Full JKSC Online DT Summary Nov 20

J.K.
Shah Classes
Inter CA DT Nov 20
(Prof.Aagam Dalal)
Notes:1. This note is in summarised version
2. Things kept blank are to be written from video lecture

uploaded online on JKSC official website
Inter CA Nov 20 JKSC online Lecture DT(Prof. Aagam S. Dalal) 1 J.K.Shah Classes
CHAPTER: 1 Basic concept
 How Government has power to make any law
Article 246 of constitution.
Union List State List Concurrent List
 Entry 82: Income Tax other  Stamp Duty  GST

than agriculture Local Authority
 Entry 83: Customs  Sewerage tax GST  246A
 Municipal tax
 Water tax
 Why Taxes : Compulsory

Taxes
Direct Tax Indirect Tax

Burden on “ Payer ” Burden on “ Consumer”
Income Tax Act, 1961
Act Income Tax Rules, CircularCBDT Finance Act, 2019 Case, Laws
1962 NotificationCG & (1&2)
CBDT Budget
I.T.Act,1961 CBDT
Circular, binding on 1. Rate of Tax

officer 2. TDS
Notification : For all 3. Advance Tax
4. Net Agri. Income
 Step to be followed :-
Computation of Total Income
Determine Resident status
Classify under heads
Salaries I.F.H.P PGBP C.G IFOS
Apply Clubbing
Set off / Carry
GTI
Deduction u/c VI-A(80C to 80U)
Total Income
Applicable Rates
Surcharge / Rebate
Health & Education Cess(4%)
Advance Tax & TDS
Tax Payable / Refundable
 Income Tax Act. 1961
 Section 1. Title, applicable from 1-4-1962
o Apply to whole of India
(A) India :-[2(25A)]

Territorial water
12 NM
As referred to in Article 1
Exclusive Economic Zone
of constitution
For special purpose
+ Continental self
Air Space 200 NM
 Section 4: Charging Section
Income Tax is Payable by Every person[2(31)]
On Total earned in Relavent to At the

Income  Previous Year  Asst Year Rates
2(24), 80B, 2(45) 2(34) 2(9) Applicable
(Incometax act & Finance Act)
 Section 2 (31) : Person :

1. Individual :
 Human beings & includes Male, Female
 Includes Minor & unsound mind but income is charged to guardian.
2. HUF :
 Not defined in I.T. Act but in Hindu laws
 HUF includes Males , Wife & Daughter (Main person is called Karta)
 Members are called co-parceners (Right in Property)
 Two schools of HUF
Dayabaga School Mitakshari School
West Bengal & Assam Rest of India
Son will not be co-parcener By birth

Until father is alive
3. Firm :
Partnership Act, 1932 Limited Liabilities Partnership Act, 2008
4. Company :
Domestic Company [2(22A)] Foreign Company [2(23A)]
Indian Company [2(26)] Company which has Which is not Domestic

Made arrangement for
Registered in Company’s Act declaring & paying
+ Dividend out of income
Principal office in India char. to Tax in India.
5. AOP / BOI :
AOP BOI
 Two or more Person for common  Two or more Person individual
goal / objective. When jointly taxed
 As such it is firm but not registered under  Not for common goal / objective
Partnership Act.(E.G. JV) E.g. to handle joint ancestral Property
6. Local Authority :
 AMC, BMC, etc. (CG & SG not covered)
7. Every Artifical Judicial Person : (Not Covered above)

 Trust, Co-Op Soc, Animals, Court, etc.
 Section 2(24) : Income -(To be done at the end)
Concepts of Income
 Income Vs Inflow :
 Inflow : Loan
 Income : Fees
“Every income is inflow but every inflow is not income”
Application of Income Vs Diversion of Income (Not in law-SC judgement)
Application of income Vs Diversion of income
After earning the Income discharging Creating an “Overriding title” to Income &
the obligation & so, income is diverting it before it reaches to the person.
chargeable to Tax, e.g. Donation. e.g. by agreement we decide 50% - 50%
income so eventhough I am receiving 100%
& then giving you 50% but it is not Taxable.
Exempt Vs Taxable
Exemption is given in these sections: Section 10,11,12,13A
Due Basis Vs Receipt Basis
o PGBP/IFOS  As per method of A/c.

o Salary  W.e. earlier.
o CG / HP  Due.
 Previous Year (3):

o P.Y. means year immediately preceding A.Y.
o P.Y. = Financial Year.
o Income earned in this year is Taxed in A.Y. (that is next year, but law is written
reversely).
o P.Y. = 2019-20 A.Y. = 2020-21
o For Business, Profession newly setup or source of income newly coming  P.Y.
from Date of setting up to 31st March.
o So P.Y. can be lesser then 12 months
 Assessment Year [2(9)]:

o The period of 12 month from [1-4 To 31-3]
o It is of 12 months [April To March]
o It is “Assessment” year because the Income of P.Y. is assessed  Calculated in
this year for return filing & Tax Payment.
 Rates of Taxes [Finance Act, 2019]:
Resident individual Resident individual Resident individual

below age of 60 + of age 60 or more at of age 80 or more at
HUF + AJP + AOP + any time during P.Y any time during
BOI + All Non (Senior citizen) P.Y
Resident Individual (Very senior
citizen)
Basic Exemption 5,00,000

2,50,000 3,00,000
Limit
5% From 2.5L – 5L From 3L – 5L ---
20% From 5L – 10L From 5L – 10L From 5L – 10L
30% Above 10L Above 10L Above 10L
[From 10,00,001] [From 10,00,001] [From 10,00,001]
 At any time : even 1 day.

[CBDT, SC  if birthday on 1-4-2020 & completing 60 on that day then can be said that
completed 60/80 years on 31-3-2020. Higher limit for 19-20 also]
Examples:
(1) Mr. Aagam (23 Years)  Income ` 30,00,000
Upto 2.5L Blw 2.5L - 5L 5L - 10L 10L - 30L

NIL + 12500 + 1,00,000 + 6,00,000
Basic Tax = ` 7,12,500

+ 4% H & E Cess = ` 28,500
= ` 7,41,000
± R/off =` -
Tax Payable = ` 7,41,000
 Mr. (Resident,95 yrs)-7L
Basic tax = Rs.40000

+ 4% H&EC = Rs.1600
---------------------------
Tax payable=41600
 Mr..(100 yrs-NR)-7L
Paurav HUF(NR-100 yrs)
 Rates :
(1) Firm ,LLP,Local authority  Flat 30%
E.g. Firm total income 45 Lakhs.
(2)Company :
Domestic Company Foreign Company
30% 40%
But if Gross receipt/T/o
of 2017-18 is upto ` 400 Crore
than 25%
E.g. Ltd GTI 60L, Ded.  2L, T/o of 19-20-500 cr,17-18 ` 100 cr Tax ?
 Rebate (87A)  Discount

Only for Resident individual + Total (Net) Income does not exceed ` 5L Then, Rebate
from basic Tax (Before cess)
= ` 12500 or Tax whichever is lower
Example: Resident .Individual  Income  4,60,000, what if NR
 Income  510000
(1) Surcharge (Tax on tax for rich people)
Individual (All) / HUF / AOP / BOI / AJP (Again To be done in CG)
Total income Rate(on tax)
>50 Lakh <=1 cr (Incl all income) 10%
>1 cr <=2 cr (Incl all income) 15%
>2 cr <= 5 cr (Excluding STCG u/s 111A & LTCG u/s 112A) 25%
>5 cr (Excluding STCG u/s 111A & LTCG u/s 112A) 37%
 E.g.— Example:
o Aagam  ` 63 Lakh
Calculation :
Basic Tax  Income ` 63 Lakh
Upto ` 2.5L 2.5L - 5L (5%) 5L - 10L (10%) 10L - 30L (30%)

NIL + 12500 + 1,00,000 + 15,90,000
Basic Tax = ` 17,02,500

+ Surcharge (10%) = ` 1,70,250
= ` 18,72,250
+ 4% H & E Cess = ` 74,910
Tax Payable = ` 19,47,660
(2) Firm / LLP / Local Authority :

Total Income > 1 Cr. 12%
E.G. Firm  Income  ` 3,50,00,000
(3) Company :
Domestic Company Foreign Company
>1 Cr but ≤ 10 Cr. >10 Cr. >1 Cr but ≤ 10 Cr > 10 Cr.
7% 12% 2% 5%
(Because Tax is high)
 Round off (288A / 288B)
` 10 Round off (total income & tax payable).
If lower than 5  then lowerside(if >=5 then higherside)
Company:
Info TCS Google Fb

(17-18 t/o=390 cr)
Total Income 2 Cr. 15 Cr. 2 Cr. 15 Cr.
Tax rate 30% 25% 40% 40%
Tax amt 60L 3.75 cr 80L 6 cr

+ S.C 7% 12% 2% 5%
Surcharge 4.2L 45L 1.6L 30L
B+S 64.2L 4.2 cr 81.6L 6.3 cr

+ 4% Cess
Tax Payable
 Marginal Relief:
 Concept : Due to increase in Income S.C is there. But diff. of Tax due to difference in
income should not be more than diff of Income.
Example :
T.I ` 50,00,000 ` 51,00,000
Tax ` 13,12,500 ` 13,42,500
(Before Cess) + 10%
` 14,76,750
Income Diff = ` 1,00,000
Tax Diff = ` 1,64,250
Marginal Relief = ` 64,250
Marginal Relief = (Basic Tax + S.C on Tax) – (Tax before cess on Threshold Limit) – Diff of
Income
Basic Tax = 
+ Surcharge = 

– Marginal Relief = ()
= 
+ Cess @ 4% = 
Tax Payable =
E.g.Mr. A(resident,50 years) ` 1,01,00,000
Maximum marginal rate: It is the rate at which an individual will pay tax at if having highest
income..It is used if government want to punish any person…30%+37%+4%
* Concepts that will be taught later on:

After 5 Heads  Definition of Income
IFOS  Previous year of Undisclosed source of Income
Assess Pro.  Certain cases where assessed in P.Y itself
CG. IFOS  Special Taxes
Ch. 2: Residential Status & Scope of Income
Residential Status
Individual / HUF Any Other Assessee
Resident Non Resident Resident Non Resident
Ordinary Not Ordinary
Note:1. Residential status has nothing to do with citizenship
2. Residential status can change every year.
Residential status of individual
Whether satisfy “any” of the two basic conditions?(W.N.1)
Resident Non-Resident
Whether satisfy Both the Additional condition? (W.N.2)
Yes No
Resident & Ordinary Resident but

Resident not ordinary
Resident
W.N. 1 : Basic Condition(Section 6(1))

1) His stay in India for at least 182 days during the P.Y.
2) His stay in India for at least 60 days during P.Y. & 365 Days during 4 preceding Years
Immediately preceding P.Y.
 How to count presence in India (Days)?
It timing of arrival & if timings not available

Departure are available
Then 24 hrs = 1 Day The day when he enters India

& Day he leaves, both Included.
Example : Mr. Aagam comes in India for the first time on 10-4-2019 & leaves on 30-6-2019.
He again comes In India on 1-12-2019 & leaves on 28-3-2020 status ?
 Ans :
Example : Suppose in the above example instead of 1 st December if he comes on 15th January then?
Example : Mr. Modi From 2015-16 visits India for 60 days each yr. Resi. Status?
 Explanation to 6(1)  exception to basic condition, for these two cases, to determine
Residential status, we have to see Only first condition i.e. of 182 days & not the second
one.
Individual = Citizen of India + OR India = Citizen of India or person of

Leaves India as member of Indian origin comes to visit India.
Crew of foreign bound Indian ship or
For purpose of e’ment o/s India.
(Kerala HC-E’ment includes self e’ment)
For crew member  Rule 126:

presence in india=365/366-CDC
The day of incharge & discharge
as per “continues Discharge certi”
Shall be excluded for presence in
India.
 JFK Indian Citizen
By Birth Express Citizenship
 Person of Indian origin:

Person or parents (either) or G.P. (either) are born in Undivided India [India + Bang + Pak.]
before 1947.
Example: 1) Mr. X for job in USA left India on 1-9-2019 for first time what R.S ?
Refer illu-1 SM same as Q-2 hw section jk.
W.N-2 : Section 6(6) : Additional condition:
(1) He has been Resident of India for at least 2 yrs out of 10 yrs immediately preceding P.Y (as
per W.N.1)
(2) He has been in India for at least 730 days during 7 years Immediately Preceding 7 years.
Example : Mr. Darshil A Japanize citi came to India on 1-4-2013 & stayed here thereafter he left for
Japan on 10-4-16. He again came back on 7-1-20 & stayed here determine R.S.
Ans :- Mr. Darshil P.Y.2019-20 A.Y 2020-21
Step-1: Section 6(1)

April-Dec : - 15-16 : 365
Jan : 25 16-17 : 10
Feb : 29 17-18 : -
March : 31 18-19 : -
85 > 60 375 > 365
Resident
Step-2: Section 6(6)

2009-10 ̶
10-11 ̶
11-12 ̶
12-13 ̶
13-14 365 > 182 Resident for 3 yrs(So in all 3 years resident)
10 Yrs 7 Yrs 14-15 365
15-16 366
16-17 10 R & OR
17-18 ̶
2018-19 ̶
1106 > 730
Example : 2 Mr. Gagan coming to India for 100 Days every year since 2008-09=JK Q-2=Illu-2 of
SM)Detemine R.S
A) Would ans if for 105 days
Ans :-
Refer jk Q-1,4,5,Illu-2(SM)
H.W Q-3 jksc,Illu-3(SM)
 Section 6(2) : Resi. Status of HUF:
Control & Management
Wholly or Partly in India Wholly O/S India
Resident NR
Whether karta satisfy

Both the condition of section 6(6)
Yes No
R & OR R BNOR
(Note: )
Example: Mr. X HUF partly from USA, Partly from Baroda. Mr. X visit India for 50 days each year
since 15-16. Prior for 200 days, Ind,HUF  R.S ?
Ans :- Individual-In year 19-20 stay=50 days.
So,NR in 19-20.
6(2)  Resident(because partly from india)
6(6) : stay of karta

Mr. X
2018-19 : 50  NR
2017-18 : 50  NR
2016-17 : 50  NR
2015-16 : 50 > 730 Days  NR
2014-15 : 180  Resi
2013-14 : 180  Resi 2 Times
2012-13 : 180
2011-12 : 180
2010-11 : 180
2009-10 : 180
R & OR
 Section 6(2) : Firm & AOP :
Control & Management
Wholly or Wholly O/S

Partly in India India
Resident NR
[for any other assessee other than Ind / HUF / Co.  The above chart is applicable 6(4)]
BOI, AJP, etc
 Section 6(3) : Company:
Indian Co. Other Than Indian Co.
Resident *** POEM
In India O/s India
Resident NR
[*** POEM  Place of effective management CBDT circular (In Final)]
Scope of Income
 Section : 5 : Scope of income

Particulars Tax incidence in case of
R& RBNOR NR
OR(Global
income
taxable)
1. Income received in India
whether or not accrued in Yes Yes Yes
India (e.g. salary o/s India
credited in India)
2. Income deemed to be
received in India (e.g TDS, Yes Yes Yes
section 7)
3. Income accruing or arising
in India whether or not
received in India Yes Yes Yes
(Note:
)
4. Income deemed to accrue Yes Yes Yes
or arise in India (Sec. 9)
5. Income received & accrued
o/s India from the business Yes Yes No
controlled in or Prof. setup
in India
6. Income received accrued
o/s India from B/P Yes No No
controlled o/s India
7. Any income (other than
B/P received accrued o/s No
Yes No
India (e.g. Div. of foreign
co.)
8. Income earned in earlier No No No
years brought in India
 Section 9 : Income Deemed to accrue or arise in India :
(A) Business connection:

Example – Opening Branch, Appointing agent [Independent agent not included]
How it works??:
 Explanation to section 9(1) : i.e exception

Following shall not be treated as business connection in India.
1. In the business where not all the operations are carried out in India, only that much
income shall be deemed to accrue which can be reasonably attributed to Indian operation.
E.g. Company o/s india.10 operation-2 in india.
2. merely purchase of goods in India for export.
3. Activities merely confined to shooting of cinematographic films provided the producer is
NR Individual NR Firm NR Company
Not a citizen of Not having single No.SH = Resident +

India partner Resident+ Citizen of India
Citizen of India
4. Merely collection of news & views from India for transmission O/s India.
5. In case of foreign company engaged in business of mining of diamonds, no income shall
be deemed to accrue or arise which is confined to display of uncut & unassorted diamonds
in SEZ.
(B) Income from property, asset or source of income in India :

e.g.
HP situated in Income of interest Hire charges paid

Mumbai, Rent paid from India co,Indian O/s India for use of Machinery
in USADeemed bank a/c,etc. in India.
Accrue.
[after 30% Ded-24(a)]
(C) Income through transfer of capital asset situated in India. [Accrue=when
contract signed]
Note : Cap. asset being shares of foreign co. will be deemed to be located in India
if the value of share is directly / indirectly derived from asset located in India
Vodafone case [Final CA]
(D) Income from salaries  if services are rendered in India.

Plus : any income Payable for rest period or leave period which is preceded or
Succeeded by service rendered in India & form part of employment shall be
regarded as earned in India
[e.g : paid leave in India to NR while visit for business work]
(E) Income from salaries paid by GOI for services rendered O/s India
However 10(7)  allowances & perquisites will be exempt  paid by GOI O/s
India.
- The NR should be “ Citizen of India”.
(F) Dividend paid by Indian co. O/s India :

- Generally Div. u/s 115-O is exempt for SH u/s 10(34) except
115BBDA IFOS(above Rs.10 lakh @10%)
(G) Interest :
- Interest on money borrowed “ Deemed to accrue or arise in India” if
Payable by Government Payable by resident Payable by NR

if money used for 1. if used for B/P
1. B/P carried on India carried on India.
2. For any source of [if for other source 
Income. Not taxable]
(H) Royalty :
- Royalty means consideration to use of intangible asset.
- Royalty = “Deemed to accrue or arise in India” if
Payable by Govt. Payable by Resident & Payable by NR earned

asset used in from
(1) B/P carried on in India. (1) B/P carried on in india
(2) For any source of income. (2) For any source.
(I) Fees for Technical Services:

- Means any consideration for rendering of any managerial Technical or
Consulting service.
- Some chart as for royalty
(J) Any gift received which is made by resident person to a person outside india shall
be deemed to accue or arise in india. (On or after 5.7.19)
(Exceptions mentioned in section 56(2)(x) shall apply-IFOS.)
 Illustration-5,6,7,8,9(SM)….Q-5(Exercise) from module & Q-8 (JK)..MCQ

Homework Q-1,2,3,4(Exercise),
Homework section.:6 to 20(Self solve)
Note for sums:

1. 80 TTA  for except 80TTB (80TTB  Resi. Senior citizen any int. from Bank/Co-
op bank, Post office upto ` 50,000.)
2. 10(1), 10(34)
3. 80C  LIC
4. Section 24(a)  30% Ded. In HP
5. 10(15)  post office saving bank a/c 3500 + 80TTA  10,000
Chapter-3: Income From House Property (Section 22 to 27)
 Section – 22 : Basic of charge :
Prop. = Consist Assessee should be Prop. Should not

Of building or land Owner of Prop. Be occupied for
Appurtenant thereto. (Evenif registration is pending) Purpose of own busi.
or prof. carried on by him
[Building : Resi.House [Owner : includes deemed

Office use, factory, hall owner section-27]
Etc.
[Land appurt: approach road
Compound, backyard, garage
Garden attached to building]
Examples :
(1) Vacant land if letout 
(2) Mr. X took a house on rent for ` 5,000 P.m. he let out the same to Mr. Y for ` 6,000 P.m.
so it will be taxable for Mr.Y under head 
(3) Mr. A gave his prop. To Mr. B a CA., Mr. B is carrying on practice from there so Mr.A
whether this is a HP? 
(4) XYZ Constructors has 10 flats unsold—HP?
(5) ABC ltd. Has main activity to let put propety.Rent income taxable in-?
 Three types of H.P.
Let out Self occupied Deemed letout

The one in which
you are staying if any person has >2 property and
All are used as SOP then
any 2 =Sop and rest deemed lop]
Structure of finding “Income from H.P.”
Particulars Amt.
Gross annual value(GAV)
Less: Municipal taxes paid by owner in P.Y.
Net annual Value(NAV)
Less: Deduction u/s 24
(a) 30% of NAV
(b) Int. on borrowed capital
Income from House property
 Section 23 : Determination of Gross Annual Value:

First for LOP
 Step - 1 : Municipal value or Fair Rent W.e. Higher

 Step - 2 : Step-1 or Standard Rent W.e. Lower
 Step - 3 : Step-2 or Actual Rent W.e. Higher
(Expected Rent) (Due basis)
Meaning: 1) Municipal value  for collecting municipal tax State Govt. made valuation of
property which is M.Value
2) Fair Rent  Rent fetched by similar Prop. in same or similar locality.
3) Standard Rent  Maximum rent that can be legally recovered from any tenant under
Rent control Act.
4) In Actual Rent
1) A nonrefundable deposit will be included on pro-rata basis.
2) On accrual basis.
3) Advance Rent shall not be considered
Example :
1 2 3 4
M.V 100 100 105 100
F.R 120 120 107 N.A
Step-1 () 120 120 107 100
S.R 96 96 N.A 36
Step-2 () 96 96 107 36
A.R 100 90 103 1000
W.e. higher (GAV)
Ignore the step

For which any value is missing
Case -1 : When unrealized Rent is given

 When any not realised Rent can be termed as “Unrealised Rent”  Rule 4 of I.T.Rules
1962.
The tenancy Defaulting tenant has Assessee has taken The defaulting tenant
Is bonafide vacated or steps have all reasonable steps to is not in occupancy
Been taken to compel institute legal proceeding of any other Prop. of
Him to vacate for recovery same assessee.
How to solve the sum??
 First step & second step as it is.
 In third step
Actual Rent = Annual Rent – U.R. Rent &
then
Higher = GAV.
Example : Mr.A gives a property on rent to Mr.B for ` 10,000 p.m. Market value is ` 1,00,000 p.a
fair value is ` 8,000 p.m, standard Rent is ` 40,000 for 6 months. Unrealised rent from Mr. B were
for month of Feb & March. Calculation GAV.
Ans : GAV:
Case -2 : Loss due to vacancy
 while finding GAV due to vacancy :

RENT
AR>ER(after vacancy also) AR<ER
GAV=AR Just because of vacancy loss Not because of

(Before vacancy it was higher) vacancy loss
GAV=AR GAV=ER
e.g. expected Rent = ` 1,00,000
Actual Rent = ` 80,000 (` 8,000 p.m.for 10 month)
Ans.:
Here if there would have been no vacancy then also AR would have been 96000(8000*12) which was
also lower than GAV and now also it is lower then GAV.Means AR is lower than ER because of any
other reason and not because of Vacancy.
So, GAV=ER=100000.
It instead of 8000,` 9000 was there then?
Refer Q-1 JKSC
 GAV for SOP = NIL

 For deemed LOP GAV=ER
 Municipal Tax : (Property Tax, Sewerage Tax,etc.)

 From gross Annual Value Municipal Taxes paid to local authority is deducted if Paid
by owner in current year.
o Notes :
- If paid by tenant  no ded”
- If payable  no ded”
- If paid in C.Y. for so many years  full ded”
- If paid for SOP  No ded”
- If paid for Deemed LOP  Full ded”
- If HP is O/s India then M.tax O/s India  Deductible(Madras HC)
Refer Q-2 SM
 Section 24:
i) 24(a) : deduction of 30% of NAV from NAV
- Standard deduction & no other expense other than 24(b) is allowed as
deduction.
- However no deduction of 30% available when NAV = NIL. When NAV = NIL
In case of self occupied 23(5): where property consist of building or

Property land app. there to held as stock in trade & not
let out during whole or part of P.Y. then NAV
of such property or part shall be NIL (even
though deemed LOP)
For the period of 2 year from end of F.Y. in

which certificate of completion of
construction(COC) is obtained from
competent authority
E.G. Mr. Salman is builder who constructed 100 residential flats and office premise.
COC received on 1/4/18.He wants to know upto which year the NAV of all prop will be NIL if
prop not sold out or not given on rent.
Ans.:
ii) 24(b) : Interest on borrowed capital
Let out SOP [ Max. upto ` 2,00,000 per owner)
Purchase/ Repair/ Renovation Repair/ Renovation

Construction
a) Int. Or
No Limit No Limit b) ` 30,000
w.e Lower
Loan taken on or after 1-4-99 Loan taken before 1-4-99
a) Int. or
Pur/ Const’s is if not b) ` 30,000 w.e. lower
Completed competed
Within 5 years
From end of year
Of loan.
a) Int or
b) ` 2,00,000
w.e lower
Notes : Interest is allowed as ded” on accrual basis
: Interest deduction starts from yr in which prop purchased or construction completed.
: Interest on unpaid interest is not ded”(Penal int.= No Ded”).
: Interest on fresh loan taken to repay original loan raised is allowed.
: Brokerage / commission for arranging a loan = No ded”.
 Section 25 : if interest to be paid abroad without TDS → No deduction
 Example for interest :

1) If interest of April-2019 to March-20 paid in April-2020 for ` 2,30,000 for LOP
Deduction u/s 24(b) =
2) Interest of ` 70,000 payable for April-19 to March-20 for loan, taken for repairs of
self- occupied prop. Deduction u/s 24(b)=
What if for LOP—deduction u/s 24(b)=
3) Loan taken on 1-5-2000. Property purchased on 30-6-2005. Interest paid for P.Y.
2019-20 for SOP ` 3,00,000 what will be deduction?
Deduction =
REFER Q-4,5=(Q-3 jk), of SM
Pre-construction interest : [capital interest]
E.G, The loan is taken on 1.4.11 but construction is completed on 1/4/15.So,the interest
deduction will start from P.Y.15-16(i.e. the year of purchase/construction
completion).However assessee must have paid some interest from 1/4/11 to
31/3/15.This total interest is called as pre acquisition interest.
Pre-construction Interest is deductible in 5 equal installments starting from P.Y. in

which construction or acquisition (for purchase) is completed.
 What is pre-construction period:

Starting from Date of Loan
or (w.e later)
Date of starting construction
To 31st March Prior to P.Y. in which construction / acquisition is completed.

For 1st Five yrs :
→ Actual interest = int for P.Y. + [1/5 of P.C.I]-----Total within limits.
After 5 yrs :
→ Actual interest = int for P.Y.
E.g. : Capital int. 24(b) :
→ Date of starting of construction = 1-7-17
→ Date of Loan = 1-11-17
→ Amount of Loan = ` 15,00,000
→ Rate of Interest = 10% p.a
→ Date of Completion of const = 14-11-19
Ans : Capital Interest = PRN

12
= 15,00,000 x 10% x 17 (w.n) = ` 2,12,500
12
w.n. : from: 1-11-17 to 31-3-19 = 5+12 = 17 months.
→ Total int ` 2,12,500 is allowed as deduction over period of 5 yrs from yr in which
construction completed. i.e from P.Y. 2019-20 [212500/5 = 42500]
P.Y Cap. Int Rev. Int Total
19-20 42500 150000 192500
20-21 42500 ″ ″ ″ ″
21-22 42500 ″ ″ ″ ″
22-23 42500 ″ ″ ″ ″
23-24 42500 ″ ″ ″ ″
24-25 ̶ ″ ″ 150000
Refer Q-2(jk), Illu 6(=Q-4 jk)

 Special Cases
1: When property not occupied during whole P.Y. due to e’ment, busi / prof.
carried on at some other places.
It will be still considered as self occupied property
If
Concerned prop.is he has to reside at other no other benefit had

Not let out during P.Y place in property not owned been derived from
By him. Pr
[Also refer section 80GG]
Refer illu-3
2: When property is let out for some period & self occupied for remaining period
during P.Y.
- Here consider as if let out for whole year.(ER=full year)

- But actual rent will be taken for months for which rent is actually received.
Illu 7(=Q-8 jk)
3: House property consist of 2 independent units of which one let out, other self
occupied.
For LOP unit For SOP unit
GAV,M.Tax,Int-% wise Interest % wise
Here, loss from self occupied will be set off against income from LOP.
Refer Illu-9 (SM)=Q-9(jk)
4:When assessee owns more than two resi. HP & all are reserved for self
occupation.
Deemed let out at option of assessee so here, calc. considering any 2 as SOP &
other as LOP, then reverse case & find out where lower income is Taxed, that option
will be selected.
e.g.A=Mr,A has three property..A,B,C..Now give combinations
A&B=SOP and C= deemed LOP
B&C=SOP and A=Deemed LOP
A&C=SOP and B=Deemed LOP
Then select that option in which Income is lowest.
Q-8 (SM)
5: When house property is owned by more than one owner.
Section 26 : where property owned by 2 or more persons and shares are definite &
ascertainable then income from such HP cannot taxed as AOP. It has to be
calculated as if owned by one owner & then divide income between co-owner
as per % define.
SO,Property
SOP= Individual calculation
LOP/Deemed LOP= Calculate as if owned by one owner and then divide total
income between all owners.
[interest limit u/s 24(b) is per assessee & not per house]
Q-5 (SM) exercise = JK 7,,,,Illu-11(SM)-HW
 Section 25 A : Provision for arrears of rent & unrealised rent received subsequently
→ Both are taxable on receipt basis.
→ Std. deduction 30% is allowed.
→ even though in year of receipt Assessee is not owner, than also “IFHP”.
Q =10 (SM)
 Composit Rent :
→ Tax treatment when assessee recovers rent for the property as well as charges for
services rendered to tenant
e.g Rent for building + amount toward use of electricity, water, lift, etc. it is called
“composite rent” Treatment.
1) Split the rent to the use of property & to use of electricity, water, lift etc.
2) Amt for use of prop = HP.
Amt for service = PGBP or IFOS.
 Tax treatment when assessee let out building with other asset like P &M furniture
1. When letting is inseperable 2. When letting is seperable
Whole rent under “PGBP” or A) Rent for building → HP

“IFOS” & nothing in HP, B) other Asset → PGBP or IFOS
Even though separate rent is fixed.
 Section 27 : Deemed owner : (Ref. Sec-22)
1) Transfer to spouse or minor child:
If following conditions met then transferor of property = deemed owner
T.P=Individual He/she transfer a H.P The property is transferred without adequate

to his / her spouse (Not in consideration
Connection in arrangement
To live apart) or to minor
Child (not being married
Daughter)
House Property of ` 1 Cr. House Property of ` 1 Cr.
Mr. A Son (19 Yrs) Mr. A Mrs. A
` 1 Lakh ` 1 Lakh
[Major : no deemed owner ] [Mr. A = Deemed Owner]
2) The holder of impartible estate is deemed as owner of property:
e.g : Maharaja Janak is ex-ruler of place he divided all his properties in 4 son but could not
divide temple. As per family convention eldest son occupied that so he will be deemed
owner.
3) Property held by a member of housing co-op society:

Generally, society is a registered owner of property. But when flat is allotted by a co-op
housing society → share is distributed – Deemed owner of property eventhough member
is having shares.
4) Holding possession of immovable prop. Under part performance of contract.

If person acquires a property under sec -53A of Transfer of Property Act,1882 → Deemed
owner.
There is an Purchaser paid Purchaser = possession

agreement in writing part (or full) of property even though
between purchaser & seller consi. to seller sale deed not executed
5) If house is let out on lease

a) On a lease term of >=12 years (fixed originally or through extention) &
b) One agreement which is > 12 months
e.g. Mr. X gives prop. On lease to Mr. Y. for 8 years after which it is extendable for 6
years. So total = 14 years there for Mr. Y = Deemed owner.
 Now refer Q-5,Q-6(=exercise Q=4), of JK

H.w.: Exercise → SM → Q-1,2,3(=hw Q-1 jk), (Exercise)
SM → 11,12(=Q-10 jk) , MCQ
JK Hws Q-2,3
Chapter-4: Salary (Section 15 to 17 + Rules)
 When income is charged under head?
Employer - Employee relationship

What
Service
When
Mr. Mr. B
How
Control
Money
→ When control & supervision vest with master, it is salary.

Here servant is bound to follow master’s direction.
Remuneration. = timely basis
→ “Service” → own way → no employer-employee relationship

→ E’ment can be part time or full time
→ Salary includes wages.
 Basic of charge [Sec – 15]
(1) Due or receipt basis whichever is earlier

e.g. Salary of march-20 received in April-20 Taxable in → P.Y. 19-20 (As due in march)
- salary of April-20 received in March-20, taxable in P.Y. 19-20 [as received in march]
[Bonus → Receipt basis]
(2) Any arrears of salary paid or allowed to pay in P.Y. by any employer, if not charged earlier
[arrears → increase in salary form back date] [ Relief u/s 89]
 How to compute salary :
Particulars ` `
1. Basic salary 
2. Advance salary (Sec-15) 
3. Arrears of salary [Sec-15] 
4. Bonus (Receipt basis) 
5. Commission 
6. Allowances (W.N. 1) 
Less : Exemptions  
7. Retirement benefits (W.N. 2) 
Less : Exemptions  
8. Perquisite [17(2)] (W.N.3) 
9. Profit in lieu of salary [17(3)] (Amt. received in addition 

to salary)
10. Gross Salary 
Less : Deduction [Sec-16] (W.N.4) ()
Net Salary 
→ Special Notes:
1) Foregoing of salary does not mean it is not taxable.
2) If employee opt to surrender his salary to CG u/s 2 of voluntary surrender of salaries act →
exclude from salary
W.N.1: Allowances
Allowance → amount given for expense (Monetary) on monthly basis either as
reimbursement or otherwise.
perquisite → nonmonetary- direct benefit
1: Dearness allowance: It is the allowance given for mitigating gap due to inflation.
D.A.
Forming part of retirement benefit Not forming part of retirement benefit
Taxable Taxable
2: Foreign Allowances :
Sec-10(7): Foreign Allowance is exempt if
Allowance or By GOI to Indian For rendering service

Perq. o/s India Citizen o/s India.
e.g. Basis salary → ` 10000 p.m

Foreign Allowance → ` 2000 p.m
Calculate taxable salary
Ans :
Basic → ` 1,20,000
+ Foreign Allowance → ̶
` 1,20,000
3: House Rent Allowance [10(13A)]:
Lowest of the following is exempt
1) Actual HRA Received or
2) 50% salary (Metro cities) → [DKBC-Delhi,Kolkata,Bombay,Chennai] or 40%
of salary (Other Cities) or
3) Rent paid (-) 10% of salary.
→ Points:
Salary = Basic + DA (in terms of retirement Purpose) + commission [fixed % of
T/o]
Here advanced salary not to be considered.
→ Note: Exemption of HRA depends on
Salary Rent HRA Location

So, advisable to calc. monthly if there are any changes in any of the above factor.
Note : if no rent paid then No exemption.
Refer Sum : Q-1 Module

Q-4 Module →JK = Q-1 SM (Exercise)
4: Special Allowances [Sec 10(14)(i) + Rule 2BB]:
Exemption = Allowance or Amount Spent w.e. Lower
C = Conveyance Allowance(Journey b/w office to Field (not home))

U = Uniform Allowance(Purchase or maintenance)
T = Tour, Travel, Transfer Allowance (For Transfer of Place of Job.)
H = Helper Allowance(To meet official duly)
A = Academic Pursuit Allowance
D = Daily Allowance
E.g. Mr. X has been given ` 2,500 p.m. as uniform allowance, expense for uniform
is ` 10,000 p.a. What is taxable amount ? what if exp = ` 40,000 ?
Ans : Uniform allowance (2500 x 12) = 30000
Less : Exemption u/s 10(14)(i) = (10000)
Taxable = 20000
If 40000 → then → NIL
5: Allowances → exemption based on limit [10(14)(ii) + 2BB]
Sr. No Name of Allowance Purpose Exemption
1 Transport Allowance Journey b/w office to Blind/ Handicap →

(Example -2) home ` 3200 p.m
Other → Fully Taxable
2 Children Education - ` 100 p.m per child

Allowance (Example-1) max. for 2
3 Hostel Expense - ` 300 p.m per child

Allowance max. for 2
4 Monthly allowance for Employee operating 70% of allowance or `

personal expense commercial Transport + 10,000 p.m
(Example – 3) no daily allowance
w.e. lower.
(i.e. employer =
Transportation)
5 Special Compensatory For bad climate area ` 800 or ` 300 p.m

(Hilly area) Allowance depending on location.
` 7,000 p.m for siachen
6 Special Tribal/ Schedule - ` 200 p.m

area Allowance
7 Field area Allowance In specified state ` 2,600 p.m
8 Underground Allowance For mines etc. ` 800 p.m
Example – 1 :a. Mr.A is getting Children education allowance forRs.370 PM for 1 child.
C.E.A = ` 370 p.m x 12 month x 1 child = ` 4,400
(-) Exemption u/s 10(14)(ii) (`100x12) = (` 1,200)
Taxable = ` 3,240
b. Mr.A is getting Rs.90 P.M.for 3 children as CEA.
C.E.A = ` 90 p.m x 12 month x 3 child = ` 3,240
(-) Exemption u/s 10(14)(ii) (`90x12x2) = (` 2,160)
Taxable = ` 1,080
Example – 2 : Mr. X (Disabled).He received Transport allowance Rs.2900 P.M. upto

December and then onwards Rs.5000 P.M.
Ans.: Particulars April-Dec Jan-March
Total allowance 26100 [2900x9] 15000 [5000x3]
( ̶ ) Exemption u/s 10(14)(ii) (26100)[2900x9] 9600 [3200x3]
-- 5400
Example – 3 : Mr.Y is getting monthly allowance and he is not in receipt of daily
allowance. His employer is working in transportation. He is receiving allowance Rs. 15000
P.M.What will be answer if he has joined from 1.7.19?
Particulars 1 2 [Joined on 1-7-19]

Special Trans. allowance 1,80,000 1,35,000
[15000x12]
( ̶ ) Exempt u/s 10(14)(ii) (1,20,000) (90,000)
70% = 1,26,000 70% = 94,500
or or
` 10000 pm =1,20,000 ` 10000 pm =90,000
60,000 45000
6: Fully Taxable Allowances

→ City compensatory allowance (for high cost)
→ Entertainment allowance (Ded’ u/s 16)
→ Transport allowance (Other than disable)
→ Telephone allowance
→ Medical allowance
→ Tiffin allowance/Food allowance
→ Project allowance
→ Dearness allowance [D.A]
7: Fully exempt Allowances:

→ Allowance to HC Judge
→ Allowance Received from UNO
→ Sumptuary allowance [HC & SC Judge]
→ Allowance to MPs and MLAs
8: Exemption for some allowance to UPSC retired chairmen or member [10(45)]:

a) Value of rent free accommodation
b) Conveyance allowance
c) Sumptuary allowance
d) Value of leave travel concession
e) Upto ` 14,000 p.m for defraying service
f) Value of Resi. Telephone upto ` 1500 p.m
illu-2 SM (4-20)
W.N.-2 Retirement Benefit
(1) Gratuity [ Exepmted u/s 10(10)] (Voluntary payment for appreciation of service)
→ After service received
Govt. Employee Other Employee
Fully Exempt
[10(10)(i)] Covered by Payment of Gratuity Not Covered by
Act,1972 Gratuity Act, 1972
Railway mines oilfield
→ Least of following is → least of following is
Exempt [10(10)(ii)] Exempt [10(10)(ii)]
A. Actual Gratuity Received A. Actual Received

B. 15/30 x Avg. Salary of 10
B. 15/26 x Last Salary x
Month x completed years of
completed years of Service
Service
C. upto ` 20,00,000 C. upto ` 20,00,000
(Notification)
1) Salary = Basic + DA(All) 1) Salary = Basic + DA(forming

2) If no. of month >6 month part)+ Commision(%)
→ full year 2) Any fraction of year→Ignore
Covered by Act Not Covered by Act

24 yrs 5 months = 24 yrs 24 yrs 5 months = 24 yrs
Note :
(i) Gratuity Received during employment → Fully Taxable
(ii) Gratuity exemption from any employer together cannot exceed ` 20L / ` 10L
(So it received second time then from ` 20L / ` 10L deduct exemption availed
earlier)
(iii) Exemption available even if received after death by family member.
Solve Q-6 → JK = illu-4 SM
(2) Pension :
Pension [10(10A)]
Uncommuted Commuted (Lumpsum)

(Monthly Basis)
Taxable for any Govt. Employee Other Employee

Employee
Fully exempt
In receipt of Not in receipt

Gratuity of Gratuity
1/3 of full 1/2 of full

Pension is exempt pension is exempt
Full pension = Commuted pension X 100

% of commutation
(note → after commuted pension, uncommuted will be reduced by that %)
Case Taxability
1 Pension received from UNO Exempt
2 Family member of armed force Exempt u/s 10(19)
3 Family member of other employee after Taxable in IFOS : lowest is deductible:

death of employee
a) 1/3 of pension
b) ` 15,000/-
Q-5 of JK = illu-3 (SM)

(3) Leave Salary [10(10AA)]
During employment On retirement
Fully Taxable Govt. Employee Other Employee
Fully exempt Least is exempt:

(a) Actual A/m received
(b) Total salary of last 10 month(based
on average salary)(note-2)
(c) Cash equivalent of leave (note-1)
(d) Max. upto ` 3,00,000(Lifetime)
[Salary = Basic + DA (%) + Commission (%)]
Note-1 Cash equivalent :
o As per Income Tax Act leave can’t exceed 30 days for every completed year of service.
o Steps for calc. of cash equivalent:
1) Find out duration of service in yrs (ignore fraction)
2) Find out Gross Earned leave (but 1 yr = Max 30 days)
3) Reduce leave availed during e’ment
4) Balance is earned leave as per I.T ÷ 30 days.
5) Step-4 * Average salary of last 10 month.
Note – 2 : last 10 month from date of retirement.

Q-7 → JK = illu-5 (SM)
(4) Retrenchment compensation [10(10B)] (Profit in lieu of salary)
Lower of following is exempt: (Ind. Dispute Act)
a) A/m received
b) 15/26 x Avg salary last 3 month x completed yr of service [>6 month = full year]
c) Max ` 5,00,000
[Salary = Basic + D.A. (all)]
Q-8 JK
(5) VRS → Voluntary Retirement Scheme [10(10C)]:
Whichever is lower is exempt:

a) Amount received → VRS
b) ` 5,00,000
c) 3 month salary x complete yrs
) Last drawn salary x remaining Month of service.
Salary = Basic + DA(%) + Commission (%)
Q-9 (JK) = illu-9 (SM)
(6) Provident fund : (can be counted in PILS)
Taxability
Stat. Prov. Fund Reco. PF (RPF) Unreco PF Public PF (PPF)
(SPF)(10(11)) (URPF)
Non salaried +
For Govt. e’yees
All
(SPF Act, 1925) other e’yees
(EPF Act, 1952)
(EPF Act, 1952)
1- E’yer contri. Exempt Exempt upto Not taxable N.A

12% of salary
[E’yer don’t
(sec-7)
contri]
2- Int. credited to Exempt Exempt upto int Not taxable Exempt

P.F rate =9.5% p.a
(sec-7)
3- Ded’ u/s 80C Available Available Not Available Available

e’yee contri
4- Lump sum Exempt Exempt in some Taxable (Note-2) Exempt

maturity case (Note-1)
[10(12)]
→ Salary = Basic + DA (%) + commission (%)

Note:-1 RPF p’ment exempt only if e’yee has discharged continuous service of 5 years.
1) Mr. X → serves A ltd for 5 yrs
2) Mr. X → serves A ltd for 3 yrs
&
B ltd for 2 yrs then also exemption available if a/m is transferred to RPF (A ltd)
to RPF (B ltd)
3) Not able to complete 5 yrs because of unavoidable circumstances
Note:-2 Taxability for lump sum under URPF
Amt. of e’yer Int. on e’yer e’yee contri int on e’yees contri.

Contri contri
Taxable under head salary exempt IFOS

Salary (it is inflow not income)
[Illustration -6 ,7,8]
(7) Superannuation Fund [10(13)]
→ at time of retirement & during employment
During employment at time of retirement
Fully exempt if
E’yee’s e’yers Int. a) paid to legal heirs on death of employee
Contri contri or
b) p’ment made to e’yee as an annuity plan
80C Taxable Fully exempt after retirement.
Above or
`1.5 lakh c) p’ment made to e’yee who is
[Upto `1.5 lakh incapacitated by disability
Exempt] [if resignation --fully taxable]
W. N. -3 Perquisites
 Perquisites → means non monetary benefits given to any person [allowance are
monetary this is non monetary]
 Perquisite
Which is obligation of employee Which is not of employee obligation
Taxable for all Taxable to specified employee

1) specified person
E’yee who e’yee having substantial salary except perq.

Is director of co. int. in company exceeds `50,000 p.a
(if equity ≥20%)
 Section 17(2) → perquisites includes
(1) Value of Rent free Unfurnished accommodation :----Only to specified employee

[House, Flat, Farm House, Hotel, Motel, Guest House, Ship]
(if provided to Judge of HC or SC not taxable)
Taxable Perquisites
[Rule 3(1)]
Govt. employee Non Govt. employee
Taxable = License fee as Accomodation owned Accomodation

Per govt. rules by e’yer not owned by employer
Taxable = lowest of
a) Actual Rent paid
Population >10L but >25L or
Of city ≤ 10L ≤ 25L b) 15% of salary
Salary = Basic + DA (forming

7.5% of salary 10% 15%
part) + Bonus + Commission
Population from 2001 Census (all) + All Taxable Allowance
(2) Value of Rent free furnished Accomodation :

 When accommodation is not hotel
Step-1 : find out value as if unfurnished
Step-2 : Add value of furniture →Rule 3(7)
Furnitures owned Not owned

By e’yer
10% p.a of original cost Actual hire charges

(Ignore WDV) (–) Amt. recovered in any
Furniture includes Radio, TV, Fridge, AC.
 When accommodation is Hotel

Lower = taxable
24% of salary or Actual charges

Paid by e’yer
Same meaning
 However, accommodation in hotel will not be taxable if
Given because of transfer from & Total period not exceeding

One place to another 15 days in a year.
 When employee is given 2 accommodation at same time (because of transfer)
Upto 90 days beyond 90 days
Any one accommodation All are taxable

Is taxable at option of assessee
General Notes : Value to be calculated for period of occupation of house.(Monthwise)
(3) Value of accommodation Provided at concessional rent:

(I.e. Some amount is charged from e’yee)
Step-1 : find value as per 1 & 2
Step-2 : Deduct rent recovered from e’yee
[ If amount positive → then Taxable ]
Refer Q.13,14,15,16,17(SM)
(4) Value of perq. In respect of free domestic servants.

(Sweeper, Gardener, Watchman, Personal attendant, etc)
Rule 3(3)
taxable = Actual cost to employer
(–) Recovery from employee
 Note: If employer provides servant to e’yee then it was not obligation of e’yee (he might
have chosen not to have) so, such perq. Shall be taxable only to “specified employee”.
Q-18 (SM)(4.71)
(5) Value of perq. In respect of Gas, Electricity, Water supply [Rule → 3(4)]
Purchased by e’yer or Supplied out of own Resource.

From outsider
Taxable vaule = Amount paid/P’ble Taxable = manufacturing cost to e’yer

By e’yer
(–) Recovered from e’yee (–) Recovered from e’yee
Balance (if positive) Balance (if any)
(6) Valuation of perq. In respect of free institute [ Rule 3(5)]
Provided to employee Provided to children or other

Household member
Not Taxable
Whether education trust owned
by employer ?
Yes No
Whether outside student Actual fees paid by

Allowed ? the employer
Yes (i.e. Open) No (i.e Close)
Taxable value= Taxable value =

Fees charged from fees charged by other
Other students institute in similar
Locality providing
Similar facility.
Less : Amount reimbursed by e’yee to e’yer

Balance(If positive)-Taxable.
 Note : If educational inst. is owned by e’yer then whether open or close if facility is
provided to children then not taxable if upto ` 1000 p.m. per children.(No limit on
children) So if exceeding 1000 p.m no exemption
(Not for other member & not in case not owned by e’yer)
E.g. JK. Schools are owned by J.K.Shah Pvt Ltd. Mr. Karan is e’yee of company. He sends
children (3) & wife(1) to the school. School generally charges ` 800 p.m. from other
students but for e’yee relative it is ` 5000 p.a.
Children (3) wife (1)

Fees charged from other 28800 9600
(–) Exempt 28800 (800x12x3) –
(–) Recovered (15000) (5000)
[5000 x 3]
–––––––– ––––––––
-ve 4600
Note : Scholarship given by e’yer to e’yee children is fully exempt
(7) Leave Travel concession [Section 10(5)]
 Exemption of LTC can be availed twice in a block of 4 calendar years (from 1986 →
Rules 2B) Current Block = 2018-2021
 LTC can be availed for Travel anywhere in India (Not O/s India)
 Travellers can be e’yee + Family.
o Family = Spouse, children (Dependent or Not), Parents, Brother, Sister (Dependent).
o (Do not Include → Grand Parents, in Laws)
 Children if Date of Birth
Before 1-10-98 On or after 1-10-98
Any no. of children are allowed

Max 2 Children allowed
1st Child- Single 1st Child- Twins

2nd Child – Twins 2nd Child – Single
(Multiple Birth after single) (Single birth after multiple)
[to be consi →2] [to be consi →3]
For 1 it is taxable.
 Monetary Limits :
Journey by air Journey by rail Journey by other mode

Transport
Lowest is exempt Lowest is exempt
a) Economy class fare by a) Ac 1st class by
Shortest route shortest route
or or
b) a/m spent b) A/m spent
Place of origin & Not connected by rail

Destination
Connected by
Rail Where reco. No reco.
Public public
Lowest is exempt transport transport
a) Ac 1st class exist exist
or
b) A/m spent Lowest is Lowest is
Exempt exempt
a) 1st class or a)Ac 1st class rail
Deluxe class fare fair(as if travel in
Or rail) Or
b) a/m spent b) a/m spent.
 Carry over concession :
Concession can be carried foward if assessee has not availed travel concession during
block to next block. But it should be claimed in 1st calendar year of next block [only 1
carryover].
 Exemption is only for fare not for other expense.
Sum Q-10,11(SM)
(8) Valuation of perq. For interest free loan or loan at concessional rate of interest. [To e’yee
or Family member]
 Step : 1: Find out “Maximum o/s Monthly balance” → Means aggregate O/s balance of each
loan as on last day of each month.
 Step : 2: Find out rate of interest charged by SBI as on first day of P.Y. for same purpose.
 Step : 3: Cal. Int. for each month [Step -2 x Step-1]
 Step : 4: Total int. in step-3 (Taxable) Less : Any int. recovered.
 i.e. Notional Int. → [Market Rate – Borrowing Rate] is Taxable.
 Where such loan is not taxable
A/m of Original Loan Loan is for diseases specified

Does not exceed ` 20,000 In rule 3A.
(But loan reimbursed by any medical
Ins. Scheme is Taxable)
(9) Valuation of perq. In respect of use movable asset [3(7)(vii)]
If computer/ Laptop Any other movable asset

Given
Not Taxable Owned by e’yer Taken on Rent
Taxable = 10% p.a of original Taxable = Rent Paid

(–) Amt recovered (–) Amt recovered
Balance (if +ve) Balance (if +ve)
(10) Valuation of perq. For sale movable asset by e’yer to e’yee of nominal price
[3(7)(viii)]
Electronic/ computers Motor car any other (furniture, Motorbike etc)
Actual Cost to e’yer Actual cost Actual cost

Less : 50% for each (–) 20% for each dep (–) 10% for each dep
Dep. Completed yr by completed yr by completed yr by
WDV WDV SLM
Less : Amt. recovered (–) Amt. recovered (–) Amt. recovered
Balance (if +ve) Balance (if +ve) Balance (if +ve)
(in year → ignore fractions-only completed year to be taken)

 e.g. : X Ltd has a car purchased on 1-12-17. It was purchased for ` 50,00,000. X Ltd sold
it to e’yee on 1-5-19 for ` 10,00,000. Cal. Value of perq. [same way]
Laptop → 1-1-17 for ` 70,000, sold on 1-1-20 for ` 10,000 &
Furniture (Sofa) → 4-12-17 for ` 70,000, sold on 14-2-19 for ` 5,000
Ans : (i) Car.
→ here car is used by e’yer for 1 year and 5 month.
Completed year = 1 year
Actual cost = ` 50,00,000
(–) 20% Dep. For 1 year = (` 10,00,000)
= ` 40,00,000
Asset sold for = ` 10,00,000
Value of perquisites = ` 30,00,000
(ii) Laptop
→ Used by e’yer for 3 years
Actual cost = ` 70,000

(–) Dep. 50% (Yr-1) = (` 35,000)
= ` 35,000
(–) Dep. 50% (Yr-2) = (` 17,500)
= ` 17,500
(–) Dep. 50% (Yr-3) = (` 8,750)
= ` 8,750
Asset sold for = (` 10,000)
Value of perq. = NIL
(iii) Sofa
→ Used by e’yer for 2 years & 3 month : used for 2 year
Actual cost = ` 10,000

(–) Dep. For 2 yr [10% x 2] = (` 2,000)
= ` 8,000
Amt. recovered = (` 5,000)
Value of perq. = ` 3,000
(11) Valuation of medical facilities : [Proviso to 17(2)]

For himself or family → [spouse, children (dep. Or not), parents, brother, sister] does
not include Grand Parents inlaws.
Medical facilities in India
Provided by Provided in Provided in hospital provided in

Hospital owned Govt. Hospital approved by chief comm. Private hospital
By e’yer [For deceases mentioned (family Dr. etc)
In rule 3A(2)]
Not Taxable Not Taxable Fully Taxable
Not Taxable
Medical facilities O/s India
Treatments expense Staying expenses Travelling expenses
Exempt upto a/m certified by RBI for patient if GTI > 2 lakh if GTI ≤ 2 Lakh
& 1 attendent Fully Taxable Fully Exempt
[GTI only excluding travelling exps.]
illu-12 (SM) = Q-3 (JK)
Note : if e’yer pays medical ins. Premium of e’yee then it is in busi. Int. & hence not perq. →
clause (iii) of 1st proviso to section 17(2) .
(12) Valuation of perquisite in respect of Motor car [3(2)]-----Only to specified e’yee
 Car is owned by employee:
Situation Exps. Met by e’yee Exps. Met by e’yer
Office purpose Not Taxable No benefit = not Taxable
Cost to e’yer (Running &

main.+ Driver Salary)
Private Purpose Not Taxable (–) Amt. recovered
Bal. (+ ve) → Taxable.
Cost to e’yer
(–) Used for office purpose
Partly office / (W.N -1)
Not Taxable
Partly Private (–) Amt. recovered
Bal. (+ ve) → Taxable.
W.N -1 : How much amt. used for office purpose :

Option → A : if logbook for official purpose maintained then as per that.
or (Dep. + other Exp.)
Option → A : Car engine ≤ 1600 c.c(1.6litre)= ` 1800 p.m.
> 1600 c.c(1.6 litre) = ` 2400 p.m.
+ Driver salary (if provided) = ` 900 p.m.
 Car is owned by employer:
Situation Exps. Met by e’yee Exps. Met by e’yer
Office purpose Not Taxable Not Taxable
Cost to e’yer Cost to e’yer [10% Dep./Hire]

[10% Dep./ Hire charges] + Running - main. exps
Private Purpose (–) Recovered from e’yee + Driver Salary (if provided)
Bal. (+ ve) → Taxable. (–) Amt. recovered
[here running cost → by e’yee] Bal. (+ ve) → Taxable.
Value of Taxable Perqs.

Value of Taxable Perqs. → ≤ 1600 cc → ` 1800 p.m
CC → ≤ 1600 cc → ` 600 p.m → > 1600 cc → ` 2400 p.m
Partly office / > 1600 cc → ` 900 p.m + Driver salary → ` 900 p.m
Partly Private [No driver salary & No (if provided)
recovery to be deducted] [Here amt. is higher considering
running & maintenance exps]
 Points to remember :
i) Ignores fractions of month
ii) Car facility b/w office & residence is not taxable
iii) When 2 or more cars care allowed then at option of e’yee one car will be taxed
as per ` 1800/2400/900 p.m (i.e office + personal) & other cars → as if wholly
for private purpose.
(13) Value of perquisite in respect of Lunch / Refreshment : [Rule 3(7)(iii)
Fixed Lunch Allowance, Food, non alcoholic Lunch / Refreshment

Dinner allowance, beverages food, non-alcoholic
Refreshment allowance, beverages provided
Provided in working at other place than
Always Taxable hrs in remote area or remote area or
Offshore inst. Offshore
(in working hrs)
Not taxable
+ Tea & snacks in cost to e’yer in excess
Working hrs (In any area) of ` 50 per meal
(Not Taxable) (–) Amt. recovered
Bal. (+Ve) → taxable
(14) Value of perquisite of gift, voucher, token [Rule 3(7)(iv)]
Gift made in cash or Gift in kind upto ` 5000

Convertible to money in aggregate p.a.
(like gift cheque)
Taxable Exempt
(beyond that taxable)
2 views
If above 5000 Only amt above

Fully taxable 5000 is taxable
(Follow this)
(15) Valuation of perq. For credit card [3(7)(v)]

Find out exp by employer
(–) exp. On use for official purpose
(–) Amt. recovered from e’yee
Bal. (+ ve) → Taxable
(16) Valuation of perq. In respect of club expenditure [3(7)(vi)]
Find out exp by e’yer Health club, sport facility

(–) Used for official purpose provided uniformly to all
(–) Amt. recovered classes of e’yee by e’yer at
his premise
Bal. if any → Taxable
Exempt
[Solve Q-20 (SM)]

(17) Value of specified security or sweat equity share for purpose of sec-17(2)
Perq. Taxable Value = FMV on date of exercising option

(–) Cost (any) recovered from e’yee
Bal. if +ve Taxable.
Note : At time of sale of such shares cost of acq. wiil be such FMV [sec- 49(2AA)]
Q-21 (SM)
 However : telephone / mobile phone [ but telephone allowance = taxable]
Not Taxable
(Q-22 (SM) )
W.N. 4 : Profit in lieu of Salary : 17 (3)
→ Compensation on loss of office (VRS, etc)

→ Contri. To PF, SF, RPF
→ P’ment under keymen insurance policy
Compensation under keymen Ins. Policy
R’ved by e’yee R’ved by e’yer R’ved by family of e’yee
Taxable under salary Taxable under PGBP IFOS
W. N. 6 : Deduction (Sec 16)
Standard deduction [16(ia)]
Gross Amt. of salary or ` 50,000 w.e. less(For all salary together)
1) Entertainment allowance : [16(ii)]

Step-1 First add to salary.
Step-2 Then deduction only for Govt. e’yee
1/5th (20%) of or amount received or ` 5,000

Basic salary
w.e less
2) Professional Tax or Tax on employment [16(ii)]

→ Levied by state Govt. →Deduction only when paid by employee in P.Y.
→
If paid by employee If paid by employer
Take deduction Step-1-First add to Salary(Perq)

Step-2-Take deduction if actually
paid
[sum no 23 (sm)]
W.N. 7 : Relief u/s 89

→ Arrears of salary is received in current year the it has to be added to income of current P.Y.
so, there is a income of preceding years & current tax rate is applied → Here, relief is
to avoid any extra burden of tax.
E.G. 2010.Salary with arrear 120(Tax 12) and without arrear 100(Tax 10).So tax due to
arrear is 2.
2019.Salary with arrear 220(Tax 24) and without arrear 200(Tax 20).So tax due to
arrear is 4..
Relief=4-2=2.So tax in 2019=24-2=22
→ Relief u/s 89 → Tax difference in (–) Tax diff. in preceding yr

CY income due to arrears income due to arrears
Step-1: Cal. Tax after cess of CY with arrears & w/o arrears
Step-2: Cal. Tax after cess of all preceding yr @ rate applicable in that yr with arrears
& w/o arrears.
Step-3: Cal. of relief :
Diff of tax in step -1
(–) Diff of tax in step -2
= (+ ve) Rebate u/s 89
To be deducted from after cess Tax P’ble of C.Y.
sum Q-24 (sm) (4.92)

Do it → Q-2 (JK) (48)
 Salary from UNO :

As per sec-2 of U.N (Privileges & immunities) Act, 1947 → Any salary by UNO →
exempt.
Then → Q-1 (JK)

Q-10 (JK)=SM (Q-5)(exer)=Q-3(Jk hws)
illu-19 (SM) (4.79)=Q-11 jk
Then give HW → exercise Q-2(=Q1 jk hws),Q-3,Q-4(=Q-2 jk hws) [Q-1 → Done, Q-
5 (SM), Q-10 (JK)]
 General Notes:
→ Meaning of salary for diff things:
1) Entertainment allowance : only basic
2) Gratuity (covered) → Basic + DA (all)

Retrenchment compensation
3) Leave Salary Salary = Basic + DA (Part) +

Gratuity (Not covered) commission (%)
HRA
Reco. P.F (In excess of 12%)
VRS
4) Rent free Accommodation:

Salary = Basic + DA (Part) + Taxable allowance + Bonus + Commission (All)
For following salary = on due basis
HRA Rent free accommodation
Ch. 5 Profit & Gain from Business or Profession(28 to 44DB)
 What is Business? [ 2(13)]
Any activity in nature of: Trade or manufacturing or Commerce or any adventure (w/o
outcome) also for this purpose.
 What is Profession? [2(36)]
Profession includes Vocation
Requires intellectual skill or Natural ability to do particular

Manual skill on some learning work.
& qualification e.g. Singing, Dancing.
e.g. CA, Doctor, Lawyer.
 If activity is for pleasure only & not having profit motive then it is not Business or
Profession.
Section 145: Taxability as per method of accounting followed by assessee.
 Section 28 : Basis of charge:
1. Profit & Gains of B/P, carried on at any time during year.
2. Compensation received by
Any person managing whole or Any person holding agency Any compensation
Substantially whole affairs of any in India for others Business. Relating to contract of
Indian co. or other co. business
At or in connection with termination of his management or office or modification of

T&C.
3. Income received by Trade, Professional asso. From specific services rendered to

their member
(General service → Principal of mutual concern]
4. Incentives received or Receivable by assessee carrying on export business:
On sale of import Cash assistance Duty Profit on Trf. Of duty

entitlement Against export Drawback entitlement passbook
Scheme.
5. Value of any benefit or perquisite arising from business.

[e.g. car received by dealer as gift]
6. Partnership – Reuneration ,Interest Partner

Bonus, commission, Salary,Etc
7. Sum Received / Receivable for
Not carryingout Not to share know-how,

Any Business Patent, copy right, etc.
Other than → i.e Not in PGBP
Transfer of right Compensation from

Charged under capital gain multilateral fund
Exempt
UNO
(Ozon Layer etc)
8. Sum Received under → keyman Insurance Policy
9. Fair market value of inventory on conversion in capital asset.
10. Any sum received/ receivable on account of any capital asset being
Demolished Destroyed Discarded Transferred
If Deduction was allowed u/s 35AD
 Explanation 2 of section 28:
→ If “Speculative Transaction” is of such nature as to constitute a business, it will be
deemed to be distinct & separate of other business.
→ What is speculative: [43(5)] → Contract of Purchase or sale of commodity Incl.

share / stock settled otherwise than by actual delivery.
→ The following shall not deemed to be speculative:
Heading contract for R.M Trading in Derivatives

Or shares (Derivaties)
Format for calculation PGBP income :
Net Profit as per P & L 
Add : Exps debited to P & L A/c but not allowed as deduction 
Add : Income not credited to P & L but taxable 
Less : Exps not debited to P & L but allowed ()
Less : Income credited to P & L but charged in other source or ()

exempt
PGBP 
1. Section 29: Manner of computation of income under head PGBP :
As per section 30 to 43D
Admissible inadmissible Exp/P’ment Profits charge Other

ded’ Ded’ not deductible to
in certain circum. Tax
30 to 37 40 & 43B 40A 41 other sections
2. Section 30 : Rent, Rates, Taxes, Repairs & Insurance of Building(3RTI)
Allowed only if used for B/P
Rents Current Repairs Local Rates Insurance

Municipal Tax Premium
Notional rent if assessee is subject to condition

Not Allowed owner or u/s 43B
Tenant [Paid b4 return
[For cap. Exp filing due date]
depre.]
3. Section 31 : Repairs & Insurance of machinery plant furniture

Allowed only if used for B/P
Current repairs Ins. Premium What about Rent??

(Execpt capex) 37 (1)
Judicial rules :
→ Repair: Include renewal or renovation but not replacement or reconstruction.
Current repairs means repairs in normal course to maintain present original condition
→ it does not mean merely petty repair. [e.g of Red carpet]
4. Section 32 : Depreciation
Dep. in BOA → Disallowed

Dep. As per IT act → Allowed
→ Ded’ is to be claimed compulsorily [Explanation 5]

→ Conditions to be satisfied for depreciation.
Assessee should
Be the owner & Asset used for Busi / Profession
Even it used for a part of year

Registered or Beneficial → Allowed.
SC → Mysore
Minerals Ltd
→ Asset in respect of which depreciation is claimed must belong to either of
Following category.
Building, M/c, Plant or Knowhow, Patent, Copyright,

Furniture [Tangible] Trademark, Licence, or any other
Busi. right of similar nature
(E.G.Goodwill)
→ Used for Busi. → Court judgement → it is said to have used even if “kept ready for
use” e.g. stand by equipment.
→ Asset used for less than 180 days (Full dep/Half dep concept)
Acquired in the PY & put to use in same P.Y. Otherwise(i.e.>=)

for < 180 days during P.Y.(after 4th Oct)
Half depreciation Full dapre
Note : if acquired in 2018 but put to use on last day on 2019-20 → Then
→ Capital expenditure incurred on leasehold building
Explanation to 32: cap. exp incurred shall be entitled to dep. as if such structure or
work is owned by him [for rest of asset → to lessor → as he is owner]
→ Asset acquired under HP / Installment:
CBDT: Hire purchaser is entitled to claim dep. From inception of transaction even
though ownership passes only on last installment.
“Block of asset” system & WDV method :
Meaning: Group of asset falling within class of asset in respect of which same rate of
dep. shall be charged under WDV method as per rules.
 WDV method [Section 43(6)]
Written down value is determined as under
Particulars `
Depreciated value of block as on 1-4-19 
Add : Actual cost of asset acquired during P.Y. 
Less : Monies paid or payable for asset sold, demolished, destroyed ()
incl. any scarp value
(A) WDV for P.Y. 19-20 
Less : Depreciation actually allowed [ A x %] ()
Depreciated value of block as on 1-4-20 
Rates of Depreciation :
Before that lets understand what is plant [43(3)]:
Plant
Includes Excludes
Ship, Vehicle, Books, Scientific apparatus, Tea Bushes or livestock or building
Surgical equipment used for Business/ or Furniture / Fixture
Profession
For rate of depreciations :
[ Rule 5(1)]
Brief summary
→ Building used for residential purpose 5%
Building
[except hotels, boarding]
→ Building → office, Factory, Go down, Hotel, Boarding 10%
→ Other (e.g. Building for installing P & M) 40%
Furniture Furniture or fitting 10%
P&M → Motor car [other than used on hire] 15%
If acquired and put to use b/w 23.08.19 to 31.3.20 30%
→ Motor bus, lorries, Taxies on hire 30%
If acquired and put to use b/w 23.08.19 to 31.3.20 45%
→ General P & M 15%
→ Other (Computer, Laptop, Books) 40%
P&M Any Ship 20%
I.T.Asset Intangible asset 25%
 Examples :
Car 15%
1. Block as on 1-4-19 → 10,00,000
Purchased plant D on 1-5-19 → 2,00,000
Sold out on 28-3-20 → 30,000
Dep ?
Ans.: Block value as on 1-4-19 → 10,00,000

Add : Actual cost of Plant D (1-5-19) → 2,00,000
12,00,000
Less : Sold out Plant C → (30,000)
WDV as on 31-3-20 → 11,70,000
Depreciation @ 15% → 1,75,500
 Suppose → Pur is on 1-11-19 ?
Block 10,00,000
+Cost 2,00,000
12,00,000
Less : Sold (30,000)
11,70,000
9,70,000 2,00,000
@ 15% @15% x 50%
1,45,500 + 15000
= 160500
When WDV of “Block of asset” shall be reduced to NIL (Section 50)
When sale consi.<Op.+addition When sale consi. of one

or more asset in block exceed.
Total of Op. + Addition
Any asset exists No asset exist
Short term capital gain
Conti.Depre STCL
e.g. Op. Bal (A, B, C) 10,00,000

+ Addition (D) 3,00,000
– Sold (A) (15,00,000)
Ans: STCG Rs. 2,00,000

Sixth proviso to Sec. 32(1):
This provision is applicable for following

Cases
Succession Succession Sec. 170 Amalgamation Demerger of co.

47(xiii) 47(XIV) of co.
Firm into co. Pro. Into Succession of

Co. busi. by member,
Partner.
→ in this year, depreciation shall be cal. as follows?
Step -1: Cal. Dep as if no succession / Amalgamation / Demerger has taken place.
Step -2: Computed dep. Shall be apportioned b/w predecessor & successor in Ratio of no. of
days for which asset were used by them.
Illu-2 (SM)
Illu-3 (SM) = Q-5 (JK)
Additional Depreciation : (Over & Above normal) [32(1)(iia)]
The assessee must be New P & M should be acq. & it should be eligible
Engaged in manufacture / installed after 31-3-05 P&M
Production of article or thing
Which are not eligible?
Ships/ Asset which by its P&M installed Road P & M whose

Aircraft installation was used in office premise Transport whole actual cost
Either in / o/s India or Resi, accom. Vehicle allowed as ded’
(2nd hand) (Incl. Guest House) (by Dep. or
Otherwise.)
Rate of additional depre
In Other state In backward state: Bihar,westbengal A.P.,Telangana
For >=180 d <180 days For >=180 d <180 days
20% 10% 35% 17.5%

(Bal. 10% in subsequent year) (Bal. 17.5% in subsequent year)
→ However whole additional depre is to be deducted from WDV. This is advance Depre.
Refer Q-1 (SM)
Q-1, Q-2 (SM → exercise)(=Q 10 of hw section jk)
5. Section 32AD :
→ Investment allowance for New P & M set up by manufacturing industries in B.W.A of

states.
Deduction @ 15% [No. 180 days criteria ,not deducted from WDV]
States → AP, Bihar, Telangana, WB

So here,Normal=15%/7.5% (To be ded from WDV)
Additional=35%/17.5% (To be ded from WDV)
+ Deduction 32AD → 15% (Not to be ded from WDV)
Conditions
Assessee in P&M acquired on or after Eligible P & M in B.K.A

Manu. Ind. 1-4-15 but b4 31-3-20 of specific state
Not eligible → same as
Additional dep.
Note: If this new P & M is sold or transferred within 5 years from date of installation.
Then ded’ allowed earlier = Deemed to be income under PGBP in year of transfer [in addition
to capital gain
→ This prov. not applicable if transferred for amalgamation, demerger etc
Q-7 (SM) = JK Q.6
Special option available for assessee engaged in Business of generation & distri.
Of power/Electricity.
Assessee engaged in SLM available Additional depre ?
A) Trading No No
B) Professional No No
C) Manu. Of any article No Yes
D) Manu./ Gen & distri. Of Yes. Provided they
Yes follow WDV
power
So,
Assessee engaged in option to Option has to Option once

& distri. Power follow SLM exercise b4 due exercised shall
@ Rates date of filing be final.
Rule-5(1A) return u/s 139(1)
[can also opt
For WDV]
→ 180 Days rules applicable

→ if SLM → then no concept of block.
∴ Treatment when asset is sold, discarded demolished or destroyed.
Terminal dep [ 32(1)] or Balancing charge [41(2)]
If sale value < WDV then diff is if sales value > WDV, then
Allowed as ded’ in PGBP as diff is taxable in PGBP as
“Terminal Dep.” “Balancing charge”
Diff : a) Surplus or
b) Dep. Claimed till date
w.e lower.
Balance—Capital Gain
E.g. Cost=100,WDV=50,Sale value=120
Actual Cost : [Sec – 43(1)]
 Actual cost of asset less any portion if met directly or indirectly by any other person /
authority.
 Proviso: if exp on acq. of asset → P’ment to a single person in a single day is otherwise
than by a/c payee cheque or a/c payee draft or ECS (or through any e mode) exceeds ` 10000
→ then this will not form part of cost.
 Special Cases(Explanations)
i) When asset acquired by gift → cost WDV of previous owner.
ii) Building previously used for personal use:
Cost = original cost (–) Notional dep. from date of acquisition till starting of yr.
[so if any other pvt asset converted then actual cost = original cost]
Refer illu. 4 (SM)
iii) Capitalization of int. paid / payable in connection with acquisition of asset.
Int. for period before put to use int. for period after asset put to use
Capitalise not to capitalize(charge to pl)_
iv) Amt of duty if credit is claimed
If credit is claimed → not to be included.
v) Asset acquired by gift or without consideration for which earlier deduction u/s 35 is
claimed=COST=NIL
Unbsorbed depreciation [Sec-32(2)]
→ When there is no profit under this head or not sufficient to absorb whole dep.
→ The Balance is called “ unabsorbed dep ”
→ Which can be set off against any other head & bal. (if any) can be c/f for “n” no. of years.
In any year ded’ order.
Current year Dep. → B/f Busi. Loss → unabsorbed depreciation
Note : No depre on asset which is fully allowed as deduction as capital exp.
Refer. illu-5 & illu-6=(Q-1,2 of homework section jk)

(SM)
6. (1) Section 35 : Expenditure on scientific research :
(1) Inhouse Reseach :

 By any assessee [sec-35(1)(i) + 35(2)]
(Research should be for own business)
Following expenses are allowed as deduction
Current Year Prior period exps
3 yrs prior to commencement

Revenue + Capital(except land) of busi.
Revenue Capital
To be approved Not to approve

By autho.
Only two Every exps(Except land)

1) P’ment of salary to
Research personnel.
(not perq.)
2) Pur. Of Material for SR
100% deduction
No depreciation on asset claimed as ded’
(2). By company engaged in business of bio-technology or business of mfg / prod of any
article [sec-35(2AB)]
[except article mentioned in 11th sch.]
Current year Prior yr
Revenue Capital(Except land and building) Revenue Capital
150% deduction No deduction under this section

(So on building 100% can be claimed u/s (However 100% can be claimed
35(1)(i)+35(2)-as it is for all assessee) except land u/s 35(1)(i)+35(2))
Here R & D facility should be approved by prescribed autho.
(3)Contribution made to outsiders for scientific research / social research

Contribution to
University college University college National Co. reg in India having

Or association or association Laboratory main object of S.P.*
Which is approved which is approved IIT Uni. [35(1)(iia)]
[35(1)(ii)] [35(1)(iii)] [35(2AA)]
Scientific research for social science scientific scientific research

Or statistical research
reseach
150% of 100% of 150% of 100% of

Contribution Contribution Contribution Contribution
[From P.Y.20-21 =100%] [From P.Y. 20-21 =100%]
*Here, co. reg. u/s 35(1)(iia) cannot claim ded’ u/s 35(2AB) for in house research
However can claim 100% in section 35(1)(i)+35(2).
 Explanation :- Deduction for donation cannot be withdrawn merely on ground that after
donation, such uni. ,asso. ,Insti. Grant is withdrawn.
Other Points :
41(3) : if ded’ claimed for asset & subsequently sold.
Then from
Sale proceeds
Upto amt of ded’ claimed earlier Bal. Amt
PGBP Capital Gain
 Unabsorbed amt of scientific research → same treatment as unabsorbed depreciation
Refer Q-8 (SM)
7. Section 35AD : Deduction in respect of expenditure on specified

business
Commencement
Nature of business Date
1 Operating cold chain facility 1-4-09
2 Warehousing for agriculture produce 1-4-09
3 Warehousing for sugar 1-4-12
4 Affordable housing project 1-4-11
5 Production of fertilizer 1-4-11
6 Hospital (100+ beds) 1-4-10
7 Cross country pipeline for oil & Gas 1-4-07
8 Hotel (2 star +) 1-4-10
9 Slum re-development housing 1-4-10
10 Inland container depot or container freight station 1-4-12
11 Bee keeping and prod’ honey & bees wax 1-4-12
Laying & operating a slurry pipeline for transportation of iron 1-4-14

12
ore
Setting up & operating a semi conductor wafer fabrication 1-4-14
13 manu. Unit
Busi in nature of developing,maintaining,operating infra 1-4-17

14
facility
Deduction: - 100% of revenue & capital exps → wholly & excl. for specified busi. → ded’ in yr in
which incurred.
→ Prior period(any yr)+ rev. + cap exps → allowed in year of commencement.

Capital exps allowed only if capitalize in BOA
→ Expenses which are not allowed
Land, Goodwill, financial Payment to a person in a day

Instrument exceeding ` 10,000 otherwise
than by A/c payee, cheque,
Draft, ECS or other e-mode.
 Conditions for deduction :

1) It is not setup by splitting up, reconstruction of business already in existence (it should be
new).
2) Not set up by transfer of P & M previously used in India (2nd hand M/c in India]
However following P & M is allowed
20% of total value can be 100% Imported second hand

Previously used P&M
3) Books of accounts must be audited.
Other Points :
1) In case of assessee builds 2 star + hotel but transfer the operations then also he shall be
deemed to be carrying on specified business.
2) If any asset on which deduction u/s 35AD claimed → Sold, demolished, destroyed, then
amt received = PGBP Income [Sec. 28]
3) Loss of specified busi. can be set off only against specified business u/s 35AD
[Unabsorbed to be c/f →infinity Period]
4) An asset on which ded’ u/s 35AD claimed shall be used only for specified business for 8
years from beginning of P.Y. of acquisition.
If used for non-specified business then:
Following shall be deemed to be income of PGBP in yr in which asset so used.
Total amt. of ded’ claimed 
(–) dep. u/s 32 allowed if no ded’ was
allowed ()
Deemed Income [35AD(7B)] 
(This provision N.A If co. become sick unit in 8 years)
Refer Q-9, 10,11 (SM) (=Same as Q-7 (JK),Q-3 hws jk)

8. Section 35 CCA : Contri. For rural development
Applicable to all assessee : contribution made to/For
Approved association OR for Training OR National OR National urban Poverty

Or institution for of persons fund rural education fund.
Implementation of of such insti. Dev.
Rural dev. Programme. Programme
→ Dedcution = 100% of contri.

→ The ded’ cannot be denied if approval granted to such asso. withdrawn later on.
9. Section : 35CCC : Exp on Agricultural extension project (notified)
→ Ded’ = 150% of expenditure (100% from P.Y. 20-21)

→ No ded’ in any other section allowed
10. Section : 35CCD : Exps on skill development project
→ Eligible assessee = company

→ exp. on skill development project [other than land & Building]
→ Ded’ = 150% of exps (100% P.Y. 20-21)
→ No ded’ in any other section.
11. Section 35D : Amortization of certain preliminary expenses
→ Eligible assessee : Indian co. or any other resident person
→ Eligible expense :
Time Purpose
1) Before commencement of busi Exps for setting up
2) After commencement Exps for expansion or setting up new unit
→ List of Qualifying exps
Work to be done by assessee or Work done by any company

approved concern
Expenses in connection with preparation i) Legal charges for agreement
of: drafting MOA, AOA.
ii) Printing charges of MOA, AOA
– Feasibility report iii) Registration fees of co.
iv) Exps. for public issue of share,
– Project report deb, underwriting commission.
v) Advertisement of prospectus
– conducting market survey
– Engineering services
→ Maximum Qualifying Expense :
Corporate Non-Corporate
→ 5% of cost of project → 5% of cost of project
or
→ 5% of capital employed
W.e. higher
Or actual exps w.e. Lower
Deduction : Deduction of above expense is allowed one fifth [in 5 equal installment]
→ Starting from P.Y. in which business commences.
 Audit of BOA [Form 3B]
What is capital employed
Issued SC + Deb + LTB (SC judgement-S.P. not to be included)

[On last day of P.Y. in which busi. Commences / extension completed]
→ In case of amalgamation – demerger → Resulting co. is allowed to take rest of deduction.
E.G.: Aagam Ltd. Commences business on 1.4.19.He incurred exps during the year for
preliminary exps of Rs.200000.The capital employed on first day is Rs.3000000.On last day is
Rs.3500000.The cost of project(IPO etc) for which exps done is Rs.5000000.What will be
deduction u/s 35D in this yr 2019-20?
Ans. 5% of capital employed On last day=Rs. 3500000=5%=Rs. 175000.

5% of cost of project 5000000*5%=Rs. 250000.
W.e.higher = Rs.250000
Actual exps.=200000
W.e.lower = Rs.200000
Deduction=1/5th =40000
12. Section – 35DDA : Amortization of compensation paid under VRS
Where assessee incurred exps. in P.Y. for VRS → 1/5 of amount allowed in that P.Y. &
four succeeding P.Y.
If before 5 years amalgamation, demerger, then bal ded’ to resulting co.
→ No ded’ in other section.
13. Section – 36 : other deduction:
Applicable Conditions
Nature of Exps
To
Insurance premium on stock / store of All
business [36(1)(i)] Assessee
Insurance premium on life of cattle Federal
owned by member of primary co. op milk co-op
Soc. [36(1)(ia)] soc
Insurance premium on health of All Payment → Other than cash
employee. [36(1)(ib)] employer Insurer → Approved by IRDA
Bonus & commission paid to employee. All Not payable as profit or dividend +
[36(1)(ii)] employer payment as per sec-43B
Interest paid on borrowed capital All a) Money should be borrowed for
(owned capital → Not allowed) Section Assessee business.
[36(1)(iii)] b) In case interest payable to
financial Insti,Banks → 43B
c) Int. for capital asset from date of
borrow to date put to use → not
deductible.
[because it is to be capitalized ∴
Dep u/s 32]
Discount on zero coupon bond Issuer of → Dis. allowed as ded’ on prorata

[36(1)(iiia)] bond (from issue to maturity)
Employer contribution to reco. PF or All → as per sec -43B

approved Gratuity fund / employer
Superannuation fund [36(1)(iv) & (v)]
Employer contribution in A/c of All → Deduction upto 10% of salary of

employee pension fund u/s 80CCD employer employee [Salary = Basic+ DA(%) +
[36(1)(iva)] Commission (%)]
→ ∴ excess contri. Disallowed u/s

40A(9)
Refer Q-12
Contribution from employee toward All → Step-1:first added to income [2(24)]

P.F. S.A, other fund [36(1)(va)] employer
→ Step-2:Then ded’ is available if paid
within due date of that act.
[E.G. PF → 15 days from month]
Allowance in respect of dead or useless All Ded’ → Actual cost

animals which were used for busi Assessee
– Amt. realised on sale
[36(1)(vi)]
Bad debt (Not provision) [36(1)(vii) & All → Incidental to business.
36(2)] Assessee
→ Earlier Income must have been taken
for computing income.
→ Bad debt should be written off in

BOA.
→ Business in which debt incurred

must continued
Expense on family planning amongst Companies → Rev. exps → Fully
e’yee [36(1)(ix)] (not to
→ Capital exps → Over 5 years
firm etc)
→ Unabso. Exps → same as unabso.
Depre.
→ No ded’ in other sec.
Security Transaction Tax (STT) All Busi Allowed as ded’ if tax is paid during
Or assessee P.Y. & income is taxable under head
Commodities trans. Tax [36(1)(xv)] & PGBP.
[36(1)(xvi)]
14. Section 37 (1) : General ded’

Condition for allowability for other exps
Expense Should be in exps should Not in nature Should be

Other than connection be wholly of capital exps incurred
those with busi / & excl. + during P.Y
Specified prof. carried for busi Not personal
In sec 30-36 on by exps
Assessee
(e.g. donation)
Explanations to section 37
Explanation 1 Explanation 2
Any exps done for offense under any law CSR exps.as per Sec
Not allowed. 135 of Co.s Act,2013
Penalty for late filing return,fine, is also not allowed
Traffic memo, as deduction.
However interest on late payment of gst
is extention of tax only.so,
Int is allowed.
CBDT:1. Exps incurred in providing freedees to medical practitioner by pharmaceutical ind.
→ prohibited by law → disallowed (circular)
Refer Illu.3 (ex → SM)
Expenses Disallowed :
15. Section : 37(2B) : Advertisement exps in relation to political party
No ded’ for exps done in advertisement in ant souvenir, brochure, pamphlet by political
party.
In Que : Step-1:Disallow from PGBP

: Step-2: Ded’ u/s 80GGB / 80GGC
If paid other than cash.
16. Section : 38 : When Building, P & M, furniture, not used wholly for
business.
Proportionate exps for non-busi uses will be disallowed.
→ Note : Exps in PGBP & Income depends on system of A/c.
17. Section 40(a)(i) r.w 40 (a)(iii) :

Payment o/s india or to Non-Resident
Other than salary[40(a)(i) Salary [40(a)(iii)]

(int, fees, royalty, etc)
(u/c XVII-B) Allow only if
a) TDS deposited
TDS deducted during yr or
b) TDS deposited
No Yes
Disallow Whether TDS deposited

100% at least before due date
Exps of filing return u/s 139(1)
Allow in
Yr of No Yes
deduction
Disallow 100% Allow exps
Allow in year
TDS deposited
18. Section 40(a)(ia) :
→ Any sum payable to resident. Then whole 1st limb is applicable (for salary also). But
disallowance will be 30% of exps
→ 30% allowed in yr TDS deposited and paid.
Cross ref.: (Section 201) Note : in the following case TDS will be deemed to be deducted or
paid :
a) When payee furnished ROI u/s 139
b) Payee has taken such income
c) Has paid tax due in ROI & payer furnishes a certificate from accountant.
Then TDS deemed to be deducted or paid in yr of furnishing ROI u/s139

∴ 30%/100% allowed in that year
E.g. Mr. A paid Rs. 20000 as commission to Mr.B(Resident) without deducting TDS in
P.Y.2019-20.So 30% i.e.6000 will not be allowed in that yr.It will be allowed in yr in which
TDS deducted and deposited.
19. Section 40(a)(ii) :
Sum paid as tax or cess on profit (i.e. Direct tax) will be disallowed.
∴ Indirect tax → allowed
Direct Tax Indirect Tax
Tax Int. Penalty Tax Int Penalty
Disallowed Disallowed
Disallowed as per expl.1 Allowed as ded’ as per expl.1
u/s 40(A)(ii) of 37(1) u/s 37(1) of 37(1)
→ I.T Refund → Not income. Int. on refund : IFOS
20. 40(a)(iib):
Amt. paid as Royalty, licence fee, service fee, levied by state government on state govt
undertaking.
21. 40(a)(v) & 10(10CC):
→ Any obligation of e’yee met by e’yer then it is perquisites==Allowed as deduction to

employer & Income for employee.
→ Similarly Tax on such perq. If also borne by e’yer
→ If tax is on nonmonetary perq. Then it is not added in salary of e’yee [10(10CC)]
→ ∴ tax on nonmonetary perq. Borne by e’yer disallowed.
Disallowance u/s 40A :

(1) 40A(2) : Payment made to relative.
If payment is made to specified person (w.n-1) being relatives for Goods, services or any
facilities & considered excess than FMV by AO.
Then excess amt. will be disallowed
 Specified Person :
Individual [2(41)] → Relative (Spouse, bro, sis, lineal ascendant / Descendant)
Company → Director of co. or relative of director
Firm → Partner + Relative of partner
AOP → Member + Relative of partner
HUF → Family member + Relative of
+ any taxpayer to or persons having substantial interest & relatives
→ Co. → 20% of ECS

→ Other →20% of Profit.
(2) 40A(3) : Payment exceeding ` 10,000 :
 If assessee incurres any exps for which payment or aggregate made to a person in a day
exceeding ` 10,000.
Otherwise than by A/c payee chq, Draft, ECS,or any other e-mode
Disallowed.
 40A(3A) : if assessee is following mercantile & expense claimed in earlier P.Y., for
which payment done as per sec. 40A(3) in current P.Y. then –
Deeemed Income [19-20]
E.G. Mr. X purchase R.M. worth Rs.100000 in P.Y.2018-19 and claimed exps. on accrual
basis. Now in 2019-20 he paid Rs.100000 to creditor in cash on a single day. So now that
100000 will be deemed income of P.Y.2019-20.
 Note: In case of payment made to transport operators for plying, hiring or leasing
goods carriages → ` 35,000 instead of ` 10,000
Cases where 40A(3) will not apply [Rule 6DD]:

a) Payment made to RBI, SBI, Bank, LIC, Govt.
b) Payment made by
Letter of Mail or Credit Debit BOE

credit telegraphic card card
transfer
c) Payment made by way of adjustment against liability.
d) Where payment made for purchase of
Agriculture Produce Fish or Fish Product of

or forest of Products horticulture or
Prod. Animal apiculture
Husbandry
[To cultivator, grower, Producer]

[Not to trader, broker, middleman]
e) Purchase of products manufactured or processed w/o aid of power in cottage industry.
[e.g. Khadi]
f) Payment made in village or town in which on date payment → No bank is serving &
payment made to person doing busi./ prof in that village.
g) Payment to employee or heir retirement, retrenchment , resignation, death not exceeding `
50,000
h) Payment made of salary & TDS ded’ u/s 192 if
e’yee temporality posted does not maintain bank a/c at

for continuos 15 or more days that place.
in other place.
i) Payment made on day on which banks → closed / holiday / strike.
j) Payment made to agent who requires to make payment in cash for goods / service on behalf
of such person.
k) Payment made by A.D. for purchase of foreign currency in normal course.
Example.1. Mr. B paid Rs.5000 in cash to Mr,C for printing exps on 1/10/19 at 8 AM.He
again gave Rs. 6000 in cash to him at 5 PM.
2. ABC Ltd. Send employee Mr.A on temporary basis to Mumbai where he do not have
bank account from 1/11/19 to 13/11/19.After deducting TDS paid salary rs.50000 in
cash.
3. Mr. A made 40000 in cash payment to a single person in a single day on 26/1.
Refer Q-4 (ex-SM)(=Q 12 hws jk)

(3) 40A (7) : Provision for payment of Gratuity:
Employer
Maintain Gratuity Does not maintain fund

Fund
Ded’ available in P.Y.
Approved Not approved which payment made.
Provision Provision shall 36(1)(v)

Is deductible be disallowed
Taxpayer will get ded’

In P.Y. in which
Payment is made.
(4) 40A (9) :
Payment to unrecognised or non statutory welfare fund → Not allowed
Refer Q-5 (Ex – SM)(=Q-13 hws jk)
22. Section 41 : Deemed Income :
Nature of deemed Profit Taxable in which P.Y
1 Recovery against ded’ of any loss exps or trading P.Y. in which amt.
liabi. (for which ded’ allowed earlier) recovered or written
back.
(chargeable in hands of successor also)
2 Balancing charge on asset on which SLM dep. P.Y. in which asset sold
Charged by assessee engaged in Gen & dis of or transferred
electricity. Lower of depre till date and surplus.
3 Surplus (i.e. sale + Ded’ – cost) arising in transfer of P.Y. in which sale took
capital asset used in scientific research or family place.
planning
4 Bad debt recovered (for which ded’ allowed u/s P.Y. in which recovered
36(1)(vii)(Not taxable to successor.so in 41(1))
5 For loss: if after ceases of any busi. deemed income arises then unabsorbed loss
during the P.Y. of cease will be set off against income.
23. Section 43B : Certain ded’ to be allowed on actual P’ment :
Following expenses are allowed as ded’ only if paid by assessee on or before due date of
furnishing return u/s 139(1) of P.Y.
a) Sum payable as tax, duty, cess, fee under any law

b) Sum payable by employer by way of contri. To P.F, Superannuation fund, Gratuity fund
c) Bonus or commission to e’yees
d) Int. payable to public financial Institute or state financial corporation,NBFC
e) Int. on load from scheduled bank or co-op bank
f) Leave money to e’yee.
g) Any sum payable to Indian Railways for use of railway asset.
Note 1. This will be allowed in the P.Y. in which paid.

Note:2. if unpaid interest is converted into loan by bank / PFI → it is not actual payment.
However when installments are paid them it will be actual payment upto amount of that
installment.
Refer Q-17 (SM)
24. Section 43CA & Section 50C :
Land or building land or building held as

Held as stock capital asset.
Applicable if on date of registration stamp duty value > 105% of actual consideration
Taxpayer accept stamp Taxpayer does not accept

Duty valuation for income tax stamp duty even for any
purpose
If accept if does not accept T.P. to appeal to higher

Autho. Under stamp
Sale value = Stamp duty xA.o will assign valuation act.
officer
V.O-Value lower V.O. → Value higher V.O. → value lower

That actual Than SD than SD
Value=Actual Value = SD Value = VO
Note : Taxpayer has option to take stamp duty value as on date of agreement (& not date
of reg. ) if there is time gap b/w two.
If.
Part of consi. must have been paid by way of A/c payee cheque A/c payee draft or use of ECS
or by e-mode on or by date of agreement.
Note : if SD ≤ 105% of actual consi. Than sale value = actual consi.
Refer example
25. Special Section for partnership firm : [40(b)] :
→ 40(b) : Deduction for “remuneration to partners” & “ interest to partners”

i) Remuneration : Deductible if
Paid to working Remu’must be Remu’ should Should not

Partner autho. By not be pertaining exceed
Partnership deed period prior to permissible
Deed limit
→ Permissible limit u/s 40(b)
Book profit = N.P. as per P & L
+ Remuneration to partner if debited to P/L
± Adjustment as per sec-28 to 44DB (int. upto 12% is also ded’)
[so disallow given in P/L & allow below given]
On 1st ` 300000 on balance book profit

of book profit above ` 300000
Or loss
` 150000 or 90% of 60% of such B.P

Book profit w.e higher
Ded’ = Total or actual w.e. Less
→ Note: No adj. for B/f, C/f loss because it is covered by section 72,73, but adj, for
unabsorbed dep is to be done as it is covered u/s 32
Refer Q-15 (SM)
ii) Interest to partner [ loan or capital] :
Int. should be autho. Should not be for Rate of int. ded’ upto 12%
By deed period prior to P.a
Deed
Note: Remu. & Int. which is deductible for firm is taxable for Partner.
Refer Q-16 (SM) JK Q-8
26. Section 44AA : Maintenance of Books of A/c
(1) For specified professions: Legal, Medical, Engineering, Architect, A/c, Technical
service, film artist,etc.
If gross receipt do not exceed ` 1.5L if Gross receipt exceeds ` 1.5L

In any 1 of the 3 preceeding P.Y. in all 3 preceeding P.Y. or for
New prof. likely to exceed ` 1.5L
Maintain BOA as may maintain BOA as per Rule -6F

Enable A.O to compute Income
Rule-6F: For all : Cash book, journal,

Ledger
→ Copy of bills & receipt → serially
Numbered for amt > ` 25
→ Original bill / voucher for exp > ` 50
For medical : Daily case regi. Form 3c
→ inventory of stock.(Over nd above)
(2) For other nonspecified profession & business :
If total income do not exceed T.I. > ` 1.2L* Person show income lower
` 1.2L * & gross sale / receipt or t/o > 10L* than prescribed u/s 44AE or
Do not exceed ` 10L* in in any of 3 44ADA sec. 44AD(4)
All 3 years preceeding P.Y.
Do not require to Keep such BOA as can enable AO to

Maintain BOA compute income.
* for individual / HUF → T.I. → ` 2.5L or T/o → ` 25L

If
failure → penalty u/s 271A → ` 25000
Where to maintain For how many years
Place of busi. 6yrs from end of A.Y.
(Refer Q-18 (SM) (=Q-6 hws jk)
27. Section 44AB : Audit of Books of A/c
Assessee is covered by section Not Covered

44AD/ ADA/AE
Declares min. Declares Busi. profession

Income as per less income
that section Total t/o Gross receipt
>1 cr. > 50 L
Audit is not Audit is in P.Y. [44AB(b)]
Required compulsory [44AB(a)]
If 44AD & 44ADA if 44AE T/o = Sales + Other busi.

Receipt
Only if income Compulsory
Exceed basic [44AB(c)]
Exemption limit
[44AB(e), 44AB(d)]
 If audit is done in other act also then no second audit is required but report to be submitted.
 Audit does not apply
To person who declares & To person who derives income

Profit gain u/s 44AD as per sec-44B & 44BBA
& T/o ≤ 2 cr.
 Report to be submitted on or by due date of filing return u/s 139(1) (30/9)
28. Section 44AD : Profit or Gains on presumptive Basis :
1) Eligible assessee : Resident individual, HUF, Firm (but not LLP) & who should not
have claimed deduction u/s 10AA or heading C → 80H 80RRB of Ch. VI-A
2) Eligible business : All business (except plying, hiring, leasing, goods carriage → 44AE)
& whose T/o ≤ 2 crore.
3) Non eligibility:
Resi. ALL Busi Profession Busi of plying, Broker Person having

Co./LLP NR T/o>2 cr (44ADA) leasing,hiring of Agency income
AOP/BOI goods carriage
(44AE)
4) Presumptive tax rate : (Deemed income of PGBP)

(i.e. % of T/o)
8% of Total T/o However, it will be 6%

If amount received
(i.e. A/m of T/o)
By
A/c Payee or A/c payee or ECS,emode

Cheque Draft
During P.Y. or Before due date

Of return of income.
Assessee can claim higher % also.

E.g. Mr.J has turnover of Rs.1.5 cr in P.Y.19-20.It is received as follows:
a. Cash sales-Rs.30 L in Paytm b. Cash sales-Rs.40 L in cash
c. Credit sales-Rs.20 L(Drs paid by chq on 31/3/20)
d. Credit sales-Rs. 10 L(Drs paid in chq on 30/6/20)
e. Credit sale- Rs.15 L(Drs paid in cash on 31/5/19)
f. Credit sale-Rs.35 L(Drs paid in chq on 30/11/20)
5) Other Provision :
i) No further deduction of sec-30 to 38
[ even Remuneration to partner, Int, not allowed] – 40(b)
ii) WDV of Block will be calculated as if assessee has claimed depreciation.
iii) No requirement of maintaining books as per section 44AA & no audit u/s 44AB.
(even if T/o exceed 1 Cr. But less than equal to 2 Cr.)
6) Advance Tax : → Eligible assessee shall pay advance tax in 1 installment (or in part) upto
15th March of P.Y.
7) 44AD(4) : → if assessee fails to declare profit u/s 44AD (i.e. lower) in any five
consecutive assessment year relevant to P.Y.(i.e. subsequent) then not eligible for this
section for 5 next A.Y.from yr of contradiction.
+
Require to maintain BOA → 44AA & Audit [44AB(e)] (if income exceed BEL).
Example on p.n.=(Q-7 hws jk)

Refer illu. 19(SM)(=Q-8 hws jk)
29. Sec-44ADA: Profit – Gains of profession on presumptive Basis.

1) Eligible assessee → who is resident(Any) & engaged in specified profession as per
sec. 44AA(1).
2) Eligible business : whose gross Receipt ≤ 50Lakh in P.Y.
3) Presumptive rate:
50% of total receipt = Deemed Income. (can declare higher)
4) Other provision
a) Deduction u/s 30 to 38 → deemed allowed.
(i.e no farther ded’of remuneration & Int to partner as per sec-40(b)
b) WDV of block will be calc. as if depre has been claimed
c) No. requirement of BOA u/s 44AA & no audit.
5) Advance Tax → Before 15th March.
6) If lower profit → Audit u/s 44AB(d) nd BOA u/s 44AA if income exceed BEL.
30. Sec-44AE : Presumptive income for busi. Of hiring, plying, leasing

of goods carriage.
1) Eligible assessee: persons owning NMT 10 goods vehicle at any time during P.Y.
2) Eligible business: busi. Of plying, hire or leasing of goods carriage.
3) Presumptive rate of Tax:
Heavy Goods vehicle Other than heavy
` 1000 per ton of ` 7500 for every month

Gross vehicle weight or part per vehicle
Or unladen weight
For month or part per vehicle
During which vehicle is owned (& not used)

(can declare higher income)
Meaning: Heavy Goods Vehicle → any carriage whose GVW exceeds 12000 Kg(12 ton)
GVW → Total weight certified by autho.
Unloaded weight → Weight of vehicle with all equipment.
4) Other provision:
a) Ded’ u/s 30 to 38 → Deemed (but 40(b) → allowed additionally)
Unlike 44AD & 44ADA.
b) No. req. of BOA & Audit.
c) WDA calc as it depre allowed.
5) Advance Tax → as per normal norms
6) If lower income → Audit u/s 44AB(c)
Evenif lower BEL
Illustration – 20 (SM) (=Q-4 jk)(=Q 9 hws jk)
H.W Q-8 (Exercise)
1. Diff in three sections:

44AD 44ADA 44AE
N.A.to Co.,LLP Applicable Applicable
N.A. to NR N.A. to NR Applicable
T/o limit 2 cr 50 L 10 goods carriage
8/6% 50% 1000 per ton/7500 per mnth
Advance tax in 1 inst Advance tax in 1 inst Advance tax in 4 inst
Partner remu and int not Partner remu and int not Allowed
allowed allowed
Audit if TI>BEL Audit if TI>BEL Audit
31. Composite Income: What is tax treatment of income which is
partly agri & partly busi. (Rule 7. 7A, 7B, 8)
(For Agri in India)
Busi. Income Agri. Income Rule

1. Growing & Mfg tea 40 60 8
2. Mfg. Rubber 35 65 7A
3. Coffee grown & cured 25 75 7B
4. Coffee grown, cured, roasted 40 60 7B
→ Note : if agri o/s India → 100% Business

→ Here WDV of block shall be reduced by dep. As if allowed fully in PGBP
[expl. As per sec -43(6)]
Refer illu – 21
Refer HW → Q-6 (Ex→ SM) → 4.311(=Q-14 hws jk)
Q-7 (Ex → SM) → JK sum(=Q-2 jk)
Q-9 (Ex → SM) = Q-3 JK
Q-10 (Ex → SM)
Q-1 (JK),HW-Q-15,16 hws jk
HW-HWS 9 to 29
Ch. 6: Capital Gain
Types of Capital gain: STCG.STCL,LTCG,LTCL

 Section 45 : Chageability :
There should be a Capital asset is Profit/Gain it is not exempt u/s

Capital Asset Transferred by arises 54,54B. 54D, 54EC
Assessee during 54EE, 54F,
P.Y.
 What is capital asset [2(14)] :
Property of any kind whether or OR Securities held by foreign institutional

Not connected with business investor as per SEBI Act-1992.
Capital Asset
Exclude Include
1) Stockin trade, consumable Jwellery, Archological collection,
Store, Raw material Painting, Drawing, Sculptures
2) Movable asset having work of any art.
Personal effect of assessee [Car, Cloths not covered]
Incl. wearing apparel &
Furniture held for
Personal use, But does not include
3) Rural Agriculture land in India (Note-1)
4) Specified Gold Bonds
5) Special Bearer Bonds, 1991
6) Gold Deposit Bond as per Gold Deposit scheme, 1999.
Note:-1 What is Rural Agriculture land :
Means other than urban agriculture land.
What is urban Agriculture Land
Agriculture land in area or Beyond limit upto how much area?

Within jurisdiction of
Municipality having
Distance from
Population NLT 10,000 Population
local limit=urban
> 10,000
≤ 2 KM
≤ 1,00,000
> 1,00,000
≤ 6 KM
(Beyond 8 Km → Rural) → No. cap asset. But ≤ 10,00,000
Refer example on P.N. 4.352
> 10,00,000 ≤ 8 KM
 What is transfer [2(47)] :
i) Sale, exchange, relinquishment of asset

“Relinquishment” = Abandon / give up asset
E.g Exchange :
Gold Urban Land
(i) A B A B
Silver Rural Agri. Land
Cap. Gain Cap. Gain Cap. Gain No Cap. Gain
ii) Extinguishment of right

Extinguishment = Give up rights
E.g Mr. Aagam has 100 shares of MRF.
MRF gives Right shares 2:5 @ ` 2,00,000
Aagam sale Right offer @ ` 10,000/ share
So, this is extinguishment of Right.
iii) Compulsory acquisition of asset under any law.

iv) Conversion of capital asset into inventory.
v) Allowing possession of immovable Prop. Under part performance of contract
[cross ref. sec-53A of trf of im. Prop. Act]
vi) Any transfer (as a member of co.op. soc or co.) which has effect of transferring immovable
pro. (Cross ref sec-27)
vii) Maturity of Zero coupon bond.
 Transactions not regarded as transfer [Sec – 46 & 47]
1) Distribution of asset by company on liquidation → Section 46
On liquid co. trf If co. sells For SH who Cost will be FMV
Asset to then it is receive the on date of acq.
SH = Not trf trf asset when SH will
subsequently sale
it is deemed div
u/s 2(22)(c) (IFOS)
(Amt = FMV on date)
Upto amt of accumulated profit
Balance=Capital gain
E.g.: A Ltd.distributed asset to Mr.B on liquidation. A.P.=30,FMV=40.

Mr.B—IFOS =Rs.30 and capital gain Rs.10
2) Distri. Of asset by HUF to members at time of total or Partial partition [47(i)]

(For member it is exempt u/s 10(2))
3) Transfer of Cap. Asset by way of Gift(Except ESOPS,irrecoverable trust) or will under

Irrevocable trust [47(iii)]
[but for receiver → IFOS sec-56]
4) Trf. Of capital asset by holding co. to 100% owned Indian subsidiary or by subsidiary to
100% holding co (Indian) → 47(iv) & 47(v).(100% should be for continuously 8 yrs)
5) Transfer of asset in case of amalgamation, demerger → to resulting co or to shareholder.

[Resulting co. should be Indian]
Refer illu. 4 (SM)
6) Transfers in case in NR
Trf. Of rupee denominated Trf. Of Govt security by

Bond by NR to NR o/s India NR to NR o/s India
[ 47(viiaa)] [47(viib)]
7) Transfers of specified cap. Asset to govt or university or national museum, art, gallery, or
inst. Notified.
Specified cap asset=Work of art, archeological collection book, manuscript, drawing,
Painting, photo, print.
8) Conversion of bond/Deb/Preference shares. To shares or debenture [47(x),47(xb)]
9) Transfer of cap. Asset under reverse mortgage:
Mortgage means to borrow money for buying house.

→ Reverse Mortgage: Here it is beneficial for senior citizen who has house. They lend
their house to bank & in return receive lump sum or periodical revenue.
Ownership of house(No cap gain-47(xvi)) On death if bank

Senior citizen Bank 3rd party
Aliniate to
Installment/Lumpsum
Exempt u/s 10(43) It is cap gain
10) Transfer of units under consolidated scheme / plan of MF
Refer illu 5, 6(=Q-1,2 hws jk)

 Type of capital asset:
Short term capital asset Long term capital asset

[2(42A)] [2(29A)]
Asset held for

≤ 12 / 24 / 36 month Which is not short term
≤ 12 months → Security listed in For POH sec

Reco. Stock exch. P.N. 4.357 (SM)
→ Unit of equity fund/
UTI.
→ Zero coupon Bond.
≤ 24 months → Unlisted Share.
→ Land & Building
≤ 36 months → Unit of debt fund
→ Unlisted security other than share
→ other asset [Jwellery etc.]
Refer illu-7(=Q-3 hws jk)
 Section 48 : Computation of capital Gain
Short term capital gain Long term capital gain
Full value of consideration full value of consideration

Less : Expense incurred wholly Less : Expense incurred wholly
In connection with transfer In connection transfer
Net consideration Net consideration
Less : Cost of acquisition Less : Indexed of acquisition
Less : Cost of improvement Less : Indexed of improvement
STCG before exemption LTCG before exemption
Less : Exemption u/s 54B Less : Exemption u/s 54, 54B,54D
54D 54EC, 54EE, 54F,
STCG(u/s 111A or finance act rate) LTCG(U/s 112 or 112A)
Note: No deduction of STT is allowed in capital gain. [It was allowed in PGBP while calc.
business income]
I) Full value of consideration :
It is amount received by transferor on sale of asset b4 expense.

sometimes it is notional amount.
Section 50 D: where consideration received or accruing as a result of trf. Of cap. Asset

by assessee is not ascertainable or cannot be determined (e.g. in case of exch
extinguishment etc)
The FMV of said asset on date of trf shall be deemed to be FVC.
II) Expense in connection with transfer :
Means exps which is necessary to effect transfer.

e.g. Brokerage, commission cost of stamp, registration fee, legal exps, etc(STT not
allowed)
III) Cost of acquisition :
Means value for which it was acquired by assessee. exps of cap. nature at time of acq.
are includible.
→ Notional cost of acq. [49(1)]
In the following cases “cost to previous owner” shall be deemed to be cost of owner.
1) Acq. of asset by HUF to member on total or partial partition.
2) Acq. of prop. Under GIFT/Will
3) Acq. of property.
- On distri. Of asset on liquid. Of co.
- By trf of asset b/w holding & wholly owned Indian subsidiary.
- Under amalgamation, demerger
4) Acquisition of prop. By HUF where member converted self acquired prop. Into joint
asset.
 Platinum principles for capital gain computation :
1) If cap. Asset is acquired by any mode referred in sec 49(1) → then to find whether asset is
long term or short term → period of holding (POH) & Cost of previous owner is to be
considered.
2) As per section 55(2) → if cap. Asset acquired by owner or previous owner prior to.
1-4-2001 then option is available to adopt i) FMV on 1-4-01
or ii) Cost of acquisition
w.e.higher
Generally FMV as on 1-4-01 will be higher (some exception for listed eq. Share.)
3) Cost of acquisition shall be indexed (for LTCG) as follows:
Cost of acquisition x CII of transfer year

CII of cap. Asset of acquisition year index
(Indexation from PN.4.384)
Note : There are two views : For cases covered u/s 49(1)
1st view(From act) 2nd view

Indexation from yr of acquisition by Bom.-CIT vs. Majula J. Shah
Current owner CII from yr of previous owner
(Follow this)
4) 55(1)(b) : cost of improvement prior to 1-4-01 incurred by previous owner or by

current owner is to be ignored. (because FMV is taken it incl. all)
Cost of improvement by previous owner or owner shall also be indexed(if after 1.4.01 nd
case is u/s 49(1).
Cost of Improvement x Transfer yr Index

Improvement year index
See indexation from SM (4.384)
5) No indexation benefit for followings.

a. In case assessee covered by sec-48 (1st proviso)===NR
b. Bond or Debenture
c. Slump sale=50B
d. Listed shares covered u/s 112A
→ Refer Q-12 of jk ,JK Q-1
Capital Gain for depreciable asset

Sec-50 (learnt in PGBP)
Refer Illu. 10
 For FVC of Land or Building

Sec-50C → Refer sec.43CA of PGBP
Refer Q-6 extra sum (=Q-5 hws jk)
 Sec-50CA : FVC for trf of unlisted shares
If Actual consi. < FMV as on date of trf.
FVC=FMV
 Section – 51 : Advance money received

Tax treatment of advance money forfeited due to failure of negotiation for trf. Of cap asset.
If received before Received on or after

1-4-14 1-4-14
It is to be reduced from cost Amendment u/s 56(2)(ix)

Of acq. in year of trf.
Taxable in IFOS in yr
Of receipt.
Note: Received by previous owner → ignore

Refer Q-3 extra sum,Q-5 extra sum,Q-7 extra sum→ same as Q-13 (JK) ,
Q- 8 extra sum
Special Cases:
1) Computation of C.G. when insurance claim is received [45(1A)]:
→ History : SC gave judgment that insurance claim received on a/c of destruction of `asset
is not chargeable to tax as “destruction” is not transfer.
But by insertion of 45(1A) →Judgement nullified uto certain extent
When C.G. is chargeable u/s 45(1A)
Condition-1 Condition-2
Compensation is received because the damage or destruction is
Of “Damage to” or as a result of 4 categories
“Destruction of” C.A
i) Flood Typhoon Hurricane earthquake

ii) Riot or civil disturbance
iii) Accidental fire explosion
iv) Action by enemy
So, N.A. if asset lost w/o conditions mentioned or road accident or ship is overweight & sunk.
(because old judgement is applicable)
→ CG will be taxable in yr or receipt.

→ If any asset is received in claim then FVC = FMV of asset on date of receipt.
(Refer Q-9 (JK) = Q-4 (Ex – Jk)
2) Cap. Gain in case of conversion of cap. Asset into stock in trade → [45(2)]
Step-1 : Cal. cap gain on trf of cap. Asset into inventory
FVC = FMV of cap. Asset on date of Trf.
POH=upto conversion
CII=upto conversion
This cap. Gain will be taxable (the amount as calc. in yr of trf) in year when
inventory is sold.
Step-2 : When inventory sold profit taxable in PGBP. Cost = FMV on date or trf.
So, both a/m taxable in yr of sale
(Note : Personal asset which is not cap. Asset will not be taxable)
Refer illu. 1, 2, 3, 8 → (=Q-4 hws jk) H.W. → Q-2 (exercise)
3) Cap. Gain on transfer of cap. Asset by partner of firm/AOP/BOI [45(3,45(4)]
Asset trf by partner/member to Asset trf by firm/AOP/BOI

Firm/AOP/BOI on a/c of admission to partner/member on
or otherwise retirement or otherwise.
FVC=Value recorded in BOA(45(3)) FVC=FMV(45(4))
(refer Q-2,3 (JK))
4) Capital gain in case of compulsory acq. of asset [45(5)] ∴ [cross ref. 10(37)]
→ Trf. Of asset is by way of compulsory acquisition under any law.

Or
→ cap. Asset is trf (not by compulsory acq.) but consi. Is approved by CG or RBI.
E.g. 2013- acquired,2014-10L r’ved,2016-40 L 2020- enhanced 10L
Initial compensation Enhanced compensation
→ Charged to tax in P.Y. → Enhanced by court, trib

in which compensation → Chargeable in yr in which received
(or part) is received → FVC = Difference received
→ Cost = NIL (as full cost taken earlier)
→ FVC = Full initial comp → if enhanced because of any interim order
(even if received part) then charged to tax in yr in which final
POH=Upto trf Order is passed & not in interim order.
CII = Upto trf → Litigation exps are deductible as “exps on
Transfer”
→ Type of cap. Gain → STCG or LTCG → same
as original.
→ Where cap. Gain charged in any year & subsequently is reduced by court / trib then
assessed gain shall be recomputed by taking consi. As reduced a/m by way of
rectification u/s 155 (if increased → enhanced comp.)
→ If person die before receiving comp taxable in hand of recipient.
Refer Q-8 (JK) (JK – P.T.O)
5) Capital Gain in case of specified agreement with developer [45(5A)]
Specified agreement = Agreement in which assessee gives right to use his old land /
building to develop a new prop. in consi of share / land / building after development
and also give cash consideration for furniture etc.. So, trf. Includes rights given up but
here compensation is received after couple of yrs (when developer gives new prop.) so,
this is amendment to remove genuine hardship.
Specified agreement entered by
Individual / HUF Others
Cap. Gain(old) in yr in which

Ind. / HUF trf Ind./ HUF trf property handed over to
Share after date of his share in new prop. Developer.
Issue of completion to 3rd party before (i.e yr of trf)
Certificate of date of issue of
New Prop. Completion certi.
CG in PY in which FVC = Stamp Duty on date

COC is received of trf for old prop
Or
FVC = Stamp duty of date of COC Actual consi, w.e. higher.
+ Cash consi. Received.
This FVC will be cost of acq. For new prop.

Further sale.
Example: Mr.bewakoof has purchase a flat in 2013 for Rs.50L.He gave possession of flat
to builder for redevelopment in 2015 on which date FMV is Rs.60L. in 2018 the COC
received on which date stamp duty is Rs. 80L and builder give money for furniture Rs.5L.
Answer capital gain if:
1. He sold new flat in 2020 for Rs.1 cr.
2. What if sold in 2017 itself.
6) Trf of shares [55(2)(ac)] = cost of acq. or listed shares

→ History=earlier u/s 10(38) → LTCG was exempt now LTCG > 1L is taxable @ 10% u/s
112A so, there can be huge cap gain tax on sale of shares pur, long back.
Hence, amendment for genuine investor
Applicable for
Eq.shares in co. & Unit of equity oriented fund

On which STT paid on which STT paid at time of
Both at time of pur. & trf. Trf.
Which was acquired b4 1-2-18 (Budged date)====if on/after 1/2/18=actual
(No indexation) cost of acq. = higher of
Cost of acq. when purchased & Lower of

a) FMV of share as on
31-1-18
or
b) FVC received at time of
trf.
st
[Means gain upto 1 feb is still exempt]
e.g share sold 5800 nos, for for ` 595000 pur for 121800 on aug-16 FMV on 31-1-16 is `
75.
7) Taxability of self generated asset (cost = sec.55)
→ History=SC judgement → CIT vs B.C. srinivasashetty if cost of acq. of cap. Asset

cannot be ascertained then CG can not be computed.
Hence, No tax
→ This has been removed upto some extent by amendment :
What is cost
What is cost of
Self – Generated asset
of acq. improvement
1. Goodwill of busi. (not of profession) NIL NIL
2. Tenancy right NIL Actual
3. Right to mfg, produce or process any article NIL NIL

of busi.
4. Trademark, Brandname NIL Actual
→ The above is applicable only for self generated asset = if purchased then
Cost = Actual price.
→ if asset are not covered by above list then cost cannot be ascertain & hence SC judgement
continue.
e.g. → Goodwill of profession

→ Sale of old palace.
Refer illu. 9 (4.398)

8) Cost of acquisition of bonus share (sec-55)
Bonus share cost = NIL
So allotted b4 1-4-01(55(2)) alloted after 1-4-01
Cost or FMV w.e. higher Cost = NIL
∴ FMV = Cost
9) Cost of acquisition of right share

Situation
If right entitlement if right shares are if letter pur. by

Letter is renounced to acquired by 3rd part & pur. share
3rd party exercising option
Cost of letter = NIL Cost = Amount paid Cost = Cost of letter

(POH from option to co. + cost paid to co.
Given till renouncement)
Refer Q-1 EXTRA SUM(=Q11 JK),Q-2 EXTRA SUM

H.W. → Q-5 (JK) (ans….JK….PTO)
10) Capital Gain in case of Nonresident

(1st proviso to sec-48)
T.P = Nonresident He acquires shares or deb

At time of sale of asset of Indian co. by India co.
By utilizing F.C
Then Cap. Gain is calc. in F.C
If this rule is applied no indexation
11) Cap. Gain in case of share / deb. Or warrant issued under ESOP in case of trf. Under
Gift : (Sec-48)
If shares / deb / warrant received in ESOP is given as gift or irrevocable trust then FVC
=FMV as on date of transfer.
At time of receipt- salary income must also have taxed.
So, FMV on which tax paid at that time will be deemed COA=49(2AA)
(Refer Q-4 (JK)
12) Capital Gain on buy back of unlisted+Listed shares (Sec-46A) :
Buyback by domestic co. buyback by other than

Domestic co.
Co. → Pay additional Income Tax No Tax to co.

@23.296 % (20%+12%+4%)
Sh → Exempt u/s 10 (34A) For S.H. Cap. Gain u/s 46A
13) Cap. Gain when converted equity shares from pref. shares or deb is sold / trf. :
→ Cost of acq. = Cost of pr. Share / deb.
Q-12 (JK) (=Q-4 extra sum)
14) Capital Gain in case of slump sale (50B) :

One or more undertaking (asset)
Slump sale = Trf of more than 1 asset without value being assigned to individual asset
& liab.
→ Tax consequences: No CG for single asset but total CG.

Slump sale = LTCG but if all cap. Asset owned & held not for > 36M → STCG
[i.e. if all asset ≤ 36m → STCG]
→ FVC = Value received
→ Cost of acquisition = Net worth
= Total asset (–) liability at book value
Net worth Value
Depreciable asset WDV
Asset u/s 35AD (as ded’ is claimed) NIL
Other asset Book Value
Sub total 
Less : Liab. (Book value)
Net worth 
→ Ignore any ∆ in value of asset due to revaluation. (to avoid manipulation)

→ No. benefit of indexation.
→ If no dep. Provided on dep-asset then provide & take WDV.
→ audit report → 3CEA for correct value report.
Refer SM illu. 11 (4.409) = Q-7 (JK)
 Exemptions given in section 10:
i) section -10(33) : Trf of specified units under unit scheme 1964 is exempt.
ii) Section 10(37) :
Ind./ HUF Trf. Urban by way of exempt only if land

Agri. Land compulsory used for agri. purpose
Rural agri. Land acquisition during past-2 years
Is already not from date of trf. by
Taxable comp. or him or parents or HUF.
Enhanced
After 1-4-2004 both are
exempt
Q-9,10,11,12 extra sum= Q-6,7,8,9 hws jk
 Exemptions in capital Gain head:
Question 54 54f 54EC 54EE 54B 54D
For which Ind/HUF Ind/huf All All Ind/huf All

assessee
For which Long term Long term Long term Long LT/ST LT/ST
kindof asset term
Which asset A resi. HP Any Immovable All cap Urban land Land or
to be sold (chargeable capital prop. asset used for building of
in head hp) asset agri. Pur by. industrial
except Him/Parents undertaking
residential / HUF for compulsory
HP agri atleast 2 acquired by
yrs prior to Govt. & Used
trf. for 2 prior yrs
for ind.
Purpose.
Which asset One One 5 yr Units of Urban or Land or

to be ****(Note residential redeemable specified rural agri building for
purchased 1)residential house bond: fund land industrial
house property (Start up) purpose
-NHAI
property
-RECL
-Power
finance corp.
-Indian
railway
finance corp.
Upto what Before-1 yr 6 mnths from 2 yrs 3 yrs forward

time to After: date of trf forward
purchase? Pur: 2 yrs
Const-3 yrs
What is CG or Invst * CG CG or Invst or CG or inst Cg OR
exemption Invst Net consi 50 Lakhs w.e.lower INVST
w.e.lower W.E.LOWER
Upto what 3 yrs 3 yrs 5 yrs 3 yrs 3 yrs 3 yrs

time not to be
sold
Any other - -Assessee No loan on this No loan - -
condition? should not Bond on this
own more unit
than 1
Resi H.P.
on date of
trf of
Asset.
-In time
of 2/3 yrs
he will
not
pur/const
other HP
What if sold Exemption CG CG exempted CG Exemption Exemption

or conditions granted exempted earlier = exempted granted granted
contradicted/ earlier will earlier = LTCG in this earlier = earlier will earlier will be
be reduced LTCG in yr LTCG in be reduced reduced from
from cost of this yr this yr from cost of cost of asset
asset to calc. asset to calc. to calc. new
new CG new CG CG
CG a/c Yes Yes No No Yes Yes

scheme avbl?
Refer S.M, illu. 12 (JK -14)],Refer illu 13 SM (4.429). Q-13 extra sum
Common points
1- In section 54: instead of 1 HP benefit for 2 HP can be claimed once in lifetime if capital
gain is less than equal to 2 cr.
2- Capital gain account scheme: For sec 54, 54D, 54B, 54F, if investment not done b4
B4 → Due date of filing return or filing return w.e earlier.
then it has to be deposited in CGAS
 If amount deposited not utilized in that 2/3 years from date of trf → Unutilised amount
= CG in yr which period expires
(CBDT….In case of death → Not taxed to legal heir)
3- SC → Dempo co. ltd → even dep asset head for > 36m is LTCA. Eventhough gain is
STCG u/s 50. Exemption is available
4- 54H : In case of compulsory acq. period exemptions will start from date of compensation
received
5- Exemption available in more than 1 section also.
 Tax Rates :
Asset
Equity shares in co. or unit of Any other asset

Equity oriented fund or unit
Of business trust
LTCG STCG
Through stock Out side stock 112 Finance Act

Exchange exchange
@20% (Rates applicable)
STT applicable STT not applicable
LTCG STCG LTCG STCG
Section 112A Sec-111A 112 Finance Act
> `100000akj @ 15%

@ 10% 1 2
10% 20%
(w/o indexation) (With indexation)
Question 112(20%) 111A(15%) 112A(10%)
Shifting benefit avbl? Yes(To RESI) Yes(To RESI) Yes(To RESI)

Deduction u/c VI-A? No No No
Rebate u/s 87A? Yes Yes NO
Higher surcharge Yes NO NO
25/37% applicable?
What is shifting benefit?

1. If Other income is lower then bel then BEL can be adjusted against Special rate income
mentioned above.
Rule for shifting :
First against normal income
Then against LTCG @ 20% (112)
Then against STCG @ 15% (111A)
Then LTCG u/s 112A @ 10% (112A)

E.g.-1 Mr.__________ (Resident) (59 yrs)
Salary = 90000 STCG (111A) = 200000
STCG (Silver) = 50000 Int =50000
H.P. = 40000 L.T.C.G = 40000
Total = 470000
Normal Rate Special Rate
` 230000
LTCG STCG @111A
NIL
40000 * 200000
– 20000
20000 200000
@20% @ 15%
4000 30000
Tax 34000
– Rebate (12500)
21500
+ 4%
22360
E.g.-2 Mr.__________(Resi)(61 yrs)
H.P. Income = 70000 LTCG on Land = 50000
STCG on Gold = 100000 STCG u/s 111A= 120000
LTCG u/s 112A = 130000
Total: 470000
Tax @ Normal Special Rate
` 170000
LTCG STCG @111A LTCG@112A
NIL
50000(-) 50000 120000-80000 (130000-1L)
=@ 20% =40000 @15% @10%
=Nil =6000 =3000
All 112A Total
Total Tax = 6000 3000 9000
– Rebate u/s 87A = (6000) - (6000)
3000 3000
+ 4% = 120
3120
E.g.-3 Mr. __________(NR)
Same sum as E.g.2
E.g.4 Mr. Aagam has the following income (22 yrs, Resident):
Other income: 1,90,00,000
LTCG u/s 112:500000
STCG u/s 111A: 800000
LTCG u/s 112A: 400000
Ans: Here total income excluding 112A and 111A is below 2 cr so surcharge applicable
on total tax will be 15%.
Total: 20700000
` 19000000
5512500
500000 800000 (400000-1L)
=@ 20% = @15% @10%
=100000 =120000 =30000
Total tax: 5762500

S.C@15%: 864375
Total : 6626875
Cess4% 265075
Tax pble 6891950
E.g.5 Mr. Aagam has the following income (22 yrs, Resident):
Other income: 1,90,00,000
LTCG u/s 112:1200000
STCG u/s 111A: 800000
LTCG u/s 112A: 400000
Ans: Total income excluding 112A and 111A is exceeding 2 cr..So surcharge on other
incomes will be 25% and on 112A and 111A will be 15%.
Total: 21400000
` 19000000
5512500
1200000 800000 (400000-1L)
=@ 20% = @15% @10%
=240000 =120000 =30000
All(Except 112A & 112A & 111A Total

111A)
Total tax 5752500 150000 5902500
Surcharge rate 25% 15%
Surcharge 1438125 22500 1460625
Total 7363125
CESS 4% 294525
Total 7657650
Refer Illu. 14 (4.441)

Refer exercise & jk
Q-1( =Q-10(hws jk)),
Q-3(=Q-16 jk),
Q-14 extra(=Q-15 jk) ,
Q-15extra(=Q-11 hws) ,
Q-16 extra(=Q-10 jk),
Q-17 extra,
18 extra(=Q-12 hws jk)
Q-6 jk
60000
For stampduty  if
Date of Agree Time Tag Date of Reg.
S.D. can be taken for date of agreement if part or full consi. Is paid
by a/c payee chq. Or draft or ECS or any other e mode.
 When Sec. 56(2)(X) is N.A. :

If sum of money or prop. R’ved from
1) Relative.
2) On occasion of marriage of Ind.
3) Under Will or Inheritance.
4) In contemplation of Donor in case of death.
5) From local autho.
6) From Insti. / Trust regi. u/s 10(23C) or 12AA
 Meaning :
1). Property : Capital asset namely
Immovable Prop. Share Drawing, Painting, Bullion

Jwellery
(land or building) Securities Archological
collection,
sculpture work of
any art
[So Mobile, TV, Fridge, Car, AC, Stock in trade all these are not prop. No tax]
2). Relative :
For individual For HUF
 Spouse
 Brother or Sister Any member
 Brother or Sister of spouse
Bro or Sis or either of parents of Ind
 Lineal ascendant or descendant So, for that member HUF is
not relative(However section
 Lineal ascendant or descendant of spouse
10(2))
Spouse of all above
For nephew uncle is relative
for uncle nephew is not
Refer Illu. 3(=Q-1 hws jk),4(=Q-4 jk),5 (=Q-2 hws jk)
Note : Once the Tax is paid on these FMV or SD at time of receipt then it will be deemed cost
for capital gain in future  49(4) [DOA of previous owner will not be incl.]
 52(2) (xi) : Any compensation received in connection with term of e’ment
It not charged in salary.
 Keyman Ins. Policy : It a/m r’ved by relative.
 Any Int. Income : Taxable (Gross up : if TDS deducted)

(apart from PGBP)
 Section 94(1)  Bond washing transaction
Sometime b4
After R’vings Again sale to
High Income Sale Bond to Due Date
Int. by low that high income
Group friend or relative of Int.
group
(low Income)
To avoid this kind of tax planning Sec. 94 states that where a security owner sale security on
eve of due date of int. & reacquire it after int. p’ment then such int. income shall be deemed
income of transferor.
 94 (7) : E.G. Purchase prise-10..sale value=8..Dividend=Rs.1

Dividend Stripping it :
Any person buy Sold that : & that divi /

security within 3 share  3 month within int. is exempt
month prior to Unit  9 month within
record date record date
Then loss on sale is to be ignored upto dividend amt.
(Because loss was because of Div.and exps for exempt income is not deductible)
Refer Q-1 (JKSC – set off c/f)
 Unexplained Income / Exps. / Investment
Sec. 68 Sec. 69 Sec 69A
Cash Credit Unexplained Unexplained Money

invt.
A/m recorded in If investment Money, jwellery,

books (loan or etc.) & found & not bullion ,article found &
no explanation found) recorded in books not recorded in book
Income Income Income
 69 B  Investment not fully disclosed in BOA  Diff. = income

 69 C  unexplained expenses  expense not recorded in BOA & no explanation for that
 income (No ded in any head)
 69 D  If a/m was borrowed by hundi & repaid otherwise a/c payee ch,,  Income
Sec. 115 BBE  60% (+ 25% SC+ 4% Cess)=78%

(No Shifting Benefit)
E.g, There is a incometax search in home of Mr. Ravan and dept found 2 gold chain worth
Rs.50000 each.He could give explanation for Rs.25000 only.What is tax payable??
Ans: Unexcplained invst= Rs.75000…Tax @78’%.

 Deductible Expenses Sec. 57 :
a). Commission or remuneration paid for Interest Income
(No ded for Div.  because it is exempt)
b). e’yee contri. u/s 2(24) [It added in IFOS]  Then ded if paid on or b4 due date of
that act.
c). For letting out P & M, Furniture, Building.
Current repairs of building (like Sec. 30)

Ins. Prem. On Premises (like Sec. 30)
Repairs & Ins of P & M, Furniture (like Sec. 31)
Depre. (Sec. 32)
d). Family Pension  Ded = 15000 or 1/3rd w.e. lower
e). 50% of Int. on enhanced comp.
f). Any other expense (not capital exps) wholly & excl. for Income
Judgement--even though after exps no Income is earned then also deduction can be claimed.
 Sec. 58: Expenses not deductible
Personal exps. 100% of Int. 30% of exps. Paid to Some disallowance

paid o/s India Resi. w/o TDS or like Sec. 40A (2),
w/o TDS on deducted bt not 40A (3)
int or deposited b4 139(1) [excess e’ment to
Salary… relative & p’ment >
10,000 otherwise …]
Like 40(a)
 No exps. Against casual income.
 Sec. 59: Same as Sec. 41(1)
Any ded claimed in earlier yr &

received in this year  Deemed Income
Refer exercise Q-1,2,3,4(=Q-5 hws jk),5(=Q-6 hws jk).

Jk Q-1,5,7
CHAPTER: 7 IFOS
 Sec. 56 (1) : Basis of Charge
There is an Income Income is not exempt u/s That income is not covered
10 to 13 B by any other head.
 Sec. 145 : IFOS Income to be taxable as per method of a/c followed by assessee.
 Sec. 56(2) : Chargeable Income u/s 56(2)
a. Dividends***
b. Casual Income  Winning from lotteries, Crossword, Puzzles Card Games etc.***
c. Any sum received from e’yee as contri to fund for welfare u/s 2(24) e’yee (if not taxed in
PGBP)
d. Income by way of “Int. on securities” (If not taxed in PGBP)
e. Income from machinery, plant or furniture let an hire (If not taxed in PGBP)
f. Income from letting plant, M/C or furniture alongwith building (If not taxed in PGBP)
(cross ref. H.P.)
g. Any sum r’ved under keyman Ins. Policy (If not taxed in Salary or PGBP).
h. Sum of money / properties r’ved without consideration or Inadequate Consi.***
i. Interest r’ved on compensation or enhanced compensation.***
j. Share Premium in excess of FMV.***
***-Always taxable under head IFOS.
 Dividend : Any Div. declared, distributed or paid by Co. to Sh.  taxed in IFOS.
 Dividend Includes Deemed Dividend
It means Deemed Div. as per Sec. 2(22)

even it not termed as Div. as per Companies Act.
 Following shall not be treated as Dividend.
Any P’ment by Co. on Any Distri. Of Shares in

purchase of its own shares as accordance with Scheme of
per Sec. 77A of Co.’s Act Demerger by resulting Co.
(buy back)
 2(22)(a) to 2(22)(d): Deemed Dividend
2(22)(a) 2(22)(b) 2(22)(c) 2(22)(d)
Release of Co.’s Distri. of debentures Distri of asset by co. Distri by co.

Asset by Co. to SH w/o consi to to SH in case of to SH for
(Except in case of ESH or PSH liquidation reduction of
Liquidation) + share cap.
Bonus to PSH
Upto amt of accumulated profit---Deemed dividend
 2(22) (e)  Distribution of accumulated profit by way of Advance or Loan to
SH. Or concern is treated as Deemed Dividend to the extent of accumulated profit

(except Cap. Profit)
So, 2(22) (e) applicable when
P’ment by way of loan P’ment to SH. Who is Co. should possess

given by Co. in which registered [&] Beneficial accumulated profit
public is not & at least having 10% (except Cap. Profit)
substantially interested equity SH.
(Repayment has no
Impact)
Amt. upto A.P. In excess  No

Deemed Div. deemed div
E.G. X ltd. As R & S of Rs.50,00,000.It gave a loan to SH Mr.A having 12% shareholding
for Rs.60,00,000.What is deemed dividend.
 Loan given to concern of S.H. is Deemed Div in hands of S.H.
Loan by Co. in Given after Co. has Loan is given to concern

which Pub. is not 31/5/87 accumulated (HUF, FIRM etc. in
Sub. Int. profit which reg + Beneficial
(except Cap. S.H. of Co. ≥ 10%
Profit) Eq. Share is having Subs
Int. (≥ 20% Income)
E.G. X ltd. As R & S of Rs.50,00,000. It gave a loan of Rs. 60 L to ABC & Co., partnership
firm in which SH having 12% shareholding is having 50% profit sharing.What is deemed
dividend?
 However following shall not be treated as :

Deemed Dividend
Advanced made to It against loan given, CBDT Circular

S.H. in Ordinary future Dividend
Course of Business P’ment is set off
Trade Advances is not

deemed div.
(E.g. Advance to pay

rent on behalf of Co.)
Refer Illu. 1
(SM)=(Q-2 jk)[4.487]
 Once the Deemed Div. is given then A.P. will be reduced by that amount…(refer Q-6 jk)
 and Meaning of A.P.
For Sec. 2(22) (a), (b), (d), (e) For 2(22) (c)
Profits / Reserves upto date Profit upto date of

of distribution or p’ment liquidation only.
 Sec. 8 : Basis of Charge of Dividend Irrespective of Method of A/c
Normal Dividend Deemed Div. Interim
Income or Yr. in Yr in which When paid to S.H.

which Declared. Distributed or Paid
 Sec. 115-O : Dividend Distribution Tax
Every Domestic Co. shall pay DDT on Distri.

of normal / Deemed / Interim Div.
For all Dividend except [2 (22) For 2(22) (e)

(e)]
15% on gross amt. 30% on gross amt.
+ 12 % SC+ 4% cess
=17.304%
 For S.H. : It paid by
Domestic Co. Other than Domestic
In case of Actual In case of Deemed Taxable

Dividend Div.
2(22) (a) to 2(22) (e)

2(22) (d)
Does aggregate Fully exempt Because

Dividend exceed ® 10 Co. has not
u/s 10(34)
Lakh during P.Y. ? paid DDT
[even it exceed
10 L]
Yes No Because Co. has paid extra DDT.
Upto ® 10 Lakh Fully exempt

exempt u/s/ [10(34])
Balance amt.
Taxable u/s 115
BBDA @ 10%
(for Resident) No ded of
expense or
[Not for NR
no ded u/c
Domestic Co. &
VI-A
Institute covered
by Sec. 10(23)
(c) or Trust u/s
12 AA-
115BBDA-N.A.]
(=Q-3 jk) Refer Illu. 2 (SM) (4.489)
 56(2) (ib) : Casual Income
Winning from Crossword Races Incl. Horse

Lottery Puzzle Race, Card Game,
Other Game of
Gambling bating &
194 BB
TDS is deducted u/s 194 B@ 30% if exceeding

10000. So, if in question this income is given
(net) i.e. after TDS, then add TDS into income
This Income is taxed to SH u/s

115 BB @ 30% + cess
No Exps., No Ded u/c VI-A No Shifting Benefit

E.g. KBC Ltd & winner 1L & TDs 194B+
115 BB (TDS)
 56(2)viib)
 Share Premium in excess of FMVs
It will be treated as Income it.
Recipient is a Co. Co. R’ves Consi Consi. Exceeds

in which Pub. are for shares from for face value
not Subs. Int. Resident Person (i.e. at
premium)
Then issue price(–) FMV  Income

of IFOS
bt if shares are issued at discount 

provision is N.A.
 Provision is also N.A for
Consi. R’ved by Venture When Consi. R’ved

Capital undertaking from by Co. from class of
Venture Cap. Fund persons notified
Refer Example on 4.491
 Sec. 56 (2) (viii) : Int. on compensation / enhanced compensation: In IFOS
Sec. 145 B : Taxable  In year in which Received
Sec. 57: 50 % Ded. (No other exps allowed)

Refer Ilu. 6(=Q-3 hws jk),HW Q-3(exerc)(=Q-4 hws)
 56 (2) (ix) : Advance money forfeited.
Cross Ref. Sec. 51

(If on or after 1/4/14  IFOS)
 56(2)(x) : For recipient  Taxability of sum of money or property Received w/o consi.
Or inadequate consi.
Transaction Condition Taxable Amt.
Sum of Money Without Consi. Aggregated value exceeds Rs. Entire Amt.
50,000/- received
Movable Property R’ved without Aggregate FMV of such prop. FMV.

consi. Exceeds Rs. 50,000/-
Movable Property R’ved with It FMV exceeds consi. For more Diff. of FMV &
Indequate Consi. than Rs. 50,000/- Consi.
Immovable Prop. R’ved w/o Aggregate stamp duty exceeds Stamp Duty
consi. (land or building or Both) Rs. 50,000/-(Here per
transaction)
Immovable Prop. R’ved with Stamp Duty exceeds consi. By Difference between
Inadequate Consi. [higher] of following stampduty and
a) Rs. 50,000/- or actual
b) 5% of consi.
[In tuning with 43CA, 50C]
E.G. Mr. Aagam sold property to Mrs Nikita for Rs.2000000.Stamp duty on date of agreement
for Rs.2060000.What is FVC for Aagam and IFOS income for Mrs. Nikita?
Ans. FVC=2000000…IFOS=o
E.g. Mr. Aagam sold property to Mrs Nikita for Rs.500000.Stamp duty on date of agreement
for Rs.560000.What is FVC for Aagam and IFOS income for Mrs. Nikita?
Ans.: FVC= 560000….IFOS= 60000
For stampduty  if
Date of Agree Time Tag Date of Reg.
S.D. can be taken for date of agreement if part or full consi. Is paid
by a/c payee chq. Or draft or ECS or any other e mode.
 When Sec. 56(2)(X) is N.A. :

If sum of money or prop. R’ved from
7) Relative.
8) On occasion of marriage of Ind.
9) Under Will or Inheritance.
10)In contemplation of Donor in case of death.
11)From local autho.
12)From Insti. / Trust regi. u/s 10(23C) or 12AA
 Meaning :
1). Property : Capital asset namely
Immovable Prop. Share Drawing, Painting, Bullion

Jwellery
(land or building) Securities Archological
collection,
sculpture work of
any art
[So Mobile, TV, Fridge, Car, AC, Stock in trade all these are not prop. No tax]
2). Relative :
For individual For HUF

 Spouse
 Brother or Sister Any member
 Brother or Sister of spouse
Bro or Sis or either of parents of Ind So, for that member HUF is
not relative(However section
 Lineal ascendant or descendant 10(2))
 Lineal ascendant or descendant of spouse
Spouse of all above
For nephew uncle is relative

for uncle nephew is not
Refer Illu. 3(=Q-1 hws jk),4(=Q-4 jk),5 (=Q-2 hws jk)
Note : Once the Tax is paid on these FMV or SD at time of receipt then it will be deemed cost
for capital gain in future  49(4) [DOA of previous owner will not be incl.]
 52(2) (xi) : Any compensation received in connection with term of e’ment
It not charged in salary.
 Keyman Ins. Policy : It a/m r’ved by relative.
 Any Int. Income : Taxable (Gross up : if TDS deducted)

(apart from PGBP)
 Section 94(1)  Bond washing transaction
Sometime b4
After R’vings Again sale to
High Income Sale Bond to Due Date
Int. by low that high income
Group friend or relative of Int.
group
(low Income)
To avoid this kind of tax planning Sec. 94 states that where a security owner sale security on
eve of due date of int. & reacquire it after int. p’ment then such int. income shall be deemed
income of transferor.
 94 (7) : E.G. Purchase prise-10..sale value=8..Dividend=Rs.1

Dividend Stripping it :
Any person buy Sold that : & that divi /

security within 3 share  3 month within int. is exempt
month prior to Unit  9 month within
record date record date
Then loss on sale is to be ignored upto dividend amt.
(Because loss was because of Div.and exps for exempt income is not deductible)
Refer Q-1 (JKSC – set off c/f)
 Unexplained Income / Exps. / Investment
Sec. 68 Sec. 69 Sec 69A
Cash Credit Unexplained Unexplained Money

invt.
A/m recorded in If investment Money, jwellery,

books (loan or etc.) & found & not bullion ,article found &
no explanation found) recorded in books not recorded in book
Income Income Income
 69 B  Investment not fully disclosed in BOA  Diff. = income

 69 C  unexplained expenses  expense not recorded in BOA & no explanation for that
 income (No ded in any head)
 69 D  If a/m was borrowed by hundi & repaid otherwise a/c payee ch,,  Income
Sec. 115 BBE  60% (+ 25% SC+ 4% Cess)=78%

(No Shifting Benefit)
E.g, There is a incometax search in home of Mr. Ravan and dept found 2 gold chain worth
Rs.50000 each.He could give explanation for Rs.25000 only.What is tax payable??
Ans: Unexcplained invst= Rs.75000…Tax @78’%.

 Deductible Expenses Sec. 57 :
a). Commission or remuneration paid for Interest Income
(No ded for Div.  because it is exempt)
b). e’yee contri. u/s 2(24) [It added in IFOS]  Then ded if paid on or b4 due date of
that act.
c). For letting out P & M, Furniture, Building.
Current repairs of building (like Sec. 30)

Ins. Prem. On Premises (like Sec. 30)
Repairs & Ins of P & M, Furniture (like Sec. 31)
Depre. (Sec. 32)
d). Family Pension  Ded = 15000 or 1/3rd w.e. lower
e). 50% of Int. on enhanced comp.
f). Any other expense (not capital exps) wholly & excl. for Income
Judgement--even though after exps no Income is earned then also deduction can be claimed.
 Sec. 58: Expenses not deductible
Personal exps. 100% of Int. 30% of exps. Paid to Some disallowance

paid o/s India Resi. w/o TDS or like Sec. 40A (2),
w/o TDS on deducted bt not 40A (3)
int or deposited b4 139(1) [excess e’ment to
Salary… relative & p’ment >
10,000 otherwise …]
Like 40(a)
 No exps. Against casual income.
 Sec. 59: Same as Sec. 41(1)
Any ded claimed in earlier yr &

received in this year  Deemed Income
Refer exercise Q-1,2,3,4(=Q-5 hws jk),5(=Q-6 hws jk).

Jk Q-1,5,7
CHAPTER: 8 CLUBBING
 Sec. 60 : Transfer of Income without trf of asset
This kind of Income will be included in the Income of transferor only.

whether or not transfer is revocable or irrevocable
Refer E.g. & Illu. 1 P.N. 5.3
 Sec. 61 : Income arising from revocable (same like Bond washing) transfer :
Sec. 61 Exception (62)
 If transfer is revocable  If transfer is irrevocable +

 If it contains provision for transferor is not getting any
retransfer property to transferor. direct or indirect benefit from
 Transfer gives right to resume Income
power to transferor
Then income arising to

transferee shall be clubbed in
Income of transferor
E.g. : abroad  Trf. Prop. For 6 months
 Sec. 64(1)(ii) : Clubbing of Remu : to spouse

o clubbling is to be done if :
Tax payer is He/she along with Spouse of T.P. is Spouse has no

Ind. relative has substantial E’yed in technical or
Int. in a concern at any such concern professional
time during p.y. (Salary, Fees, knowledge for such
[Co.  ≥ 20% Voting Commi. Etc.) cash employment
Other  ≥ 20% Profit] or kind
 Relative  spouse, brother, sister lineal ascendant or descendent

 Where both husband & wife has sub Int. & both are getting remuneration w/o
knowledge from same concern
Income will be clubbed in total income of husband or wife whose T.I. (w/o salary) is
higher
Once Incl.  then for subsequent yr also in some person
H.W. Q-1 (JK) Illu. 2,3,4 (5.7)
 Sec. 64 (1) (iv) :

Income arising to spouse from asset (other than H.P.) transferred w/o adequate consi.
Tax payer is Transferred asset (not Not in Transfer Directly

Ind. H.P.) to spouse w/o agreement to or Indirectly
adequate consi. live apart
(love & affection is not
consi.)
 For H.P.  Sec. 27  Deemed owner (same provision).

 Clubbing is still appli. If money is gifted & spouse invest in asset.(Here H.P.included)
 Cap. Gain from asset is also to be clubbed
 If transferred asset are invested in business of transferee
Income from such business will be clubbed as under
Profit of busi. X A/m invested out of Trt asset as on 1st day of PY.
Total Inv. of busi. on 1st day
(This prov n.a. if amount given as bonafied loan)
Refer : illu. 5 (5.10)

H.W. Exercise Q-4(=Q-4 jk)
 Sec. 64(1) (vii) :
It asset is w/o adequate consi. transferred to any person or association & income from
such asset is for direct or indirect benefit of spouse then also clubbing will be done.
 Sec. 64(1) (vi) :

Income arising to son’s wife from asset (incl. H.P.) transferred w/o adequate consi. By
F.I. law or M.I. law.
Tax pay is Transferred asset Then it is to For transferred asset if

Individual directly or indirectly be clubbed invested in her busi.
w/o adequate consi. to then
son’s wife
Profit X
A/m as on 1st day
Total inv. As on 1st day
 Sec. 64(1) (viii) : Same as 64(1) (vii)
Direct or Indirect beneifit
 Sec. 64(1A) : Clubbing of minor’s income

 Every Income of minor (apart from 3 mentioned below) will be clubbed in parent
(whose T.I. w/o this is greater). Once it is clubbed then in subsequent year also it will
be clubbed in same parent.
 When marriage does not subsist  in the hand of parent who maintains him.
 Income of minor married daughter will also be clubbed.(different then section 27)
 The following 3 income will not be clubbed :
a). Income is on a/c of any activity of his skill, talent or specified knowledge.
b). Income is on a/c of his manual work.
c). Minor child is suffering for disability mentioned in Sec. 80U.
 Sec. 10(32) : Exemption of Rs. 1500 p.a. per child from minor’s income.
Refer Illu. 7,8(=Q-7 jk) of SM.

H.W. Q-5 (exercise)
 Cross transfer :
E.g. Mr. A. Rs. 500,000 for House Mr. B
Mrs. A. Mrs. B
Gift of Deb. of Rs. 600,000
 SC  CIT Vs Keshavji Morarji
If 2 transactions are interconnected & are Part of same transaction in such a way tht it
can be said that transaction are entered to avoid tax. Then clubbing will be appli. Here
Mr. A  Taxed for int. to Mrs. A for deb of Rs.5L
Mr. B  Taxed for HP Income to Mrs. B
NOTE : Cross transfer of same amt will be clubbed.
Refer Illu. 9
H.W. JK – 2-3
 Sec. 64(2) : Conversion of self acquired property into prop. of HUF.
Before partition of HUF After partition of HUF

If prop. transferred directly / When such converted prop. is divided
indirectly to HUF w/o adequate in total or partial portion of spouse
consi.
Income of such prop. to be clubbed to Then income to spouse to be clubbed

transferor i.e. in hands of member
[& not to HUF]
 Common Notes :
(1) Explanation 2 to Sec. 64 : Income includes loss.
(2) Clubbing u/s 64 appli. To spouse, minor child, son’s wife and HUF.
Section 60 & 61-to all.
(3) Accretion of Income i.e. Income from Income is not to be clubbed.

E.g. Mr. A give HP to Mrs. A w/o consi. Then income of HP to be clubbed o Mr. A bt
if Mrs. A invest this HP income into FD and earn int. then it is not to be clubbed.
(4) In answer also write a note abt Sec. 56(2)(X) N.A. from relative.
Refer Exercise Q. 1,2(=Q-8 jk), 3

Refer JK Q.5, Q.6
CHAPTER: 9 AGRICULTURAL INCOME
 Sec. 10(1) : Agriculture

Mr. A Land Mr. B SoldAgri.
(Owner) Rent (Tenant) Produce
Mr.B Mr. C for processing to sale in market & to MR.D for warehousing.
 Agriculture Income (2(1A) :
 Agri. Income may arise in following :

I. Any rent or revenue derived from land situated in India & used for agricultural purpose
(by anyone) i.e. tenant or owner.
II. Any Income derived from such land by agricultural operations.
III. Income derived by processing of agricultural produce. (process should be ordinarily e’yed
to render the produce fit to market).
IV. Income from farm building (farm house) on rural agri. Land used as dwelling house or store
house.
V. Income derived from sapling or seedlings grown in nursery = deemed Agri. Income.
 Term “Agriculture” in light to SC  CIT v/s Raja Benoy Kumar Sahas Roy
Basic Operation Subsequent
Means operation essential to constitute Subsequent operations which are

agricultural . Basic operation would performed after produce sprouts from
involve exps. On human skill & Labour land.
upon E.g. : Tending, pruning, cutting the
land itself. produce to fit for market.
E.g. : filling of land sawing of seeds etc.
 Mere connection with land is not sufficient to cover within “agriculture”. E.g. Breeding
& Rearing a livestock, cheese & butter making ,rent for agricultural land given for shooting,
mining activities.
Note: any spontaneous growth is not agricultural operation.
 Explanation 1 to Sec. 2(1A) :
Transfer of Urban Agri. Land is not “Agricultural Income”
See E.g. on P.N. 3.14

 Partial Merger :
Q. : Agricultural Income is exempt from Income for Act but I.T. Act Indirectly collect tax on
Agri. Income explain
Ans: Though Sec. 10(1)  Agri. Income in India is exempt. it is first to be incl. in Total Income
for determining rate at which other Income will be chargeable if following condition are
met :
a). Assessee is Ind. / HUF / AOP / BOI / AJP(Slab rates).
b). (Net) Agri. Income exceeds Rs. 5000
c). Total Income which is taxable (other than agri) exceeds max. a/m not char. To
tax.
ASSESSEE
Ind / HUF / AOP / BOI / AJP Other
Whether 3 condition satisfied Fully exempt
YES NO
Partial merger Fully exempt
 If these 3 conditions met then

Step 1 : Find out (Total Income +Net Agri. Income) for Basic tax calc. only.
Step 2 : Find out basic tax on step 1
Step 3 : Find out (B.E.L + net Agri. Income)
Step 4 : Find out basic tax on step 3 . This will be called Rebate on Agri. Income.
Step 5 : Tax Payable = (Tax on Step 2 – Step 4)
Step 6 : Then apply surcharge/REBATE & cess
Illu. 3 (3.17)
E.g. Mr.B non agri income: Rs.60 l and agri income Rs.50 L.
 What if common activity is there having agricultural and non agricultural activities(how to
bifurcate total income into agri & nonagri)
For Mfg of rubber, tea, coffee For other common busi.
Composition Step-1: Assume that agri produce used in

busi is sold in market.
So—Agri income=FMV-Agri exps.
Step-2: assume that agri produce is
purchased from market.
So---Busi income=Sale value-Exps.-
FMV
Refer Illu. 1 (3.9), Illu. 2 (3.10),

JKSC Q.1,2
Q-2(Advance tax)
Homework-Q-3,5(jk)
CHAPTER: 10 OTHER EXEMPTIONS
(1). Sec. 10(2) :

Income from HUF=exempt
if
Paid out of Or Out of Impartible estate

Income of HUF belonging to family
Refer Illu-4(Sm)
(2). Sec. 10(2A) : Share in Profit of firm
CBDT : Evenif firm has paid no tax because of any exemption or deduction u/s VI-A,
Partners share = exempt.
(3). Sec. 10(4) : For individual NR  Int. on money standing to his credit in NR (external) a/c
(NRE A/c) if it is approved by RBI.
(4). Sec. 10(4B) : NR (Indian Origin)  Income from saving certi by CG  which is purchased
from o/s India by convertible foreign exch.
10(6)(ii) : Remu. R’ved by not citizen of India for service as official of foreign govt. is
exempt if such official do not have busi. profit in India.
Provided Remu. Received by our official in their country is also exempt.
(5) 10(6)(vi) : Remu. R’ved by not citizen of india e’yee from foreign enterprise for service
rendered by him during stay in India is exempt.
Foreign enter” is not Stay in India does not Remu. is not liable to be
engaged in any trade or exceed 90 days in P.Y. deducted from Income of
busi. in India e’yer (for I.Tax)
(6) 10(6)(viii) : Income of NR Crew ship during stay in India is exempt total stay NMT 90
days
(7) 10(6)(xi) : Remu. r’ved by e’yee of foreign govt. while stay in India if remu. r’ved for
training imparted by :
a). Govt or
b). Co. wholly owned by Co. or SG
c). Co. which is subsiding of b.
f). Statutory Corporation
e). Society financed by CG or SG.
(8) Sec.10(6D) : Royally Income of NR or foreign co. for serviced rendered to  NTRO i.e.
National Technical Research Org.
(9) 10(10BB) : Any person  p’ment under Bhopal Gas Leak Disaster, 1985 is exempt if
assessee has not claimed any deduction in incometax for any loss/damage
(10) 10(10BC) : P’ment r’ved by any Individual or legal heir  for compensation r’ved from
CG or SG or LA for any disaster (condition as per 10(10BB).
Refer Illu. 5
(11) 10(11A) : Any p’ment (Int. etc) from a/c opened with Sukanya Samriddhi A/c rules 2014.
(12) 10(I5) : Following Int. Income is exempt :

1). Post Office Saving Bank Int. upto Rs. 3500 for Ind. & Rs. 7000 for joint a/c.
2). Int. p’ble by Bond issued and notified by CG E.g. NHAI, RECL, HUDCO, Power
Finance Corp., Indian Railway Finance Corp. Ltd.
(13) 10(16) : Any scholarship r’ved by Individual granted by anybody to meet cost of education.
(14) 10(17) : For member of parliament or state legislature or committee.

For MP For MLA
1). Daily allowance Entire Entire
2). Any allowance under MP Rules 1986. Entire N.A.
3) Constituency allowance N.A. Entire
 Raj.  CIT v/s Shive Charan Mathur  MPS & MLAs are not e’yee hence salary and
allowance r’ved are IFOS.
(15) 10(17A) : To any assessee who receives award or reward received in cash or kind  Given
in Public Int. by CG, SG or body established by Govt.
(16) 10(18) : Pension r’ved by e’yee or family member (after death of e’yee) from CG or SG if
he is eligible e’yee.
Eligble e’yee = who has received Param Vir Chakra, Mahavir Chakra, Virchakra.
(gallantry awards)
[Family = Spouse, children, parents, bro., sis. (dependent)
(17) 10(26) :
Member of Schedule tribe i). Income from source in
residing in that area
Nagaland, Manipur, Tripura, ii). Int. & Div. (World Int.

Arunachal Pradesh, Mizoram, , Div.)
Ladakh of J&K
(18) 10(26AAA) : A Sikkimese Individual  Any income accruing from source of Sikkim &
World Int. + Div.
However if Sikkimese woman marries on or after 1/4/08 to non Sikkimese  Then no
exemption
Refer Illu. 6
(19) 10(30) : To any assessee engaged in growing & mfg tea in India  subsidy received from
tea board.
(20) 10(31) : To any assessee engaged in growing & mfg rubber, coffee, (ginger) cardamom in
India  subsidy from concerned board.
(21) 10(35) : Any assessee  Income from units of specified MF. [Income on transfer is not
exempt]
(22) 10AA: Newly established units in SEZ.
 Unit in SEZ begun to mfg or produce any article or thing after 31.3.5 bt b4 31.3.20.
 Unit SEZ is not formed by splitting up or reconstruction of busi. already in existence
SEZ should not be setup by trf. of P & M already in use (i.e. old)
Upto 20% old P&M 100% imported

allowed secondhand P&M
(Same as 35AD)
 Report from CA is to be furnished
 Period & ded’
1st 5 consecutives A.Y. 100% of profit from export
(from A.Y. is which begins
mfg.
For next 5 A.Y. 50% of profit from export
Next 5 A.Y. 50% of profit from export or
Amt. trf. to “special eco. Zone
reinvestment allowance res’
w.e. lower
Profit from export = Profit of Busi. x Export T/o (actually received)
Total T/o of SEZ.
 Export T/o & total T/o shall not include :
Freight Telecommu. Ins. Attri. O/s Exps. in F. Exch.

Charges India O/s India
 Any amount of export T/O which is not received (E.g. bad debt) shall not be include in
T/O.
Sum P.N. Illu 7. (3.31)
Q.5 (exercise)
(22) Sec. 14A & Rule 8D : Restriction allowability of Exps.
 Sec. 14A : Exps. incurred in relation to any exempt Income is not allowed as ded’ while
computing Income for any head.
 A.O. is empowered to determine amt. of such exps for exempt income as per Rule 8D,
if he is not satisfied with claim of assessee.
 Rule 8D : Method to find exps. for exempt Income.
Amt. directly relating to Amt. equal to 1% of Avg of op. &

exempt income a/c bal. of annual avg. of monthly
avg of invest of which income is
exempt
Total Exps. = Disallowed

(can not exceed combine total Exps.)
 CBDT : Disallowance is to be made irrespective of fact that exempt income is earned

or not.
E.g, Shares op.Balance Rs. 100 Lakh and closing balance Rs,80 L..Dividend received
Rs.100000…Common exps. Is Rs.80000.What will be disallowed.
Ans. 1% of 90 L=90000 or 80000 w.r.lower
Refer Q-1,2,3,4 of exercise of SM

(No jksc question---all are covered in total income)
CHAPTER: 11 SET OFF CARRY FORWARD
LOSS In current year Inter head Carry

first Set Off [Sec.71] In forward
(Intrasource  Current year against
Sec.70 Inter Head Set which head
Off
1. Loss from salary  Not possible  X  X [No loss]
2. Loss from HP  Income from HP  Any other head 8Yrs Income from
Incl. Salary [Max.  HP 71B [No
upto 2 Limit]
Lakh(71(3A))
3. Loss from PGBP  Income from  Any other head 8Yrs Income from
(Non speculative) PGBP (Spec. + excl. salary  PGBP (72)
[Sec. 72] Non Spec. + (NS + S +
35AD) 35AD)
4. Unabso. Depre,  Income from  Any other head Infi. Any other
Sci. research PGBP excl. Salary  head (excl.
family planning (NS + S + 35AD) salary)
5. Loss from PGBP  Income from  X (No head) 4Yrs Speculative

(Speculative) Speculative  PGBP - 73(1)
(PGBP)
6. Loss from owing  Income from  X (No head) 4Yrs Income from
& main horse race O&M Race Horse  O&M – 74A
R.H.
7. Loss of 35AD  Income from  X (No Interhead) Infi. Income from

35AD  35AD (73A)
8 yrs
8. S.T.C.L.  S.T.C.G.  L.T.C.G. (70(3))  STCG +
LTCG
8 yrs
9. L.T.C.L.  L.T.C.G.  X  LTCG
10. Loss I.F.O.S.  Income from OS  Any head (Incl.  X No Clf.

Salary)
11. Loss from card  No Set Off
game, lotteries,
gambling
Note :
1) Business loss can be set off against CG bt Capital loss can’t against Business loss.
STCL canbe setoff against LTCG bt LTCG can’t against STCG
NS loss can be setoff against S loss bt S loss can’t be setoff against NS.
2) As per Sec. 72(2) :

Order for Set Off
C.Y. Dep.
B/f Loss of B.P.
Unabso. Dep.
Unabso. Sci. research  Family planning
1) Sec. 80 : Submission of return for loss :

Assessee must file a return of Income on or before due date u/s 139(1) to carry forward
losses. However following loss can be set off even without filling return on time.
i) H.P. Loss (71B)

ii) Unabsorbed dep. (32(2))
2) Owning & maintaining camel  same treatment as “non speculative busi.”.
3) Loss from exempt source cannot be set off against profit of Taxable source.
4) Sec. 78(2) : Where a person carrying on Busi / Profession has been succeeded by another
person  No loss can be c/f by him except in case of Inharitance.
5) Whenever H.P. Loss is there ,first set off against Salary (Because other are not allowed).
6) Where any Co. will deemed to carry out speculative busi.  when dealing in other’s shares.
However following Co. will not be deemed :
Co. Not having Co. whose principal busi. :

PGBP Income a) Trading in Share
b) Busi. of Banking
c) Granting Loans.
7) Note : Deduction u/c VI-A is N.A. against any “special rate Income”
8) Book Profit :
N.P. (b4 Loss & Unabso) 270000
Busi. Loss 200000
Unabso. Depre 120000
Cal. B.P. & Remu.
Ans : 270000 - 70000(Note-1) [2.7L – 2L = 70,000]

= 200000
Remu. = 180000 (90%)
Note-1: As per 40(b), only adjustments from 28 to 44DB to be done .So business loss is
not to be deducted but unabsorbed depre to be deducted. However amount of unabsorbed
depre depends on business loss as first loss is to be deducted.
Refer Illu., exercise.

H.W. Ex. 6,10
JKSC  Q.1 Done in IFOS

Q.2, 3  ICAI
Q.4 – Behind
Homework section of jksc-All question same as module questions.
CHAPTER: 12 Deduction from GTI u/c VI-A
 General Rules
1) Section-80A: Aggregate a/m of ded’ u/c/ VI-A can not exceed G.T.I..
2). No ded’ can be claimed from special rate income (LTCG, STCG u/s/ 111A, lottery
Div. etc)
3) 80AB : Ded’ of heading C (80IA to 80RRB) is allowed upto amt. incl. in GTI.
4) 80AC : For claiming ded’ of heading C
(80IA to 80RRB  80JJAA, 80QQB,80RRB), Return has to be filed on or before due
date u/s 139(1)
Refer Illu. 1(7.6)
1) Sec. 80C : Deduction for specified Investment to Ind. / HUF(R+NR)
 Max. Ded’ under this Section is Rs. 1,50,000
 Following are allowed
a) Life Insurance Premium :
For Ind.  him/herself + spouse + any children [No ded’ for parents]
For HUF member
Can be paid by any made
Deduction of Ins. Prem. Cannot exceed :
Normal Person Person suffering
from 80U
 Policy b/w 1/4/3 to 20% of sum assured 20%

31/3/12
 Policy b/w 1/4/12 to 10% 10%
31/3/13
 From 1/4/13 10% 15%
Cross ref : Sec. 10(10D) :

Amt. R’ved under LIP incl. bonus is exempt except
Cross
Ref.
Received for Keyman Ins. If Prem. Paid was
Sec. Dependend person u/s Policy in excess of
194DA) 80DD 10/15/20% of sum
assured [on death
 exempt]
[Refer Illu. 2]
b) i. E’yee contri. To approved superannuation fund, SPF., RPF

ii. Contri. to Any contri. In PPF for family
Int. on PPF  exempt.
Refer IIu. 3
c) Amt. deposited in “Sukanya Samridhi Yojana” [For Ind. + girl child]
d) Subscription in NSC VIII [National Saving Certi]
Int on NSC  First add to IFOS then ded’ u/s 80C.
e) Notified mutual fund or UTI.
f) Subscription to notified deposit scheme e.. HUDCO.
g) Tuition fees paid in India for full time education for max upto 2 children.
h) For house property whose income is chargeable under head “HP”
Stamp Duty, regi. Fees Home loan principal repayment to

CG, SG, Bank, LIC, Public Co.
[So, if loan taken from friend, relative then Int. is allowed u/s 24(4) bt. Principal
r’ment is not]Pre contruction not allowed.
i) Subscription in certain Eq. share / deb.
j) Invst. In > 5 yr term depo of schedule bank,post office.
Note : If Invest. Of fixed period withdraw before 5 yr then deemed Income =Ded’
Allowed earlier
k) Bond of NABARD.
l) Depo. In Senior Citizen Saving Scheme, 2001
m) Contribution by CG employee for contribution in NPS A/c(This is additional account-
Tier II)..80CCD gives deduction for tier-1 account of NPS.
Note : except point no. a, b ,c,g all other for Ind. / HUF himself.
2) Sec. 80CCC : Contribution in Pension Fund of LIC by Individual(R+NR)

 Ded’ only if paid out of Income chargeable to tax [same as 80D, 80E].
 Ded’ = Exps. or Rs. 150000 w.e. lower.
 At time of maturity / surrender  amt. of pension is taxable.
 If ded’ taken in 80C  No ded’ in 80C
3) Sec. 80CCD (1): Contri. to pension scheme notified to CG (Eg. NPS,Atal Pension
Yojna)
Sec. 80CCD (1) :
Individual e’yed by e’yer  Ded’ upto 10% of Salary
or actual or Rs.150000
Eligible assessee
Self employed 20% of GTI or actual or

Rs.150000
Salary = Baisc + DA(%) + Commi. (%)

Sec. 80CCE : [Agreegate] of 80C + 80CCC + 80CCD(1) – Rs. 150000
Now onwards Over & above Rs. 150000
4) 80CCD (1B) : Additional deduction for Individual on Investment in pension scheme

i.e. NPS upto Rs. 50000 [If there are other deductions also in sum then always taken ded’
first in this & then in 80CCD (1)]
At time of maturity
Full withdrawal Partial withdrawal
Employee Selfemployed Employee Selfemployed
60% of total is exempt Fully taxable 25% of e’yee contri Fully taxable
(Earlier it was 40%) is exempt
(10(12A)) (10(12B))
[For all  In case of death  to nominee not taxable u/s 80CCD (3)]
E.G.Mr.A has a NPS account.Total balance Rs.200000..Give taxability:

1. Mr.A is employee and withdraw full Rs.200000
2. Mr.A is businessmen and withdraw full Rs.200000.
3. Mr.A is employee and withdraw Rs.50000(Employee contri in that is Rs.30000)
4. Mr.A is businessmen and withdraw Rs.50000.
5. In case of death family member withdraw the same.
5) 80CCD(2) : Additional ded’ to Ind. For contri. made by CG or e’yer in pension

plan
Step-1: First add to Income of salary.
Step-2:Then ded’ upto 10% of Salary.However if CG contributes then 14%.
[For same amt. ded’ to e’yer u/s 36(1) (iva)  Double benefit]
Refer Illu. 4&5(=Q-1,2,3 hws jk)

Summary
80C 80CCC 80CCD(1) 80CCD(1B) 80CCD(2)
Max Rs. 1.5L Max rs.1.5L

For e’yee For self e’yed Addi. upto Upto 10%
10% of salary 20% of GTI Rs.50000 of salary
Or actual or or actual or For CG
1.5L w.e.lower 1.5L w.e.lower e’yee-14%
80CCE-Max rs.150000
6) 80D : Deduction in respect of Mediclaim for Ind/HUF(R+NR)
Condition : Ind. / HUF + Mediclaim paid out of Income Chargeable to tax (same
 80CCC, 80E)
: Payment should be “other than cash”
: However, preventive health check up can be made in cash.
Max. Ded’
To Individual HUF
Himself Parents For
+For spouse (Dep. + Not Dep.) Member
+ Depn. Child)
i). Mediclaim Avbl Avbl Avbl Avbl
ii). CG Health Scheme Avbl Avbl N.A. N.A.
iii),Preventive health Avbl Avbl Avbl N.A.
check up (PHCU)
25000 25000(Separate) 25000
(If any person = Resi .S .S (If any person = (If any
then 50000) Resi .S .S then person =
50000) Resi .S .S
then 50000)
 For PHCU  Max. ded’ Rs. 5000 (Incl. in limit of Rs. 25000 / 50000) for all.
 For himself + spouse or parents if Resi.S.S + > 60 yrs & no ins. then medical exps. upto
Rs. 50000
E.g. : Mediclaim 10000 + Rs. 6000 for PHCH  15000

 80D (4A) : If mediclaim is paid for lumpsum, for more than 1 yr then ded’ will be
proportionately for each year.
Deduction= Total premium paid/total no.of months* no.of months in this year
Illu. 6,7(=Q-4,5 hws jk)
7) Sec. 80DD : Ded’ for maintainance Incl. Medical treatment of dependent being
person with disability
 Condition : Resident Ind. / HUF.

: Taxpayer has incurred exps. for medical treatment under
scheme of LIC or other, for person dependent with disability
: Such person has not claimed 80U.
 Ded’ :
Disability Fixed ded’ if any
Exps. Done
40% - 79% 75000
>=80% 125000
(Severe Disability)
Dependent  Indi.  spouse, children, parent, bro, sis (Dependent)

 HUF  member.
[Grandparents, Uncle not covered]
 Other Condition : For ded’File Certi. issued by medical autho.
Illu 8,9
8) Sec. 80DDB : Medical Treatment

 Condition : Resident Ind. Or HUF  Actually paid a/m for medical treatment
For Himself or Dependent Relative for diseases mentioned under rule 11 DD
 Ded’ : Actual exps or limit w.e. lower

Himself / Dependent  40000
Resi. Senior Citizen  100000
Dependent  Same as 80DD
 Ded’ amt shall be reduced by reimbursement by e’yer by insurer.

 E.g, Exps of Rs. 60000 & Insurer reimbursed 10000.
9) Sec. 80E : Loan taken for higher studies.(R+NR)

 Condition : Individual has taken loan for higher studies (after 12th) from financial institute
or approved charitable institutes.
For himself, spouse or any child (even for child of which he is legal guardian)
& Int. a/m paid from Income chargeable to tax.

 Ded’ : Entire Int. for 8 years or repayment of loan w.e. earlier
(No need to see full time or Part time)
In 80C  Tuition fee for full time
Refer Illu. 10 (7.42)(=Q-6 hws jk)

[H.W. Q-1(exercise)]
10)Sec. 80EE : Int. on loan taken for Resi. H.P. :
 Condition : Individual + Home loan taken from Fin. Inst. & Sanctioned in P.Y.
16-17
: A/m of loan < =35 L
: A/m of home < =50 L
: T.P. does not own any H.P. on date of sanction of loan.
 Ded’ : Int. or 50000 w.e.lower [In addition to 24(b)]
So If H.P.
SOP LOP
Upto 2 L  24(b) 24(b)
Balance Upto 50000  80EE (No Limit)..Bt in

set off chapter
max 200000
against other
head.So balance
here upto 50000.
Refer Illu. 11(=Q-7 hws jk)
11)Sec.80EEA. - Deduction in respect of interest on loan taken for certain house

property(From finance Act,2019(No.2))
Condition: Ind+ Not eligible to claim 80EE+ Home loan from fin,Inst (Not NBFC) &
sanctioned in P.Y.2019-20
: stampduty of house<= 45 Lakhs
: T.P. does not own any H.P. on date of sanction of loan.
 Ded’ : Int. or 150000 w.e.lower [In addition to 24(b)]
 So If H.P.
SOP LOP
Upto 2 L  24(b) 24(b)
Balance Upto 150000  80EEA (No Limit)..But in

setoff max 200000
against other head..So
balance can be
claimed here upto
150000.
12) Sec.80EEB. - Deduction in respect of purchase of electric vehicle (From finance
Act,2019(No.2))
Condition: Ind+ loan from fin,Inst(Incl.NBFC) to purchase electric vehicle & sanctioned
between 1-4- 19 to 31-03-23
Ded’ : Int. or 150000 w.e.lower .
Refer Illu-12
Difference between 80EE,80EEA,80EEB
Topic 80EE 80EEA 80EEB

Purpose Homeloan Homeloan E vehicle Loan
Sanctioned in 16-17 19-20 1.4.19 to 31.3.23
Value of prop <=50L S.D.<=45L No limit
Loan A/m <=35L No limit No limit
NBFC allowed? No No Yes
Deduction 50000 150000 150000
13)Sec. 80G : Donation to certain fund, charitable, institution.(To any assessee)

 Condition :i) Donation in Kind  not deductible
ii) Donation directly to beneficiary  Not deductible
iii) Donation for particular cast / commu.  Not deductible
iii) Donation in Cash > 2000  Not deductible
iv) Deduction only if paid in India
v) Ded’ only if not claimed in PGBP.
 Deduction :
Type 1 Type 2 Type 3 Type 4
100% w/o limit 50% w/o limit 100% with limit 50% with limit
(clue : CG / SG) (clue : congress) (clue : games) (General)
Find names having 1) Jawaharlal Nehru 1) CG / SG for Any other

1) National 2) Indira Gandhi promoting family charitable / religious
2) International 3) Rajiv Gandhi planning trust registered u/s
3) Central 4)PM’s draught 2) Indian Olympic 80G
4) State Relief fund Asso. [to Indian
5) Zila Co. Only]
6) PM 3) Indian Archery
7) CM Asso.
8) Notified Uni.
9) Swach Bharat
10) Clean Ganga
Type 3 & 4 together subject to 10% of

Adjusted Total Income
Adjusted total Income=GTI-Deduction u/s 80C to 80U(Except 80G)-LTCG u/s

112/112A-STCG u/s 111A.
Total Ded’ = Type 1

+ 50% of Type 2
+ Type 3 (upto 10% of ATI)
+ (Type 4 * 50%) or 50% [ATI. * 10% - Type 3] w.e. lower.
E.g. : Olympic asso.  60000

Trust  100000
10% of ATI  100000
Refer illu-13(JK Q-4)
Hw Q-4(Execrise)
14)80GG : Rent paid by self employed

Condition : 1). Indi. + Any self e’yed or E’yee with no HRA
2). Person or spouse or HUF or minor child does not own any Resi.
H.P. where he resides
Ded’ : 1) Rs. 5000 P.M. or
2) 25% of A.T.I. or w.e. lower
3) Actual Rent – 10% of A.T.I.
A.T.I. = GIT – Ded’ u/s 80C to 80U (except 80GG) – LTCG – STCG u/s 111A.
Refer Illu. 14(=Q-2 hws jk)
15)Sec. 80GGA : Donation for scientific research or rural development.

Condition : Person = whose income do not cover PGBP Income
: Sum paid to Science Research, Social Science, Rural Development
approved fund
(i.e. same like 35(i)(ii), 35(1) (iii), 35CCA).
Ded’ : Ded’ = Actual Exps.
: No ded’ for donation in cash > Rs. 10000.
16)Sec. 80GGB : Donation by India Co. to political party. [which was disallowed in
PGBP 37(2B)](B Vs. C)
: No ded’ for sum contributed by Cash.
: Donation to political party or electoral trust  Regi. u/s 29A of
Representation of People Act, 1951.
+
for exps (Dir or Indirectly) by Co. on advertisement in any
publication of party souvenir, brochure etc
Deduction= 100% of amount contributed
17)Sec. 80GGC : Donation by any person (other than co.) to political party
Same as 80GGB
+ Ded’ not avbl. to local autho. & AJP. 100% Which funded by govt.
Illu. 15 (7.53)
H.W. Q-2 (exercise)
18)80QQB : Royalty Income of Author

Condition : To resi. Individual
: The book is authored by him related to literacy, artistic or science nature.
:No ded’ for T.B. of schools, guides, newspaper, journal pamphlet
Ded’ : Royalty Income
Lumpsum % wise
A’m received or A’m NMT 15% or

Rs. 300000 w.e. lower Rs. 300000 w.e. lower
 In case of Royalty from abroad only received within 6 m from end of P.Y. will be
income.
 Ded’ to be cal. after exps.
JK Q-1(Ch.2)
Note: In this sum First convert into 15%, then compare with received within 6 month..Then deduct
exps..Then 300000.
19)80RRB : Royalty for patent

Condition : Resi. Individual + Regi. as true & first inventor under Patent Act,
1970.
Ded’ : Royalty Patent Income
A/m Received or 3 L w.e. lower(No % condition)

 Abroad  To be received without 6 m from end of P.Y.
 Where name is removed subsequently from Patent Register  Rectification of return.
20)80JJAA : Deduction for e’ment of new employee
Ded’ = 30% of additional e’yee cost for 3 P.Y. from employment (if)
Assessee is audited Busi. is not by Busi. not acquired Report of CA is

u/s 44AB splitting up or by transfer attached to ROI.
reconstruction or
existing busi.
Existing Busi. New Busi.

st
Additional e’yee cost shall be NIL if : 1 Yr.  Total e’yee p’ment
i) No increase in e’yee = additional cost
ii) P’ment by other than a/c payee
chq. Draft, ECS or any other e-
mode.
(So if new e’yee  allowed)
Additional e’yee shall exclude :

i) e’yee > 25000 P.M.
or ii) e’yee  salary is contributed entirely by EPF, ESIC dept.
or iii) e’yee  e’yed for < 240 day(For busi of mfg of appearel, footware ,
leather produce it is 150 days)—They will be deemed
appointed in next year.
or iv) e’yee  does not participate in Reco. P.F.(E.g. Casual Worker)
Refer Illu. 16 (7.57)(=Q-3 hws jk)-
21)
Topic 80TTA 80TTB
Applicable to Any Ind+HUF(Except Resi. S.S.

Resi.S.S.)
For S/B A/c Interest(First add to FD+SB A/c Int
income then deduction)
Deduction Max.10000(Note-1) Max.50000
Note-1: cross ref 10(15)  First P.O. Saving Int. exemp. upto Rs. 3500 then ded” of
80TTA]
E.g. Post office sb a/c interest Rs.13000.
Refer Illu 17, 18 (= JK Q-5)(=Q-4 hws jk)
22)Sec. 80U : Ded’ in respect of Income or person with disability

(Cross ref. Sec. 80DD)
Condition : Resi. Ind. + Disability > 40%
Ded’ : >=40% - <80%  Fixed Rs. 75000
> =80% Fixed Rs. 125000
80C  Dep. _ Non dep. child 43(1)—Proviso for depre..single day >10000
40A(3)—for any exps.>10000(Transporter-
80D  Dep. Child 35000)
35AD—for cap exps no ded if >10000
43CA,50C,56(2)(x)—sd on date of agreement
if part consi by a/c payee.
44AD---6% if t/o by a/c….upto due date
80C  can be in cash
80D  other than cash (PHCU can be in cash)
80G  Cash > 2000  Not ded’
80GGA Cash > 10000  Not ded’
80GGB, GGC --: No ded for cash
80JJAA  otherwise then by a/c , no ded’
Refer Q.3 (exercise) + JK Q-1,2,3 ch.1
MCQS Q.5 (exercise) + JK Q-1,2,3 ch.2(rest all homework problems like module)
A-3: Computation of total income

Basic(100000*12) 1200000
DA(50000*12) 600000
Bonus 200000
Eyer contri(0.15*(12L+6L)) 270000
Less: exempt @12%(12L+6L)) (216000) 54000
Rentfree accommodation(Mumbai..So 15% of salary)
(0.15%(1200000+600000+200000)) 300000
Gross salary 2354000
Less: Std deduction (50000)

Taxable salary 2304000
GTI 2304000
Less: deduction u/c VI-A
80C: e’yee contri RPF 150000
80D: Mediclaim-self 25000
Parents 33000
80DD: Dependent disabled-severe disability 125000
80E: Int on education loan 24000
: 20000 (377000)
Total income 1927000
A-1 of second unit: Royalty
A B C
90000@18% 600000@12.5% 800000
So,@15%=75000 600000
Received in 6M=70000 India In 6M=700000
So eligible=70000 600000 700000
Less: Exps.=10000 Less: exps=180000 Less: exps.: 240000
Royalty=60000 Royalty=420000 Royalty=460000
Max 300000 Max 300000 Max=300000
Deduction=60000 Deduction=300000 Deduction=300000
CHAPTER: 13 Tax Deducted at Source & Collected at Source
 Section 190 : Ded’ of Tax & Advance Tax

Income of P.Y. is taxable in A.Y. However Incometax is recovered in PY through
TDS TCS Advance Tax
Section Purpose Who deduct Threshold Rate Time of ded
 Section 192 : Ded’ of tax from salaries (applied to NR also)
Ded’ at time of Rate = Avg. E’yer will Exemption & Ded’

Payment I.Tax p’ble by estimate + Relief u/s 89 to be
(monthly) e’yee Income incl. considered for TDS
perq. of e’yee
 If e’yee has 2 e’yer  e’yee will select any one of TDS ded’.
 Steps for deducting TDS
Tax on [Salary – Loss on H.P. + other +ve Income-Deduction u/c VI-A]
(-) TDS on rent + TDS on other Income
TDS on salary / No. of months
= monthly TDS.
Note : Any cap. Gain loss or busi. loss to be ignored for calc. TDS. (only HP Loss
allowed).
 Sec. 192(2D). It will be duty of e’yer to obtain from assessee evidence or proof of
Estimating Income Ded’ of TDS

(for claim ded’)
Refer Q-1  JK
 Sec. 192A : P’ment of accumulated balance due to e’yee. (i.e. EPF).
Ded’ of TDS from EPF
Who? At time of Threshold @10%

Trustee of EPF payment 50000 (If no PAN-MMR)
(Only if e’yee not rendered
continuous service of 5 yrs due to avoidable reason)
(if rendered >=5 then exempt)
Example:
Service tenure Amt PAN given TDS?
6 51000 Y
3 49000 Y
2 52000 Y
2 52000 N
1(Illhealth) 60000 Y
 Sec. 193 : Ded’ of TDS from Int. on Security
For paying Int. Time payment No threshold @

on securities to (any mode) of A/m 10%
Resi. Or
Credit to a/c w.e. earlier
[cr. in BOA incl.
suspence a/c]
 Sec. 193 is N.A. for following :
1. Deb. Issued by Insti / Public Sector / Co. Op. Soc. / CG.
2. Any security by CG / SG. [However TDS @ 10% on a/m exceeding Rs. 10000 on
8%/7.75% saving (taxable) bond 2003]
3. No TDS if securities owned by LIC / GIC, Armed forces, PF.
4. No TDS on int payable on Power finance and Indian railway finance corp bond.
5. Gold Bonds.
To whom Section 194 A/C/H/I/J applicable?

Who is required
 Every person other than Ind / HUF
 Ind./HUF whose T/o exceeds limits mentioned in 44AB(a) / (b) in preceding P.Y. (i.e. 1 cr /
50 L)
Example:
Status B/P T/o of last yr CY ACHIJ?
Firm B 1L 50L
Co. P 2L 1L
HUF P 10L 55L
Ind B 90L 2 cr
Ind P 52L 10L
Ind B 1.01 cr 90L
 Sec 194 A : TDS from Int. other than Int. on Securities (For Resi.)
Who is required @ 10% Limit Time

** P’ment
Same in 194C, 194H, 194I, Or
194J] Bank/P.O Other-5000 Credit
w.e. earlier
To
resi.S.S.- To-Other-40000
50000
CBDT : For CBS System, where int. is credited monthly / daily basis for micro
monitoring use  TDS to be ded’ on accrual basis.
 limit of Rs. 5000 / Rs. 40000 / Rs. 50000 is not branchwise if bank has
adopted CBS [If no CBS  Branchwise]
 No ded’ if Int. paid / credited (to)
Banking Co. Op. Soc. In LIC By Co. Op. Soc Hudco

Co. Banking Busi. or UTI to Co. Op. Soc.
Inst. Busi
 Partnership Firm to Resi Partner---

Profit-Exempt
Salary-No Tds u/s 192
Interest-No Tds u/s 194A
 No TDS on Saving a/c.

 No TDS on Int. paid by CG on direct tax.
 Sec. 194B : Winning from lotteries or crossword puzzle or card game & other game.
Who ? At time of On amt if @ 30%

Person P’ment exceeds
responsible for Rs. 10000
paying by way
of lottery
 Where winning price is wholly or partly in kind & cash component is not enough to meet
TDS requirement then person responsible for paying shall before releasing winning shall
ensure for payment
[CBDT : Payer may collect amt. from winner & pay TDS to govt.]
 “Entertainment programme of TV” is covered by “Card game & other game.”
 Sec. 194BB : Winning from horse races.
Who ? At time of If a/m exceeds @ 30%

Bookmaker or P’ment Rs. 10000
person whom
license is
granted
Note: No TDS on gambling & Betting.
 Sec. 194C : Payment to contractor / sub contractor
Who ? To Resi. For any work At time of Limit

[same as Contractor / Sub (Incl. supply of payment Single P’ment
194A] Contractor labour for Or > 30000
carrying work Cr. w.e. earlier Or
Aggregate in a FY
> 100000
Rate :
Payee Rate
Ind. / HUF 1%
other 2%
contractor / sub contractor NIL.
in transport (with PAN) & less than 10
trucks in the year
Note-1 :No TDS for Ind. / HUF  if work is for personal purpose (same in
194J)
Meaning of Work :
Advertising Broadcasting Carriage of Catering Mfg. or supplying a

telecasting goods & product as per
passenger by specification of customer
any mode
other than by
Railway
By using R.M By using R.M

Supplied from customer supplied from
3rd party
It is work
It is not work
 Where in invoice material and labour both are there  TDS to be deducted
If material is mentioned Material not shown

separately separately
On Amt. excl. mat. On whole value
CBDT :1). Applicability of TDS For Broadcaster or T.V. Channel  P’ment to prod’
house.
P’ment to prod’ house to P’ment for acquisition of

make program as per broadcasting right for content
specification already produced
It is work : 194C No work : No 194C
Refer Illu. 2,3 (9.23)

JK : Q-2
 Sec. 194D : Insurance commission
Who ? Time of P’ment If a/m exceeds @ 5%

Person making p’ment Or Rs. 15000
to Resi. Any income as Credit
Ins. Commi. w.e. earlier
[To solicit Busi.]
 Sec. 194DA : TDS on non exempt p’ment under LIC.
Who ? At time of P’ment If a/m >= @ 1%

Person paying LIC a/m to Rs. 100000
Resi. Not exempt u/s
10(10D) From
1/9/19 it
will be 5%
TDS to be deducted on amount

after deducting LIC premium
paid till date.
Cross Ref :Sec. 80C & 10(10D): If premium was under % then exempt otherwise taxable
Note:Step 1: Taxable or exempt based on sum assured.
2. If taxable then whether maturity a/m> 1L
3. If yes then Find out amount for TDS=Maturity value(-) LIC premium upto date
4. Then see rate of TDS.
Refer: Illu. 4
 Sec. 194E : NR sportsman or sport association (Ref : 115BBA)
Payee Income
1. NR foreign citizen sportsman (Incl. - Participation in any game in India (other

athlete) [umpire coach not covered than card & gambling)
 195)] - Advertisement
- Contri. of article
- Amt. guarantee to be paid in relation to
game (other than card & gambling)
2. NA Sports asso.
- Income from performance in India.
3. NR foreign citizen entertainer
 At time of Cr. Or P’ment w.e. earlier
@ 20% (+ H&EC)  No Limit
20.8%
Illu. 5
 194EE : P’ment for National Saving Certificate
Person paying At time of If a/m @ 10% No TDS on

amt. P’ment > =2500 p’ment to legal
heir of assessee
 194F : P’ment of repurchase of units by MF or UTI :
Person making p’ment At time of @ 20% No

as per 80CCB (old sec.) P’ment Limit
 194G : Commission on sale of lottery ticket.
Person paying Comm. P’ment If exceeds @ 5%

On lotery ticket Or Rs. 15000
Cr.
w.e. earlier
 Sec. 194H : Commission or Brokerage (other than Ins. Commission)
Who ? P’ment If exceeds

@ 5% No TDS
[Like 194A] Or Rs. 15000 i) By BSNL or MTNL
to Res. Cr. for p’ment to PCO
w.e. earlier (Pub. call office)
ii) For dealing in
securities
 TDS applicable even if used for personal purpose (unlike 194C, 194J)
 194 I : Income by way of Rent [lease, sublease tenancy]
Who ? Cr. Rate It a/m exceeds Rent Incl. 

(like 194A) Or P&M  2% Rs. 240000 Advance rent bt
P’ment Land. Buldg. [To one party excl. refundable
w.e. furni.  10% for all contract] deposit.
earlier
 TDS to be ded’ whether or not payee is owner.

 TDS appli. Even for personal use (unlike 194C, 194J)
 CBDT. : 1). Hotel on regular basis  Rent
merely fixing room tarrif  Non regular…No rent
2). No TDS on GST component (If charged separately for all Sec.
No. TDS on GST)
3). Service of giving cold storage space & charge as “cooling
charges” is not right to use that space 194C & not 194I.
4). No TDS on charges paid by Airline to Airport operator for
providing parking service [as no right to use land]
Refer JK Q-3
 Sec. 194 IA : Purchase of Immovable prop.
(CG Income) Cr. If exceeds @ 1% of

Transferee making p’ment Or > =50 L actual value
to Resi. Transferor (seller) P’ment [Ignore
for pur. Of Immovable prop. w.e. earlier stamp duty]
(except rural agri. Land)
 Amt will include all charges in nature of club membership fees,car parking fees,electricity
and water facility, advance fees etc.
 For payer  Provision of TAN (Sec. 203)  N.A.
 Prop. may or may not be in India.
 Challan cum Form No. 26QB.
Illu 7
 Sec. 194IB : P’ment of rent by certain Ind. / HUF (not covered in 194I).
By Ind./HUF TDS appli. @ 5% TDS to be ded’ in last

whose T/o was not If monthly month of p.y. or last
exceeding limit u/s rent exceeds month of tenancy [tds
44AB(a) / (b) Rs. 50000 will not exceed last
month rent]
 No requirement of TAN u/s 203A.
 If no PAN of payee  @ 20% [Restricted to last month rent]
 Sec. 194 IC : Specified agreement
Who ? Cr. Sec. 194IA @ 10%

Person making p’ment Or do not (no limit)
to Resi. (in cash) as per P’ment attracted
agreement u/s 45(5A) w.e. earler here
Redevelopment of real
estate project
 Sec. 194 J : Profession or technical fees
Who ? For Limit for Cr. @ 10%

(194A) a) Professional each service Or [For only Busi.
b) Technical exceeding P’ment of call centre 
c) Royalty Rs. 30000 w.e. earlier @2%]
d) Non complete
[No limit
agree
e) Remu. to director for director
[if paid otherwise than Rs. 1 also
salary] TDS]
 No TDS if for personal use (same as 194C).

 Limit of 30000 is category wise & not payeewise.
 Professional service incl. sport activity. [sport person, umpire, referee coach, trainer,
event manager, etc.]
 So, Event Mgmt
Sport Other event
194J 194C
 Sec. 194 LA : P’ment of compulsory acquisition compensation
Who ? P’ment If exceeds @ 10%

Paying to Resi. For Rs. 2.5 L
compulsory acq.
[Except for Urban &
Rural agri. Land]
No TDS if p’ment as per right to fair
compensation & transparency in land acq.
Rehabilitation & Resettlement Act, 2013.
Section 194M: Payment for Work or professional fees or commission
Who? For payment to resident

Ind/HUF not for carrying out work p’ment or Thres.: Rs.50L @5%
Covered by section or professional fees or Cr.
194C/194J/194H Commission(except w.e.earlier
Ins comm)
No requirement for TAN.
This section is w.e.from 1.9.19…TDS deducted evenif for personal purpose
SO now-Summary for 5 main section,
Any section ACHIJ,M,IB

Except ACHIJ,M,IB
Appli. To any person Co./Firm/AOP/ Ind/HUF

BOI/LA
ACHIJ appli. Last yr t/o Otherwise

>1cr/50L
IB for rent
ACHIJ appli. M-W/P/C
(C,J not for personal
Purpose)
Refer Illu-10(SM)
Section 194N: TDS on cash withdrawal
Who?
Bank,postoffice, For resident at time of thre.1 cr 2%
Co.op.soc in banking for withdrawal payment above
Busi. From any a/c maintained Rs.1 cr
This section w.e.from 1.9.19.For limit 1 crore even withdrawal before 1.9.19 to be
taken into calculation.(CBDT)
This section not applicable if payment made to:

1. Government
2. Bank, post office, co.op.soc.
3. Business of banking as per RBI bank
4. ATM operator
Other section
A) Sec. 195A : Income p’ble “Net of Tax”
 TDS on Income after grossing up
B) Sec. 196 : No ded’’ of TDS on p’ment of Int. or dividend or other sum to

a). Govt.
b). RBI
c). Corporation Established by act which is exempt from I.T.Act
d). Mutual fund u/s 10(23D).
C) Sec. 197A : Payment without TDS or with TDS at lower rate [Form 15G, 15H]
 If resi.person except Firm/Co. estimate their tax payable NIL then they can file
certificate not to deduct TDS to payer for 192A,193,194A,194EE,194D,194DA,194I
Payee  declaration  Payer  on or before 7th day of declaration to PCIT

of the next month
D) Section 197: Lower TDS certificate(Form 13)

If any assessee predicts that his/its final tax payable on total income will be lower than
TDS to be deducted(Other than 194B,194BB,194N)then it can apply to A.O.in form
no.13 for lower TDS certificate.
E) Section 198,199,Rule-37BA
 TDS shall be deemed received in India.So always add TDS amt in income.
(Except TDS u/s 194N)
 Credit of TDS will be available in that year in which income is chargeable to tax.
 In case of clubbing-credit will be available to that person in whose hand income is
chargeable.
General process:
Deductor After ded” deposit to govt monthly Then file quarterly TDS return
F) Section 200: It will be duty of deductor to deposit TDS to govt within time prescribed.
Timelimit-Rule 30
Deductor Month/challan Due date
Any other deductee For any month On or b4 7th of next month
For march month 30th April
TDS u/s 194IA,194IB Within 30 days of next

month
G) Time limit of TDS return(Rule 31A)(Quarterly statement)
Quarter ending on Due date of TDS return

30th June 31st July
30th Sept 31st Oct
31st Dec 31st Jan
31st March 31st May
H) Section 200A: Processing of statement of TDS

After filing TDS return it will be checked by e-software for clerical, arithmetical, logical
error and if any it will be sent to deductor.
I) Section 201: If any person fails to deduct tax or deduct lower tax then he will be deemed
as assessee in default.
However he will not be termed as assessee in default if(Cross reference-40(a)))
Payee has filed ROI Payee shown all income Payer has given
u/s 139(1) in that ROI and has paid tax a certificate to this
effect from
accountant
J) Interest liability:
Does not deduct TDS or deduct lower TDS Fails to pay TDS to govt after ded”
@1% of TDS per month or part thereof @1.5% of TDS per month or part
From date on which TDS deductible to the from date on which Tds
Date on which actually deducted. Ded” to the date on which paid
(Section 201(1A)(i)) (Section 201(1A)(ii))
Refer Illu-11(SM)
K) Section 205:Bar (Denial) against direct demand: Assessee shall not be called to pay
tax again upto amount of TDS deducted if deductor has not deposited to government.
Refer Q-4 JK
L) Section 206AA: Mandatory furnishing PAN: Deductee has to mandatorily furnish

PAN. If no PAN then no TDS then deductor has to deduct TDS at higher of
i). Applicable rate or ii). 20% (For 192A=MMR)
No certificate u/s 197,197A w/o PAN
If incorrect PAN=deemed that no PAN.
Tax collected at source:TCS
Explanation: TDS was deducted by payer of amount.Intention was that govt should
come to know which person has earned how much income…TCS is collected by person
receiving the income from the buyer..Intention is govt wants to know for some goods that
which person has done exps on purchase for how much amount.
Section 206C: TCS: meaning: every specified seller shall collect below mentioned rate
of TCS in addition to bill amount for specified goods from specified buyer.
Goods Rate
1. Alcoholic liquor for human
consumption
2. Indian made liquor 1%
3. Scrap
4. Mineral(Coal,lignite,ore)
5. Timber 2.5%
6. Forest produce
7. Tendu leaves 5%
TCS collected at time of debit in books or receipt whichever is earlier.
Specified seller means: All person (Excl. AOP/BOI/Ind/HUF) + Ind/HUF whose turnover
in preceding yr is exceeding limits of section 44AB(a)/(b).
Specified buyer means: Every buyer other than
a) Buyer in retail sale for personal consumption c) Public sector co.
b) Govt.,embacy,etc.
Section 206C(1C) : For parking lot,toll paza,mining by one person to another for
business..then TCS @ 2%
This section N.A. if buyer is: Retail user for personal purpose, public sector Co., Mining
activity of mineral oil, petrol, natural gas.
Section 206C(1F) : Seller who receives amount on sale of motor vehicle above Rs. 10
lakh..collect TCS @1%.
This section apply only for retail user and not to dealer or distributor.
TCS to be collected at time of receipt of amount.
TCS procedure..all dates same for payment of TCS.However TCS return instead of last
date it is 15th date…(15th July/Oct/Jan and 15th May)
Refer Q-1 to 4(Exercise)
Advance Tax
Section 207,208: Every person is liable to pay advance tax except
Advance tax p’ble is less than 10000 or Advance tax not appli.
(If >= 10000 then pay) to Resi.senior citizen if
does not have PGBP.
Advance Tax=Total tax-TDS-TCS
E.g. Whether Advance tax applicable?

Name Age Resi status PGBP? Adv tax pble Liable to
pay?
X 30 Resi No 9800
Y 50 Resi Yes 10000
Z 60 Resi No 1000000
A 65 NR No 1000000
B 70 Resi Yes 10000
C 75 Resi Yes 9800
Section 211: Time limit:
Due date All assessee(Except Assessee covered by

44AD,44ADA) 44AD,44ADA
On or before 15th June of Upto 15% of adv.tax -
P.Y.
On or before 15th sept of Upto 45% of adv.tax -
P.Y.
On or before 15th Dec of Upto 75% of adv.tax -
P.Y.
On or before 15th March Upto 100% of adv.tax Upto 100% of adv.tax
of P.Y.
Even tax paid between 16th march and 31st march is said advance tax.
If on due date bank holiday then advance tax p’ble on next working day.
E.g. Mr. X has total income of Rs.600000. How much advance tax and due date.
Total tax: 33800
Inst. Upto 15/6 15/9 15/12 15/3

% 15% 45% 75% 100%
Tax 5070 15210 25350 33800

(-) paid ( 0 ) (5070) (15210) (25350)
Adv tax 5070 10140 10140 8450
 Interest payment for advance tax defaults:
234B:Int on nonpayment of tax 234C: Int on deferment of tax
1. Interest u/s 234B:Int for default in payment of advance tax.

Whether 90% of advance tax paid for assessed income?
Yes No
No interest Pay interest @1% Per month

or part on balance advance tax from 1st April of
A.Y. to the date of order u/s 143(1) or 143(3).
E.G. 1. Mr.A Income 7L TDS 1600.Adv tax paid 48000.234b?

2. What if paid 46000.and date of 143(1) is 15.7.20
2.Interest u/s 234C:Int on deferment of TDS on returned income.

Due date % TO BE PAID No int if paid upto If paid lower than
% column 3 then
interest
15/6 15% 12% 1% * 3 month *
balance tax
15/9 45% 36% 1% * 3 month *
balance tax
15/12 75% 75% 1% * 3 month *
balance tax
15/3 100% 100% 1% * 1 month *
balance tax
Note:1. For 44AD only last installment interest
2. For advance tax paid between 16/3 to 31/3 no 234B but 1 mnth int of 234C will be
calculated.
3. No interest u/s 234C if shortfall is due to below mentioned reason and tax on that
income paid in subsequent installments:
Capital gain Casual Income PGBP arising for 1st time

Div.above
Rs,10 L
Rule 119A: In calculation of Int u/s 234A,234B amount on which Int to be calculated is to be
round off to lower side Rs.100.
Refer Q-5(Exercise) and JKsc Q-1.

All mcqs
A-1.Tax on returned/assessed Income: 75400-TDS 9400
So,Advance tax payable=66000
234B: Total advance tax paid:=8000+5000+14000+12300

= 39300
90% Advance tax not paid..S0 234B applicable.
Amount on which?=66000-39300=26700(Rounded off)
Interest=26700*1%*(From 1/4/20 to 10.3.21)
=26700*1%*12 M
=3204
234C:
Due date How much Advance Min % amt for no How much Interest(If 3 is
tax to be paid(1) int(2) Paid(3) < 2 then Int on
(1-3)
15/06 66000*15%=9900 66000*12%=7920 8000 No interest
15/09 66000*45%=29700 66000*36%=23760 13000 (29700-
13000)*1%*3
m=501
15/12 66000*75%=49500 49500 27000 (49500-
27000)*1%*3
m=675
15/03 66000*100%=66000 66000 27000 (66000-
27000)*1%*1
m=390
Total Interest-234C 1566
Chapter-14 : Assessment procedure
General chart: In assessment year calculation of income
filing return of income after paying tax
For 100% return will be processed by e-system (CPC) for clerical, arithmetical, error and
intimation will be sent to the assessee.(Summary assessment)---order u/s 143(1)
Then For around 5% assessee A.O.will call for scrutiny and BOA checking
If assessee co-operates If assessee don’t co-operate
Order u/s 143(3)-regular assessment order u/s 144-Best judgement assessment
 Section : 139 (1) : Return of Income
Every Co & Firm Any other person has deposited >1 cr in

= Compulsory file return ROI only if total income one or more current a/c
Of income or loss. > BEL* OR
Incurred>2 Lakh for foreign
Here, Total Income = travel for himself + relative
Gross Total Income + OR
Section 54,54F,54EC,54B,54D Incurred > 1 Lakh for
(54EE to be deducted) electricity
E.g. Salary 200000..LTCG 50000(After exemption u/s 54 rs. 450000), Deduction u/s 80C=1.5L.
ROI?
 However, an R & OR shall mandatorily file ROI if at time in PY: He holds asset in foreign
country as beneficial owner or beneficiary.
 Due date of ROI :

Assessee Due Date
1 Assessee = Report u/s 92E (Transfer Pricing)—ca final 30th Nov. of A.Y.
2 Assessee = Co not covered u/s 92E

Or Assessee audited u/s 44AB or any other law 30th Sept.
Or Working partner of a audited firm
3 Any Other Case 31st July
Refer SM Q-1
 What if ROI Filed late than 139 (1) ?
Int. u/s 234A + Late fees u/s 234F
Int @1% per month or part Total Income

from next day of due date to
5L >5L
If ROI filed If ROI not filed
`1000
The date of return date of completion ROI filed After 31/12
filing. Of asst.u/s 143(3)/144 Upto 31/12
On On self asst.tax `5000 `10000

(If no tax is to be paid then no Int)
E.G.Mr.X due date=31/7.T.I. 7L paid tax=15000.ROI filed on 30/9.What are consequences?
 Section : 139(1A) Furnishing ROI by employer (i.e ROI of employee through employer)
→ Any employee income under head “Salaries” → Option to furnish ROI to employer
before due date of ROI will file all return received to government as per mode prescribed.
( No Practical utility)
 139 (1C) : Specified class or classes are exempted from filing ROI :
CG has power to notify such class. Every notification shall be laid before both house of
parliament.
 139 (3) : Return of Loss (Cross Ref. Section 80) :
Any below loss can be carried forward only if ROI filed on or by due date u/s 139(1)
72(1) 73(2) 73A(2) 74A(3) 74(3)

PGBP Speculation Specified Owing & Main. Cap. Gain
Business horse races
 Below losses can be c/f even if ROI not filed within due date.
1. HP loss
2. Unabsorbed depre
 Sec. 139 (4) : Belated Return
→ If ROI not filed as per 139(1), last date upto which if can be filed
End of A.Y. or Completion of

assessment assessment
w.e. earlier
 Sec – 139 (5) Revised Return
Original Return must have Assessee discover any omission

Been filed u/s 139(1) or 139(4) or wrong statement therein
(i.e. belated can also be Revised)
Can be filed on or by
End of A.Y. or Completion of assessment
W.e. lower
→ Once revised return filed, it will attract all provision as if filed originally
→ Revised return can be filed any no. of times.
Refer SM Illu-2
 Sec – 139 (6) Details to be furnished with ROI :
Exempt Prescribed Bank a/c No. Prescribed

Income asset details or Credit Card Exps details
 Sec – 139 (6A) Particulars to be furnished with ROI if PGBP income :
Report u/s Place of Busi. & if firm then if he is a member of

44AB (if any) Branches Partner’s details firm/ AOP/BOI then
details of that.
 Sec – 139 (9) Defective Return :
→ If has overriding effect on all section
AO → discretion to intimate defect to assessee
Assessee to do rectification in 15 days of intimation or such extended period as allowed by

AO.
Assessee fails to rectify Assessee → Rectify after

Extended Time but before
assessment
Return = Invalid + Prov. Apply
As if not filed ROI. AO may condone delay & treat
it Valid
 ROI = Defective if
Not file any annexure, OR Not accompnied by

Statement, Column, etc. 1) Computaion 2) Report u/s 44AB
3) Proof of tax 4) Audited P/L, B/S
5) Various A/cs
 Sec-139A : Permanent Account Number :

Every below mentioned person shall take PAN :
Sr.no. Who is required to obtain Upto which date

application to be made.
1 T.I.> BEL Upto 31st May of A.Y.
2 T/O > 5 lakh in P.Y, Before end of P.Y.
3 Resident person (Except ind) entering Upto 31st May of A.Y.
into financial transaction> 2.5 lakh
4 Every trustee,director,karta,member etc Upto 31st May of A.Y.
of point no.3
5 Ao can also allot pan suo moto
 PAN is 10 digit alphanumeric numbers.E.g.CFJPS6565D

 PAN to be quoted in every I.T. Return & all correspondence.
 Person who does not have PAN & enters into above referred transaction  form no. 60
 In lieu of PAN even AADHAAR number can be quoted w.e.f.1.9.19.
 Sec-139 AA: Quoting AADHAAR NUMBER
 Aadhaar is compulsory to be quoted after 1-7-2017 in
I.T. Return PAN Card Appli.
 if no Aadhaar  Enrollment Id (28 Digit)

 if fails to intimate AADHAAR  PAN shall be made inoperative after date notified by
CBDT
 Followings are not required to obtain AADHAAR
Resident NR as per Very Senior Not a Senior

Of J & K I.T. Act citizen Citizen
Aasam,
Meghalaya
 Sec-139 B: Scheme of submission of Return through tax Return Preparers (TRP)
 Only resident non audited Ind/HUF can file ROI through TRP(CBDT).
They will assist the assessee in furnishing ROI. TRP cannot be.
Officer Legal Practitioner CA Employee other than

of Bank employee of co. or
with which assessee employee of person audited u/s 44AB
has bank a/c.
Who can not file ROI through TRP.

1) Individual/ HUF who is required to be audited u/s 44AB or
2) NR individual / HUF.
 Only those TRP can file revised return who has filed Original Return.
So,a audited person cant file return through TRP but employee of that firm can become TRP.
What is qualification required to be TRP: Degree of bachelor or Inter CA/CS/CMA.
Refer Illu-3 SM
 Sec-139 D : Filing Return in e-form

139C : Power of CBDT to dispense with 139D for specific class or classes.
 Sec-140 : Return to be verified by

Assessee By
1 Individual  Present in India Himself
 Not present in India Guardian / A.P
2 HUF  Karta Present in India Karta
 Karta not present in India Adult member
3 Co  MD able to verify  MD
 MD unable / no MD  Other director
 Co. is NR  Holder of Power of
attorney
 Co. in liquidation  Liquidator
 Co. Management by Govt.  Prin. Office
 Co. in Process of IBC  Insolvency
Professional
4 Firm Managing or major
Partner
5 LLP  Designated Partner  D.P.
 No D.P / Unable  other Partner
6 Local Autho. Prin. Officer
7 Political Party CEO
8 AOP Member
9 Any Other Any person able to
Verity
 Sec-140 A : Self assessment tax

S.A.T. = Tax incl. sc and H&ec 
(–) TDS / TCS 
(–) Advance Tax 
(–) MAT credit u/s 115JD 
(–) relief u/s 89 
+ Int. u/s 234A/B/C + 234F 

 ROI shall be accompanied with proof of p’ment if short p’ment 1st adj. with fees then
interest.
 if short paid  Then “Assessee-in-default”
 Special cases where income is assessed in Previous year instead of assessment year.
1. Section 172: Shipping Busi. Of NR: Pay tax & ROI and leave india.
2. Sectiom 174: Person leaving India and no intention to return to India then pay..
3. Section 174A: AOP/BOI/AJP formed for particular event & AO feels that it will be
dissolved then pay..
4. Section 175: Person likely to transfer property to avoid tax then…
5. Section 176: Discontinued business.
Refer all icai
Total Income
AMT concept(Section 115JEE): Alternate minimum tax concept is applicable for
Person Deduction u/s 35AD/10AA/80JJAA/80QQB/80RRB
Not claimed Claimed
1) For firm/LLP N.A. Applicable
2) Ind/HUF/AOP/BOI/AJP N.A. Applicable.
whose adjusted total
income> 20 Lakhs
What is Adjusted total income for this section:

Total income ==
Add: Deductions u/s 80JJAA/80QQB/80RRB (==)
Add: Deduction u/s 10AA (==)
Add: Deduction u/s 35AD(-) Notional Depreciation (==)
ATI
How to compute final tax in this case when AMT Applicable:

Step-1: Find out total income
Step-2: Find out normal tax payable on step-1
Step-3: Find out ATI
Step-4: 18.5% of step-3.(Plus surcharge + cess etc.)
Step-5: Final tax payable=Step-2 or Step-4 w.e.higher.
All other provisions of act as it is applicable.

E.g.1 Mr.A has total income of Rs.700000 after claiming deduction u/s 10AA Rs.400000.Calculate
ta payable.
Ans. Here adjusted total income is Rs.1100000. So AMT is not applicable.(Ind & < 20L ATI).
So tax payable is=62500+ 4%
E.g.2 Suppose in above e.g.T.I. is Rs.1700000.Then>

Ans. AMT applicable because ind+ ATI> 20L.
Stap-1: 1700000
Step-2: 335400
Step-3: 2100000(17+4)
Step-4: 404040
Step-5: Final tax payable=Rs.404040.
E.g.3 Mr.B total income Rs.1700000.After claiming deduction u/s 35AD for capital exps of P&M
rs.500000.Calc tax payable.
Ans. ATI= 1700000+(5L-15% dep)=2125000.
So,AMT applicable.
Step-1: 1700000
Step-2:335400
Step-3: 2125000
Step-4: 408850
Step-5: 408850
115JD: AMT credit.

If assessee has paid tax as per AMT then credit of that extra paid tax i.e. AMT-normal tax
(Step-4(-)Step-2) will be available in future as follows:
Whether tax paid as per AMT in earlier yrs?
Yes then credit available. No credit
Whether in this yr co.paid normal tax?(As per step-2)
Yes No
Then this yr credit can be availed No credit can be availed.

Max=Tax in this yr as per normal
(-) Tax in this yr as per AMT
Credit can be carried forward upto 15 yrs from the yr of credit.

For company-MAT provisions---CA final.
E.g.4 In 2016-17 Mr. G paid tax under AMT: 100000..Normal tax:75000.In 2019-20 normal
tax:90000,AMT:80000.Calc tax payable in 2019-20.
Ans.: AMT credit avbl from P.Y.2016-17=Rs.100000-75000=Rs.25000.

In the year 2019-20: He paid tax in normal provision. So Credit can be availed.
Credit can be availed=Max=Rs.90000-80000=Rs.10000.
So final tax payable in 2019-20= 90000(-) 10000= Rs.80000.

Balance credit of Ra.15000 can be c/f for remaining yrs.
Refer all exercise.

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J.K.

Notes:1. This note is in summarised version

2. Things kept blank are to be written from video lecture

 How Government has power to make any law

Article 246 of constitution.

Union List State List Concurrent List

 Entry 82: Income Tax other  Stamp Duty  GST

 Why Taxes : Compulsory

Direct Tax Indirect Tax

Income Tax Act, 1961

Circular, binding on 1. Rate of Tax

Determine Resident status

Classify under heads

Salaries I.F.H.P PGBP C.G IFOS

Set off / Carry

Deduction u/c VI-A(80C to 80U)

Health & Education Cess(4%)

Advance Tax & TDS

Tax Payable / Refundable

(A) India :-[2(25A)]

 Section 4: Charging Section

Income Tax is Payable by Every person[2(31)]

On Total earned in Relavent to At the

 Section 2 (31) : Person :

Dayabaga School Mitakshari School

West Bengal & Assam Rest of India

Son will not be co-parcener By birth

Partnership Act, 1932 Limited Liabilities Partnership Act, 2008

Domestic Company [2(22A)] Foreign Company [2(23A)]

Indian Company [2(26)] Company which has Which is not Domestic

7. Every Artifical Judicial Person : (Not Covered above)

 Section 2(24) : Income -(To be done at the end)

“Every income is inflow but every inflow is not income”

Application of income Vs Diversion of income

Due Basis Vs Receipt Basis

o PGBP/IFOS  As per method of A/c.

 Previous Year (3):

 Assessment Year [2(9)]:

Resident individual Resident individual Resident individual

Basic Exemption 5,00,000

20% From 5L – 10L From 5L – 10L From 5L – 10L

30% Above 10L Above 10L Above 10L

[From 10,00,001] [From 10,00,001] [From 10,00,001]

 At any time : even 1 day.

Upto 2.5L Blw 2.5L - 5L 5L - 10L 10L - 30L

Basic Tax = ` 7,12,500

 Mr. (Resident,95 yrs)-7L

Basic tax = Rs.40000

Domestic Company Foreign Company

 Rebate (87A)  Discount

Example: Resident .Individual  Income  4,60,000, what if NR

>50 Lakh <=1 cr (Incl all income) 10%

>1 cr <=2 cr (Incl all income) 15%

Upto ` 2.5L 2.5L - 5L (5%) 5L - 10L (10%) 10L - 30L (30%)

Basic Tax = ` 17,02,500

(2) Firm / LLP / Local Authority :

Domestic Company Foreign Company

>1 Cr but ≤ 10 Cr. >10 Cr. >1 Cr but ≤ 10 Cr > 10 Cr.

Info TCS Google Fb

Tax amt 60L 3.75 cr 80L 6 cr

Surcharge 4.2L 45L 1.6L 30L

B+S 64.2L 4.2 cr 81.6L 6.3 cr

* Concepts that will be taught later on:

Individual / HUF Any Other Assessee