Inter CA DT JKSC Mumbai-Prof - Aagam Dalal (May 23 Nov 23)

CHAPTER: 1 Basic concept (3 to 6 Marks)
 How Government has power to make any law

Article 265-No tax can be levied except by authority of law
Article 246 of constitution.
Union List/central list State List Concurrent List
 Entry 82: Income Tax other  Stamp Duty No tax

than on agriculture Income  Water tax
 Municipal tax GST  246A
Taxes
Direct Tax(Incometax act) Indirect Tax(GST,custom)
[Burden on “ Payer ”] [Burden on “ Consumer ”]
Income Tax Act, 1961
Act Income Tax Rules, CircularCBDT Finance Act, 2022 Case Laws
1962 NotificationCG &
CBDT Budget
Section, Subsection CBDT

Clause, sub clause
Circular: binding on 1. Rate of Tax
officer 2. TDS
Notification: For all 3. Advance Tax
Proviso & explanation 4. Net Agri. Income
Proviso=exceptions
Explanation=Further clarification
CBDT=Central Board of direct taxes
Inter CA – DT Summary Page 1 Prof. Aagam Dalal (J.K.S.C)

 Step to be followed :-
Computation of Total Income
Determine Residential status
Classify under heads
Salaries Income from house property Profit & Gain from Capital Gains Income from
Business/profession (CG) other sources
(PGBP) (IFOS)
Apply Clubbing
Set off / Carry forward
Gross total Income (GTI)
(-) Deduction u/c VI-A (Section 80C to 80U)
Total Income
Basic Tax @ Applicable Rates
+ Surcharge / Rebate
+ Health & Education Cess (4%)
(-) Advance Tax & TDS
Tax Payable / Refundable

 Section 1. Title: Income Tax Act. 1961: applicable from 1-4-1962 to whole of India including J&K
(A) India :-[2(25A)]

Territorial water
12 NM from baseline
As referred to in Article 1
of constitution
+ Continental self / Exclusive Economic Zone

Air Space 200 NM from Baseline For special purpose of extracting
Natural gas/petroleum
NM=Nautical Miles
 Section 4: Charging Section
Income Tax is Payable by Every person[2(31)]
On Total earned in Relavent to At the

Income  Previous Year  assessment Year Rates
2(24), 80B, 2(45) 2(34)/Sec.3 2(9) Applicable
(Income tax act & Finance Act)
 Section 2 (31) : Person :

1. Individual :
2. HUF :
 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

till father is alive
3. Firm :
Partnership Act, 1932 Limited Liabilities Partnership Act, 2008

4. Company :
It has two types:
1. Foreign Company: Which is not domestic Company
2. Domestic Company: It includes Indian Company which is registered in India
+Registered office is In India.
5. AOP / BOI : Association of person (Any person can become member)

Body of Individual (Only individual can become member)
E.g. Trust, Political party, Club, etc.
6. Local Authority :
 E.g. Bombay municipal corporation (BMC) (CG & SG not covered)
7. Every Artifical Judicial Person(AJP) : (Not Covered above)

 E.g. Statutory bodies e.g.ICAI,RBI,etc.
 Section 2(24) : Income -(To be done at the end)

1. Income Vs Inflow :
 Inflow: E.G. Loan
 Income: E.g., Fees
Note: Every inflow is not income bur every income is inflow. Generally, non repayable
inflow is income.
2. Exempt Vs Taxable
Exemption is given in these sections: Section 10,11,12,13A
3.Gross Total Income [80B(5)]  Total of the Heads

& Total Income [2(45)]  GTI Less deduction u/c VI-A
 Previous Year 2(34)/ section 3:

o P.Y. means year immediately preceding A.Y.
o P.Y. = Financial Year. Income earned in this year is Taxed in A.Y.
o P.Y. = 2022-23 A.Y. = 2023-24
o For Business, Profession newly setup or source of income newly coming into
existence for the first time in life  P.Y. from Date of setting up the business 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 in this year income is assessed, tax is assessed
and it is paid and return of income is filled.

 Rates of Taxes [Finance Act, 2022]:
Slab rates 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 Limit 2,50,000 3,00,000 5,00,000

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
 At any time: even 1 day.

CBDT: If any person has birthdate on 1/4/23 and completing 60th yr and starting 61st yr then
actually he is completing 60th year on preceding date i.e., 31.3.23. So higher limit available in
PY 2022-23.
Examples:
(1) Mr. Aagam (24 Years)  Income ` 30,00,000
Up to 2.5L B/w 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. (95 yrs)-7L
Upto 5,00,000 Nil

(5.00.000-7,00,000) @20% 40000
Basic Tax 40,000

Add: 4% H&EC 1,600
Tax payable 41,600
 What if above person is NR.

Upto 2,50,000 Nil
(2,50,000-5,00,000) @ 5% 12,500
(5.00.000-7,00,000) @20% 40,000
Basic Tax 52,500

Add: 4% H&EC 2,100

Tax payable 54,600
Homework: (1) Mr. Ram(63 yrs)-Rs. 8L,

(2) Paurav HUF(NR-100 yrs)-Rs.15L,
(3) NR Mr. Pankaj (85 yrs)-Rs. 20L
Section 115BAC: With effect from(W.E.F) PY 20-21

new optional tax regime is introduced for Individual/HUF (for all-resi, NR, senior citizen,
all) Subject to non deduction of some expenses, deduction, exemption (See Total Income
chapter)
Total Income Tax Rate (under
the new regime)
Up to Rs. 2,50,000 Nil
>2,50,000 -Rs. 5,00,000 5%
>5,00,000 -Rs. 7,50,000 10%
>7,50,000 -Rs. 10,00,000 15%
>Rs. 10,00,000- Rs. 12,50,000 20%
>Rs. 12,50,000 -Rs. 15,00,000 25%
> Rs. 15,00,000 30%
 Rates :
(1) Firm, LLP, Local authority  Flat 30%
E.g. ABC & Co. Total income-Rs.45 L
Basic tax(30%)= 1350000

+4% H&EC = 54000
=====================
1404000
(2) Co-operative society:

Up to 10000 10%
10001-20000 20%
Above 20000 30%
(3) Company
Domestic Company Foreign Company
30% 40%
But if Gross receipt/T/o
of 2020-21 is upto ` 400 Crore
than 25%
E.g.Tata Ltd Gross total Income 60L, Deductions  2L,

T/o of 22-23-500 cr,T/o of 20-21 ` 100 cr
What will be Tax for PY 2022-23 ?

Basic tax(@25%)= 1450000
+4% H&EC = 58000
======================
1508000
Example on basic exemption limit:

Person Age Resi status BEL?
Mr.A 65 R
Mr.B 59 NR
Mr.C 85 NR
A HUF 70 R
ABC & Co. 80 R
Reliance Ltd. 80 R
 Rebate (87A)  Discount

Only for Resident individual + Total Income(Net Income) does not exceed ` 5L Then,
Rebate from basic Tax (Before cess)
= ` 12500 or basic Tax whichever is lower
Example: Resident Individual  Income  4,60,000,

Basic tax = 10500
Less: rebate u/s 87A (10500)
===============
Tax payable=Nil
What if NR
Basic tax = 10500
Less: rebate u/s 87A = NA for NR
===============
10500
Add: 4% H&EC = 420
=================
Tax payable = 10920
R.I (65 yrs): 510000

Basic tax= 12000 (10000+2000)
Add: 4% H&EC= 480
=================
12480

Homework (1) HUF  Income  380000
(2) Mr.A(NR)(69 yrs)-400000
 Surcharge : Tax on tax for rich people

(1) 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 Dividend, STCG u/s 111A & LTCG u/s 112, 25%
112A)
>5 cr (Excluding Dividend, STCG u/s 111A & LTCG u/s 112, 37%
112A)
 E.g.— Example:
o Aagam  ` 63 Lakh
Calculation :
Basic Tax  Income ` 63 Lakh
Upto ` 2.5L 2.5L - 5L (5%) 5L - 10L (20%) 10L - 63L (30%)

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

+ Surcharge (10%) = ` 1,70,250
= ` 18,72,750
+ 4% H & E Cess =` 74,910
Tax Payable = ` 19,47,660
E.g.2 Mrs Dalal(65,NR) T.I. 6 cr

Basic Tax  Income ` 6 cr
Upto ` 2.5L 2.5L - 5L (5%) 5L - 10L (20%) 10L – 6 cr(30%)

NIL + 12500 + 1,00,000 + 17700000
Basic Tax = ` 1,78,12,500

+ Surcharge (37%) = ` 65,90,625
= ` 2,44,03,125
+ 4% H & E Cess =` 9,76,125
Tax Payable = ` 2,53,79,250
HW: (1) X huf(100,Resi) T.I.: 4 cr

(2) Firm / LLP / Local Authority :
Total Income > 1 Cr. 12%
E.g.Firm  Income  ` 3,50,00,000
Basic Tax: 1,05,00,000

Add: Surcharge @12% : 12,60,000
=================
1,17,60,000
Add: 4% H&EC : 4,70,400
==================
Tax payable: 1,22,30,400
(3) Co. Op. Society: TI > 1cr but <= 10 cr- 7%...IF T.I > 10 crore- 12%
(4) 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 lower side (if >=5
then higher side)
E.g Tax payable= 186,534 then rounded off to 186,530
Tax payable=186,535 then rounded off to 186,540
Marginal Relief:
 Concept: Due to increase in Income above threshold then Surcharge is applicable. But diff.
of Tax due to difference in income should not be more than diff of Income.
Example :
threshold ` 50,00,000 ` 51,00,000--TI
Tax ` 13,12,500 ` 13,42,500
(Before Cess) + 10%--Surcharge
` 14,76,750
Income Diff = ` 1,00,000
Tax Diff = ` 1,64,250
Marginal Relief = ` 64,250—to be deducted from tax payable and then add cess

Marginal Relief = (Basic Tax + S.C on Tax) – (Tax payable before cess on Threshold Limit) – Diff
of Income---ignore if answer is negative
E.g. Mr.A T.I. 1.01 cr
Solution: Total Income: 1,01,00,000

Basic Tax(12500+100000+2730000) 2842500
Add: surcharge @15% 426375
3268875
Less:Marginal Relief(W.N.1) (75125)
3193750
Add: 4% H&EC 127750
Total Tax Payable 3321500
W.N.1: Marginal Relief
MR= Tax before cess on total Income (-) Tax before cess on threshold (-) Diff. of total Income
= 3268875 (-) 3093750(w.n.2) (-) 100000
= 75125
W.N.2: Tax on threshold limit

Basic Tax(12500+100000+2700000) 2812500
Add: surcharge @10% 281250
3093750
HW: (1) Mr.B(NR,65 yrs) T.I.: 55 Lakhs

(2) Mr. (Resi.,70 yrs) T.I.499000.
(3) Mr. HUF,T.I,499000.
* 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
Resident & Resident but not

Ordinary resident ordinary resident
Section 6(1): 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
1) He is in India at least 182 days during the P.Y.
OR
2) He is 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)?
If timing of arrival & if timings not available

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

& Day he leaves, both Included.

Example 1: Mr. Aagam comes in India for the first time on 10-4-2022 & leaves on 30-6-2022.
He again comes In India on 1-12-2022 & leaves on 28-3-2023 status.? He is foreign
citizen.
Ans: Number of days for Mr. Aagam for P.Y.2022-23(A.Y. 2023-24)

April : 21(30-9)
May : 31
June : 30
July-Nov : -
Dec : 31
Jan : 31
Feb : 28
March : 28
200>182….Resident
Example 2: What if instead of 1.12 he is coming back on 15.1?
Ans: April : 21(30-9)

May : 31
June : 30
July-Nov : -
Dec : -
Jan : 17
Feb : 28
March : 28
155<182…and last 4 yrs not in India...Non-Resident
Example 3: Mr. Shyam-US citizen from 2018-19 visits India for 60 days each yr. Resi. Status ?
Ans : 18-1960
19-2060  Total 240
20-2160 (< 365) = NR
21-2260
22-2360
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)
AND
(2) He has been in India for at least 730 days during 7 years Imm. Preceding 7 years.
JKSC Q-1

Ans.: As per section 6(1),If an Individual is satisfying any of the two following basic conditions
then he will be resident of India:
1) He is in India at least 182 days during the P.Y.

OR
2) He is in India for at least 60 days during P.Y. & 365 Days during 4 preceding Years
immediately preceding P.Y.
In P.Y.2022-23 stay in India for Mr.J is as under:
Month Day
April-Dec -
January 20(31-11)
Feb 28
March 31
Total 79 > 60
First basic condition not satisfied so now will check second basic condition:
Stay in past 4 years is as under:
Years Days
2021-22 -
2020-21 10
2019-20 365
2018-19 365
Total 740>365
As the second basic condition is satisfied, the person is resident.

Now to check whether he is ordinarily resident or not we have to check both additional conditions as
per section 6(6) :
Year Days Residential Status Year Days Residential status

2021-22 - NR 2014-15 - NR
2020-21 10 NR 2013-14 - NR
2019-20 365 Resi(>182) 2012-13 - NR
2018-19 365 Resi(>182)
2017-18 365 Resi(>182)
2016-17 - NR
2015-16 - NR
1105>730 in past 7 years
Here he is satisfying both additional conditions hence he is ROR.

Illu-3(SM)

(A) Exception to General rules:
Special Provision for determining residential status
Indian Indian Indian citizen or person of Indian origin Indian citizen -

citizen citizen coming to India for visit purpose not covered
leaving leaving elsewhere
India for the India as a
purpose of member of TI (excluding
>=182 days <182 days during
employment foreigncrew Foreign Source
during PY-Resi. the PY
abroad of an Income) > 15
Indian ship Then check both Lakhs + if he is
additional not liable to tax in
conditions u/s any other country
6(6) or territory-
RBNOR(6(1A))
TI(Excluding Foreign TI(Excluding Foreign

Basic condition (b) is not Source Income) <= Source Income) > 15
applicable. If Basic 15 Lakhs Lakhs
condition (a) is satisfied
then assessee is resident
otherwise he is directly non
resident.
NR(Not to be seen Basic Condition (b)
If assessee is resident then
any other conditions) i)  120 days in PY
additional condition are to
but <182 +
be checked for the purpose
ii)  365 days in
of R&OR or RBNOR
preceding 4 PY
Then RBNOR
If not satisfied then
NR
For crew member Rule 126: presence in India=365/366-days as per CDC (Continues
discharge certificate)
Kerala HC- Employment includes self employment

Indian Citizen
By Birth Express Citizenship

 Person of Indian origin:
parents (either) or Grand Parents (either) are born in India and if before 1947 then in
undivided India [India + Bang + Pak.]
Example:1) Mr. X(Indian citizen) for job in USA left India on 1-9-2022 for first time what is R.S ?
Ans.:No. of days in India  154 days  NR(as <182).
2) What if for trip
Ans.:Then = Resident (Because not covered by exception and >60+last 4 years >365)
Master Example on amendment:

Name Citizenship Description No.of In last Indian Residential status
days in 4 yrs Income..
India (TI
in excluding
22-23 foreign
Income)
Mr. Amitabh Indian Leaving 120 400 16 lakhs NR
India for Job
Mr.James US Leaving 80 400 16 lakhs Resident(Second
India for Job basic condition)
Mr.Shahrukh Indian Coming 130 400 8 Lakh NR
India for
visit
Mr.Amir Indian Coming 130 400 16 Lakhs RBNOR(Exception)
India for
visit
Mr.Saif Indian Coming 184 400 16 Lakhs Resident (Now see
India for additional)
visit
Mr.Windiesel US Coming 70 370 20 Lakhs Resident (Second
India for basic condition)
visit
Mr.Jay Indian Not coming - - 16 Lakhs RBNOR(6(1A))
citizen not in India
charged in
any country
Mr.Viru Indian Not coming - - 13 Lakhs NR
citizen not in India
charged in
any country
Mr.Lalit Indian Not coming - - 16 Lakhs NR(Rule is only for
origin & US in India Indian citizen)
citizen
illu-1 (SM)  same as Q-2 hw section jk.

Refer =JK Q-2=Illu-2 of SM
Refer JK Q-4,5

Ans. 4: As the grandfather of MR. F was born before 1947 in Bangladesh (Which at that time was
part of India) so, Mr. F can be said as person of Indian Origin.
As per section 6(1) when an Indian origin comes to visit India then we have to check only first basic
condition of 182 days if Total Income excluding foreign Income is less than 15 lakhs.
Here he is visiting only 181 days hence he is NR for P.Y. 2022-23.
Ans. 5: As per section 6(1) when an Indian origin or Indian citizen comes to visit India then first we
have to check basic condition of 182 days.
Number of stay in India is as under:

Month Days
April 24(30-6)
May 31
June 30
July 31
Aug 31
Sep 30
Oct 31
Nov 30
Dec-March -
Total 238>182..So the person is Resident
Now he has to check both additional conditions:

For years from 2019-20 will check only first basic condition as covered by exception.
Year Days Residential Status Year Days Residential status

2021-22 165 NR(<182) 2014-15 365 Resi(>182)
2020-21 145 NR(<182) 2013-14 366 Resi(>182)
2019-20 67 NR(<182) 2012-13 366 Resi(>182)
2018-19 365 Resi(>182)
2017-18 365 Resi(>182)
2016-17 366 Resi(>182)
2015-16 365 Resi(>182)
1838>730 in past 7 years
As he satisfied both additional condition,he is ROR.

H.W Q-3 jksc.

 Section 6(2) : Resi. Status of HUF:
Control & Management
Wholly or Partly in India Wholly O/S India
Resident NR
Whether Karta satisfy

the condition of section 6(6)
Yes No
R & OR R BNOR
(Note: Karta can be NR but Still HUF can be R & OR or RBNOR)
Example: Q-6-JK
Ans :- Residential status of HUF
6(2) Resident(because partly from india)
6(6): stay of karta

Mr. X
2020-21 : 50  NR
2019-20 : 50  NR
2018-19 : 50  NR
2017-18 : 50 >730 days  NR
2016-17 : 200  Resi
2015-16 : 200 Resi 6 Times
2014-15 : 200  Resi
2013-14 : 200  Resi
2012-13 : 200 Resi
2011-12 : 200 Resi
R & OR
Residential status of Karta himself

His stay in India is < 50 days in PY 2022-23 so he is not satisfying any of the basic condition hence
he is NR for PY 2022-23.
Refer Illu 4 SM

 Section 6(2) : Firm & AOP ,BOI,AJP:
Control & Management
Wholly or Wholly O/S

Partly in India India
Resident NR
 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
Tax incidence in case of
Particulars R & OR
(Global income RBNOR NR
taxable)
1. Income received in India
whether or not accrued in India
Yes Yes Yes
(e.g. salary o/s India credited in
Indian bank account)
2. Income deemed to be received Yes
Yes Yes
in India (e.g TDS, section 7)
3. Income accruing or arising in
India whether or not received in Yes
Yes Yes
India(Accrue Where
contract/invoice is made)
4. Income deemed to accrue or Yes
Yes Yes
arise in India (Sec. 9)
5. Income received & accrued
outside India from the business No
Yes Yes
controlled in or Profession
setup in India
6. Income received accrued o/s
India from B/P controlled o/s Yes No No
India
7. Any income (other than B/P
received accrued o/s India (e.g. Yes No No
Div. of foreign co.)
8. Income earned in earlier yrs No
No No
brought in India
Note: If words are remitted to India that means first received outside India then in this
year only brought to India..Such Income will be taxable to ROR only if accrued
outside India…
If specifically written prior years then only assume past year income and in that case
taxable to no one.
EG: Income of 100000 from business outside india but controlled from India and 70000
received in India.

 Section 9 : Income Deemed to accrue or arise in India (Taxable to all)
(A) Business connection :

1. If business is done because of agents in India…Business connection in India..
Taxable to all.
Following shall not be treated as business connection in India.
1. Activities merely confined to shooting of cinematographic films.
2. Merely collection of news & views from India for transmission O/s India.
3. Purchasing goods from India as raw material and directly export to other country.
(B) Any Income from house property in India, asset in India, Capital gain from
capital asset which is belonging to India, Dividend paid by Indian Company to
any person.Salary Income because of services provided in India.
E.g.:HP in Mumbai but rent paid in USA, Income of interest from bank account in
India,Capital gain of Indian Company shares.
Note: Incase of rent income from house property take 30% standard
deduction(Chapter house property).
(C) Income from salaries paid by GOI for services rendered O/s India
[Example: External affair] However 10(7)  allowances & perquisites will be
exempt  paid by GOI O/s India.
(D) Interest :
- Interest on money borrowed “ Deemed to accrue or arise in India” if
1. Interest paid by GOI-Taxable for all
2. Interest paid by Resident person and he has used borrowed money for any
purpose in India-Interest Taxable for all
3. Interest paid by NR and he has used borrowed money for business/profession
in India(Not for other purpose)-Then only taxable for all.
E.g.
For Lender whether
Where borrower is
Lender borrower Interest deemed to
using money
accrue?
Mr.A (NR) GOI In India
O/s India
Mr.B (NR) Mr.Ram(Resi) Busi in India
Busi o/s India
Pur House Prop in

India

Pur HP o/s India
Mr.C (NR) Mr.John(NR) Busi in India
Busi o/s India
Pur HP in India
Pur HP o/s India
(E) Royalty & Technical fees:

- Royalty means consideration to use of intangible asset.
Technical Services: Means any consideration for rendering of any managerial
Technical or Consulting service.
- Royalty/technical fees “ Deemed to accrue or arise in India” if

1. Paid by GOI-Taxable for all
2. Paid by Resident person and he has used services for any purpose in India-
Taxable to income recipient
3. Paid by NR and he has used services for any purpose in India- Taxable to
income recipient
(G) Any monetary gift received a person outside India from resident of India shall be
deemed to accrue or arise in India.
Exceptions mentioned in section 56(2)(x) shall apply-IFOS.
 Then sum  Illustration-5, 6, 7, 8, (SM) from module & Q-6 (JK)
Homework Q-1, 2, 3, 4,5 (Exercise),
Homework section.: 6 to 20 (Self solve)
Note for sums:

1) 10(1)-Agricultural Income in India is exempt for all.
A-6 Calculation of Taxable Income for Mr. R

P.Y: 2022-23
A.Y.2023-24
Particulars R & OR R B NOR NR
1. Royalty from GOI 24000 24000 24000
(Deemed to accrue in India)
2. Income from business in Afghanistan.
15000 15000 15000
→ Received in India
10000 - -
→ Received o/s india
3. Int, Received from NR to run busi in India
5000 5000 5000
(Deemed accrued In india)

4. Royalty from Resi. To run o/s India
20000 20000 20000
(Received in India)
5. Income from busi. In Jaipur 40000 40000 40000
6. Profit on sale of share in India co, (Deemed) 15000 15000 15000
7. Dividend: From Japan
10000 - -
5000 5000 5000
→ RP Ltd
8. Income from prop. In London
70000 - -
[1L- 30% Ded’]
9. Busi. Canada: Received in India
27000 27000 27000
: Controlled from Mumbai 23000 23000 -
Total
Chapter-3: Income from House Property (Section 22 to 27)
 Section – 22 : Basic of charge :
Property = Consist Assessee should be Prop. Should not

Of building or land Owner of Prop. Be occupied for
Appurtenant thereto. (Even if 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: Any land attached to building]
Examples :
(1) Vacant land if letout  No HP but IFOS or PGBP [why -it is not appurtenant to building]
(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 ` 72,000(6000*12 m) will be Taxable under head  IFOS(Subletting) [Not Owner]
(3) Mr. Aagam gave his prop. to Mrs. Dalal a CA., Mrs. Dalal is carrying on practice from
there so  HP for Aagam [Mr. Aagam is not doing B/P from that]
(4) Lodha Constructor has 10 flats unsold and given on rent — HP? --- Yes
(5) ABC Co.is in business of renting of property? — HP?? ---- No PGBP.

 Three types of H.P.
Let out property Self occupied Property (SOP) Deemed letout (DLOP)
(LOP) The one in which
which is given you or family Which is not SOP & not LOP.
on rent are staying also
if any person has >2 SOP then
any 2=SOP balance will be DLOP.
Format of structure
Gross Annual Value(GAV)
(-) Municipal tax paid by owner during PY
------------------------------------------
Net Annual Value(NAV)
(-) 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) (Receivable)
(Due basis)
Meaning: 1) Municipal value  for collecting Tax Govt. made valuation of prop. which is
Municipal 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) Actual rent: On Due basis + Advance rent not to consider+ refundable deposit not to
be taken.
 Refer Illu-1  SM

Case -1 : When unrealized Rent is given
 When any not realized Rent can be termed as “Unrealized Rent” Rule 4of I.T.Rules
1962.
1. Tenant has vacated premise or steps taken to make him vacate.
2. Legal proceeding started to recover the rent.
3. Tenant is not in occupancy of any other property of same owner
 First step & second as it is.

 In third step
Actual Rent = Annual Rent – U.R. Rent & then
w. e. higher = GAV.
Note: Alternative View  UR Can be deducted from GAV also.
Example : Mr.A gives a property on rent to Mr.B for ` 10,000 p.m. Municipal value is ` 1,00,000
p.a fair value is ` 8,000 p.m, standard Rent is ` 40,000 for 6 months. Unrealized rent
from Mr. B were for month of Feb & March. Calculation GAV.
Ans : GAV: M.R 1,00,000

F.R 96,000
Step-1 1,00,000
S.R 80,000
Step-2 80,000
Actual Rent 1,00,000(120000-20000 UR)
GAV 1,00,000
Case -2: Loss due to vacancy
 While finding GAV due to vacancy :

RENT
AR>ER (after vacancy also) AR<ER
GAV=AR
(AR+ Vacancy loss) > ER (AR+ Vacancy loss) < ER
(Before vacancy it was higher)
GAV=AR GAV=ER
e.g.
Expected Rent = ` 1,00,000
Actual Rent = ` 80,000 (` 8,000 p.m. For 10 month)
GAV = ER because ER = 1,00,000 & (AR + Vacancy loss) =96000 Still ER is higher. So GAV=ER

It instead `9000 is actual rent…then for 10 months it will be 90000
(AR + Vacancy loss) = 108,000 but ER=100000.So, GAV=AR=90000
Refer Q-1 JKSC
A-1:
1 2 3 4 5
(i) M.V 30000 30500 30000 40000 70000
(ii) F.R 32500 33000 32250 39000 75000
Step-1 (i) or (ii) w.e. higher 32500 33000 32250 40000 75000
(iii) SRRCA 29750 29500 31500 42500 60000
Step-1 or step-2 (iii)
29750 29500 31500 40000 60000
w.e. lower---ER
(iv) Actual Rent 33000 24938 21000 27000 8000
AR + Vacancy Loss - 28500 36000 36000 48000
GAV 33000 29500 21000 40000 60000
Note-1 Note-2 Note-3 Note-4 Note-5
Notes :
1) AR>ER..GAV=AR
2) (AR+ Vacancy loss) <ER…GAV=ER
3) (AR+ Vacancy loss) >ER…GAV=AR
 GAV for SOP = NIL

 For deemed LOP [23(1)(a)]  GAV=ER
 Municipal Tax : (Property Tax, Sewerage Tax)(% of municipal Value)

 From gross Annual Value Municipal Taxes paid to local authority is deducted ifPaid
by owner in current year.
o Notes :
- If paid by tenant  no ded”
- If payable  no ded”
- If paid in P.Y. for so many years combinly full ded”
- If HP is O/s India then M. tax O/s India Deductible (Madras HC)
For SOP = No deduction
- For deemed LOP = Full deduction
Refer Illu-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 OR 23(5): where property consist of building

Property there to is 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 is obtained from competent
authority
E.G. Mr. Salman is builder who constructed 100 residential flats and office premise. COC received
on 1/4/20. He wants to know up to which year the NAV of all prop will be NIL if prop not
sold out or not given on rent.
ii) 24(b) : Interest on borrowed capital

Type of HP
LOP/DLOP SOP
Repairs/renovation Purchase/ Repairs /renovation Purchase/

Construction construction
No limit No limit Max 30000 Max 200000

Per yr per yr per owner
if 2 condition
fulfilled

For purchase/construction-SOP:
If loan is taken:
on or after 1.4.99 &
purchase/construction is completed within 5 years from end of year in which loan
taken
then deduction limit will be Rs.200000 per year per owner.
If conditions not satisfied then max deduction 30000 per year per owner.
(IF loan taken before 1.4.99 then limit Rs.30000 OR when purchase/construction
not completed within 5 years from end of yr of loan then also limit 30000)
Remember: Maximum deduction per owner for any loan combinly is
Rs.200000 for SOP (Limit is per owner not per house)
Notes : Interest is allowed as ded” on accrual basis

: Interest deduction starts from beginning of yr in which prop purchased or construction
completed.
: Interest on unpaid int is not ded” (i.e. Penalty int = No Ded”)
: Interest on fresh loan taken to repay original loan raised is allowed
: Brokerage / commission for arranging a loan = No ded”
: No deduction in 24(b) for SOP if 115BAC followed.
 Section 25 : if interest paid abroad without TDS → No deduction
 Example for interest:

1) If interest of April-2022 to March-23 paid in April-2023 for `2,30,000 for LOP
24(b) =
2) Interest of ` 70,000 payable for April-22 to March-23 for loan, taken for repairs of
self-occupied prop Deduction = What if for LOP? Ded=
3) Loan taken on 1-5-2000. Property purchased on 30-6-2005. Interest paid for P.Y.
2022-23 for SOP ` 3,00,000 what will be deduction?
Deduction = ` 2,00,000 [ within 5 year from end of year of loan]
REFER Illu-4,5=(Q-3 jk), of SM
Pre-construction interest:
E.G, The loan is taken on 1.4.12 but construction is completed on 1/4/17.So,the interest
deduction will start from P.Y.17-18(i.e. the year of purchase/construction
completion)However assessee must have paid some interest from 1/4/12 to 31/3/17.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 taken

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 Pre Construction Interest] - Total within limits if SOP
(No limit in LOP/DLOP).
After 5 yrs :
→Actual interest = int for P.Y.
E.g. : Capital int. 24(b) :
→ Date of starting of construction = 1-7-18
→ Date of Loan = 1-11-18
→ Amount of Loan = ` 15,00,000
→ Rate of Interest = 10% p.a
→ Date of Completion of const = 14-11-20
Calculate interest for 6 yrs from 2020-21.
Ans : Capital Interest = PRN

12
= 15,00,000 x 10% x 17 (w.n) = ` 2,12,500
12
w.n. : from: 1-11-18 to 31-3-20 = 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. 2020-21 [212500/5 = 42500]
P.Y PC.I Current yr Int Total

20-21 42500 150000 192500
21-22 42500 ″ ″ ″ ″
22-23 42500 ″ ″ ″ ″
23-24 42500 ″ ″ ″ ″
24-25 42500 ″ ″ ″ ″
25-26 ̶ ″ ″ 150000
Refer Q-2(jk)
a) D.O.T.L → 1-6-16
D.O.C → 1-11-16
Pre construction period starts on → 1-11-16

Pre construction ends on → 31-3-22
Period = 65 months
Capital Interest = PRN
12
= 12,00,000 x 12% x 65/12
= 7,80,000 per year = 7,80,000/5 = 156000
P.Y. PCI current yr int Total LOP SOP

22-23 156000 144000 300000 300000 30000
23-24 156000 144000 300000 300000 30000
24-25 156000 144000 300000 300000 30000
25-26 156000 144000 300000 300000 30000
26-27 156000 144000 300000 300000 30000
27-28 - 144000 144000 144000 30000
[Why? = const. is not completed in 5 yrs from end of yr of loan]
b) 11-4-22 to 31-3-23 → No pre acquisition. As yr of taking loan & yr of completion is same.
c) 1-12-18 to 31-3-22 = 40 month.

Illu 6(=Q-4 jk)
 Special Cases
1) When property not occupied during whole P.Y. due to employment, busi / prof.
carried on at some other places.
It will be considered as self-occupied property
If
Concerned prop.is & he has to reside at other

Not let out during P.Y place in property not owned
By him.
Refer illu-3(SM)
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 (So,ER for full year, deduct municipal
tax.No limit in int also). But actual rent will be taken for months for which rent
is actually received.(Do not consider vacant for the period for which it was SOP)
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
ER,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 will assume
A & B=SOP and C=DLOP
B & C=SOP and A=DLOP
A & C=SOP and B=DLOP
And the income from HP w.e.lower will be final option
Illu-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 it has to be calculated as if owned by one owner & then divide
income between co-owner as per % define
[Interest limit u/s 24(b) is per assessee & not per house]
So, Prop
SOP LOP
Calc.of Int individually as per % Calc.as if owned by one owner
and then bifurcate into co-owners
as per %
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”.
Illu =10 (SM)

 Composite 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 inseparable 2. When letting is separable
Whole rent under “PGBP” or A) Rent for building → HP

“IFOS” & nothing in HP, B) other Asset → PGBP or IFOS
 Now refer Q-5 JK ,exercise Q-4=Q.6 JK
A-5: calculation of income from house property for Mr. Suraj

P.Y. 2022-23 A.Y. 2023-24
UNIT – 1(50%)- UNIT – 2(50%-

SOP LOP)
Gross Annual Value NIL 162000
Less : Municipal Taxes paid by owner NIL (10000)
Net Annual Value NIL 152000
Less : Deduction u/s 24
24(a) : 30% Std Ded’ NIL (45600)
24(b) : Int. on borrowed Cap.
(As the loan is taken prior to 1.4.99 the (30000) (32500)
maximum deduction will be 30000)
(30000) 73900
Income from HP 43900
W.N. 1 GAV
M.rent [26000 x 12] 312000
F. R [27000 x 12] 324000
Step-1 w.e higher 324000
S. R [30000 x 12] 360000

ER(For entire house) 324000
ER for Unit-2(50%) 162000
A.R. [30000 x 4.5] 135000
GAV 162000
Note: here if there would have been no vacancy then AR+ Vacancy
loss=135000+15000(Half month)=150000 which is lower than ER so,AR=ER.
Q-10 jk
GAV=150000/9*12 = 200000(ER=200000 or AR=135000 w.e.higher)
Less: 24(a):30% (60000)
(b): Int. (40000)….100000(IFHP)
H.w.: Exercise → SM → Q-1,2,3(=hw Q-1 jk), (Exercise)

JK Hws Q-2,3
 Section 27 : Deemed owner : (Ref. Sec-22)
1) Transfer to spouse or minor child:

If following conditions met then transferor of property = deemed owner
Tax Payer=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-Market value` 1 Cr. House Property- Market value ` 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 palace 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.
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 on Purchaser paid Purchaser = possession

Agreement in writing part (or full) of property
b/w purchaser &seller consi. To seller
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 therefore Mr. Y = Deemed owner.

Chapter - 4: Salary (Section 15 to 17 + Rules)
 When income is charged under head?

Employer Employee relationship is must.
→ Employment can be part time or full time
 Basic of charge [Sec – 15]

(1) Due(Accrue) or receipt basis whichever is earlier
e.g. Salary of march-23 received in April-23 Taxable in → P.Y. 22-23 (As due in march)
- salary of April-23 received in March-23, taxable in P.Y. 22-23 [as received in march]
(2) Bonus → Receipt basis
(3) Any arrears of salary taxable in year in which allowed to pay by employer
[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 (Fixed,% of NP,% of turnover) 
6. Allowances (W.N. 1) 
Less : Exemptions () 
7. Retirement benefits (W.N. 2) 
Less : Exemptions () 
8. Perquisite [17(2)] (W.N.3) 
9. Gross Salary 
Less : Deduction [Sec-16] (W.N.4) ()
Net Salary 
W.N.1: Allowances
Allowance → amount given for expense (Monetary) on monthly basis as fixed amount.
perq→ non monetary- direct benefit or reimbursement of exps.
(1) Dearness allowance: It is the allowance given for mitigating gap due to inflation.
D.A. is fully taxable whether or not it is forming part of retirement benefit
(Forming part of employment)
E.g. Mr. Shyam joined Reliance Industries with DA 1,00,000. Company has decided that at time of
retirement only 60% of current DA will be given.
In PY 2022-23 how much will be taxable? Ans:
(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 outside India.
e.g. Mr.A is government employee working in USA and he is Indian citizen. He got
followings from GOI:
Basis salary → ` 10000 p.m
Foreign Allowance → ` 2000 p.m
Calculate taxable salary

Ans :
(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: No exemption if 115BAC followed.

: Salary = Basic + DA (% in terms of retirement Purpose) + commission [% of T/o]
→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: Illu-1 Module

Q-4 →JK = Q-1 SM (Exercise)

A-1: Computation of gross salary of Mr. Mohit
P.Y 2022-23
A.Y 2023-24
Particulars ` `
Basic salary [10000 x 10 + 11000 x 2] 122000
+ D.A. (50% forming part) 100%*122000 122000
+ House Rent Allowance (6000x9+7000x3) 75000
Less : Exemption u/s 10(13A)(W.N) (53700) 21300
Gross Salary 265300
W.N. Calculation of exemption u/s 10(13A)
April-May June-Oct Nov-Dec Jan Feb-March

2 Month 5 Month 2 Month 1 Month 2 Month
Salary=Basic+ (10000+ 15000*5 15000*2 15000*1 (11000+550
DA(%)+ 5000)*2 =75000 =30000 =15000 0) *2
Commission(%) =30000 =33000
1. HRA received 30000 12000 7000 14000

(6000x5) (6000x2) (7000x1) (7000x2)
2. 50% Salary or 30000 x 50% 15000 x 50%= 33000*50%

No rent = 15000 7500 = 16500
40% Salary paid so no 75000*40%
exemption. =30000
3. Rent Paid 30000 16000 8000 16000

– 10% of salary (7500) (3000) (1500) (3300)
22500 13000 6500 12700
Exemption NIL 22500 12000 6500 12700
Total exemption = 53700
(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 client place)

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?
Ans : Uniform allowance (2500 x 12) = 30000
Less: Exemption u/s 10(14)(i) = (10000)
Taxable = 20000
E.g.2 What if exp = ` 40,000 in above case?

If 40000 → then →Exemption = 30000 or 40000 w.e.lower=30000
So, taxable= NIL
No exemption if 115BAC followed except CTD-Conveyance, travelling,

daily allowance.
(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 children
3 Hostel Expense - ` 300 p.m per child
Allowance max. for 2 children
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 in
business of
Transportation)
5 Special Tribal/ Schedule - ` 200 p.m
area Allowance
Example – 1: a. Mr.A is getting Children education allowance for Rs.370 PM for 1 child.
C.E.A = ` 370 p.m x 12 month x 1 child = ` 4,440
(-) Exemption u/s 10(14)(ii) (`100x12) = (` 1,200)
Taxable = ` 3,240
b. Mr.A is getting Rs.90 P.M.for 3 children each 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
Particulars Rs.
Special Trans. allowance 1,80,000
[15000x12]
( ̶ ) Exempt u/s 10(14)(ii) (1,20,000)
70% = 1,26,000
or
` 10000 pm =1,20,000
60,000
No exemption if 115BAC followed except transport allowance.
(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/SC Judge
→ Allowance Received from UNO
→ Allowance to MPs and MLAs
Illu-2 SM

W.N.-2 Retirement Benefit
(1) Gratuity [ Exempted u/s 10(10)](Voluntary payment for appreciation of service)

→ Exemption only 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
→ Least of following is → least of following is

Exempt [10(10)(ii)] Exempt[10(10)(iii)]
A. Actual Gratuity Received A. Actual Received

B. 15/30xAvg. 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
1) Salary = Basic + DA(All) 1) Salary = Basic + DA(forming

2) If no. of month >6 month part)+ Commission(%)
→ 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
Solve Q-6 → JK = illu-4 SM

Note :
(i) Gratuity Received during employment→ Fully Taxable
(ii) Gratuity exemption from any employer together cannot exceed ` 20L
(So if received second time then from ` 20L deduct exemption availed earlier)

(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 %)
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
(i.e. avg salary * 10 months)
(c) Cash equivalent of leave (note-1)
(d) Max. upto ` 3,00,000
[Salary = Basic + DA (In part) + 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:
It is nothing but balance leaves as per I.Tax Act in terms of months.
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. (Unavailed leave as per IT Act in
mnths)
5) Step-4 * Average salary of last 10 month.
Example: Reliance Ltd. is allowing per year 35 days of leaves to Mr. Dalal who has served in
Co. for 20 years and 4 months. He has already availed 370 days leaves already. What will be
Leaves unavailed in terms of month as per income tax.
Ans:
Total Leaves
Less: Leave availed as per company
Leave unavailed days
Q-7 → JK = illu-5 (SM)
(4) Retrenchment compensation [10(10B)](Profit in lieu of salary)

Lower of following is exempt:
a) A/m received
b) 15/26 xAvg 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
A-8: Computation of taxable retrenchment compensation: Mr. Garg
Amount received 1000000

(–) Exemption u/s 10(10B)(W.N) (432692)
567308
W.N: least of following is exempt

→ Amount received 1000000
→ Max Exemption 500000
→ 15 x 25000 x 30 yrs 432692
26
(5) VRS→ Voluntary Retirement Scheme [10(10C)]:

Exemption = lower of
a) Amount received → VRS
b) ` 5,00,000
c) 3 month salary x complete yrs(Ignore fractions)
d) Last drawn salary x remaining Month of service.
Salary = Basic + DA(%) + Commission (%)

Q-9 (JK) = illu-9 (SM)

(6) Provident fund :
Taxability
Stat. Prov. Reco. PF Unreco PF Public PF Superannuation
Fund (RPF) (URPF) (PPF) Fund(10(13))
(SPF)(10(11)) Non salaried (Like a pension
For Govt. e’yees other e’yees + All Fund)
(SPF Act, 1925) (EPF Act, (EPF Act,
1952) 1952)
1- E’yer Exempt Exempt upto Not taxable N.A No separate
contri. 12% of salary yearly [E’yer don’t exemption (See
(cross ref. sec- contri] notes below)
7)
2- Int. Exempt Exempt upto Not taxable Exempt Exempt
credited int rate =9.5% yearly
to P.F p.a (sec-7)
3- Ded’ Available Available Not Available Available
u/s 80C Available
e’yee
contri
4- On Exempt Exempt in Taxable Exempt Exempt in some
Maturity some case (Note-2) cases(Note-3)
(Note-1)
[10(12)]
→ Salary = Basic + DA (%) + commission (%)

Note:-1: If employee has withdrawn money after working 5 years from any organization then exempt.
If withdrawn before 5 years but due to unavoidable reasons then also exempt.
In all other cases taxable.
E.g.
Employee rendered services for Reason of leaving Maturity of RPF taxable?
10 yrs -
3 yrs Start own business
2 yrs Illhealth
2 yrs in A ltd and then trf Worked in B ltd for 4 yrs
amount to RPF a/c B Ltd.
Note:-2Taxability 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]

Note:3
Supperannuation Fund Fully exempt if
Maturity is given as annuity to employee or given to relative in case of death.
Note: W. e. from P.Y.20-21, employer’s contribution to RPF, superannuation fund and NPS
together if exceeding 750000 in a year then excess is taxable and interest on such excess
is also taxable.(Means now max exemption=Total Exemption or 750000 w. e. lower)
2. If employee contribution to PPF+RPF is more than 250000 p.a. than interest on

amount in excess of 250000 is taxable. (If no employer contribution then 5L will be
limit)
How to determine interest belonging to such excess?-Rule 3B
TP= (PC/2)*R + (PC1+TP1)*R
TP=Taxable perquisite u/s 17(2)(viia)-Taxable interest component for the PY

PC=Amount in excess of 750000 as employer contribution for this PY
PC1= Amount in excess of 750000 as employer contribution for all years after 1.4.20 up to starting
this PY.
TP1= Taxable perquisite u/s 17(2)(viia)-Taxable interest component for all years after 1.4.20 up to
starting of this PY.
R= I/Favg (Means Interest divided by average of opening and closing balance of all funds).
Process in easy words:
First identify whether employer contribution in RPF+ NPS+ Superannuation fund is exceeding
750000 p.a. If no then no further calculations.
If yes then identify taxable perq. that will be PC.
Now Identify how much total interest is given this year. And decide rate of interest.
Rate=Interest of the year/Avg of opening and closing balances of funds.
Based on that rate apply formula.
Illustration 10
W. N. -3 Perquisites
 Perquisite
Which is obligation of employee Which is not of employee obligation
Taxable for all Taxable to specified employee
for specified e’yee
or or
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%)

(1) Value of Rent free Unfurnished accommodation:
[House, Flat, Farm House, Hotel, Motel, Guest House] (if provided to Judge of HC or SC not
taxable)
Taxable Perquisites
[Rule 3(1)]
Govt. employee Non Govt. employee
Taxable = License fee as Accommodation owned Accommodation

Per govt. rules by e’yer not owned by employer
Taxable = lower 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 Accommodation:
 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)
Furniture includes household appliances like Radio, TV, Fridge, AC.
 When accommodation is Hotel

24% salary or hire charges w.e. lower will be taxable
 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.(Month wise)
(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 Illu.14, 15, 16, 17, 18(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
Illu-19 (SM)
(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 value = 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 Positive)

(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 & 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(Alternatively we can also take
value above 1000 p.m. only taxable)
 (Not for other member & not in case not owned by e’yer)
Note: If tie-up with school then also deemed owned by employer
E.g. JK. Schools are owned by J.K. Shah Pvt Ltd. Mr. Chintan is e’yee of company.
He sends children (3) & wife (1) to the school. School generally charges ` 800
p.m.(i.e. annually 9600) from other students but for e’yee relative it is ` 5000
p.a.
Children (3) Other (1)
Fees charged from other 28800 9600
(–) Exempt [800x12x3] 28800 –
(–) Recovered [5000 x 1] (5000)
–––––––– ––––––––
0 4600

(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 = 2022-2025
 LTC exemption can be availed for Travel anywhere in India (Not O/s India)
 Exemption for Travellers who is e’yee + Family.
o Family = Spouse, children (Dependent or Not), Parents, Brother, Sister
(Dependent).(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- Multiple

2ndChild – Multiple 2ndChild – Single
(Multiple Birth after single) (Single birth after multiple)
[to be consi →2] [to be consi →3]
For 1 child it is taxable.
Journey done through Exemption

Rail Upto AC 1st class
Air Economic class fare
Recognized public transport Executive class fare
Any other mode Ac 1st class fare as if journey by rail
 Carry over concession :
Concession can be carried forward 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 Illu-11, 12(SM)

(8) Valuation of perq. For interest free loan or loan at concessional rate of interest. [To e’yee
or Family member](Rule 3(7)(i))
Perquisites= Interest @ market rate- Interest charged by employer
If repayment is monthly then calculate perq monthly.
 Market rate= Find out rate of interest charged by SBI as on first day of P.Y. for same
purpose.
 Where such loan is not taxable
A/m of Original Loan Or Loan is for diseases specified

Does not exceed ` 20,000 In rule 3A.

(9) Valuation of perq. In respect of use of movable asset [3(7)(vii)]
If computer/ Laptop/telephone/mobile Any other movable asset(except car)

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. :1) X Ltd has a car purchased on 1-12-20. It was purchased for ` 50,00,000. X Ltd sold
it to e’yee on 1-5-22 for ` 10,00,000. Cal. Value of perq.
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: Laptop → purchased on 1-1-20 for ` 70,000, sold on 1-1-23 for ` 10,000
→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: Furniture (Sofa) → 1-12-20 for ` 10,000, sold on 1-2-23 for ` 5,000
→Used by e’yer for 2 years& 2 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)]

Exemption only for himself or family → [spouse, children (dep. Or not), parents,
brother, sister(Dep)] does not include Grand Parents inlaws.
So any exps paid by employer for a person who is not Family-Always taxable
Medical facilities in India-For himself/family
Provided by Provided in Provided in hospital provided in

Hospital owned Govt. Hospital approved by I. tax authority Private hospital
By e’yer [For deceases mentioned (family Dr,
In rule 3A(2)] Nursing home. etc)
Not Taxable Not Taxable Fully Taxable

Not Taxable
Medical facilities O/s India-For himself/family
Treatments expense + Staying expenses Travelling expenses
Exempt upto amount certified by RBI for patient if GTI > 2 lakh if GTI ≤ 2 Lakh
& 1 attendant Fully Taxable Fully Exempt
[GTI only excluding travelling exps.]
illu-13 (SM) =Q-3 (JK)

Note: if e’yer pays medical ins. Premium of e’yee or family then it is not perq. → Clause (iii)
of 1st proviso to section 17(2) .
But life ins prem paid by employer is fully taxable.

(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 &

maintainance+ Driver Salary)
Private Purpose Not Taxable
(–) Amt. recovered
Bal. (+ ve) → Taxable.
Cost to e’yer
(–) Used for office purpose
Partly office /
Not Taxable (W.N -1)
Partly Private
W.N -1 : How much amt. used for office purpose :
Option →A : if logbook is maintained then for official purpose divide exps as per Kms
mentioned in that. or
Option →B : 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% of Dep. SLM/ Hire
+ Running main. exps
charges]
Private Purpose + Driver Salary (if provided)
(–) Recovered from e’yee
[here running cost → by e’yee]
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 / CC → > 1600 cc → ` 900 p.m + Driver salary → ` 900 p.m
Partly Private [No driver salary added & No (if provided)
recovery to be deducted] [Here amt. is higher considering
running & maintenance exps]
(13)

(14) Value of perquisite in respect of Lunch / Refreshment : [Rule 3(7)(iii)]
If its food allowance Fully taxable

Tea of coffee in working hrs Not taxable
Food,Meal, Non alcoholic drink given in Not taxable
working hrs in remote location
Food, Meal, Non alcoholic drink given in Taxable Value=
other normal area Total cost to employer
(-) Rs. 50 per mean
(-) Recovery from emplyee
(15) Value of perquisite of gift, voucher, token [Rule 3(7)(iv)]
Gift made in cash or Convertible to money Gift in kind upto ` 5000 in

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

Fully taxable 5000 is taxable
(Follow this)
(16) 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-1 : At time of sale of such shares cost of acq. wiil be such FMV[sec-49(2AA)]
Note-2 : If sweat equity is given by employer who is startup unit(As certified by government)-
then tax on such esops will be paid by employee in the year
1. after 48 months after end of AY(5 yrs from end of PY) or
2. year of sale Or
3. year of termination
w.e.earlier. Illu-22 (SM)=Q.18 of HWS
(17) Valuation of perq. For any other purpose not specified elsewhere
Find out exp by employer
(–) exp. On use for official purpose
(–) Amt. recovered from e’yee
Bal. (+ ve) → Taxable
[ Illu-21,23 (SM) ]
Special note on maturity of keyman insurance policy:

→ 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. 4 : Deduction (Sec 16)

1) Standard deduction [16(ia)]
Gross Amt. of salary or ` 50,000 w.e. less (For all salary together in the P.Y.)
2) Entertainment allowance: [16(ii)]

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

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

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

Step-2-Take deduction if employer has actually paid
No deduction in section 16 if followed 115BAC

[Sum no 24 (sm) ]
Then → Q-1 (JK)

Q-1 Computation of income salary for Mr. Narendra Modi for PY 2022-23
AY 2023-24
Particulars Rs.
Basic 45000 x 12 540000
+ D.A (Forming part) 3000 x 12 36000
+ D.A (not forming part) 2000 x 12 24000
+ Bonus (Due) Not received –
+ Commi (% of T/o) – 40000
+ Commi (NP) – 50000
+ Uniform allowance 30000
(–) Exempt u/s 10(14)(i) (22500) 7500
+ Children Education Allowance 2880
(–) Exempt u/s 10(14)(ii) [80 x 2 x 12] (1920) 960
+ Transport allowance 1450 x 9
2100 x 3 Fully taxable
19350
+ HRA 240000
(–) Exempt u/s 10(13A) [W.N. -1] (214400) 25600
+ Project Allowance – 24000
+ Entertainment allowance 700 x 12 8400
Gross salary 775810
(–) Deducation u/s 16
(i) Std deducation [16(ia)] 50000
(ii) Ent. Allowance –
(iii) Prof. Tax(16(iii)) 5000 (55000)
720810
HRA calculation:
Salary=Basic+DA(% )+Commission(% of T/o)
= 540000+36000+40000
= 616000
Lower of following is exempt:
1. Actual HRA 240000
2. 50% of Salary(616000*50%) 308000
3. Rent paid – 10% of salary 214400
(276000-61600)
Exempt 214400
SM (Q-5)(exer)= Q-10 (JK)=Q-3(Jk hws)

illu-20 (SM) =Q-11 jk
HomeWork → exercise Q-2(=Q1 jk hws),Q-3,Q-4(=Q-2 jk hws)
Homework: Q-4 to 21 of Homework section

W.N. 5 : 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 & on that 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.
2020.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 2020=24-2=22
→ Relief u/s 89 → Tax difference in (–) Tax diff. in preceding yr

Current Year income due to arrears income due to arrears
Step-1:Cal. Tax after cess of Current Year with arrears & without arrears
Step-2:Cal. Tax after cess of all preceding yr @ rate applicable in that yr with arrears &
without arrears.
Step-3:Cal. of relief :
Diff of tax in step -1
(–) Diff of tax in step -2
(if + ve)=Relief u/s 89(If ans is negative-Ignore)
This relief to be deducted from after cess Tax P’ble of Current Year
Q-2 (JK)
sum Q-24 (sm)
A-2
Step-1: Calculation of tax on total income with & without arrears of Mr. Sai
P.Y 2022-23(A.Y 2023-24)
Particulars With arrears Without arrears
Total Income 670000 670000
Add: Arrears 90000 -
Tax Payable (After cess) 67080 48360
Tax difference due to arrears= 18720
Step-2: Calculation of tax on total income with & without arrears of Mr. Sai
P.Y 2011-12(A.Y 2012-13)
Particulars With arrears Without arrears
Add: Arrears 90000 -
Tax Payable (After cess) 48410 31415

Tax difference due to arrears= 16995
Step-3: Relief U/s 89=Step-1 (-) Step-2
= 18720-16995
= 1725
Step-4: Total tax payable= 67080-1725

=65355-65360(Rounded off)
 Salary from UNO :

As per sec-2 of U.N (Privileges& immunities) Act, 1947 → Any salary by UNO →
exempt.
 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 for this
purpose.
 What is Profession? [2(36)]: Sale of service…It also includes vocation.
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 person in connection with modification of T&C with
regards to business contract.
3. Incentives received or Receivable by assessee carrying on export business:
Like Cash assistance against export, Duty drawback, etc.
4. Value of any benefit or perquisite arising from business.

[E.g. car received by dealer as gift]
5. Partnership – Remuneration ,Interest For Partner PGBP.

Bonus, commission, Salary, Etc
6. Sum Received / Receivable for not sharing any intangible asset to others or not
to do business.
7. Sum Received under → keyman Insurance Policy
8. Fair market value of inventory on conversion in capital asset.
Note: Any speculative business to be kept separate from other business and all calculations to
be done separately (E.g. Intraday share trading)
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 heads 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

deduction Deduction not deductible to
in certain circumstances Tax
30 to 37 40 & 43B 40A 41 44AA,44AB,

44AD,44ADA,44AE
2. Section 30 : Rent, Repairs, Rates, Taxes, & Insurance of Building(3RTI)

Allowed only if used for B/P
Rents Current Repairs Local Rates Insurance

Municipal Tax Premium
[For cap. Exp subject to condition

depre.] u/s 43B
[Paid b4 return
filing due date]
3. Section 31 : Repairs & Insurance of machinery plant furniture

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

(Except capex)
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

→ Asset in respect of which depreciation is claimed must belong to either of
Following category.
Building, Machinery, Plant or Knowhow, Patent, Copyright,

Furniture [Tangible] Trademark, License, or any other
Busi. right of similar nature
(Other than goodwill)
→ Asset used for less than 180 days(Full dep/Half dep concept)
Acquired in the yr & put to use in same P.Y. otherwise (>=180 upto 3rdoct)
for < 180 days during P.Y.(after 3rdOct)
Half depreciation Full depre
Note :
Date of purchase Put to use date Depreciation
1.4.22 1.11.22
1.4.21 31.3.23
1.5.22 3.10.22
1.5.22 4.10.22
→ 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 1-4-22 
Add : Actual cost of asset acquired during P.Y. 
Less : Monies received or receivable for asset sold, demolished, ()
destroyed incl. any scarp value
(A) WDV for P.Y. 22-23 
Less : Depreciation [ A x %] ()
Depreciated value of block as on 1-4-23 

Rates of Depreciation:
Before that lets understand what is plant [43(3)]:
Plant include computers, laptop, books, equipments, vehicles but exclude
building,furniture,livestocks.
For rate of depreciations:[ Rule 5(1)]

Brief summary
→ Building used for residential purpose
Building 5%
[except hotels ]
→ Building → office, Factory, Godown, Hotel 10%
Furniture Furniture-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, Motor car if used as taxi 30%
If acquired and put to use b/w 23.08.19 to 31.3.20 45%
→ General P & M-Equipment 15%
→ Other (Computer, Laptop, Books) 40%
I.T.Asset Intangible asset(Other than goodwill) 25%
 Examples:
Plant 15%
1. Block as on 1-4-22 → 10,00,000
Purchased plant D on 1-5-22 → 2,00,000
Sold out on 28-3-23 → 30,000
Dep ?
Ans.: Block value as on 1-4-22 → 10,00,000

Add : Actual cost of Plant D (1-5-22) → 2,00,000
12,00,000
Less : Sold out Plant C → (30,000)
WDV as on 31-3-23 → 11,70,000
Depreciation @ 15% → 1,75,500
 Suppose → Pur is on 1-11-22 ?
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 Short term capital loss
e.g.
Op.WDV No. Add No. Total Sold No. Depre?(Y/N) STCG/STCL
10,00,000 10 5,00,000 5 15L-15 12,00,000 8
10,00,000 10 5,00,000 5 15L-15 18,00,000 8
10,00,000 10 5,00,000 5 15L-15 12,00,000 15
Sixth proviso to Sec. 32(1):

This provision is applicable for following
Cases: Amalgamation, succession, demerger, conversion, etc.
→ in this year, depreciation shall be cal. as follows?

Step -1: Cal. Dep as if no such event 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.(From next yr only successor will claim depre)
Q.5 JK
A-5
Pts Amount Rate Total Ratio of Depre of Sai Depre of Shirdi
of depre bifurcation Ltd. Ltd.
depre for PY
2020-
21
Opening 40L 15% 600000 275:90 452054 147945
WDV (Note-1) (6L/365*275) (6L/365*90)
Addition 14.40L(<180 7.5% 108000 61:90 43629 64371
days) (Note-2) (108000/151*61) (108000/151*90)
Total 495683 212316
depre
Note-1: Here the asset is used from 1.4.22 to 31.3.23 so the ratio between two companies will be
275(1.4.22 to 31.12.22) : 90(1.1.23 to 31.3.23).
Note-2: Here the asset is used from 1.11.22 to 31.3.23 so the ratio between two companies will be
61(1.11.22 to 31.12.22) : 90(1.1.23 to 31.3.23).
Additional Depreciation : (Over & Above normal depreciation)[32(1)(iia)]
The assessee must be New P & M should be acq. & It should be eligible
Engaged in manufacture / installed P&M
Production of article or thing
Which are not eligible?
Ships/ Asset which b4 its P&M installed Road P & M whose

Aircraft installation was used in office premise Transport whole actual cost
Either in / outside India or Resi. accom. Vehicle allowed as ded’
(2nd hand) (Incl. Guest House) (E.g.section 35)
Rate of additional depre:

20% of original asset cost (Only in 1st yr of purchase of such plant).
If asset is put to use for <180 days then in this year 10% and in subsequent year balance 10%.
→ However whole additional depre is to be deducted from WDV same like normal
depreciation.
No additional depre can be claimed if 115BAC followed.

Refer Illu-1 (SM)
Q-1, Q-2 (SM → exercise) (=Q 10 of hw section jk)
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
power follow WDV
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(TD) [ 32(1)] or Balancing charge(BC) [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. Assume that electricity company has followed SLM

Cost Op.WDV Sale value Surplus/Deficit TD/BC STCG?
1,00,000 50,000 70,000
1,00,000 50,000 10,000
1,00,000 50,000 120,000
1,00,000 50,000 1,00,000
Actual Cost : [Sec – 43(1)]

 Actual cost=total cost born by assessee to purchase asset
 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.
Other e-mode includes-credit card, debit card, net banking, IMPS, UPI, RTGS, NEFT,
BHIM Aadhar pay
 Special Cases (Explanations)

i) When asset acquired by gift → cost=WDV of previous owner.
ii) When earlier asset deduction taken in section 35/35AD now Cost=Nil
iii) Building previously used for personal use and in this year brought to business:
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. 2 (SM)
iv) Capitalization of int. on loan 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 (take direct deduction)

v) Amt of tax on purchase of asset (GST, custom)-- if credit(ITC) is claimed
If credit is claimed → that much amount not to be included in total cost.

If ITC not taken—Then it will be added to actual cost.
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 except salary & 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-3&illu-4=(Q-1,2 of homework section jk)
5. (1) Section 35 : Expenditure on scientific research :

(1) Inhouse Research :
 By any assessee [sec-35(1)(i) + 35(2)+35(2AB)]
(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.
(except perquisite exps.)
2) Pur. Of Material for Scientific Reaserch
100% deduction

No depreciation on asset claimed as ded’
Here R & D facility should be approved by prescribed autho.
(2) Contribution made to outsiders for scientific research / social research

(No deduction if 115BAC followed.)
Contribution to
University college University college National Co. registered in India having

Or association or association Laboratory main object of Sci. research
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
research
100% of 100% of 100% of 100% of

Contribution Contribution Contribution Contribution
 Explanation: -If any approval for such institution, university is withdrawn then also
donation given prior to such withdrawal will be valid for deduction.
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 Illu-5 (SM)

6. 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 project 1-4-10
10 Inland container depot or container freight station 1-4-12
11 Bee keeping and production of 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%)
Current year Prior yr (No limit)
Revenue Capital Revenue Capital

(Only if capitalized 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) Secondhand machinery should not be purchased beyond 20% of total value of P&M.(Here
if second hand P&M is imported from outside India then its totally allowed-No restriction)
3) Books of accounts must be audited.
Other Points:
1) When deduction u/s 35AD claimed for same exps no other deduction like section 10AA,
section 32.
2) Claim of 35AD is optional. So if any person is not claiming 35AD then they can claim
other deduction like section 32.
3) No deduction if 115BAC claimed.
4) If any asset on which deduction u/s 35AD claimed → Sold, demolished, destroyed, then
amt received = PGBP Income [Sec. 28]
5) Loss of specified busi. can be set off only against specified business u/s 35AD even though
that business is not claiming 35AD because it was started earlier than the date specified.
[Unabsorbed to be c/f →infinity Period]
6) 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 Illu-6, 7, 8 (SM)
(=Same as Q-7 (JK), Q-3 hws jk)
7. Section 35D : Amortization of certain preliminary expenses

→ Eligible assessee : Indian co. or any other resident person
→ Eligible expense : Before starting business or to start new unit.
→ List of Qualifying exps: Feasibility report, Engineering report, Project report, Market
survey, Printing MOA, AOA, Prospectus etc.

Maximum Qualifying Expense :
Company Others
→ 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 installments]
→ Starting from P.Y. in which business commences.
Audit of BOA
What is capital employed
Issued Share Capital + Debenture + Long Term Borrowings(SC judgement-Securities premium

not to be included)
[as On last day of P.Y. in which busi. Commences / extension completed]
Cost of project means value of fixed asset on last day of PY.
E.G.: Aagam Ltd. Commences business on 1.4.22.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 for which exps done is Rs.5000000.What will be deduction u/s
35D in this yr 2022-23?
Ans.
8. Section – 35DDA : Amortization of compensation paid under VRS

Where assessee incurred exps. In P.Y. for VRS → 5 equal annual installment
9. Section – 36 : other deduction:

Applicable
Nature of Exps Conditions
To
Insurance premium on stock / store of All
business [36(1)(i)] Assessee
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 (If 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 →Total discount allowed as ded’ on
[36(1)(iiia)] bond prorata basis from yr of 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)] → ∴ excess contri. Disallowed u/s
40A(9)
Refer Illu-9(SM)
Contribution from employee toward All → Step-1:first add to income of
P.F. S.A, other fund [36(1)(va)] employer employer [2(24)]
→ Step-2: Then ded’ is available if paid
within due date of that act.
[E.G. PF → 15 days from month]
Bad debt [36(1)(vii) & 36(2)] All → Incidental to business.
Assessee → Bad debt should be written off in
BOA.
No deduction for bad debt
provision/reserve.
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. & such income is taxable under
Commodities trans. Tax [36(1)(xv)] & head PGBP.
[36(1)(xvi)]

10. Section 37 (1) : General ded’
Condition for allowability for other exps
Expense Should be in Not in nature Should be

Other than connection of capital exps incurred
those with busi / + during P.Y
Specified prof. carried Not personal
In sec 30-36 on by exps
Assessee
(e.g. donation not
A busi.exps.)
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.
Explanation 3: Expl. 1 shall include any offence in or outside India.

Any amount which the receiver cannot legally accept due to any law, rules,
regulation is also disallowed.
Any Payment done to compound the offence is also disallowed.
CBDT: 1. Exps incurred in providing freebees to medical practitioner by pharmaceutical

ind. → prohibited by law → disallowed (circular)
2. Premium paid on keyman ins. Policy →Allowed (circular)
Refer Q.3 (ex → SM) (=Q-11 hws jk)
Expenses Disallowed:
11. Section : 37(2B) : Advertisement exps in relation to political party
No ded’ for exps. done in advertisement in any souvenir, brochure, pamphlet by political
party.
In Que : Step-1: Disallow from PGBP
: Step-2: Ded’ u/s 80GGB
If paid other than cash.

12. Section: 38: When Building, P & M, furniture, not used wholly for business.
Proportionate exps for non busi uses will be disallowed.
13. Section 40(a)(i) r.w 40 (a)(iii) :

Payment O/s India or to Non-resident on which payer has duty to deduct TDS,
then that expenses will be allowed as deduction only if during the year TDS is deducted and
that TDS is deposited to government on or before due date of filling return of Income U/s
139(1).
So, If TDS not deducted during the year—100% of that expense will be disallowed.
If TDS deducted but not deposited up to due date of filling return of income then also
disallowed 100%.
This 100% will be allowed in that subsequent year in which TDS is deducted and deposited.
E.g. Mr. A paid Rs.100000 as royalty to MR.B (NR).Mr. A deducted TDS in PY 22-23 but
deposited to government on 1.11.23(Due date of return is 31.10.23).
Ans.:
14. Section 40(a)(ia) :

→ Any sum payable to resident and TDS not deducted or after deducting the same not
deposited to govt on or before due date of 139(1) then disallowance will be 30% of exps
→ 30% allowed in yr TDS deducted and deposited.
E.g. Mr. A paid Rs. 20000 as commission to Mr.B(Resident) without deducting TDS in
P.Y.2022-23.So 30% i.e.6000 will not be allowed in that yr.It will be allowed in yr in which
TDS deducted and deposited.
Refer Illu-10, 11(=Q-4, 5 hws jk)—Refer only after TDS chapter.
15. Section 40(a)(ii) :

Sum paid as tax or cess on profit (i.e. Direct tax) will be disallowed.
∴ Indirect tax → allowed as deduction (GST, Customs, etc)
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

Note: Any surcharge, cess is also part of direct tax hence not allowed.
16. 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.
→ But if tax on such perq. If also borne by e’yer = Exempt to employee u/s 10(10CC) and
disallowed to employer u/s 40(a)(v)
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 Fair Market Value (FMV) by Assessing Officer.
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 member
HUF → Family member + Relative of such family member
+ any persons having substantial interest in above concerns & relatives
Substantial int=Ownership of >= 20%
Note: Payment to uncle, sister in law etc eventhough excess than FMV still allowed
because they are not relative.
(2) 40A(3) : Payment exceeding ` 10,000 :

 If assessee incurred 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
E.G. Mr. X purchase R.M.Worth Rs.100000 in P.Y.2021-22 and claimed exps on

accrual basis.Now in 2022-23 he paid Rs.100000 to creditor in cash on a single
day.So now that 100000 will be deemed income of P.Y.2022-23.

 Note: In case of payment made to transport operators for plying, hiring or leasing
goods carriages → ` 35,000 instead of ` 10,000
This will not apply to loan Transaction, because it is not expense.
Cases where 40A(3) will not apply [Rule 6DD]:

a) Payment made to RBI, Any Bank, LIC, Govt.
b) Payment made by letter of credit, bills of exchange.
c) Where payment made for purchase of
Agricultural or forest or fishery produces to cultivator, grower, Producer
[Not to trader, broker, middleman]
d) Purchase of products manufactured or processed w/o aid of power in cottage industry.
[e.g. Khadi]
e) 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.
f) Payment to employee or legal heir on retirement, retrenchment, resignation, death for
amount not exceeding ` 50,000.
g) Payment made of salary & TDS ded’ u/s 192 if
e’yee temporality posted & does not maintain bank a/c at

for continues 15 or more days that place.
in other place.
Example.1. Mr. B paid Rs.5000 in cash to Mr,C for printing exps on 1/10/22 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 1/11/22 to 13/11/22.After deducting TDS paid salary Rs.50000 in
cash.
Refer Q-4 (ex-SM)(=Q 12 hws jk)
(3) 40A (7) : Provision for payment of Gratuity:

For employer Provision for gratuity is not allowed as deduction but when actually paid then
allowed as deduction.
However if employer is maintaining own gratuity fund which is approved then deduction
of provision is allowed.

(4) 40A (9) :
Payment to unrecognised or non statutory welfare fund → Not allowed
Refer Q-5 (Ex – SM)(=Q-13 hws jk)
17. Section 41 : Deemed Income :

Nature of deemed Profit Taxable in which P.Y
41(1) Recovery against ded’ of any loss exps or trading P.Y. in which amt.
liabi. (for which ded’ allowed earlier) recovered or written
(E.g. Discount given by creditor, Custom duty back.
recovered)
41(4) Bad debt recovered only upto amount allowed as P.Y. in which recovered
deduction earlier
Note: Unallowed portion will be recovered first.
41(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.
Example:
Bad debt Allowed Unallowed Bad debt Taxable?
recovery
10000 6000 4000 6000
10000 10000 0 8000
10000 2000 8000 5000
10000 8000 2000 6000
18. 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 Bank. public financial Institute or state financial corporation, NBFC
Note: Int on friends, relatives not covered.
e) Leave money to e’yee.
f) Any sum payable to Indian Railways for use of railway asset.
Note: 1. This section is applicable when assessee follows mercantile system.(In cash basis we
take deduction only in year in which actually paid)
Note: 2. This will be allowed in the P.Y. in which paid.
Note: 3. If unpaid interest is converted into loan/debenture/bond by bank / PFI → it is not
actual payment. However, when installments are paid then it will be actual
payment upto amount of that installment.
Refer Illu-14 (SM)

19. Special Section for partnership firm : [40(b)] :
→ 40(b) : Deduction for “remuneration to partners” & “ interest to partners”
i) Remuneration : Deductible if
Paid to working partner as per the deed.
Maximum deduction only up to permissible limit.
→ Permissible limit u/s 40(b)
This limit is based on book profit:
Book profit in simple terms means PGBP income before deducting remuneration
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 if debited in P/L & allow below given]
On 1st` 300000 of book profit + on balance book profit

Or loss above ` 300000
` 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 Illu-12 (SM)
ii) Interest to partner [ loan or capital] :

Can be paid to any partner but maximum deduction @12% p.a.
Note: Remu. & Int. which is deductible for firm is taxable for Partner.
Refer Illu-13 (SM) / JK Q-8
Example: Mr. A is partner of ABC & Co. Firm pays interest to partner @18% Rs.18000.
What will be allowed as deduction to firm and what will be taxable to partner for interest amount.
Answer: Maximum deduction allowed to firm will be @12%-Which will be Rs.12000. So for firm
balance 6000 will be disallowed.
For partner, he will pay tax on Rs.12000 of interest(Which was allowed as deduction to firm)

20. Section 44AA : Maintenance of Books of A/c
(1) For specified professions: Legal, Medical, Engineering, Architect, A/c, Technical
service, film artist, CS, IT professional
If gross receipt do not exceed ` 1.5L if Gross receipt exceeds ` 1.5L

In all/any of the 3 preceding P.Y. in all 3 preceding 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:: Cash book, journal(If mercantile

system), Ledger
→ Copy of bills & receipt → serially
Numbered for amt >` 25
→ Original bill / voucher for exp >` 50
For medical additional requirement: Daily case regi. Form 3c
→ Inventory of stock.
(2) For other nonspecified profession & business :
If PGBP Income do not exceed PGBP >` 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 preceding P.Y.
Do not require to Keep such BOA as can enable AO to

Maintain BOA compute income.
* for individual / HUF → PGBP → ` 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 Illu-15 (SM)

21. 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.(Note-1) > 50 L in PY
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)]
Note: 1. Instead of 1 cr limit will be 10 cr if:
A. Total Receipt in cash (incl. for sales, gross receipt) in PY is <= 5% of total receipt. and
B. Payment in cash for exps., etc in PY is <=5% of total payment.
(No change in limit for professionals)
(Cash includes cross cheque, bearer cheque)
 Report to be submitted on or b4 1 month prior to due date of filing return u/s 139(1)
(means 30th September because due date of return is 31/10.)
22. 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 or emode

Cheque Draft
During P.Y. or Before due date

Of return of income.
Assessee can claim higher % also.
Note: If turnover amount is received from debtor after due date of return of income then whatever is
mode of payment always we have to apply 8%.
E.g. Mr.J has turnover of Rs.1.5 cr in P.Y.22-23.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 31/3/23)
d. Credit sales Rs. 10 L(Drs paid in chq on 30/6/22)
e. Credit sale Rs.15 L(Drs paid in cash on 31/5/23)
f. Credit sale Rs.35 L(Drs paid in chq on 30/11/23)
5) Other Provision :
i) No further deduction of sec-30 to 38..No other disallowances to be made.
[even Remuneration to partner, Int. not allowed]
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.
6) Advance Tax :→ Eligible assessee shall pay advance tax in 1 installment up to 15th March
of P.Y.
7) 44AD(4) :→ if assessee fails to declare profit u/s 44AD (i.e. declaring lower profit) in any
five consecutive year after the relevant to P.Y. then not eligible for this section for 5
next year from yr of contradiction. +
In the year in which shown lower profit--Require to maintain BOA → 44AA & Audit
[44AB(e)] (if income exceed BEL).

Note: This means if last yr 44AD was not followed then this year it is not compulsory to show
minimum income as per 8/6%. Hence, last year 44AD was not followed but still showing lower profit
then 8/6% in this year then no audit. But if last year 44AD was followed then this year it is compulsory
and hence if shown lower than 8/6% then audit is applicable.
Refer illu. 16(SM)(=Q-8 hws jk)
 For Resident Individual / HUF / Firm (excl LLP) (i.e. person to whom sec 44AD(1) applies
Total sales, Aggregate cash
turnover or gross Profits and gains receipt  5% of
receipts in the (as a % of total total receipts AND Audit
Financial year sales, turnover or Aggregate cash Applicable?
(Assume last yr gross receipt) payments  5%
44AD followed) total payments
> 10 Crores NA NA Yes u/s 44AB(a)
> 2 Crores &  10 NA Yes No

Crores NA No Yes u/s 44AB(a)
 8% or 6% NA No
 2 Crores
< 8% or 6% NA Yes u/s 44AB
23. Sec-44ADA: Profit – Gains of profession on presumptive Basis.

1) Eligible assessee → who is resident IND/Firm(Except LLP) & 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…No further disallowances
(i.e no farther ded’of remuneration & Int to partner)
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.
(No 5 years criteria)
For Resident Professionals (Sec 44AB + Sec 44ADA)
Gross receipts from

Profit and gains (as a % of
profession in the financial Audit Applicable ?
total Gross receipts)
year
> 50 Lakh NA Yes u/s 44AB(b) ?

 50% No2
 50 Lakh
< 50% Yes u/s 44AB(d) ?
24. 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(Wight>12 tons..>12000kg) Other than heavy
` 1000 X per ton of ` 7500 X Per month

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

(can declare higher income)
Other provision:
a) Ded’ u/s 30 to 38 → Deemed (but remuneration and int to partner→ allowed
additionally)..No further disallowances
Unlike 44AD & 44ADA.
b) No. req. of BOA & Audit.
c) WDV calc as it depre allowed.
4) Advance Tax → as per normal norms(i.e.4 installments)

5) If lower income → Audit u/s 44AB(c)
Evenif lower BEL
Illustration – 17 (SM) (=Q-4 jk)(=Q 9 hws jk) H.W Q-8 (Exercise)

Illu 17:
Calculation of presumptive Income U/s 44AE for for MR.X :
i) For Light goods vehicle
Sr.No. Date of No.of No.of Presumptive

purchase Months vehicle Income
(1) (2) (3) (7500*2*3)
1 10.4.21 12 2 180000
2 15.3.22 1 1 7500
3 16.7.21 9 3 202500
4 2.1.22 3 1 22500
Total 412500

ii) For heavy goods vehicle
Sr.No. Date of No.of Months Tonnes No.of vehicle Presumptive

purchase (2) (3) (4) Income
(1) (1000*2*3*4)
1 29.8.21 8 15 2 240000
2 23.2.22 2 15 1 30000
Total 270000
Total PGBP Income=682500
1. Diff in three sections:

44AD 44ADA 44AE
N.A.to Co.,LLP N.A.to Co., LLP, HUF Applicable
N.A. to NR N.A. to NR Applicable
T/o limit 2 cr 50 L 10 goods carraiage
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
5 yr criteria exist No such rule No such rule
25. 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 – 18
Refer → Q-6 (Ex→ SM) (=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

A-1: Computation of professional Income of Dr.Krishna for PY 2022-23(AY 2023-24)
Particulars Rs. Rs.
NP as per P&L 246000
Less: Rent income (27000)
(Charged in income from house property)
Less: Dividend Income (9000)
(Charged under Income From Other Sources)
Add: Rent paid 30000
(Section 37(1)-Personal expense not allowed as deduction)
Add: Depreciation as per books -
Less: Depreciation U/s 32
(500000*15% + 200000*7.5%) (90000) (90000)
Add: Medicine consumed 10000
Add: Municipal tax paid for personal residential property 2000
Add: Salary Income - -
(Charged under head salaries)
Add: Donation to scientific research association - -
(Allowed as deduction U/s 35)
Profit and gains from business or profession 162000
PGBP Income as per section 44ADA:

Gross receipt: 897500
Presumptive Income(50%): 448750
Ans-7: Computation of Income from PGBP for Mr. Shivam for PY 2022-23(AY 2023-24)
As per normal provision
Particulars Rs. Rs.

NP as per profit & loss 50000
Less: Income from UTI (2400)
(Taxable under IFOS)
Less: Opening stock (9000)
Add: Closing Stock 18000 9000
Add: Excess salary paid to relative above fair market value 2000
(Disallowed U/s 40A(2))
Add: Printing exps.paid in cash in excess of 10000 in a single day to 23200
a single person
(Disallowed U/s 40A(3)
Add: Depreciation in books of accounts 105000
Less: Depreciation U/s 32(W.N.1) (66000) 39000
Add: GST liability - -
(As paid before due date of return of income u/s 139(1) hence not
disallowed u/s 43B)
Add: Donation to charitable trust(Not a business expense so not 2000
allowed u/s 37(1))

Add: Loss on sale of shares(To be deducted from capital gain 8100
income)
Profit & Gains from business & Profession 130900
W.N.1: Calc of depre U/s 32

Opening WDV 420000
Add: Actual cost(>180 days) 70000
490000
Less: Sold (50000)
WDV on 31.3.22 440000
Depre @ 15% 66000
Calculation of PGBP Income under presumptive taxation u/s 44AD

Sales 11211500
Presumptive rate @6% 672690
Answer-9: Computation of Total Income for Mr. Raju for PY 2022-23(AY 2023-24)
Particulars Rs. Rs. Rs.
Profit & Gains from business or profession
NP as per Profit & loss 500000
Less: Dividend from domestic company (Taxable in IFOS) (15000)
Less: Agricultural Income (180000)
(Exempt U/s 10(1)
Add: Excess commission paid to relative above fair market 10000
value
(Disallowed U/s 40A(2))
Add: Transportation expense -
(As per 40A(3) the limit for payment otransport operator is
Rs.35000.Here payment is made in cash below 35000 hence
not disallowed)
Less: Salary omitted to be recorded(4000*12) (48000)
(Alternatively it can be treated as unexplained exps U/s 69C
and it will be added to income)
Add: Interest on bank loan paid after due date of return of 40000
Income
(As per 43B interest not paid to bank upto due date of return
of income to be disallowed (60000-20000=40000)
Add: Depreciation as per books 200000
Less: Depreciation U/s 32(W.N.1) (223500) (23500)
Add: GST penalty(Disallowed as per explanation 1of section 5000
37(1))
Profit & Gains from business or profession 288500
Income from Other sources

Dividend income 15000
Income From House Property

Self occupied property
Net annual Value Nil
Less: Deduction U/s 24(b): Interest on borrowed capital (23000) (23000)
Gross total Income 280500

Less: 80C: Principal repayment of housing loan (50000)
Total Income 230500
W.N.1: Calc of depre U/s 32
Opening WDV 1190000

Add: Actual cost(>180 days) 200000
Add: Actual Cost(<180 days) 200000
WDV on 31.3.22 1590000
Normal Depreciation
(1390000*15% + 200000*7.5%) 223500

Ch. 6: Capital Gain
Types of Capital gain: Short term Capital Gain (STCG), Short Term Capital Loss (STCL),
Long Term Capital Gain (LTCG), Long Term Capital Loss (LTCL).
 Section 45 : Chargeability :
+ + +
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 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) Stock in trade, consumable Jewellery, Archeological
Store, Raw material collection, Painting,
2) Personal Movable asset Drawing, Sculptures work of
any art. [Car, Cloths, watch, etc. not
e.g. wearing apparel & covered]
Furniture held for Personal use,
But does not include
3) Rural Agriculture land in India (Note-1)
4) Specified Gold Bonds

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 up to 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
But ≤ 10,00,000
> 10,00,000 ≤ 8 KM
Refer example on P.N. 4.346
 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 a letter for offering to purchase Right shares 2:5 @ ` 2,00,000
Aagam sale Right offer letter @ ` 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
reference-Section 27)
[cross ref. sec-53A of transfer of Property Act]

Generally trf takes place at time of registration but if part consideration is paid at time of
agreement and possession is also given then trf takes place at time of agreement.
vi) Any transfer of shares by a member of co. op. society which has effect of transferring
immovable property (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 For SH who Cost will be FMV

Asset to is receiving the on date of acq.
SH = Not trf asset when SH will
subsequently sale
It is deemed div
u/s 2(22)(c) (IFOS)
(Amt = FMV on date)
Up to amt of accumulated profit(R&S)
Balance=Sale value for capital gain
E.g.:
Co. R&S Asset FMV at CG for Deemed CG for SH COA
PUSC time of company? dividend for for
liquidation SH future
sale
1,00,000 50,000 2,10,000
1,00,000 50,000 1,30,000
1,00,000 50,000 80,000
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 or will under Irrevocable trust(Except ESOPS
given under gift or 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% holding should be for continuously for
8 yrs from date of trf of asset)
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 of specified cap. Asset to govt or university or national museum, art, gallery, or
institution Notified.

Specified cap asset=Work of art, archeological collection book, manuscript, drawing,
Painting, photo, print.
7) Conversion of bond/Deb/Preference shares into shares or debenture [47(x),47(xb)]
8) Transfer of cap. Asset under reverse mortgage:

→ 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.
Alienate Ownership of house (No cap gain-47(xvi)) on death if bank

Senior citizen Bank 3rd party
Alienate to
(Sold to)
Installment / Lumpsum It is cap gain for bank
Exempt u/s 10(43)
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 → Listed shares, securities

→ Mutual Fund Unit of equity fund/
UTI(Unit trust of India).
→ 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 (FVC) 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(COA) Less : Indexed Cost of acquisition
Less : Cost of improvement(COI) Less : Indexed Cost of improvement
STCG before exemption LTCG before exemption
Less : Exemption u/s 54B Less : Exemption u/s 54, 54B,54D
54D 54EC,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 + capital exps at time of acq.
→ 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.
- By succession inheritance.

- By trf of asset b/w holding & wholly owned Indian subsidiary.
- Under amalgamation, demerger.
 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 acquisition 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(See note)
or ii) Cost of acquisition
w.e.higher
(Except for listed eq. Share.)
Note: For land or building:
Step-1: FMV on 1.4.1 or stamp duty on 1.4.1 w.e.lower
Step-2: Step-1 or actual cost w.e. higher
E.g. Determine COA for following asset(Purchased prior to 1.4.2001)
Asset Purchase cost FMV on Stamp duty on COA
1.4.2001 1.4.1
Jwellery 100,000 150,000 -
Unlisted 50,000 20,000 -
Shares
Land 20,00,000 23,00,000 22,00,000
Building 30,00,000 33,00,000 35,00,000
3) Cost of acquisition shall be indexed (for LTCG) as follows:
Cost of acquisition x CII of yr of transfer

CII of yr in which asset acquired
CII=Cost inflation Index
(Indexation from PN.4.376)
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. Manjula 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.
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
5) No indexation benefit for followings.

a. Bond or Debenture
b. Slump sale=50B
c. Listed shares covered u/s 112A
→ Refer Q-12 of jk(=Q.4 extra sum) ,JK Q-1
Ans.1
For HUF
In the year 2003-4 HUF distributed the asset to members under partition which is not regarded as
transfer u/s 47(i), hence no tax liability for HUF.
For Mr. Ram:

POH
Date of acquisition: 1.4.1
Date of transfer: March,2023
POH is more than 24 months-Long term Capital Gain.
Computation of Long term capital gain for Mr.Ram for PY 22-23(AY 23-24)
Pts Rs. Rs.

Full value of consideration 200,00,000
Less: Exps. In connection with transfer -
Net consideration 2,00,00,000
Less: Indexed cost of acquisition (41,37,500)
(Note-1)
Long term capital Gain 1,58,62,500
Note 1:
As per section 49(1) if HUF transferred any asset at time of partition to members then for members
cost of acquisition will be cost of HUF(Cost to previous owner)
As per section 55(2) when asset is acquired prior to 1.4.1 COA will be FMV on 1.4.1 which in this
case is Rs. 1250000(25,00,000/2).
As per bom HC in case of CIT Vs. Manjula J.Shah if case is covered u/s 49(1) then Indexation
benefit will be from previous owner.
So Indexed COA=1250000*331/100=41,37,500
Capital Gain for depreciable asset

Sec-50 (learnt in PGBP)

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
Refer Illu. 9
 For FVC of Land or Building

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 >110% of actual consideration
Whether Taxpayer accept stamp Duty valuation for income tax?
If accept if does not accept
Sale value = Stamp duty A.O will assign valuation

Officer
V.O-Value lower V.O. → Value higher V.O. → value lower

That actual Than SD than SD
FVC=Actual FVC = SD FVC = value of V.O.
A.O=Assessing officer, V.O=Valuation officer,SD=Stampduty
Note : Generally we take stamp duty on date of registration but Taxpayer has option to
take stamp duty value as on date of agreement (& not date of reg.)
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 b4 date of agreement.
Note : if SD ≤ 110% of actual consi. than sale value = actual consi.
Refer example on PGBP
Refer Q-6 extra sum (=Q-5 hws jk)

 Sec-50CA : FVC for trf of unlisted shares
Actual Consi. Or FMV on date of trf w.e.higher.
 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, Q-6 JK
A-6
Computation of Capital gain in the hands of Mr.Y (PY-2022-23, AY-2023-24)
Pts Rs. Rs.

Full value of consideration (Note-1) 77,50,000
Less: Exps in connection with transfer (73750)
(7375000*1%)
Net consideration 7676250
Less: Indexed Cost of acquisition (Note-2) (215150)
(115000-50000=65000)
65000*331/100
Less: Indexed cost of improvement (Note-3) (396729) (611879)
(40000*331/113 = 117168)+
(125000*331/148 = 279561)
Long term capital Gain 7064371
Note-1: As per section 50C if stamp duty exceeds 110% of actual consideration then stamp-duty
will be FVC but if assessee does not accept it for income tax purpose then AO will appoint valuation
officer who will determine value of the property and if he determine value more than actual
consideration but less then stamp duty then it will be deemed as full value of consideration.
So, here value determined by VO will be deemed as FVC.

Note-2: As per section 49(1) when assessee receives asset as a gift then cost of acquisition for him
will be cost to previous owner. However, as per section 55(2) if asset is acquired prior to 1.4.2001
then FMV on 1.4.1 will be deemed as COA (If lower then stamp duty on 1.4.1)
As per section 51 any advance forfeited by previous owner is to be ignored but any advance money
forfeited by current owner before 1.4.14 to be deducted from cost of acquisition.
As per BOM-CIT vs. Manjula J. Shah if case is covered by section 49(1) then indexation can be
claimed from previous owner.
Note-3: If cases covered by section 55(1)(b) if cost of improvement is incurred prior to 1.4.1
then such cost to be ignored.
 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 upto 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
→ CG will be taxable in year of 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. For profit calculation Cost = FMV
of capital asset on date of conversion.
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) 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.
E.g. 2014- acquired, 2015-10L r’ved,2017-40 L received, 2018-interim order-5L & in

2020- enhanced total 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.
→ If person die before receiving compensation- taxable in hand of recipient.

Refer Q-8 (JK) (Ans in Jk Only)
4) 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 new land / building after development and
also give cash consideration which can be used for furniture etc.. So at time of giving
up old asset to contractor CG attracts 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 person other than Ind/HUF-CG of property given to contractor
taxable in year in which given to him (FVC=Stamp duty on date of trf- Handing over)

If agreement entered by Individual/HUF then CG of property given to contractor taxable in year in
which Certificate of completion (COC) received for new property. (FVC=Stamp duty on date of COC
+ Cash consideration)
If Ind/HUF has transferred share in new property before COC came or he has not accepted share in
new property rather opted out then cap gain for old property taxable in that yr of handling over to
constructor. (FVC= Stamp duty on date of handing over)
However in all cases indexation of COA to be done upto the yr of transfer.

Whatever is FVC here, will become COA for new property.
Q.3 of JK
A-3:
1. For Individual/HUF the year in which COC received for new property will become the
year of taxability. So 2021-22 will be the year of chargeability. FVC= Rs.27,00,000.
2. For Individual/HUF the year in which property transferred will become the year of
taxability in case he has not opted the new scheme. So 2017-18 will be the year of
chargeability. FVC= Rs.20,00,000.
3. If owner by ABC Ltd. then yr= 2017-18 and FVC= 20,00,000.
5) 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 purchased long back.
Hence, amendment for genuine investor
Applicable for listed shares and equity oriented mutual fund on which at time of purchase and
sale STT is paid.
Which was acquired b4 1-2-18 (Budged date)
COA= Step-1: FVC on trf or FMV on 31.1.18 w.e. lower

Step-2: Step-1 or actual cost w.e. higher
[Means gain upto 1st feb is still exempt]
Note: This rule is same for listed bonus & right shares also.
: FMV on 31.1.18 to be taken as highest price on stock exchange.
: If shares were acquired on/after 1/2/18 COA=actual cost
: No indexation benefits available.
e.g Assume all below mentioned are listed shares

Shares Date of Actual FMV on FVC on What is COA? What is CG?
acquisition Cost 31.1.18 transfer =FVC-COA
Reliance 1.1.18 10,000 12,000 13,000
Ltd.
TATA Ltd. 1.3.16 54,000 58,000 57,000

Sanofi Ltd 1.2.5 100,000 1,02,000 99,000
Asian Paints 1.3.19 132000 N.A. 150000
Ltd
6) Taxability of self-generated asset (cost = sec.55)
What is cost of acq. &

Self – Generated asset
Cost of improvement
1. Goodwill of busi. and profession NIL
2. Tenancy right NIL
3. Right to mfg, produce or process any article
NIL
of business.
4. Trademark, Brand name NIL
→ What if goodwill is purchased?

If purchased prior to 1.4.20 COA=WDV on 1.4.20
If purchased on or after 1.4.20 COA=Actual cost
7) Cost of acquisition of bonus share (sec-55)

Unlisted bonus shares Allotted prior to 1.4.01 COA=FMV on 1.4.01
Allotted on or after 1.4.1 COA=NIL
Listed Bonus Shares Allotted prior to 1.2.18 COA= FMV on 31.1.18 or

FVC whichever is lower
Allotted on or after 1.2.18 COA=NIL
8) Cost of acquisition of right share

a) Original shareholder sale the right entitlement letter…for this letter COA=NIL
b) Original shareholder purchase right shares. For these shares COA=Actual cost
c) 3rd party who purchase letter from original shareholder.
COA of shares=Cost paid to original shareholder for letter + Cost of shares paid to
company
Refer Q-1 EXTRA SUM(=Q11 JK),Q-2 EXTRA SUM
H.W. → Q-5 (JK) (ans….JK….PTO)
9) 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 it will
be treated as transfer. (IF ESOPS given under will then again not a transfer)
FVC =FMV as on date of transfer.
COA=FMV as on date of acquisition(49(2AA))
Because, at time of receipt- salary income must also have taxed.
(Refer Q-4 (JK)
A-4

1. ESOPs sold
Computation of total Income of Mr.X for PY 2022-23(AY 2023-24)
Pts Rs. Rs. Rs.
Income From Salary
Valuation of perquisites for sweat equity
shares
FMV on date of allotment 300000
Less: Recovery from employee (80000) 220000
Gross Salary 220000
Less: 16(ia) Standard deduction (50000)
Total Salary 170000
Capital Gains
Full Value of consideration(Note-1) 900000
Less: Exps in connection with transfer -
Net consideration 900000
Less: Cost of acquisition(Note-2) (300000)
Short term Capital Gain 600000
Total Income 770000

Note-1: Section 50CA:For unlisted equity shares FVC will be higher of sale consideration or FMV.
Note-2: 49(2AA): In case of ESOPs FMV on date of allotment will be deemed cost of acquisition.
2. ESOPs given under gift:
In this case salary income will be same Rs.170000.

As per section 47(iii) ESOPs given under gift is transfer and hence capital gain is attracted wherein
FVC=FMV on date of transfer.
Hence no difference in total Income.
3. ESOPS given under will
In this case salary income will be 170000(As computed earlier).

However as per section 47(iii) any asset(Including ESOPs)given under will is not treated as
transfer.So,no capital gain will be attracted.
10) 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

12) Capital Gain in case of slump sale (50B) :
One or more 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 for < 36M → STCG
FVC = FMV of consideration received or FMV of business w.e.higher
→ Cost of acquisition = Net worth
= Total asset (–) liability at book value
Net worth Value
Depreciable asset WDV as per incometax act
Asset u/s 35AD (as ded’ is claimed) NIL
Self-generated goodwill 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.
Refer SM illu. 10 = Q-7 (JK)
 Exemptions given in section 10:

i) section -10(33) : Trf of specified mutual fund 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.
Taxable Initial or
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 54B 54D
For which Ind/HUF Ind/huf All Ind/huf All
assessee
For which Long term Long term Long term LT/ST LT/ST
kindof asset
Which asset A Any capital Immovable prop. Urban land used Land or
to be trf residential asset except for agri.
building of
House residential Purpose forindustrial
Property HP atleast 2 yrs undertaking
(chargeable prior to date ofcompulsory
in head hp) trf. acquired by
Govt. & Used
for 2 prior yrs
for industrial
Purpose.
Which asset One One 5 yr redeemable Urban or rural Land or
to be residential residential bond: agri land building for
purchased house house -NHAI industrial
property in property in (National Highway purpose
India India authority of India)
(Note 1) -RECL
(Rural
electrification
corporation Ltd.)
-Power finance
corp.
-Indian railway
finance corp.
Upto what Within 1 yr 6 mnths from date of 2 yrs from date 3 yrs from date
time to before date trf of trf of trf
purchase? of trf or
After
transfer
within:
Pur: 2 yrs
Const-3 yrs
What is CG or Invst* CG CG or Invst or 50 CG or invst Cg OR INVST
exemption Invst Net consi Lakhs w.e.lower w.e.lower W.E.LOWER
w.e.lower
Upto what 3 yrs 3 yrs 5 yrs 3 yrs 3 yrs
time new
prop not to
be trf
Any other - -Assessee No loan on this - -
condition? should not Bond
own more
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 trf or Exemption CG CG exempted Exemption Exemption

conditions granted exempted earlier = LTCG in granted earlier granted earlier
contradicted/ earlier will earlier = this yr will be reduced will be reduced
be reduced LTCG in from cost of from cost of
from cost of this yr asset to calc. asset to calc.
asset to calc. new CG new CG
new CG
CG a/c Yes Yes No Yes Yes
scheme avbl?
Refer S.M, illu. 11 (JK -14)],Refer illu 12 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.(No such benefit in 54F)
2- Capital gain account scheme(CGAS): For sec 54, 54D, 54B, 54F, if investment not
done b4 Due date of filing return then amount to be invested in future 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 depreciable asset held for > 36m is LTCA. So,Even though
gain is STCG u/s 50. Exemption is available u/s 54F,54EC.
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.
Extra sum Q.19, Q-15 extra (=Q-11 hws) ,Q-3 exercise(=Q.16 jk)
Homework: Extra Q.16

 Tax Rates :
Asset
Listed shares/securities or unit of Any other asset

Equity oriented Mutual fund or unit
Or business trust
LTCG STCG
Through stock Outside 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 Or 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 NO NO NO
25/37% applicable?
Note: Higher surcharge also not applicable on dividend income,
What is shifting benefit?
1. If Other general rate income is lower than Basic Exemption limit (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)

“For Surcharge of Individual/HUF/AOP/BOI/AJP”
What is Total Income
(Incl. 111A,112 112A& Dividend Income)
> 50L but < 1 Cr >1 Cr but <2 Cr >2 Cr but <5 Cr >5Cr
10% 15% Excl. 111A,112

112A & Div.
> 5Cr > 2Cr < 2 Cr

Excl. Excl. 111A,
37% But 15%
111A,112,112A,div. 112,112A,div.
Also > 2 Cr & 15% < 5 Cr On all
< 2 Cr

25% on Tax of 25%&
15% on all
other Income 15%
15% on Tax
U/s
111A,112,112A,div.
E.G. For surcharge:
Surcharge on
Total Income 111A,112
Total Surcharge on 111A,112
excluding 112A&
income(Incl.all) other Income 112A&
111A,112,112A,div dividend
Dividend
56 L 3 cr 3.56 cr
3 cr 56 L 3.56 cr
6 cr 5 cr 11 cr
50 L 70 L 1.2 cr
50 L 10 L 60 L
10 L 1.95 cr 2.05 cr
2.1 cr 10 L 2.2 cr

E.g.-1 Mr.__________ (Resident) (59 yrs)
Salary(Computed) = 90000 STCG (111A) = 200000 STCG (Silver) = 50000
Int =50000 H.P.(Computed) = 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
*Shifting benefit-250000-230000=20000
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 120000 (130000-1L)
- 50000 -80000
=0* 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
Total: 470000
`170000
NIL
50000 120000 (130000-1L)
=@ 20% =120000 @15% @10%
=10000 =18000 =3000
Basic tax: 31000

+4% H&EC=1240
Total= 32240
E.g.4 Mr. Aagam has the following income (24 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 112,112A and 111A is below 2 cr so surcharge
applicable on total tax will be 15%.
Total: 20700000
` 19000000
LTCG STCG@111A LTCG@112A
` 5512500
500000 800000 (400000-1L)
=@ 20% = @15% @10%
=100000 =120000 =30000
Total tax : 5762500
S.C@15% : 864375

Total : 6626875 + Cess4% = 265075 = Tax payable = 6891950
E.g.5 Mr. Aagam has the following income (25 yrs, Resident):
Other income: 2,02,00,000
LTCG u/s 112:1200000
STCG u/s 111A: 800000
LTCG u/s 112A: 400000
Ans: Total income excluding 112,112A and 111A is exceeding 2 cr..So surcharge on other
incomes will be 25% and on 112,112A and 111A will be 15%.
Total: 22600000
` 20200000
` 5872500
1200000 800000 (400000-1L)
= @ 20% = @15% @10%
= 240000 = 120000 = 30000
All(Except 112,112A
112,112A & 111A Total
& 111A)
Total tax 5872500 390000 6262500
Surcharge rate 25% 15%
Surcharge 1468125 58500 1526625
Total 7789125
CESS 4%
Total 8100690
Refer Illu. 13
Refer exercise& jk
Q-1 exercise (=Q-10(hws jk)),
Q-17 extra,
Homework: Q-14(=Q.15 jk),18 extra (=Q-12 hws jk)

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. Income by way of “Int. on securities” (If not taxed in PGBP)
d. Income from machinery, plant or furniture let on hire (If not taxed in PGBP)
e. Any sum r’ved under keyman Ins. Policy (If not taxed in Salary or PGBP).
f. Sum of money / properties r’ved without consideration or Inadequate Consi.***
g. Interest r’ved on compensation or enhanced compensation. ***
h. 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 if not termed as Div. as per Companies Act.
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
Here AP= R&S + Bonus share value.

 2(22) (e)
Distribution of accumulated profit by way of Advance or Loan to Shareholder is treated as
Deemed Dividend to the extent of accumulated profit (except Cap. Profit-Bonus share value)
So, 2(22) (e) applicable when
1) Loan/advances given by company in & 2) Loan/advance given to shareholder having
which public is not substantially >= 10% of shareholding in company
interested i.e. closely held company
(Unlisted company)
Then
Amount up to Accumulated Profit In excess  No

(Excluding bonus share i.e. capital deemed div
profit)
Deemed Div.
Loan given Loan Shareholding Amount Amount Deemed div

by given % of loan of R&S for
to shareholder
ABC Mr.A 9% 10,00,000 12,00,000
Ltd(Unlisted)
PQR Mr.B 50% 10,00,000 12,00,000
Ltd.(Listed)
Bewakoof Mr.C 11% 10,00,000 12,00,000
pvt. Ltd.
Aagam Pvt Mr.D 10% 10,00,000 8,00,000
Ltd
 Loan given to concern of S.H. is Deemed Dividend in hands of S.H.

1) Loan/advances given by & 2) Loan/advance given to a concern (i.e. HUF / firm /
Unlisted company company, etc) in which our shareholder having >= 10% of
shareholding in company is substantially interested (Means
owner for >=20%)
Means 2 conditions-- >=10% shareholding in lending
company and >=20% ownership in borrowing concern
Then that loan amount will be Deemed dividend for that shareholder upto amount
of accumulated profit
E.G. X ltd. has 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?
Ans:
 However, following shall not be treated as deemed dividend u/s 2(22)(e):

1. Giving loan is ordinary course of business for compony like bank, NBFC

2. Advances given to Shareholder which is trade advance for benefit of company
Refer Illu. 1
(SM)=(Q-2 jk)
Once the Deemed Div. is given then A.P. will be reduced by that amount… (refer Q-5 jk)
A-5:
Case Date Loan Deemed Amount of Amount of Deemed
taken by dividend loan R&S dividend
taxable for u/s 2(22)(e)
1 - Mr. A Mr. A 1500000 2400000 1500000
2 - Mr. B Mr. B 2600000 2400000 2400000
3 - XYZ Bros. Mr. A 1500000 1800000 1500000
4 5.5.20 Mr. A Mr. A 1200000 1500000 1200000
6.6.20 Mr. B Mr. B 1000000 300000 300000
 On which date A.P. to be seen
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 of Yr. in Yr in which Paid Yr in which paid

which Declared.
Note: Dividend is a slabrate income.
Section 57: Against dividend income only interest exps. can be deducted maximum up to
20% of dividend income. (No other exps. can be deducted against dividend income)
E.G. Loan of 50,00,000 taken @10% to purchase shares. Dividend received Rs.10,00,000.
IFOS?
 56(2) (ib) : Casual Income
Winning from Crossword Races Incl. Horse

Lottery Puzzle Race, Card Game,
Other Game of
Gambling betting

This Income is taxed to recipient u/s
115 BB @ 30%
No Exps. allowed, No Deduction u/c VI-A, No

Shifting Benefit but rebate available.
Note:
Payer will deduct TDS u/s 194B/194BB @30% and it will pay balance amount. So
if in question after the Income(Net) is written then add gross income in IFOS.
Question: Mr.Bagha won Rs.5,00,000 in lottery and lottery company gave Rs.3,50,000(After
30% TDS) to him. Bagha has done Rs.30,000 exps to win this lottery.Calculate tax payable by
Bagha.
Ans:
56 (2) (viib) : Share Premium in excess of FMV

Conditions
Recipient is a Co. Receives Consideration

unlisted company Consideration for Exceeds for face
shares from value
Resident Person (i.e. at premium)
If above conditions satisfied then IFOS Income= (Issue price-Fair market value)
Note: If shares issued at discount then this concept not applicable
Refer Example on 4.462
 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. 5(=Q-3 hws jk), HW Q-3(exerc)(=Q-4 hws)
 56 (2) (ix): Advance money forfeited on failure to execute contract of sale of

building/land: If received on or after 1.4.14 then taxable in IFOS
Cross Ref. Sec. 51—Cap gain chapter

 56(2)(x) : For recipient  Taxability of sum of money or property Received w/o consi.
Or inadequate consideration (Gift Income)…W.E.From 1.10.2009
Transaction Condition Taxable Amt.
Sum of Money Without Aggregated value exceeds Rs. Entire Amt.
Consideration 50,000/- p.a. received
Movable Property Received Aggregate FMV of such prop. Entire FMV.
without consideration Exceeds Rs. 50,000/- p.a.
Movable Property R’ved with If FMV exceeds consi. For more Diff. of FMV &
Inadequate Consideration than Rs. 50,000/- p.a. Consi.
Immovable Prop. R’ved w/o Stamp duty exceeds Rs. Stamp Duty
consideration (land or building 50,000/- (Here per transaction)
or Both)
Immovable Prop. R’ved with Diff of actual value & SD is Difference between
Inadequate Consideration higher then stamp duty and
(Actual sale consi< Stampduty) a) Rs. 50,000/- & actual consideration
b) 10% of actual consi.
[In tuning with 43CA, 50C]
E.G. Mr. Aagam sold property to Mrs. Dalal for Rs. 2000000. Stamp duty on date of
agreement for Rs.2060000. What is IFOS income for Mrs.Dalal? And What will be FVC
for Aagam
Ans. IFOS= 0(Because diff is not more than 10% of actual consideration)
FVC= 20,00,000 for Aagam
E.g. Mr. Aagam sold property Mrs.Dalal for Rs.500000. Stamp duty on date of agreement
for Rs.610000. What is IFOS income for Mrs.Dalal? And What will be FVC for Aagam
Ans.: IFOS= 110000, FVC= 610000
Note : Generally we take stamp duty on date of registration but Taxpayer has option to
take stamp duty value as on date of agreement (& not date of reg.)
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 b4 date of agreement.
 When Sec. 56(2)(X) is N.A. :

If sum of money or prop. R’ved from :
1) Relative.
2) On occasion of own marriage
3) Under Will or Inheritance.
4) From local autho.
5) From Institution / Trust registered u/s 10(23C) or 12AA/12AB
6) Gift Income will also not be taxable if received for the followings:
1. Received by individual for expense on himself/family for illness of Covid 19
2. Received by family memberof deceased person from employer of deceased person(For
any amount) or from any other person (Upto total 10 lakhs).This exemption only if death
is due to Covid-19 and gift received within 12 month from date of death.
 Meaning :
1) Property : Capital asset namely
Immovable Prop. Share/ Jewellery Drawing, Painting, Bullion

(land or building) Securities/ Archeological
Virtual collection, sculpture
digital asset work of any art
[So, Capital asset do not include other movable asset like Mobile, TV, Fridge, Car, AC,
It also don’t include Stock in trade, rural agricultural land and hence if we receive any of
these assets without consideration then still 56(2)(x) not applicable]
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
 Lineal ascendant or descendant of spouse
Spouse of all above
For nephew uncle is relative

for uncle nephew is not
Rapid fire:
Gift Gift received amount Gift received Taxable?
from
Gift through bank 51,000 Friend
Gift through bank 50,000 Friend
Jwellery FMV=101000 Sister
Jwellery FMV=51000 Nephew
Bullion FMV=40000 Non relative
Car FMV=570000 Non relative
Land SD=61000 Brother of
mother
Building SD=41000 Friend
Cheque=40000 Total 85000 Friend
Jwellery=45000
Refer Illu. 2(=Q-1 hws jk),3(=Q-4 jk),4(=Q-2 hws jk)
Note :
Whether At time of Then what will be COA POH will be from?
receipt of gift it was at time of future CG?
taxable?
NO 49(1)-Cost to previous From previous owner
owner
Yes 49(4)-FMV/SD taxed in From current owner
IFOS
56(2) (xi) : Any compensation received in connection with term of e’ment If received from
person other than employer
 Unexplained Income / Exps. / Investment
Sec. 68 Sec. 69 Sec 69A
Cash Credit Unexplained invt. Unexplained Money
A/m recorded in books If investment Money, Jwellery,

(loan or etc.) & no found & not bullion, article found &
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 amt was borrowed by hundi & repaid otherwise a/c payee ch,,
Income
Sec. 115 BBE  60% (+ 25% SC+ 4% Cess) = 78%

(No expense, No deductions, No rebate, No Shifting Benefit)
E.g, There is a income tax 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: Unexplained invst= Rs.75000…Tax @78%=58500
 Deductible Expenses Sec. 57 :

a. Commission or remuneration paid for Interest Income
b. For letting out P & M, Furniture, Building.
Current repairs of building, Ins. Prem. On Premises, Repairs & Ins of P & M,
Furniture, Depre.
c. Family Pension  Ded =15000 or 1/3rd w.e. lower(No deduction if 115BAC
followed)
d. 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./salary 30% of exps paid same disallowance like
Paid o/s India to resi. w/o TDS sec. 40A(2), 40A(3),
Without TDS [excess payment to
relative & p’ment >
10000 otherwise than by…]
No exps. against casual income.
 Sec. 59: Same as Sec. 41(1)

Any deduction claimed in earlier yr & recovered 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
A-1:
Computation of Total Income of Mr.Chaturvedi (PY 2022-23 AY 2023-24)
Pts. Rs. Rs. Rs.

Income From other sources
Dividend Income 120000
(Section 8:Final dividend taxable in the year in which
declared)
Less: Interest expense paid abroad without TDS(Not -
allowed u/s 58)
Less: Interest paid in India in cash(Not allowed u/s -
58)
Less: Collection charges(As per section 57 from - 120000
dividend income only interest expense is allowed)
Dividend from shares in saraswat co-op bank 15000

(As per section 56(2) dividend is always taxable
under the head IFOS)
Loan from kalasangam private limited 600000

(As per section 2(22)(e) if shareholder having more
than 10% shareholding in a closely held company
takes loan then loan is taxable as deemed dividend
upto the amount of accumulated profit)
Interest Income:
Incometax refund interest 2000
Casual Income(70000+30000 TDS) 100000

Less: Expense(As per section 58 no exps is allowed - 100000
against casual income)
Gift Income:
From friends(5000*11) 55000
From wife(As per 56(2)(x) gift from relatives are not - 55000
taxable)
892000
Profit & gains from business or profession

Interest Income from govt bond held as stock 123000
Income From Salary

Gross salary 1200000
Less:16(ia) Standard deduction (50000) 1150000
Total Income 2165000
Calculation of tax payable:
Income taxed u/s 115BB(@30%) 100000*30% 30000
General rate income 2065000(Slab rate) 432000
Basic Tax 462000

Add: 4% Health & Education Cess 18480
Total Tax 480480
Less: Tds deducted (30000)
Tax payable 450480

CHAPTER: 8 CLUBBING
 Sec. 60 : Transfer of Income without transfer 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 transfer:
Sec. 61 Exception (62)

 If transfer is revocable
 It contains provision for  If transfer is irrevocable
retransfer property to transferor. then no clubbing applicable.
Then income arising to transferee

shall be clubbed in income of
transferor
 Sec. 64(1)(ii) : Clubbing of Remuneration paid to spouse clubbing is to be done if:
Taxpayer is He/she along with Spouse of T.P. is Spouse has no

Individual Relative has substantial employed in such technical or
Int. in a concern at any concern (salary, professional
time during P.Y. Fees, commi. Etc) knowledge for
[Co.   20% Voting cash or kind such
Other   20% Profit] employment.
 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 same person
Note: In case salary is clubbed.. Std deduction will be separate?:
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.
Taxpayer is Transferred asset (not Not in Transfer Directly

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

 Clubbing is still applicable if money is gifted & spouse invest in asset.
 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 Transfer asset as on 1st day of PY.
Total Investment of busi. on 1stday
(This prov N.A. if amount given as bonafied loan)
Refer : illu. 5
H.W. Exercise Q-4(=Q-4 jk)
 Sec. 64(1) (vii) :
If asset is trf w/o adequate consi. to any person or association & income from such asset is
used 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 Father
In law or Mother In 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 benefit for son’s wife
Refer Illu. 6

 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 income 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.
 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.
(No exemption if 115BAC followed)
Child
Minor married daughter Other minor
Every income(Including If rent income-Section 27

HP Income) to be clubbed (1500 exemption Not avbl)
To parent u/s 64(1A) Other Income-U/s 64(1A)
(1500 exemption available)
Refer Illu. 7,8(=Q-7 jk) of SM.

H.W. Q-5 (exercise)
 Cross transfer :
E.g. Mr.A trf shares of Rs.50000 to Mrs.B-Dividend Income Rs.2000

Mr.B trf debentures of Rs.60000 to Mrs.A-Interest Income is Rs.2400.
So here Income of Mrs.B for Rs.2000 taxable to Mr.B & Income of Mrs.A
Rs.2000(2400/60000*50000) will be taxable to Mr.A(Balance Rs.400 to Mrs.A)
 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.
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 given in
indirectly to HUF w/o adequate total or partial portion to spouse of
consi. trasnferor
Income of such prop. to be clubbed to Then income of 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.
This accretion point is N.A. for income of minor.
(4) In answer also write a note abt Sec. 56(2)(X)  N.A. from relative.
Refer Exercise Q. 1,2(=Q-8 jk)

Homework: Exercise Q.3,Refer JK Q.5, Q.6

CHAPTER: 9 AGRICULTURAL INCOME
 Sec. 10(1) :
Mr.A is owner of agri land in India. He gives on rent to Mr. B for Rs.10000. Mr. B uses for agri
produce and basic production is given for subsequent operations to Mr. C for Rs.5000. Some
produce is transferred to warehouse near this land for Rs.2000.Then Mr.B sales produce in market
for Rs.40000.
Here all incomes are agricultural Incomes.
 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 on rural agri. Land.
V. Income derived from sapling or seedlings grown in nursery = deemed Agri. Income.
 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,
Note: any spontaneous growth is not agricultural operation.
 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. For tax payable we may consider
agricultural Income if following condition are met :
a). Assessee is Ind. / HUF / AOP / BOI / AJP(i.e. persons to whom Slab rates applicable).
b). (Net) Agri. Income exceeds Rs. 5000
c). Total Income which is taxable (other than agri) exceeds BEL.
ASSESSEE
Ind / HUF / AOP / BOI / AJP Other
Whether other 2 condition satisfied Fully exempt
YES NO
Partial merger Fully exempt

 If these 3 conditions met then: Find out total Income by considering fully exempt but then find
out tax payable as under:
Step 1 : Find out (Total Income + Net Agri. Income)
Step 2 : Find out basic tax on step 1 (b4 cess)
Step 3 : Find out (B.E.L + net Agri. Income)
Step 4 : Find out basic tax on step 3(b4 cess) .
Step 5 : Final Basic Tax = (Tax on Step 2 – Step 4)
Step 6 : Then apply surcharge/REBATE & H&EC
Illu. 3 JKSC Q.1, 2
Q-2(Advance tax)
Note: For limits of rebate & surcharge only see taxable income.
E.g. Mr.B non agri income: Rs.60 L and agri income Rs.50 L
Ans:
 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: Agri income = FMV-Agri exps.
Step-2: Busi income = Sale value-Exps.-

FMV of agri produce.
Refer Illu. 1, Illu. 2,

Homework-Q-3, 5(jk)

A-1:
(a) As the taxable income is below basic exemption limit Rs.90000, partial merger will not apply. Hence
entire agri income will be exempt.
(b) Assessee is Individual, Taxable income is Rs.2,80,000(More than BEL) & Net agri Income is > 5000 hence
partial merger will be applicable.
Cal of tax payable
Step-1: Total Income + Net agri. Income
=280000+340000
=620000
Step-2: Basic tax on step-1
= 36500
Step-3: Net agri Income+BEL
= 340000+250000
= 590000
Step-4: Basic Tax on step-3
= 30500
Step-5: Step2-step4
=36500-30500=6000
Step-6: As total Income is less than 5L Rebate U/s 87A will apply
=Tax payable=6000-6000=Nil
(c) For company partial merger do not apply.

So entire agri Income will be exempt.
Tax payable=600000*25%(Assuming Turnover of 2020-21 is < 400 cr)
= 150000+4% H&EC
= 156000
A-2(Advance tax)
Computation of total Income of Ms.Shraddha for PY-2022-23(AY-2023-24)

Pts Rs. Rs.
Income from salary 580000
Income From House property
Rent Received 360000
Less:24(a) 30% std deduction (108000) 252000
Income From Other sources
Int on govt securities 25000
Int on saving bank Interest 3000
Casual Income(14000/70%) 20000
Agri Income(Exempt U/s 10(1)) - 48000
Gross Total Income 880000

Less: Deduction U/c VI-A
80C: Contri in PPF 60000
80TTA: Saving Bank Int 3000 (63000)

Total Income 817000
Cal Of Tax Payable:
817000
General Income:797000 U/s 115BB: 20000

Tax= 85400 Tax=20000*30%
(Working Note-1) = 6000
Basic Tax= 91400

+4% H&EC= 3656
----------------------------
= 95056
Less: TDS = (43080)
(6000+37080)
-----------------------------
Tax payable= 51976
= 51980
Working Note-1:
As assessee is Individual, Net agri Income is > 5000 & Total Income(Slab rate) is more than BEL Partial
merger will apply.
Step-1: Total Income + Net agri. Income
=797000+90000
=887000
Step-2: Basic tax on step-1
= 89900
Step-3: Net agri Income + BEL
= 90000+250000
= 340000
Step-4: Basic Tax on step-3
= 4500
Step-5: Step2-step4
=89900-4500=85400

CHAPTER: 10 OTHER EXEMPTIONS
(1). Sec. 10(2) : Income From HUF as a share from asset etc. is exempt for member.
Refer Illu – 4 (Sm)
(2). Sec. 10(2A) : Share in Profit of firm is exempt for partner
(3). Sec. 10(4): For individual  Int. on money standing to his credit in NR (external) a/c (NRE
A/c) is exempt if it is approved by RBI.
(4). 10(6)(ii) : Remuneration R’ved by foreign citizen for service as official of foreign govt. is
exempt if such official do not have any other busi./employment in India.
Provided Remu. Received by our official in their country is also exempt.
(5) 10(6)(vi) : Remuneration Received by foreign citizen e’yee from foreign enterprise for service
rendered by him during stay in India is exempt if stay in India does not exceed 90 days.
(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
given to govt or govt officials.
(8) Sec.10(6D) : Royalty Income of NR or foreign co. for serviced rendered to  NTRO i.e.
National Technical Research Org.
(9) 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 provided the person has not claimed any loss/damage as exps in
incometax.
Refer Illu. 5
(10) 10(11A): Any p’ment (Int. etc) from a/c opened with Sukanya Samriddhi A/c rules 2014.
(11) 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.
(12) 10(16): Any scholarship r’ved by Individual granted by anybody to meet cost of education.
(13) 10(17): For Member of Parliament or state legislature or committee:

Daily allowances,any allowamnces as per MP rules,1986,constituency allowance.
 Raj.  CIT v/s Shive Charan Mathur  MPS & MLAs are not e’yee hence salary and
allowance r’ved are IFOS.
No exemption in 10(17) if 115BAC followed.

(14) 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.
(15) 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.
Eligible e’yee = who has received Param Vir Chakra, Mahavir Chakra, Virchakra. (gallantry
awards)
(16) 10(26) :
Member of Schedule tribe i). Income from source in that
residing in area
Nagaland, Manipur, Tripura, ii). Int. & Div. (World Int.

Arunachal Pradesh, Mizoram, , Div.)
Ladakh of J&K
(17) 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
(18) 10AA: Newly established units in SEZ.

(No exemption if 115BAC followed)
 Unit in SEZ begun to mfg or produce any article or thing on or after 1.4.06 but before
31.3.21.
 Report from CA is to be furnished
 Period & ded’
Period Deduction
st
1 5 consecutives A.Y. (from 100% of profit from export
A.Y. is which begins mfg.
For next 5 A.Y. 50% of profit from export
50% of profit from export or Amt. trf. to “special
Next 5 A.Y. eco. Zone reinvestment allowance res’
w.e. lower
Profit from export = Profit of SEZ x Export T/o of SEZ

Total T/o of SEZ.
 Export T/o & total T/o shall not include :
Freight Telecommunication Ins. Exps. in F. Exch.

Charges Attributable O/s India
O/s India

Sum P.N. Illu 7
Q.5 (exercise)
(19) 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.
Exps to be disallowed in same PY in which it accrued even though that exempt income has
not been accrued or not received.
 Rule 8D: Method to find exps. for exempt Income.
Amt. equal to 1% of Avg invest of which income is exempt.(Maximum upto total exps)
E.g: Capital in partnership op.Balance Rs. 100 Lakh and closing balance Rs,80 L..Profit
received Rs.100000…Common exps. Is Rs.80000.What will be disallowed.
Ans: 1% of 90 L = 90000 or 80000 w.e.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
(Intra head  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

Incl. Salary [Max.  from HP
upto 2 71B [No
Lakh(71(3A)) Limit]
3. Loss from PGBP  Income from  Any other head 8Yrs Income
(Non speculative) PGBP (Spec. + excl. salary  from PGBP
[Sec. 72] Non Spec. + (72) (NS +
35AD) S + 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 -
(PGBP) 73(1)
6. Loss from owing  Income from  X (No head) 4Yrs Income

& main horse race O&M Race Horse  from O&M
– 74A R.H.
7. Loss of 35AD  Income from  X (No head) Infi. Income

35AD  from 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 C/f.

Salary)
11. Loss from card  No Set Off

game, lotteries,
gambling

NS=Non speculative
S= Speculative
Note :
1) Business loss can be set off against CG but Capital loss can’t against Business gain
STCL canbe setoff against LTCG bt LTCL can’t against STCG
NS loss can be setoff against S gain bt S loss can’t be against NS gain.
NS loss can be setoff against 35AD gain bt 35AD loss cant be againt NS gain
2) As per Sec. 72(2) :

Order of setoff in any year:
CY depreciation then CY PGBP loss then B/f PGBP loss then Unabsorbed depre.
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 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, generally first set off against Salary (Because other are not
allowed).
6) No setoff of HP against other head income if 115BAC followed.
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  ICAI

Q.3 – Behind
Homework section of jksc - All question same as module questions.
A-3: Calculation of Total Income of Mr. Krishna for PY-2022-23(AY 2023-24)
Pts. Rs. Rs.

PGBP Income
Income from business 175000
Less: CY depre. (40000)
135000
Less: B/f loss (135000) Nil
(Balance b/f loss of Rs.35000 to be carried forwarded for
balance life)
Income from house property

GAV 432000
Less: Municipal Tax (32000)
Net annual Value 400000
Less: 24(a) Std deduction 30% of NAV (120000)
280000
Less: Unabsorbed depre(Can be setoff against any head (155000) 125000
except salary)
Capital Gain
Short term capital gain on sale of plot(<24 months)
Full Value of consideration 640000
Less: Cost of acquisition (410000) 230000
LTCG on sale of debenture 60000

Less: LTCL (60000) Nil
(Balance LTCL to be carried forwarded)
Income From Other Sources

Total Income 387000
Losses to be carried forwarded
Loss Amount Upto which year

B/f business loss 35000 AY-2025-26
Long term cap loss 15000 AY 2031-32

CHAPTER: 12 Deduction from GTI u/c VI-A
 General Rules
1) Section-80A: Aggregate a/m of ded’ u/c VI-A cannot exceed G.T.I.

2) No ded’ can be claimed from special rate income (LTCG, STCG u/s/ 111A, lottery. etc)
3) 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)
4) Entire chapter not applicable if 115BAC followed except 80CCD(2), 80JJAA.
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 mode
Deduction of Ins. Prem. Cannot exceed:
Normal Person Person suffering from
80U
 Policy b/w 1/4/3 to 31/3/12 20% of sum 20%
assured
 Policy b/w 1/4/12 to 31/3/13 10% 10%
 From 1/4/13 10% 15%
Cross ref : Sec. 10(10D) :

Amt. R’ved under LIP incl. bonus is exempt except
Cross
Received for Keyman Ins. If Prem. Paid was in
Ref. Dependent person u/s Policy excess of
Sec. 80DD 10/15/20% of sum
194DA 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 IlIu. 3
c) Amt. deposited in “Sukanya Samridhi Yojana” [For Ind. + girl child]
d) Subscription in NSC [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.g. 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(b) but principal r’ment is
not] Pre construction period principal repayment 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.
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
w.e.lower
Eligible assessee
Self employed 20% of GTI or actual or
Rs.150000 w.e.lower
Salary = Basic + DA(%)
Sec. 80CCE: [Aggregate] 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 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 Self employed Employee Self employed
60% of total is exempt 60% of total 25% of e’yee contri fully taxable
exempt 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 e’yer in pension plan
Step-1: First add to Income of salary.
Step-2: Then ded’ upto 10% of Salary. However if CG/SG contributes then 14%.
Refer Illu. 4&5(=Q-1, 2, 3 hws jk)

Summary
80 C 80CCC 80CCD(1) 80CCD(1B) 80CCD(2)
Max ` 1.5L Max ` 1.5L Addi. upto Upto 10%

For e’yee For self e’yed ` 50000 of salary
10% of salary or 20% of GTI for CG
actual or 1.5L or actual or e’yee-14%
w.e. lower 1.5L w.e. lower (Also add full amt
80CCE – Max ` 150000 in salary income)

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 Member
+For spouse (Dep. + Not Dep.)
+ Depn. Child)
i). Mediclaim Avbl Avbl Avbl
ii). CG Health Avbl N.A. N.A.
Scheme
iii) Preventive Avbl Avbl N.A.
health check up
(PHCU)
25000 25000 25000
(If any person (If any person = (If any
= Resi .S .C Resi .S .C then person =
then 50000) 50000) Resi .S .C
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.C + > 60 yrs & no ins. Then actual medical exps. upto
Rs. 50000
E.g.: Mediclaim 10000 + Rs. 6000 for PHCU  what will be deduction u/s 80D=
 80D (4A): If mediclaim is paid for lumpsum, for more than 1 yr then ded’ will be
proportionately for each year. (For PY covered by policy tenure)
Deduction= Total premium paid/total no.of years (franctions=1)
E.g. Mr,A paid Rs.30000 as Mediclaim on 1.3.23 for 3 yrs. What will be deduction u/s 80D for
PY 2022-23?
Ans:
Illu. 6,7(=Q-4,5 hws jk)
7) Sec. 80DD : Ded’ for maintenance 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 medical treatment 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.

In case of death of annuity scheme if money received by nominee taxable.(80DD(3))
If before death money received by disabled person then not taxable.(80DD(3A)
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
If the patient is Resi. Senior Citizen  100000
Dependent person  Same as 80DD
 Ded’ amt shall be reduced by reimbursement by e’yer by insurer.

 E.g, Exps of Rs. 60000 done by resident for NR Brother dependent(62 years) on him & 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(Not
NBFC) 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…Deduction available for 8 years
(No need to see full time or Part time course)
In 80C  Tuition fee for full time
Refer Illu. 10(=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), but in set off chapter
Max 200000 against other head
So. Balance loss here upto 50000
11) Sec.80EEA. - Deduction in respect of interest on loan taken for certain house property
Condition: Ind + Not eligible to claim 80EE+ Home loan from fin. Inst (Not NBFC) &
sanctioned in P.Y.2019-20 to P.Y.2021-22
: Stamp duty 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 set off
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 Home loan Home loan E vehicle Loan
Sanctioned in 16-17 19-20,20-21,21-22 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 / community  Not deductible
iv) Donation in Cash > 2000  No deduction
v) Deduction only if paid in India
 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 Company
5) Zila Only]
6) PM 3) Indian Archery
7) CM Asso.
8) Notified Uni.
9) Swachh Bharat
10)Clean Ganga
(Only to resident)
11) PM Cares Fund
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)
+ 50%(Type 4 ) or 50% [Limit - 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
3) himself do not own any other HP as SOP anywhere.
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. = GTI – Ded’ u/s 80C to 80U (except 80GG) – LTCG – STCG u/s 111A.
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
Ded’ : Ded’ = Actual Exps.
: No ded’ for donation in cash > Rs. 2000.
16) Sec. 80GGB : Donation by India Co. to political party. [which was disallowed in
PGBP 37(2B)]
: 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(But here no deduction for advertisement exps.)
+ Ded’ not avbl. to local autho. & AJP. 100% Which funded by govt.
Illu. 15
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 ` 300000 A/m NMT 15% or

W.e. lower ` 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.
Illu 17, 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.
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
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 within 6 m from end of P.Y.

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 by Report of CA is

u/s 44AB splitting up or 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  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 iii) 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. Senior citizen
Resi.S.C.)
For(From Bank/PO) 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)
Note-1: cross ref 10(15)  First P.O. Saving Int. exempt upto Rs. 3500 then ded” of 80TTA]
E.g. Post office sb a/c interest Rs.13000.
Refer Illu 18, 19 (= 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

43(1) — Proviso for depre..single day >10000
40A(3) — for any exps.>10000(Transporter-
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 >2000 Not ded’
80GGB, GGC --: No ded for cash
80JJAA  otherwise then by a/c , no ded’
Refer Q.3 (exercise) + JK Q-2 ch.2
Homework:Q.5 (exercise) +JK Q-1,2,3 ch.1 (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
2354000
Gross salary
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-3 Computation of total Income of Mr.Chaturvedi (Age 70 years) For PY 2022-23(AY 2023-24)
Pts Rs. Rs.

LTCG U/s 112 245000
STCG 58000
S/b A/c interest 12000
FD interest 40000
Other Income(Bal Fig) 463240
80C: PPF 120000
80D: Mediclaim(For senior citizen limit is Rs.50000) 50000
80TTB:S/b A/c interest & FD interest(Max upto 50000) 50000
80G(Note-1) 17662 (237662)
Total Income 580578

Rounded off 580580
Note-1: Adjusted total Income=GTI-LTCG U/s 112/112A-STCG U/s 111A-All deductions(Except 80G)
= 818240-245000-120000-50000-50000
= 353240
Deduction for public charitable trust will be restricted to:
=(Donation *50%) or 50%(10% of ATI)
=(50000*50%) or 50%(35324)
=17662
Tax payable
LTCG U/s 112 @20% 245000 * 20% 49000

Slab rate Income 335580 1779
Basic Tax 50779

Add: 4% H&EC 2031
Tax Payable 52810

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 Income tax is recovered in PY through
TDS TCS Advance Tax

Summary chart
Who will Time of
Section Purpose Threshold Rate
deduct deduction
 Section 192 : Ded’ of tax from salaries (applied to NR also)
Ded’ at time of Rate = I.Tax E’yer will Exemption & Ded’ +

Payment p’ble by e’yee estimate Relief u/s 89 to be
(monthly) 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 positive Income-Deduction u/c VI-A]
(-) 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 claims
done by assessee
 Rule 26C : E’yer shall take following from e’yee as a proof u/s 192(2D)
HRA  it rent > 1L – Name, Address, PAN of Landlord
LTC, Ded’  Evidence of Exps.
Int. of H.P.  Name, Address, PAN of Lender
Deduction U/c VI-A= All proof of payment
Refer Q-1  JK
Note: For non monetary perq if employer has to bear TDS then first calc total tax of
employee.So we will get rate of Incometax(Total tax/ Total Income).Then apply that
rate of incometax on that non monetary perq..That much TDS not to be deducted.

A-1: Computation of Total Income(For TDS purpose) of MR. Manoj PY 2022-23(AY 2023-
24)
Particulars Rs. Rs.
Income From Salary
Basic salary(40000*12) 480000
DA(40%) 192000
Bonus 90000
Gross Salary 762000
Less: Sec 16(ia) (50000)
Std.deduction
Total Salary 712000
(-)Loss under HP (50000)
662000
Income From Other

Sources
Winning from lottery 80000
Royalty(Gross) 60000 140000
(Can’t deduct business loss
for calc tds u/s 192)

80C: LIP 20000
: PPF 50000 (70000)
80G: PMNRF(Type-1) (15000)

Total Income 717000
Calc of tax payable:
Casual Income U/s 115BB(80000*30%) 24000

General Income(637000-slab rates) 39900
Basic Tax 63900

Add: 4% H&EC
Total tax 66456
Less: TDS Under 194B (24000)
: TDS Under 194J (6000)
Tax payable(Rounded off) 36460

÷ 12 months 12
TDS Per month U/s 192 3038

 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)
Note: MMR- Maximum marginal rate (30%+37% SC +4% H&EC= 42.744%)
Example:
Service tenure Amt PAN given TDS?
6 51000 Y No
3 49000 Y No
2 50000 Y 10%
2 52000 N MMR
1(Ill health) 60000 Y No
 Sec. 193 : Ded’ of TDS from Int. on Security
For paying int. Time payment No threshold @ 10%

On securities to or of A/m
Resi. Credit to a/c w.e.
Earlier [Cr. in BOA incl.
Suspense a/c]
 Sec. 193 is N.A. for following :
1. IRFC, Power finance corporation 54EC capital gain bond interest then no TDS.
2. Any security by CG / SG.
3. IF RBI Bonds then TDS @ 10% if ineterst exceeding ` 10,000
4. No TDS if securities owned by LIC or GIC or subsidiary of GIC or any other insurer
5. 6.5/7% Gold bonds held by resident Individual provided total value of bond does not exceed
10000.
 Sec. 194: Ded’ of TDS from Dividend Income of domestic co.
For paying dividend to time payment 5000 @ 10%

Resi. or
Credit to a/c
w.e. earlier

Note: 1. No Threshold limit if dividend is paid by cash. (Means from 1st rupee TDS
applicable)
2. TDS N.A. If div paid to LIC, GIC, subsidiary of GIC
 Sec. 194K: Ded’ of TDS from Dividend of Mutual fund.
For paying dividend to time payment 5000 @ 10%

Resi. or
Credit to a/c
w.e. earlier
To whom 194 ACHIJ applicable?

Who is required
 Every person other than Ind / HUF
 Ind./HUF whose T/o exceeds 1 cr/50L in preceding P.Y.
Example:
Status B/P T/o of last yr CY ACHIJ?
Firm B 1L 50 L Y
Co. P 2L 1L Y
HUF P 10 L 55 L N
Ind B 90 L 2 cr No
Ind P 52 L 10 L Y
Ind B 1.01 cr 90 L Y
 Sec 194 A: TDS from Int. other than Int. on Securities (For Resi.)
Who is required @ 10% Limit Time

 *** P’ment or
Same in 194C, 194H, credit
194I, 194J] Bank/P.O Other-5000 w.e. earlier
To resi. S.C. 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. Rs. 40000 / Rs. 50000 is not branch wise if bank has adopted CBS
[If no CBS  Branch wise]

 No ded’ if Int. paid / credited (to)
Bank LIC By co. Op. Soc. Hudco

UTI to Co. op Soc.
 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.
Refer Illu. 1
 Sec. 194B: Winning from lotteries or crossword puzzle or card game & other game.
Who? At time of on amt of @ 30%

Person responsible p’ment exceeds
For paying by way ` 10000
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 Rs. @ 30%

Bookmaker or P’ment 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
Note: If TDS deducted due to amt exceeding 30000 then not to be deducted on entire amt…On
entire amt only when exceeding 100000 in FY.
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)
(For this payment refer 194M)
2. Meaning of Work :
Advertising Broadcasting Carriage catering Mfg. or supplying a

Telecasting of goods product as per
Passenger by specification of
Any mode customer
Other than by
Railway
By using R.M By using R.M

Supplied from supplied from
Customer It is work 3rd party
(Also if material supplied from associates- 40A (2) (b))
It is not work
3. Where in invoice material and labour both are there  TDS to be deducted
If material is mentioned Separately Material not shown 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 make P’ment for acquisition of broadcasting

Program as per specification right for content already produced
It is work : 194C No work : No 194C
Refer Illu. 2, 3,6 JK : Q-2
 Sec. 194D : Insurance commission
Who? Time of p’ment if a/m exceeds @ 5%

Person making p’ment or credit ` 15000
To resi. any income as w.e. earlier
Ins. Commi.
 194G : Commission on sale of lottery ticket.
Person paying comm. P’ment or if exceeds @ 5%

On lottery ticket cr. w.e. earlier ` 15000
 194H : Commission or Brokerage (other than Ins. Commission)
Who? P’ment if exceeds @ 5% no TDS

like 194A] or cr. ` 15000 For dealing in
To res. W.e. earlier Securities
TDS applicable even if used for personal purpose (unlike 194C, 194J)
 Sec. 194DA: TDS on non exempt p’ment under LIP.
Who? At time of p’ment if a/m > = 5%

Person paying LIP maturity ` 100000
a/m resi. not exempt u/s
10(10D)
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
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
2. NR Sports asso. - Amt. guarantee to be paid in relation to

game (other than card & gambling)
3. NR foreign citizen entertainer - Income from performance in India.
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 p’ment

Amt. p’ment > = 2500 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 limit

As per 80CCB (old sec.) p’ment

 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 for excl. refundable
w.e. furni. 10% 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). merely fixing room tarrif  Non regular…No rent
2). No TDS on GST component (If charged separately for all Sec. No TDS
on GST)
Refer JK Q-3
 Sec. 194 IA : Purchase of Immovable prop.
Transferee making p’ment to Cr. If prop.value @ 1%

Resi. Transferor (seller) for pur. Or > =50 L
Of Immovable prop. (except P’ment (Actual or
rural agri. Land) w.e. earlier SDV on date
of reg. w.e.
higher)
 Amt will include all charges in nature of club membership fees, car parking fees, electricity
and water facility, advance fees etc.
 Here limit is per property(Not per payer)
 Prop. may or may not be in India.(Owner should be resident)
Illu 7
 Sec. 194IB : P’ment of rent by certain Ind. / HUF (not covered in 194I).
By Ind./HUF not TDS appli. If @ 5% TDS to be ded’ in last

covered under monthly rent month of p.y. or last
194ACHIJ exceeds month of tenancy [tds
Rs. 50000 will not exceed last
month rent]
 If no PAN of payee  @ 20% [Restricted to last month rent]
Refer Illu. 8

 Sec. 194 IC : Specified agreement
Who ? Cr. @ 10%

Person making p’ment to Or (no limit)
Resi. (in cash) as per P’ment
agreement u/s 45(5A) w.e. earlier
Redevelopment of real estate

project
 Sec. 194 J : Profession or technical fees
Who ? For Limit for Cr.

Same as a) Professional each service or
(194A) b) Technical exceeding P’ment
c) Royalty Rs. 30000 w.e. earlier
d) Non compete agree [No limit for
e) Remu. to director director Rs.
[if paid otherwise than 1 also TDS]
salary]
Rate of TDS
Professional Fee, Non competence Fee, dir 10%
remuneration
Technical Fees 2%
All royalty 10%
Royalty in case of sale/distribution/exhibition 2%
of cinematographic films
In case payee is in business of call center For entire section 2%
 No TDS if for personal use (same as 194C).

 If deductor is individual/HUF then TDS to be deducted only on prof fees and technical
fees.
 Limit of 30000 is per payee per category.
 Professional service incl. sport activity. [Sport person, umpire, referee coach, trainer, event
manager, etc.]
 So, Event Mgmt
Sport Other event
194J 194C
Refer Illu. 9

 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 p’ment thres. ` 50L @5%

Ind/HUF not for carrying our work or or cr.
Covered by professional fees or w.e. earlier
Section 194C/ commission
194J/194H
So, if covered 194C.194J and payment for personal purpose then 194M
TDS deducted even if for personal purpose
So, now-summary for 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

> 1 cr/50L
IB for rent
ACHIJ appli. M-W/P/C
(C.J. not for
Personal purpose,
so for that 194M)
Refer Illu-10(SM)

Section 194N: TDS on cash withdrawal
Who? For resident at time of thre. 1Cr 2% above

Bank, post office for withdrawal payment `1 Cr.
Co. op soc in banking from any a/c
Busi. Maintained
However if person who is withdrawing cash has not furnished ROI for last three PY for
which limit of 139(1) is expired upto last PY….Then >20 L upto 1 cr—2% and if> 1 cr—
5%.
This section not applicable if cash withdrawn by:
1. Government, bank, Post office, NBFC
2. ATM operator
3. Trader, agent registered in APMC.
Section 194O: TDS on Payment of certain sums by e-commerce operator to e-

commerce participant
Who? Time of p’ment @1% If parti. For goods

Ecommerce operator or is IND/HUF & service
While making payment credit in BOA then threshold
To ecommerce participants W.e. earlier Rs.5L (If provide
(E.g. Amazon making to PAN and Aadhaar)
Traders for purchasing goods
from trader)
Note: If TDS deductible in this section then no TDS in any other section.
Section 194P: Deduction of TDS by specified bank in case of a senior citizen
Banking co. as notified by govt. (Specified bank) will deduct TDS of a resident Ind. aged
75 or more if individual has only:
Pension Income credited in the bank and Any interest (S/b or FD) Income from that bank.
If such person has furnished declaration, then bank will deduct TDS equal to tax payable
by such person and such person will not be required to file ROI then.
Refer Illu. 11

 Sec-194R: Deduction of tax on benefit or perquisites in respect of business or profession
(W.e.from 1.7.22)
Who? For resident before 20000 10%

Same like getting benefit releasing
ACHIJ or perquisites in benefit
Cash or kind
CBDT guidelines (12/2022)
Note: Though TDS applicable from 1.7.22 but limit computation to be done from 1.4.22.
Other section
A) Sec. 196 : No ded’’ of TDS on p’ment to

a). Govt., RBI, Mutual fund exempt in 10(23D)
B) 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 from end of month of declaration 
to Principal Commissioner of Income Tax of the next month
C) 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.
D) Section 198, 199, Rule-37BA

 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
E) Section 200: It will be duty of deductor to deposit TDS to govt within time prescribed.
Time limit-Rule 30
Deductor Month/challan Due date
Any other Deductee For any month On or before 7th of next month
For march month 30th April
TDS u/s 194IA,194IB Within 30 days of next month

F) Section 203: Deductor shall issue TDS certificate to Deductee:
Type Issue date

For TDS on salary Form 16(Annually)-by 15th June
For other TDS Form 16A(Quarterly)
G) 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
H) Interest liability:
Does not deduct TDS or deduct lower TDS
Deduct TDS after the date of deductible Fails to pay TDS to govt after ded”
@1% of TDS per month or part thereof @1.5% of TDS per month or
From date on which TDS deductible to the part 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-13(SM)
Note: See months date wise
I) 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
J) Section 206AA: Mandatory furnishing PAN: Deductee has to mandatorily furnish PAN. If
no PAN then deductor has to deduct TDS at higher of
i). Applicable rate or
ii). 20% (For 192A=MMR& 194O,194Q-5%)
No certificate u/s 197,197A w/o PAN
If incorrect PAN=deemed that no PAN.
L) Section 206AB: Higher TDS for non fillers of Income tax:

If the payee has not filled Income tax return for last year and aggregate TDS/TCS in that year is
>50000 then deductor will deduct TDS at higher rate of:
1. Twice the rate applicable

2. 5%
If to such person 206AA is also applicable then higher rate of 206AA or 206AB.
Refer Q-1 to 4(Exercise)
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 Rates
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%
8. For lease of parking lot, toll plaza, 2%
mining by one person to another for
business
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 1 cr/50L.
Specified buyer means: Every buyer other than

a) Buyer in retail sale for personal consumption c) Public sector co.
b) Govt., embassy, etc.
Note: If above goods are raw material for generating electricity then NO TCS.
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.

Section 206C(1G): Every authorized dealer of RBI at time of taking collection for remitting
outside India under Librelised remittance scheme of RBI will collect TCS (Other than tour
package) of buyer.
@5% on amt in excess of 7L if amount is >7L in FY.
@0.5% on amt in excess of 7L if amt is >7L in FY for purpose of repayment of education loan
taken from financial institution abroad.
A overseas tour operator will collect TCS @5% from buyer who purchases package.(No
threshold)
Time of TCS: debit in BOA or receipt w.e.earlier.

No TCS if buyer is CG, SG,high commission, LA.
No TCS of NR if he is on visit to India.
Section TDS 194Q
A buyer while purchasing goods during the year from Resident Seller will deduct TDS.
Conditions:
1. During the P.Y. purchase of goods exceeds Rs.50 Lakhs from the resident seller.
2. Total Turnover of buyer in immediately preceding PY was exceeding Rs. 10 Cr.
3. No other TDS or TCS applicable on the said transaction other than 206C(1H).
 TDS to be deducted @ 0.1% on amount of purchase in excess of Rs. 50 Lakhs.

 TDS to be deducted at time of credit in books or payment whichever is earlier.
TCS U/s Section 206C(1H) :Eligible Seller of goods to collect TCS of buyer if in PY sale
consi>50 Lakhs.
At time of receipt
TCS applicable from 1.4.21 itself.
@0.1% (If no PAN/aadhaar given then 1%).
No TCS if TDS is deducted u/s 194Q or anyother section.
No TCS on export.
Eligible seller = Seller whose T/o or gross receipt from business in last PY > 10 cr.
Eligible buyer = Any buyer except Govt, Local authority
No TCS for the goods mentioned in 206C(1)
Practical on TDS U/s 194Q r.w. TCS U/s 206C(1H)

Buyer Buyer’s Seller Seller’s last Goods TDS/TCS?
last year year purchased
turnover turnover during the
previous year
Mr. A 2 cr Mr. B 12 cr 40 L No TDS, No TCS
Mr.A 2 cr Mr. B 12 cr 60 L Mr.B will collect TCS
from MR.A on 10 L-
206C(1H)
Mr.A 12 cr Mr.B 2 cr 40 L No TDS,No TCS
Mr.A 12 cr Mr.B 2 cr 60 L Mr.A will deduct TDS of
MR.B on 10 L-194Q
Mr.A 7 cr Mr.B 5 cr 1 cr No TDS, No TCS
Mr.A 12 cr Mr.B 15 cr 70 L Mr.A will deduct TDS of
MR.B on 20 L-194Q
(Here TCS not applicable)
Mr.A 15 cr Mr.B 20 cr 80L TDS U/s 194-O will be
(Purchasing (E-commerce deducted by Amazon from
through participants) payment to be done to
Amazon) MR.B.
1. TDS U/s 194Q will not be applicable in case of transactions through recognized stock exchanges or
registered power exchanges or any other exchanges. (As buyer and seller do not know identity of each other)
2.If TDS deducted at time of advance—TDS on entire amount.

If TDS deducted at time of credit in books—TDS on Invoice amount excluding GST.
Illustration 12
Section 206CC: If no PAN provided then TCS rates higher of:

1.Twice rates of TCS and
2. 5%(1% in case of 206C(1H)
Section 206CCA: Same as 206AB.
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

Here TDS which is not deducted even though deductible is not to be reduced.
E.g. Whether Advance tax applicable?

Liable to
Name Age Resi status PGBP? Adv tax pble
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 44AD, Assessee covered by 44AD,
44ADA) 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 of Upto 100% of adv.tax Upto 100% of adv.tax
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).(If date not given then upto date
of filling return of income)

E.g. 1. Mr.A Income 7L TDS 1600.Adv tax paid 48000.234b?
Ans:
2. What if paid 46000.and date of 143(1) is 15.7.22.

Ans:
2. Interest u/s 234C: Int on deferment of TDS on returned income.
If paid lower than

No int if paid
Due date % TO BE PAID column 3 then
upto %
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/44ADA only last installment interest

2. For advance tax paid between 16/3 to 31/3 no 234B but 1month 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, dividend Casual Income PGBP arising for 1st time
Rule 119A: In calculation of Int u/s 234A, 234B, 234C amount on which Int to be calculated is to be
round off to lower side Rs.100.
Refer Q-5, 6(Exercise) and JKsc Q-1.

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. So 234B applicable.
Amount on which? = 66000-39300=26700(Rounded off)
Interest = 26700*1 %*( From 1/4/22 to 10.3.23)
= 26700*1%*12 M
= 3204
234C:
Interest(If 3 is <
How much Advance Min % amt for no How much
Due date 2 then Int on (1-
tax to be paid(1) int(2) Paid(3)
3)
15/06 66000*15%=9900 66000*12%=7920 8000 No interest
15/09 66000*45%=29700 66000*36%d=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)
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 Company/Firm/LLP OR
Every other person only if (Gross total Income+ Exemptions of capital gain)>Basic
exemption limit. OR
Deposited > 1 cr in any current bank accounts during FY OR
Incurred > 2 Lakhs in foreign travelling for himself +Relative OR
Incurred > 1 Lakh in electricity during FY OR
HE is R&OR and Owning any foreign asset OR
During PY turnover > 60 Lakhs (Rule 12AB) OR
During PY Professional receipt > 10 Lakhs (Rule 12AB) OR
Aggregate TDS/TCS in PY > 25000(For resident senior citizen Rs.50000)(Rule 12AB)
Deposited > 50 Lakhs In one or more saving account (Rule 12AB)
 Due date of ROI :
Assessee Due Date

th
1 Assessee = Report u/s 92E (T.P) 30 Nov. of A.Y.
2 Assessee = Co not covered u/s 92E
OrAssessee audited u/s 44AB or any other law 31st October.
Or ALL(Working/nonworking) partner of audited firm
3 Any Other Case 31st July
Refer SM Illu-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
Date of filling ROI
On self asst.tax 5L >5L
(If no tax is to be paid then no Int)
`1000 5000
E.G. Mr.X due date=31/7.T.I. 7L paid tax=15000.ROI filed on 30/9.What are consequences?
Ans: Tax payable = 39600

234A= 1% * 39600 * 2 months
= 792
234F= 5000
 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) :
No losses can be carried forwarded if ROI filled late after the due date of 139(1)
 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
3 mnths before End of A.Y. or Assessment(Scrutiny)order
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
3 mnths before End of A.Y. or Assessment(scrutiny) order
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(8A): Updated return
This return can be filled whether or not original return/belated return/revised return is filled.
This return can be filled up to 2 yrs (24 months) from end of AY.
This return cannot be filled if its return of loss or it decreases tax or increases refund from
the earlier filled return u/s 139(1)/(4)/(5)
This return cannot be filled if once return in this section is filled.
This return cannot be filled if assessment/reassessment/revision is pending or completed.
Provisos: When a person has filled ROI earlier showing loss then now updated return can be
filed only for return of Income.
Tax to be paid first u/s 140B.
Section 140B: How much additional income tax to be paid for return u/s 139(8A):
1. If return to be filed up to 12 months from end of AY then 25% of additional incometax.

2. If return to be filed after 12 months but before 24 months from end of AY then 50% of
additional Income tax.

 Sec – 139 (9) Defective Return :
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 accompanied 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. Upto which date
Who is required to obtain
No. 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 into Upto 31st May of A.Y.
financial transaction> 2.5 lakh
4 Every trustee,director,karta,member etc of Upto 31st May of A.Y.
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.
 In lieu of PAN even AADHAAR number can be quoted w.e.f.1.9.19.
For following transaction, PAN is to be quoted (CBDT).
Transaction Limit
(1) Sale / Purchase of motor vehicle (other than 2-Wheeler) Any amount
(2) Opening account (other than TD and Savings a/c) Any amount
(3) Appli. to debit card – credit card Any amount
(4) Opening demat a/c. Any amount
(5) Payment to hotel / Restaurant at one time or for travel in foreign If in cash > Rs.50,000
or pur. F. currency
(6) Payment for purchase of MF units Amount > 50,000

(7) Payment for purchase of debentures / bonds to company or Amount > 50,000
from RBI to purchase bonds.
(8) Deposit with Bank/P.O. If cash deposit in a day >
Rs.50,000
(9) Purchase of Bank draft or pay order In cash > 50,000 in a day
(10) Any time deposit (Bank, Post, NBFC) For 1 TD > 50,000 or
aggregate > 5 L in PY.
(11) Payment to LIC Premium > Rs.50,000 in a year
(12) Sale, purchase of securities (not shares) > 1 L per transaction
(13) Sale, purchase of unlisted shares > 1 L per transaction
(14) Sale, purchase of immovable property > 10L (actual or stamp
duty)
(15) Sale, purchase of Goods – service > 2 L per transaction
Question 5
 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 Indian

Of J & K I.T. Act citizen Citizen
Aasam,
Meghalaya
234H: 1/4/22 to 30/6/22-Late Fees Rs.500…After that Rs.1000.

If no PAN and Aadhaar linked then from 1.4.23(Rule 114AAA):
No return can be filled, No return will be processed, No refund, No response of defective return,
TDS at higher rate.
 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 with employee of co. or
which assessee employee of person
has bank a/c. Audited u/s 44AB
 Only those TRP can file revised return who has filed Original Return.
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 / Authorised person
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
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 member who is able to
verify
 Sec-140 A : Self assessment tax

S.A.T. = Tax incl. sc and H&ec 
(–) TDS / TCS 
(–) Advance Tax 
(–) AMT credit 
(–) relief u/s 89 

 Special cases where income is assessed in Previous year instead of assessment year.
1. Section 172: Shipping Busi. Of NR: Pay tax & file ROI in PY itself and then leave India.
2. Section 174: Person leaving India and no intention to return to India then pay tax file ROI
of the PY in the PY itself
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 pay…
5. Section 176: Discontinued business.

Total Income
AMT concept (Section 115JEE): Alternate minimum tax concept is applicable for
Deduction u/s
Person 35AD/10AA/80JJAA/80QQB/80RRB
Not claimed Claimed
1) For firm/LLP N.A. Applicable
2) Ind/HUF/AOP/BOI/AJP
whose adjusted total N.A. Applicable.
income> 20 Lakhs
AMT only if 115BAC not followed.
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:---Section 115JC
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.)—rate as per 115JF
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=52500+ 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 year 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.
Year Tax as AMT AMT Credit to be Tax Credit AMT Credit
per Credit used in this payable generated available
normal available year (1or 2 this year (Closing
(1) (2) (Opening (1-2) or 3 w.e. (5)=2-1 balance)
balance) w.e.lower higher)-4 (3-4+5)
(3) (4)
2016- 100000 125000 0 0 125000 25000 25000
17
2017- 120000 125000 25000 0 125000 5000 30000
18
2018- 130000 120000 30000 10000 120000 0 20000
19
2019- 90000 92000 20000 0 92000 2000 22000
20
2020- 80000 60000 22000 20000 60000 0 2000
21
Section 115BAC: New tax regime with effect from P.Y.20-21 for Individual/HUF-Optional.
Government has introduced a new scheme for Individuals and HUFs (Resi/NR/Senior
citizen/all) with lower rates for those foregoing certain exemptions / deductions:
Total Income Tax Rate (under the new

regime)
Up to Rs.2,50,000 Nil
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 7,50,000 10%
Rs. 7,50,001 to Rs. 10,00,000 15%
Rs. 10,00,001 to Rs. 12,50,000 20%
Rs. 12,50,001 to Rs. 15,00,000 25%
Above Rs. 15,00,000 30%
1. Optional scheme.
2. No change in Rebate/surcharge/special rate income/H&EC.
3. Individual or HUF does not have business income, the option is to be exercised for
every year along with the filing of the return of income under section 139(1) for the
year.
4. Where such individual or HUF has business/profession, the option is to be exercised
on or before the due date of filing the return of income and such option once exercised
shall apply for that previous year and to all subsequent years. One-time change is
possible. After such change is done once then change never possible unless business
stops.
5. Which deduction/exemptions not to be allowed?

1. Leave Travel Concession – section10(5)
2. House Rent Allowance – section10(13A)
3. Exemption for allowance u/s 10(14) except-Transport allowance,
Conveyance allowance, daily allowance, tour-travel-transfer
allowance.
4. Allowances to MPs/MLAs – section10(17)
5. Clubbing Exemption Rs.1,500 – section10(32)
6. Exemption for unit in SEZ – section10AA
7. Standard and other deductions (including profession tax) from salary – section16
8. Interest in respect of Self Occupied Property– section 24(b)
9. Setoff of loss under the head income from house property against other heads –

10. Additional depreciation – section32(1)(iia)
11. Specified deduction for donations or for expenditure on scientific research –
section 35(1)(ii)/(iia)/(iii) or section 35(2AA)
12. Weighted deduction for expenditure on specified business/agricultural Extension
project–sections 35AD and 35CCC
13. Standard deduction for family pension–section57(iia)
14. Deductions under Chapter VI-A (such as section 80C, 80D, 80 TTA, 80TTB, 80G
etc.) Other than the following:-
a) 80CCD(2) – employer’s contribution in notified pension scheme
b) 80JJAA – employment of new employees
c) 80LA – IFSC centre(CA Final)
15. AMT concept N.A. once this option is exercised
If any last yr loss belongs to above mentioned deductions then that loss cannot be setoff
this year.
If employee wants employer to deduct TDS U/s 192 as per 115BAC then give declaration in
starting of PY.
Refer all exercise.

A-2
Computation of total Income of Dr.Niranjana for PY 2022-23(AY 2023-24)
Pts Rs. Rs. Rs.
Profit or gains from business & profession
Net profit as per P&L 440400
Less: Incometax refund (5000)
(Not an Income)
Less: Incometax refund interest (450)
(Chargeable in the head IFOS)
Less: Dividend Income (10500)
Less: Casual Income (35000)
Less: Rent Income (27000)
(Chargeable in the head House property)
Add: Rent paid for residential house 30000
(As per 37(1) personal expenses not allowed as
deduction)
Add: Depreciation as per books -
Less: Depreciation u/s 32(5L*15%+2L*7.5%) (90000) (90000)
Add: Municipal tax of residential house 2000
(As per 37(1) personal expenses not allowed as
deduction)
Add: Donation for scientific research (100% - -
allowed as per section 35)
304450
Income From House property

Gross annual value(GAV) 27000
Less: Municipal tax paid by owner (2000)
Net annual Value 25000
Less: Deduction u/s 24
(a) 30% of NAV (7500)
(b) Interest on Borrowed capital - (7500) 17500
Income From Salary

Gross Salary 90000
Less: 16(ia) Standard deduction (50000) 40000
Income From Other sources

Income tax refund interest 450
Casual Income(Gross=35000+15000) 50000 60950

80E: Interest on education loan 55000
80C: Tuition fees 100000
80D: Mediclaim(As she is senior citizen limit 28000
will be 50000)
80GG: Rent paid by self employed(Not - (183000)
allowed as deduction because in same city surat
she has another HP)
Total Income 239900
A-6
Computation of total income Mr.Rajiv for PY 2022-23(AY 2023-24)
Pts Rs. Rs. Rs.
Profit & Gains from business & profession
Fees from professional service 5938000
Less: staff salary (2150000)
Less: Admin exps (1148000)
Less: Office rent (30000)
Less: Depreciation on motor car (25500)
(425000*15%*50%*4/5)
Less: Depreciation of books (8000)
(20000*40%)
Less: Depreciation of computer (6000)
(30000*40%*50%)
Less: Motor car maintenance (8000)
(10000*4/5)
Less: Depreciation on opening balances
Furniture (60000*10%) (6000)
Plant & machinery (80000*15%) (12000)
Computers (50000*40%) (20000) (38000)
2524500

Self occupied property (50%)
NAV Nil
Less: 24(b) Int.on borrowed capital (30000) (30000)
(88000/2=44000 restricted to 30000 as loan taken
before 1.4.99)
Let out property (50%)

Gross Annual Value(Always accrual basis) 60000
(5000*12)
Less: Municipal tax -
Net annual value 60000
Less: Deduction u/s 24
(a) 30% of NAV (18000)
(b) interest on b.c.(88000/2) (44000) (2000) (32000)

Less: Deduction u/c VI-A
80C: Principal repayment of housing loan 100000
: LIP 24000
: PPF 20000 144000
80D: Mediclaim 18000 (162000)
Total Income 2330500
A-10
Computation of total income of Ms. Rosy(NR) for PY 2022-23(AY 2023-24)
Pts. Rs. Rs.
Income From Salary:
Pension from Canadian government(Received - -
and accrued outside India so not taxable to NR in
India-Sec.5)
Capital Gains
Long term capital gain 100000
(From Land at Mumbai-deemed accrued in
India-Section 9)
Short term capital gains on sale of shares 20000 120000
(deemed accrued in India-Section 9)

Rent received(GAV/NAV) 60000
Less: 24(a) 30% of NAV (18000) 42000

(40000)
Less: 80C: LIP
Total Income 122000

Calculation of tax payable
Pts Rs. Rs.
Special rate income: LTCG 100000*20% 20000
@112(No shifting benefit to
NR)
STCG @ 111A 20000@15% 3000
General Rate Income-2000 0 0
Basic Tax 23000

Add: 4% H&EC 920
Total Tax payable 23920
Computation of total Income for Ms.Mary(R&OR) for PY 2022-23(AY 2023-24)

Pts Rs RS
Income from salary
Gross Salary 60000
Less: 16(ia) Std deduction (50000) 10000
Capital Gains
Long term capital gains(112) 100000
Short term capital 250000 350000
gains(111A)
Income From House

Property
Rent received 30000
Less: 24(a) 30% std (9000) 21000
deduction

80C: LIP 10000
: PPF 20000
80D: Mediclaim 25000
Total 65000
Deduction restricted to (31000)
general rate income
Total Income 350000
Computation of tax payable

Pts. Rs. Rs.
LTCG u/s 112@20% (100000-shifting benefit -
100000)*20%
STCG U/s 111A @ 15% (250000-balance Rs.150000 15000
shifting benefit)*15%
Basic Tax 15000

Less: Rebate U/s 87A (12500)
Tax 2500
Add: 4% H&EC 100
Tax Payable 2600
Last day to be checked:

Things that you will forget in exam:
1. Salary std deduction 50000
2. Rent income std deduction 30%
3. Family pension std deduction 15000 or 1/3rd of full pension w.e.lower
4. Int on compensation std deduction 50%
5. Rebate U/s 87A
6. Round off
7. Deduction cannot be claimed against special rate income
8. Shifting benefit for resident
9. Minor income exemption u/s 10(32) upto 1500 p.a.
10. 80TTA/80TTB & 10(15) post office int exempt upto 3500
11. 50CA
12. Max deduction against dividend income 20% or interest w.e.lower
Case laws to remember:

1. Bom-CIT Vs. Manjula J.Shah
2. SC-CIT Vs.Dempo Co.Ltd.
3. SC-CIT Vs. Keshavji Morarji
4. Raj-CIT Vs.Shive charan Mathur
Dates to be remembered:
1. 1.10.98-LTC children limit
2. 1.4.99- HP SOP int limit
3. 1.4.1-FMV as per 55(2)
4. 1.4.14- Advance money forfeited
5. 1.2.18 & 31.1.18- FMV for listed shares
6. 1.10.9 – Gift section became applicable
7. 1.7.21- TDS U/s 194R applicable.

9. 23.8.19 to 31.3.20- Car higher depre.
Limits for cash transactions we have already written in deduction chapter end pls refer it.
TDS chart to be seen last day.
Most imp for May 23-Residential status exceptional cases, PF interest Rule 3B,115BAC, 194-
O, 194I,194P,194R, 80EEA,194Q,206C(1H), 139(1) cases,139(8A)
“Believe in GOD, Believe in you….If determination is there then you will be CA ANYHOW”
ALL THE BEST

Inter CA DT JKSC Mumbai-Prof - Aagam Dalal (May 23 Nov 23)

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CHAPTER: 1 Basic concept (3 to 6 Marks)

 How Government has power to make any law

Article 246 of constitution.

Union List/central list State List Concurrent List

 Entry 82: Income Tax other  Stamp Duty No tax

Direct Tax(Incometax act) Indirect Tax(GST,custom)

[Burden on “ Payer ”] [Burden on “ Consumer ”]

Income Tax Act, 1961

Section, Subsection CBDT

Inter CA – DT Summary Page 1 Prof. Aagam Dalal (J.K.S.C)

Determine Residential status

Classify under heads

Set off / Carry forward

Gross total Income (GTI)

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

Basic Tax @ Applicable Rates

+ Health & Education Cess (4%)

(-) Advance Tax & TDS

Tax Payable / Refundable

Inter CA – DT Summary Page 2 Prof. Aagam Dalal (J.K.S.C)

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

+ Continental self / Exclusive Economic Zone

 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

Inter CA – DT Summary Page 3 Prof. Aagam Dalal (J.K.S.C)

5. AOP / BOI : Association of person (Any person can become member)

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

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

3.Gross Total Income [80B(5)]  Total of the Heads

 Previous Year 2(34)/ section 3:

 Assessment Year [2(9)]:

Inter CA – DT Summary Page 4 Prof. Aagam Dalal (J.K.S.C)

Slab rates Resident individual Resident individual Resident individual

Basic Exemption Limit 2,50,000 3,00,000 5,00,000

 At any time: even 1 day.

Up to 2.5L B/w 2.5L - 5L 5L - 10L 10L - 30L

Basic Tax = ` 7,12,500

 Mr. (95 yrs)-7L

Upto 5,00,000 Nil

Basic Tax 40,000

 What if above person is NR.

Basic Tax 52,500

Inter CA – DT Summary Page 5 Prof. Aagam Dalal (J.K.S.C)

Homework: (1) Mr. Ram(63 yrs)-Rs. 8L,

Section 115BAC: With effect from(W.E.F) PY 20-21

Basic tax(30%)= 1350000

(2) Co-operative society:

Domestic Company Foreign Company

E.g.Tata Ltd Gross total Income 60L, Deductions  2L,

Inter CA – DT Summary Page 6 Prof. Aagam Dalal (J.K.S.C)

Example on basic exemption limit:

ABC & Co. 80 R

 Rebate (87A)  Discount

Example: Resident Individual  Income  4,60,000,

R.I (65 yrs): 510000

Inter CA – DT Summary Page 7 Prof. Aagam Dalal (J.K.S.C)