rs 3,00,000 and Rs 5,00,000,
respectively.
• Vide Circular No 28/2016, dated 27th July 2016, the CBDT has clarified that a person born on
1st April would be considered to have attained a particular age on 31 st March, the day preceding the
anniversary of his birthday. In particular, the question of attainment of age of eligibility for being
considered a senior/very senior citizen would be decided on the basis of above criteria.
• Therefore, a resident individual whose 60th birthday falls on 1st April 2022, would be treated as having
attained the age of 60 years in PY 2021-22 and thus would be eligible for higher basic exemption limit of
Rs 3,00,000. Likewise, a resident individual whose 80th birthday falls on 1st April 2022, would be treated
as having attained the age of 80 years in PY 2021-22 and thus would be eligible for higher basic exemption
limit of Rs 5,00,000.

Surcharge Rates Applicable In Case Of Assessees Taxable At Slab Rates {Individuals/HUF/AOP/
BOI/AJP} – Changes Made Through The Taxation Laws (Amendment) Act, 2019 & Budget 2020:
• Vide the Budget 2019 introduced on 5th July 2019, the Finance Minister increased the rate of surcharge sharply
for those Individuals / HUF / AOP / BOI / AJP who fall in higher income bracket. Two new rates of surcharge
were introduced, ie 25% and 37% where income of said persons exceeds Rs 2 cr and Rs 5 cr, respectively.
• Though the Government had enhanced the rate of surcharge with an intention to tax the high net-worth
individuals but this decision severely impacted the flow of investments in stock-market. To encourage
investment in the capital market, the Taxation Laws (Amendment) Ordinance, 2019 (introduced in
September 2019) has withdrawn the enhanced rates of surcharge (25% & 37%) on capital gains arising
u/s 111A and 112A. Thus, the enhanced rate of surcharge (ie, 25% or 37%) shall not be levied on
Individuals / HUF / AOP / BOI / AJP in respect of tax payable on income arising from transfer of listed
equity shares or units of equity oriented mutual fund (whether long-term or short-term).
• In November 2019, the Ministry of Finance issued a press release stating that the Union Cabinet has approved
the proposal for introducing the Taxation Laws (Amendment) Bill, 2019 in order to replace the Taxation Laws
(Amendment) Ordinance, 2019. The Taxation Laws (Amendment) Bill, 2019 has now been passed by both Houses
of the Parliament. After receiving the asset of the President on 11th December 2019, the Taxation Laws
(Amendment) Bill, 2019 has now become the Taxation Laws (Amendment) Act, 2019.
• Till PY 2019-20, the provisions of Dividend Distribution Tax (DDT) were applicable wherein a domestic company
was liable to pay DDT on the distribution of dividends to the shareholders and the resultant dividend was
exempt in the hands of the recipient shareholders. With the introduction of Budget 2020, the concept of DDT
was done away with due to which dividend income has become taxable in the hands of the shareholders at the
applicable rate and the domestic company is not required to pay any DDT. The Finance Act, 2020 further
clearly stated that the surcharge rate in respect of dividend income shall not exceed 15%.
• Surcharge Rates Applicable In Case Of Individuals / HUF / AOP / BOI / AJP:

Range of Total Income
Types of Income More Than More Than More Than

More Than
Upto Rs 50L Rs 50L But Rs 1 Cr But Rs 2 Cr But
Rs 5 Cr
Upto Rs 1 Cr Upto Rs 2 Cr Upto Rs 5 Cr
STCG u/s 111A;

LTCG u/s 112A; and Nil 10% 15% 15% 15%
Dividend Income
Unexplained Income
25% 25% 25% 25% 25%
u/s 115BBE
Any Other Income Nil 10% 15% 25% 37%
• Manner Of Computation Of Surcharge In Case Of Individuals / HUF / AOP / BOI / AJP:

Rate Of Example
Surcharge
S.No. Particulars
On Income Applicable Rate Of
Tax Components Of Total Income
Surcharge
(i) Total Income (Including 10% ➢ Dividend Income – Rs 10 lakhs Surcharge would be
Dividend Income, STCG levied @ 10% on income
➢ STCG u/s 111A - Rs 20 lakhs
u/s 111A & LTCG u/s tax computed on total
112A) Exceeds Rs 50L ➢ LTCG u/s 112A - Rs 25 lakhs income of Rs 95 lakhs
But Does Not Exceed
➢ Other Incomes - Rs 40 lakhs
Rs 1 Cr
➢ Total Income – Rs 95 lakhs
APPLICABILITY OF SURCHARGE AND MARGINAL RELIEF

(Uniformly Applicable In Case Of Both Residents & Non-Residents)
• The Finance Act, 2019 introduced in July 2019 has introduced a multi-tier surcharge for individuals
wef PY 2019-20 (ie AY 2020-21). The revised rates of surcharge have been listed below:
Level Of Total Income Rate Of Surcharge
Upto Rs 50L Not Applicable
More Than Rs 50L But Upto Rs 1 Crore 10%
More Than Rs 1 Crore But Upto Rs 2 Crores 15%
More Than Rs 2 Crores But Upto Rs 5 Crores 25%
More Than Rs 5 Crores 37%
• Surcharge shall be calculated on the total tax payable before Health & Education Cess.
• Marginal Relief: Where the total income of an individual marginally exceeds Rs 50 lakhs/Rs 1 cr/
Rs 2 cr/Rs 5 cr, surcharge is calculated on the entire amount of income tax due to which increase in tax
amount may be more than the increase in income. Such defect is rectified by allowing the assessee
the benefit of marginal relief. The amount of marginal relief is calculated as follows:
➢ Case (a): Total income of individual exceeds Rs 50 lakhs but does not exceed Rs 1 crore:
Particulars (Rs)
Tax + Surcharge of 10% (Total Income > 50 lakhs) XXXX
Less: Tax on total income of Rs 50 lakhs (XXXX)
Increase in tax due to total income becoming more than Rs 50 lakhs – (A) XXXX
Increase in income beyond Rs 50 lakhs – (B) XXXX
Marginal Relief – [(A) minus (B)] (marginal relief is always positive) XXXX
➢ Case (b) – Total income of individual exceeds Rs 1 crore but does not exceed Rs 2 crores:
Particulars (Rs)
Tax + Surcharge of 15% (Total Income > 1 crore) XXXX
Less: Tax + Surcharge of 10% on total income of Rs 1 crore (XXXX)
Increase in tax due to total income becoming more than Rs 1 crore – (C) XXXX
Increase in income beyond Rs 1 crore – (D) XXXX
Marginal Relief – [(C) minus (D)] (marginal relief is always positive) XXXX
➢ Case (c) – Total income of individual exceeds Rs 2 crores but does not exceed Rs 5 crores:
Particulars (Rs)
Tax + Surcharge of 25% (Total Income > 2 crores) XXXX
Less: Tax + Surcharge of 15% on total income of Rs 2 crores (XXXX)
Increase in tax due to total income becoming more than Rs 2 crores – (E) XXXX
Increase in income beyond Rs 2 crore – (F) XXXX
Marginal Relief – [(E) minus (F)] (marginal relief is always positive) XXXX
➢ Case (d) – Total income of individual exceeds Rs 5 crores:

Particulars (Rs)
Tax + Surcharge of 37% (Total Income > 5 crores) XXXX
Less: Tax + Surcharge of 25% on total income of Rs 5 crores (XXXX)

(ii) Total Income (Including 15% ➢ Dividend Income – Rs 10 lakhs Surcharge would be
112A) Exceeds Rs 1 Cr ➢ LTCG u/s 112A - Rs 65 lakhs income of Rs 1.85 crore
But Does Not Exceed
➢ Other Incomes - Rs 50 lakhs
Rs 2 Cr
➢ Total Income – Rs 1.85 crore
(iii) Total Income (Excluding 25% ➢ Dividend Income – Rs 60 lakhs ➢ Surcharge would be
Dividend Income, STCG levied @ 15% on
u/s 111A & LTCG u/s income tax on:
112A) Exceeds Rs 2 Cr ➢ LTCG u/s 112A - Rs 55 lakhs
• Dividend income of
But Does Not Exceed
➢ Other Incomes - Rs 3 crore Rs 60 lakhs;
Rs 5 Cr
➢ Total Income – Rs 4.69 crore • STCG u/s 111A of
Surcharge Rate On 15% Rs 54 lakhs; and
Income Tax Payable On • LTCG u/s 112A of
Portion Of Dividend Rs 55 lakhs.
Income & Capital Gains
Chargeable To Tax As ➢ Surcharge @ 25%
Per Section 111A & would be levied on
Section 112A income tax computed
on other incomes of
Rs 3 crore included
in total income.
(iv) Total Income (Excluding 37% ➢ Dividend Income – Rs 60 lakhs ➢ Surcharge would be
Dividend Income, STCG levied @ 15% on
u/s 111A & LTCG u/s income tax on:
112A) Exceeds Rs 5 Cr ➢ LTCG u/s 112A - Rs 65 lakhs
• Dividend income of
➢ Other Incomes - Rs 6 crore Rs 60 lakhs;
Surcharge Rate On 15%
Income Tax Payable On ➢ Total Income – Rs 7.75 crore • STCG u/s 111A of
Portion Of Dividend Rs 50 lakhs; and
Income & Capital Gains • LTCG u/s 112A of
Chargeable To Tax As Rs 65 lakhs.
Per Section 111A &
Section 112A ➢ Surcharge @ 37%
would be levied on
income tax computed
on other incomes of
Rs 6 crore included
in total income.
(v) Total Income (Including 15% ➢ Dividend Income – Rs 55 lakhs Surcharge would be
112A) Exceeds Rs 2 Cr ➢ LTCG u/s 112A - Rs 55 lakhs income of Rs 2.8 crore
In Cases Not Covered
➢ Other Incomes - Rs 1.10 crore
Under (iii) & (iv) Above
➢ Total Income – Rs 2.8 crore
Increase in tax due to total income becoming more than Rs 5 crores – (G) XXXX
Increase in income beyond Rs 5 crore – (H) XXXX
Marginal Relief – [(G) minus (H)] (marginal relief is always positive) XXXX
SPECIAL BENEFITS FOR ONLY RESIDENT INDIVIDUALS

(Not Available In Case Of Non-Residents)
1) DEFICIENCY IN NORMAL INCOME:

• This benefit is available to a resident individual provided his normal income is below the exemption limit
(Rs 2,50,000/Rs 3,00,000/Rs 5,00,000).
• The difference between the normal income and the exemption limit is referred to as deficiency.
{Deficiency = Applicable Slab Exemption (-) Normal Income After Deductions u/s 80C-80U}
• Such deficiency is allowed to be set-off against the special incomes and tax is charged @ 20% / 15% / 10%
(as the case may be) on the balance income remaining after adjustment of deficiency. Deficiency needs to
be adjusted in the following order:
❑ Firstly against LTCG u/s 112
❑ Secondly against STCG u/s 111A
❑ Balance against LTCG u/s 112A
❑ No deficiency can be adjusted against Casual Income
• Example: A resident individual, aged 56 years, has LTCG of Rs 1,00,000, STCG u/s 111A of Rs 2,00,000
and normal income of Rs 80,000. In this case, there is a deficiency of Rs 1,70,000 (Rs 2,50,000 –
Rs 80,000). Such deficiency shall be first adjusted towards LTCG and the balance Rs 70,000 shall be
adjusted towards STCG u/s 111A. Tax @ 15% on STCG u/s 111A shall be calculated on Rs 1,30,000 only.
2) REBATE OF Rs 12,500 u/s 87A:

• A rebate is available to a resident individual u/s 87A where his/her total income does not exceed
Rs 5,00,000 (ie total income is Rs 5,00,000 or less).
• Rebate is available from tax on all kinds of income including casual income. Amount of rebate is
deducted from the tax payable before Health & Education Cess. In other words, rebate is first allowed
and then Health & Education Cess is calculated.
• The amount of rebate is lower of the following:
❑ 100% of the tax payable before Health & Education Cess; or
❑ Rs 12,500.
Section 288B - ROUNDING-OFF OF TAX LIABILITY

(Uniformly Applicable In Case Of Both Residents & Non-Residents)
The final tax liability shall be rounded off to the nearest multiple of Rs 10. For this purpose, any paise shall
be ignored and if the last digit is 5 or more, such amount will be rounded off to the higher multiple. If the
last digit is less than 5, such amount will be rounded off to the lower multiple.
Example: Income tax liability of Rs 50,005.60 shall be rounded off to Rs 50,010 whereas Rs 50,004.99
shall be rounded off to Rs 50,000.

COMPUTATION OF TAX LIABILITY OF HUF

• Normal Income: Taxable at slab rates (Basic slab of Rs 2,50,000 is applicable; the age of Karta is
irrelevant for the purposes of determining the applicable slab)
• Surcharge & Marginal Relief: The provisions relating to applicability of surcharge (and its rates)
and calculation of marginal relief shall apply to a HUF in the same manner as they apply to an individual.
OTHER POINTS:
• The benefit of adjustment of deficiency in normal income is allowed to a resident HUF in the
same manner as available to a resident individual.
• The benefit of rebate u/s 87A is not available to a HUF.
• The provisions relating to Health & Education Cess and rounding-off of tax liability u/s 288B shall
apply to a HUF in the same manner as they apply to an individual.
• Profits of HUF distributed amongst its members are exempt in their hands u/s 10(2).
COMPUTATION OF TAX LIABILITY OF PARTNERSHIP FIRM (INCLUDING LLP)

• Normal Income: Taxable at flat rate of 30%.
OTHER POINTS:
• The benefit of adjustment of deficiency in normal income is not available to a partnership firm.
• The benefit of rebate u/s 87A is not available to a partnership firm.
• Where the total income of a partnership firm exceeds Rs 1 crore, a surcharge of 12% shall apply.
Marginal relief to be checked in order to ensure that increase in tax should in no case be more than
increase in income.

apply to a partnership firm in the same manner as they apply to an individual.
• Profits of a partnership firm distributed to the partners are exempt in their hands u/s 10(2A).
COMPUTATION OF TAX LIABILITY OF COMPANIES

• Special Incomes: Taxable at special rates
(LTCG @ 10% u/s 112A or 20% u/s 112; STCG u/s 111A @ 15% and Casual Income @ 30%)
• Normal Income: Taxable at flat rates
➢ In case of domestic companies, flat rate of 30% applies (concessional rate of 25% shall apply if
the gross turnover of domestic company during PY 2019-20 does not exceed Rs 400 crores).
➢ In case of foreign companies, flat rate of 40% applies (a foreign company is a company other than a
domestic company)
MEANING OF DOMESTIC COMPANY:

• An Indian company (ie, a company registered in India) is always a domestic company.
• A foreign company (ie, a company registered outside India) is treated as a domestic company if all
the following three conditions are satisfied:
❑ The register of shareholders is maintained at its principal place of business in India;
❑ The Annual General Meeting of the foreign company is held in India; and
❑ Necessary arrangements have been made for declaration and payment of dividend within India.
• Surcharge:
Total Income Domestic Company Foreign Company
Exceeds Rs 1 crore; Does Surcharge of 7% on the amount Surcharge of 2% on the amount
not exceed Rs 10 crores of tax payable before H&EC of tax payable before H&EC
Surcharge of 12% on the amount Surcharge of 5% on the amount
Exceeds Rs 10 crores
of tax payable before H&EC of tax payable before H&EC
• Marginal Relief:
➢ Case (a): Total income exceeds Rs 1 crore but does not exceed Rs 10 crores:
Particulars (Rs)
Tax + Surcharge of 7% or 2% (Total Income > 1 crore) XXXX
(Surcharge of 7% in case of domestic companies & 2% in case of foreign companies)
Less: Tax on income of Rs 1 crore (XXXX)
Increase in tax due to total income becoming more than Rs 1 crore – (A) XXXX
Increase in income beyond Rs 1 crore – (B) XXXX
Marginal Relief – [(A) minus (B)] (marginal relief is always positive) XXXX
➢ Case (b) – Total income exceeds Rs 10 crores:

Particulars (Rs)
Tax + Surcharge of 12% or 5% (Total Income > 10 crores) XXXX
Less: Tax + Surcharge of 7% or 2% on income of Rs 10 crores (XXXX)

Increase in tax due to total income becoming more than Rs 10 crores – (P) XXXX
Increase in income beyond Rs 10 crores – (Q) XXXX
Marginal Relief – [(P) minus (Q)] (marginal relief is always positive) XXXX
Note: The benefit of adjustment of deficiency in normal income as well as rebate u/s 87A is not
available to a company. However, the provisions relating to Health & Education Cess and rounding-off
of tax liability u/s 288B shall apply to a company in the same manner as they apply to an individual.
SIGNIFICANT REDUCTION IN CORPORATE TAX RATES

(Applicable Only In Case Of Domestic Companies)
With an objective of providing a stimulus to the economy and to attract fresh investment in manufacturing
sector (thereby boosting ‘Make in India’ initiative), the Finance Minister introduced two new sections vide
the Taxation Laws (Amendment) Ordinance, 2019. The Ordinance has now been replaced by a proper law
passed by both Houses of the Parliament, ie the Taxation Laws (Amendment) Act, 2019.
I. Section 115BAA - Tax On Income Of Certain Domestic Companies:

• In order to provide relief to domestic companies, Section 115BAA has been newly inserted in
the Income Tax Act, 1961 with effect from AY 2020-21 to provide an option to domestic
companies to pay tax @ 22% (plus 10% Surcharge and 4% H&EC). However, the option to avail
the benefit of Section 115BAA shall be available only when the total income of the company is
computed without providing for the following deductions/exemptions:
➢ Section 10AA (SEZ Units)
➢ Section 32(1)(iia) (Additional Depreciation)
➢ Section 32AD (Investments in Notified Backward Areas)
➢ Section 33AB (Tea/Coffee/Rubber Development Allowance)
➢ Section 33ABA (Site Restoration Expenditure Fund)
➢ Section 35 (Scientific Research)
➢ Section 35AD (Expenditure on Specified Business)
➢ Section 35CCC (Expenditure on Agricultural Extension Project)
➢ Section 35CCD (Expenditure on Skill Development Project)
➢ ‘Heading C’ of Chapter VI-A Deductions (other than Section 80JJAA)
• Further, the option to avail the benefit of Section 115BAA must be exercised on or before the due
date of furnishing return of income u/s 139(1) in the prescribed manner. This option once exercised
cannot be subsequently withdrawn.
II. Section 115BAB – Tax On Income Of Certain New Domestic Manufacturing Companies:
• The Taxation Laws (Amendment) Ordinance, 2019 has inserted Section 115BAB under the
Income Tax Act, 1961 with effect from AY 2020-21 to provide an option to pay tax @ 15%
(plus 10% Surcharge and 4% H&EC) in case of domestic manufacturing companies incorporated
on or after 1st October 2019.
• A domestic company can avail the benefit of Section 115BAB only if it fulfils the following conditions:
➢ The domestic company should be incorporated on or after 1st October 2019.
➢ It should commence the manufacturing activities on or after 1 st October 2019 but before
31st March 2023.
➢ It is not formed by splitting up or the reconstruction, of a business already in existence.

➢ It does not use any plant or machinery which has been previously used.
➢ It does not use any building previously used as a hotel or convention centre.
➢ The total income of the company has been computed without claiming specified deductions,
exemption or incentives as discussed u/s 115BAA.
• Further, the option to avail the benefit of Section 115BAB must be exercised on or before the due
date of furnishing the first return of income u/s 139(1) in the prescribed manner. This option once
exercised cannot be subsequently withdrawn.
SURCHARGE RATES APPLICABLE IN CASE OF DOMESTIC COMPANIES:

Range of Total Income
Particulars
More Than Rs 1 Cr
Upto Rs 1 Cr More Than Rs 10 Cr
But Upto Rs 10 Cr
Domestic Company Opting
10% 10% 10%
For Section 115BAA
Domestic Company Opting
10% 10% 10%
For Section 115BAB
Any Other Domestic
Nil 7% 12%
Company
COMPUTATION OF TAX LIABILITY OF LOCAL AUTHORITY

• Local authorities have been given a preferential status under income tax by way of exemption u/s 10(20)
of the Income Tax Act, 1961. Section 10(20) grants exemption to various incomes earned by a local
authority from its jurisdictional areas. Where such exemption is not available, the tax rates applicable
on incomes earned by local authority have been discussed below:

• Normal Income: Taxable at flat rate of 30%
OTHER POINTS:
• The benefit of adjustment of deficiency in normal income is not available to a local authority.
• The benefit of rebate u/s 87A is not available to a local authority.
• Where the total income of a local authority exceeds Rs 1 crore, a surcharge of 12% shall apply.
Marginal relief to be checked in order to ensure that increase in tax should in no case be more than
increase in income.
apply to a local authority in the same manner as they apply to an individual.

COMPUTATION OF TAX LIABILITY OF AOP, BOI & ARTIFICIAL JURIDICAL
PERSON (OTHER THAN CO-OPERATIVE SOCIETY)
• Normal Income: Taxable at slab rates (Basic slab of Rs 2,50,000 is applicable)

• Surcharge & Marginal Relief: The provisions relating to applicability of surcharge (and its rates)
and calculation of marginal relief shall apply to an AOP/BOI/AJP in the same manner as they apply to an
individual.
OTHER POINTS:
• The benefit of adjustment of deficiency in normal income is not available to AOP/BOI/AJP.
• The benefit of rebate u/s 87A is not available to AOP/BOI/AJP.
apply to AOP/BOI/AJP in the same manner as they apply to an individual.

1.14 COMPUTATION OF TOTAL INCOME By: CA Vijender Aggarwal
QUESTIONS FOR PRACTICE
Taxability of Individuals
Question 1
Compute the tax liability in the following cases for Assessment Year 2022-23.
(i) Mr X has total income of Rs 7,00,000
(ii) Mr X has total income of Rs 10,00,000
(iii) Mr X has total income of Rs 12,00,000
Question 2
Mr A has income as given below:
Particulars Amount (Rs)
Income under the head Salary 2,50,000
Income under the head House Property 4,50,000
Income under the head Business/Profession 5,49,684
Deductions allowed u/s 80C to 80U are Rs 1,15,000. Compute the income tax liability for PY 2021-22.
Question 3
Compute tax liability in the following cases for Assessment Year 2022-23:
(i) Mr A (resident) has total income of Rs 20,00,000
(ii) Mr A (non-resident) has total income of Rs 20,00,000
(iii) Mr A (resident), aged 60 years has total income of Rs 20,00,000
(iv) Mr A (non-resident), aged 60 years has total income of Rs 20,00,000
(v) Mr A (resident), aged 80 years has total income of Rs 20,00,000
(vi) Mr A (non-resident), aged 80 years has total income of Rs 20,00,000
Question 4 (Surcharge)
Compute tax liability in the following cases for Assessment Year 2022-23.
(i) Mrs A (resident) has total income of Rs 50,50,000
(ii) Mrs A (resident) has total income of Rs 51,00,000
(iii) Mrs A (resident) has total income of Rs 51,50,000
(iv) Mrs A (resident), aged 60 years has total income of Rs 51,80,000
(v) Mrs A (resident), aged 80 years has total income of Rs 52,50,000
(vi) Mrs A (resident) has total income of Rs 1,01,00,000
(vii) Mrs A (resident) has total income of Rs 1,02,00,000
(viii) Mrs A (resident) has total income of Rs 1,03,00,000
Question 5 (Rebate)
Compute the tax liability of Mr A having total income of Rs 3,49,000.
Question 6 (Rebate)
Compute the tax liability of Mr A for Assessment Year 2022-23.
• Gross total income Rs 5,62,000
• Deductions allowed u/s 80C to 80U are Rs 1,30,000
Question 7 (Rebate)
Compute the tax liability of Mrs A, aged 64 years for PY 2021-22 (AY 2022-23):
“Gross total income Rs 4,44,000; Deductions allowed u/s 80C to 80U are Rs 98,000”
Case 1: Mrs A is a resident
Case 2: Mrs A is a non-resident
COMPUTATION OF TOTAL INCOME By: CA Vijender Aggarwal 1.15
Question 8 (Casual Income)
Compute the tax liability of Mr Z under the following two cases if he has salary income of Rs 6,00,000 and casual
income of Rs 2,00,000.
• Case I: Deductions u/s 80C to 80U Rs 1,80,000.
• Case II: Deductions u/s 80C to 80U Rs 8,00,000.
Question 9 (Casual Income)

Compute the tax liability of Mr Y having casual income of Rs 51,00,000 and deductions allowed u/s 80C to 80U are
Rs 2,50,000.
Question 10
Compute tax liability of Mr B for AY 2022-23 from the following information:
Income under the head Salary 48,000
Income under the head House Property 32,000
Income under the head business/Profession 28,000
Long Term Capital Gains 1,90,000
Short Term Capital Gains 42,000
Short Term Capital Gains u/s 111A 5,00,000
Lottery Income 2,00,000
Other Income 11,000
Deductions allowed u/s 80C-80U 2,00,000
• Case 1: Mr B is resident.
• Case 2: Mr B is resident and aged about 68 years.
• Case 3: Mr B is resident and aged about 81 years.
• Case 4: Mr B is non-resident.
Question 11
Compute tax liability of Mr X for AY 2022-23 from the following information:
(i) Mr X (a resident) has casual income Rs 3,50,000.
(ii) Mr X (a resident) has short term capital gains u/s 111A Rs 3,30,000.
(iii) Mr X (a resident) has long term capital gains Rs 2,80,000.
(iv) Mr X (a non-resident) has casual income Rs 3,50,000.
(v) Mr X (a non-resident) has short term capital gains u/s 111A Rs 4,40,000.
(vi) Mr X (a non-resident) has long term capital gains Rs 2,80,000.
(vii) Mr X (a non-resident), aged 64 years, has casual income Rs 3,50,000.
(viii) Mr X (a non-resident), aged 64 years, has short term capital gains u/s 111A Rs 4,40,000
(ix) Mr X (a non-resident), aged 64 years, has long term capital gains Rs 2,80,000.
Question 12
What will be the tax liability of Mr A for AY 2022-23 if he has normal income of Rs 21 Lakhs and LTCG of Rs 30 lakhs?
Question 13
Compute the tax liability of Mr Dherya, aged 58 years, for AY 2022-23 from the following details:
Income from salaries 25,28,000
Profits and gains from business/profession 73,00,000
Income from other sources (Interest on bank FD) 3,82,000
Amount deposited in Public Provident Fund (PPF) 1,30,000

Taxability of HUF
Question 14
Compute the tax liability of a HUF for AY 2022-23 from the following information:
Long term capital gains 5,00,000
Short term capital gains u/s 111A 2,00,000
Casual Income 3,00,000
Deductions allowed under sections 80C to 80U 95,000
Question 15
Compute the tax liability of HUF and Karta if AB HUF has PGBP income of Rs 30,00,000 and its Karta, Mr A, has
individual income of Rs 12,50,000.
Taxability of Partnership Firm

Question 16
ABC is a partnership firm. Compute the tax liability for AY 2022-23 from the following information:
(i) The firm has income under the head Business/Profession Rs 10,000.
(ii) The firm has income under the head Business/Profession Rs 5,00,000.
(iii) The firm has income under the head Business/Profession Rs 1,00,00,000.
(iv) The firm has income under the head Business/Profession Rs 9,00,00,000.
(v) The firm has long term capital gains of Rs 10,000.
(vi) The firm has long term capital gains of Rs 5,00,000.
(vii) The firm has long term capital gains of Rs 1,00,00,000.
(viii) The firm has long term capital gains of Rs 9,00,00,000.
Question 17
Compute the income tax liability of AB Partnership Firm for AY 2022-23 from the following information:
Income under the head business/Profession 11,50,000
Long Term Capital Gains 2,30,000
Short Term Capital Gains 1,20,000
Short Term Capital Gains u/s 111A 2,00,000
Lottery Income 2,00,000
Other Income 61,000
Deductions allowed u/s 80C-80U 2,00,000
Taxability of Domestic Companies

Question 18 (Surcharge)
ABC Ltd is a domestic company. Compute the tax liability of company for AY 2022-23:
• Case I: The company has income under the head Business/Profession Rs 1,00,00,000
• Case II: The company has income under the head Business/Profession Rs 1,02,00,000
• Case III: The company has income under the head Business/Profession Rs 10,00,00,000
• Case IV: The company has income under the head Business/Profession Rs 10,02,00,000

Question 19
RST Ltd is a domestic company. Compute the tax liability for AY 2022-23 in the following situations:
(i) The company has winnings from lottery Rs 3,00,00,000.
(ii) The company has long term capital gains of Rs 2,50,000.
(iii) The company has long term capital gains of Rs 10,00,000.
(iv) The company has long term capital gains of Rs 5,00,00,000.
(v) The company has PGBP income Rs 20,000 (Turnover of FY 19-20 is Rs 348 crores).
(vi) The company has PGBP income Rs 2,00,00,000 (Turnover of FY 19-20 is Rs 498 crores).
(vii) The company has PGBP income Rs 12,00,00,000 (Turnover of FY 19-20 is Rs 47.50 crores).
Question 20
DEL Ltd, a domestic company has total income of Rs 6,00,00,000. Compute tax liability of company for PY 2021-22.
Question 21
Compute the tax liability of ABC Limited for AY 2022-23 from the following information:
Deductions allowed u/s 80C to 80U 2,00,000
Taxability of Foreign Companies:

Question 22
XYZ Ltd is a foreign company. Compute the tax liability of the company for Assessment Year 2022-23.
• Case I: The company has income under the head Business/Profession Rs 1,00,00,000.
• Case II: The company has income under the head Business/Profession Rs 1,01,00,000.
• Case III: The company has income under the head Business/Profession Rs 10,00,00,000.
• Case IV: The company has income under the head Business/Profession Rs 10,01,00,000.
Question 23
GST Ltd is a foreign company. Compute the tax liability of the company for AY 2022-23 in the following situations:
(i) The company has winnings from lottery Rs 3,00,00,000.
(ii) The company has long term capital gains of Rs 2,50,000.
(iii) The company has long term capital gains of Rs 10,00,000.
(iv) The company has long term capital gains of Rs 5,00,00,000.
(v) The company has PGBP income Rs 20,000.
(vi) The company has PGBP income Rs 2,00,00,000.
(vii) The company has PGBP income Rs 12,00,00,000.
Question 24
XYZ Ltd, a foreign company has total income of Rs 6,00,00,000. Compute its tax liability for PY 2021-22.
Question 25
Compute the tax liability of ABC Limited, a foreign company, for AY 2022-23 from the following information:
Deductions allowed u/s 80C to 80U 5,00,000

SOLUTIONS
Taxability of Individuals
Answer 1
Part (i)
Tax Liability 54,600
Part (ii)
Tax Liability 1,17,000
Part (iii)
Answer 2
Computation of Total Income of Mr A for AY 2022-23:
Income under the head Salary 2,50,000
Income under the Business/Profession 5,49,684
GROSS TOTAL INCOME 12,49,684
Less: Deduction u/s 80C to 80U (1,15,000)
Total Income 11,34,684
Rounded off u/s 288A 11,34,680
Computation of Tax Liability:

Tax Liability 1,59,020.16
Rounded off u/s 288B 1,59,020
Answer 3
Part (i) Computation of Tax Liability:
Part (ii) Computation of Tax Liability:

Part (iii) Computation of Tax Liability:

Part (iv) Computation of Tax Liability:

Part (v) Computation of Tax Liability:

Part (vi) Computation of Tax Liability:

Answer 4
Part (i) Computation of Tax Liability:
Part (ii) Computation of Tax Liability:


Part (iii) Computation of Tax Liability:
Part (iv) Computation of Tax Liability:

Part (v) Computation of Tax Liability:

Part (vi) Computation of Tax Liability:

Part (vii) Computation of Tax Liability:

Part (viii) Computation of Tax Liability:

Answer 5
Tax Liability Nil
Answer 6
Tax Liability Nil
Answer 7
Case I: Computation of Tax Liability:
Tax Liability Nil
Case II: Computation of Tax Liability:

Tax Liability 4,992
Tax Liability (Rounded off u/s 288B) 4,990
Answer 8
Case I: Computation of Total Income of Mr Z:

Case II: Computation of Total Income of Mr Z:


Answer 9
Computation of Total Income of Mr Y:


Answer 10
Computation of Total Income:
TOTAL INCOME 8,90,000
• CASE 1 – Mr B is resident: Computation of Tax Liability

• CASE 2 – Mr B is resident and aged about 68 years: Computation of Tax Liability

• CASE 3 – Mr B is resident and aged about 81 years: Computation of Tax Liability

• CASE 4 – Mr B is non-resident: Computation of Tax Liability

Answer 11
Case (i)
Case (ii)
Tax Liability Nil
Case (iii)
Tax Liability Nil
Case (iv)
Case (v)
Case (vi)
Case (vii)
Case (viii)
Case (ix)
Answer 12
Tax on LTCG of Rs 30,00,000 @ 20% u/s 112 6,00,000
Tax on normal income of Rs 21,00,000 at slab rates 4,42,500
Tax before surcharge 10,42,500
Add: Surcharge @ 10% 1,04,250
Tax before Marginal Relief 11,46,750
Less: Marginal Relief (WN 1) (34,250)

Tax before Health & Education Cess 11,12,500
Add: Health & Education Cess @ 4% 44,500
WN 1
Tax + Surcharge of 10% on Income of Rs 51,00,000 11,46,750
Less: Tax on Income of Rs 50,00,000 10,12,500
There can be two situations
• (Normal Income Rs 20,00,000 + LTCG Rs 30,00,000): Tax Rs 10,12,500
• (Normal Income 21,00,000 + LTCG Rs 29,00,000): Tax Rs 10,22,500
The law is silent on the point as to which combination should be opted for.
Therefore, the option which minimizes the tax liability of the assessee has been taken.
Increase in Tax 1,34,250
Increase in Income 1,00,000
Marginal Relief (1,34,250 – 1,00,000) 34,250
Answer 13
Computation of Total Income of Mr Dherya for AY 2022-23:
Total Income 1,00,80,000
Computation of Tax Liability

Taxability of HUF
Answer 14
Computation of Total Income of HUF (AY 2022-23):

Answer 15
Tax Liability of HUF
Tax Liability of Karta
Taxability of Partnership Firms

Answer 16
Case (i) – Computation of Tax Liability:
Tax Liability 3,120
Case (ii) – Computation of Tax Liability:

Case (iii) – Computation of Tax Liability:

Case (iv) – Computation of Tax Liability:

Tax Liability 3,14,49,600

Case (v) – Computation of Tax Liability:
Tax Liability 2,080
Case (vi) – Computation of Tax Liability:

Case (vii) – Computation of Tax Liability:

Case (viii) – Computation of Tax Liability:

Answer 17
Computation of Total Income of AB Partnership Firm (Assessment Year 2022-23):

Taxability of Domestic Companies

Answer 18
• Case I:
• Case II:
• Case III:
• Case IV:
Answer 19




Tax Liability 5,200



Answer 20
Assumption: The total income includes only PGBP income and does not include capital gains or casual income.
Answer 21
Computation of Total Income of ABC Limited (Assessment Year 2022-23):

Taxability of Foreign Companies

Answer 22
• Case I:
Computation of Tax Liability of XYZ Ltd:
• Case II:
• Case III:
• Case IV:
Computation of Tax Liability of ABC Ltd:
Answer 23




Tax Liability 8,320


Answer 24
Assumption: The total income includes only PGBP income and does not include any capital gains or casual income.
Answer 25
Computation of Total Income of ABC Limited (Assessment Year 2022-23):



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Section 2(9) Definition of ‘Assessment Year’

Section 2(24)(ix) Meaning of ‘Casual Income’

Section 2(31) Definition of ‘Person’

Section 3 Concept of ‘Previous Year’

Section 87A Rebate of maximum Rs 12,500 to a resident individual

Section 112 LTCG taxable @ 20%

Section 115BB Casual income taxable @ 30%

Section 288A Rounding off of total income

Section 288B Rounding off of tax liability

BASIC CONCEPTS OF INCOME TAX

2) Annual Finance Act:

3) The Income Tax Rules, 1962:

5) Circulars & Clarifications:

6) Judgements given by Courts:

Subscribe CA Vijender Aggarwal’s Telegram Channel (https://t.me/vijenderaggarwaltax) For Accessing Notes,

Person – Person includes:

Subscribe CA Vijender Aggarwal’s Telegram Channel (https://t.me/vijenderaggarwaltax) For Accessing Notes,

Cases Where Income of Previous Year is Assessed in the Same Year

1) Shipping Business of Non-Residents (Section 172):

2) Assessment of Persons Leaving India (Section 174):

4) Assessment of Persons Likely to Transfer Property to Avoid Tax (Section 175):

5) Discontinued Business (Section 176):

Subscribe CA Vijender Aggarwal’s Telegram Channel (https://t.me/vijenderaggarwaltax) For Accessing Notes,

Heads of Income Legislative Provisions

• Income is taxable u/h ‘salary’ only where there exists an employer-

• Salary income is treated as normal income which is taxable at

• Income from house property is treated as normal income which

• Expenses incurred in relation to such business/profession shall be

• Income from business/profession is treated as normal income

• Income from transfer of short-term capital asset is known as

• LTCG (other than Section 112A) are taxable @ 20% in case of

• STCG (other than Section 111A) are treated as normal income

• Income u/h other sources (other than casual income) is treated

Subscribe CA Vijender Aggarwal’s Telegram Channel (https://t.me/vijenderaggarwaltax) For Accessing Notes,

• Meaning of Casual Income: Income in the nature of winnings

COMPUTATION OF “TOTAL INCOME”

Section 288A: Rounding-Off of Total Income

Subscribe CA Vijender Aggarwal’s Telegram Channel (https://t.me/vijenderaggarwaltax) For Accessing Notes,

Total Tax (Before Surcharge/Rebate/Cess) XXXX

COMPUTATION OF TAX LIABILITY OF INDIVIDUALS

• Special Incomes: Taxable at special rates.

• Normal Income: Taxable at slab rates.

Category 2 (Senior Citizens):

Category 3 (Very Senior

CLARIFICATION REGARDING ATTAINING PRESCRIBED AGE OF 60 YEARS / 80 YEARS

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• Surcharge Rates Applicable In Case Of Individuals / HUF / AOP / BOI / AJP:

Types of Income More Than More Than More Than

STCG u/s 111A;

Any Other Income Nil 10% 15% 25% 37%

• Manner Of Computation Of Surcharge In Case Of Individuals / HUF / AOP / BOI / AJP:

APPLICABILITY OF SURCHARGE AND MARGINAL RELIEF

➢ Case (d) – Total income of individual exceeds Rs 5 crores:

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SPECIAL BENEFITS FOR ONLY RESIDENT INDIVIDUALS

1) DEFICIENCY IN NORMAL INCOME:

2) REBATE OF Rs 12,500 u/s 87A: