Taxation

 Direct Taxes
 Tax levied on the income or wealth of a person

 Indirect Taxes
 Tax levied on goods and services(GST) or Customs
Duty

Uma Nagarajan,IBS
 Income Tax Act,1961
 Assessee:
 The person being assessed, ie, the tax payer

 Previous Year
 The period of 12 months from 1st April. It is the year in which the
income is earned. PY 2022-23 (or) PY 2021-22

 Assessment Year
 Assessment Year (AY) is the year in which income of the previous
year is taxed. Assessment Year (AY) is a period of twelve months
starting from 1st April and ending on 31st March.
 Eg) PY /FY 2022-23 AY 2023-24
 PY /FY 2021-22 AY 2022-23
Uma Nagarajan,IBS
Residential Status of Individuals
 Resident:
 An individual is said to be a resident if he satisfies any ONE
of the following basic conditions

 He has been in India for at least 182 days in the previous

year
 He has been in India for at least 365 days in the four years
before the previous year and for 60 days in the previous
year.

 Non Resident:
 If both conditions are not satisfied, he is a non resident
Uma Nagarajan,IBS
 Q1 )Australian cricketer, Brett Lee, has been visiting
India for 100 days every year for the last 10 years. Find
his residential status for the AY 2023-24.

 2022-23 -100 days

 2021-22 -100 days
 2020-21 -100 days
 2019-20 -100 days
 2018-19 -100 days
 He has been in India for at least 365 days in the four
years before the previous year and for 60 days in the
previous year. Since one basic condition is satisfied,he is
a resident.
Uma Nagarajan,IBS
 Heads of Income

 Income from Salary

 Income from House Property
 Income from Business/Profession
 Income from Capital Gains
 Income from Other Sources

Uma Nagarajan,IBS
 Salary for the purpose of Income tax includes basic
pay, bonus, commission, allowances (dearness
allowance, overtime allowance etc).
 Perquisites are also part of salary.
 These are calculated per annum and are fully
taxable.
 Standard deduction of Rs 50,000 is allowed from
total salary.

Uma Nagarajan,IBS
 House Rent Allowance
 House Rent Allowance
 Granted to an employee by the employer for payment of rent for
his residence

 Out of the HRA received the employee,a certain amount is

exempted from tax.

 For eg)if HRA received is Rs 10,000 pm(120,000 pa),a certain

amount is exempted from tax(eg,50,000 could be exempted
from tax).

Uma Nagarajan,IBS
 House Rent Allowance-Exemption
 The LEAST of the following is exempt
 For the purpose of HRA calculation, salary is defined as
basic pay +dearness allowance

Metro Cities Non Metro Cities

House Rent Allowance House Rent Allowance actually
actually received received

50% of salary for PY 40% of salary for PY

Actual Rent paid minus 10% Actual Rent paid minus 10% of
of salary salary

Uma Nagarajan,IBS
 Question 2
 Mr Akash Kumar who stays in Delhi has furnished the
following details for the AY 2023-24.Calculate his HRA
exemption and gross salary for the AY 2023-24.

Basic Pay 40,000 per month

Dearness Allowance 6,000 per month
Commission 150,000 per annum
Car for personal use(expenses 18,000 per annum
reimbursed by employer)
Other Allowances 48,520 per annum
House rent allowance 15,000 per month
Rent paid Uma Nagarajan,IBS 16,000 per month
 HRA EXEMPTION CALCULATION
Metro city? YES

HRA Actually received 15,000 x 12 =180,000

50% of Salary (Basic pay+DA) 40,000+6000 =46,000
46,000 X 12
552,000

50% of 552,000 = 276,000

Actual Rent paid -10% of salary Rent Paid : 16,000 X12 = 192,000
10 % of salary = 552,000 x 10%
= 55,200

192,000-55,200= 136,800
Uma Nagarajan,IBS
 Gross Salary Calculation
Particulars Rs Rs

Basic Pay (40,000 x12) 480,000

Dearness allowance (6,000 x12) 72,000

Commission 150,000

Car Reimbursement 18,000

Other Allowances 48,520

House Rent Allowance 180,000

Less: Exempt 136,800 43,200

GROSS SALARY 811,720

Less:Standard Deduction (u/s 16(ia) 50,000

Salary after Standard Deduction

Uma Nagarajan,IBS 761720
 Income from House Property

 Refers to the rent received from the house. It is fully

taxable.

Uma Nagarajan,IBS
Particulars Rs

Gross Annual Value

Less: Municipal Taxes (% of Municipal Value)

Net Annual Value

Less:Deductions u/s 24

30% of NAV

Interest on borrowed capital

Income from House Property

 Two self occupied properties are tax free,ie,annual value of two self
occupied properties can be taken as nil.
Uma Nagarajan,IBS
 Gross Annual Value(GAV) is the higher of –
 Expected Rent (ER)
 Actual rent received or receivable during the year

 The Expected Rent (ER) is the higher of

 Fair rent (FR) and municipal value (MV)

Uma Nagarajan,IBS
Question 3
 Akash has a property whose municipal valuation is Rs
170,000 pa. The fair rent of the property is Rs 150,000 pa.
The actual rent received is 15,000 per month for 12
months. He paid municipal taxes if 8% per annum. Interest
on borrowed capital is Rs 65,000 per annum.
 Calculate the income from house property for Akash for the
AY 2023-24

 GAV -180,000
 Higher of ER and AR -170,000 and 180,000
 ER(Higher of FR and MV) – 170,000 and 150,000

Uma Nagarajan,IBS
Particulars Rs Rs

Gross Annual Value 180,000

Less: Municipal Taxes @ 8% of 170,000 13,600

Net Annual Value 166,400

Less:Deductions u/s 24

30% of NAV 49,920

Interest on borrowed capital 65,000

Income from House Property

Uma Nagarajan,IBS
51,480
Income from Business/Profession

 Profits gained from a business are fully taxable.

Uma Nagarajan,IBS
 Income from Other Sources

 Dividend Income, Income from mutual funds are fully

taxable at normal slab rates.

 Casual Earnings( winnings from lottery,races,betting

etc) at 30%

Uma Nagarajan,IBS
 Income from Capital Gains
 Short Term Capital Gain (STCG)
 Difference between sale price and cost of acquisition of
shares which have been held for LESS than 12 months
 Tax rate -15%

 Long Term Capital Gain(LTCG)

 Difference between sale price and cost of acquisition of
shares which have been held for MORE than 12
months
 10% if gain is in excess of 100,000

Uma Nagarajan,IBS
 Gross Total Income(GTI)

 Refers to the total income from all the five heads.

Uma Nagarajan,IBS
 Deductions from GTI (Chapter VI A)

Deductions Section Limit

Contribution to provident fund, 80 C
payment of LIC Premium
Contribution to Pension Fund 80 CCC Rs 150,000
(80C+80 CCC)

Medical Insurance Premium 80 D Rs 50,000

Interest on education loan 80 E
Interest on home loan 80 EEA Rs 150,000
Contribution to charities 80 G
Interest on savings deposit 80 TTA 10,000

Uma Nagarajan,IBS
 Tax Rates

Uma Nagarajan,IBS
Uma Nagarajan,IBS