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PART – I
[SEC. 4] BASIC PRINCIPLES FOR CHARGING INCOME TAX .
 Income tax is charged for every assessment year.
 It is charged on every person.
 It is a charge on total income earned by the person during the Previous Year.
 Tax is levied at the rate prescribed in Finance Act.

ASSESSMENT YEAR (A.Y.) [SEC. 2(9)] - Assessment year means the period of
12 months commencing on the 1st day of April every year. It is the year (just
after the previous year) in which income earned in the previous year is charged
to tax.

Difference Between Previous year AND Assessement Year

Previous year A Assessement Year

Sec. 3 of the Income Tax Act is
formed for the Previous Year.
Previous Year means the financial year
immediately preceding the assessment
year.
Previous Year may be less than 12
months in case of newly set-up
business or profession.
The year in which income is earned
is known as Assessment Year
2(9) is formed for the Assessment Year.
Assessment Year means the period of twelve months
commencing on the first day of April every year and
ending on 31st March of the next year.
Assessment Year will always be for a period of
12 months.
The next year in which the previous year's
income become taxable is known as the
Assessment Year.

PREVIOUS YEAR OR UNIFORM PREVIOUS YEAR [SEC. 3] - Previous Year means

the financial year immediately preceding the Assessment Year. Income earned
in a year is assessed in the next year. The year in which income is earned is
known as Previous Year and the next year in which income is assessed is known
as Assessment Year.

Determination of the first previous year in case of a newly set-up business

or profession or for a new source of income

In case of Previous year is the period

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Business or profession being Beginning with the date of

newly set-up setting up of the business &
ending on 31st March of that
financial year.
A source of income newly coming Beginning with the date on
into existence which the new source of
income comes into existence
& ending on 31st March of
that financial year.

Exceptions to the general rule that income of a Previous Year is taxed in its
Assessment Year
Cases where Income is charged to tax in Previous year only.

1. Income of a non-resident assessee from shipping business (Sec. 172)

2. Income of a person who is leaving India either permanently or for a long
period (Sec. 174)
3. Income of bodies, formed for a short duration (Sec. 174A)
4. Income of a person who is likely to transfer property to avoid tax
(Sec.175)
5. Income of a discontinued business (Sec. 176). In this case, the Assessing
Officer has the discretionary power
i.e. he may assess the income in the same previous year or may wait till the
Assessment year.
Gross Total Income – The aggregate of Income under the following head is
known as Gross Total Income.
1 Income from Salary
2 Income from House Property
3 Profit and Gains of Business & Profession.
4 Capital Gain
5 Income from other sources
The Income Under each head is computed after making deductions permissible
under that head. Further brought forward losses shall be deducted to arrive at the
assessable Income.
Difference Between Gross Total Income & Total Income.
Gross Total Income Total Income

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1 Aggregate of various Head of After deduction under section 80C to

Income is called Gross Total
Income.
2 GTI is not rounded off.
3 Tax is not levied on GTI.
4 GTI cannot be less than Total
Income
5 Agriculture Income is not
Included in GTI.
80U the balance is called as Total
Income.
Total Income is rounded off to
nearest multiple of ten rupees
Tax is levied on the Total Income at
prescribed rates.
Total Income can be equal or less
than GTI.
If Agriculture Income exceeds
5000,then IT is included in Total
Income of assessee.

ASSESSEE [SEC. 2(7)] - “Assessee” means,

a) A person by whom any tax or any other sum of money (i.e., penalty or
interest) is payable under this Act
b) Every person in respect of whom any proceeding under this Act has been
taken.
c) A person who is assessable in respect of income or loss of another person;
d) Every person who is deemed to be an assessee under any provision of this
Act; and
e) A person who is deemed to be an ‘assessee in default’ under any provision of
this Act. E.g. A person, who was liable to deduct tax but has failed to do so,
shall be treated as an ‘assessee in
PERSON [SEC. 2(31)] - The term person includes the following:
i) an Individual;
ii) a Hindu Undivided Family (HUF);
iii) a Company;

iv) a Firm including LLP;

v) an Association of Persons (AOP) or a Body of Individuals (BOI), whether
incorporated or not;
vi) a Local authority; &
vii) every artificial juridical person not falling within any of the preceding
categories.
 Individual – Natural person.

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 Hindu Undivided Family (HUF) - A Hindu Undivided Family (on which

Hindu law applies) consists of all persons lineally descended from a
common ancestor & includes their wives & unmarried daughters.
 Company [Sec. 2(17)] - Company means an artificial person created by
law with perpetual seccession & common seal & carrying a limited
liability.
a. any Indian company; or
b. any body corporate, incorporated under foreign country laws or
c. any institution, association or body which is or was assessable or was
assessed as a company for any assessment year on or before April 1, 1970; or
d. any institution, association or body, which is declared by CBDT to be
a company
 Firm - As per sec. 4 of Indian Partnership Act, 1932, partnership means
“relationship between persons who have agreed to share profits of the
business carried on by all or any one of them acting for all”.
 Association of Persons (AOP) or Body of Individuals (BOI) –
In case of BOI, only individuals can be the members, whereas in case of AOP,
any person can be its member i.e. entities like Company, Firm etc. can be the
member of AOP but not of BOI.

Local Authority - a local authority means a municipal committee, district board,

body of Port Commissioners, Panchayat, Cantonment Board Etc.

Artificial Juridical Person - Artificial juridical person are entities -

• which are not natural person;
• has separate entity in the eyes of law;
• may not be directly sued in a court of law but they can be sued through
person(s) managing them.

Casual Income - Any receipt which is of a casual and non-recurring nature

is casual income. In other words, casual income is that income the receipt
of which is accidental and without any stipulation. It is in nature of an
unexpected wind-fall.
Example - Winnings from lotteries, crossword puzzles, card games etc.
The casual income does not include:
1. (a) capital gains; or

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(b) receipts from business profession or occupation; or

(c) any addition to remuneration of an employee, such as bonus, gratuity,
perquisites, etc.
2. Gift from Relative
3. Payment by Husband to Wife under an agreement to live apart.
Other provisions for casual Income.
- Expenses are not deductible.
- Set off losses are not permitted.

Virtual Digital Assest -

(a) any information or code or number or token (not being Indian
currency or any foreign currency), generated through
cryptographic means or otherwise, by whatever name called,
(b) (b) a non fungible token or any other token of similar nature by
whatever name called;
(c) (c) any other digital asset, as the Central Government may specify

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PART - II
BASIC TAX RATES

HEADS OF INCOME [SEC. 14]

Computation of Total income or Mr X for the AY – PY-

Particulars
Salaries; (Section 15 -17) xx
Profits and gains of business or profession; (Section 28 – 44DB) xx
Income from house property; (Section 22 - 27) xx
Capital gains; (Section 45 – 55A) xx
LTCG 112A – 10% in excess of 1 lakh
LTCG 112 – 20%
STCG 111A – 15%
Other STCG –Normal Tax Rates.
Income from other sources. (Section 56 - 59) xx
115BB – Tax on lotteries, card game, horse race etc – 30%
115BBE – Deemed Income - 60%
Gross total income xx XX
Deduction U/s 6A xx
From 80C to 80U
Total Income xx XX
Computation of tax liability
Tax on Total Income xx
Less – Rebate U/s 87A (If applicable ) xx
Add – Surcharge xx
Add – Health & Education Cess @4% xx
Total Tax Liability - xx
Less – Advance tax /TDs/TCS/MAT/AMT credit xx
Tax payable /refundable XX

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TAX RATES
# Individual, HUF, AOP, BOT, Artificial Juridical Person Tax Rate
A For Individual, HUF, AOP, BOL, AJP (Resident or Non-resident)
Total income upto 2,50,000 (Basic Exemption Limit) Nil
> 2,50,000 upto 5,00,000 5%
> 5,00,000 upto 10,00,000 20%
> 10,00,000 30%
B For Senior Citizen ( Resident Individual age 60 years or more in PY.)
Total income upto 3,00,000 (Basic Exemption Limit) Nil
> 3,00,000 upto 5,00,000 . 5%
> 5,00,000 upto 10,00,000 20%
> 10,00,000 30%
C For Super Senior Citizen ( Resident Individual age 80 years or more in P.Y.)
Total income upto 5,00,000 (Basic Exemption Limit) : Nil
> 500,000 upto 10,00,000 20%
> 10,00,000 30%

Surcharge
(i) | Total Income upto 50 Lakhs Total Income Nil
(ii) | Total Income > 50 Lakhs but upto 1Cr. 10%
(iii)| Total Income >1Cr. but upto 2Cr. 15%
(iv) | Total Income >2Cr. but upto 5Cr. 25%
(v) | Total Income >5Cr. 37%
Note –

///
For dividend,Capital Gain u/s 112A/111A,(Special incomes) Surcharge can
be maximum 15%.
Assessee will never hit a higher surcharge of 25%/37%, Just because of
these special income.
For example if -
Nature Sur Sur Sur
Special Income. 50,lakh 15% 100 lakh 15% 50lakh 10%
Other Income 250 lakh 25% 200lakh 15% 30lakh 10%
Total 300 lakh 300lakh 80lakh

Health & education cess (mandatory) 4%

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Note - Any Resident Individual whose 60th/80th birthday falls on 1st April 2022
shall be treated as having completed the age of 60/80 years on 31st March 2022 i.e.
PY 2021-22 (AY 2022-23) and hence would be eligible for the higher basic
exemption limit of 3,00,000 & 5,00,000,

# | For Company

A. | Domestic Company

(i) Total Turnover or Gross Receipt of P.Y. 2019-20 Tax Rates

upto = 400 Crore 25%

(ii) Otherwise 30%

B. | Foreign Company 40%

Surcharge: Domestic Co. Foreign Co.

Total Income (NTI)

> 1 Crore but upto 10 Crore 7% 2%

> 10 Crore 12% 5%

Partnership firm /LLP

Tax rate - 30%

Surcharge - @12 if Total Income is more than 1Cr

| For Co-operative societies Tax rate

Total Income upto 10,000 10%

Total Income > 10,000 but upto 20,000 20%

Total Income > 20,000 30%

Surcharge - @12 if Total Income is more than 1Cr.

— Note : In all the above cases, Health & Education Cess is applicable @ 4% of
Tax & Surcharge.

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Rebate u/s 87A - For Resident individuals having NTI upto = 5,00,000.

a) 100% of tax payable, or

b) 12500

Whichever is Lower

This rebate shall be reduced before adding education cess.

Note : Rebate u/s 874A available against all types of Income except LTCG
u/s112A.

Marginal relief

It is applicable in case of All Assessee where surcharge is applicable. fou have to

check marginal relief concept when the total income is little bit more than 50
Lakhs/1 Crore /2Crore/ 5 Crore (in case of Ind/HUF/AOP/ BOI/AJP)
OR
1 Crore (in case of Company/ Firm/local Authority/ Co. op. society) or 10 Crore (in
case of Company).
Section 115BAC (Alternate taxation scheme)

Sec115BAC Tax on Income of Individual & HUF Tax rate

Total income
Upto 2,50,000 Nil
>250,000 to 5,00,000 5%
>5,00,000 to 7,50,000 10%
>7,50,000 to 10,00,000 15%
>10,00,000 to 12,50,000 20%
>12,50,000 to 15,00,000 25%
>15,00,000. 30%
Special Special Income (u/s 111A, 112, 112A etc.) shall be taxable ©
income Special rates.
AMT Assessee opting for sec. 115BAC is not required to pay
provisions AMT.
B/F AMT credit cannot be set off against income u/s
115BAC.
Therefore, if assessee has b/f AMT credit, it should first
exhaust the AMT credit and thereafter opt for sec 115BAC.

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Section 115BAC

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