Basic Concepts and Taxation of Individuals

Monika Goel’s Online Classes
For CS Professional Students
Advanced Tax - Laws and Practice

Chapter 1- Taxation of Individuals, Partnerships and Companies
About the course
Advanced Tax Law & Practice covers three areas of taxation divided in two
parts
• Part A- Direct Taxes and International Taxation

(30 marks)
• Part B- Indirect Taxes (70 marks)
– Covers excise, customs, service tax and VAT.
How to study
• Regular study is must
• Updated knowledge of amendments, notifications and judicial decisions
very important (almost 20% of the question paper from updates)
– Once a topic is introduced in the class, try to finish reading it from the
study material the very next day. Thereafter, check out the reference
books and read it from reference books.
– Try solving practical problems with hand, once you have understood
the theoretical aspects.
– Mark important aspects in the study material or make your own notes.
– In case of any doubts, click a picture of it and send it to me through
email preferably, else through whatsapp and if the doubts are more,
take an appointment to discuss over phone.
– Prepare well for exam preparatory (Dec-15 almost 20% q.p from exam
prep questions) and use the feedback to improve upon your
understanding of the subject.
mail: mgonlineclasses@gmail.com
Reference Books
Direct Taxes and International
Taxation Indirect Taxes
TAXATION IN INDIA- THE
CONSTITUTIONAL FRAMEWORK
Constitutional Framework...
• Taxes levied by Central Government and State Government(s)
• Authority to levy a tax is derived from the Constitution of India
– Which allocates power to levy various taxes between the Centre and
State
– Article 265 of the Constitution which states that "No tax shall be
levied or collected except by the authority of law”
• Article 246 of the Indian Constitution, distributes legislative powers
including taxation, between the Parliament of India and the State
Legislature
• Schedule VII enumerates use of three lists;
– List - I Where the parliament is competent to make laws
– List - II Where only the state legislature can make laws
– List - III Where both the Parliament and the State Legislature can
make laws upon concurrently
...Constitutional Framework
Union List State List Concurrent List
• Income Tax • Taxes on lands and • Stamp duties other than
• Custom Duty buildings duties or fees collected
• Excise Duty • Excise duty on alcoholic by means of judicial
liquor etc stamps, but not
• Corporation Tax
• Entry tax including rates of stamp
• Service tax duty
• Sales Tax
• Central Sales Tax
• Tolls
• Stamp duty in respect of
bills of exchange, • Luxury Tax
cheques, promissory • Stamp duty in respect of
notes, etc documents other than
those specified in the
provisions of List I
The constant blurring of taxing jurisdiction between the Centre and the
States has necessitated multiple Constitutional challenges
Heads of Taxation in three Lists- Union List
S. Parliament
No.
1 Taxes on income other than agricultural income (List I, Entry 82)
2 Duties of customs including export duties (List I, Entry 83)
3 Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for
human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal
and toilet preparations containing alcohol or any substance included in (ii). (List I, Entry 84)
4 Corporation Tax (List I, Entry 85)
5 Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of
companies (List I, Entry 86)
6 Estate duty in respect of property other than agricultural land (List I, Entry 87)
7 Duties in respect of succession to property other than agricultural land (List I, Entry 88)
8 Terminal taxes on goods or passengers, carried by railway , sea or air; taxes on railway fares and freight (List I,
Entry 89)
9 Taxes other than stamp duties on transactions in stock exchanges and futures markets (List I, Entry 90)
10 Taxes on the sale or purchase of newspapers and on advertisements published therein (List I, Entry 92)
11 Taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course
of inter-State trade or commerce (List I, Entry 92A)
12 Taxes on the consignment of goods in the course of inter-State trade or commerce (List I, Entry 93A)
13 All residuary types of taxes not listed in anymgonlineclasses@gmail.com

mail: of the three lists (List I, Entry 97)
Heads of Taxation in three Lists- State List
S. State Legislature
No
1 Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and
records of rights, and alienation of revenues (List II, Entry 45)
2 Taxes on agricultural income (List II, Entry 46)
3 Duties in respect of succession to agricultural income (List II, Entry 47)
4 Estate Duty in respect of agricultural income (List II, Entry 48)
5 Taxes on lands and buildings (List II, Entry 49)
6 Taxes on mineral rights (List II, Entry 50)
7 Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human consumption, and (ii)
opium, Indian hemp and other narcotic drugs and narcotics (List II, Entry 51)
8 Taxes on entry of goods into a local area for consumption, use or sale therein (List II, Entry 52)
9 Taxes on the consumption or sale of electricity (List II, Entry 53)
10 Taxes on the sale or purchase of goods other than newspapers (List II, Entry 54)
11 Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio or television (List II,
Entry 55)
12 Taxes on goods and passengers carried by roads or on inland waterways (List II, Entry 56)
13 Taxes on vehicles suitable for use on roads (List II, Entry 57)
14 Taxes on animals and boats (List II, Entry 58)
15 Tolls (List II, Entry 59)
16 Taxes on profession, trades, callings and employments (List II, Entry 60)
17 Capitation taxes (List II, Entry 61)
18 mail: amusements,
Taxes on luxuries, including taxes on entertainments, mgonlineclasses@gmail.com
betting and gambling (List II, Entry 62)
Constitutional Amendment Bills
•To enable Parliament to formulate by law principles for determining the
modalities of levying the Service Tax by the Central Govt. and collection of the
proceeds thereof by the Central Govt. and the State, the amendment vide
Constitution (92nd amendment) Act, 2003 has been made.
•Consequently, new article 268 A has been inserted for Service Tax levy by Union
Govt., collected and appropriated by the Union Govt., and amendment of seventh
schedule to the constitution, in list I-Union list after entry 92B, entry 92C has been
inserted for taxes on services.
•The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014

was introduced in the Lok Sabha on December 19, 2014 by the Minister of
Finance, Mr. Arun Jaitley. (passed by Lok Sabha on 6th May 2015)
•The Bill seeks to amend the Constitution to introduce the goods and services tax
(GST). Consequently, the GST subsumes various central indirect taxes including
the Central Excise Duty, Countervailing Duty, Service Tax, etc. It also subsumes
state value added tax, octroi and entry tax, luxury tax, etc.
Concurrent powers for GST: The Bill inserts a new Article in the Constitution to
give the central and state governments the concurrent power to make laws on the
taxation of goods and services.
• A law to levy or collect any tax or duty or cess
or fees does not include an executive order or
a rule without express statutory authority. A
Money Bill, which includes a bill to impose,
abolish, remit, alter or regulate any tax shall
not be introduced in Rajya Sabha or a
legislative council. Such a Bill shall not be
moved or introduced except as the
recommendations of the President or the
Governor, as the case may be.
Distribution of revenues between the
Union and States
• Stamp duties like those on financial documents and excise or medicinal or toilet preparations as
mentioned in the Union list are to be levied by the Government of India but are to be collected by
the States (Article 268).
• Central Sales Tax is levied and collected by the Government of India but is assigned to the States
(Article 269).
• All taxes and duties referred to in the Union list, except those referred to in Articles 268 and 269,
surcharge on taxes and duties, for the purposes of the Union and any cess levied by the Parliament
for specific purposes are to be collected by the Government of India and are to be distributed
between the Union and the States in the manner prescribed by the President by order until a
Finance Commission has been constituted and after its constitution, as prescribed by the President
by order after considering the recommendations of the Finance Commission.
• As per recommendations of the Thirteenth Finance Commission duly accepted by the Government,
in the overall scheme of transfer of funds, 39.5% of the gross revenue receipts is the ceiling for such
transfer of funds to the States.
• The share of states in the net proceeds of shareable central taxes has been raised from 30.5 per
cent to 32 per cent.
• Fourteen Finance commission has submitted its report on 24th February, 2015 increasing the share
of states in divisible pool to 42% and not sharing the proceeds of service tax with the State of J&K.
Review Question
1. Prior recommendation of the President of India is required to Bills
affecting taxation in which States are interested under Article —
(a) 271 of the Constitution of India
(b) 281 of the Constitution of India
(c) 274 of the Constitution of India
(d) 273 of the Constitution of India.
2. As per Article 270(1) read with Article 4(a) of the Constitution of
India, the proceeds of corporation tax are ––
(a) Not divisible among the States
(b) Divisible among the States
(c) Divisible between the Centre and States
(d) None of the above.
3. Powers given to Parliament by Entry No.97 of List I of Seventh
Schedule to the Constitution of India are called_____________.
Review Questions
• Which schedule to the Constitution of India indicates bifurcation of powers
to make laws, between Union government and State governments —
(a) First Schedule
(b) Seventh Schedule
(c) Eighth Schedule
(d) Twelfth Schedule.
• (ii) Which article of the Constitution of India provides that no tax shall be
levied or collected except by authority of law ––
(a) Article 265
(b) Article 268
(c) Article 269
(d) Article 274.
Review Question
• (i) What is the source of power of levying VAT under the
Constitution of India -
(a) Entry 84 of List I
(b) Entry 97 of List I
(c) Entry 52 of List II
(d) Entry 54 of List II.
(ii) What is the source of power of levying Service Tax under the
Constitution of India –
(a) Entry 92C of List I
(b) Entry 97 of List I
(c) Entry 54 of List II
(d) Entry 59 of List II.
Review question
The Income Tax Act, 1961
Income-tax Act, 1961
• Came into force w.e.f. 1st April, 1962
• Extends to whole of India
• Consists of more than 300 sections, 23 Chapters and 14

schedules. The number of sub-sections, provisos and
Explanations runs into several hundreds
18
• The Act determines which persons are liable to pay tax and in
respect of which income. The sections lay down the law of
income tax and the schedules lay down certain procedures and
give certain lists, which are referred to in the sections.
• However, the Act does not prescribe the rates of Income Tax
19
• The rates of Income-tax are prescribed every year by the
Finance Act (popularly known as “The Budget”)
• At present, the tax rates are same for all corporate assessees
and partnership firms (30%) and there are different slabs for
Individual tax payers
• We also have surcharge and education cess for all assessees
20
Finance Act
• Part I of the First Schedule to the Finance Act, 2016, seeks to specify the
rates at which income-tax is to be levied on income chargeable to tax for
the assessment year 2017-18.
• Part II lays down the rate at which tax is to be deducted at source during
the financial year 2015-16 from income subject to such deduction under
the Income-tax Act, 1961;
• Part III lays down the rates for charging income-tax in certain cases, rates
for deducting income-tax from income chargeable under the head
"salaries" and the rates for computing advance tax for the financial year
2016-17 i.e., A.Y.2017-18.
• Part III of the First Schedule to the Finance Act, 2016 will become Part I of
the First Schedule to the Finance Act,2017 and so on.
Surcharge on T.D.S
• Surcharge and education cess would be levied on T.D.S in case of non-corporate
nonresidents and foreign companies.
• If the recipient is a non-corporate non-resident, surcharge@15% would be levied
on such income-tax if the income or aggregate of income paid or likely to be paid
and subject to deduction exceeds Rs. 1 crore
• If the recipient is a foreign company, surcharge@ –
– (i) 2% would be levied on such income-tax, where the income or aggregate of such incomes paid or
likely to be paid and subject to deduction exceeds Rs. 1 crore but does not exceed Rs.10 crore; and
– (ii) 5% would be levied on such income-tax, where the income or aggregate of such incomes paid or
likely to be paid and subject to deduction exceeds Rs. 10 crore.
• Surcharge would not be levied on deductions in all other cases. Also, education
cess and secondary and higher education cess would not be added to tax
deducted or collected at source in the case of a domestic company or a resident
non-corporate assessee.
Income-tax Rules, 1962
• The Act empowers the CBDT to formulate rules for
implementing the provisions of the Act. Rules can be amended
more easily than the Act - by merely publishing a notification in
the Official Gazette of the GOI.
• To amend the Act, an amendment Bill has to be passed in the

Parliament.
• In case of a conflict between the Act and the Rules, the

provisions of the Act shall prevail.
23
Circulars issued by the CBDT
• CBDT issues circulars on certain matters for the guidance of
the Tax Officers and the general public
• Circulars are binding only on the Income Tax Officers
• Circulars cannot change the provisions of law; they can merely

clarify the law or relax certain provisions in favour of the
taxpayers
• In event of a dispute, the Courts are not bound by the

circulars
24
Case Laws and Doctrine of Precedents
• Case Laws are the decisions of the various Income-tax Appellate
Tribunals (ITAT) and the High Courts (HC) and the Supreme
Court (SC)
• Decisions of the SC are binding on all lower Courts and tax

authorities in India
• HC decisions are binding only in the states which are within the
jurisdiction of that particular High Court
• Decisions of one HC has persuasive powers over other HCs

when deciding similar issues
• ITAT can be a single member bench (SMC) or a two member

bench or a Special Bench or a Third Member Bench 25
Definitions
• Section 2 gives definitions of various terms referred to in the
Act
• Definitions can be inclusive definitions or exclusive definitions
• Definition of one term may lead to the definition of another

term
26
Definitions
• Some of the important definitions contained in the

Act are of:
• Person
• Assessee
• Assessment Year
• Previous Year
• Assessment
• Income
• Dividend
27
Important Terms
• Assessee
• Assessment Year (A.Y. 2017-18)
• Previous Year (F.Y. 2016-17)
• Residential Status
• Gross Total Income
• Deductions
• Total Income
28
Assessee
• Means a person by whom any tax or any other sum

of money is payable under this Act, and includes –
• Person in respect of whom any proceedings under this
Act has been taken for assessment of his income
• Deemed assessee under provisions of this Act
• Any person deemed to be an assessee in default under
any provisions of this Act
Assessment Year
• Assessment year means the period starting from
April 1 and ending on March 31 of the next year.
Previous Year
• The financial year immediately preceding the
assessment year
• E.g.: For the assessment year 2017–18, the previous year is F.Y. 2016-17
• In case of a business or source of income, the

previous year commences from the date of set up of
business or the date on which the source of income
comes into existence
Residential Status
• Residential status of an assessee is important in determining the
scope of income on which income tax has to be paid in India.
• The different types of Residential Status are:-

– Resident (R)
• An individual or HUF assessee who is resident in India may
be further classified into
– resident and ordinarily resident (ROR) and
– resident but not ordinarily resident (NOR).
– Non Resident (NR)
• To be determined in each previous year (1 April to 31 March

next)
32
Residential Status
Importance of Residential Status:
• Resident – World income is taxable in India

• Non Resident – Only income arising or accruing in
India is taxable in India
• Resident but Not Ordinarily Resident – Income
accruing or arising outside India may also be taxable
in India
Section 6 - Resident
An individual is said to be resident in India in
any previous year, if he satisfies any of the 2
basic conditions –
a.Physical presence in India for 182 days or more in a

previous year
OR
a.Physical presence in India for 60* days or more in
the previous year and 365 days or more during the
4 years preceding the previous year
* See next slide
* the above is subject to the following
i. Citizen leaves for employment or as member of

crew of an Indian ship – instead of 60 days, it is 182
days
ii. Citizen or Person of Indian Origin already abroad

comes on a visit - instead of 60 days, it is 182 days
Individual - Resident but Not
Ordinarily Resident
Satisfies any one Basic condition and

two Additional conditions –
a. Such person has been a non resident in India in at
least 9 out of 10 previous years preceding the
relevant previous year; or
b. The person has been in India for a period of 729 days

or less during 7 years preceding the relevant previous
year
Section 6 – Residential Status of
Individuals – summary
Assessee Basic Condition Additional Condition
Must NOT satisfy both the

Resident and He must satisfy at least one of
additional conditions
Ordinarily Resident the basic conditions.
Not Ordinarily Must satisfy at least one of the Must satisfy either of the
Resident basic conditions. additional conditions
Non-Resident Should not satisfy any of the Not applicable

basic conditions.
 Hindu Undivided Family
 Resident unless Control and Management of affairs
wholly outside India
 R-NOR if Manager (Karta) is a non resident in India in 9
out of 10 preceding previous years or is in India for 729
days or less in 7 preceding previous years
 Company
 Resident in India
▪ If an Indian Company – Section 2(26)
▪ If place of effective management is in India
• Firm, Association of Persons and Any other person
– Resident unless control and management of its affairs

is situated wholly outside India
Basic principles of Income-
tax
• What is income?
• Distinction between Taxable Income and Tax-free
Income
• Heads of Income
• Sources of Income
• Gross Total Income
• Deductions
• Total Income
• Tax on Total Income
Scope of Total Income- Section 5
The scope of Total Income depends on the
Residential Status of the tax payer. The incidence of
tax under different circumstances is given in the
following table
41
Scope of Total Income-Section 5
ROR RNOR NR
Income received in India Yes Yes Yes
Income deemed to be received in India Yes Yes Yes
Income accruing or arising in India Yes Yes Yes

Income deemed to accrue or arise in Yes Yes Yes
India
Income received/ accrued outside India Yes Yes No
from a business in India
Income received/ accrued outside India Yes No No

from a business controlled outside India
Definition of Income:
• Income is defined to “include” several items
• It is not an exhaustive definition
• Any income which is not specifically exempt is taxable
Examples of Exempt Income
Section 10
• Agricultural income
• Receipts by a member from a HUF
• Gratuity received on retirement, termination or death
• Commuted Pension
• Exemption of amount received by way of encashment of
unutilized earned leave on retirement.
• Dividend Income
• Any allowance to the extent not taxable
• Amount received from insurance policies on maturity of LIC
policies (subject to conditions prescribed)
• Income from provident
funds
Examples of Exempt Income
• Voluntary Retirement Receipts to the Maximum limit of Rs.
5,00,000 (subject to conditions)
• Payments from Superannuation Fund
• House Rent Allowance (subject to conditions)
• Educational Scholarships
• Exemption in respect of clubbed income of minor
• Long Term Capital Gains on Transfer of listed Equity Shares
and Units of Equity Oriented Mutual Funds
Heads of Income
• Five main Heads of Income:
– Salaries (Section 15-17)
– Income from House Property (Section 22-27)
– Profits and Gains of Business or Profession
(Section 28-44DB)
– Capital Gains
– Income from Other Sources
46
Sources of Income
• Under each Head of Income, there could be
multiple Sources of Income
• For example, a person could be employed with more

than one employer. In such a case, each employment is a
different Source of Income under the Head of Salaries
47
Salaries (basis of charge)
Income is taxable under head “Salaries”, only if there exists
Employer - Employee Relationship between the payer and the
payee. The following incomes shall be chargeable to income-tax
under the head “Salaries”:-
1.Salary Due
2.Advance Salary [u/s 17(1)(v)]
3.Arrears of Salary
Note:
(i)Salary is chargeable on due basis or receipt basis, whichever is
earlier.
(ii)Advance salary and Arrears of salary are chargeable to tax on
receipt basis only.
Income from house property
Properties can be broadly classified into:
• Let out property

• Self occupied property
• Deemed to be let out
• The annual value of property consisting of any
buildings or lands appurtenant thereto of which
the assessee is the owner
• other than such portions of such property as he

may occupy for the purposes of any business or
profession carried on by him
Determination of Annual Value
This involves three steps:
Step 1 – Determination of Gross Annual Value (GAV)

Step 2 – GAV minus municipal tax paid by the owner
during the previous year
Step 3 – Balance = Net Annual Value (NAV)
Step 4 – Reduce 30% of NAV as an ad-hoc Standard
Deduction
Step 5 – Reduce Interest, if any, paid on a loan taken to
buy/construct the property
Profit and Gains from Business &
Profession
Business :
“Business” simply means any economic activity carried on for
earning profits. Sec. 2(3) has defined the term as “ any trade,
commerce, manufacturing activity or any adventure or concern
in the nature of trade, commerce and manufacture”.
Profession :
“Profession” may be defined as a vocation, or a job
requiring some thought, skill and special knowledge like that
of C.A., Lawyer, Doctor, Engineer, Architect etc. So profession
refers to those activities where the livelihood is earned by the
persons through their intellectual or manual skill.
Capital gains
Capital Gain’s tax liability arises only when the
following conditions are satisfied:
 There should be a capital asset.

 The capital asset is transferred by the assessee
 Such transfer takes place during the previous year.
 Any profit or gains arises as a result of transfer.
 Such profit or gains is not exempt from tax under
section 54, 54B, 54D, 54EC, 54F, 54G, 54GA and
54GB
Income From Other Sources
(Residuary head of Income)
Income of every kind, which is not to be excluded from the
total income and not chargeable to tax under any other
head, shall be chargeable under the head “Income from
Other Sources”.
List of items chargeable under this head:-
 Dividends from Co-op. Banks/Foreign companies

 Winning from lotteries, crossword puzzles, races,
gambling, betting of any form
 Interest on securities
 Income from plant, machinery or furniture on hire
Contd.
• Any sum received under a Keyman insurance policy
• Any gift exceeding Rs. 50,000 received from non relatives
• Interest on foreign government securities
• Agriculture income received outside India
• Director’s Sitting Fees
Amendment by Budget 2016
• Additional tax at the rate of 10% of gross
amount of dividend will be payable by the
recipients receiving dividend in excess of Rs.
10 lakh per annum.
Filing of Returns
• Any Individual whose total income exceeds the
threshold limit is chargeable to tax in India and has
to file return of income
• All corporate tax payers and all partnership firms
have to file the return irrespective of the level of
income
• Different forms and due dates prescribed for the
returns
57
Deductions
• The total income of an assessee is to be computed
after making deductions permissible u/s 80C to 80U.
However, the aggregate amount of deductions
cannot exceed the Gross Total Income.
• Deductions are allowed under chapter VI-A of

Income Tax Act.
Section 80C Deductions
Section 80C of the Income Tax Act allows certain
investments and expenditure to be deducted from
total income up to the maximum of 1lac. The total
limit under this section is Rs. 100,000 (Rupees One lac)
which can be any combination of the below:
 Contribution to Provident Fund or Public Provident fund

 Payment of Life Insurance Premium
 Investment in Pension Plans
 Investment in Equity Linked Savings Scheme of Mutual Funds.
 Investment in NSC
Section 80C Deductions
(Contd.)
 Tax Saving Deposits provided by Banks
 Payment towards principal repayment of housing loans
 Payment of Tuition fees of Children
 Post Office Term Deposit
This investment can be from any source and not necessarily

from income chargeable to tax.
Section 80D: Medical Insurance
Premium
 Deduction is available in respect of the amount paid to effect or to keep in
force health insurance under a scheme –
 made by General Insurance Corporation of India (GIC) and approved by
Central Government; or
 made by any other insurer and approved by IRDA
 Deduction shall be to the extent of lower of –
 Actual Health insurance premium paid by any mode other than cash, or
 Rs. 25,000 (Rs. 30,000 if the insured is a senior citizen).
 For uninsured super senior citizens (more than 80 years old)
medical expenditure incurred up to Rs 30,000 is allowed as a
deduction.
 Deduction on account of expenditure on preventive health check-up
(for self, spouse, dependent children and parents) shall not exceed in the
aggregate Rs.5,000. This payment can be made in cash.
 The deduction for preventive health-checkup is included in the overall limit
of Rs. 15,000 / Rs. 20,000 as the case may be
Section 80TTA: Deduction for Interest
on Saving Bank Account
• This section has been inserted into the Income-tax Act
with effect from Assessment Year 2013-14 i.e. F.Y. 2012-
13.
• This section provides deduction to an individual or a
Hindu undivided family in respect of interest received on
deposits (not being time deposits) in a savings account
held with banks, cooperative banks and post office.
• The deduction is restricted to Rs.10,000 or actual interest
whichever is lower.
Dec-15 Question
• Examine, the correctness of the following
statement:
• Section 80TTA is applicable on all assessees.
Total Income and Tax Payable
• Step 1 – Determination of residential status
• Step 2 – Classification of income under different heads
• Step 3 – Exclusion of income not chargeable to tax
• Step 4 – Computation of income under each head
• Step 5 – Clubbing of income of spouse, minor child etc.
• Step 6 – Set-off or carry forward and set-off of losses
• Step 7 – Computation of Gross Total Income
• Step 8 – Deductions from Gross Total Income
• Step 9 – Total income
• Step 10 – Application of the rates of tax on the total income
• Step 11 – Surcharge
• Step 12 – Education cess and secondary and higher education cess on income-tax
• Step 13 – Advance tax and tax deducted at source,
• Step 14- Self Assessment tax ,Double taxation relief.
Rates of Tax
Rates of tax
• For the financial year 2016-17 relevant to the assessment year
2017-2018,
• for domestic companies -30% income tax plus a surcharge of 7% of
such income tax.
• Tax rate is 29% if turnover or gross receipt of the company does not
exceed Rs. 5 crore.
• 15% short term capital gains tax and 20% long term capital gains tax
and surcharge of 5% on that.
• for foreign companies- 40% income tax plus a surcharge of 2% of
such income tax.
• Secondary and Higher Education cess of 3%.
• Surcharge is applicable only if the total income exceeds Rs. 1 Crore.
A higher surcharge of 12% and 5% is applicable for domestic and
foreign companies respectively for incomes above Rs.10 crores.
mail: monikagoelfcs@gmail.com
Rates of Tax-Individual resident aged below 60 years (i.e. born on
or after 1st April 1954) or any NRI / HUF / AOP / BOI / AJP*
Income Slabs Tax Rate

i. Where the total income does not exceed Rs. 2,50,000/-. NIL
10% of amount by which the total
income exceeds Rs. 2,50,000/-.
ii.
Where the total income exceeds Rs. 2,50,000/- but does Less: (in case of Resident
not exceed Rs. 5,00,000/-. Individuals only) Tax Credit - 10%
of taxable income upto a
maximum of Rs. 2000/-.
Rs. 25,000/- + 20% of the amount
Where the total income exceeds Rs. 5,00,000/- but does
iii. by which the total income exceeds
not exceed Rs. 10,00,000/-.
Rs. 5,00,000/-.
Rs. 125,000/- + 30% of the
iv. Where the total income exceeds Rs. 10,00,000/-. amount by which the total income
exceeds Rs. 10,00,000/-.
Surcharge: 15% of the Income Tax, where total taxable income is more
than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)
Education Cess: 3% of the total of Income Tax and Surcharge.
Rates of Tax-Individual resident who is of the age of 60 years or more but
below the age of 80 years at any time during the previous year (i.e. born
on or after 1st April 1934 but before 1st April 1954)
i. Where the total income does not exceed Rs. 3,00,000/-. NIL
10% of the amount by which the

total income exceeds Rs. 3,00,000/-
Where the total income exceeds Rs. 3,00,000/- but Less: (in case of Resident Individuals
ii.
does not exceed Rs. 5,00,000/- only) Tax Credit - 10% of taxable
income upto a maximum of Rs.
2000/-.
Rs. 20,000/- + 20% of the amount by

Where the total income exceeds Rs. 5,00,000/- but
iii. which the total income exceeds Rs.
does not exceed Rs. 10,00,000/-
5,00,000/-.
Rs. 120,000/- + 30% of the amount

iv. Where the total income exceeds Rs. 10,00,000/- by which the total income exceeds
Rs. 10,00,000/-.
Surcharge: 15% of the Income Tax, where total taxable income is more than Rs. 1
crore. (Marginal Relief in Surcharge, if applicable)
Individual resident who is of the age of 80 years or more at any time
during the previous year (i.e. born before 1st April 1934)

Where the total income does not exceed Rs.
i. NIL
5,00,000/-.
20% of the amount by
Where the total income exceeds Rs. 5,00,000/-
ii. which the total income
but does not exceed Rs. 10,00,000/-
exceeds Rs. 5,00,000/-.
Rs. 100,000/- + 30% of the
amount by which the total
iii. Where the total income exceeds Rs. 10,00,000/-
income exceeds Rs.
10,00,000/-.
Surcharge: 15% of the Income Tax, where total taxable income is more than
Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)
• Income Tax Rates for Partnership Firm
including LLP: 30%
• Surcharge : 12% of the Income Tax, where
total taxable income is more than Rs. 1 crore.
(Marginal Relief in Surcharge, if applicable)
• Education Cess: 3% of the total of Income Tax
and Surcharge.
Rate of Income Tax- for Companies
• New Manufacturing Company incorporated after 01-03-2016
rate of tax- 25%. Option Subject to following conditions;
– (a) do not claim profit linked or investment linked
deductions and
– (b) do not avail of investment allowance and accelerated
depreciation.
• Companies with Turnover of upto Rs. 5 Crores during the F. Y.
ending March, 2015-29%
• Start-ups Registered from 01-04-2016 to 31-03-2019 rate of
tax 0%
– For 3 out of 5 years [MAT applicable under 115JB]
• Other Domestic Companies -30%
Review Question
• Mr. X has a total income of Rs. 12,00,000. Compute his gross tax liability.
• Tax Liability = Rs. 1,25,000+ 30% of Rs. 2,00,000 = 1,85,000..
• Alternatively:
• Tax Liability:
• First Rs. 2,50,000 - Nil
• Next Rs. 2,50,000- Rs. 5,00,000 - @ 10% of Rs. 2,50,000= Rs. 25,000
• Next Rs. 5,00,000- Rs. 10,00,000 -@ 20% of Rs. 5,00,000= Rs. 1,00,000
• Balance i.e Rs. 2,00,000 -@ 30% of Rs. 2,00,000= Rs. 60,000
• Tax Rs. 1,85,000
• Education cess @ 3% Rs. 5,550
• Total tax Rs. 1,90,550
• It is to be noted that for a senior citizen (being a resident individual who is of
the age of 60 years but not more than 80 years at any time during the previous
year), the basic exemption limit is Rs. 3,00,000. Further resident individuals at
the age of 80 years or more at any time during the previous year, being very
senior citizens, would be eligible for a higher basic exemption limit of Rs.
5,00,000.
Review Question
• Surcharge of 15% is payable by an individual where the total
income exceeds :
– (a) Rs.7,50,000
– (b) Rs.100,00,000
– (c) Rs.10,00,000
– (d) None of these
• (ii) Additional surcharge (Education cess) of 2% is payable on
– (a) Income-tax
– (b) Income-tax plus surcharge, if any
– (c) Surcharge
– (d) Not payable by any assessee
Rebate of Rs.2000/-
• As per 2013 Budget (Finance Act, 2013) section
87A of the Income Tax Act, 1961 rebate of
Rs.5000/- (enhanced from Rs. 2000/- by Budget
2016) will be given to the individual tax payer
whose total does not exceed Rs 5 lakhs or we can
say that Individual Tax Payer whose total income
doesn’t exceed Rs 5 Lakhs is eligible for deduction
of Rs 50000/- from income.
• A Surcharge of 15 percent has also been levied on
persons (other than companies) whose taxable
income exceed Rs.1 crore to augment revenues.
Marginal Relief- Example
• Compute the tax liability of X Ltd., a domestic company,
assuming that the total income of X Ltd. is Rs. 1,01,00,000 and
the total income does not include any income in the nature of
capital gains.
• The tax payable on total income of Rs. 1,01,00,000 of X Ltd.
computed@ 32.1% (including surcharge) is Rs. 32,42,100.
However, the tax cannot exceed the tax of Rs. 30,00,000
payable on total income of Rs. 1 crore by more than the
Rs.1,00,000, being the amount of total income exceeding Rs. 1
crore. Therefore, the tax payable on Rs. 1,01,00,000 would be
Rs. 31,00,000 (30,00,000+1,00,000). The marginal relief is Rs.
1,42,100 (i.e., Rs.32,42,100 – Rs. 31,00,000).
Some other rates…
• Section 112 has prescribed the rate of tax @20% in respect of long term capital
gains. In case of non-corporate non-residents and foreign companies, long-term
capital gains arising from transfer of unlisted securities would be subject to
tax@10% without giving effect to indexation provision and currency fluctuation
• Section 111A provides for a concessional rate of tax (i.e. 15%) on the short-term
capital gains on transfer of -
– (i) an equity share in a company or
– (ii) a unit of an equity oriented fund.
• The conditions for availing the benefit of this concessional rate are –
– (i) the transaction of sale of such equity share or unit should be entered into on or after
1.10.2004 and
– (ii) such transaction should be chargeable to securities transaction tax.
• (3) Section 115BB prescribes the rate of tax @30% for winnings from-
– (i) any lottery; or
– (ii) crossword puzzle; or
– (iii) race including horse race; or
– (iv) card game and other game of any sort; or
– (v) gambling or betting of any form.
Some Practical Questions
Review Question (Dec-15)
Solution
Determination of Residential
Status
Review Question
Various Heads of Income
INCOME UNDER THE HEAD
SALARIES (SECTION 15 TO 17)
Practice Questions
Review Question
• An employee is going to join your company on annual CTC of
Rs. 18,00,000. Prepare a remuneration plan for him keeping in
view the following :
(i) He wants to minimise his tax liability within the legal
framework but take home salary should not be less than Rs.
9 lakh.
(ii) He does not own a house.
(iii) He owns a car. But he can take another car from the
company.
(iv) He has two children and one of them is in a boarding school.
(v) His wife is employed and she gets children education
allowance.
(vi) There is no uniform code in your company.
Solution
Solution Contd..
Solution Contd..
Solution contd..
He will get Rs.13,77,204 as take home salary. His tax liability will get
reduced to 1,19,880 from 4,05,820.
Review Question
• Vijay is employed with Sunder Ltd., at a monthly salary of Rs. 45,000. He
also receives Rs. 5,000 per month as house rent allowance.
– He deposited Rs. 40,000 in the PPF account. He also pays Rs. 30,000 as
tuition fees of his two children.
– Vijay’s wife, Isha is employed with Chander Ltd., at a monthly salary of
Rs. 25,000, where Vijay holds 21% of the shares of the company. Isha
is not adequately qualified for the post held by her in Chander Ltd.
– Isha owns a house used as self occupied house by the family.
Municipal value of the house is Rs. 3,60,000. It was constructed with
borrowed funds in 2013-14.
– Interest on loan is Rs. 1,80,000 p.a. Isha insured the house and paid
insurance premium of Rs. 8,000 to United India Insurance Company.
She also paid Rs. 20,000 as municipal taxes.
• Suggest a scheme of tax planning for both Vijay and Isha to minimise their
tax liability during the financial year 2014-15. (5 marks)
Solution
• Some of the Tax planning measures for Vijay and Isha could be:
• (i) Vijay holds substantial interest (21%) in Chander Ltd. where Isha holds a post for which she
is not adequately qualified. Thus, the remuneration received by Isha would be clubbed in the
income of Vijay. To avoid this, Vijay may reduce his shareholding in Chander Ltd. to 19%.
• (ii) Vijay and Isha may request to their respective employers to restructure their salaries, as
follows:
• (a) Restructure salaries to break up the monthly salary into basic pay, conveyance allowance /
car facility, leave travel facility, medical reimbursement and telephone reimbursement etc.
This will reduce the amount of taxable salary.
• (b) There are several employees’ welfare schemes such as recognised provident fund,
approved superannuation fund, gratuity fund. Payments made towards such schemes are
eligible for deductions. So, Vijay and Isha may request their employer to include these
welfare schemes and make contribution towards same.
• (iii) Currently Isha is treating the house as self occupied by the family; she may rent out this
to Vijay against a rent receipt. This will enable Vijay in claiming deduction for House Rent
Allowance.
• (iv) Isha may claim the deduction for the principal amount and the interest amount paid for
the funds borrowed for construction of house. For principal amount, deduction, could be
claimed for upto Rs. 1,50,000 and for interest amount deduction could be claimed upto Rs.
2,00,000.
June-16 Question OS
Ramesh, aged 26 years, has received an offer of employment in Delhi
and is offered two options of remuneration as under :
Profits and gains from Business
and Profession
Review Question
• State the rate of deduction allowable under the Income-tax Act, 1961 while assessing income from
business or profession in the following cases :
• (i) For acquisition and installation of new plant or machinery by a manufacturing company.
– (i) 150% of aggregate amount of actual cost of new assets acquired and installed.
• (ii) For expenditure (revenue or capital) on in-house scientific research by a company engaged in business
or manufacture or production of any article other than those specified in the Eleventh Schedule of the
Income-tax Act, 1961.
(ii) 200% of the expenditure
• (iii) Contribution to approved scientific research association including social and statistical research.
– (iii) Contribution to an approved Scientific research association which has its object undertaking of
scientific research qualifies for 175% deduction under section 35(1)(ii). However where the
contribution has been made to a research association which has as its object the undertaking of
research in social science or statistical research, the deduction is 125% under section 35(1)(iii) of the
Income Tax Act, 1961.
• (iv) Capital expenditure (other than on acquisition of land, goodwill or financial instrument) incurred for
setting-up and operating cold chain facility.
– (iv) 150% of the capital expenditure
• (v) Expenditure incurred by companies on notified skill development projects.
– (v) 150% of the expenditure
Review Question
• You are the financial controller in a manufacturing company having turnover
exceeding Rs. 800 crore. Write a report for your Managing Director highlighting the
legal position pertaining to the following :
• Allowance for acquisition and installation of new plant and
machinery under section 32AC.
– A new section 32AC was introduced by Finance Act, 2013 to provide that where an assessee, being a
company:-
– (a) is engaged in the business of manufacture of an article or thing; and
– (b) invests a sum of more than Rs.100 crore in new assets (plant or machinery) during the period
beginning from 1st April, 2013 and ending on 31st March, 2015, then, the assessee shall be allowed:-
– (i) for assessment year 2014-15, a deduction of 15% of aggregate amount of actual cost of new
assets acquired and installed during the financial year 2013-14, if the cost of such assets exceeds
Rs.100 crore;
– (ii) for assessment year 2015-16, a deduction of 15% of aggregate amount of actual cost of new
assets, acquired and installed during the period beginning on 1st April, 2013 and ending on 31st
March, 2015, as reduced by the deduction allowed, if any, for assessment year 2014-15.
– Transfer of the plant or machinery for a period of 5 years has also been restricted.
– If such asset is transferred within 5 years of its purchase and installation then
– Investment Allowance allowed as deduction earlier shall be taxable as Profits and Gains from
Business of Profession in the year of transfer. This is in addition to capital gain liability. However, this
restriction shall not apply in amail:
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of amalgamation or demerger but shall continue to apply to the
amalgamated company or resulting company, as the case may be.
Contd…
• Tax consequences of assignment of keyman insurance policy before
maturity by employer-company to its employee.
– Keyman insurance policy means a life insurance policy taken by a
person on the life of another person who is or was the employee of
the first-mentioned person or is or was connected in any manner
whatsoever with the business of the first-mentioned person and
includes such policy which has been assigned to a person, at any time
during the term of the policy, with or without any consideration.
– With effect from 1st April, 2014, where keyman insurance policy which
has been assigned to any person during its term, with or without
consideration, it shall continue to be treated as a keyman insurance
policy and consequently would not be eligible for any exemption
under section 10(10D) of the Income-tax Act.
Review Question
• A corporate assessee, who inadvertently
failed to claim deduction under section 80IB
during the initial years, cannot claim
deduction under the said section for the
remaining years during the period of
eligibility, in spite of fulfillment of stipulated
conditions. Examine the assertion contained
in the above para in the background of
judicial decision.
Solution
• The provisions contained in Section 80IB of the Act, nowhere stipulates any
condition that such a claim has to be made in the first year failing which there
would be forfeiture of such claim in the remaining years. As decided in Praveen
Soni v. Commissioner of Income Tax (2011) (Delhi), if the assessee fulfils the
conditions mentioned under Section 80IB of Income Tax Act, he will be eligible for
claiming the deduction for 10 consecutive years.
• Merely because of the reason that though the assessee was eligible to claim this
benefit from a specific year, but did not claim in that year would not mean that he
would be deprived from claiming this benefit for the remaining years during his
eligibility.
• Further, had the assessee claimed this benefit in the year in which he became
eligible, he would have been allowed this benefit for 10 consecutive years but now
he could claim the benefit only for the remaining period. For example, if the
assessee became eligible in assessment year 2008-09, he would have claimed
deduction for 10 years up to assessment year 2017-18, but now, he could claim
exemption for only the 5 remaining years that is from assessment year 2013-14 to
2017-18.
Review Question
• Tinoo Ltd. is eligible to claim deduction of Rs. 2 crore under section 80-IA. It has
filed its return of income after the due date as specified in section 139(1). Discuss
the allowability of deduction under section 80-IA.
• Facts : Tinoo Ltd. is eligible to claim deduction of Rs. 2 crore under section 80-IA,
however, it has filed return after the due date specified in section 139(1).
• Applicable Provisions: Section 80AC of the Income Tax Act, 1961 provides that
where in computing the total income of an assessee of the previous year relevant
to the assessment year, any deduction is admissible under section 80-IA or section
80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such
deduction shall be allowed to him unless he furnishes a return of his income for
such assessment year on or before the due date specified under sub-section (1) of
section 139.
• Decision: Thus, Tinoo Ltd. shall not be allowed deduction under section 80-IA
Review Question
• Explain the meaning of ‘eligible expenses’ for the purposes of claiming benefit
under section 35D. Also enumerate these eligible expenses.
• What are eligible expences?
• For the purpose of Section 35D of the Income Tax Act, 1961, eligible expenses are
those which are incurred by an assessee, being an Indian company or a person
(other than a company) who is resident in India:
• (i) before the commencement of his business, or
• (ii) after the commencement of his business, in connection with the extension of
his undertaking or in connection with his setting up a new unit.
• Why is it relevant to know what are eligible expences?
• The assessee shall, be allowed a deduction of an amount equal to one-fifth of such
expenditure for each of the five successive previous years beginning with the
previous year in which the business commences or, as the case may be, the
previous year in which the extension of the undertaking is completed or the new
unit commences production or operation.
Contd…
• These eligible expenses include expenses in connection with:
– (a) Preparation of feasibility report;
– (b) Conducting market survey or any other survey necessary for the business;
– (c) Preparation of Project report;
– (d) Engineering services relating to the business;
– (e) Legal charges for drafting an agreement relating to the setting up or conduct of the
business;
– (f) Legal charges for drafting and printing of Memorandum of Association (MOA) and
Articles of Association (AOA);
– (g) Registration fees of a company paid to Registrar of Companies;
– (h) Expenses and legal charges incurred in drafting, printing and advertising for
prospectus;
– (i) Expenditure incurred on issue of shares or debentures like underwriting commission,
brokerage.
Review Question
• Examine the taxability or allowability or otherwise in the following cases while computing
income under the head "Profits and gains from business or profession" to be declared in the
return of income for the assessment year 2017-18:
• (i) Amount received towards power subsidy with a stipulation that the same is to be
adjusted in the electricity bills.
• Answer: As per section 2(24)(xviii) assistance in the form of subsidy or grant or cash incentive
by the Central Government or a State Government or any authority or body or agency in cash
or kind is chargeable to tax as income. Also, ICDS VII seeks admission of such grant as income.
Government grants should not be recognized until there is reasonable assurance that (i) the
person shall comply with the conditions attached to them, and (ii) the grants shall be
received. However, recognition of such grant shall not be postponed beyond the date of
actual receipt. Since power subsidy has been received by the assessee, it is revenue in nature
and chargeable to tax in A.Y. 2017-18.
• (ii) Donations received by a person in the course of carrying on vocation, from his
followers.
• Answer: Donations received by a person from his followers in the course of carrying on
vocation for the furtherance of the objects of his vocation are receipts arising from carrying
on of his vocation and are not casual or non-recurring receipts. The Supreme Court, in Dr. K.
George Thomas vs. CIT (1985) 156 ITR 412, has held that such donations are taxable as
business income as there is a direct nexus between the vocation carried on by the assessee
and the receipt of such donations.
Review Question
• (iii) Profit derived by an assessee engaged in carrying on the business as dealer in shares,
on exchange of the shares held as stock in trade of one company with the shares of
another company.
• Answer: The difference between the price of shares of the first company and the market
value of shares of the new company on the date of such exchange has to be treated as
“profit” derived by the dealer in shares (on exchange of shares held as stock-in-trade of the
first company with the shares of the new company) in the normal course of business, and
hence such profit is taxable as business income. It was so held by the Supreme Court in
Orient Trading Co. Ltd. vs. CIT (1997) 224 ITR 371.
• (iv) The amount of margin money forfeited by a bank on the failure of its constituents of
not taking the delivery of the shares purchased by such bank on their behalf.
• Answer: Since the bank is purchasing shares on behalf of the constituents, the forfeiture of
margin money by the bank from the constituents for not paying the balance amount of
purchase price and not taking delivery of shares purchased by the bank on their behalf is in
the normal course of its banking business and hence, the forfeited amount is assessable as
business income of the bank. The forfeited amount being revenue in nature cannot be
adjusted against the purchase price of the shares. The Supreme Court has, in the case of CIT
vs. Lakshmi Vilas Bank Ltd. (1996) 220 ITR 305, confirmed this view.
Review Question
• (v) Depreciation on the “decoders” given on loan to the cable
operators but owned by the assessee who is engaged in the
business of distributing satellite channels.
• Answer: Loan of “decoders” to cable operators is in the normal course of the assessee‟s
business of distribution of satellite channels, and hence the same can be treated as use of
asset for business purposes. Since the assessee is the owner of decoders used for business
purposes, he is entitled to depreciation under section 32. The Delhi High Court, in CIT vs.
Turner International India (P) Ltd. (2008) 297 ITR 373, has confirmed this view.
Review Question
Solution
Solution
Review question
• A partnership firm has two partners X and Y.
They have contributed Rs. 6,00,000 each as
capital and Rs. 2,00,000 each as loan.
Partnership deed allows payment of interest
on loan as well as on capital @16% p.a. and
remuneration of `5,00,000 to each acting
partner.
• If profits of the firm after paying interest but
before deducting
Solution
Review Questions
Solution
Section 54EC and Depreciable
Assets- Case Study
• BACKGROUND
• M/s. Shri Kanabar Industries (herinafter referred to as ‘SKI’) is a
partnership concern from Mumbai. SKI owns an Industrial Gala. SKI carried
on the business of manufacturing Cartoon material in this Gala but later,
the partners ceased to conduct business in SKI. No business activity has
been carried out by SKI in last 8 years. As on 31.03.2013, Written Down
Value of Gala was Rs. 1,27,830/- and that of the furniture at the Gala was
Rs. 2,010/-
• The partners of SKI have now decided to sell the aforesaid Gala for Rs.
96,00,000/-. They would like to know the tax implication of such transfer
on SKI and the ways by which they can legitimately minimize the tax
burden.
FACTS OF THE CASE
• 1. SKI acquired the Gala in 1980 vide Assignment
Deed dated 13.10.1980.
• 2. SKI has acquired and used the said Gala in its
business of manufacturing Cartoon material.
• 3. SKI has discontinued business activity for a period
exceeding three years.
• 4. SKI wishes to sell the Gala for Rs. 96,00,000/- and
wants to Register a Sell Agreement for the same on
or before 31st March 2014.
1. What will be the tax implications if SKI sells
the property for Rs. 96,00,000/-?
PARTICULARS RUPEES
Sales Value of Gala with Furniture 96,00,000
Less: Written Down Value of:
Gala 1,27,830
Furniture 2,010 -1,29,840
Less: Cost of Transfer if Any* -25,000
Short Term Capital Gain 94,45,160
Tax on above @ 30.90% 29,18,554
*Cost of Transfer been assumed at Rs. 25000/-.
2. Is there a legitimate way by which SKI can minimize
its tax liabilities due to aforesaid sales?
• One of the option by which SKI can save tax on the aforesaid
capital gain is by investing the capital gain amount in bonds
specified under Section 54EC of the Income Tax Act, 1961.
While considering the benefit of section 54EC exemption, the
following question may arise:-
– a. Whether exemption u/s 54EC is available when
investment of Rs. 50,00,000/- each has been made in two
financial years, but within 6 months from the date of
transfer?
– b. Whether exemption under section 54 is available for
depreciable assets held for more than 36 months?
– c. From which date the period of six months will be
counted?
Some amendments by Budget
2016
• Tax to be deducted at source at the rate of 1 %
on purchase of luxury cars exceeding value of
Rs. ten lakh and purchase of goods and
services in cash exceeding Rs. two lakh.
• Securities Transaction tax in case of ‘Options’
is proposed to be increased from .017% to
.05%.
Amendment by Budget 2016-
Section 115BA
• Tax rate on newly setup domestic companies
engaged solely in manufacture or production
of any article or thing proposed to be reduced
to 25%, at the option of the company, subject
to not claiming certain specified
deductions/claims.
Conditions
• The company should be set up and registered on or after 1st March 2016
• Company should not be engaged in any business other than the business of
manufacture or production of any article or thing
• Company has not claimed any benefit/ deduction under certain prescribed
provisions of the Act while computing its total income such as:
• Deduction for SEZ units; additional depreciation; capital expenditure in specified
businesses; deduction for research and development; Chapter VI-A deductions
other than deduction for additional wages to employees etc;
• Depreciation allowance in respect of any block of assets entitled to more than
40%, is restricted to 40% on the written down value of such block of assets
• The company has not claimed set-off of any unabsorbed loss of earlier years if
such loss has been occasioned by claiming any deduction under the specified
sections
• The option under this section is exercised on or before the due date specified
under section 139(1) of the Act for filing the first of the income tax returns which
the company is required to furnish under the provisions of the Act

Basic Concepts and Taxation of Individuals

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Monika Goel’s Online Classes

For CS Professional Students

Advanced Tax - Laws and Practice

• Part A- Direct Taxes and International Taxation

2 Duties of customs including export duties (List I, Entry 83)

13 All residuary types of taxes not listed in anymgonlineclasses@gmail.com

•The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014

• Came into force w.e.f. 1st April, 1962

• Extends to whole of India

• Consists of more than 300 sections, 23 Chapters and 14

• We also have surcharge and education cess for all assessees

• To amend the Act, an amendment Bill has to be passed in the

• In case of a conflict between the Act and the Rules, the

• Circulars are binding only on the Income Tax Officers

• Circulars cannot change the provisions of law; they can merely

• In event of a dispute, the Courts are not bound by the

• Decisions of the SC are binding on all lower Courts and tax

• Decisions of one HC has persuasive powers over other HCs

• ITAT can be a single member bench (SMC) or a two member

• Definitions can be inclusive definitions or exclusive definitions

• Definition of one term may lead to the definition of another

• Some of the important definitions contained in the

• Means a person by whom any tax or any other sum

• In case of a business or source of income, the

• The different types of Residential Status are:-

• To be determined in each previous year (1 April to 31 March

• Resident – World income is taxable in India

a.Physical presence in India for 182 days or more in a

* the above is subject to the following

i. Citizen leaves for employment or as member of

ii. Citizen or Person of Indian Origin already abroad

Satisfies any one Basic condition and

b. The person has been in India for a period of 729 days

Must NOT satisfy both the

Non-Resident Should not satisfy any of the Not applicable

• Firm, Association of Persons and Any other person

– Resident unless control and management of its affairs

Income deemed to be received in India Yes Yes Yes

Income accruing or arising in India Yes Yes Yes

Income received/ accrued outside India Yes No No

• Income is defined to “include” several items

• It is not an exhaustive definition

• Any income which is not specifically exempt is taxable

• For example, a person could be employed with more

Properties can be broadly classified into:

• Let out property

• other than such portions of such property as he

This involves three steps:

Step 1 – Determination of Gross Annual Value (GAV)

 There should be a capital asset.

List of items chargeable under this head:-

 Dividends from Co-op. Banks/Foreign companies

• Deductions are allowed under chapter VI-A of

 Contribution to Provident Fund or Public Provident fund

This investment can be from any source and not necessarily

Income Slabs Tax Rate

10% of the amount by which the

Rs. 20,000/- + 20% of the amount by

Rs. 120,000/- + 30% of the amount

Income Slabs Tax Rate

Less: Written Down Value of:

Furniture 2,010 -1,29,840