Income Tax 1

DIRECT TAXES
UNIT – I
Income Tax Act – Definition – Income – Agricultural Income – Assessee – Previous year – Assessment year –
Residential status – Scope of Total Income – Capital and Revenue –Receipts and Expenditure – Exempted
Incomes.
UNIT – II
Computation of Income from Salaries and Income from House property.
UNIT – III
Computation of Profits and Gains of Business or profession – Calculation of Capital gain.
UNIT – IV
Computation of Income from other sources – Set-Off and Carry Forward of Losses - Deduction from Gross
Total Income – Assessment of Individuals.
UNIT – V
Income Tax Authorities – Procedure for Assessment – Collection of Tax , Procedures of e – Filing
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INCOME TAX ACT
Income Tax including surcharge (if any) & cess is charged for any person at the rate as prescribed by
Central Act for that assessment year. Income-tax Act has provided separate provisions with respect
to levy of tax on income received in advance as well as the income with respect of which the amount
has not yet been received. A person also has to keep track of his TDS deducted while calculating his
final tax liability at the end of the year.
Previous Year:
For Income Tax Act 1961, previous year is defined as the financial year which immediately precedes
the assessment year. In case the source of income is new or the business set up is new, previous year
for that entity will start from the date of setting up of that business or profession or from the date
when the source of income of this new existence starts and ends in the said financial year.
Exception to Previous Year:

These incomes are taxed as the income of year immediately preceding the assessment year at the
rates applicable to such person.
1. Income of a person who is leaving India for a long period or permanently

2. Income of a person who is trying to alienate his assets with an intention to avoid taxes
3. Income of a discontinued business
4. Income of non-resident shipping companies who don’t have any representative in India
Scope of Total income:

As per Income Tax Act 1961, the total income of previous year for a person who is resident of India
will include all his income irrespective of source of that income which is either received or has
accrued in India in previous year.
However, if person is not an ordinarily resident in India as per Section 6 of Income Tax Act, 1961,
income from the sources which accrues or arises for him outside India shall not be included in total
income. In respect of non-residents any income which is received or arises in India is taxable in
India.
Various Heads for Income under Income Tax Act 1961:
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Every income arising to any person will always be classified under one of the following headers
provided by the Act: -
1. Salaries
2. Income from house property
3. Profit and gains of business or profession
4. Capital gains
5. Income from other sources
Type of Taxes:
Income Tax holds its importance for it is the money which tends to support the running of our
government. It is one of the major sources of revenue for the government and thus is inevitable to
not to impose it on the income earned or utilized in the country. It helps meet the funds required to
develop the country and other defense related needs of a nation.
There are basically two kinds of taxes - Direct Tax and Indirect Tax. Direct Tax is tax that is paid by
an individual or any other person on the basis of his Income. It is a form of tax that is directly paid by
the person to the government, i.e., the liability to pay the tax and the burden of tax falls on the same
person. Indirect taxes are the types of taxes where the person depositing the tax with government
and the person actually having been burdened by the tax are different. Generally these taxes are
included in the prices of the goods or services which are provided to the people and then such taxes
are deposited by the person collecting the same from their customers. GST is one of the most popular
type of indirect tax.
Some Important Definition under Income-Tax Act 1961:

1. Income Tax:
It is the tax that is collected by Central Government for each financial year levied on total taxable
income of an assessee during the previous year.
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2. Assessee:
As per Income Tax Act 1961 section 2(7), an assessee is a person who is liable to pay the taxes under any
provision of Income Tax Act 1961. Assessee can also be a person with respect of whom any proceedings have
been initiated or whose income has been assessed under the Income Tax Act 1961 Assessee is any person who
is deemed assessee under any of the provisions of this act or an assessee in default under any provisions of this
Act.
3. Assessment:
Assessment is primarily a process of determining the correctness of income declared by the assessee
and calculating the amount of tax payable by him and further procedure of imposing that tax liability
on that person.
4. Assessment Year:
Assessment year is the 12 months’ period commencing on 1st of April till 31st March of next year. It is
the year in which the income of previous year is assessed.
5. Person:
As per section 2(31) of Income-Tax Act 1961, a Person would be any one who is-
 An Individual
 A HUF (Hindu Undivided Family)
 A Company
 A Firm
 An association of person or body of individuals
 A local Authority
 Every artificial and juridical person who is not included in any of the above mentioned category.
6. Income:
The definition of Income as per section 2 (24) is inclusive but not exhaustive of below mentioned items:
 Any illegal income arising to the assessee
 Any income that is received at irregular intervals
 Any Taxable income that have been received from a source outside India
 Any benefit that can be measured in money
 Any subsidy or relief or reimbursement
 Gift the value of which exceed INR 50,000 without any consideration by an individual or HUF.
 Any prize
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 Causal incomes like winning from lotteries or horse race gambling etc.
AGRICULTURAL INCOME – OVERVIEW & TAXABILITY

Updated on Sep 11, 2018 - 02:45:30 PM
Agriculture is said to be the primary occupation in India. It is usually the only source of income for the large
rural population in India. The country as a whole is entirely dependent on agriculture for its basic food
requirements. The government has a numerous amount of schemes, policies and other measures to promote
growth in this sector – one of them being an exemption to income tax.
It may seem like the fact of exemption to income tax is all that we need to know when it comes to the taxation
of agricultural income but there is more to it. Let us take a look at the provisions of the law in this regard.
Meaning of agricultural income

The Income-tax Act has its own definition of agricultural income which constitutes the following 3 main
activities:
1. Rent or revenue got from agricultural land situated in India:
Rent is the consideration for the right to use the land. The scope of the possible sources of income that can be
derived from land is many. An example would be fees received for renewal of grant of land on lease. However,
revenue from land does not include consideration received on sale of land.
2. Income derived from agricultural land in the following ways:
a. Agriculture: The meaning of agriculture though not covered in the Act has been laid down by the Supreme
Court in the case CIT v. Raja Benoy Kumar Sahas Roy where agriculture has been explained to consist of two
types of operations –
basic operations and subsequent operations.
The basic operations would include cultivation of the land and consequently tilling of the land, sowing of
seeds, planting and all such operations that require the human skill and effort directly on the land itself.
The subsequent operations would include operations that are carried out for growth and preservation of the
produce like weeding, digging soil around the crops grown etc. and also those operations which would make
the produce fit for use in the market like tending, pruning, cutting, harvesting, etc. Income derived from
saplings or seedlings grown in a nursery would also be considered to be agricultural income whether or not the
basic operations were carried out on land.
b. Through performance of a process by the cultivator or the receiver of rent in kind that results in the
agricultural produce being fit to be taken to the market:
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Such processes involve manual or mechanical operations that are ordinarily employed to make the agricultural
produce fit for the market and the original character of such produce is retained.
c. Through sale of such agricultural produce: Where the produce does not undergo ordinary processes
employed to become marketable, the income arising on sale would generally be partly agricultural (exempt)
income and part of it will be non-agricultural (taxable) income.
The Income Tax has prescribed rules to make this bifurcation regarding agricultural and non agricultural
produce for products like tea, coffee, rubber, etc.
3. Income derived from farm building required for agricultural operations:
The conditions for classifying income derived from farm building as agricultural income are as follows:
a. The building should be on or in immediate vicinity of the agricultural land and is one which the receiver of
rent or revenue or the cultivator, by reason of his connection with the land, requires the building as a house to
stay or as a storehouse, or uses it for these kind of situations
b. Either of the two conditions should be satisfied:
The land is assessed by either land revenue or a local rate assessed and collected by government officers; OR
If the above condition is not satisfied, the land should not be located within the following region:
Aerial distance from municipality* Population as per last preceding census.
Within 2 kms 10,000 to 1,00,000
Within 6 kms 1,00,000 to 10,00,000
Within 8 kms > Rs. 10,00,000
*municipality includes municipal corporation, notified area committee, town area committee, town committee
and cantonment board.
Note: Even where the local population is < 10,000, the land should also not be situated within the jurisdiction
of the local municipality or cantonment board.
In cases where the activities have only some distant relation to land like dairy farming, breeding, rearing of
livestock, poultry farming, etc. they do not form a part of agriculture income.
Taxation of agricultural income
As discussed above, agricultural income is exempt from income tax. However, the Income-tax Act has laid
down a method to indirectly tax such income. This method or concept may be called as the partial integration
of agricultural income with non-agricultural income. It aims at taxing the non-agricultural income at higher
rates of tax.
Applicability: Individuals, HUFs, AOPs, BOIs and artificial juridical persons have to compulsorily calculate
their taxable income using this method. Thus Company, firm/LLP, co-operative society and local authority are
excluded from using this method.
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Conditions: This method is applicable when the following conditions are met:
 Net agricultural income is greater than Rs. 5,000 during the year; and
 Non-agricultural income is:
o Greater than Rs. 2,50,000 for individuals below 60 years of age and all other applicable persons
o Greater than Rs. 3,00,000 for individuals between 60 – 80 years of age
o Greater than Rs. 5,00,000 for individuals above 80 years of age
In simple terms, the non-agricultural income should be greater than the maximum amount not chargeable to tax
(as per the slab rates).
Calculation:
INCOME TAX ASSESSMENT

Every assessee, who earns income in excess of the basic exemption limit in a Financial Year (FY), must file a
statement containing details of his income, deductions, and other related information. This is called the Income
Tax Return. Once you as a taxpayer file the income returns, the Income Tax Department will process it. There
are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an
assessee gets picked for an assessment.
The various forms of assessment are as follows:
1. Self Assessment
2. Summary Assessment
3. Regular Assessment
4. Best Judgement Assessment
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5. Income Escaping Assessment
1. Self Assessment
The assessee himself determines the income tax payable. The tax department has made available various forms
for filing income tax return. The assessee consolidates his income from various sources and adjusts the same
against losses or deductions or various exemptions if any, available to him during the year. The total income of
the assessee is then arrived at. The assessee reduces the TDS and Advance Tax from that amount to determine
the tax payable on such income. Tax, if still payable by him, is called self assessment tax and must be paid by
him before he files his return of income. This process is known as Self Assessment.
2. Summary Assessment
It is a type of assessment without any human intervention. In this type of assessment, the information
submitted by the assessee in his return of income is cross-checked against the information that the income tax
department has access to. In the process, the reasonableness and correctness of the return are verified by the
department. The return gets processed online, and adjustment for arithmetical errors, incorrect claims,
disallowances etc are automatically done. Example, credit for TDS claimed by the taxpayer is found to be
higher than what is available against his PAN as per department records. Making an adjustment in this regard
can increase the tax liability of the taxpayer.
After making the aforementioned adjustments, if the assessee is required to pay tax, he will be sent an
intimation under Section 143(1). The assessee must respond to this intimation accordingly. Here you can read a
more detailed article on Section 143(1).
3. Regular Assessment
The income tax department authorizes the Assessing Officer or Income Tax authority, not below the rank of an
income tax officer, to conduct this assessment. The purpose is to ensure that the assessee has neither
understated his income or overstated any expense or loss or underpaid any tax.
The CBDT has set certain parameters based on which a taxpayer‘s case gets picked for a scrutiny assessment.
a. If an assessee is subject to a scrutiny assessment, the Department will send a notice well in advance.
However, such notice cannot be served after the expiry of 6 months from the end of the Financial year, in
which return is filed.
b. The assessee will be asked to produce the books of accounts, and other evidence to validate the income he
has stated in his return. After verifying all the details available, the assessing officer passes an order either
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confirming the return of income filed or makes additions. This raises an income tax demand, which the
assessee must respond to accordingly.
4. Best Judgement Assessment

This assessment gets invoked in the following scenarios:
a. If the assessee fails to respond to a notice issued by the department instructing him to produce certain
information or books of accounts
b. If he/she fails to comply with a Special Audit ordered by the Income tax authorities
c. The assessee fails to file the return within due date or such extended time limit as allowed by the CBDT
d. The assessee fails to comply with the terms as contained in the notice issued under Summary Assessment
After providing the assessee with an opportunity of being heard, the assessing officer passes an order based on
all the relevant materials and evidence available to him. This is known as Best Judgement Assessment.
5. Income Escaping Assessment

When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment,
he has the authority to assess or reassess the assessee‘s income. The time limit for issuing a notice to reopen an
assessment is 4 years from the end of the relevant Assessment Year. Some scenarios where reassessment gets
triggered are given below.
a. The assessee has taxable income but has not yet filed his return.
b. The assessee, after filing the income tax return, is found to have either understated his income or claimed
excess allowances or deductions.
c. The assessee has failed to furnish reports on international transactions, where he is required to do so.
Assessment, in the case of some taxpayers, could close quickly while for some, it could prove to be quite
gruelling. In case you are not comfortable dealing with income tax officers, it is suggested that you take the
help of a Chartered Accountant to help you with your case
PREVIOUS YEAR
Notices Issued Under the Income Tax Act
You are surprised to receive an intimation/ notice from the Income Tax Department even after having
successfully filed your income tax return within the due date. You are not sure about what it is and how to
respond to it. Don‘t worry, we will break it down for you to help you understand your notices in detail.
First and foremost, it is important that you understand the difference between an intimation and a notice. There
is a very thin line of difference between the two. Intimation is to highlight the outcome of the processing of
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your return or conclusion of assessment, and you may not be required to act upon it (although there are a few
exceptions to it). However, when you receive a notice, it requires you to act on it. Interestingly, very recently
the CBDT has notified a new scheme known as Centralized Communication Scheme (CCS) whereby,
gradually all communications will happen in an electronic mode.
Let us now understand various notices/intimations issued by the income tax department.
1. Intimation Under Section 143(1)
2. Notice Under Section 143(2)
3. Notice Under Section 148
1. Intimation Under Section 143(1)

After having filed your return, it is electronically processed by the Central Processing Centre(CPC). The
income is computed after making the following adjustments to the total income in the return:
 any arithmetical error in the return;
 an incorrect claim (provided the incorrect claim is apparent from the information filed);
 disallowance of incorrectly claimed loss or expenditure;
 any income which has not been included in the return
Upon successful processing of the return an intimation under section 143(1) is issued by the CPC under any of
the three instances:
 there is tax liability to be paid;
 a refund has been determined;
 there is no refund or demand, but there is an increase or reduction in the amount of loss
In case there is a tax demand, then the intimation must be issued within one year from the end of the year in
which return has been filed. For example, if you have filed your return for Assessment Year (AY) 2016-17 on
27 July, 2016, then an intimation can be issued anytime on or before 31 March, 2018.
Processing of return under this section has been made mandatory even if a scrutiny notice is issued from the
AY 2017-18.

The purpose of this notice is to notify the assessee, that the return filed has been picked for a scrutiny. It is
pertinent to note that the section under which it will be scrutinized is different from the one in which the notice
has been issued. Via a detailed scrutiny, the assessing officer intends to be assured that you have not done any
of the following:
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 understated your income;
 claimed excessive loss; or
 paid lesser taxes
Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents
required by the income tax department. The assessing officer is supposed to service this notice within 6 months
after completion of the AY to which it pertains.
For instance, Rohit filed his return on 20th May 2018 for the AY 2018-19. Here notice under section 143(2)
can be issued to Rohit within 6 months after completion of the AY to which it pertains i.e. 30th September
2019.
Don‘t know what to do with such an income tax notice? Use our Notice Upload Facility to allow us to help you
out. Alternatively, you can even seek the help of a CA.

If the assessing officer has reasons to believe that you have not disclosed your income correctly and therefore,
you have paid lower taxes or where you have not filed your return at all in a case where you should have
ideally filed it as per law, this is termed as income escaping assessment. Under these circumstances the
assessing officer is entitled to assess or reassess your income, as the case maybe.
Prior to making such assessment or reassessment, the assessing officer should serve a notice to the assessee
asking him to furnish his return of income. The notice issued for this purpose is issued under the provisions of
section 148. The various timelines to be adhered to for issuance of notice under section 148 is as follows:
Upto four years from the end of the relevant AY:
Notice cannot be issued by any officer below the rank of Assistant Commissioner or Deputy Commissioner.
An assessing officer can only issue a notice under section 148 on the direction of the Joint Commissioner after
recording the reasons to do so.
For AY 2017 -18 notice under section 148 can be issued till 31st March 2022
Beyond four years but upto six years from the end of the relevant AY:
Notice can only be issued by the Chief Commissioner or Commissioner is satisfied that income has escaped
assessment. The amount of income which has escaped assessment should be more than Rs. 1,00,000.
For AY 2017 -18 notice under section 148 can be issued till 31st March 2024
Beyond four years but upto sixteen years from the end of the relevant AY:
Notice under section 148 can be issued if income in relation to any asset (including financial interest in any
entity) located outside India, is chargeable to tax in India but has escaped assessment.
For AY ending 2017 -18 notice under section 148 can be issued till 31st March 2034.

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If the assessing officer has reasons to believe, that there is tax demand which has not been paid for the previous
years and he wants to set off the current year refund against that demand, notice under section 245 is issued.
However, the adjustment of demand and refund could be done only after you have been provided with a proper
notice and an opportunity for being heard.
The timeline to respond to the notice is within 30 days from the day of receipt of the notice. If you do not
respond within the aforesaid timeline, the assessing officer can consider the non response as a consent and
proceed with the adjustment. Therefore, it is advisable to respond to the notice at the earliest.

A notice under section 142(1) can be issued under two circumstances:
 If you have filed your return, but the assessing officer requires additional information and documents; or
 If you have not filed your return, but the assessing officer wants you to.
The information is called for, to enable the officer to make a fair assessment. Being non-responsive to this
notice has consequences,
 a penalty of Rs 10,000 can be levied for each such failure
 prosecution which may extend up to 1 year
 both of the above
RESIDENTIAL STATUS
Basis of Charge (Residential Status)
1. Introduction
2. Residential Status of an Individual
3. Residential Status of H.U.F., Firm, A.O.P.
4. Residential Status of a ‘Company’
5. Residential Status of ‘Every’ other Person
1. INTRODUCTION to Residential Status

All Taxable entities are divided in the following categories for the purpose of determining Residential Status :
a. an individual
b. a Hindu Undivided Family ( HUF)
c. a Firm or an Association of Person (AOP)
d. a joint stock company ; and
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e. every other person
Tax is levied on total income of assessee. Under the provisions of Income Tax Act, 1961 the total income on
each person is based upon his Residential Status. Sec. 6 of the Act divides the assessable persons into Three
Categories :
1. Resident ;
2. Resident but Not ordinarily Resident ; and
3. Non-Resident.
The concept of Residential Status has nothing to do with nationality or domestic of a person. An Indian, who is
a citizen of India can be non-resident for Income Tax purposes, whereas an American who is a citizen of
America can be Resident of India for Income Tax purposes. Residential Status of a person depends upon the
territorial connections of the person with this country , i.e. for how many days he has physically stayed in
India.
The Residential Status of different types of persons is determined differently . Similarly, the Residential Status of the
Assessee is to be determined each year with reference to the “Previous Year”. The Residential Status of the Assessee
may change from Year to Year. What is essential is the Status during the Previous year and not in the assessment year.
RESIDENTIAL STATUS OF AN ‘INDIVIDUAL’

An individual may be …
(a) Resident and ordinarily Resident in India
(b) Resident and not-ordinarily Resident in India;
(c) non-resident in India.
(a). Resident and Ordinary Resident [ Section 6 (1), 6(6)(a) ]
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To determine the Residential Status of an Individual, [Section 6 (1)] prescribes Two Test. An individual who
fulfils any one of the following Two Tests is called Resident under the provisions of this Act. These Tests are :
Test No. 1. Stay in India for 182 days or more.
If an individual has to become Resend of India during any previous year, his / her personal stay in India during
that year is a must although the number of days of stay differs in the two tests. It means that if an individual
does not stay in India at all in any previous year , he cannot be Resident of India in that year. Stay in India
means that the individual should have stayed in India territory and anywhere ( cities, villages, hills, even Indian
territory waters ) for such number of days.
The period of 182 days need not be at a stretch. But physical presence for an aggregate of 182 days in the
relevant previous is enough. The Status of Resident is not linked with any particular place or town or house.
The onus to prove the number of days of stay in India lies on the assessee. It is for him to prove, if he desires to
be taxed as non-resident or not ordinarily resident.
Test No. 2. Presence for 365 days during the Four preceding Previous Year and 60 days or more in that
relevant Previous Year.
A person may be frequent visitor to India. In his case, the residential status will be determined on the basis of
his presence in India for 365 days in four years immediately preceding the relevant Previous year. Along with
this his presence for 60 days during the relevant previous year is another essential conditions to be fulfilled.
The purpose, object or reason of visit to and stay in India has nothing to do with the determination of
residential status.
Explanations :
For Indian Citizen going abroad on a Job or as a member of crew of an Indian ship [Explanation (a) ]
In case of Indian citizen who is going outside Indian for a Job and his contact for such employment outside
India has been approved by the Central Government or he is a member of crew of an Indian Ship, Test (a) U/s
6(1) remains same but in Test (b) words ‗60 days‘ have been replaced to 182 days.
For Indian Citizens and Persons of Indian Origin [Explanation (b) ]
For such person Test (a) remains the same but in Test (b) ) words ‗60 days‘ have been replaced to 182 days.
( A person shall be deemed to be of Indian origin if he or either of his parents or any of his grand parents was
born in India or undivided India .)
Ordinary Resident Resident But Not Ordinarily Resident
(a) He was in India for a period or periods totaling (a) He was in India for a period or periods totaling
in all to 182 days or more during relevant previous in all to 182 days or more during relevant previous
year. year
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OR OR
(b) He was in India for a period or periods totaling (b) He was in India for a period or periods totaling
in all to 60 days or more during relevant previous year in all to 60 days or more during relevant previous.
and 365 days or more during four previous years year and 365 days or more during four previous years
preceding the relevant previous year. preceding the relevant previous year.
And And
Must be resident of India (by fulfilling at least one of Was non-resident in India in 9 or 10 previous years
two above mentioned tests) in at least 2 out of 10 out of 10 previous years preceding the relevant
previous years preceding the relevant previous year. previous year.
And OR
Must have stayed in India for 730 days or more during Was in India for less than 730 days during 7 previous
7 previous years preceding the relevant previous year. years preceding the relevant previous year.
To Summarise
Ordinary Resident = Satisfying any one of two conditions given u/s 6(1) + Satisfying both the additional
conditions of Sec. 6(6)(a)&(b)
Not Ordinarily Resident = Satisfying any one of the two conditions u/s 6(1) +Satisfying none or any one of the additional
conditions
(c) Non- Resident [ Section 2(30) ]

Under Sec. 2(30) of the Income Tax Act, 1961 an assessee who does not fulfill any of the two conditions given
in Sec. 6(1) (a) or (b) would be regarded as ― Non-Resident‖ assessee during he relevant previous year for all
purposes of this Act.
Rule of Residence for an Individual in brief :
The following Table given below summarize the Rule of residence for the assessment year 2018-2019.
In the case of an Indian Citizen In the case of an Indian Citizen or a In the case of an individual [other
who leaves India during the person of Indian origin ( who is abroad) than that mentioned in column (1)
previous year for the purpose of who comes on a visit to India during the and (2)]
employment (as a member of the previous year.
crew of an Indian Ship)
(1) (2) (3)
(a) Presence of at least 182 (a) Presence of at least 182 days in (a) Presence of at least 182
days in India during the previous India during the previous year 2018- days in India during the previous
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year 2018-2019 2019. year 2018-2019.
(b) Non-functional (b) Non-functional (b) Presence of at least 60 days
in India during the precious year
2018-2019 and 365 days during 4
years immediately preceding the
relevant previous year (i.e., during
April 1, 2014 and March 31, 2018.)
ADDITIONAL CONDITIONS AT A GLANCE

Resident in India in at least 2 out of 10 years immediately preceding the relevant previous year [ or must
satisfy at least one o f the basic conditions, in 2 out of 10 immediately preceding previous years ( i.e. 1998-99
to 2007-08].
Presence of at least 730 days in India during 7 years immediately preceding the relevant previous year ( i.e.
during April 1, 2001 and March 31, 208.)
Residential Status OF ‘H.U.F.’ , ‘FIRM’ , ‘ A.O.P.’

Section 6(2) of the Act provides that status of these persons shall be determined as per Tests given below :
1. Resident [ Section 6(2) ]
It means that if a H.U.F. , FIRM, AOP is controlled from India even partially it will be Resident assessee.
The Control and management of affairs refers to the controlling and directing power, the Head and the Brain. It
means that decision making power for vital affairs is situated in India. The control and management means de
facto control and management and not merely the right to control or manage.
In case of a Firm, it is said that the control and management of firm is saturated at a place where partners meet
to decide the affairs of the firm. If such place is outside India , it will be said that the control and management
is outside India.
2. Non- Resident [ Section 2(30) ]
a H.U.F. , FIRM, AOP shall be Non-Resident if the control and management affairs is situated wholly outside
India.
3. Not Ordinarily Resident [ Section 6(6)b ]
H.U.F. will be ‗Not Ordinarily Resident‘ if :
(i) its manager (Karta) has not been resident in India in 9 out of 10 previous year preceding the relevant
accounting year ; or
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(ii) the manage had not , during the 7 previous year preceding the relevant accounting year been present in
India for a period or periods amounting in all to 730 days.
While determining the Residential Status of a Firm or HUF Is should be noted that Residential Status of
Partners or co-parceners of a HUF is of immaterial consideration. What is important to note is that from where
the business is being controlled. There may be a situation where all the partners of a Firm are Resident in India
but even then that Firm may be Non-Resident if its full control and management lies outside India.
SCOPE OF TOTAL INCOME

Scope of Total Income/ Incidence of Tax [Sec 5)
Scope of total income is according to residential status of assessee.
1. Resident in India/ ordinarily resident in India
A person is assessable to tax in respect of income which
i. Is received or deemed to be received in India by him or on his behalf
ii. Accrues or arises or deemed to accrue or arise to him in India
iii. Accrues or arises to him outside India
2. Resident but not ordinarily resident in India
iii. Accrues or arises to him outside India from a business controlled in or profession set up in India.
3. Non-resident in India
Other points:
 Received in India means first receipt in India. If an income is received first outside India and then subsequently
remitted to India, it shall be treated as received outside India.
 Past untaxed profits shall not be considered to be income of the current year in any case.
Particulars of Income ROR RNOR NR
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Income received or deemed to be Taxable in Taxable in
Taxable in India
received in India India India
Income accrue or arises or deemed to Taxable in Taxable in

Taxable in India
accrue or arises in India India India
Income accrue or arises or deemed to

Taxable in Taxable in
accrue or arises outside India , but first Taxable in India
India India
receipt in India

Taxable in Not Taxable
accrue or arises outside India , but first Not Taxable in India
India in India
receipt outside India

Not
accrue or arises outside India from Taxable in
Taxable in India Taxable in
business/ profession controlled in/from India
India
India
Income received or deemed to be received in India [Sec 7)

Income received in India: Any income which is received in India is liable to tax in India, whether the person
receiving income is resident or non- resident. ‗Received in India‘ means first receipt.
Income deemed to be received in India: Following incomes shall be deemed to be received in India even in
the absence of actual receipt:
i. Contribution by employer to recognized provident fund in excess of 12% of salary of employee
ii. Interest credited to RPF in excess of 9.5%
iii. Transferred balance from unrecognized PF to RPF
iv. Contribution by Government/Employer to notified pension scheme
Dividend Income (Sec 8 )
For the purposes of inclusion in the total income of an assessee,—
(a) any dividend declared by a company or distributed or paid by it within the meaning of sub-clause (a) or
sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall be deemed
to be the income of the previous year in which it is so declared, distributed or paid, as the case may be ;
(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such
dividend is unconditionally made available by the company to the member who is entitled to it.
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Income deemed to accrue or arise in India (Sec 9)
Following income shall be deemed to accrue or arise in India:
i. Income from any property, asset or source of income in India
ii. Income from the transfer of any capital asset situated in India
iii. Any income from salary if it is payable for services rendered in India
iv. Salary (not allowances) payable by the government of India to an Indian citizen for services rendered
outside India
v. Interest payable by
a. Government or
b. Resident in India if money is used by the borrower for the purpose of business or profession or earning any
income from any source in India or
c. Non-resident in India if money is used by the borrower for the purpose of business or profession in India
vi. Royalty payable by
a. Government or
b. Resident in India if services are utilized for the purpose of business or profession or earning any income
from any source in India or
c. Non-resident in India if services are utilized for the purpose of business or profession or earning any income
from any source in India
vii. Fees for technical services payable by
a. Government or
b. Resident in India it services are utilized for the purpose of business or profession or earning any income
from any source in India or
c. Non-resident in India it services are utilized for the purpose of business or profession or earning any income
from any source in India
viii. Income from a business connection in India
Any income which arises, directly or indirectly, from any activity or a business connection in India is deemed
to be earned in India. If all business activities are not carried out in India, then only such part of income, as is
reasonably attributable to the operations carried out in India, is taxable
Examples of business connection includes
i. branch office in India,
ii. agent of non-resident entering into contracts,
iii. Subsidiary in India
iv. maintaining stocks etc
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However in case of non-resident, following shall not be treated as business connection in India:
i. Purchase of goods in India for purpose of exports
ii. Collection of news and views for transmission outside India by non-resident who is engaged in the business
of running news agency or of publishing newspapers, magazines or journals
iii. Shooting of films in India if
a. In case of individual – he is not a citizen of India
b. In case of Firm – none of the partner is citizen or resident of India
c. In case of company – none of the shareholder is citizen or resident of India
(ix) a dividend paid by an Indian company outside India
CAPITAL VS REVENUE
Capital vs Revenue (A Distinction Between As Per Income Tax ACT. 1961
1. Introduction
2. Capital Receipt vs Revenue Receipt
3. Capital Expenses vs. Revenue Expenses
4. Capital Losses vs Revenue Losses
1. INTRODUCTION
Income Tax is levied on income of assessee and not an every receipt which he receives. The method of
charging tax on different types of receipt is different. Income tax Act, 1961 provides a separate head ―
CAPITAL GAINS‖ for levying tax on capital receipts. Similarly, while calculating net taxable income of an
assessee only revenue expenses are allowed to be deducted out of revenue receipts.
Particularly while calculating business profit or professional gain only revenue receipts and revenue expenses
are considered. This make the distinction between capital and revenue of vital importance. For this distinguish
capital and revenue items can be divided in to 3 sub-parts :
1. Capital Receipts vs Revenue Receipts
2. Capital Expenses vs Revenue Expenses
3. Revenue Losses vs Capital Losses
2. CAPITAL RECEIPT VS REVENUE RECEIPTS

As discussed above the capital receipts are to be charged to tax under ― Capital Gains‖ and revenue receipts are
taxable under other heads, it is of vital importance to understand which receipt is a capital receipt and which
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one is a Revenue. Some tests, however, can be applied in particular cases. These Tests are :
1. On the basis of nature of Assets : If a receipt is referred to Fixed Asset, it is capital receipt and if it is
referable to circulating asset it is revenue receipt.
Fixed assets is that with the help of which owner earns profit by keeping it in this possession, e.g. Plant
, Machinery, Building or factory etc.
Circulating Asset is that with help of which owner earns profits by parting with it and letting others to
become its owner, e.g. Stock-in Trade.
Profit on the sale of Motor Car used in business by an assessee is Capital Receipt whereas the profit
earned by an automobile dealer, dealing in cars, by selling a car is his revenue receipt.
2. Termination of source of income : Any sum received in compensation for the termination of source of
income is capital receipt, e.g. compensation receive by an employee from its employer on termination
of his services is capital receipt.
3. Amount received in substitution of income : Any sum received in substitution of income is revenue
receipt,
e.g. ‗A‘ company purchased the right to produce a Film fro its earlier producer with the condition that
no other produce will be given these rights. Afterwards, it is found that the rights for producing this
film had already been sold. The ‗A‘ Company claimed damages and was awarded Rs.50,000. It was
held that damages received are the compensation for the profits which were to be earned. Hence, this is
Revenue Receipt.
4. Compensation received on termination of Lease or surrender of a Right. Any amount received as
compensation on surrendering a right or termination of any Lease is Capital Receipt where as any
amount received for loss of future income is a revenue receipt.
e.g. An Author gives up his right to publish a book and receives Rs. 1,00,000 as compensation. It is
capital receipt but if he receives it as advance Royalty for 5 years it is Revenue receipt.
3. CAPITAL EXPENSES VS REVENUE EXPENSES

To distinguish a Revenue Expenditure from a Capital Expenditure, the following tests can be applied for this
purpose :
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(i) Nature of the Assets : Any expenditure incurred to acquire a Fixed Assets or in connection with
installation of Fixed Assets is Capital Expenditure.
Whereas..
any expenditure incurred as price of goods purchased for resale along with other necessary expenses incurred
in connection with such purchase are Revenue Expenses.
(ii) Nature of Liability : A payment made by a person to discharged a capital liability is a capital
expenditure.
Whereas..
An expenditure incurred to discharged a revenue liability is Revenue Expenditure,
e.g. Amount paid to a contractor for cancellation of contract to construct a factory building is capital
expenditure.
(iii) Nature of Transaction : if an Expenditure is incurred to acquire a source of income, it is Capital
Expenditure e.g. purchase of patents to produce picture tubes of T.V. sets.
Whereas..
An Expenditure incurred to earn an income is revenue expenditure , e.g. salary to staff, advertisement
expenses. Etc.
(iv) Nature of Payment in the hands of payer : If an expenditure is incurred by an assessee as a Capital
Expenditure, it will remain a capital expenditure even if the amount may be revenue receipt in the hands of
receiver ,
e.g. purchase of Motor Car by a businessman is capital expenditure in his hands although it is revenue receipt
in the hands of car dealer.
4. CAPITAL LOSSES VS REVENUE LOSSES

Distinction has to be made between revenue losses and capital losses of the business because under the
provisions of this Act Capital Losses are dealt with under the Chapter ― Capital Gain‖ whereas Revenue
Looses are treated as Business Losses and as such are treated under the head ― Profit and Gains of Business or
Profession‖.
Distinguish has to be made between Revenue Losses and Capital Losses of the business because under the
provisions of this Act, Capital Losses can be set off against the Income from Capital Gain only, whereas the
Revenue Losses are business losses and as such can be set off against any other income of the assessee.
It is very difficult to distinguish between a Capital Loss and a Revenue Loss on the basis of certain principles.
On the basis of court judgment, following decisions have become distinguishing points :
(i) Loss due to sale of Assets : Where there is loss on selling a Capital Assets, it is a Capital Loss whereas
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any loss incurred during the sale of Stock-in-Trade is a Revenue Loss.
(ii) Loss due to embezzlement : Where there is embezzlement done by an employee and this causes loss to
the business, it is of Revenue Loss.
(iii) Loss due to withdrawal of money from bank : Oncethe amount is deposited in Bank and then it is
withdrawn by an employee and is misappropriated , is a Capital Loss.
(iv) Loss due to liquidation of company : Amount deposited by a person with manufacturing industry to get
its agency and lost due to company being liquidated is a Capital Loss.
(v) Loss due to Theft by an employee : Losses occurring due to theft or embezzlement of misappropriation
committed by an employee is Revenue Loss.
Example :
State , giving reasons, whether the following are Capital or Revenue Receipts :
1. Compensation received for compulsory vacation of place of business.
1. Bonus shares received by a dealer of shares.
2. Money received by a Tyre Manufacturing company for sale of technical know-how regarding
manufacture of tyre.
3. Dividend and interest for investment.
Solutions :
1. Revenue receipt as it is in compensation of assessee‘s profit which it would have earned.
2. If the assessee has also converted the bonus shars into stock in trade then it is a revenue receipt
otherwise it is an accretion in the capital assets.
3. Revenue Receipt but in case the sale of technical know-how results into substantial reduction in value
of the tyre company or company closes down its business in that particular line then the receipt would
be a Capital Receipt.
Assessee gets the income of dividend and interest regularly and form a define source and it is a return for the
use of his asset by somebody else and so it is a revenue receipt.
WHAT IS CAPITAL EXPENDITURE?

Capital expenditure, also known as CapEx comprises the funds used by an organization or the government to
purchase and maintain fixed assets like property, machine or any other equipment.
Capital Expenditure is a necessary requirement at times to take on new ventures or projects. Companies engage
in capital expenditure while budgeting their expenses to broaden operations. It is also important when the
company is engaged in expansion activities.
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While discussing capital expenditure for governments, it includes the creation of assets as well as reduction of
liabilities. For example, repaying loans also constitutes a capital expenditure. This is because it helps in
reducing liabilities of an organization or government. These expenses are covered for by the government by
raising capital or by capital transfers.
What is a Revenue Account?

A revenue account is an account with a credit balance. It includes all the revenue receipts also known as
current receipts of the government. These receipts include tax revenues and other revenues of the government.
Tax revenues include the revenue earned by the government authorities by levying direct and indirect taxes and
duties. Direct taxes include income tax, corporate tax and so on. Indirect taxes include Excise duties,
customs duties, and service tax.Other revenues include revenues from other sources of investments like
interest, dividends, profits from public sector units, fees, fines and so on.
Revenue expenditure includes expenses which are not used for the creation of assets or repayment of liabilities.
These basically include current expenses of the government. For example, paying salaries, giving grants are
instances of revenue expenditure. It can further be divided into plan and non-plan expenditure. The current
budget, however, has not used this classification.
What is a Capital Account?

A capital account is an account that includes the capital receipts and the payments. It basically includes assets
as well as liabilities of the government. Capital receipts comprise of the loans or capital that are raised by
governments by different means.
They can also raise money from the public, such loans are market loans. They could also borrow from banks or
other sources by means of Treasury Bills, also called T-Bills. Loans are also raised from external sources like
foreign governments or international institutions. Another way of raising capital is by disinvestment in public
sector units or other assets.
Difference between Revenue Expenditure and Capital Expenditure
Capital expenditures are usually one off and they include the substantial investments of money or capital that a
government makes for the purpose of expansion in various sectors and different business in order to generate
profits.
These expenditures are generally for the purchase of fixed assets or assets with a long life. These include
machines, manufacturing equipment or equipment to enhance the infrastructure. These assets generate value
throughout there life term for the government and may or may not have a salvage value. The assets depreciate
and their cost will deduct throughout the life of the asset and not in one go.
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Revenue expenses, on the other hand, are relatively current or short-term in nature. They are expenses the
government requires for running the day to day activities. These expenses are fully charged in the year of the
expense and not depreciated over a period. They may also be recurring or non-recurring in nature.
Solved Question for You

Q: Tax is a major source of revenue for the government. True or False?
Ans: The above statement is True. Taxes both Direct and Indirect are the governments biggest source of
revenue.
EXEMPTED INCOMES
List of Exempted Incomes (Tax-Free) Under Section-10
1. Agriculture Income [Section 10(1)]

As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Agricultural
income is defined under section 2(1A) of the Income-tax Act. As per section 2(1A), agricultural income
generally means:
a. Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
b. Any income derived from such land by agriculture operations including processing of agricultural
produce so as to render it fit for the market or sale of such produce.
c. Any income attributable to a farm house subject to satisfaction of certain conditions specified in this
regard in section 2(1A). Any income derived from saplings or seedlings grown in a nursery shall be
deemed to be agricultural income.
2. Any sum received by a Co-parcener from Hindu Undivided Family

(H.U.F.) [Section 10(2)]
As per section 10(2), amount received out of family income, or in case of impartible estate, amount received
out of income of family estate by any member of such HUF is exempt from tax.
Example-1. HUF earned `. 5,00,000 during the previous year and paid tax on its income. Mr. A, a co-parcener
is an employee and earns a salary of `.20,000 p.m. During the previous year Mr. A also received `.1,00,000
from HUF. Mr. A will pay tax on his salary income but any sum of money received from his HUF is not
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chargeable to tax in Mr. A‘s hands.
Example-2. HUF earned `.90,000 during the previous year 2016-17 and it is not chargeable to tax. Mr. A, a co-
parcener is earning individual income of `. 20,000 p.m. Besides his individual income, Mr. A receives `.30,000
from his HUF.
Mr. A will pay tax on his individual income but any sum of money received by him from his HUF is not
chargeable to tax in the hands of co-parcener whether the HUF has paid tax or not on that income.
3. Share of Income from the Firm [Section 10(2A)]

As per section 10(2A), share of profit received by a partner from a firm is exempt from tax in the hands of the partner.
Further, share of profit received by a partner of LLP from the LLP will be exempt from tax in the hands of such partner.
This exemption is limited only to share of profit and does not apply to interest on capital and remuneration received by
the partner from the firm/LLP.
4. Interest paid to Non-Resident [Section 10(4)(i)]

As per section 10(4)(i), in the case of a non-resident any income by way of interest on certain notified
securities or bonds (including income by way of premium on the redemption of such bonds) is exempt from
tax.
As per section 10(4)(ii), in the case of an individual, any income by way of interest on money standing to his
credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange
Management Act, 1999, and the rules made thereunder is exempt from tax.
Exemption under section 10(4)(ii) is available only if such individual is a person resident outside India as
defined in clause (q) of section 2 of the said Act or is a person who has been permitted by the Reserve Bank of
India to maintain the aforesaid Account.
5. Interest to Non-Resident on Non-Resident (External) Account

[Section 10(4)(ii)]
Any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any
bank in India shall be exempt from tax in case of an individual who is a person resident outside India or is a
person who has been permitted by the RBI to maintain the aforesaid account. The person residing outside India
shall have the same meaning as defined under Foreign Exchange Regulation Act, 1973, FEMA, 1999. This
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exemption shall not be available on any income by way of interest paid or credited on or after 1-4-2005.
6. Interest paid to a person of Indian Origin and who is Non-

Resident [Section 10(4 B)]
In case of an individual, being a citizen of India or a person of Indian origin, who is nonresident, any income
from interest on such savings certificates issued by the Central Government, as Government may specify in
this behalf by notification in the Official Gazette, shall be fully exempt. The exemption under this section shall
not be allowed on bonds or securities issued on or after 1-6-2002.
This exemption shall be allowed only if the individual has subscribed to such certificates in Foreign Currency
or other foreign exchange remitted from a country outside India in accordance with the provisions of the
Foreign Exchange Act, 1973, FEMA, 1999 and any rules made there under.
For this purpose, a person shall be deemed to be of Indian origin if he or either of parents or any of his
grandparents, was born in India or in undivided India.
7. Leave Travel Concession or Assistance (LTC/LTA) to an Indian

Citizen Employee [Section 10(5)]
The employee is entitled to exemption under section 10(5) in respect of the value of travel concession or
assistance received by or due to him from his employer or former employer for himself and his family, in
connection with his proceeding—
a. on leave to any place in India.
b. to any place in India after retirement from service or after the termination of his service.
The exemption shall be allowed subject to the following:
i. where journey is performed by air — Maximum exemption shall be an amount not exceeding the air
economy fare of the National Carrier by the shortest route to the place of destination;
ii. where places of origin of journey and destination are connected by rail and the journey is performed by
any mode of transport other than by air — Maximum exemption shall be an amount not exceeding the
air-conditioned first class rail fare by the shortest route to the place of destination; and
iii. where the places of origin of journey and destination or part thereof are not connected by rail and the
journey is performed between such places — The amount eligible for exemption shall be:
A. where a recognised public transport system exists, an amount not exceeding the 1st class or
deluxe class fare, as the case may be, on such transport by the shortest route to the place of
destination; and
B. where no recognised public transport system exists, an amount equivalent to the airconditioned
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first class rail fare, for the distance of the journey by the shortest route, as if the journey had
been performed by rail.
Exemption will, however, in no case exceed, actual expenditure incurred on the performance of journey.
HOW MANY TIMES CAN EXEMPTION BE CLAIMED?
 The assessee can claim exemption in respect of any two journeys in a block of 4 years. For this
purpose, the first block of 4 years was calendar years 1986-89, second block was 1990-93, third block
was 1994-97, fourth block was 1998-2001, fifth block was 2002-05 sixth block was 2006-09, seventh
block is 2010 to 2013, eight block is 2014-2017 and ninth block will be 2018-2021.
 If the assessee has not availed of the exemption of LTC in a particular block, whether for both the
journeys or for one journey, he can claim the exemption of first journey in the calendar year
immediately succeeding the end of the block of four calendar years. In other words, maximum one
journey can be carried forward and that too only for the first journey in the following calendar year
unless the period is otherwise extended. Such journey undertaken during the extended period will not
be taken into account for determining the tax exemption of two journeys for the succeeding block.
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UNIT- II
House Property and Taxes
Owning a house one day – everybody dreams of this, saves towards this and hopes to achieve this one day.
However, owning a house property is not without responsibilities. Paying house property taxes annually is one
of them. If you want to learn how to save tax on home loan interest, this guide is for you. It also talks about
how to report home ownership in your income tax return.
1. Basics of House Property
2. Steps to Calculate Income From House Property
3. Tax Deduction on Home Loans
4. Claiming Deduction on Home Loan
5. Tax Benefits on Home Loans for Joint Owners
6. HRA and Deduction on Home Loan
7. Case Study
8. Significant Budget Amendment in 2017 – Impact explained with an example
1. Basics of House Property

A house property could be your home, an office, a shop, a building or some land attached to the building like a parking
lot. The Income Tax Act does not differentiate between a commercial and a residential property. All types of properties
are taxed under the head ‘income from house property’ in the income tax return. An owner for the purpose of income
tax is its legal owner, someone who can exercise the rights of the owner in his own right and not on someone else’s
behalf.
When a property is used for the purpose of business or profession or for carrying out freelancing work – it is taxed
under the ‘income from business and profession’ head. Expenses on its repair and maintenance are allowed as business
expenditure.
a. Self-Occupied House Property
A self-occupied house property is used for one‘s own residential purposes. This may be occupied by the
taxpayer‘s family – parents and/or spouse and children. A vacant house property is considered as self-occupied
for the purpose of Income Tax.
Prior to FY 2019-20, if more than one self-occupied house property is owned by the taxpayer, only one is
considered and treated as a self-occupied property and the remaining are assumed to be let out. The choice of
which property to choose as self-occupied is up to the taxpayer.
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For the FY 2019-20 and onwards, the benefit of considering the houses as self-occupied has been extended to 2
houses. Now, a homeowner can claim his 2 properties as self-occupied and remaining house as let out for
Income tax purposes.
b. Let Out House Property
A house property which is rented for the whole or a part of the year is considered a let out house property for
income tax purposes
c. Inherited Property
An inherited property i.e. one bequeathed from parents, grandparents etc again, can either be a self occupied
one or a let out one based on its usage as discussed above.
2. Steps to Calculate Income From House Property
Here is how you compute your income from a house property:
a. Determine Gross Annual Value (GAV) of the property: The gross annual value of a self-occupied house is zero. For a
let out property, it is the rent collected for a house on rent.
b. Reduce Property Tax: Property tax, when paid, is allowed as a deduction from GAV of property.
c. Determine Net Annual Value(NAV) : Net Annual Value = Gross Annual Value – Property Tax
d. Reduce 30% of NAV towards standard deduction: 30% on NAV is allowed as a deduction from the NAV under
Section 24 of the Income Tax Act. No other expenses such as painting and repairs can be claimed as tax relief beyond
the 30% cap under this section.
e. Reduce home loan interest: Deduction under Section 24 is also available for interest paid during the year on housing
loan availed.
f. Determine Income from house property: The resulting value is your income from house property. This is taxed at the
slab rate applicable to you.
g. Loss from house property: When you own a self occupied house, since its GAV is Nil, claiming the deduction on
home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads.
Note: When a property is let out, its gross annual value is the rental value of the property. The rental value must be
higher than or equal to the reasonable rent of the property determined by the municipality.
3. Tax Deduction on Home Loans

a. Tax Deduction on Home Loan Interest: Section 24
Homeowners can claim a deduction of up to Rs. 2 lakhs (Rs. 1.5 lakhs, if you are filing returns for FY 2013-14) on their
home loan interest, if the owner or his family reside in the house property. The same treatment applies when the
house is vacant. If you have rented out the property, the entire interest on the home loan is allowed as a deduction.
However, your deduction on interest is limited to Rs. 30,000 instead of Rs 2 lakhs if both the following conditions stand
satisfied:
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a. The loan is taken on or after 1 April 1999
b. The purchase or construction is not completed within 5 years from the end of the FY in which loan was
availed
When is the deduction limited to Rs 30,000?
As already mentioned, if the construction of the property is not completed within 5 years, the deduction on home loan
interest shall be limited to Rs. 30,000. The period of 5 years is calculated from the end of the financial year in which
loan was taken. So, if the loan was taken on 30th April 2015, the construction of the property should be completed by
31st March 2021. (For years prior to FY 2016-17, the period prescribed was 3 years which got increased to 5 years in
Budget 2016).
Note: Interest deduction can only be claimed, starting in the financial year in which the construction of the property is
completed.
How do I claim a tax deduction on a loan taken before the construction of the property is complete?
Deduction on home loan interest cannot be claimed when the house is under construction. It can be claimed only after
the construction is finished. The period from borrowing money until construction of the house is completed is called
pre-construction period.
Interest paid during this time can be claimed as a tax deduction in five equal instalments starting from the year in which
the construction of the property is completed. Understand pre-construction interest better with this example.
b. Tax Deduction on Principal Repayment
The deduction to claim principal repayment is available for up to Rs. 1,50,000 within the overall limit of Section 80C
from FY 2014-15 onwards (Rs. 1 lakh if you are filing returns for last financial year). Check the principal repayment
amount with your lender or look at your loan installment details.
Conditions to claim this deduction-
 The home loan must be for purchase or construction of a new house property.
 The property must not be sold in five years from the time you took possession. Doing so will add back the
deduction to your income again in the year you sell.
Stamp duty and registration charges Stamp duty and registration charges and other expenses related directly to the
transfer are also allowed as a deduction under Section 80C, subject to a maximum deduction amount of Rs. 1.5 lakhs.
Claim these expenses in the same year you make the payment on them.
C. Tax Deduction for First-Time Homeowners: Section 80EE
Section 80EE recently added to the Income Tax Act provides the homeowners, with only one house property on the
date of sanction of loan, a tax benefit of up to Rs.50,000.
Click here to read more.
These benefits are not available for an under construction property.
Do you own more than one house?
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If you own more than one house, you need to file the ITR-2 form.
Read our guide to ITR-2 form here.
4. Claiming Deduction on Home Loan

 The amount of deduction you can claim depends on the ownership share you have on the property.
 The home loan must also be in your name. A co-borrower can claim these deductions too.
 The home loan deduction can only be claimed from the financial year in which the construction is completed.
 Submit your home loan interest certificate to your employer for him to adjust tax deductions at source
accordingly. This document contains information on your ownership share, borrower details and EMI payments
split into interest and principal.
 Otherwise, you may have to calculate the taxes on your own and claim the refund, if any, at the time of tax
filing. It’s also possible that you may have to deposit the dues on your own if there is a tax payable.
 If you are self-employed or a freelancer, you don’t have to submit these documents anywhere, not even to the
IT Department. You will need them to calculate your advance tax liability for every quarter. You must keep
them safely to answer queries that may arise from the IT Department and for your own records.
5. Tax Benefits on Home Loans for Joint Owners

The joint owners, who are also co-borrowers of a self-occupied house property, can claim a deduction on interest on
the home loan up to Rs 2 lakhs each. And deduction on principal repayments, including a deduction for stamp duty and
registration charges under Section 80C within the overall limit of Rs. 1.5 lakhs for each of the joint owners. These
deductions are allowed to be claimed in the same ratio as that of the ownership share in the property.
You may have taken the loan jointly, but unless you are an owner in the property – you are not entitled to the tax
benefits. There have been situations where the property is owned by a parent and the parent and child together take
up a loan which is paid off only by the child. In such a case the child, who is not a co-owner is devoid of the tax benefits
on the home loan.
Therefore, to claim the tax benefits on the property:
1. You must be a co-owner in the property
2. You must be a co-borrower for the loan
Each co-owner can claim a deduction of maximum Rs 1.5 lakhs towards repayment of principal under section 80C. This
is within the overall limit of Rs 1.5 lakhs of Section 80C. Therefore, as a family, you will be able to take a larger tax
benefit against the interest paid on the home loan when the property is jointly owned and your interest outgo is more
than Rs 2,00,000 per year.
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It’s important to note that the tax benefit of both the deduction on home loan interest and principal repayment under
section 80C can only be claimed once the construction of the property is complete.
6. HRA and Deduction on Home Loan

Scenario 1:
You live in a rented accommodation since your house is too small for your needs
Raghav lives in a rented house in Noida since his own office, son’s school and his wife’s office are in Noida, He has his
own house on the outskirts of Delhi which is quite small and also lying vacant. He is paying interest on the loan on his
own house.
Raghav can claim:
 HRA for rent he pays for the house in Noida,and
 Deduction on interest up to Rs 2,00,000 on the home loan
Scenario 2:
You live in a rented house; your own house is also let out
Neha recently bought a flat in Indore, though she lives and works in Bangalore. She has no plans of returning to Indore
in the next five years so she gives that flat on rent. She lives on rent in Bangalore.
Neha can claim:
 HRA for the rent she pays for the house in Bangalore and
 Claim the entire interest she pays during the year on the home loan
7. Case Study
Aditya earns rental income from his house in Vizag.See how his GAV and NAV are computed and how much he has to
pay as taxes here.
8. Significant Budget Amendment in 2017 – Impact explained with an

example
Till FY 2016-17, loss under the head house property could be set off against other heads of income without any limit.
However, form FY 2017-18, such set off of losses has been restricted to Rs 2 lakhs. This amendment would not really
affect taxpayers having a self-occupied house property. This move will have an impact on taxpayers who have let-out/
rented their properties. Though there is no bar on the amount of home loan interest that can be claimed as a deduction
under Section 24 for a rented house property, the losses which could arise on account of such interest repayment can
be set off only to the extent of Rs 2 lakhs.
Here is an example to help you comprehend the impact of the amendment:
33
Particulars AY 2017-18 AY 2018-19
Salary income 10,00,000 10,00,000
Income from other sources (Interest income) 4,00,000 4,00,000
Income from house property (*) (4,40,000) (2,00,000)
Gross Total Income 9,60,000 12,00,000
Deductions 2,00,000 2,00,000
Taxable income 7,60,000 10,00,000
Tax on the above 77,000 1,12,500
Additional tax outgo excluding cess in AY 2018-19 on account of the amendment 35,500
Workings for Income from House Property
AY 2017-
Particulars AY 2018-19
18
Property A
Annual Value Nil Nil
(-) Interest on housing loan restricted to 2,00,000 2,00,000
Loss from House Property(A) (2,00,000) (2,00,000)
Property B
Net income from House Property after

60,000 60,000
all deductions (B)
Property C
Annual Value 5,00,000 5,00,000
Less : Standard Deduction 1,50,000 1,50,000
Less : Interest on loan 6,50,000 6,50,000
Loss from House Property (C) (3,00,000) (3,00,000)
Total income from house property Restricted to (2,00,000). Balance loss of Rs 2.4 lakhs can be
(4,40,000)
(A+B+C) carried forward for the next 8 AYs
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UNIT – III
PROFITS AND GAINS FROM BUSINESS AND PROFESSION
3.1 Chargeability:
The following incomes are chargeable to tax under the head Profit and Gains from Business or Profession:
S. Section Particulars
No.
1. 28(i) Profit and gains from any business or profession carried on by the assessee at
any time during the previous year
2. 28(ii) Any compensation or other payment due to or received by any specified

person
3. 28(iii) Income derived by a trade, professional or similar association from specific

services performed for its members
4. 28(iiia) Profit on sale of a license granted under the Imports (Control) Order 1955,
made under the Import Export Control Act, 1947
5. 28(iiib) Cash assistance (by whatever name called) received or receivable by any
person against exports under any scheme of Government of India
6. 28(iiic) Any duty of Customs or Excise repaid or repayable as drawback to any person
against exports under the Customs and Central Excise Duties Drawback Rules,
1971.
7. 28(iiid) Profit on transfer of Duty Entitlement Pass Book Scheme, under Section 5 of
Foreign Trade (Development and Regulation) Act, 1992
8. 28(iiie) Profit on transfer of Duty Free Replenishment Certificate, under Section 5 of

Foreign Trade (Development and Regulation) Act 1992
9. 28(iv) Value of any benefits or perquisites arising from a business or the exercise of a
profession.
10. 28(v) Interest, salary, bonus, commission or remuneration due to or received by a

partner from partnership firm
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11. 28(va) a) Any sum received or receivable for not carrying out any activity in relation
to any business or profession; or
b) Any sum received or receivable for not sharing any know-how, patent,
copyright, trademark, licence, franchise, or any other business or commercial
right or information or technique likely to assist in the manufacture of goods or
provision of services.
12. 28(vi) Any sum received under a Key man Insurance policy including the sum of
bonus on such policy
12A. 28(via) Any profit or gains arising from conversion of inventory into capital asset.
13. 28(vii) Any sum received ( or receivable) in cash or in kind, on account of any capital
assets (other than land or goodwill or financial instrument) being demolished,
destroyed, discarded or transferred, if the whole of the expenditure on such
capital assets has been allowed as a deduction under section 35AD
14. Explanation Income from speculative transactions. However, it shall be deemed to be

to section 28 distinct and separate from any other business.
15. 41(1)  Remission or cessation of liability in respect of any loss, expenditure or

trading liability incurred by the taxpayers
 Recovery of trading liability by successor which was allowed to the
predecessor shall be chargeable to tax in the hands of successor.
Succession could be due to amalgamation or demerger or succession of
a firm succeeded by another firm or company, etc.
 Any liability which is unilaterally written off by the taxpayer from the
books of accounts shall be deemed as remission or cessation of such
liability and shall be chargeable to tax.
16. 41(2) Depreciable asset in case of power generating units, is sold, discarded,
demolished or destroyed, the amount by which sale consideration and/ or
insurance compensation together with scrap value exceeds its WDV shall be
chargeable to tax.
17. 41(3) Where any capital asset used in scientific research is sold without having been
36
used for other purposes and the sale proceeds together with the amount of
deduction allowed under section 35 exceed the amount of the capital
expenditure, such surplus or the amount of deduction allowed, whichever is
less, is chargeable to tax as business income in the year in which the sale took
place.
18. 41(4) Where bad debts have been allowed as deduction under Section 36(1)(vii) in
earlier years, any recovery of same shall be chargeable to tax.
19. 41(4A) Amount withdrawn from special reserves created and maintained
under Section 36(1)(viii) shall be chargeable as income in the previous year in
which the amount is withdrawn.
20. 41(5) Loss of a discontinued business or profession could be adjusted from the
deemed business income as referred to in section 41(1), 41(3), (4) or (4A)
without any time limit.
20A. 43AA Any foreign exchange gain or loss arising in respect of specified foreign
currency transactions shall be treated as income or loss. Such gain or loss shall
be computed in accordance with notified ICDS [subject to Section 43A]
21. 43CA Where consideration for transfer of land or building or both as stock-in-trade is
less than the stamp duty value, the value so adopted shall be deemed to be the
full value of consideration for the purpose of computing income under this
head.
However, no such adjustment is required to be made if value adopted for
stamp duty purposes does not exceed 105% of the sale consideration.
21A. 43CB The profits and gains arising from construction contract or a contract for
providing service is to be determined on the basis of percentage completion
method, in accordance with the notified ICDS.
In case of contract for providing services with duration of not more than 90
days, the profits and gains shall be determined on basis of project completion
method.
While as in case of contract for providing services with indeterminate number
of acts over a specified period of time shall be determined on basis of straight
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line method.
22. 43D As per RBI Guidelines, Interest on bad and doubtful debts of Public Financial
Institution or Scheduled Bank or [a co-operative bank other than a primary
agricultural credit society or a primary co-operative agricultural and rural
development bank] or State Financial Corporation or State Industrial
Investment Corporation, shall be chargeable to tax in the year in which it is
credited to Profit and Loss A/c or year in which it is actually received,
whichever happens earlier.
23. 43D Similarly as per NHB Guidelines, Interest on bad and doubtful debts of
housing finance company, shall be chargeable to tax, in the year it is credited
to P & L A/c or year in which it is actually received by them, whichever is
earlier.
24 — Assistance in the form of a subsidy or grant or cash incentive or duty drawback

or waiver or concession or reimbursement (by whatever name called) by the
Central Govt. or State Govt. or any authority or body or agency to the assessee
would be included in definition of income as referred to in Section 2(24).
However, in the following cases subsidy or grant shall not be treated as
income:
i) The subsidy or grant or reimbursement which is taken into account for
determination of the actual cost of the asset in accordance with the provisions
of Explanation 10 to clause (1) of Section 43;
ii) The subsidy or grant by the Central Government for the purpose of the
corpus of a trust or institution established by the Central Government or a
State Government, as the case may be
Calculating Profits and Gains from Business and Profession

To calculate profits and gains from business and profession, the following types of incomes must be added:
1. Profit and gains from any business or profession carried on by the assessee at any time during the
previous year
2. Any compensation or other payment due to or received by any specified person
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3. Income derived by a trade, professional or similar association from specific services performed for its
members
4. Profit on sale of a license granted under the Imports (Control) Order 1955, made under the Import
Export Control Act, 1947
5. Cash assistance (by whatever name called) received or receivable by any person against exports under
any scheme of Government of India
6. Any duty of Customs or Excise repaid or repayable as drawback to any person against exports under
the Customs and Central Excise Duties Drawback Rules, 1971.
7. Profit on transfer of Duty Entitlement Pass Book Scheme, under Section 5 of Foreign Trade
(Development and Regulation) Act, 1992
8. Profit on transfer of Duty Free Replenishment Certificate, under Section 5 of Foreign Trade
(Development and Regulation) Act 1992
9. Value of any benefits or perquisites arising from a business or the exercise of a profession.
10. Interest, salary, bonus, commission or remuneration due to or received by a partner from partnership
firm
11. Any sum received or receivable for not carrying out any activity in relation to any business or
profession; or
12. Any sum received or receivable for not sharing any know-how, patent, copyright, trademark, licence,
franchise, or any other business or commercial right or information or technique likely to assist in the
manufacture of goods or provision of services.
13. Any sum received under a Key man Insurance policy including the sum of bonus on such policy
14. Any sum received ( or receivable) in cash or in kind, on account of any capital assets (other than land or
goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of
the expenditure on such capital assets has been allowed as a deduction under section 35AD
15. Income from speculative transactions. However, it shall be deemed to be distinct and separate from any
other business.
16. Remission or cessation of liability in respect of any loss, expenditure or trading liability incurred by the
taxpayers
17. Recovery of trading liability by successor which was allowed to the predecessor shall be chargeable to
tax in the hands of successor. Succession could be due to amalgamation or demerger or succession of a
firm succeeded by another firm or company, etc.
18. Any liability which is unilaterally written off by the taxpayer from the books of accounts shall be
deemed as remission or cessation of such liability and shall be chargeable to tax.
39
19. Depreciable asset in case of power generating units, is sold, discarded, demolished or destroyed, the
amount by which sale consideration and/ or insurance compensation together with scrap value exceeds
its WDV shall be chargeable to tax.
20. Where any capital asset used in scientific research is sold without having been used for other purposes
and the sale proceeds together with the amount of deduction allowed under section 35 exceed the
amount of the capital expenditure, such surplus or the amount of deduction allowed, whichever is less,
is chargeable to tax as business income in the year in which the sale took place.
21. Where bad debts have been allowed as deduction under Section 36(1)(vii) in earlier years, any recovery
of same shall be chargeable to tax.
22. Amount withdrawn from special reserves created and maintained under Section 36(1)(viii) shall be
chargeable as income in the previous year in which the amount is withdrawn.
23. Loss of a discontinued business or profession could be adjusted from the deemed business income as
referred to in section 41(1), 41(3), (4) or (4A) without any time limit.
24. Where the consideration for transfer of land or building or both as stock-in-trade is less than the stamp
duty value, the value so adopted shall be deemed to be the full value of consideration for the purpose of
computing income under this head.
25. As per RBI Guidelines, Interest on bad and doubtful debts of Public Financial Institution or Scheduled
Bank or [a co-operative bank other than a primary agricultural credit society or a primary co-operative
agricultural and rural development bank] or State Financial Corporation or State Industrial Investment
Corporation, shall be chargeable to tax in the year in which it is credited to Profit and Loss A/c or year
in which it is actually received, whichever happens earlier.
26. Similarly, as per NHB Guidelines, Interest on bad and doubtful debts of housing finance company,
shall be chargeable to tax, in the year it is credited to P & L A/c or year in which it is actually received
by them, whichever is earlier.
27. Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession
or reimbursement (by whatever name called) by the Central Govt. or State Govt. or any authority or
body or agency to the assessee would be included in definition of income as referred to in Section
2(24). However, in the following cases subsidy or grant shall not be treated as income:
28. The subsidy or grant or reimbursement which is taken into account for determination of the actual cost
of the asset in accordance with the provisions of Explanation 10 to clause (1) of Section 43;
29. The subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution
established by the Central Government or a State Government, as the case may be.
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UNIT – IV
INCOME FROM OTHER SOURCES:

Income from other sources is one of the five heads of income that the Income Tax Act, 1961 broadly classifies
income under. This category includes earnings which can't be accounted for under any of the other heads of
income viz. Income from Salary, Income from House Property, Profits and Gains from Business or Profession
and Income from Capital Gains.
All taxable income under this head is calculated according to the accounting method the assessee follows viz.
accrual or cash basis. The exceptions to this are dividend and interest income i.e. whatever the accounting
method, assessees will have to declare and pay tax on dividend and interest earned during the previous year.
The nature of income earned will decide whether income has to be shown under this head. However, there are
some standard inclusions as outlined below.
1. Dividends: Income by way of dividend is shown under this head. Deemed dividend as under section
2(22)(e) is fully taxable as is dividend from co-operative societies and foreign companies.
Dividend not chargeable to tax includes dividends exempt U/S 10(34) i.e. dividend from Indian
companies, dividend liable to corporate dividend tax, income on mutual fund units or income from UTI
unit holder.
2. Winnings: This includes winnings over Rs.10,000 from lotteries, puzzles, races, games and all forms
of gambling and betting. E.g. card games, horse races, game shows etc.
3. Interest received: All interest income earned in the previous year (on compensation/enhanced
compensation) is taxable. However, 50% of this income can be claimed as deduction.
4. Incomes not declared under the head â€˜Profits and Gains of Business or Profession': This
includes contributions made to an employer's employee welfare fund, interest earned on securities,
rental income from furniture, plant and machinery (including building where it cannot be let out
separately), keyman insurance policy proceeds.
5. Gifts: Taxable gifts are declared under this head by individuals and HUFs. This includes monetary or
non-monetary items received without any consideration or without adequate consideration. Non-
monetary gifts include all immovable property and certain movable property.
Gifts are taxed only if the total amount received during the previous year is more than Rs.50,000 and applies
only to those gifts individuals or HUFs received after Oct.1st 2009. This doesn't apply if the assessee receives
money
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 from relatives or a local authority or a trust, fund, educational/medical institution, body or any such
institution outlined under section 10(23C) and section 12AA
 as a wedding gift
 by way of being named in a Will or as inheritance
 from a dying donor
Set Off and Carry Forward of Losses

When one aspires to earn the profit, there is an equally likely chance of incurring losses too. Incurring losses,
undoubtedly, is a hard fact to digest. However, the Income-tax law in India does provide taxpayers some
benefits of incurring losses too. The law contains provisions for set-off and carry forward of losses which are
discussed in detail in this article.
1. Set off of losses
2. Carry forward of losses
Set off of losses

Set off of losses means adjusting the losses against the profit/income of that particular year. Losses that are not
set off against income in the same year, can be carried forward to the subsequent years for set off against
income of those years. A set-off could be :
a. An intra-head set-off
b. An inter-head set-off
a. Intra-head Set Off
The losses from one source of income can be set off against income from another source under the same head
of income.
For eg: Loss from Business A can be set off against profit from Business B where Business A is one source
and Business B is another source and the common head of income is ―Business‖.
Exceptions to an intra-head set off:

1. Losses from a Speculative business will only be set off against the profit of the speculative business. One
cannot adjust the losses of speculative business with the income from any other business or profession.
2. Loss from an activity of owning and maintaining race-horses will be set off only against the profit from an
activity of owning and maintaining race-horses.
3. Long-term capital loss will only be adjusted towards long-term capital gains. Interestingly, a short-term
capital loss can be set off against long-term capital gain or short-term capital gain.
42
4. Losses from a specified business will be set off only against profit of specified businesses. But the losses
from any other businesses or profession can be set off against profits from the specified businesses.
b. Inter-head Set Off
After the intra-head adjustments, the taxpayers can set off remaining losses against income from other heads.
Eg. Loss from house property can be set off against salary income
Given below are few more such instances of an inter-head set off of losses:
1. Loss from House property can be set off against income under any head
2. Business loss other than speculative business can be set off against any head of income except income from
salary.
One needs to also note that the following losses can‘t be set off against any other head of income:
a. Speculative Business loss
b. Specified business loss
c. Capital Losses
d. Losses from an activity of owning and maintaining race-horses
Carry forward of losses

After making the appropriate and permissible intra-head and inter-head adjustments, there could still be
unadjusted losses. These unadjusted losses can be carried forward to future years for adjustments against
income of these years. The rules as regards carry forward differ slightly for different heads of income. These
have been discussed here:
Losses from House Property :

 Can be carry forward up to next 8 assessment years from the assessment year in which the loss was incurred
 Can be adjusted only against Income from house property
 Can be carried forward even if the return of income for the loss year is belatedly filed.
Losses from Non-speculative Business (regular business) loss :
 Can be adjusted only against Income from business or profession
 Not necessary to continue the business at the time of set off in future years
 Cannot be carried forward if the return is not filed within the original due date.
Speculative Business Loss :
 Can be adjusted only against Income from speculative business
 Cannot be carried forward if the return is not filed within the original due date.
43
Specified Business Loss under 35AD :
 No time limit to carry forward the losses from the specified business under 35AD
 Cannot be carried forward if the return is not filed within the original due date
 Can be adjusted only against Income from specified business under 35AD
Capital Losses :
 Long-term capital losses can be adjusted only against long-term capital gains.
 Short-term capital losses can be set off against long-term capital gains as well as short-term capital gains
Losses from owning and maintaining race-horses :
 Can only be set off against income from owning and maintaining race-horses only
Points to note:
1. A taxpayer incurring a loss from a source, income from which is otherwise exempt from tax, cannot set off
these losses against profit from any taxable source of Income
2. Losses cannot be set off against casual income i.e. crossword puzzles, winning from lotteries, races, card
games, betting etc.
SELF-ASSESSMENT TAX
What is Self-Assessment Tax?
Every individual earning an income has to pay Income Tax to the Government of India. That being said, if the
taxes due aren‘t paid in full, it could cause issues. The Self-assessment tax revolves around tax filing itself. If
this tax is due, it has to be paid to ensure e-filing is done successfully. After all, taxes are collected by tax
payers in different forms, including Advance Tax, TDS as well as Self-Assessment. Self-assessment tax refers
to any balance tax that has to be paid by an assessee on his assessed income after the TDS and advance tax
have been taken into account before filing the return of income. The IT return cannot be submitted to the IT
Department till the time the taxes have been paid. At the end of the year, if there is any tax that is pending
before filing the ITR, there is a final amount that has to be calculated. This is known as the Self-Assessment
Tax or SAT. To put it simply, Self-Assessment Tax is the balance tax that an assessee pays on the income that
44
has been assessed, only after taking the TDS as well as advance tax into consideration before he or she files the
return of income.
Why Should Self-Assessment Tax be Paid?
Self-Assessment Tax is a tax that is paid by an individual in relation to the income from other sources. If the
taxpayer misses out on some income while making the final payment, TDS might not have been deducted or
might have been done at a lower rate. While there is no exact date of payment, the tax is always paid for the
end of a particular year. Paying it as soon as possible helps in avoiding the interest on the tax amount. Since
this tax has to be paid before the Income Tax Returns are filed, it has to be done in the same assessment year.
While there is no particular date of paying this tax, it can be done upon filing a tax challan ITNS 280 either
online or at the bank.
Payment of Self-Assessment Tax

The Self-Assessment Tax can easily be paid online via net banking in the following manner:
 Log in to the income tax website www.incometaxindia.gov.in
 Sign in and click on the e-Pay taxes option
 You will be redirected to the National Securities Depository Ltd. site
 Select the ‗Challan no./ITNS 280‘ tab, and then the ‗(0021) Income tax (other than companies)‘ option
 Fill your details: PAN card, name and contact coordinates
 Choose the applicable assessment year that you will be making payment for
 Select the ‗type of payment‘ – (300) Self Assessment Tax
 Choose the bank and make the payment
 Enter the ‗tax payable amount‘
 You will be redirected to the bank‘s net banking page for making the payment
 Make the payment
 Check the challan displayed for inclusions like CIN, payment details and name of the bank
 Save a soft copy or print a hard copy if required.
 It should reflect on your Form 26AS in a few days. If it doesn‘t reflect, fill in the challan details while
filing the ITR.
Computation of Self-Assessment Tax

If payments for tax have been made before the assessment date, the interest can be calculated in the following
ways:
 The amount of the advance tax that hasn‘t been paid is the amount considered for calculating the
interest for the date until the payment of the SAT.
45
 The SAT will be subtracted from the advance tax amount, to be considered for computation from the
time the SAT payment has been made.
Simplified steps to follow:
 Make use of the income tax slabs that are available online
 Calculate the taxable amount that is payable on your total income
 After that, add the interest payable under Sections 234A, 234B and 234C
 After that amount has been added, the relief amount should be deducted under Sections 90 and 90A
from the total amount
 The MAT credit amount under Section 115JAA has to be deducted
 Subtract the advance tax amount
 You will reach the self-assessment tax that is payable on your income tax
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UNIT – V
CENTRAL BOARD OF DIRECT TAXES
1. Functions and Organisation
The Central Board of Direct Taxes is a statutory authority functioning under the Central Board of
Revenue Act, 1963. The officials of the Board in their ex-officio capacity also function as a Division of
the Ministry dealing with matters relating to levy and collection of direct taxes.
2. Historical Background of C.B.D.T.
The Central Board of Revenue as the apex body of the Department, charged with the administration of
taxes, came into existence as a result of the Central Board of Revenue Act, 1924. Initially the Board
was in charge of both direct and indirect taxes. However, when the administration of taxes became too
unwieldy for one Board to handle, the Board was split up into two, namely the Central Board of Direct
Taxes and Central Board of Excise and Customs with effect from 1.1.1964. This bifurcation was
brought about by constitution of two Boards u/s 3 of the Central Board of Revenue Act, 1963.
3. Composition and Functions of CBDT
The Central Board of Direct Taxes consists of a Chairman and following six Members: -
1. Chairman
2. Member (Income-tax)
3. Member (Legislation & Computerisation)
4. Member (Personnel & Vigilance)
5. Member (Investigation)
6. Member (Revenue)
7. Member (Audit & Judicial)
4. Jurisdiction (Zonal)
o Chairman – Delhi & North West Region
o Member (IT) – South Zone (Tamil Nadu, Karnataka and Kerala)
o Member (L&C) – Rajasthan, Andhra Pradesh, Gujarat & Maharashtra (except Mumbai)
o Member (R) – West Bengal, North East Region, Orissa, Bihar and Jharkhand
o Member (P&V) – Mumbai
o Member (A&J) – Madhya Pradesh, Chattisgarh, Lucknow & Kanpur
o Member (Inv.) – All DGsIT(Inv.), All CCsIT(Central) and DGIT(I&CI)
5. Allocation of work:
47
0. Cases or classes of cases, which shall be considered jointly by the Board.
1. Policy regarding discharge of statutory functions of the Board and of the Union Govt.
under the various laws relating to direct taxes.
2. General Policy relating to: -
 (a) Organisation of the set-up and structure of Income-tax Department.
 (b) Methods and procedures of work of the Board.
 (c) Measures for disposal of assessments, collection of taxes, prevention and
detection of tax evasion and tax avoidance.
 (d) Recruitment, training and all other matters relating to service conditions and
career prospects of the personnel of the Income-tax Department.
3. Laying down of targets and fixing of priorities for disposal of assessments and collection
of taxes and other related matters.
4. Write off of tax demands exceeding Rs.25 lakhs in each case.
5. Policy regarding grant of rewards and appreciation certificates.
6. Any other matter which the Chairman or any Member of the Board, with the approval of
the Chairman, may refer for joint consideration of the Board.
1. Cases or classes of cases which shall be considered by Chairman, Central Board of Direct
Taxes
1. Administrative planning.
2. Transfers and postings of officers in the cadre of Chief Commissioner of Income-Tax
and Commissioner of Income-tax.
3. All matters relating to foreign training.
4. Work relating to Grievance Cell and Inspection Division.
5. Matters dealt with in the Foreign Tax Division except matters under Section 80-O of the
Income-tax Act, 1961.
6. All matters relating to tax planning and legislation relating to direct taxes referred to
Chairman by Member (Legislation).
7. Supervision and control over DGIT(Intl. Taxation), DGIT(Logistics) with DIT(BPR),
DIT(Exp. Budget), DIT(Infra-I&II) and DIT(O&MS).
8. All matters relating to Central and Regional Direct Taxes Advisory Committees and
Consultative Committee of the Parliament.
9. Any other matter which the Chairman or any other Member of the Board may consider
necessary to be referred to the Chairman.
48
10. Coordination and overall supervision of Board's work.
2. Cases or classes of cases, which shall be considered by Member (Income-tax)
1. All matters relating to Income-tax Act, Super Profit-tax Act, Companies Profit (Sur-tax)
Act, and Hotel Receipts Tax Act, except matters which have been specifically allotted to
the Chairman or to any other Member.
2. All matters relating to Interest Tax Act, 1974, Compulsory Deposit Act, 1974.
3. Approvals under Section 36(1)(viii) and (viii a) of the Income-tax Act, 1961.
4. Supervision and Control over the work of DGIT (Exemptions) and work of DIT (IT)
through DGIT(Admn.) except the work relating to examinations, which would be seen
by Member (P & V).
3. Cases or classes of cases which shall be considered by Member (Legislation &
Computerisation)
1. All work connected with the reports of various commissions and committees relating to
Direct Taxes Administration.
2. All matters of tax planning and legislation relating to direct taxes and the Benami
Transaction (Prohibition) Act, 1988.
3. Monitoring of tax avoidance devices suggesting legislative remedial action.
4. Computerisation of Income tax Department.
5. Supervision and control over the work of DGIT(Systems).
4. Cases or classes of cases, which shall be considered by Member (Revenue)
1. All matters relating to Revenue budget including assigning of Revenue Budgetary
targets amongst Chief Commissioners of Income-tax throughout the country.
2. Recovery of taxes (Chapter XVII of Income Tax), sections 179, 281, 281B, 289, Second
Schedule and Third Schedule of the Income-tax Act, 1961.
3. Matters relating to departmentalised accounting system.
4. All matters concerning Wealth-tax Act, Expenditure-tax Act, Estate Duty Act and
Benami Transaction (Prohibition) Act, excluding those relating to prevention and
detection of tax avoidance.
5. All matters falling under Chapter XIVA, XXA, XXC of the Income-tax Act, 1961.
6. General coordination of the work in the Board.
7. Work relating to DGIT(Admn.) with DIT (Recovery), DIT (PR,PP&OL) & DIT (TDS).
8. Supervision and control over the work of Chief Engineers (Valuation Cell).
9. All matters relating to widening of tax base.
49
5. Cases or classes of cases which shall be considered by Member (Personnel & Vigilance)
1. All Administrative matters relating to Income-tax establishments. Transfers and posting
at the level of Assistant/Deputy Commissioners, Joint/Addl. Commissioners,
Commissioners & Chief Commissioners will be routed through Member (P&V) and
shall be made with the approval of the Competent Authority as per Transfer and Posting
guidelines, 2010.
2. All matters relating to deputation of officers of the Dedpartment to ex-cadre posts.
3. All matters relating to training except foreign training.
4. All matters relating to expenditure budget.
5. All matters relating to implementation of official language policy.
6. Office equipments.
7. Office and residential accommodation for the Income-tax Department.
8. Supervision and control over the work of DGIT (HRD), DGIT (Training),
DGIT(Vigilance), Examination work of DIT(IT) through DGIT(Admn.).
9. Vigilance, Disciplinary proceedings and complaints against all officers and members of
staff (both gazetted and non-gazetted).
6. Cases or classes of cases, which shall be considered by Member (Investigation)
1. Technical and administrative matters relating to prevention and detection of tax evasion
particularly those falling under Chapter XIIB in so far as they are relevant to the
functioning of Directors General of Income-tax (Inv.) and Chief Commissioners of
Income-tax (Central), all matters falling under Chapter XIIIC, Chapter XIXA, Chapter
XXB, Chapter XXI, Chapter XXII, Sections 285 B, 287,291, 292 and 292 A of Chapter
XXIII of the Income-tax Act, 1961 and corresponding provision of other Direct Tax
Acts.
2. Processing of complaints regarding evasion of tax.
3. All matters relating to administrative approval for filing, dropping or withdrawing of
prosecution cases in respect of offences mentioned in Chapter XXII of the Income-tax
Act and corresponding provisions in other Acts relating to Direct Taxes.
4. All technical and administrative matters relating to provisions of sections 147 to 153
(both inclusive) of the Income-tax Act, 1961.
5. Searches, seizures and reward to informants.
6. Survey.
7. Voluntary disclosures.
50
8. Matters relating to the Smugglers and Foreign Exchange Manipulators (Forfeiture of
Property) Act, 1976.
9. Work connected with High Denomination Bank Notes (Demonetisations) Act, 1978.
10. Supervision and control over the work of all DGsIT(Investigation), all Chief
Commissioners of Income Tax (Central) and DGIT(I&CI).
7. Cases or classes of cases, which shall be considered by Member (Audit & Judicial)
1. All judicial matters under Chapter XX and section 288 of the Income-tax Act, 1961.
2. All matters relating to writ and appeals to the High Courts and Supreme Court and all
matters relating to Civil suits under the code of Civil Procedure, 1908.
3. Matters relating to appointment of Standing Counsels, Prosecution Counsels and Special
Counsels for the Income tax Department before the High Courts and Supreme Court.
4. All matters relating to Audit & Public Accounts Committee.
5. All matters falling u/s 72A and 80-O of the IT Act, 1961.
6. All matters concerning Wealth Tax Act, Expenditure Tax Act, State Duty Act and
Benami Transaction (Provision) Act, excluding those relating to prevention and
detection of tax avoidance.
7. Supervision and control over the work of DGIT (L & R) and DIT (Audit) through
DGIT(Admn.).
INCOME TAX ASSESSMENT

Income tax assessment is estimation for an amount assessed while paying Income Tax by assessee himself or
by income tax officer. Following types of assessment are carried out under Income tax act. We will discuss
each type of assessment in detailed in this article.
(i) Self assessment u/s 140A.
(ii) Summary Assessment u/s 143(1)
(iii) Scrutiny assessment u/s 143(3).
(iv) Best judgment assessment u/s 144.
(v) Protective Assessment.
(vi) Income escaping assessment u/s 147.
(vii) Assessment in case of search u/s 153A
For making assessment under these various provisions of the act, some compliance is mandatory to assessing
officer:
51
Particulars Mandatory Requirements
Self assessment u/s 140A. –
Scrutiny assessment u/s 143(3). Section 143(2) Notice
Best judgment assessment u/s 144. Show cause notice u/s 144
Protective Assessment –
Income escaping assessment u/s 147. Section 148 Notice
Assessment in case of search u/s Section 153A
153A
Self Assessment u/s 140A

Page Contents
 Self Assessment u/s 140A
 Summary Assessment u/s 143(1)
 Scrutiny assessment u/s 143(3).
 Best judgment assessment u/s 144.
 Protective Assessment.
Before submitting returns assessee is supposed to find whether he is liable for any tax or interest. For this
purpose this section has been introduced in Income tax act.
Where any tax is payable on the basis of any return required to be furnished under section 139 or section 142
or section 148 or section 153A, after deducting:
1. Advance tax Paid, if any
2. TDS/TCS
3. Relief under section 90, 91 & 90A
4. MAT credit under 115JAA or 115JD
Then assessee shall pay tax & interest and fee before furnishing return and proof of such payment will be
accompanied with return of income.
Self assessment calculation Summary:
Particulars Amount
Income tax + Edu. Cess +Surcharge if any Xxx
Add Interest u/s 234A, 234B, 234C Xxx
Less TDS/TCS Xxx
Less Advance tax Paid, if any Xxx
52
Less Relief under section 90, 91 & 90A Xxx
Less MAT credit under 115JAA or 115JD Xxx
Amount Payable by way of Self Assessment u/s 140A xxx
If any amount is payable under section 140A then amount so paid shall be adjusted against interest payable
first and then balance amount to be adjusted toward tax payable.
Summary Assessment u/s 143(1)

―Summary Assessment‖, it is not an actual assessment. Under this section, the Return of Income filed by
assessee will not be scrutinized, however whatever, is claimed by assessee in his ROI will be accepted by
assessing officer after only confirming arithmetical accuracy.
1. the total income or loss shall be computed after making the following adjustments, namely:—
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was
furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total
income in the return;
(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section
80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in
computing the total income in the return. However no adjustment shall be made under this in relation to a
return furnished for the assessment year commencing on or after the 1st day of April, 2018
However no such adjustments shall be made unless an intimation is given to the assessee of such adjustments
either in writing or in electronic mode:
The response received from the assessee, if any, shall be considered before making any adjustment, and in a
case where no response is received within thirty days of the issue of such intimation, such adjustments shall be
made.
2 .the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a);
3. the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the
tax and interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at
source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any
relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-
assessment and any amount paid otherwise by way of tax or interest and fee;
53
4. an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be
payable by, or the amount of refund due to, the assessee under clause (c); and
5. the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted
to the assessee:
Scrutiny assessment u/s 143(3).

Scrutiny assessments are popularly known as regular assessment.
1. On the day specified in the notice issued under] sub-section (2), or as soon afterwards as may be, after
hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may
require on specified points, and after taking into account all relevant material which he has gathered, the
Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee,
and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.
2. No order of assessment/ reassessment under section 143(3) shall be made after the expiry of 21 months(18
months for A.y 2018-19 and 12 months wef wef A.y 2019-20) from the end of relevant Assessment Year.
3.Where a reference has been made to Transfer Pricing Officer to determine Arm‘s Length Price, then no order
of assessment/ reassessment under section 143(3) shall be made after the expiry of 33 months(30 months for
A.y 2018-19 and 24 months wef wef A.y 2019-20) from the end of relevant Assessment Year.
What if Analysis of Section 143(2) and 143(3)?
What if – Answer
What if assessee has not filed Return of Notice under section 143(2) can not
Income? issue therefore assessment under 143(3)
not possible.
What if notice under section 143(2) not Assessment is Void
issued?
What if Notice is served after the expiry Assessment is Void
of six months from the end of the
financial year in which the return is
furnished.
What if, Assessing officer reduce Yes AO can reduced below returned
income below returned income? income, as per CBDT clarification
What if assessee claims certain No request will be entertain unless
54
deduction through letter to Assessing return has be
officer during assessment?
Taxpayers and Income Tax Slabs

Taxpayers in India, for the purpose of income tax includes:
 Individuals, Hindu Undivided Family (HUF), Association of Persons(AOP) and Body of Individuals
(BOI)
 Firms
 Companies
Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian
companies have a fixed rate of tax of 30% of profits, the individual,HUF, AOP and BOI taxpayers are taxed
based on the income slab they fall under. People‘s incomes are grouped into blocks called tax brackets or tax
slabs. And each tax slab has a different tax rate. In India, we have four tax brackets each with an increasing tax
rate.
 Income earners of up to 2.5 lakhs
 Income earners of between 2.5 lakhs and 5 lakhs
 Income earners of between 5 lakhs and 10 lakhs
 Those earning more than Rs 10 lakhs
Income Range Tax rate Tax to be paid
Up to Rs.2,50,000 0 No tax
Between Rs 2.5 lakhs and Rs 5 lakhs 5% 5% of your taxable income
Between Rs 5 lakhs and Rs 10 lakhs 20% Rs 12,500+ 20% of income above Rs 5 lakhs
Above 10 lakhs 30% Rs 1,12,500+ 30% of income above Rs 10 lakhs
This is the income tax slab for FY 2017-18 for taxpayers under 60 years. There are two other tax slabs for two
other age groups: those who are 60 and older and those who are above 80.
A word of note: People often misunderstand that if they earn let‘s say Rs.12 lakhs, they will be paying a 30%
tax on Rs.12 lakhs i.e Rs.3,60,000. That‘s incorrect. A person earning 12 lakhs in the progressive tax system,
55
will pay Rs.1,12,500+ Rs.60,000 = Rs. 1,72,500.
Check out the income tax slabs for previous years and other age brackets.
Exceptions to the Tax Slab

One must bear in mind that not all income can be taxed on slab basis. Capital gains income is an exception to
this rule. Capital gains are taxed depending on the asset you own and how long you‘ve had it. The holding
period would determine if an asset is long term or short term. The holding period to determine nature of asset
also differs for different assets. A quick glance of holding periods, nature of asset and the rate of tax for each of
them is given below.
Type of
Holding period Tax rate
capital asset
House Holding more than 24 months – Long Term

20% Depends on slab rate
Property Holding less than 24 months – Short Term
Debt mutual Holding more than 36 months – Long Term

20% Depends on slab rate
funds Holding less than 36 months – Short Term
Equity mutual Holding more than 12 months – Long Term Exempt (until 31 March 2018) Gains > Rs
funds Holding less than 12 months – Short Term 1 lakh taxable @ 10% 15%
Shares (STT Holding more than 12 months – Long Term Exempt (until 31 March 2018)Gains > Rs
paid) Holding less than 12 months – Short Term 1 lakh taxable @ 10% 15%
Shares (STT Holding more than 12 months – Long Term

20% As per Slab Rates
unpaid) Holding less than 12 months – Short Term
Holding more than 36 months – Long Term

FMPs 20% Depends on slab rate
Holding less than 36 months – Short Term
Residents and non residents:

Levy of income tax in India is dependent on the residential status of a taxpayer. Individuals who qualify as a
resident in India must pay tax on their global income in India i.e. income earned in India and abroad. Whereas,
those who qualify as Non-residents need to pay taxes only on their Indian income. The residential status has to
be determined separately for every financial year for which income and taxes are computed.
Defining Income
56
Income has been very widely defined in the Income-tax Act. In simple words, income includes salary, pension,
rental income, profits out of any business or profession, any profit made out of the sale of any specified asset,
interest income, dividends, royalty income etc. The law classifies income under 5 major heads as already
mentioned above.
 Salary Income
 House Property income
 Profits and Gains from Business or Profession
 Capital Gains
 Income from other Sources
The law also allows a taxpayer to claim deductions specific to each such income and hence to avail the
appropriate deductions, it is important that you classify income under the right heads. Eg. A salaried taxpayer
can claim a standard deduction of Rs 40,000 while a taxpayer having rental income from a flat can claim
municipal taxes as a deduction.
Income Tax deductions

There are broad themes to what the government incentivizes. These are either in the form of:
1. Various deductions available under Section 80 of the Income Tax Act which can be claimed from the
Total Income or
2. Deductions that are specific to each source of income.
Some of the key deductions have been discussed here:
Home ownership
 Stamp duty and Registration under Section 80C
 Home loan principal and interest
 First time homeowner benefit of Rs.50,000 under Section 80EE
Maximum allowed (for

Deduction on self-occupied house Maximum allowed (for property on rent)
property)
Rs.1,50,000 within the

Stamp duty and registration + Rs.1,50,000 within the overall limit of Section
overall limit of Section
principal 80C
80C
Deduction on home loan interest No cap (but rental income must be shown in the
Rs.2,00,000
under Section 24 income tax return) Further, maximum loss from
57
house property capped at Rs 2 lakhs
Deduction for first-time

homeowners under Section 80EE Rs.50,000 –
*certain conditions apply
Home renting
 House Rent Allowance or HRA (for salaried only) Given how many Indians move cities for work, this
is a common allowance most salaried individuals can find in their payslips. If you are renting an
apartment, be sure to claim this in your tax return.
 Section 80GG (if you are renting and don‘t get HRA) If you are not salaried, or you are still salaried,
but don‘t get HRA, then you can claim deduction for rent under Section 80GG. Learn more.
Health
 Life insurance premium under Section 80C
 Medical insurance under Section 80D
 Preventative health checkups under Section 80D
 Medical bills (for salaried only)( replaced with standard deduction of Rs 40,000 effective 1 April 2018)
Tax Deductions for health insurance under Section 80D in FY 2017-

18
Maximum deduction Below Maximum deduction 60 years
Person insured
60 years or older
You, your spouse, your children Rs.25,000 Rs.50,000
Your parents Rs.25,000 Rs.50,000
Preventative health checkup Rs.5,000 Rs.5,000
Maximum deduction (includes preventative

Rs.50,000 Rs.1,00,000
health checkup)
Long-term savings
Employee provident fund (for salaried only)Companies cut 12% of your basic salary and put it in a fund
managed by EPFO.Public provident fundIndividuals can open a PPF account from a post office or a public
sector bank like State Bank of India and ICICI Bank. All of these allow you a deduction under Section 80C
58
upto RS 1.5 lakhs Contribution to NPS is also another tax saving avenue for claim of deduction under
Section 80CCD
Other investment avenues

Investment Risk Interest Guaranteed Returns Lock-in Period
ELSS funds Equity-related risk 12-15% expected No 3 years
NSC Risk-free 7.6% Yes 5 years
5-Year FDs Risk-free 7-9% expected Yes 5 years
Business profits
Running a business and wondering how to go about your taxes? It is simple. Take your gross receipts from
your business and reduce various business related expenses from it eg telephone, internet, salary you pay to
people you have hired, depreciation on the items that you use for your business like computer etc. What you
are left with are your profits that you need to offer as your Income from Business. Similar is the method of
computing your taxable profits if you are carrying out a profession too. But make sure you maintain proper
books of accounts recording all your business transactions as law mandates that you do do. However, if you do
not want to maintain books, you may opt for Presumptive taxation scheme where you will have to offer a fixed
percentage of your gross receipts as your income.
Read our detailed article on Income from Business and presumptive income and taxes
Tax Credits
Income of certain nature will suffer a Tax Deduction at source itself. Eg salary, interest, rent, commission etc.
The person in charge of paying such income will have to mandatorily deduct taxes before making the payment
subject to certain conditions. Similarly, one may be liable to pay advance taxes if taxes payable after reducing
TDS is Rs 10,000 or more. After TDS and advance tax, if there still tax to be paid, the same would be paid in
the form of Self Assessment Taxes. All of the above taxes paid i.e. TDS, Advance Tax and Self Assessment
Tax would reflect in Form 26AS of the taxpayer which is a significant document one needs to rely on while
filing the return of income. This Form 26AS is called the tax credit statement that contains all the tax credits
lying against you PAN for any given financial year.
Income Tax Rules

While the Income Tax Act, 1961 is the law enacted by the legislature for governing and administering income
taxes in India, Income Tax Rules, 1962 has been framed to help apply and enforce the law contained in the
Act. Further, the Rules cannot be read independently. They must be read in conjunction with the Act only.
59
Further, the Rules must be within the framework of the Act and cannot override the provisions of the Act. For
example, the Act lays down the law with regard to taxability of perquisites given by the employer to his
employees as ―salary‖. However, it does not discuss how the perquisites must be valued. Such valuation is in
turn prescribed under Rule 3 of the Income-tax Rules.
Income Tax Calculation

Every income that your receive should form part of your income tax return. Of course, the law does provide for
exemption of certain incomes eg. dividend income from an Indian company, LTCG on listed equity shares
upto Rs 1 lakh in any financial year etc. Therefore, here is a quick guideline you can probably follow to
compute taxes due on your income:
 List down all your income – be it salary, rental income, capital gains, interest income or profits from
your business or profession
 Remove incomes that are exempt under law
 Claim all applicable deductions available under every source of income . eg claim standard deduction
of Rs 40,000 from salary income, claim municipal taxes from rental income, claim business related
expenses from your business turnover etc
 Claim all applicable exemptions under every head of income eg. amount reinvested in another house
property can be claimed as exemption from capital gains income etc
 Claim applicable deductions from your total income eg the 80 deductions like 80C, 80D, 80TTA,
80TTB etc
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DIRECT TAXES

Computation of Income from Salaries and Income from House property.

Computation of Profits and Gains of Business or profession – Calculation of Capital gain.

Exception to Previous Year:

1. Income of a person who is leaving India for a long period or permanently

Scope of Total income:

Some Important Definition under Income-Tax Act 1961:

AGRICULTURAL INCOME – OVERVIEW & TAXABILITY

Meaning of agricultural income

Within 2 kms 10,000 to 1,00,000

Within 6 kms 1,00,000 to 10,00,000

Within 8 kms > Rs. 10,00,000

INCOME TAX ASSESSMENT

4. Best Judgement Assessment

5. Income Escaping Assessment

1. Intimation Under Section 143(1)

2. Notice Under Section 143(2)

3. Notice Under Section 148

4. Notice Under Section 245

5. Notice Under Section 142(1)

1. INTRODUCTION to Residential Status

RESIDENTIAL STATUS OF AN ‘INDIVIDUAL’

Ordinary Resident Resident But Not Ordinarily Resident

(c) Non- Resident [ Section 2(30) ]

employment (as a member of the previous year.

crew of an Indian Ship)

(1) (2) (3)

ADDITIONAL CONDITIONS AT A GLANCE

Residential Status OF ‘H.U.F.’ , ‘FIRM’ , ‘ A.O.P.’

SCOPE OF TOTAL INCOME

Particulars of Income ROR RNOR NR

Income accrue or arises or deemed to Taxable in Taxable in

Income accrue or arises or deemed to

Income accrue or arises or deemed to

Income accrue or arises or deemed to

Income received or deemed to be received in India [Sec 7)

2. CAPITAL RECEIPT VS REVENUE RECEIPTS

3. CAPITAL EXPENSES VS REVENUE EXPENSES

4. CAPITAL LOSSES VS REVENUE LOSSES

WHAT IS CAPITAL EXPENDITURE?

What is a Revenue Account?

What is a Capital Account?

Solved Question for You

1. Agriculture Income [Section 10(1)]

2. Any sum received by a Co-parcener from Hindu Undivided Family

3. Share of Income from the Firm [Section 10(2A)]

4. Interest paid to Non-Resident [Section 10(4)(i)]

5. Interest to Non-Resident on Non-Resident (External) Account

6. Interest paid to a person of Indian Origin and who is Non-

7. Leave Travel Concession or Assistance (LTC/LTA) to an Indian

1. Basics of House Property

3. Tax Deduction on Home Loans

4. Claiming Deduction on Home Loan

5. Tax Benefits on Home Loans for Joint Owners

6. HRA and Deduction on Home Loan

8. Significant Budget Amendment in 2017 – Impact explained with an

Salary income 10,00,000 10,00,000

Income from other sources (Interest income) 4,00,000 4,00,000