Income Tax - II (2022-23)

UNIT-I
CAPITAL GAINS:
INTRODUCTION:
Any Income derived from a Capital asset movable or immovable is taxable under the head Capital Gains
under Income Tax Act 1961. Taxation of Capital Gains depends on two aspects namely
 Capital assets
 Transfer
CAPITAL ASSETS SEC 2(14):
Capital assets refers to property of any kind whether fixed or circulating, movable or immovable, tangible or
intangible held by an Assessee including property of his business or profession, but excluding non – capital
assets. Capital assets include goodwill, leasehold rights, jewellery, shares, manufacturing licence, etc.
Types of Capital Assets:
There are three types of capital assets:
a) Financial Assets:
Financial assets include shares, debentures, securities, units of UTI, mutual funds, Zero Coupon Bonds etc.
Financial assets divided into two types Short term capital assets If any taxpayer has sold a Capital asset
within12 months/ 1 year of its purchase Long term capital assets If any taxpayer has sold a Capital asset
more than 12 months/ 1 year of its purchase.
b) Depreciable Assets:
Depreciable assets (building, machinery etc) always called Short term capital assets.
c) Other Assets:
Other assets divided into two types Short term capital assets If any taxpayer has sold a Capital asset
within36 months/ 3 years of its purchase Long term capital assets If any taxpayer has sold a Capital asset
more than 36 months/ 3 years of its purchase.
TRANSFER SEC 2(47):
The term transfer includes
 Sale , Exchange or Relinquishment of the assets or
 Extinguishment of any right therein or
 Compulsory acquisition by law or
 Where the asset is converted by owner into stock – in – trade or
 Transaction involves in allowing the possession of any immovable property to be taken or retained in
part performance of contract or
 Maturity or redemption of a Zero Coupon Bonds With Effect from the AY 2006-2007
CAPITAL GAIN:
It refers gain on transfer of capital assets.
Types of Capital Gain:
There are two types of capital gains namely
a) Short Term Capital Gains:
Any gain from the sale or transfer of short term capital assets will be termed as Short Term Capital Gains.
Taxability of short term capital gains: short term capital gain is taxed @ 15% for the AY 2013-2014
plus 2% education cess and 1% secondary higher education cess
b) Long Term Capital Gains:
Any gain from the sale or transfer of long term capital assets will be termed as long Term Capital Gains.
The Central government notifies cost inflation index for every year. The indexed cost of acquisition is
calculated by multiplying the actual cost of acquisition with C.I.I of the year in which the capital asset is sold
and divided by C.I.I of the year of purchase of capital asset. Similarly the indexed cost of improvement can be
calculated by using the C.I.I of the year in which the capital asset is improved. Where the capital asset was
acquired before the year 1981 then the cost of acquisition shall be the fair market value or the actual cost of its
acquisition whichever is higher. The Fair market value of a capital asset can be known by the valuation of the
registered value.
Taxability of long term capital gains:
Long Term Capital Gain is taxed @ 20% for the AY 2013-2014 plus 2% education cess and 1% secondary
higher education cess
SLUMP SALE (SEC 42 C):
Transfer of one or more undertakings as a result of the sale for a lump- sum consideration without values
being assigned to the individual assets and liabilities.
COST OF ACQUISITION (SEC 55(2) b):
Cost of acquisition refers to the cost for which the asset was purchased by the Assessee. Any expenses
relating to acquisition can be included in cost of acquisition. Interest on borrowed capital for the purpose of
acquisition can be considered as part of cost of acquisition provided, it is not considered in any other
provision.
Cost of acquisition in case of depreciable assets (sec 50):
The written down value of the block of the assets on last day of the previous year should be considered. Any
gain from depreciable assets should always be treated as short term capital gain.
FMV as on 1st April 1981 Taken as Cost of Acquisition (SEC 55(2)):
If the asset purchased before 1.4.1981: the following provision should be followed
Actual cost or FMV as on 1.4.1981 whichever is higher is taken as cost of acquisition.
Cost of improvement SEC 55(1) b):
Cost of improvement refers to any capital expenditure spent towards additions or improvements to the
existing capital assets. The following points should be considered
 Cost of improvement on or after 1.4.1981 should be considered
 Cost of improvement before 1.4.1981 should not be considered
Indexed cost (SEC 48):
Indexed cost refers to cost, which has been proportionately converted with the cost inflation index. It
includes both cost of acquisition as well as cost of improvement. In case of bonds and debentures, there is no
indexed cost but capital indexed bonds issued by government it should be indexed.
FORMAT FOR COMPUTATION OF INDEXED COST:
Cost
Indexed cost = ---------------------------------------------- X Index of the Year of Sale (852)
Index of the year of acquisition/ improvement
FORMAT FOR COMPUTATION OF SHORT TERM CAPITAL GAIN:
Particulars Amount Amount
Sale consideration of the assets xxxxxx
Less: Expenditure in connection with transfer xxxx
Less: Cost of acquisition of the assets xxxx
Less: Cost of improvement of the assets xxxx
Less: Exemption from capital gain under section 54B,54D,54G,54GA xxxx xxxxxx
Net taxable capital gain xxxxxx
FORMAT FOR COMPUTATION OF LONG TERM CAPITAL GAIN:
Particulars Amount Amount
Sale consideration of the assets xxxxxx
Less: Expenditure in connection with transfer xxxx
Less: Indexed Cost of acquisition of the assets xxxx
Less: Indexed Cost of improvement of the assets xxxx
Less: Exemption from capital gain under section xxxx xxxxxx
54,54B,54D,54EC,54F,54G,54GA,54GB
Net taxable capital gain xxxxxx
REALIZATION EXPENSES:
Brokerage, commission, stamp duty, registration fees and travelling expenses in connection with transfer are
deductable from sale consideration.
WHEN ADVANCE MONEY IS RECEIVED:
Section 51 deals with Advance Money. When any advance money received and retained by the Assessee in
respect of transfer, then the advance money received and retained should be deducted from the cost value or
written down value or fair market value, as the case may be while calculating cost of acquisition. The
Assessee should be the same person (the person who received the advance money as well as the person who
sells the property should be same)
CAPITAL GAINS EXEMPTED U/S10:
The following are the capital gains, which are, exempted U/S 10 of the Income Tax Act.
 Capital gain (short term or long term) on transfer of a unit of US 64
 Long term capital gain on transfer of BSE 500 Equity shares
 Capital gain (short term or long term) on compulsory acquisition of urban agriculture land
 Long term capital gain towards securities covered by transaction tax
ASSETS NOT INCLUDED UNDER CAPITAL ASSETS:
 Stock in trade, consumable stores or raw materials held for the purpose of business or profession
 Personal effects like furniture, refrigerator, television, household appliances, pooja articles, motor car
and any other vehicles.
 Gold bonds of central government
 Special bearer bonds 1991 etc.
DEDUCTIONS/ EXEMPTIONS AVAILABLE U/S 54 WHILE CALCULATING CAPITAL GAINS:
For what purpose Rules to be followed
Section
it is allowed
a) Capital gain arising from Transfer of residential house
property and investing in residential house property comes under
this section
b) Only individuals and HUF can claim exemption under this
section
c) The transferred house property should be LTCA
d) Capital should be reinvested 1 year before or 2 years after the
Transfer of
date of sale
residential house
e) Newly constructed it should be within 3 years
property and
54 f) The new house purchased or constructed should not be sold
investing in
within 3 years
residential house
g) If the amount of capital gain is not re invested in another
property
residential house that should be deposited in Capital Gains
Deposit Accounts Scheme of any public sector bank and should
be utilized within the specified time.
h) To claim exemption if the amount is deposited in the CGDAS,
proof should be shown to the assessing officer.
i) The exemption will be actual gain or amount invested in assets
whichever is less.
a) Only individuals and HUF can claim exemption under this
section
b) The transferred asset may be LTCA or STCA
c) The land should be used by the Assessee for a period of 2
years before the date of transfer
d) The gain should be invested in another agricultural land
Sale of land used
within 2 years from the date of transfer
for agricultural
e) The new agricultural land should not be sold within 3 years
54B purposes and
f) If the amount of capital gain is not re invested that should be
invested in another
deposited in Capital Gains Deposit Accounts Scheme of any
agricultural land
public sector bank and should be utilized within the specified
time.
g) To claim exemption if the amount is deposited in the CGDAS,
proof should be shown to the assessing officer.
h) The exemption will be actual gain or amount invested in
assets whichever is less.
a) It is available to individuals, HUF firm, company and other
persons.
Compulsory b) The transferred asset may be LTCA or STCA
acquisition of land c) The land and building should be used by the Assessee for a
and building, period of 2 years preceding the date of Compulsory acquisition
54D
forming part of d) It is not necessary that the Assessee should own such land and
industrial building during the 2 years.
undertaking e) The gain should be invested in another land and building 3
years from the date of transfer
f) The new land and building should not be sold within 3 years
g) If the amount of capital gain is not re invested that should be
time.
h) To claim exemption if the amount is deposited in the CGDAS,
proof should be shown to the assessing officer
i) The exemption will be actual gain or amount invested in assets
whichever is less.
a) It is available to individuals, HUF firm, company and other
persons.
b) The transferred asset must be LTCA
c) The gain should be invested within 6 months from the date of
transfer
Amount invested d) The Assessee can invest the whole or part of the capital gain
in certain long in long term specified assets. (bonds issued by NABARD or
54EC
term specified National Highways Authority of India or Rural Electrification
assets (bonds) Corporation or National Housing Bank or Small industries)
e) The exemption will be actual gain or amount invested in
specified assets whichever is less.
f) The new asset should not be sold within 3 years
h) Investments in the mentioned specified assets on or after
1.4.2007, should not exceed Rs.5000000
section
b) The transferred asset may be LTCA other than residential
house property
c) The new house should be purchased within 1 year before or
within 2 years after the sale.
d) If the house is constructed it should be constructed within 3
years from the date of transfer.
Sale of long term
e) Exemption should be calculated as follows: Exemption =
capital assets other
LTCG X Amount invested/ Net consideration
than residential
54F f) If the amount of capital gain is not re invested that should be
house property but
investing in house
property
time.
g) To claim exemption if the amount is deposited in the CGDAS,
h) The new asset should not be sold within 3 years
Note: Assessee should not own any other residential house on
the date of sale and he should construct a residential house
within a period of 3 years or should not purchase within 2 years
a second house.
a) This section applies when capital assets like plant, machinery,
land or building or any right in land or building used in urban
For shifting of
area is shifted.
industrial
b) The amount should be reinvested within a period of 1 year
54G undertaking from
before or 3 years after the date of transfer in new plant,
urban area to non
machinery, land or building should be acquired.
urban area
c) Shifting expenses can be claimed as deductions.
d) The new asset should not be sold within 3 years
e) If the amount of capital gain is not re invested that should be
time.
f) To claim exemption if the amount is deposited in the CGDAS,
a) Applies to shifting of plant, machinery, land or building or
any right in land or building used in urban area to Special
Economic Zone
b) The amount should be reinvested within a period of 1 year
For shifting of
before or 3 years after the date of transfer
industrial
c) Shifting expenses can be claimed as deductions.
undertaking from
54GA d) The new asset should not be sold within 3 years
urban area to any
e) If the amount of capital gain is not re invested that should be
Special Economic
Zone
time.
f) To claim exemption if the amount is deposited in the CGDAS,
section
b) It is available for transfer of Lt residential property between
1.4.2012 and 31.3.2017
c) Equity shares in eligible company should be acquired on or
before due date of furnishing of return
d) Eligible company should utilize the amount for the purchase
of new assets within one 1 year from the date of purchase of
equity shares.
Transfer of long
e) Exemption should be calculated as follows: Exemption =
term residential
LTCG X Amount invested (cost of plant)/ Net consideration
property and
f) Equity shares in the eligible company should not be sold
investing in Equity
54GB within 5 year.
shares of an
g) New asset should not be transferred within 5 years.
eligible company
h) Deposit account should be utilized fully or partly for
(small and medium
purchasing the new asset within one year from the date of
enterprises)
subscription in equity shares.
i) Eligible company: i) incorporated on or after April 1 of the PY
in which residential property is transferred ii) Engaged in the
business of manufacture of any article or thing iii) The transferor
of residential property has more than 50% share capital or voting
right after subscription in shares by the Assessee (transferor) iv)
The company qualifies to be a SME
j) New asset includes plant and machinery excluding office
appliance, computers, software, vehicle, 100% depreciable asset.
a) It deals with the extension of time limit for acquiring new
assets
Extension of time b) It deals with the time limit prescribed in each section and also
54H limit for acquiring the enhanced compensation
new assts c) Enhanced compensation is taxable in the year in which it is
received. Under this the time Limit will be determined from the
date of receipt of additional compensation.
Hints for calculating taxable income from capital gains:
1. Cost should be indexed only for long term capital assets by looking into the cost inflation index table.
2. Depreciable assets should always be treated as STCA.
3. Indexed cost should be calculated by considering net consideration.
4. Except section 54F and 54GB all other sections can be given in full.
5. Section 54F and 54GB should be calculated as follows
Exemption = LTCG X Amount invested (cost of plant)/ Net consideration
The cost inflation index table as notified is here below:

Cost Inflation Index Notified by the GOVTs
Financial Year (CII)
2001-2002 100
2002-2003 105
2003-2004 109
2004-2005 113
2005-2006 117
2006-2007 122
2007-2008 129
2008-2009 137
2009-2010 148
2010-2011 167
2011-2012 184
2012-2013 200
2013-2014 220
2014-2015 240
2015-2016 254
2016-2017 264
2017-2018 272
2018-2019 280
2019-2020 289
2020-2021 301
2021-2022 317
2022-2023 331
TREATMENT OF ADVANCE MONEY RECEIVED:
a) Section 51 deals with advance money.
b) When any advance money is received and retained by the Assessee in respect of transfer, then the advance
money received and retained should be deducted from the cost value or written down value or fair market
value, as the case may be, while calculating cost of acquisition.
c) The Assessee should be the same person. (I.e. the person who received the advance money as well as the
person who sells the property should be same)
d) If any advance money is received before 1.4.1981, and the FMV as on 1.4.1981 is taken into consideration
for calculation, then the advance money received may be deducted from the FMV.
PROBLEMS :
1. Cost of acquisition in 2002-2003 Rs.120000. find out the indexed cost if sold in 2018-2019. (CII for 2002-
03 is 105 and CII for 2022-23 is331)
ANS:
Indexed cost = cost ( purchase price)

---------------------------- x CII of the year of sale
CII of the year of purchase
=120000/105x 331= Rs. 378286
2. Find out the indexed cost of the following long term capital assets if they are sold during the PY 2018-
2019.
S.No Asset Year of purchase Cost FMV on .
1.4.1981
1 Jewellery 2004-05 80000 -
2 Bonds 2006-07 200000 -
3 House 2010-11 400000 -
4 Plot inherited in 1985-1986 Acquired by father in 1998-1999 100000 200000
(CII for 2004-05 is 113,for 2006-2007 is 122 for 2010-11 is 167 and 2022-23 is 331)
ANS :
Indexed cost = cost ( purchase price)

------------------------------------ x CII of the year of sale
1) jewellery = 80,000/113 X 331 =Rs. 2,34,336
2) Bonds = NO INDEXING
3) House = 4,00,000/167 X 331= Rs. 7,92,814

4) Cost = Cost/ purchase price = 1,00,000
FMV ON 2001 = 2,00,000
WEH = 2,00,000
= 2,00,000/100X 331 = Rs. 6,62,000
3. Mr.Ghosh sold a house on 1.9.2022 for Rs.1600000. this house was inherited by him during 2001-2002
from his father who had constructed it in 1991-1992 for Rs.50000. Mr.Ghosh spent Rs.50000 on renovation of
the house in 2006-2007. Fair market value of the house as on 1.4.2001 was Rs.440000.
This house was under negotiations for sale in May, 2010 and he received Rs.20000 as advance money. The
contract could not materialize and the advance money was forfeited. Compute the amount of capital gain
assuming that he does not qualify for any exemption.
(CII for 2001-2002:100,2006-2007:122,2010-2011:167&, 2022-23 is 331)
ANS :
a) Indexed cost = cost ( purchase price)

------------------------------------ x CII of the year of sale
= 80,000/112X 331= Rs. 2,36,428
b) Cost / purchase price = 90,000
FMV ON 2001 = 1,50,000
WEH = 1,50,000
= 1,50,000/100X 331= Rs. 4,96,500
c) Cost /Purchase price = 2,00,000
FMV ON 2001 = 4,00,000
WEH = 4,00,000/100 X 331 = Rs. 13,24,000
4. Mr.A purchased a piece of land for Rs.500000 during the PY 2001-02. In 2005-2006 he agreed to sell it to
Mr.B for Rs.900000 and accepted advance money of Rs.50000. Mr.B, however failed to honour his promise
and could not get the sale deed executed in his favour within stipulated time. As a result the advance money
was forfeited by Mr.A. Now,
a) Mr.A has sold this land during 2022-2023. for 2000000. Determine the amount of capital gains chargeable
to tax in the hand of Mr.A
b) Suppose Mr.A received advance money in May 2016 and forfeited the same as the buyer could not pay the
balance amount within stipulated period of 3months.
(c) Suppose Mr.A.transferred this land to Mr.C under a gifting deed durig 2012-2013 and land is sold by Mr.c
for Rs.2000000 during 2022-2023.Calculate capital gain in the land of Mr.C.
(CII for 2001-2002 is 100,for 2005-2006 is 117, 2012-2013 is 200 and for 2022-23 is 331)
ANS :
a) calculation of short term capital gain
written down value furniture = 18,000

sales price = 26,000
sales consideration = 26,000
(-) written down value on furniture = 18,000
---------------
Short term capital gain 3000
----------------
b) Bonds – long term capital gain
No indexing
Calculation of long term capital gain
Sales consideration = 4,00,000

(-) cost = 2,60,000
----------------
Long term capital gain 1,40,000
-------------------
c) House property – Long term capital gain
sales consideration 28,60,000

(-) Expenses on sale 60,000
-------------------
Net consideration 28,00,000
(-) indexed cost of acquisition
4,60,000/100X 331 15,22,600
-------------------
12,77,400
(-)Indexed cost of asset
3,20,000/137X 331 7,73,138
-------------------
Long term capital gain 5,04,262
------------------
5. Mr.S.Krishna received a gift of a house in Nov.2007 from Mr.K hedge who had purchased it in Nov.1997
for Rs.6300000. Mr.K hedge renovated the house in March 1998 at a cost of Rs.270000. Its FMV on 1.4.2001
was Rs.10,00,000. In 1998-1999 Mr.K hedge had agreed to sell the house and had received Rs.100000 as
advance money. The sale could not materialize and advance money was forfeited. The house was further
renovated in 2010-2011 (CII is 167) at a cost of Rs.200000. Mr.S.Krishna sold the house in December 2022
for Rs3560000 and paid Rs.60000 as brokerage. Compute his taxable capital gain.(CII for 2001-2002 is
100,for 2007-2008 is 129 and for 2022-23 is 331)
6. Find out the inflated cost of the following cases for the assessment year 2019-2020.
a) Cost of plot acquired in 2006-2007 for Rs.80000
b) Cost of house purchased in 1998-1999 for Rs.90000 (Fair market value on 1.4.2001 being Rs.150000)
c) Cost of house purchased in 1996-1997 for Rs.200000 (Fair market value on 1.4.2001 being Rs.400000)
(CII for 2001-02 = 100,2006-07= 122 and 2022-23=331)
7. Find out the indexed cost and capital gain in the following cases:
a) W.D.V of office furniture as on 1.4.2018Rs.18000 (which was purchased on 15.9.2008 for Rs.20000 and
sold on 1.9.2022(CII is 331) for Rs.26000)
b) Bonds purchased on 1.11.2006 (CII is 122) for Rs.260000 were sold on 1.1.2023 (CII is 331) for
Rs.400000
c) Cost of acquisition of house at delhi in 1996-1997 Rs.100000
Cost of improvement made in 1999-2000 Rs.50000
FMV on 1.4.2001 (CII is 100) Rs.460000
Cost of additions made in 2008-2009 (CII is 137) Rs.320000
Sale price of the house on 1.11.2022 (CII is 331) Rs.2860000
Expenses on sale Rs.60000
d) Mr. Raman Raj inherited a house at ludhiana from his father Mr.D on 1.1.2006. (CII 117). The house was
acquired by Mr.D. Raju in in 1989-1990 for Rs.60000 and its FMV as on 1.4.2001 was Rs.520000 and it was
sold in 2022-23 - (CII is 331) for Rs.1350000
8. Mr.Rahman purchased a house on 1.11.2001 for Rs.200000 which was improvised in 2010.-2011 at the
cost of Rs.100000. what will be its indexed cost during 2022-2023 if CII for 2001-2002 is 100, in 2010-2011
is 167 and for 2022-23 is 331.
9. Compute the taxable capital gain from the particulars given below:
i) Net consideration of a residential house Rs.10,00,000 2.6.2022 (CII :331)
ii) Cost of acquisition of this house Rs.210000 1.5.2007 CII: 129
iii) New house acquired on 1.9.2017 for Rs.200000
10. Mr.Vasudev purchased a house in Udipi in1996 for Rs.150000. He incurred the following expenses for the
improvement of the house.
Renovation of the house Rs.125000 and additions of 2 rooms after one year Rs.200000. The FMV of the
house on 1.4.2001 was Rs.610000. He sold the house in May 2022 for Rs.23,00,000.
He purchased another house property within 2 months for Rs.200000 and invested in capital gains account
scheme Rs.50000. Calculate taxable capital gain for the previous year 2017-2018. Cost inflation Index for
2001-2002 was 100 for 2022-23 is 331
.
11. Mr. Raj Singh Parmer sold a plot of land at Jaipur on 1.6.2022 (CII: 331) for Rs.1440000. He paid
Rs.40000 as selling expenses. The plot was received by him on death of his father on 15.3.2005 (CII was
113). His father had acquired it on 1.4.1990 for Rs.100000 and its FMV on 1.4.2001 was Rs.310000.
On 1.10.2022 he invested Rs.300000 in bonds issued by Rural Electrification Corp. Limited notified U/S
54EC and Rs.200000 on 1.3.2023 in Bonds of National Highway Authority of India. Compute his taxable
capital gain
12. Mr. Avtar singh purchased a plot in 2002-2003 for Rs.400000. It was sold on 15.1.2023 for Rs.1580000
and he paid Rs.20000 as brokerage charges. He invested Rs.200000 in bonds of National Highway Authority
of India on 31.3.2023 and Rs.310000 in bonds issued by Rural Electrification Corp. Limited on 1.6.2023.
Compute his taxable capital gain. CII for 2002-2003 was 105 and for 2022-23 is 331.
13. Mr.H submits the following particulars about sale of assets during the year 2017-2018.
Particulars Jewellery Plot Gold
Sale price 500000 2174000 250000
Expenses on sale Nil 24000 Nil
Cost of acquisition 150000 700000 80000
Year of acquisition 2007-2008 2004-2005 2009-2010
CII 129 113 148
He has purchased a house for Rs.1200000 on 1.3.2023. Calculate the amount of taxable capital gain if CII for
2022-23 is 331
.
14. Mr.Atul sold the following assets during the previous year 2018-2019.
Particulars Securities Silver Jewellery Shop
Sale price 260000 1500000 600000 1150000
Date of sale 1.6.2022 1.12. 2022 11.03.2023 31.03.2023
Cost of acquisition/FMV as on 1.4.2001 180000 30000 150000 330000
FMV
400000
Year of acquisition 1.1.2009 1.1.1999 1.9.2006 1.3.2003
CII 137 100 122 105
He has purchased a house for Rs.2400000 on 1.6.2023. Calculate the amount of taxable capital gain .
.
15. a) Mr.Yash sold an asset on 15.8.2022 (CII:331 ) for Rs.250000. the cost price of the asset purchased on
11.2.1996 is Rs.20000. the fair market value of the same on 1.4.2001 (CII was 100) Was Rs.50000. The
income of Mr.Yash from other sources during the previous year was Rs.222700
b). Sh.Dewan, who inherited building properties consisting of a residential house and a shop worth
Rs.138000, sold on 1.11.2022 residential property for Rs.890000 (CII : 331). The fair market value of the
property sold was Rs.260000 on 1.4.2001 (CII was 100) His income from other sources was Rs.1,12,000
16. During the year ended 31st March, 2023 Mr. David sold the following assets:
a) Shop purchased in 2005-2006 (CII 117) for Rs.48000, sale proceeds Rs.180000
b) Machinery purchased in 2003-2004 (CII 109) for Rs.50000 (WDV on 1.4.2022 Rs.35000), sale proceeds
Rs.60000
c) Furniture purchased on 1.5.2022 for Rs.1000, sale proceeds Rs.1300
d) Machinery purchased on 1.5.2022 for Rs.10000, sale proceeds Rs.12000
e) Agricultural land in Agra purchased in 1998-1999 for Rs.40000 (FMV on 1.4.2001 (CII 100) being
Rs.72000), sale proceeds Rs.340000
f) Residential house purchased in 2007-2008 (CII :129) Rs.80000, sale proceeds Rs.290000
During the year he bought another house for his residence for Rs.800000. work out the amount of capital
gains to be included in the gross total income and also compute his total income, if his other business income
during the year was Rs.100000. cost inflation index for 2022-2023 is 331
.
17.Mr.Chandrahas joshi sold his residential house on 1.11.2022 for Rs.1875000 which he had purchased for
Rs.410000 on 1.2.2002. He spent Rs.56100 for its improvement in 2003-2004. In 2005-2006 he had agreed to
sell the house to Mr.K.Rajasekar for Rs.650000 and had received an advance of Rs.10000 for the same.
However since Mr.Rajasekar did not get the sale registered within the agreed time, the agreement was
cancelled and the advance money was forfeited by Mr.joshi.
Compute the capital gain for the Assessment year 2023-2024 assuming that Mr.C. joshi bought a new
residential house on 1.11.2022 for Rs.250000 and invested on 1.3.2023 Rs.120000 in the capital gains Bonds
of National Highway Authority of India notified U/S 54EC. (The cost inflation index for the financial years
2001-2002, 2003-2004, 2005-2006,and 2022-2023 were 100, 109,117, and 331 respectively.
18. From the following information of Mrs.Juhi compute taxable capital gains for the Assessment year 2023-
2024:
i) Cost of acquisition of residential house in 2001-2002 Rs.520000
ii) Sale proceeds on 2.8.2022 Rs.2200000
iii) Cost of construction of new residential house. (The house was constructed during 2022-2023 .The house is
used by Juhi sister for her residence) Rs.400000
The cost inflation index in 2001-2002 was 100 and 2022-2023 it is 331 .
19.From the following relating to PY 2022-2023 compute taxable capital gains of Mrs.Karishma for the
Assessment year 2023-2024:
i) Purchased agricultural land (Agra city) in 2002-2003 (self cultivated) Rs.160000
ii) Sold the land on 10.8.2022 for Rs.700000
iii) He invested in purchase of a house on 10.9.2022 Rs.200000
iv) Purchased another piece of agricultural land on 10.10.2022 Rs.150000
The cost inflation index in 2002-2003 was 105 and 2022-2023 it is 280. He does not own any other house.
----------------------------------------------------------------------------------------------------------------
9. Compute the taxable capital gain from the particulars given below:
i) Net consideration of a residential house Rs.10,00,000 2.6.2022 (CII :331)
ii) Cost of acquisition of this house Rs.210000 1.5.2007 CII: 129
iii) New house acquired on 1.9.2017 for Rs.200000
Solution
• Net consideration 10,00,000
- Indexed cost 2,10,000x331 /129 5,38,837
---------------
LTCG 4,61,163
-Exempted u/s54 2,00,000
---------------
Taxable cap gain 2,61,163
---------------
10. Mr.Vasudev purchased a house in Udipi in1996 for Rs.150000. He incurred the following expenses for the
improvement of the house.
Renovation of the house Rs.125000 and additions of 2 rooms after one year Rs.200000. The FMV of the
house on 1.4.2001 was Rs.610000. He sold the house in May 2022 for Rs.23,00,000.
He purchased another house property within 2 months for Rs.200000 and invested in capital gains account
scheme Rs.50000. Calculate taxable capital gain for the previous year 2017-2018. Cost inflation Index for
2001-2002 was 100 for 2022-23 is 331
Solution
• Net consideration 23,00,000

- Indexed cost 6,10,000x331 /100 20,19,100
---------------
LTCG 2,80,900
-Exempted u/s54 2,00,000
Capital gains account 50,000 2,50,000
---------------
Taxable cap gain 30,900
---------------
11. Mr. Raj Singh Parmer sold a plot of land at Jaipur on 1.6.2022 (CII: 331) for Rs.1440000. He paid
Rs.40000 as selling expenses. The plot was received by him on death of his father on 15.3.2005 (CII was
113). His father had acquired it on 1.4.1990 for Rs.100000 and its FMV on 1.4.2001 was Rs.310000.
On 1.10.2022 he invested Rs.300000 in bonds issued by Rural Electrification Corp. Limited notified U/S
54EC and Rs.200000 on 1.3.2023 in Bonds of National Highway Authority of India. Compute his taxable
capital gain
Solution
• Sale consideration 14,40,000
- Expenses on sale 40,000
---------------
net consideration 14,00,000
- Indexed cost 3,10,000x331/113 9,08,053
---------------
LTCG 4,91,947
-Exempted u/S54ec
Amt invested in Rural Electrification 3,00,000
- Exemption u/s 54EC
- Invest in bonds of National Highway
Not allowed invested after 6 months
---------------
Taxable cap gain 1,91,947
---------------
12. Mr. Avtar singh purchased a plot in 2002-2003 for Rs.400000. It was sold on 15.1.2023 for Rs.1580000
and he paid Rs.20000 as brokerage charges. He invested Rs.200000 in bonds of National Highway Authority
of India on 31.3.2023 and Rs.310000 in bonds issued by Rural Electrification Corp. Limited on 1.6.2023.
Compute his taxable capital gain. CII for 2002-2003 was 105 and for 2022-23 is 331.
Solution
• Sale consideration 15,80,000
- Expenses on sale 20,000
---------------
net consideration 15,60,000
- Indexed cost 4,00,000x331/105 12,60,952
---------------
LTCG 2,99,048
-Exempted u/S54EC
Amt invested in Rural Electrification 3,10,000
- Exemption u/s 54EC
- Invest in bonds of National Highway 2,00,000 5,10,000
---------------
Taxable cap gain nil
---------------
13.Mr.H submits the following particulars about sale of assets during the year 2017-2018.
Particulars Jewellery Plot Gold
Sale price 500000 2174000 250000
Expenses on sale Nil 24000 Nil
Cost of acquisition 150000 700000 80000
Year of acquisition 2007-2008 2004-2005 2009-2010
CII 129 113 148
Percentage of LTCG TO NETCONSIDERATION

LTCG/NC X100
JEWELLERY=1,15,116 /5,00,000 X100=23.02%
PLOT=99558/21,54,000 X100=4.63%
GOLD=71,081 /2,50,000X100=28.43%
HP= 12,00,000
-GOLD 2,50,000
------------
9,50,000
-JEWLLERY 5,00,000
------------
4,50,000
-PLOT
21,50,000-99,558
4,50,000-99,558 X4,50,000/21,50,000=23,818
PARTICULARS Jewellery plot gold
Sale price 5,00,000 21,74,000 2,50,000
- Exp on sale nil 24,000 nil
Net consideration 5,00,000 21,50,000 2,50,000
-indexed cost 1,50,000x331/129 7,00,000x331/113 80000x331/148
3,84,884 20,50,442 1,78,919
LTCG 1,15,116 99,558 71,081
EXEMPTIONU/S 54F 1,15,116 20838 71,081
TAXABLE LTCG NIL 78720 NIL
14.Mr.Atul sold the following assets during the previous year 2018-2019.
Particulars Securities
Silver Jewellery Shop
Sale price 260000 1600000 600000 1150000
Date of sale 1.6.20221.12. 2022 11.03.2023 31.03.2023
Cost of acquisition/FMV as on 1.4.2001 180000 30000 150000 330000
FMV
400000
Year of acquisition 1.1.2009 1.1.1999 1.9.2006 1.3.2003
CII 137 100 122 105
He has purchased a house for Rs.2400000 on 1.6.2023. Calculate the amount of taxable capital gain .
.
PARTICULARS Securities Silver Jewellery Shop
Sale price 260000 1600000 600000 1200000
- Exp on sale nil nil nil nil
Net consideration 2,60,000 1600000 600000 1200000
-indexed cost 1,80,000 4,00,000 x 1,50,000 3,30,000x

331/100 x331/122 331/105
13,24,000 4,06,967 10,40,286
LTCG 80,000 2,76,000 1,93,033 1,59,714
EXEMPTIONU/S 54F nil 2,65,650 1,93,033 NIL
TAXABLE LTCG NIL 10,350 NIL 1,59,714
• Percentage of LTCG TO NETCONSIDERATION

LTCG/NC X100
SECURITIES=80,000 /2,60,000X100=30.76%
SILVER=2,76,000 /16,00,000 X100=17.25%
JEWELLERY =1,93,033 /6,00,000X100=32.17%
SHOP= 159714/1200000 X100 = 13.309%
HP= 24,00,000
-JEWELLERY 6,00,000
------------
18,00,000
-SECURITIES 2,60,000
------------
15,40,000
-SILVER
16,00000-2,76,000
15,40,000-2,76,000X 1540000/1600000=2,65,650
15. a) Mr.Yash sold an asset on 15.8.2022 (CII:331 ) for Rs.250000. the cost price of the asset purchased on
11.2.1996 is Rs.20000. the fair market value of the same on 1.4.2001 (CII was 100) Was Rs.50000. The
income of Mr.Yash from other sources during the previous year was Rs.222700
b). Sh.Dewan, who inherited building properties consisting of a residential house and a shop worth
Rs.138000, sold on 1.11.2022 residential property for Rs.890000 (CII : 331). The fair market value of the
property sold was Rs.260000 on 1.4.2001 (CII was 100) His income from other sources was Rs.1,12,000
Computation of Taxable Capital Gain
i) Sales price 2,50,000
(-) Indexed cost
50,000x331/100 1,65,500
--------------
LTCG 84,500
--------------
ii) Sales price 8,90,000
(-) Indexed Cost
2,60,000 x331/100 8,60,600
--------------
LTCG 29,400
--------------
16. During the year ended 31st March, 2023 Mr. David sold the following assets:
a) Shop purchased in 2005-2006 (CII 117) for Rs.48000, sale proceeds Rs.180000
b) Machinery purchased in 2003-2004 (CII 109) for Rs.50000 (WDV on 1.4.2022 Rs.35000), sale proceeds
Rs.60000
c) Furniture purchased on 1.5.2022 for Rs.1000, sale proceeds Rs.1300
d) Machinery purchased on 1.5.2022 for Rs.10000, sale proceeds Rs.12000
e) Agricultural land in Agra purchased in 1998-1999 for Rs.40000 (FMV on 1.4.2001 (CII 100) being
Rs.72000), sale proceeds Rs.340000
f) Residential house purchased in 2007-2008 (CII :129) Rs.80000, sale proceeds Rs.290000
During the year he bought another house for his residence for Rs.800000. work out the amount of capital
gains to be included in the gross total income and also compute his total income, if his other business income
during the year was Rs.100000. cost inflation index for 2022-2023 is 331
.
Computation of Capital Gain (Assessment Year 2023-24)
(A) Short-term Capital Gain
i) Furniture (Purchased on 1-5-2022) 1300
(-) cost of furniture 1000
----------
STCG 300
Sale price of Machinery 60,000
(-) WDV 35,000
----------
STCG 25,000
ii) Sale price of Machinery 12,000

(-) Cost of the Machinery 10,000
----------
STCG 2,000
(B) Long- Term Capital gain ------------ 27,300
i) Residential House
Sale Price 2,90,000
- Indexed cost (80,000x331/129) 2,05,271
-------------
Capital Gain 84,729
- Exempted u/s 54 84,729
-----------
NIL
ii) Agriculture Land
Sale Price 3,40,000

- Indexed cost (72,000x331/129) 2,38,320
------------- 1,01,680
Sale Price 1,80,000
- Indexed cost (48,000x331/129) 1,35,795
------------- 44,205
---------------
Total LTCG 1,45,885
(-) Exempted u/s 54 F- Fully as he has
Invested Rs 8,00,000-84,729( exemption u/s54)
= 7,15,271 1,45,885 nil
-------------
Taxable capital Gain 27,300
Statement of Total Income
Business Income 1,00,000
Capital gain 27300
------------
GTI 1,27,300
--------------
UNIT-II
INCOME FROM OTHER SOURCES
INTRODUCTION:
Income from Other Source is residual head of income. It means: A source of income which does not fall
under any one of the other four heads of income (viz., ‘salaries’, ‘Income from house property’, ‘Profits and
gains of business and profession’, or ‘Capital gains’) is to be computed and brought under the head ‘Income
from other sources’.
INCOMES THAT ARE TAXED UNDER OTHER SOURCES:
General incomes / (Incomes U/S 56(1) :
a) Agricultural income from outside India.
b) Receipts from person other than employer i.e., university
c) Income from subletting or rent from subletting or rent of vacant land or ground rent
d) Director’s fees or sitting fees
e) Remuneration for delivering lectures or writing articles
f) Withdrawal from NSS U/S 80CCA (principal and interest amount)
g) Repurchase of units U/S 80CCB (principal amount)
h) Casual incomes other than that taxable U/S 56(2)
i) All types of interest except taxable U/S 56(2)
j) income derived from coal mine owner from rent and royalties
k) Income from writing articles by a non journalist
Specific Incomes / (Incomes U/S 56(2) :

a) Dividend from foreign company
b) Dividend from cooperative society
c) Interest on securities
d) Winnings from lotteries, races, crossword puzzles, TV game shows, card games, gambling and betting.
e) Any amount received as gift or gift received during 2012-13 which is not exempted u/s 56(v)
f) Income from letting of plant and machinery where it is not regular business.
g) Income from letting of building along with furniture and plant and machinery and rent is inseparable
h) Any amount deducted by employer out of employees’ salary as their contribution towards providend fund
or ESI fund.
i) Dividend 56(2)(i)
DEDUCTIONS CAN BE CLAIMED WHILE CALCULATING INCOME FROM OTHER SOURCES:
a) Amount paid for the purpose of realizing an income such as
i) Remuneration
ii) Commission
iii) Collection charges
iv) Interest paid on loan taken to buy shares or securities.
b) In case of Plant and Machinery or Furniture
i) Repairs
ii) Insurance premium paid
iii) Depreciation (provided the Assessee owns the asset. If the Assessee is a lessee or mortgagee, depreciation
is not allowed)
c) Amount paid by employer to provident fund or ESI authorities by appropriate date.
d) Any expenditure spent to maintain racehorses is allowed.
e) In case of family pension received by legal heirs, a standard deduction of 1/3 of such pension or
Rs.15000 whichever is less is allowed as deduction.
f) For any other income such as royalties etc. any amount actually spent to earn such income can be
claimed as deduction.
AMOUNT NOT DEDUCTABLE UNDER INCOME FROM OTHER SOURCES:
a) Personal expenses of the Assessee
b) Any interest which is paid or is payable on which tax is not deducted at source.
c) Any amount paid as wealth tax in India or abroad
d) Any amount which is considered as unreasonable
e) Any expenditure in connection with winnings from lotteries, crossword puzzles, races including horse
races, gambling, betting in any form.
METHODS OF ACCOUNTING:
There are two methods of accounting. They are:
1) Cash system of accounting: Under this system of accounting all those receipts and payments, which are
actually collected and spent during the current previous year, are considerable in order to calculate net profit.
In simple terms any receipts or payments paid are considered and due are not considered under this system.
2. Mercantile system: Under this system of accounting all those receipts and payments, which are paid or due
will be considered to calculate net profit.
INTEREST EXEMPTED FULLY RFOM TAX WHILE CALCULATING OTHER SOURCES
INCOME:
The following incomes by way of interest is exempted for all (from point 1 to 12)
1. 12 year National Savings Annuity certificates
2. National Defence Gold Bonds, 1980
3. Special Bearer Bonds, 1991
4. Post Office Cash Certificates (5yeras)
5. Treasury Savings Deposit Certificates
6. National Plan Certificates (10 years)
7. National Plan Savings Certificates (12 years)
8. Post office National Savings certificates (12 years/ 7 years)
9. Post Office Savings Bank Accounts. (Rs.3500 for individual and Rs.7000 for joint account is exempted)
10. Post Office Savings Accounts Rules (interest upto Rs.5000)
11. Special Deposit Scheme 1981.
12. Non Resident Rupee Deposit Scheme.
13. Interest on 7% Capital Investment Bonds.
14. Interest on Notified Relief Bonds in case of Individuals and HUF
15. Interest payable to any foreign banks performing central banking function outside India
16. Interest received by an individual who has received bonds by way of gift from NRI.
CASUAL INCOME:
It is a receipt in the nature of windfall being received by chance, without any stipulation, contract,
calculation, estimation or design. It is of casual and nonrecurring in nature. For the taxation, under this section
it includes the following:
i) Lotteries
ii) Crossword puzzle
iii) Races including horse races
iv) Card games and other games
v) Gambling or betting.
Tax is deducted at source at prescribed rates out of the following incomes:
The gross winnings from lottery, crossword puzzles, and card games, gambling or betting of any races
including horse races will be included in the scope of total income without allowing any deduction towards
expenditure. However, expenditure for maintaining racehorses can be claimed as deduction. Income Tax Act
has specified a standard rate of 30% tax apart from surcharge and education cess as applicable. TDS(Tax
Deducted at Source) will be deducted at 30% in respect of winning from lotteries or cross word puzzles or
card games or other games if the income exceeds Rs.10000. (Rs.5000 in case of winning from horse races).
Calculation of Gross Amount if Net Amount is given:
Gross Amount = Net Amount X 100/ 70
* No deduction is allowed for casual income. TDS will not be deducted if the prize money from winning
lottery, crossword puzzle etc is Upto Rs.10000 (RS.5000 in case of winning from horse races.)
KINDS OF SECURITIES:
Securities can be classified into the following types:
Kinds of securities
Government securities Commercial securities
Tax free Less tax Tax free Less tax

government government commercial commercial
securities securities securities securities
1) Government Securities:
a) Tax free government securities:
i) Interest on these types of securities is fully exempted
ii) It is not included in the scope of total income.
b) Less tax government securities:
i) These securities are issued by Central Government or State Government
ii) No TDS is deducted on these types of securities
iii) These types of securities are taxable securities
iv) Interest received should not be grossed up) while working out problem take the actual amount without
grossing up)
1) Commercial Securities:
a) Tax free commercial securities:
i) Local authority or statutory corporation or a company issues these types of securities in the form debentures
or bonds
ii) Tax is paid by the employer
iii) Since employee is not paying the tax it is termed as tax free commercial securities
iv) Interest amount should be grossed up always (while working out problems always gross up these types of
securities.)
b) Less tax government securities:
i) These types of securities are taxable securities
ii) Income tax is deducted at source
iii) Interest amount should be grossed up if the net amount is given. If the gross amount or the rate of interest
is given it should be calculated as it is.
TDS (TAX DEDUCTED AT SOURCE)
It refers Tax Deducted at Source. Under this concept, the Assessee will not receive the gross total amount he
is eligible. He will be getting his net amount. The tax to be paid on the gross amount will be deducted by the
person who pays the amount to the Assessee at source itself, and will deposit in the Treasury of the
government. Usually in case of salary income the employer will be the person who will deduct TDS. In case
of securities, which are eligible, or TDS or any winnings, the person who pays the amount will deduct TDS
before paying the amount to the respective person.
GROSSING UP RATE (TDS RATE):
Particulars TDS Rate
Interest on any security of Central or State Government No TDS
Interest on debentures listed in a recognized stock exchange, statutory bodies, and 10%
local authorities
Any other (listed,unlisted) interest on security 10%
Winnings from lottery, crossword puzzles, card games, horse races, Tv games 30%
shows etc.
Grossing up of income done only if net, received, after deduction of interest on tax free (non-govt.)
securities or amount collected by bankers is given.
FORMAT FOR CALCULATION OF INCOME FROM OTHER SOURCES:
Particulars Amount
Dividend from Foreign company:
Amount received as dividend xxxx xxxx
Less: Amount spent for collection xxx
Interest on securities: xxxx
Amount received xxxx
Less: Collection charges xxx
Commission xx
Interest paid on loan taken to buy shares xx xxx
Casual incomes: xxxx
Winnings from card games, horse races, crossword puzzles, lotteries, gambling,
betting
Income from letting of plant and machinery, building, furniture: xxxx
Actual amount received xxxx
Less: Repairs xxx
Insurance premium xxx
Depreciation xxx xxx
Family pension received by legal heirs: xxx
Pension received xxx
Less : 1/3 of such pension or Rs.15000 whichever is less xxx
Royalty received by authors: xxx
Actual amount received xxx
Less: Actual expenditure xx
Examinership remuneration: xxxx
Any other income (director fee, honorarium, etc.) xxx
Income from other sources xxxxxx
Hints for calculating taxable income from other sources:
1. Dividend from Indian
2. No deduction is allowed for casual income.
3. Depreciation can be allowed only when the Assessee is the owner of the asset.
4. TDS will not be deducted if the prize money from winning lottery, crossword puzzle etc is up to Rs.10000
5. Interest includes Hedging Transaction charges on account of currency fluctuation
6. Tax free government securities should not be grossed
7. Tax free commercial securities should always be grossed
8. Less Tax government securities should not be grossed
9. Less Tax commercial securities should be grossed if net amount is given.
10. Indian agricultural income is fully exempted.
11. Foreign agricultural income is fully taxed.
12. For final dividend date of declaration should be taken.
13. For interim dividend date of payment should be taken
14. Gift received from any relative, during marriage, by way of will, from local authority, university,
educational institutions, hospitals, charitable institute, any individual received gift from any person for a
medical treatment for any illness related to COVID-19 is not taxable.
15. Gift received from a friend which exceeds Rs.50000 is taxed in the hand of the Assessee. Amount up to
Rs.50000 is not taxable.
16. Gift from the employer is taxed in the hands of employer and in the hands of employee.
17. Income from the activity of maintenance of horse for race purpose is to be calculated as follows.
Stake money received (stake money refers prize money) – Maintenance expenses
PROBLEM QUESTIONS
1. Mr.J furnishes the following particulars of income for the previous year. Calculate income from other
sources.
He received Rs.250000 as stake money. He spent Rs.50000 for maintenance of horse races.
Ans: IFOS Rs.200000
2. Mr. A furnishes the following particulars of income for the previous year. Calculate income from other
sources.
a) Rs.25000 received as interest from government securities. Rs.2000 spent towards collection charges.
b) Dividend from an Indian company Rs.40000
c) Dividend from a foreign company Rs.15000
d) Family pension Rs.12000
Ans: IFOS Rs.46000
3. Calculate the gross amount if Rs.200000 is invested in 9% tae free commercial securities (unlisted)
Ans: Gross amount Rs.20000
4. Rs.200000 is invested in 6% less tax commercial securities. Calculate the taxable amount of interest.
Ans: Taxable amount of interest Rs.12000
5. Rs.9000 has been received as interest towards less tax commercial securities. Calculate gross amount.
6. Rs.500000 is invested in 14% less tax government securities. Calculate the gross amount of interest.
7. Calculate income from other sources from the following assuming all commercial securities are unlisted
securities.
a) Rs.250000 invested in 12% less tax government securities
b) Rs.250000 invested in 12% tax free commercial securities
c) Rs.250000 invested in 12% less tax commercial securities
d) Rs.8000 received as interest from less tax commercial securities
Ans: IFOS Rs.102222
8. Calculate income from other sources from the following assuming all commercial securities are listed
securities.
a) Rs.350000 invested in 10% less tax government securities
b) Rs.300000 invested in 8% tax free commercial securities
c) Rs. 50000 invested in 10% less tax commercial securities
d) Rs.12000 received as interest from less tax commercial securities
Ans: IFOS Rs.80000
9. Calculate income from other sources from the following

a) Income from agricultural land in Pakistan Rs.43000
b) Income from royalty Rs.5000. actual expenditure spent for this Rs.500
c) Salary as a member of parliament Rs.4000pm.
d) Winning from crossword puzzle Rs.10000
e) Rental income from plant and machinery Rs.40000 excluding Rs.2000 for repairs and Rs.5000 for
depreciation.
Ans: IFOS Rs.138500
10. Calculate income from other sources from the following particulars given by Mr. A.
a) 7% UP government securities Rs.1400000
b) 8% listed debentures of MM Ltd Rs.1000000
c) Gift received Rs.75000 in foreign currency from a friend on 12 th December 2022.
d) 6% listed debentures of HLL Ltd Rs.3000000 (interest payable on 1 st June and 1st January of every year)
e) Mr. A has sold her 6% listed debentures of HLL Ltd on 15 th December 2022.
Ans: IFOS Rs.343000

a) Rs.25000 interest from post office savings bank account.
b) Rs.25000 from 10% debenture of listed tea company.
c) Rs.4000 interest received from national development bonds.
d) Rs.2500 received as interest from the debentures of a co- operative society.
e) 10% tax free debentures of Chennai municipal corporation Rs.25000
Ans: IFOS Rs.33277
12. Mr.G owns horses at Bombay and Bangalore. These horses run for races at the race course. During the
year 2018-2019 Mr.G submits the following information:
i) Expenses on race horses at Bombay Rs.260000
ii) Expenses on race horses at Bangalore Rs.430000
iii) Stake money earned by horses at a) Bombay Rs.120000 b) Bangalore Rs.500000
iv) Mr.G received Rs.105000 on 1.7.2014 on betting during horse races at Bombay. Compute his taxable
income under other sources.
Ans: IFOS Rs.150000 Loss from activity of maintenance of horses for race purposes cannot be set off
from any other income including race winnings.
13. Mr.R held the following investments:

i) Rs.90000 10% (Tax free) Debentures of a listed company. (Rate of TDs 10%)
ii) Rs.100000 2% Panjab Govt.Loan. Compute his income from interest on securities for the year ending
31.3.2014 if interest accrues annually on 1 st January.
Ans: Taxable Interest i) Rs.10000 ii) Rs.12000.

i) Winnings from lottery Rs.100000
ii) Amount received from race winnings Rs.35000
Gifts received during the PY 2017-2018
i) Received Rs.20000 as gift from his friend.
ii) Received Rs.100000 as gift from his elder brother.
iii) Received Rs.140000 as gift on his marriage.
iv) Received Rs.80000 as gift from his NRI friend on 1.1.2023
v) Gift from another friend Rs.18000.
Ans: IFOS Rs.268000

i) Interest on deposits with a company Rs.10000
ii) University remuneration for working as examiner Rs.6000
iii) Royalty for writing books Rs.60000. he claims to have spent Rs.20000 on writing books
iv) Dividend declared by R Company on 1.3.2023 but paid on 1.5.2015 Rs.6000
v) Interim dividend paid on 1.5.2022 Rs.3000
vi) Stake money on race horses Rs.150000. Horses are maintained by him and expenses on maintenance of
those horses are Rs.240000
vii) Family pension received Rs.36000
Ans: IFOS Rs. 80000
16. Calculate income from other sources of Mr.K who held the following investments during the PY 2022-
2023:
i) Rs.11000, 10% Central Govt., Securities.
ii) Rs.36000, 10% Tax-free commercial securities.
iii) Rs.6300, received as interest on Tax free public limited company securities (listed).
iv) Rs.7200 received interest on Karnataka Govt. securities.
v) Rs.3600 received as interest on Deepak Fertilizers (listed).
vi) Rs.30000, 13.5% securities of a paper mill company (listed)
vii) Rs.35000, 11% securities of a paper mill company (listed)
viii) Rs.10000, 15% Jaipur Municipal Corporation bonds
ix) Dividend from Carona Ltd.Rs.4000
x) During the year he also got a prize in Karnataka state Lottery. The net amount received by him was
Rs.35000. interest on all securities is payable on 1st January every year. Bank charges Rs.200 as collection
charges.
Ans: IFOS Rs. 86500
17. Calculate income from other sources of Mr.H who held the following investments during the PY 2022-
2023:
i) Dividend from REC international ltd. Rs.4800. Dividend declared on 16.5.2022 by sundaram finance ltd.
Rs.2700, interest paid on capital borrowed for the purpose of investment in shares of sundaram finance
ltd.Rs.4200. Collection charges in respect of dividend Rs.50.
ii) Winnings from lottery net amount Rs.70000, tax deducted at source Rs.30000, Winnings from card games
Rs.23500. Interest on securities issued by the Government of Singapore Rs.20750.
Ans: IFOS Rs. 1,59670
18. Calculate income from other sources of Mr.M who held the following investments during the PY 2022-
2023:
i) Dividend equity (gross) Indian Company Rs.600
ii) Dividend on preference shares (Indian company) Rs.3200
iii) Income from letting on hire of building and machinery composit lease Rs.17000
iv) Interest on bank deposits Rs.2500
v) Director’s sitting fees Rs.1200
vi) Ground rent Rs.600
vii) Income from undisclosed Rs.10000
viii) Income from lotteries (gross) Rs.10000
The following deductions are claimed by him:
a) Collection charges of dividend Rs.20
b) Allowable depreciation on building and machinery Rs.4000
c) Fire insurance on building and machinery Rs.100
Ans: IFOS Rs. 41000
19. Rohit furnishes the following particulars of his income for the financial year 2022-2023:
i) Dividend received from UTI Rs.10000
ii) Net amount received as winning from horse race Rs.21000
iii) Winning from camel race (net) Rs.15000
iv) Winning fro lottery (net) Rs.70000. Cost of lottery ticket was Rs.500. Commission paid to lottery seller
Rs.1000 out of prize money.
v) Income tax refund Rs.10000 (related to next year)
vi) Interest on income tax refund Rs.1000
vii) Amount won from TV programme Rs.200000
viii) Interest on 8% Tax free Relief Bonds issued by RBI Rs.5000
ix) On 1.10.2014, he purchased 1000, 8% debentures of Rs.100 each of Hexa limited company from open
market @ Rs.105. Dates of interest payment are June 30 and December 31 st every year.
x) On 1.10.2022, he subscribed for 1000, 10% debentures of Rs.100 each of pearl Ltd. The date of interest
payment is March 31st every year.
Ans: IFOS Rs. 439100
20. Calculate income from other sources of Mr.M if he is Resident, Not Ordinary Resident, and Non Resident,
who held the following investments during the PY 2022-2023:
i) Interest on Saving Bank deposit A/C with Union Bank Delhi Rs.1000
ii) Income from agriculture in Africa invested in Pakistan Rs.40000
iii) Dividends received in USA from an American Company part of which Rs.4000 remitted to India
Rs.12000
iv) Family pension received in Kenya for services rendered in India Rs.54000
Ans: IFOS Resident Rs. 92000. Not ordinary resident and Nonresident Rs.40000
21. From the following particulars for the year ended 31 st March, 2015, compute the income under the head
income from other sources:
i) Equity dividends (Indian company) Rs.25200
ii) Dividends (Preference) Rs.12000
iii) Collection charges in respect of dividend 1% of dividend
iv) Rent from letting out of a building along with plant and machinery Rs.30000
v) Depreciation on buildings Rs.4000
vi) Insurance on buildings Rs.1600
vii) Office expenses relating to buildings Rs.1600
viii) Repairs, rates etc. Rs.1600
Ans: IFOS Rs. 58400
22. From the following particulars of Mr. Edward for the PY ended 31 st March, 2015 compute his income
from other sources for the AY 2019-2020.
He received:
i) Director’s fees from a company Rs.10000
ii) Interest on bank deposits Rs.3000
iii) Income from undisclosed business Rs.12000
iv) Winning from lotteries (net) Rs.24500
v) Royalty on a book written by him Rs.8000
vi) By giving lectures in functions Rs.5000
vii) Interest on loan given to a relative Rs.7000
viii) Interest on tax free debentures of a company (net) Rs.3600
ix) Dividend on shares Rs.6300
x) Interest on post office savings bank A/c Rs.500
xi) Interest on government securities Rs.2200
He paid Rs.100 for collection of dividend and Rs.1000 for typing the manuscript of book written by him.
Ans: IFOS Rs. 92200
23. Dr.PAHWA is a professor of economics. He submits before you the following information to compute the
income under the head income from other sources for the PY 2018-2019.
i) He is the author of a book which fetched him a gross royalty of Rs.20000. He claims the following
deductions out of royalty income. a) Salary to a clerk who collects for him necessary data and goes through
the final proof readings Rs.3000 b) Purchased books worth Rs.400 in connection with the revision of the
book. c) Telephone expenses of Rs.1600 attributed to the publication and sale of his book and other matters in
connection with the printing of the new edition of the book.
ii) Income from articles which were published inYOJNA Rs.4000
iii) He lives in rented house paying a rent of Rs.3000 p.m. The house is too big for his family. Hence he has
sub let one third portion of the house on a rent of Rs.1500 p.m. Dr.PAHWA has undertaken the liability of
paying municipal taxes of Rs.5400 on the whole house and also the current repairs of the whole house
amounting to Rs.6000.
iv) He received Rs.60 per lecture delivered at the Christian Institute. During the PY he delivered 20 lectures.
v) He is an examiner of a number of universities. This source gave him a remuneration of Rs.2600. He
incurred Rs 60 on postage.He received Rs 400 as remuneration for invigilation work in the university
examinations
vi) His other incomes were:
a) Winning from card games and betting Rs.6500
b) Winning from chess Rs.1000
c) Received interest on government of England bonds Rs1,500
vii) Received Rs 2000 as dividend from an Indian company in which the public is substantially interested
viii) Income from agricultural land situated in Ujjain Rs 7000
ix) Rs 800 per month scholarship for research work from UGC
x) Salary Rs 15,600 per month from Vaishnaw commerce college
(IFOS 36400)
UNIT-III
SET-OFF CARRY FORWARD,AGGREGATION OF INCOME AND DEDUCTIONS
SET OFF, CARRY FORWARD AND SET OFF OF LOSSES
SET OFF, CARRY FORWARD AND SET OFF OF LOSSES SECTION 70 to 80
SET OFF OF LOSSES:
Set Off Of Losses is adjusting losses from on head with other head of income or within the same head
of income in the previous year. In this we have the following two concepts:
a) Set off of loss from one source against income from another source under the same head of income:
(inter source adjustment):
Inter source adjustment is one, where the loss is set off within the same head of income.
b) Set off of loss from one head against income from another: (inter head adjustments):
Inter head adjustment is one, where the loss of one head of income is set off against another head of income.
Points to be considered in case of set off of losses:
1. Loss from speculative business cannot be set off from any other income except income from speculative
business.
2. Long term capital loss can be set off only from long term capital gain.
3. Loss from owning and maintaining of race horses can be set off from any income earned from owning and
maintaining of horse races.
4. Loss from business can be set off from house property, capital gains, and other sources except salaries.
5. Loss from house property can be set off from any other head of income.
CARRY FORWARD AND SET OFF OF LOSSES:
If a loss cannot be adjusted in a financial year, then that portion of loss, which cannot be adjusted,
will be taken to the next financial year to get it adjusted. This method of taking it to next year and get it
set off is termed as carry forward and set off of losses.
TABLE SHOWS THE PROVISIONS FOR SET OFF, CARRY FORWARD AND SET OFF OF
LOSSES
Nature of Set off of losses in Carry forward and set off of losses Number of
income/ loss current PY carry
forward and
set off
Income from Carry forward and set off will not arise in this head of income because there will
salary be no loss under the head of salary income
Income/ loss Loss from house property i) Loss which cannot be adjusted in Loss can be
from house can be set off first from current PY can be carried forward. carried
income from another
property ii) Carried forward loss should be set forward for a
house and then from any off only from HP income and not period of 8
other head including years
from any other income
salary
iii) Return of loss should be filed
within the time limit.
Income/ loss Loss from business can be i) Loss which cannot be adjusted in Loss can be
from set off first from income carried
business from another business and current PY can be carried forward. forward for a
then from any other head ii) Carried forward loss should be set period of 8
a) Non
except salary
speculative off only from business income and years
business loss not from any other income
iv) It is not necessary that loss
should belong to the same business.
Continuity of business is not
necessary to carry forward and set
off
b)Speculative i) Loss which cannot be adjusted in
Loss from speculative current PY can be carried forward.
business loss
business can be set off
ii) Carried forward loss should be set Loss can be
with income from
off only from speculative business carried
speculative business and
income and not from any other forward for a
not from any income
income period of 4
years
iv) It is not necessary that loss
should belong to the same business.
Continuity of business is not
necessary to carry forward and set
off
Income/ loss Loss from Short term i) Loss which cannot be adjusted in Loss can be
from capital capital can be set off with current PY can be carried forward. carried
gains short term capital gain forward for a
ii) Carried forward short term loss
and long term capital gain
a) Short term should be set off both from long period of 8
capital loss term and short term capital gains and years
not from any other income
a) Long term loss from long term i) Loss which cannot be adjusted in
capital loss capital can be set off with Loss can be
current PY can be carried forward.
long term capital gains carried
only and not from any ii) Carried forward long term loss forward for a
gain. should be set off only from long period of 8
term capital gains and not from any years
other income
Income/ loss Other sources loss can be i) Loss from owning and Loss can be
from other set off only with other maintaining or race horses comes carried
sources sources income under this head. forward for a
ii) Loss which cannot be adjusted in period of 4
years
current PY can be carried forward.
iii) Carried forward loss should be
set off only against any income from
owning and maintaining or race
horses.
iv) Return of loss should be filed
Casual No set off, carry forward and set off of losses under this head of income.
income
Unabsorbed Depreciation can be i)Unabsorbed depreciation cannot be No restriction
depreciation adjusted with any income adjusted in current PY can be carried
except salary forward.
ii) Carried forward Depreciation
can be adjusted with any income
except salary
iii) The following order should be
followed:
a) Current depreciation
b) B/F losses of business
c)Unabsorbed depreciation
SET OFF & CARRY FORWARD OF LOSSES
1. The following are the particulars of income and loss of an individual under different heads of income. Set –
off losses in the AY 2023-2024 and find out the net result:
Income from property A Rs.5000
Incomer from property B Rs. (-) 8000
Income from interest on securities Rs.20000
income from cycle business Rs. (-)20000
Profit from speculation business Rs.20000
Loss from short term capital asset Rs. Rs.6000
Long-term capital loss Rs25000
Long term capital gain (investments) Rs.21000
Ans: Gross Total Income Rs.17000
2. Compute taxable income and loss to be C/F:

Business profit for the PY 2022-2023 Rs.20000
B/F business loss of 2020-2021 Rs.10000
Capital loss on shares Rs.60000
Loss from self occupied houses Rs.5000
Ans: Gross Total Income Rs.5000 and Long term capital loss of shares not allowed to be C/F and so it is
ignored.
3. The following are the particulars of income/ loss of Mr.A. You are required to set off losses and carry
forward and set off where necessary.
Particulars Assessment year 2022-2023 Assessment year 2023-2024
Income from salary computed 15000 15000
Income from interest on securities 5000 (gross) 5000(gross)
Loss from business 53000 15000
Short term capital gain 8000 Nil
Long term capital gain (land) 21000 Nil
4. From the following particulars given below Of Assesses A, B, and C, how the capital losses shall be set off
and carried forward for the PY ending 31.3.2023?
(A ) i) Business income Rs.15000
ii) Short term capital loss Rs.1200
iii) Long term capital gain (shares) Rs.7200
iv) Long term capital gain on sale of jewellery Rs.20000
(B) i) Business income Rs.30000
ii) Short term capital loss Rs.40000
(C) i) Business income Rs.60000
ii) Short term capital gain Rs.20000
iii) Long term capital gain (land) Rs.17000
iv) Carry forward loss (short term capital assets) Rs.50000
Ans: A) Gross Total Income Rs.33800 B) Gross Total Income Rs.30000 C) Gross Total Income
Rs.60000
5. Mr.Atul, an Indian resident, furnishes the following particulars of his income for the AY 2023-2024. You
are required to deal with set off and carry forward of losses.
i) Income from securities (gross) Rs.10000
ii) Income from residential house (computed) Rs.5000
iii) Profits from Rayon business Rs.25000
iv) Income from an agency business Rs.2000
v) Speculation income Rs.2000
vi) Short term capital gain Rs.4000
vii) Long term capital gain Rs.9500
The carry forward items from the AY 2022-2023 are :
i) Loss from Hosiery Business (discontinued in 2020-2021) Rs.4000
ii) Loss in agency business Rs.3000
iii) Loss from Rayon business Rs.3000
iv) Speculation loss Rs.4000
v) Short term capital loss Rs.6000
vi) Long term capital loss (of previous year 2020-2021) Rs.6500
Current year’s depreciation for Rayon business is Rs.500
6. The following are the particulars of income of an Assessee as determined by the ITO for the AY 2023-
2024. Compute his total income.
Silver speculation loss (discontinued) Rs.10000
Hosiery business loss Rs.6000
Rolling steel mill profit (before charging depreciation of Rs.10000) Rs.8000
Profit from another business Rs.5000
Income from house property Rs.2000
Gold speculation profit Rs.20000
Hosiery business loss Rs.2000
Rolling steel mill profit (before charging depreciation of Rs.10000) Rs.6000
Profit from another business Rs.16000
Income from house property Rs.2000
Ans: Gross Total Income Assessment year 2022-2023 Nil and Gross Total Income Assessment year2023-
2024Rs.21000
7. From the particulars given below, compute the total income for the previous year 2022-2023 i) Income
from let out house (computed) Rs.6000
ii) Annual rental value of his self occupied house Rs.4000
iii) Municipal taxes Rs.400
iv) Profit from electric goods business after depreciation Rs.10000
v) Profit from agency business Rs.3000
vi) Speculation gain from gold Rs.2000
vii) Long term capital gain from land Rs.7000
viii) Short term capital gain Rs.2000
Following losses have been brought forward from 2021-2022 previous year:
i) Loss from electric goods business Rs.6000
ii) Loss from an agency business Rs.1000
iii) Speculation loss from silver Rs.4000
iv) Unabsorbed Depreciation Rs.1000
v) Long term capital loss (land) Rs.4400
vi) Short term capital loss Rs.3000
Ans: House property: Let out Rs.6000; Self occupied Exempted; Business income Rs.5000; Long term
capital gain Rs.1600; Total income Rs.12600; Speculation unabsorbed loss Rs.2000 C/F.
8. From the following particulars compute the total income of Mr. David for the PY 2023-2024:
Loss from house property Rs. (-) 8000
Short term capital gain on sale of shares Rs.95000
Long term capital loss on sale of bonds Rs. (-) 85000
Other sources: Interest on government securities Rs.18000
The Assessee has unabsorbed depreciation of Rs.35000 being brought forward from 2021-2022. Assessee had
closed the business and all the assets have been disposed of.
Ans: Gross Total Income Rs.70000, house property loss to be adjusted from other heads; unabsorbed
depreciation to be set off from any other income. Long term capital loss to be carried forward
Rs.85000.
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AGGREGATION OF INCOME/ UNDISCLOSED INCOME/ INVESTMENT OR DEEMED INCOME
INTRODUCTION:
Assessing officer, while making a scrutiny assessment will make enquiries regarding extraordinary receipts,
investments made or expenditure incurred during the year. If the Assessee is not in a position to give an
explanation or if the AO is not satisfied with the explanation given by the Assessee than that part of income
will be included in the Assesses total income of that particular year of assessment. The following are the
incomes, which are usually treated as undisclosed income or investments.
a) Cash credits
When any sum is found credited in the books of an Assessee maintained during any previous year, Assessee
is supposed to establish the nature, source and genuineness of the amount. The said amount credited in the
books of account will be charged to income tax provided.
i) No explanation is given by the Assessee or
ii) The explanation given by the Assessee is not satisfactory in the opinion of the AO.
b) Unexplained investments
when an Assessee has made investments which are not recorded in the books of account maintained by him
for any source of income, the value of the investments may be deemed to be the income of the Assessee
provided,
Unexplained money, etc
When an Assessee is found to be the owner of any money, bullion, jewellery or other valuable article which
is not recorded in the books of account maintained by him it will be taxes as the deemed to be the income of
the Assessee provided,
Undisclosed investments
When an Assessee has made investments or is found to be the owner of any bullion, jewellery or other
valuable article, and the Assessing Officer finds that the amount expended on making such investments or in
acquiring such bullion, jewellery or other valuable article not fully disclosed in the books of account
maintained by the Assessee then that amount will be treated as deemed income of the Assessee provided,
Unexplained expenditure, etc
Where an Assessee has incurred any expenditure during any financial year, then the amount covered by
such expenditure or part thereof will be consider as deemed income of the Assessee provided,
Amount borrowed or repaid on hundi
When any amount is borrowed on a hundi from, or any amount due thereon is repaid to any person
otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be
deemed to be the income of the person borrowing or repaying the amount. To avoid double taxation, if the
person is taxed at the time of borrowing then he will be taxed at the time of repayment and vice versa. The
repayment amount includes the amount of interest paid on the borrowed amount.
CLUBBING OF INCOMES
MEANING:
Clubbing of income simply refers to shifting of one’s income to some other person’s income in order to
minimize tax. The Income Tax Act deals with certain provisions regarding clubbing of income under sections
60 to 65. Under the mentioned sections, income of other person may be included in the income of Assessee
total income. Such inclusion of income is termed as Clubbing of income of the Assessee. Deemed income
refers to those incomes which are not actually the income of the Assessee, but are included in the total income
for the purpose of tax purposes. For example: Income of husband which is shown to be the income of his wife
is clubbed in the income of Husband and is taxable in the hands of the husband. Income of a minor child is
taxable in the hands of his parents.
CLUBBING OF INCOMES U/S 60 to 64:
Normally every person pays tax on his own income but in following cases income of spouse, minor child,
and son’s wife or a third person is included in the income of individual. These cases are:
1. Transfer of income without transfer of asset
When there is transfer of income without transfer of asset sec.60. Such incomes remain transferor’s income.
2. Revocable transfer of assets
When there is revocable transfer of assets sec.61. Income from such asset remains transferor’s income.
Transfer is revocable if the transferor reserves the right to get back the asset at any time or retransfer the asset
at any time or assume the income of such asset at any time.
In case transfer is not revocable during the lifetime of transferee, it is treated as irrevocable and its income
remains transferree’s income.
3. Income of spouse or son’s wife:
a) Any salary, commission or remuneration, fees received by spouse from a concern in which individual has
substantial interest, shall be added in the income of such individual. But salary, commission or remuneration
will not be clubbed if it is earned by the spouse due to his/her personal qualification or experience. A person is
said to have substantial interest if he owns 20% or more share in such concern. Section 64(1) (ii).
b) Income from an asset transferred to spouse without adequate consideration, remains transferor’s income.
The relationship of husband and wife must exist on the date of transfer. The transfer must not be under an
agreement to live apart. In case income from such asset is reinvested, the income from such reinvestment will
not be clubbed. Section 64(1) (iii).
c) In case asset is transferred to a third person but benefit from such asset is still accruing to spouse, son’s
wife or minor child, income from such asset remains transferor’s income. Section 64(1)(viii).
d) In case asset is transferred to son’s wife without adequate consideration, income remains transferor’s
income. Section 64(1)(vi).
e) In case an asset which was transferred without adequate consideration is reinvested in business, the
proportionate profits of such business shall be added in the income of transferor.
4) Income of minor child section 64(1A):
Every income of minor child from any source shall be added in the income of that parent whose income is
higher. Income of minor child, who is physically challenged or mentally retarded, shall not be clubbed. Any
income earned by a minor child with his own skill or art will not be clubbed. A parent in whose income,
income of a minor child is clubbed can claim exemption of Rs.1500 per child or income so clubbed whichever
is less.
SUMS
1. Income of D and Mrs.D for the PY 2022-2023 is as follows:

Particulars Mr.D Mrs.D
Salary from Himalayas Ltd 215000 Nil
Capital gain short term 90000 Nil
Income from other sources:
Bank interest 12000 6250
Interest on Govt.securities 3600 2750
D, having no qualifications or experience, is employed by Himalayas Ltd. Mrs.D holds 22% equity share
capital in Himalayas Ltd. From September 12, 2022. Find out gross total income of D and Mrs.D for the AY
2023-2024.
Ans: Gross Total Income Mr.D Rs.105600 Mrs.D Rs.224000
2. Discuss whether the provisions of clubbing of income of minor shall be applicable or not, in each of the
following cases:
a) Ram Prasad deposited Rs.500000 in the name of his minor grandson, Monu under fixed Deposit Account.
The deposit carries an annual interest income of Rs.50000
b) Savya, a minor child artist (aged 10 years) acted in a bolly wood movie and earned Rs.500000 from the
film producer.
c) Continuing with case b) above, further suppose that Rs.500000 earned by Savya is deposited in Punjab
National Bank in her name. The fixed deposit carries annual interest of Rs.70000
Ans: a) Yes b) No c)Yes
3. From the particulars given below compute the total income of Mr.X for the AY 2023-2024 explaining each
point clearly:
i) Income from profession Rs.86500
ii) Income of minor son (Singing is his profession) Rs.12000
iii) Winning from lottery: ticket purchased in the name of the Mr.X’s minor daughter Rs.6800
iv) Mr.X’s father gifted debentures in an Indian company to Mr.X’s minor son and company paid gross
interest Rs.6650
v) Mr.X’s wife is a government servant and her income computed under the head salaries Rs.56000
vi) Interest on debentures purchased by Mr.X but gifted to Mrs.X Rs.18000
4. Decide about the person in whose hands the following incomes shall be taxable:
i) Mr.Jeevan transfers 1000 debentures of Rs.100 each carrying 15% interest to Mr.Ramesh on the condition
that if price is not paid within 1 year, the debentures will revert back to Mr. Jeevan.
ii) Master D. (Age 16 years) had following incomes during 2022-2023:
a) Interest on bank deposits Rs.6000
b) Interest on debentures Rs.8000
c) Interest on fixed deposit with a company Rs.9000
d) Income from a singing concert held by him Rs.40000
e) His father’s income Rs.69400
f) His mother’s income Rs.69500
iii) Mr.S transfers a shop (monthly rent Rs.4000) to his relative Mr.B on the condition that shop will revert
back to Mr.S on the death of Mr.B.
Ans: i) Revocable transfer income of Rs.15000 to be clubbed with income of Mr.Jeevan; ii) Income to be
clubbed with mother’s income Rs.6000 + 8000+9000- U/S 10(32) Rs.1500 = Rs.21500 iii) Irrevocable
transfer hence transferee’s income.
5. Assessee was engaged to be married to R. the engagement was announced on 30.9.2021 and marriage took
place on 15.10.2021. Assessee transferred to R on 12.10.2021 debentures worth Rs.100000. R received
Rs.15000 as interest on these shares in September 2022; ITO’s contention is that it is not R’s income. Discuss
whether ITO’s contention is correct or wrong.
Ans: No clubbing R’s Income.
DEDUCTION FROM GROSS TOTAL INCOME UNDER SECTIONS 80C TO 80U

INTRODUCTION:
In computing the total income of an Assessee, deductions specified under sections 80C to 80U will
be allowed from his Gross Total Income. However, the aggregate amount of deductions under this chapter
shall not, in any case, exceed the gross total income of the Assessee. Gross total income means the aggregate of
all heads of income after adjusting and clubbing of income and set off and carry forward of losses. To calculate the
taxable income certain deductions from gross total income are permissible under section 80C and 80U. These
deductions are allowed to motivate the savings in certain cases and to provide relief in certain other cases.
SECTION 80C: Applicable to Individual and HUF.
PURPOSE OF ALLOWING DEDUCTIONS U/S 80C:
Deduction in respect of life insurance premium, deferred annuity, contributions to provident fund,
subscription to certain equity shares or debentures, etc. (w.e.f. Asst. Year 2007-2008).
1. Life Insurance premium to (a) self, spouse and any child in case of individual and (b) any member, in
case of HUF. Insurance premium should not exceed 20% of the actual capital sum assured.
2. A deferred annuity contract on life of self, spouse and any child in case of individual.
3. As contribution to Statutory Provident Fund; i.e., any provident fund to which the Provident Funds Act,
1925, applies.
4. As contribution to Public Provident Fund scheme, 1968, in the name of self, spouse and any child in
case of individual and any member in case of HUF.
5. As contribution by an employee to a recognized provident fund.
6. As contribution by an employee to an approved superannuation fund.
7. Any sum deposited in a 10 year or 15 year account under the Post Office Savings Bank (CTD) Rules,
1959, in the name of self and as a guardian of minor in case of individual and in the name of any member in
case of HUF.
8. Subscription to the NSC (VIII issue).
9. As a contribution to Unit-linked Insurance Plan (ULIP) of UTI or LIC Mutual Fund (Dhanraksha plan) in
the name of self, spouse and child in case of individual and any member in case of HUF.
10. To effect or to keep in force a contract for such annuity plan of the LIC (i.e., Jeevan Dhara, Jeevan
Akshay and their upgradations) or any other insurer as referred to in by the Central Government.
12. As subscription to any units of any Mutual Fund referred u/s. 10(23D) (Equity Linked Saving
Schemes).
12. As a contribution by an individual to any pension fund set up by any Mutual Fund referred u/s 10(23D).
13. As subscription to any such deposit scheme of National Housing Bank (NHB), or as a contribution to
any such pension fund set up by NHB as notified by Central Government.
14. As subscription to notified deposit schemes of (a) Public sector company providing long-term finance
for purchase/construction of residential houses in India or (b) Any authority constituted in India for the
purposes of housing or planning, development or improvement of cities, towns and villages.
15. As tuition fees (excluding any payment towards any development fees or donation or payment of similar
nature), to any university, college, school or other educational institution situated within India for the
purpose of full-time education of any two children of individual.
16. Towards the cost of purchase or construction of a residential house property (including the
repayment of loans taken from Government, bank, LIC, NHB, specified assessee’s employer etc., and also
the stamp duty, registration fees and other expenses for transfer of such house property to the Assessee). The
income from such house property should be chargeable to tax under the head "Income from house property".
17. As subscription to equity shares or debentures forming part of any eligible issue of capital of public
company or any public financial institution approved by Board.
18. As Term Deposit (Fixed Deposit) for 5 years or more with Scheduled Bank in accordance with a
scheme framed and notified by the Central Government.
19. As subscription to any notified bonds of National Bank for Agriculture and Rural Development
(NABARD).
20. In an account under the Senior Citizen Savings Schemes Rules, 2004.
21. As five year term deposit in an account under the Post Office Time deposit Rules, 1981.
CALCULATION OF DEDUCTION U/S 80C:
Actual amount invested / contributed or Qualifying amount fixed Rs.150000 whichever is less is Deduction
U/S 80C.
SECTION 80CCC: Applicable to Individual
PURPOSE OF ALLOWING DEDUCTIONS U/S 80CCC: Deduction In Respect Of Contribution To
Certain Pension Funds
DEDUCTION U/S 80CCC: The maximum amount available under this section is Rs.150000
SECTION 80CCD: Applicable to Individual
PURPOSE OF ALLOWING DEDUCTIONS U/S 80CCD: Deduction In Respect Of Contribution To
Pension Scheme Of Central Government
DEDUCTION U/S 80CCD: The maximum amount available under this section is 10% of Assessses salary
(basic + DA forming)
SECTION 80CCF: Applicable to Individual and HUF.
PURPOSE OF ALLOWING DEDUCTIONS U/S 80CCF: Deduction In Respect Of Long Term
Infrastructure Bonds. Investment or subscription made in notified long term infrastructure bonds as eligible as
deduction
DEDUCTION U/S 80CCF: The maximum deduction limit is Rs. 20,000/-.
SECTION 80D: Applicable to Individual and HUF
PURPOSE OF ALLOWING DEDUCTIONS U/S 80D: Deductions In Respect Of Medical Insurance
Premium. Premium paid on Mediclaim Policy issued by GIC or any other insurer approved by IRDA
(Insurance Regulatory and Development Authority).
DEDUCTION U/S 80D: i) The amount should be paid by any mode other than cash out of taxable income.
ii). (a) Insurance on the health of the self, spouse, parents or children of the Assessee in the case of
Individual or (b) Insurance on the health of any member if the Assessee is HUF.
iii) Extent of Deduction A. For taxpayer his/her spouse and dependent children: 100% of premium paid
subject to ceiling of (a) Rs. 50,000/- in the case of premium paid in respect of senior citizen (who has
attained the age of 65 years or more) and (b) Rs. 25,000/- in other cases. Rs 5000 for health check up
iv) Additional deduction for parents of the taxpayer whether dependent or not 100% of premium paid
subject to ceiling of (a) Rs. 50,000/- in the case of premium paid in respect of senior citizen (who has
attained the age of 65 years or more) and (b) Rs. 25,000/- in other cases.
From Assessment year 2023-24, the benefit of deduction will be extended to the contribution made to
Central Government Health Scheme. However, the aggregate limit for deduction remains the same.
SECTION 80DD Applicable to Individual/HUF
PURPOSE OF ALLOWING DEDUCTIONS U/S 80DD: Deduction In Respect Of Maintenance Including
Medical Treatment Of Handicapped Dependant. Expenditure incurred on medical treatment [including
nursing], training and rehabilitation of a disabled dependant, or (b) Any payment or deposit made under a
scheme framed by LIC or any other insurer or the administrator or the specified company and approved by the
Board for payment of lump sum amount or annuity for the benefit of dependant with disability.
DEDUCTION U/S 80DD: (a) Rs. 75,000/- in case of normal disability or (b) Rs. 125,000/- in case of severe
disability.
SECTION 80DDB Applicable to Individual/HUF
PURPOSE OF ALLOWING DEDUCTIONS U/S 80DDB: Deduction In Respect Of Medical Treatment,
Etc. Expenditure actually incurred for the medical treatment of such diseases or ailments specified in Rule
11DD (some of the diseases are Parkinson disease, malignant cancers, full blown AIDS, chronic renal failure,
thalassaemia etc.) for self or dependant relative (spouse, children, parents, brothers and sisters) in case of
individual or any member of HUF in case of HUF.
DEDUCTION U/S 80DDB:
100 % of the expenses incurred subject to ceiling of (a) Rs. 100,000/- in the case of expenses incurred for
senior citizen (who has attained the age of 65 years or more) and (b) Rs. 40,000/- in other cases.
SECTION 80E Applicable to Individual
PURPOSE OF ALLOWING DEDUCTIONS U/S 80E: Any amount paid by way of interest on loan taken
from any financial institution or any approved charitable institution for his/her higher education or w.e.f. 1-4-
2008 for the purpose of higher education of his/her spouse, children and legal guardian of the Individual.
DEDUCTION U/S 80E: Entire amount of interest and 7 subsequent years or until interest is paid in full
SECTION 80G
PURPOSE OF ALLOWING DEDUCTIONS U/S 80G: Deduction In Respect Of Donations To Certain
Funds, Charitable Institutions, Etc. there are certain donations, which can be allowed in full, where as certain
donations which can be allowed with certain limitations.
Donations without limit:
Deduction @ 100% Deduction @ 50%
1. National Defence fund set up by the central 1.Jawaharlal Nehru Memorial Fund;
government 2.Prime Minister’s Drought Relief Fund;
2. Prime minister’s national relief fund 3. National Children’s Fund;
3. Prime Minister’s Armenia Earthquake Relief 4. Indira Gandhi Memorial Trust;
Fund; 4.Africa (Public Contributions — India)
Fund; 5. Rajiv Gandhi Foundation.
5 National Foundation for Communal
Harmony;
6.An approved university/educational
institution of National eminence;
7.The Maharashtra Chief Minister’s Relief
Fund Chief Minister’s Earthquake Relief Fund,
Maharashtra; Any fund set up by the State
Government of Gujarat exclusively for
providing relief to the victims of earthquake in
Gujarat;
8. Zila Saksharta Samiti constituted in any
district under the chairmanship of the Collector
of that district;
9. National Blood Transfusion Council or to
any State Blood Transfusion Council;
10. any fund set up by a State Government for
the medical relief to the poor;
11. The Army Central Welfare Fund or the
Indian Naval Benevolent Fund or the Air Force
Central Welfare Fund, 12. Andhra Pradesh
Chief Minister’s Cyclone Relief Fund, 1996;
13.National Illness Assistance Fund;
14.Chief Minister’s Relief Fund or Lieutenant
Governor’s Relief Fund in respect of any State
or Union Territory;
15.National Sports Fund;
16.National Cultural Fund;
17.Fund for Technology Development and
Application; 18.National Trust for Welfare of
Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities;
19.Any trust, institution or fund to which
applies for providing relief to the victims of
earthquake in Gujarat
20.Swachh Bharath kosh
21. Clean gang fund
22. National fund for control of Drug Abuse
Donations with limit:
Deduction @ 100% Deduction @ 50%
1. If donation given to Government or any 1. Any notified temple, mosque, gurdwara,
approved local authority, institution or church or other place for renovation and repair.
association to be utilized for the purpose of 2. Any corporation specified for promoting
promoting family planning; interest of minority community
2. Donation by a Company to the Indian 3. Any authority constituted in India by law for
Olympic Association or to any other notified the purpose of planning, development or
association or institution established in India improvement of cities, towns and villages or
for the development of infrastructure for
sports and games in India or the sponsorship for both
of sports and games in India. 4. Government or any local authority to be
utilized for any charitable purpose other than
promoting family planning.
DEDUCTION U/S 80G:
1. In case of No limit Donations:
a) Take the actual amount for consideration.
b) If it is 100% allowable, allow 100% of the donation.
c) If it is 50% allowable, allow 50% of the deduction.
1. In case of limit Donations:
a) Take 10% of Gross Total Income after allowing section 80C to 80U (without 80G), LTCG, STCG and any
other income on which tax is not payable.
b) Gross Total Income (given in the problem) xxxx
Less: Deductions U/S 80C to 80U except 80G xxxx
Less : LTCG or STCG if any xxx
Gross Total Income on which 10% is to be calculated xxxx
c) Take the amount calculated as per step (b)
d) Allow 100% donations with limit first followed by 50% donation with limit to the available extent.
SECTION 80GG
PURPOSE OF ALLOWING DEDUCTIONS U/S 80GG: Deduction In Respect Of Rent Paid Any
Assessee other than Assessee having income falling u/s 10(13A) (i.e., House Rent Allowance).
DEDUCTION U/S 80GG: Lower of (a) Rs. 5,000 per month, or (b) 25% of the total income (after allowing
all deductions except under this section), or (c) Rent paid in excess of 10% of the total income (after allowing
all deductions except under this section).
SECTION 80GGA available to all Assessee
PURPOSE OF ALLOWING DEDUCTIONS U/S 80GGA: Deduction In Respect Of Certain Donations
For Scientific Research Or Rural Development
1. Any sum paid to a scientific research association or to a university, college, or other institution to be used
for scientific research [approved u/s. 35(1) (ii)];
2. Any sum paid to a university, college, or other institution to be used for research in social science or
statistical research [approved u/s. 35(1)(iii)];
3. Any sum paid to an association or institution for any programme of rural development [approved u/s.
35CCA];
4. Any sum paid to an association or institution for training of persons for implementing rural
development programmes [approved u/s. 35CCA];
5. Any sum paid to a public sector company or local authority or to an association or institution approved by
National Committee for carrying out any eligible project or scheme [approved u/s. 35AC];
6. Any sum paid to a rural development fund set up and notified by Central Government for the purposes
of Section 35CCA(1)(a);
7. Any sum paid to a National Urban Poverty Eradication Fund set up and notified by Central
Government for the purposes of Section 35CCA(1)(d).
Relevant Conditions/Points:
1. No deduction is allowed if Assessee has income chargeable under the head "Profits and gain of business
and profession".
2. Any sum in respect of which deduction is allowed under this section will not qualify for deduction under
any other provision of this Act for any assessment year.
3. If donation is paid for rural development, then the Assessee should furnish the certificate referred to in
Section 35CCA(2) or 35CCA(2A) from such association or institution and if donation paid for eligible
project/scheme then the Assessee should furnish the certificate referred to in Section 35AC(2)(a) from such
association.
DEDUCTION U/S 80GGA:
100% of the amount paid as donation/contribution.
SECTION 80GGB Available to Indian company
PURPOSE OF ALLOWING DEDUCTIONS U/S 80GGB: Deduction In Respect Of Contribution Given
By Companies To Political Parties Or An Electoral Trust"
DEDUCTION U/S 80GGB: 100% Of The Amount Paid As Contribution.
SECTION- 80GGC
PURPOSE OF ALLOWING DEDUCTIONS U/S 80GGC: deductions in respect of donations to
political parties. This deduction is allowed to any person other than a local authority when he has made
contribution to a political party registered under sec 29A.
SECTION 80QQB
PURPOSE OF ALLOWING DEDUCTIONS U/S 80QQB: Deductions in respect of royalty income of
authors of text books. This deduction is allowed to an individual who has received royalty for his work on
literacy, artistic or scientific nature.
DEDUCTION U/S 80QQB: He can claim the actual royalty subject to the maximum of Rs. 300000 as
deductions
SECTION 80RRB
PURPOSE OF ALLOWING DEDUCTIONS U/S 80RRB: deductions in respect of royalty on patents. This
deduction is allowed to a individual who is resident and patentee and is his gross total income includes royalty
in respect of such patent. The patent should be registered on or after 1.4.2003 under the patents act 1970.
DEDUCTION U/S 80RRB: He can claim the actual royalty subject to the maximum of Rs300000 as
deductions
Deduction u/s TTA – Interest on deposits in Savings Account
SECTION 80U
PURPOSE OF ALLOWING DEDUCTIONS U/S 80U: deductions in respect of person with disability
DEDUCTION U/S 80U: If the Assessee is a person with disability he can claim deductions under this
section. He must be certified by the medical authority as person with disability. As Assessee who is suffering
from severe disability (i.e., disability to the extent of 80% or more) can claim up to Rs100000. An Assessee
who is suffering from disability but not severe disability can claim up to Rs50000. This deduction is allowed
irrespective of actual expenditure.
1. From the following particulars of Mr.X, compute the amount of deduction U/S 80C for the PY 2013-2014.
a) Life insurance premium paid i) On own life policy Rs.30000 ii) On the life of wife Rs.10000 iii) On the
life of father Rs.10000 iv) On the life of married daughter and her husband (joint policy) Rs.10000
b) Contribution of recognized provident fund Rs.2000 p.m. Rs.24000
c) Deposit in public Provident Fund in March’2023 Rs.45000
d) Group insurance premium Rs.3000
e) Investment made during 2022-2023 in NSC VIII issue out of agricultural income Rs.10000
f) Repayment of housing loan from LIC for the construction of residential house Rs.4000 p.m. including
Rs.1000 p.m. as interest Rs.48000
g) Accrued interest on NSC VIII issue Rs.4000
h) Insurance premium on the life of minor son paid on 2.4.2023 8,000.
Ans: Deduction U/S 80C Rs.150000
2. Mr.A got medical insurance of all family members and paid premium in the previous year 2013-2014 as
under:
i) Medical insurance of self paid by cheque Rs.10000
ii) Medi- claim premium of wife paid in cash Rs.5000
iii) Medical insurance premium of 16 years old son paid by cheque to a private insurance company approved
by insurance regulatory and development authority Rs.3000
iv) Medi claim premium paid on the medical insurance of his father and mother Rs.22000
v) Medi claim premium on the policy of dependent younger brother Rs.4000
vi) Preventive medical check -up of wife Rs.4000
Ans: Deduction U/S 80D Rs.39000
3. Mr.R paid the following insurance premia during the previous year 2013-2014. Compute the amount of
deduction admissible U/S 80D:
i) Life Insurance Premium on own life Rs.6000 p.a.
ii) Premium paid by cheque to General Insurance Corporation to ensure the health of wife and children
Rs.20000 p.a.
iii) Accident insurance premium Rs.3000 p.a.
iv) Premium paid to GIC under Mediclaim to ensure the health of dependent mother who is 70 years old
Rs.20000 p.a.
v) Premium paid to GIC under Mediclaim in cash to ensure own health Rs.3000 p.a.
vi) He spent Rs.4000 on the medical checkup of his father.
vii)He paid by cheque to GIC under the mediclaim policy of his father who is 70 years old 28000
Ans: Deduction U/S 80D Rs.70000
4. Mr.D is karta of an HUF. The HUF has a child (son of D’s brother) who is mentally retarded. Mr.D’s
mother is also physically disabled. The HUF has spent Rs.24000 on their treatment and rehabilitation. Can
HUF claim deduction U/S 80DD and if yes, how much?
Ans: Deduction U/S 80DD Rs.75000
5. Mr.X is a government employee and he, his father (who is not dependent on him) and his son are suffering
from notified illness. He has incurred the following expenses on treatment:
On his own treatment Rs.50000
Amount reimbursed by employer Rs.20000
On treatment of his son Rs.40000
Insurance claim received Rs.18000
On treatment of his father Rs.60000
Insurance claim received Rs.16000
Calculate the amount of deduction U/S 80DDB
Also calculate the amount of his deduction in case his father is dependent upon him.
Ans: Deduction U/S 80DDB Rs.2000, Deduction U/S 80DDB(father being senior citizen)- 46000
6. Mr.Singh left on 1.4.2020 for USA for his higher studies. For this purpose he had taken a loan from bank.
He started repaying this loan with effect from 1.4.2022 and during 2022-2023 he repaid Rs.30000 as principal
amount and Rs.28000 as interest. Can he claim benefit under income tax Act 1961 for the amount repaid by
him.
Ans: Deduction U/S 80E Rs.28000
7. Mr.Soni whose gross total income is Rs.4000000 makes the following donations during the PY ending on
31.3.2023:
i) To prime minister’s national relief fund Rs.100000
ii) To national defence fund Rs.200000
iii) To a temple of public worship for its repair (so notified) Rs.200000
iv) To a local college for construction of commerce block Rs.100000
v) To a poor student as aid Rs.10000
vi) To municipal committee Rs.100000
vii) To PGI Chandigarh for promotion of family planning Rs.50000
viii) To chief minister’s earthquake relief fund MaharashtraRs.20000
The gross total income includes Rs.1000000 as profit on sale of long term capital assets. Compute his total
income for the AY 2023-2024.
Ans: Deduction U/S 80G Rs.495000
8. The gross total income of Mrs.Usha amounted to Rs.600000 in the PY ending on 31st March, 2023. She has
made the following donations:
i) To Gujarat earthquake relief fund Rs.40000
ii) To Africa ( public contributions India) Fund Rs.10000
iii) To approved educational institutions Rs.15000
iv) To approved temples Rs.35000
v) Clothes distributed to poor Rs.5000
vi) To municipal corporation for promotion of family planning Rs.20000
vii) To PGI Chandigarh for helping the poor and needy in cash Rs.20000
viii) During the year he also donated Rs 20000 to clean ganga fund
Compute the amount of deduction admissible U/S 80G for the assessment year 2023-2024.
Ans: Deduction U/S 80G Rs.110000; Donation given in cash exceeding Rs.2000 does not qualify for
deduction U/S 80G.
9. Shri Anil earned gross total income of Rs.500000 in the previous year 2022-2023 and made the following
donations during the year:
i) Rs.10000 to Chief minister’s earthquake relief fund Gujarat.
ii) Rs.15000 to national foundation for communal harmony.
iii) Rs.20000 to municipal corporation approved for promotion of family planning.
iv) Rs.45000 to approved institutions
v)Rs 20000 to Swach Bharath Kosh.
Compute the amount of deduction admissible to him U/S 80G for the AY 2023-2024.
Ans: Deduction U/S 80G Rs.80000
10. If a professional man has his gross taxable income (i,e. income before allowing this deduction) of
Rs.3,60,000 and pays rent of Rs.5000 p.m. at Varanasi, calculate the amount of deduction U/S 80GG.
Ans: Deduction U/S 80GG Rs.24000
11. Mr. Raman, a chartered accountant, is living at Kanpur and carrying on his profession there. For the year
2022-2023 he has supplied the following particulars. Compute his total income for the AY 2023-2024:
i) Professional gain Rs.500000
ii) Rent received from house at Delhi Rs.18000 p.a.
iii) Municipal taxes Rs.1500 p.a.
iv) Long term capital gain Rs.10000
v) Part time salary as lecturer in taxation laws Rs.164000
vi) Rent paid at Kanpur Rs.6000 p.m.
vii) Interest on government securities Rs.29000
viii) He deposited Rs.15000 PPF
Ans: Deduction U/S 80GG Rs.8050 and U/S80C Rs.15000, Total Income Rs.641505
UNIT-4
Tax Liability- Assessment of Individuals-Assessment of Firms
COMPUTATION OF TAX LIABILITY
ROUNDING OFF OF INCOME (SEC 288 A):

Total taxable income of the Assessee shall be rounded- off to the nearest multiple of 10 i.e. if the last
figure in the total income is five or more, it would be raised to the next higher multiple of 10 and if the last
figure of total income is less than five, the same shall be reduced to lower amount which should be a multiple
of ten.
Format of computing total taxable income
Particulars Amount
Taxable income from salaries Sec 15 to 17 xxxxx
Taxable income from house property Sec.22 to 27 xxxxx
Taxable income from business or profession Sec.28 to 44 xxxxx
Taxable income from capital gains (excluding LTCG and STCG liable for xxxxx
STT) Sec.45 to 55
Taxable income from other sources (excluding casual incomes) Sec.56 to 59 xxxxx
Gross total income excluding LTCG & STCG liable for STT & casual xxxxxxx
income
Less: Deduction U/S 80C to 80U xxxxx
Total income excluding LTCG & STCG liable for STT & casual income xxxxxxx
Add: Casual income xxxxx
LTCG xxxxx
STCG xxxxx xxxxxx
Total taxable income or net income xxxxxxx
COMPUTATION OF TAX LIABILITY:
After computing the total income, next step is to compute the tax liability. Steps for computation of tax
liability are:
i) Round off total income to the nearest multiple of 10.
ii) Divide the total income into four parts:
a) Long term capital gain. Calculate tax at the rate of 20%
b) On short term capital gains on shares subject to STT calculate tax @ 15%
c) Winning from lotteries, puzzles, races, card games, gambling and betting. Calculate tax at the rate of 30%.
d) Balance is total income which will be rounded off. Calculate tax at scheduled rates.
iii) Tax calculated as above is added up.
iv) On the amount of tax calculated above, add
b) Health and education cess @ 4% of tax.
RATE OF TAX:
RATE OF TAX FOR THE ASSESSMENT YEAR 2022-2023:
1) INDIVIDUAL RESIDENT (less than 60 years: age):

Income slabs Income tax rate
Upto Rs.250000 Nil
From Rs.250000 to Rs.500000 5%
From Rs.500000 to Rs.1000000 20%
Above Rs.1000000 30%
Educational cess: 3% of the income tax.
2) INDIVIDUAL RESIDENT (who is of the age of 60 years or more but below the age of 80 years at any
time during the P/Y):
Upto Rs.300000 Nil
From Rs.300000 to Rs.500000 5%
From Rs.500000 to Rs.1000000 20%
Above Rs.1000000 30%
Educational cess: 3% of the income tax.
3) INDIVIDUAL RESIDENT (who is of the age of 80 years or more at any time during the P/Y):
Upto Rs.500000 Nil
From Rs.500000 to Rs.1000000 20%
Above Rs.1000000 30%
Educational cess: 3% of the income tax. Surcharge: Nil
SUMS
.1. Compute the amount of tax payable for the assessment year 2023-2024 in the following cases:
a) Total income of M.X is Rs.520064
b) Income of Mr.Y a senior citizen is Rs.520064
c) Income of Mr.S a super senior citizen is Rs.520064
d) Income of Mr.A is as under
Income from salary Rs 4,20,000
Income from STCG Rs 30,000
Income from LTCG Rs 40,000
Winning from Lottery Rs 50,000
Ans: a) Tax liability Rs.35030 b) Tax liability Rs.29880 c) Tax liability Rs.4130.
3. Dr.V.P Sharma whose age is 69 years has given following details of his income. compute his tax liability
for the assessment year 2022-2023.
i) Pension from government Rs.247500
ii) Salary from a private sector company Rs.650000
iii) Long term capital gain Rs.36500
iv) Interest on fixed deposit with bank Rs.72600
v) Deposited Rs.10000 in ELSS and Rs.10000 in NSS 1992.
Ans: a) Total Income Rs.886600 and Tax liability Rs.90,815
4. Following are the particulars of income of Mr.K for the year ending 31.3.2014.
i) Interest on government securities (gross) Rs.3300
ii) Interest from bank deposits Rs.3500
iii) Rental value of house property (municipal taxes being Rs.750) Rs.4000
iv) Profits of retail cloth business Rs.187300
v) 1/10th share in the AOP which has no such members whose individual income exceeds Rs.200000
Rs.10000
vi) Dividends from co-operative society Rs.3200
vii) Dividend from Indian company Rs.2700
viii) Interest on securities of co-operative society Rs.300
ix) He is insured for Rs.10000 and insurance premium paid Rs.1500
x) He donated Rs.2000 to a school in which his son is studying
Compute his total income and tax payable for the Ay 2014-2015.
Ans: a) Total Income Rs.208875 and Tax liability Rs.915
5. Compute the tax liability of Mr.A for the AY 2014-2015 if his total income is a) Rs.181670 b) Rs.214371
c) Rs.1011549
Ans: a) Tax liability Rs.Nil b) Tax liability Rs.1480c) Tax liability Rs.137470.
6. Compute the tax liability for the assessment year 2014-2015 of an individual from figures given below:
i) Gross salary Rs.196000
ii) House property rent Rs.20000
iii) Long term capital gains Rs.20000
iv) Winning from lottery Rs.50000
v) Interest on debentures Rs.4400
vi) Qualifying amount for deduction U/S 80C Rs.10000
7. Compute the tax liability for the assessment year 2014-2015 of an individual from figures given below:
i) Business income Rs.204300
ii) Long term capital gain Rs.30000
iii) Race winnings Rs.10000
iv) Amount deposited in PPF Rs.20000
v) NSC VIII issue purchased Rs.10000
8. Mr.R is carrying on his own profession as lawyer, and for the AY 2014-2015 he submits the following
particulars:
ii) Share of income from a AOP 1/4th share Rs.16000
iii) Share of income from another AOP ½ share Rs.16000
Compute his tax liability for the Ay2014-2015.
Ans: Tax Rs.1895 and share from both AOP’s shall not be added as AOP’s shall pay tax at MMR as
individual income of Mr.R exceeds Rs.200000
9.. From the particulars given below compute the tax liability of Mr. J an artist for the AY 2014-2015.
ii) LTC gain Rs.10000
iii) Short term Capital gain in shares covered under STT RS.30000
iv) Amount deposited in PPF Rs.10000
v) Life insurance premium Rs.16000
Ans: Tax on STCG Rs.4500, on LTCG Rs.2000, on other income Rs.400 and cess Rs.207 Tax liability
Rs.7110
ASSESSMENT OF INDIVIDUALS
1. From the particulars given below, compute the total income and tax payable of Mr.D, a central government
employee working at Chandigarh:
Income from salary
a) Salary Rs.20000 p.m
b) TA bill Rs.5000 p.a, Actual Expenditure Rs.6000 p.a.
c) His contribution to statutory Provident Fund Rs.1700 p.m
d) Employer’s contribution to SPF 10% of salary
e) Interest on accumulated balance of SPF @ 13% Rs.12000
f) Entertainment Allowance Rs.1000 p.m
Income from HP: He owns two houses, one of which is let out at a rent of Rs.400 p.m. and other (whose
annual value is Rs.1000) remained vacant throughout the year on account of his employment at Ambala where
he has taken a house on rent. The two houses are subject to municipal taxes of Rs.600 and 100 respectively.
Income from Capital gain: During the year he sold shares of HERO Honda Ltd. And earned a short term
capital gain of Rs.50000. (STT paid)
Income from other sources: He earned Rs.11500 as interest from government securities and bank interest on
fixed deposits Rs.11000 and on a saving account Rs.10600. He pays Life Insurance premium of Rs.25000 on
his life policy of Rs.400000. he deposited Rs.10000 in Home Deposit Account.
2. The following particulars are given below by Mr.M.D, Madras, in respect of his annual income for the year
ended 31st March 2014:
a) Consolidated salary till 30.9.2013 at Rs.13500 p.m. and from 1.10.2013 Rs.14000 p.m.
b) House rent allowances at 20% of salary
c) Actual house rent paid Rs.3500 p.m.
d) Contribution to recognized Provident Fund by self and employer- each 12% of salary.
e) Life insurance premium paid Rs.1200. (Sum assured Rs.20000and policy taken on 1.4.2013)
f) Leave Travel Allowance received Rs.22700; Rs.20000 was spent on travel to home district under LTC
g) Interest and dividend income:
i) Interest on term deposits with Punjab National Bank Rs.29000
ii) Income from units of UTI Rs.3000
iii) Interest on debentures of Ponds India Ltd. Rs.21750
iv) Dividend from a Co-operative society Rs.15000
v) Interest on government securities Rs.13000
h) Short term capital gains on sale of shares (STT paid) Rs. 20000; Long term capital gains Rs.30000
i) Medical expenses incurred in private hospital for treatment of self and family Rs.5000. his employer
reimbursed Rs.2500
j) Rent received from tenant of own house property Rs.9600. Municipal taxes paid Rs.600
Compute total income and tax liability.
Ans: a) Total Income Rs.289250 and Tax liability Rs.13310.
3. The following are the particulars of the Income of GND University teacher during the year ending 31 st
March 2014:
a) Salary Rs.37400 p.m. plus Rs.9000 p.m. as grade pay from which 10% is deducted for statutory provident
fund to which the university contributes 12%.
b) Rent free bungalow of the annual letting value of Rs.18000
c) Wardenship allowance Rs.2000 p.m.
d) 12% interest on government loan of Rs.65000
e) Income from house property computed Rs.29560
f) He received Rs.3500 for writing articles in a journal.
g) He paid Rs.2000 by cheque to GIC under Mediclaim.
h) Interest on postal saving bank deposit Rs.6500
i) Interest gross Rs.2500
j) Examinership remuneration Rs.3500
k) During the year, he sold shares of reliance industrial Ltd. And earned a long term capital gains of Rs.60000.
During the year he paid Rs.24000 as life insurance premium on his own policies and spent Rs.600 on books
purchased for his own use. Find out his Total income, tax and exempted income. Population of Amritsar is 12
Lakhs
Ans: a) Total Income Rs.688740 and Tax liability Rs.52340.
ASSESSMENT OF FIRM
1. The profit and Loss Account of a firm in which the partners X,Y and Z share profits and
Lossess in the ratio of 5:4:1 March 2023
Debits Credits
Donation to National 11,000 Capital gain on sale of 5,000
Defence Fund Machinery
Share to partners Interest on debentures after 22,500
deduction of tax at source
Rs 2,500
X 15,000 Interest on securities 3,500
Y 19,000
Z 22,000
Commission to X 6,000
Office Rent (Paid to X) 12,000
Compute the total income of the firm for the assessment year 2023-24. The firm has submitted
certified copy of instrument of partnership along with return and it provides for payment of salary
commission to working partners X, Y and Z as per above
2)A and B are active partners and C and D are sleeping partners in a partnership firm. A Profit and
Loss account drawn for the year ending 31.03.2023 shows a profit of Rs 25000. The profit has been
arrived at after allowing salary and interest of partners as follows
Particulars A B C D
Salary 25000 23000 - -
Interest @15% 2000 4000 6000 3000
Further long term capital gains of the firm are Rs 10000. Partners share the profit or loss equally. Compute the
total income of the firm and its tax liability. Interest to all partners and salary to active partners has been paid
as per deed
3.643Calculate firms income under the head profits and gains for the assessment year 2023-24 from
information given below :
Net profit as per P& L a/c (after debiting the following ) 1,20,000
Salary to A 1,60,000
To B 1,40,000
Commission to A 1,20,000
Interest on capital @15%
To A 30,000
To B 15,000
The payment to partners A & B (who are working partners ) have been made in accordance with the
partnership deed whose certified copy has been submitted along with return of income for the assessment year
2023-24. Also compute the individual income of partners A& B which is taxable under the head profits and
gains
UNIT-V
Income Tax Authorities – Powers – Assessment Procedure – Types of Assessment – Appeals &
Revisions.
INCOME TAX AUTHORITIES AND ITS POWERS:
Section 116 of the Income Tax Act, 1961 provides for the administrative and judicial authorities for
administration of this Act. The Direct Tax Laws (Amendment) Act, 1987 has brought far-reaching changes in
the organizational structure. The implementation of the Act lies in their hands of these authorities. The
change in designation of certain authorities and creation of certain new posts in the structure are the main
features of amendments made by The Direct Laws (Amendment) Act, 1987.
ADMINISTRATIVE AUTHORITIES:
Under this wing authorities are:
1. Central board of direct tax (CBDT)
2. Director General of income tax / chief commissioners of income tax.
3. Directors of income tax/ commissioners of income tax.
4. Additional director of income tax.
5. Joint director of income tax.
6. Deputy Director of income tax.
7. Assistant director of income tax.
8. Income tax officers.
9. Tax recovery officers.
10. Inspectors of income tax.
1. CBDT:
CBDT is the top most authority with regard to direct tax. It is constituted under the central board of
revenue act 1963. CBDT is given powers to issue orders, instructions and direction to other income tax
authorities as it may fit for the proper administration of the Act. The board functions under the control of
ministry of finance, Government of India. Its jurisdiction is whole of India.
The central government is empowered to appoint its members and the government can increase the
number upto a maximum of five. At present there are four members besides the chairman. One of the
members of the board is appointed as its chairman.
POWERS OF CENTRAL BOARD OF DIRECT TAXES (CBDT):
The whole of income tax department is to be looked after by the board. It has to perform the functions of
administration, supervision and control of entire income tax structure in India. The orders and directions
issued by the board are to be complied with by all subordinate authorities. The orders and directions issued by
the board will not interfere in the performance of appellate functions of appellate commissioner.
Income-tax Act provides following specific powers to the board:
a) The board can declare any association whether incorporated or not and whether Indian, or non Indian,
as company under the provision of section 2(17).
b) The board has power to determine the jurisdiction of various authorities mentioned in this Act
(Section 118).
c) The board may issue directions for the exercise of powers and performance of the functions by all or
any of these authorities. While issuing such directions the board will keep in any of the following
criteria:
i) Territorial area;
ii) Persons or classes of persons;
iii) Incomes or classes of incomes
iv) Cases or classes of cases.
d) The board may authorize, by general or specific order, director general or director to perform the
powers of any of the income tax authorities.
e) The board may empower director general or chief commissioner or commissioner to authorize deputy
commissioner or deputy director to exercise the powers of assessing authority in respect of any
specified area, person, incomes or cases or class of persons, class of incomes or class of cases.
f) The board may authorize any authorities to exercise its powers concurrently with any other authority.
In case such notification is issued by the board, the lower authority (in rank) shall exercise such
powers as are directed to it by higher authority.
g) To carry out the different provisions of the Act the board makes rules for whole of India.
h) The board has been empowered by taxation laws Act 1975 to make rules regarding the maintenances
of accounts and documents required under section 44 AA.
However, this Board has no power to issue orders which will affect the functions of appellate
Income-tax Authorities. Similarly, it cannot issue a direction to an assessing officer to dispose of a case in a
particular manner.
2. PRINCIPAL DIRECTOR GENERAL OF INCOME TAX/ CHIEF COMMISSIONER OF INCOME
TAX:
i) Appointment: The central government may appoint such persons as it thinks fit to be the principal director
general/ chief commissioner of income tax.
ii) Jurisdiction: The jurisdiction of these authorities shall be determined by the CBDT keeping in view the
area, persons, incomes or cases.
iii) Function: The CBDT may by general or special order and subject to such conditions, restrictions or
limitations, authorize any principal director or chief commissioner to perform such functions of any other
income tax authority as may be assigned to him in such order.
iv) Power:
1. It may be empowered to authorize a Deputy Commissioner to exercise the powers of an assessing
officer in respect of a person, case, income or an area.
2. It may be empowered by the board to appoint income tax authorities below the rank of an assistant
commissioner.
3. These authorities may, after giving the assessee a reasonable opportunity of being heard in the matter,
and after recording his reasons, transfer any case from one assessing officer to another.
4. It may exercise the powers of assessing officer, in case he has reason to suspect that any income has
been concealed or is likely to be concealed by an assessee coming within his jurisdiction.
5. Section 119 (3) empowers the director to issue instructions to the assessing officers and such
instructions are issued for their guidance and are binding on them.
6. Given power to the director to make any inquiry or investigation in case of such type of assessees who
falls within his jurisdiction and in whose case he has reason to suspect that any income has been
concealed or is likely to be concealed.
7. The director shall be competent to make any inquiry under this act and for this purpose shall have all
the powers that an assessing officer has under this act in relation to the making of inquiries.
3. PRINCIPALCOMMISSIONER/DIRECTOR/ADDITIONAL COMMISSIONER/ADDITIONAL
DIRECTORS OF INCOME TAX:
i) Appointment: The central government may appoint such persons as it thinks fit to be the commissioner of
income tax.
ii) Jurisdiction: The jurisdiction of commissioners to be determined by the CBDT keeping in view the area,
persons, incomes or cases.
iii) Function: The CBDT may by general or special order and subject to such conditions, restrictions or
limitations, authorize any commissioner to perform such functions of any other income tax authority as may
be assigned to him in such order.
iv) Power:
1. Under the directions of the board, a commissioner may exercise the powers of an assessing officer.
2. A commissioner has the power to transfer any case from one or more assessing officers subordinate to him
to any other assessing officer or officers also subordinate to him. He can do so only after giving the assessee
an opportunity of being heard and after recording the reasons for doing so.
3. The commissioner has been empowered to grant approval for an order issued by the assessing officer
asking a non company assessee to get its accounts audited from a chartered accountant.
4. The prior approval of the commissioner is required for reopening of an assessment beyond the time limit of
4 years.
5. The commissioner has the power to revise an order passed by assessing officer, if in his opinion it is
erroneous or prejudicial to the interest of the revenue. He can do so only after giving the assessee an
opportunity of being heard.
6. The commissioner has the power to revise any other order issued by ITO and not covered under section
263, either of his own motion or on application by the assessee for such revision.
7. The commissioner may direct the assessing officer to appeal to appellate tribunal against the order passed
by commissioner.
4. JOINT COMMISSIONER/ JOINT DIRECTORS OF INCOME TAX:
i) Appointment: The central government may appoints joint commissioners/ joint directors of income tax
and they are subordinate to commissioners, and chief commissioners..
ii) Jurisdiction: The area of operation is specified by the board or any authority so authorized. Their
jurisdiction can be concurrent with other such authorities.
iii) Function: They perform such functions as are assigned to them by general or special order issued by the
board and in respect of specific area, class of persons or specific cases or class of cases.
iv) Power:
a) He is empowered to accord sanction to levy additional income tax on companies in which public are
not substantially interested.
b) He may be authorized by the board or chief commissioner to exercise the powers of assessing officer.
c) He has the power to cancel the registration of a firm which is not a genuine firm.
d) He has the power to issue instructions to assessing officer to revise an order issued by ITO if he has
received an application from assessee regarding a pending case.
The finance act 2017 has authorized the joint director, Deputy Director or the Assistant Director to call for
the information for the purpose of any inquiry without seeking approval of the higher authority
5. INCOME TAX OFFICERS/ ASSESSING OFFICER/DEPUTY COMMISSIONER/ASSISTANT
COMMISSIONER:
The assessing officer is the most important authority in the organization structure of income tax department.
He is the primary authority to initiate assessment proceedings and make assessment. He is the only authority
to collect tax. He is the authority which comes into contact with the public.
JURISDICTION:
a) Determination by CBDT: The jurisdiction of income tax authorities shall be determined by the CBDT.
While determining the jurisdiction the board may consider the following:
i) Territorial area,
ii) Persons or classes of persons,
iii) Incomes or classes of cases.
b) Instructions by director general/ commissioner or commissioner of income tax: The assessing officer
shall perform his functions in respect of such classes of persons or incomes as the above mentioned authorities
may instruct. The assessing officer shall have jurisdiction within the area assigned to him and in respect of:
i) Any persons who is carrying on his business or profession in such area, or if he is carrying on business at
more than one place, the principal place of business is situated within such area; and
ii) Any other persons who is residing in such area.
c) Concurrent jurisdiction: If two or more persons are appointed as assessing officers in same area, each one
will perform such functions as are directed by the commissioner. If two or more assessing officer is required
to attend the cases in same area, the directions of that assessing officer who is senior in rank shall prevail.
d) Dispute regarding jurisdiction:
i) If there is dispute regarding the Jurisdiction of an assessing officer, it will be decided by the director/ chief
commissioner or commissioner of income tax.
ii) If dispute relates to areas which fall within the jurisdiction of different such authorities, it will be decided
by the concerned director general or chief commissioner or commissioner.
iii) If such authorities are not in agreement the dispute will be decided by the board or any other authority so
notified.
e) Jurisdiction not to be disputed:
i) The jurisdiction of the assessing officer shall not be challenged after the expiry of one month from the date
on which he has filed a return u/s 139(1) or u/s 115WD (2); or after the completion of assessment whichever
is earlier.
ii) If he has not filed such return and the time allowed by notice served under sections 142 (1) or 148 or 144
has expired.
iii) If assessing officer is not satisfied about the contentions of the assessee regarding the dispute, he will refer
the case for decision to the commissioner/ chief commissioner or director general of income tax.
POWERS: The assessing officer shall exercise the following powers:
a) Powers of Civil Court: These authorities shall have the same powers, as are vested in a court under the
code of civil procedure 1908, when trying a suit in respect of the following matters:
a. Discovery and Inspection.
b.Enforcing the attendance of any person including any officer of a banking company and examining him
under oath.
c. Compelling a person to produce books of accounts and other documents; and
d.Issuing Commissions.
b) Powers of Search and Seizure:
These authorities shall have the power of searching any building, place, vessels, vehicle or aircraft and
seize books of accounts, other documents, money, bullion, jewellery or other valuable articles or things.
Identification marks shall be put on the seized articles and an inventory shall be made. The books of accounts
or the other documents seized shall not be retained by the authorities for a period exceeding 180 days from the
date of seizure unless for the reasons recorded, the approval of chief commissioner or commissioner is
obtained. The extension cannot be granted beyond 30 days in case of books relating to the year to which they
are relevant. The assets so seized shall be retained by the assessing officer in his authority and shall be applied
towards the recovery of existing and estimated tax liability of the assessee.
c) Power of Assessment: An assessing officer or any other authority acting as assessing officer shall have
following powers while performing his functions:
a. Power regarding self assessment as mentioned in Sec. 140A.
b. Power of making regular assessment under section 143 and best judgment assessment under section 144.
c. Power to reopen an assessment under section 146.
d. Power to reopen as assessment incase income has escaped assessment under section 147 and 148.
e. Power to treat a person as an agent u/s 163.
f. Power to assess a person leaving India u/s 174 and income of person trying to alienate his Assessee u/s
175.
d) Power to call for information
The authorities have the power to call for necessary information from a firm and HUF. They can ask an
assessee to furnish a statement of names and addresses of all the persons to whom he has paid in any previous
year rent, interest, commission, royalty or brokerage etc. amounting to more than Rs.1000 or such higher
amount as may be prescribed together with particulars of all such payments. The assessing officer can ask any
person including a banking company or an officer thereof to furnish information relating to such points or
matters or to furnish statements of accounts and affairs verified in the prescribed manner.
e) Power of Survey
Under section 133A, an IT authority may enter any place where business or profession is carried on, if
such place is within the limits of the area assigned to him or is occupied by any person in respect of whom the
AO exercises jurisdiction.
f) Power to inspect Registers of Companies
The above mentioned authority, may inspect, if necessary, take copies or cause copies to be taken of
any register of members, debenture holders, and mortgages of company or of any entry in such register.
6. INCOME TAX INSPECTOR:
They are appointed by chief commissioner or commissioner of income tax and are subordinate to
assessing officers. They assist assessing officers in performance of their duties. They may be directed to
perform any other function by general or specific order.
ASSESSMENT PROCEDURE
Assessment of income relating to one PY starts in the succeeding financial year, which is called AY.
Assessment procedure begins when an Assessee files his return of income to the income tax department.
I - FILING OF RETURN [SEC 139 (1)]
 Every person being a company or a firm; whether it has income or loss during the previous year has to
file return of income in the prescribed form within the specified time limit if his total income exceeds
the maximum non-taxable limit.
 A person being a resident other than not ordinary resident in India within the meaning of section 6(6),
who is not required to furnish a return under this sub section.
Time of filing of return
In the case of a company, due date of submission is 31st October
In the case of person other than a company Where audit is compulsory, due date of filing return is 31st
October. In any other case, the due date of filing of return is July 31
If the last day of filing of return of income or loss is fall on a holiday, then the Assessee can file the return on
the next working day.
Filing of Return through Employer
An employee (individual) may, at his option, furnish the return of his income for any previous year to
his employer. The employer shall furnish the returns received by him on or before the due date in
accordance with a notified scheme by the Board.
Filing of Return on Computer readable media (E-Filling)
Any person who is required to furnish a return of income [u/s 139(1)] may, at his option, furnish it on
or before the due date in accordance with a notified scheme by the Board.
The returns of income may be furnished in such form (including on a floppy, diskette, magnetic
cartridge tape, CD-ROM or any other computer readable media) and manner as may be specified in such
scheme.
Interest chargeable:
In case Assessee has failed to file the return or has filed the return late, interest @ 1% per month or part
thereof is to be charged.
Penalty for non filling of return:
In case a person fails to submit his return u/s 139 (1) or under one by six scheme on or before due date,
a penalty of Rs.5000 shall be imposed on such person. Rs 10000 in any other cases. However if the total
income of the person does not exceed Rs 5,00,000,the fee payable under this section shall not exceed
Rs1000
Return of loss [Sec 139 (3)]
Return can also be filed in the prescribed form in respect of loss suffered by the Assessee. It is not
compulsory to file a return of loss, but certain losses can be carried forward only on filing return of loss.
Return by a Company or a Firm
Every company or a firm shall furnish on or before the due date the return in respect of its income or
loss in every previous year. ‘Due date’ means:
(a) Where the Assessee is –(i) a Company, or (ii) a person (other than a company) or a working partner of
a firm where accounts are required to be audited under this Act or any other law-31st October of the
A.Y.
(b) In any other case, 31st July of the A.Y.
Belated Return of income before assessment is completed [Sec.139 (4)]
Where an Assessee fails to furnish the return of income within the time allowed u/s 139(1) or within
time allowed under a notice issued u/s 142(1), he may furnish the same at any time before the expiry of
one year from the end of the relevant assessment year or before the completion of assessment, whichever is
earlier.
Consequences of filing a belated return:
 Assessee shall be liable to pay interest @ 1% p.m
If return for any previous year is submitted after the end of relevant assessment year, the assessee shall be
liable to a penalty of Rs.5000. However if the total income of the person does not exceed Rs 5,00,000,the
fee payable under this section shall not exceed Rs1000
 A belated return can also be revised
 Deduction U/S 80 IA, 80IB, 80IC, 80ID and 80IE shall not be available.
Return on behalf of a Charitable Trust, etc.[Sec.139 (4A)]
Every person in respect of income derived from property held under trust wholly or in part only
charitable or religious purposes or income from voluntary contributions, shall, if the total income in respect
of which he is assessable as a representative Assessee (without giving effect to the provisions of sections
11 and 12( exceeds the non-taxable maximum limit)
Return on behalf of a Political Party [Sec.139 (4B)]
The Chief Executive Officer of every political party, if the total income of the party (without giving
effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to tax,
furnish a return of income of the previous year on or before the due date in the prescribed form and
verified in the prescribed manner.
Return by Other Persons
The following persons shall also furnish their return of income if the total income, without giving
exemption limits:
(i) Scientific research association [referred to in Sec.10 (21)];
(ii) News agency [referred to in Sec. 10(22B)];
(iii) Association or institution [referred to in Sec.10 (23A)];
(iv) Institution [referred to in Sec.10 (23 B)];
(v) Fund or institution, trust or institution, university or other educational institution, hospital or other
medical institution [referred to in Sec.10 (23C) (iv) (v) (vi) (via).
(vi) Trade union or association of trade unions [referred to in Sec.10 (24)].
Revised Return of Income [Sec.139 (5)]
If any person having furnished a return under section 139(1) or 142(1) discovers any omission or any
wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the
end of the relevant assessment year or before the completion of assessment, whichever is earlier.
Important points:
 A belated return can also be revised
 A return can be revised any number of times
 There is no need to take any permission from any authority before submitting a revised return.
 There is no fees for filing a revised return
 A return of loss can also be revised.
Compulsory Return [Sec.142 (1) (i)]
Where any person is assessable either in respect of his income or income of any other person and he has
not furnished the return of income on or before the due date of furnishing the return [u/s 139(1)] the Assessing
Officer may serve a notice on such person requiring him to furnish the return.
Defective return [Sec 139(9)]
Where the AO finds that the return filed by an Assessee is defective he should intimate the Assessee about
the defect and give him an opportunity to rectify the defects within 15 days from the date of intimation or
within such further extended time as the AO may allow. If the defect is not rectified within the time allowed,
the return will be treated as invalid and it will be deemed that no return has been filed by the Assessee
attracting penal interest.
II PRESCRIBED FORM: (forms for return)
The return of income shall be filed in prescribed form and shall be verified in the prescribed manner. An
Assessee is required to furnish the following particulars:
 Income exempt from tax
 Assets of prescribed nature
 Expenditure exceeding the prescribed limits
 Location and principal place and all branches
 Name and address of all partners
 Share of each partner etc.,
S.no Assessee Form .no
1 Individual having income from salary ,pension, one house property ITR-1 SAHAJ
2 Individual and HUF’S not having business and professional income ITR-2
3 Individual and HUF’S being partners in a firm but not carrying any business ITR-3
and professional under any proprietorship
4 Individual and HUF’S having business and professional income ITR-4
5 Individual and HUF’S, Firms having business income as mentioned under ITR-4S SUGAM
44AD and AE
6 Firm, AOP, BOI ITR-5
7 Companies other than those claiming deductions u/s 11 ITR-6
8 Assessees and companies claiming deductions u/s 11 and those who are ITR-7
required to furnish return u/s139
9 Where the data of return of income transmitted electronically without digital ITR-V
signature
III- SUBMISSION OF INCOME TAX RETURN THROUGH TAX RETURN PREPARERS (U/S
139B)
A new scheme to facilitate submission of Income Tax Return through Tax Return Preparers has been
inserted w.e.f. June 1, 2006. This new scheme provides: Certain specified class or classes of persons may be
allowed to furnish their returns of income through a Tax Return Preparer authorized to act as such under this
scheme. Every Tax Return Preparer shall assist the persons furnishing the return of income in such a manner
as may be specified in the scheme framed under this section and affix his signature on such return.
IV-VERIFICATION OF RETURN (SECTION 140)
According to section 140, the return of income as filed under section 115WD; or 115WH or 139, must be
verified as follows-
a) In case of individual himself:
 By the individual himself;
 While he is absent from India by the individual himself or by some person duly authorized by him in
this behalf.
 Where he is mentally incapacitated- by his guardian
b) HUF- by karta
c) Local authority – by principal
d) Company – by managing director
e) Firm – managing partner
V- TYPES OF ASSESSMENT/ MAKING ASSESSMENT/PROCEDURE FOR ASSESSMENT
1. Self assessment [Sec 140A]
Every Assessee liable to pay income tax is required to submit his return u/s139, 142,148 or 153 A.
Under self- Assessment the Assessee himself makes an assessment about his tax liability before filing his
return of income. The Assessee should prepare his return after taking into account following points;
 The amount of tax, if any, already paid under any provision of this Act.
 Any tax deducted or collected at source.
 Any relief of tax claimed u/s 90A in account of tax paid in any specified terriority outside India.
 Any tax credit claimed.
Enquiry before assessment:
Before finalizing the assessment of an Assessee, the Assessing Officer may be interested to go through
certain books, accounts, documents, statements of the Assessee and certain other inquires, which the
Assessing Officer may think desirable before finalizing the Assessment.
2. Assessment on the basis of return [Sec.143 (1)]
With effect from assessment year 1989-1990 new procedure of regular assessment has been prescribed
which is as follows:
Where a return has been filed u/s 139 of his own or u/s 142(1) on receipt of a notice: The total income or loss
shall be computed after making the following adjustment namely
i) If any tax or interest is due intimation shall be sent to the Assessee specifying the amount to be paid
ii) If any refund is due on the basis of return, it will be refunded to the Assessee and intimation to this effect
will be sent to the Assessee.
iii) No intimation will be made after the expiry of one year from the end of the financial year in which the
return is made.
Summary assessment [Sec 143(1)]
If on the basis of return filed, any tax or interest is due the A.O shall send intimation to the Assessee
specifying the sum so payable. If any refund is due on the basis of such return it shall be granted to the
Assessee. Such intimation shall be deemed to be a notice of demand. Such intimation should be send before
the expiry of 2 years from the end of the AY in which income was first assessable
Assessment in response to an order [Sec 143(2)]
Assessment of income after receiving a notice from income tax authorities is called assessment in
response to an order. A.O can send notice if he considers it necessary to ensure that the Assessee has not
understated the income or has not underpaid tax. After hearing such evidence as the Assessee may produce in
response to the notice and after taking into account all relevant materials, which the A.O has gathered, he shall
pass an assessment order in writing determining the total income of the Assessee and the sum payable or
refund due to the Assessee on the basis of such assessment order.
3. Regular Assessment (Sec 143)/ Assessment made u/s 143(3) or scrutiny assessment:
An assessment made U/S 143 is known as Regular Assessment. It can either be:
 On the basis of return filed by the Assessee or
 On the basis of evidence produced by the Assessee.
Regular assessment means the assessment made on the basis of evidence [u/s 143(3)] or best judgment
assessment (u/s 144).
When the Assessing Officer considers it necessary to verify the correctness or completeness of the return in
order to verify whether the income submitted in the return is not understand or the tax is not paid, the
Assessing Officer may send a notice to the Assessee asking for evidence from the Assessee. However the
notice cannot be sent after 6 months from the end of the month in which are filed.
The Assessing Officer may issue notice to any person in order to complete the assessment to produce
documents relating to accounts such as statement of assets and liabilities etc.
4. Best Judgement Assessment [Sec 144]
Best judgment assessment is left to the discretion of the Assessing Officer, where he has to consider all
relevant material that are needed to make an assessment of the total income or loss to the best of his
knowledge without any prejudice. Best judgment assessments are of two types:
a) Compulsory Best Judgement Assessment (Sec.144). The Assessing Officer shall, after giving the
Assessee an opportunity of being heard, make the assessment to the best of his judgement in any of the
following three cases:
 If the Assessee has not filed a voluntary return or a belated return or a revised return
 If he fails to comply with the terms of the notice or
 Fails to comply with the direction to get his account audited
 If he fails to comply with the terms of the notice requiring the presence or production of evidence and
documents
 Fails to comply with accounting standards prescribed by Central Government.
b) Discretionary best judgement assessment:
If the A.O is not satisfied with the correctness or completeness of the accounts of the Assessee in the
following cases the best judgment assessment can be made only after giving the Assessee a reasonable
opportunity of being heard. Assessee has a right to file an appeal or to make an application for revision to the
commissioner.
 If the A.O is not satisfied with the correctness or completeness of the accounts
 If the A.O feels that no method of accounting has been regularly and consistently followed by the
Assessee.
Consequences of Best Judgment Assessment:
The following are the consequences of best judgment assessment:
1. The Assessee is liable to pay penalties under section 271.
2. The Assessee is liable to prosecution u/s 276CC and 276 D.
6. Income Escaping Assessment (Re-assessment)
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped
assessment for any assessment year, he may assess or re-assess such income keeping in view the provisions of
sections 148 to 153. Further, once an assessment is reopened, any other income which has escaped
assessment and which comes to the notice of the Assessing Officer subsequently in the course of the
proceeding under this section shall also be included in the assessment.
Time-limit for completion of assessment or re-assessment: The following time-limits for completion of
assessment and re-assessment have been prescribed:
An assessment order u/s 143 or 144 shall be made within 21 months from the end of the assessment year.
7. Precautionary or protective Assessment
Precautionary or protective Assessment comes into picture when the Assessing Officer is not clear about
the person who has received the income. That is there is no basic evidence as to prove whose income it is. In
such case that income will be taken into consideration and assessment will be carried.
VI-RECTIFICATION OF MISTAKES [SEC 154]
The Direct Laws Act, 1987 with a view to rectifying any mistake apparent from the record an income-tax
authority:
 May amend any order passed by it or
 Amend any intimation sent
Where a rectification has the effect of enhancing tax liability or reducing the refund, the AO is required to
issue a notice of its intention to the Assessee and give the Assessee a reasonable opportunity of being heard.
Rectification of mistakes may be made either on its own motion or on the application of the Assessee.
Rectification can be made only within 4 years from the end of financial year in which the order sought to be
rectified was passed.
STAGES IN ASSESSMENT
The following are the various stages in assessment
1) Assessee on his own files a return or as per the requirement of the AO (Assessing Officer)
2) Computation of Taxable Income
3) Determination of Tax Payable
4) Making of the Assessment order and issue notice of demand.
PERMANENT ACCOUNT NUMBER (PAN)
PERMANENT ACCOUNT NUMBER (PAN) is a code number issued by income tax department to every
Assessee. An Assessee covered under Income Tax Act, 1961 is identified by this code. Every person whose
taxable income exceeds Rs.2,50,000 or Rs.300000 (for senior citizen) or Rs.500000 (for very senior citizen)
during an accounting year is required to obtain PAN. Every person who has been allotted PAN should quote
such number in all his returns or correspondence with income tax authorities. This PAN is an alphanumeric
code having ten characters and is issued in the form of a laminated card.
Persons who should have PAN compulsorily:
1. Exporter or importer
2. Assessee under the Central Excise Act
3. Service tax Assessee
4. Persons registered under the Central Sales Tax Act or Central Sales Tax Law
5. Any employer who is required to file return of fringe benefits.
Important point related with PAN
1. PAN should be quoted in all correspondence with income tax department
2.Any person who is receiving any sum of money or income on which TDS is to collected have to furnish the
PAN to the person who is responsible for deducting TDS.
3. If person fails to apply for PAN or to quote PAN in specified documents or transaction is liable to pay a
penalty of Rs.10, 000/-
4. In case of a minor who does not have any income chargeable to tax and who wants to open bank account or
time deposit exceeding Rs.50000, PAN of his mother or father or guardian should be quoted.
TAX PLANNING
Tax planning refers to paying minimum amount of tax after legally utilizing the available deductions,
exemptions, rebate and relief provided by the income tax department. Tax planning is in the hands of the tax
payer. Tax planning is legal in nature and is entirely different from tax evasion and tax avoidance.
Tax evasion is one where the Assessee makes a false claim of his income to reduce or escape tax liability.
Tax avoidance is one where the Assessee tries to reduce his tax liability by taking advantage of some
provisions or some of the loopholes in the tax law. A person who has avoided tax is not liable for any penalty.
APPEALS AND REVISIONS
INTRODUCTION
On receipt of any order of assessing officer, if Assessee is not satisfied, he has the following two remedies
available:
A. To file an appeal to CIT (appeals) and to other appellate authorities sequential manner.
OR
B. To apply the commissioner of income tax (CIT) for the revision of the order passed by an authority
subordinate to him. Revision u/s 264
However, in certain cases, commissioner of income tax (CIT) can also revise any order of assessing officer, if
such order is found to be erroneous and prejudicial to the interest of the revenue [revision u/s263]
APPEALS
MEANING
Appeal refers to be an act of referring the case/matter/situation to a higher authority against the order
passed by a lower authority in respect of that case or matter. It implies a complaint to a higher authority
against the order or judgment (alleged to be erroneous) of an administrative authority or applet authority.
Simply it means complaint expressed to the superior authority regarding the injustice done by a subordinate.
Quite often, an Assessee is not satisfied by an assessment order/ any other order issued by any income
tax authority and such an aggrieved Assessee can present his case before specified authorities prescribed
under income tax act. Such prescribed authorities constitute appellate ‘machinery’ or ‘appellate authority.
Right to appeals is a statutory right under income tax act:
The right to appeal is not the natural inherit right of the Assessee. It is available to him only if
specifically granted under income tax act. Thus, it is a statutory right of the Assessee and cannot be denied to
him by any order of central board of direct tax (CBDT) if can be snatched from the Assessee only by an
express provision provided under income tax act.
Parties to appeals: There are following two parties to any appeal.
a) Appellant: The person filing an appeal is called “appellant” or “applicant “under income tax. The first
appeal can only be filled by Assessee and hence only Assessee can be appellant in such a case. However,
in subsequent appeals appellant can be Assessee or C.I.T.
b) Defendant/ Respondent: The person against whom the appeal is filed is called ‘Defendant’/ Respondent.
Various appellate authorities under income tax act:
1. Commissioner (appeals)
2. Income tax appellate tribunal (ITAT)
3. High court / NTT.
4. Supreme court.
1. Appeal to the commissioner (appeals) section 246 (2):
Any Assessee aggrieved by any of the following orders may appeal to the commissioner against such order:
 An order passed by a joint commissioner
 An order making the Assessee liable to tax but where he denies his liability
 An intimation objecting to the adjustments made
 An order of assessment or re-assessment
 A rectification order
 An order of assessment after partition of HUF
 An order for refund
 Any other penalty orders
a) Form of appeal, fee and time limit (section 249)
 Appeal must be made in prescribed form no.35 verified in prescribed manner.
 The appeal must be accompanied by a receipt of fee at prescribed rates.
Particulars Fees
Where the total income of the Assessee as computed by AO is up to Rs.100000 250
Where the total income of the Assessee as computed by AO is between 500
Rs.100000 toRs.200000
Where the total income exceeds Rs.200000 1000
 The appeal shall be presented in the prescribed form and verified in the prescribed manner, within 30
days of intimation of order against the appeal.
b) Pre-requisites for appeal:
No appeal shall be admitted unless at the time of filing of the appeal:
 Where a return has been filed by the Assessee
 The Assessee has paid the tax due
c) Procedure for appeal (section 250)
 Shall fix a day and place for the hearing
 The applicant or an authorized person shall have the right to be heard at the hearing of the appeal
 Commissioner shall have the power to adjourn
 The order of commissioner disposing of the appeal shall be in writing
 Limitation period to decide the appeal within a period of 1 year from the end of financial year in which
appeal is made.
d) Powers of commissioner (appeals) section 251
In disposing of the appeal, the commissioner as the case may be, has the following powers:
 To confirm, reduce, enhance or annual the assessment
 To confirm, reduce, enhance or cancel the penalty imposed
 In other cases to pass such orders in the appeal as he thinks fit.
2. Income tax appellate tribunal (ITAT)
If the Assessee is not satisfied with an order passed by the commissioner he is entitled under section 253 to
file an appeal to higher authority known as the Appellate Tribunal. This is final fact finding authority. Any
Assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order:
 An order passed by deputy commissioner
 An order passed by commissioner
 An order passed by Assessing Officer
 An order passed by chief commissioner
a) Form of appeal, fee and time limit (section 253 (6))
 Appeal must be made in prescribed form in prescribed manner.
 The appeal must be accompanied by a receipt of fee at prescribed rates.
Particulars Fees
Where the total income of the Assessee as computed by AO is up to Rs.100000 500
Where the total income of the Assessee as computed by AO is between 1500
Rs.100000 toRs.200000
Where the total income exceeds Rs.200000 or 1% of total income WEL 10000
 The appeal shall be presented in the prescribed form and verified in the prescribed manner, within 30
days of intimation of order against the appeal.
b) Procedure in appeal (section 255)
 Shall form a benches, the benches constituted by its president and every bench shall exercise the powers and
discharge the functions of Appellate Tribunal. The bench shall consist of one judicial member and one
accountant member.
 The Tribunal shall have powers to regulate its proceedings in its own manner
 In case any disagreement the matter has to be referred by president
c) Powers of Appellate Tribunal section 254
In disposing of the appeal, the Appellate Tribunal has the power to pass orders. Appellate tribunal is not a
court but enjoys all powers which any appellate court enjoys under code of civil procedure.
3. Appeal to High Court section 260 A
a) Who can file appeal: Assessee or chief commissioner or commissioner of income tax.
b) Ground of appeal: An appeal shall lie to high court against the decision of the appellate tribunal. The
appeal will be admitted only if high court is satisfied that the case involves a substantial question of law.
c) Time limit to file appeal: The appeal can be made within 120 days on which order, against which appeal is
being made, was received by the Assessee or chief commissioner or commissioner.
d) Fees: Every appeal must be accompanied by such fees as may be specified in the relevant law relating to
court fees.
e) Procedure of hearing:
 The appeal shall be heard by a bench of at least 2 judges
 The appeal shall be heard only formulated question of law. But the high court can hear any other
question of law
 The high court will decide the question of law and deliver the judgement.
f) Communication of Order: A copy of order shall be sent to the Assessee as well as to commissioner or
chief commissioner of income tax
4. Appeal to Supreme Court section 261
 An appeal to supreme court can be made:
a) Against the judgement of high court on reference made u/s 256
b) Against the order of high court u/s 254
c) Against the judgement in appeal made to high court u/s 254
 U/S 262(1) the appeal will be heard in same manner as is applicable in appeals against the decrees of
high court
 The cost of appeal shall be at the discretion of Supreme Court. If the Supreme Court varies the
judgement of high court, effect shall be given to the judgement of Supreme Court in same manner as
given U/S260.
REVISION
An Assessee may apply to the commissioner for revision of any order of any subordinate authority. It should
be done within one year from the date of order. The application should accompany a fee of Rs.500.
a) Revision of best judgement assessment: section 146
The Assessee may, under prescribed circumstances, make an application to the Assessing officer against his
orders issued u/s 144 of the act making best judgment assessment for not complying with the notices issues u/s
139(2) or 142(1) or 143(2) for revision such order. In case an Assessing Officer is satisfied with the contention
of the Assessee, he shall cancel the original best judgement assessment and shall make a fresh regular
assessment.
b) Revision by Commissioner:
i) Revision of order prejudicial to revenue:
Section 263 of the Act, gives powers to chief commissioner or commissioner to review any orders passed by
Assessing Officer and to pass such orders thereon as the circumstances of the case justify. While passing such
orders he may enhance, cancel or modify an assessment or he may order a fresh assessment. The Assessee has to
be provided an opportunity of being heard in this case. No order shall be made under this section after the expiry
of 2 years from the end of financial year in which the order sought to be revised was passed.
ii) Revision of others orders:
Under the provisions of section 264 in case of any order, passed by authority subordinate to commissioner, the
commissioner may either of his own motion or an application by the Assessee for revision, call for the record of
any proceedings, under the Act in which any such order has been passed and make such enquiries and orders
thereon as he thinks fit. These orders cannot be prejudicial to the Assessee. In this case the revision proceedings
can be started by the commissioner of his own motion within one year of the passing of the order sought to be
revised. If the Assessee wants revisions of any order, the application accompanied by a fee of Rs.500 only from
1.6.2001 must be made within one year of the date on which the order in question was communicated to him or
the date on which he otherwise comes to know of it, whichever is earlier.
The commissioner shall not revise any order under this section in the following circumstances:
 Where an appeal against the order lies to the deputy commissioner or appellate tribunal
 Where the order is pending on an appeal before the deputy commissioner
 Where the appeals has been made to appellate tribunal against the order.
Electronic Filing of Income Tax Returns (E-Filing)
The process of electronically filing income tax returns through the internet is known as E-Filing or
electronic filing of return
Provisions relating to E-Filing
1) The class of persons
2) The form and the manner in which the returns to be furnished
3) The documents, statements, receipts, certificates or audit reports which may not be furnished shall
be produced before the assessing officer
4) The computer resources or the electronic record to which the return in electronic form may be
transmitted
Persons required to file return of income electronically
1. Individual or HUF
2. A company
3. A person required to furnish return in form ITR-7
4. A firm or limited liability partnership or any other person who is required to file return in form ITR-
5
Modes of E-Filing
1. E-Filing using a digital signature
2. E-Filing without a Digital signature – ITR-V is to be submitted
3. E-Filing under Electronic verification code

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UNIT-I

The cost inflation index table as notified is here below:

Indexed cost = cost ( purchase price)

=120000/105x 331= Rs. 378286

Indexed cost = cost ( purchase price)

1) jewellery = 80,000/113 X 331 =Rs. 2,34,336

3) House = 4,00,000/167 X 331= Rs. 7,92,814

FMV ON 2001 = 2,00,000

= 2,00,000/100X 331 = Rs. 6,62,000

a) Indexed cost = cost ( purchase price)

= 80,000/112X 331= Rs. 2,36,428

b) Cost / purchase price = 90,000

FMV ON 2001 = 1,50,000

= 1,50,000/100X 331= Rs. 4,96,500

c) Cost /Purchase price = 2,00,000

FMV ON 2001 = 4,00,000

WEH = 4,00,000/100 X 331 = Rs. 13,24,000

written down value furniture = 18,000

Sales consideration = 4,00,000

c) House property – Long term capital gain

sales consideration 28,60,000

• Net consideration 23,00,000

Percentage of LTCG TO NETCONSIDERATION

PARTICULARS Jewellery plot gold

Sale price 5,00,000 21,74,000 2,50,000

- Exp on sale nil 24,000 nil

Net consideration 5,00,000 21,50,000 2,50,000

-indexed cost 1,50,000x331/129 7,00,000x331/113 80000x331/148

3,84,884 20,50,442 1,78,919

LTCG 1,15,116 99,558 71,081

EXEMPTIONU/S 54F 1,15,116 20838 71,081

TAXABLE LTCG NIL 78720 NIL

Sale price 260000 1600000 600000 1200000

- Exp on sale nil nil nil nil

Net consideration 2,60,000 1600000 600000 1200000

-indexed cost 1,80,000 4,00,000 x 1,50,000 3,30,000x

LTCG 80,000 2,76,000 1,93,033 1,59,714

EXEMPTIONU/S 54F nil 2,65,650 1,93,033 NIL

TAXABLE LTCG NIL 10,350 NIL 1,59,714

• Percentage of LTCG TO NETCONSIDERATION

ii) Sale price of Machinery 12,000

Sale Price 3,40,000

b) Receipts from person other than employer i.e., university

d) Director’s fees or sitting fees

e) Remuneration for delivering lectures or writing articles

f) Withdrawal from NSS U/S 80CCA (principal and interest amount)

g) Repurchase of units U/S 80CCB (principal amount)

h) Casual incomes other than that taxable U/S 56(2)

i) All types of interest except taxable U/S 56(2)

k) Income from writing articles by a non journalist

Specific Incomes / (Incomes U/S 56(2) :

Government securities Commercial securities

Tax free Less tax Tax free Less tax

9. Calculate income from other sources from the following

11. Calculate income from other sources from the following

13. Mr.R held the following investments:

14. Calculate income from other sources from the following

15. Calculate income from other sources from the following

SET OFF & CARRY FORWARD OF LOSSES

2. Compute taxable income and loss to be C/F:

AGGREGATION OF INCOME/ UNDISCLOSED INCOME/ INVESTMENT OR DEEMED INCOME

1. Income of D and Mrs.D for the PY 2022-2023 is as follows:

DEDUCTION FROM GROSS TOTAL INCOME UNDER SECTIONS 80C TO 80U