Microsoft Word - Income Tax Ay 2019-20 by Jishnu Cheeroli

A Capsule for Quick Revision by Jishnu cheeroli
INCOME TAX
LAW AND PRACTICE
A Capsule for Quick Revision

AY 2019-2020
B.Com/BBA/M.com
Jishnu Cheeroli
M.com,NET
Contents
· Introduction to income tax
· Residential status of persons
· Heads of income – salary
· Income from house property
· Profit or gains of business or profession
· Capital gain
· Income from other source
· Clubbing of income
· Setoff & carry forward of losses
· Deductions from GTI
· Rate of tax
· Agricultural income
Chapter 1
Introduction to income tax
Indian tax system
1. Direct Tax 2.Indirect Tax

Income tax GST &Customs Duty
· Income tax act -1961
Governs the levy of income tax in India
· Income tax rules -1962
Formulated by CBDT for proper
Administration of the act
· Finance act
Brings amendments - tax rates
· Circulars
Issued by CBDT to clarify
the meaning and scope of certain
provisions of the act
· Supreme and high court decisions
BASIC TERMS
· Assessment year -2(9) –the financial year in which the income of the previous
year assessed.(1st April To 31st March)
· Previous year – (3) – the financial year immediately preceding the assessment
year
· Assessee - 2(7) – assessee is a person who is liable to pay tax or any sum of
money under IT act 1961
1. Deemed assessee – an assessee who represent some other persons.
2. Assessee in default – an assessee who fails to do duty under income tax
act.
3. Ordinary assessee - all other assessee except deemed and default.
· Person – 2(31) – 1.Individual,2.HUF,3.Company,4.Firm,5.AOP/BOI
6. Local Authority, 7.Every AJP
Chapter 2
Residential status of persons
1. INDIVIDUAL
Basic Condition
If an Individual is present in India
1. for period or periods of atleast 182 days in the relevant PY
2. for atleast 60 days in the relevant PY & atleast 365 days in last
4 years immediately preceding the relevant PY
Additional Condition
1. Resident in India for atleast 2 years in last 10 years immediately preceding the relevant PY
2. Present in India for atleast 730 days in last 7 years immediately preceding the relevant PY.
Satisfied NO
basic Non Resident
Condition
Yes
Resident
Check additional
Condition
Satisfied - Additional Condition No. 1 Resident in India for at least NO

2 years in the 10 Previous Years, preceding the Previous Year
Resident but
Yes not ordinary
NO resident
Satisfied - Additional Condition No. 1 Resident in India for at least
2 years in the 10 Previous Years, preceding the Previous Year
Yes
Ordinary Resident
2.
Residential Status Control & Management of the affairs of the business
of other person In India Outside India
HUF /
S Firm /
6(2) AOP / BOI Wholly /
Partially Wholly
Local
authority /
S 6(4) AJP
Resident Non-Resident
3.
Control & Management of the affairs of the
6(3). Residential Status business
of Company Outside
In India India
Foreign Wholly /
S 6(3) Company Wholly Partially
Resident Non-Resident
Note: Residential Status of Indian Company is always resident irrespective of control

and management of affairs of the business.
HEADS OF INCOME
1. Income from salary section 15,16,17

2. Income from house property section 22 to 27
3. Profit or gains of business or profession section 28 to 44
4. Capital gain section 45 to 55
5. Income from other source section 56 to 59
Chapter 3
Income from salary - section 15,, 16, 17
Chargeability (Section 15) Deduction (Section 16) Meaning (Section 17)

Salary due Standard ddeduction Salary
Entertainment allowance Perquisite
Paid or allowed, though not due
Professional tax Profits in lieu of salary
Arrears of salary
· All receipts from employer to emplo

employee in connection with job
· It may be in cash or in kind
· It may be received from present, past or proposed employer
· Salary is taxable on both accrual and receipt basis
ALLOWANCES = CASH + PARTICULAR PURPOSE + FIXED

1. Fully
1. S 10(7). ER : CG. EE : Indian Citizen
Exempted
Working abroad then allowances and perquisites fully
Allowances
exempt.
2. Allowances to High Court / Supreme Court Judges is
fully exempt
3. Salary to UNO employees is ffully exempt
2. Fully Taxable Allowances (SCOPE

SCOPE DRAFT
DRAFT)
Servant, City Compensatory, Overtime, Project, Entertainment, Dearness, Rural, Absent
Absent,
Fixed Medical, Tiffin Etc……
3. Amount spend towards official or specified purpose (fully exempt)
Transfer, Helper, Academic, R & D,, Daily, Uniform, Conveyance, Travelling (THAR
THAR DUCT)
DUCT
4. Exemption as specified in Income Tax Rules

*Children education -up
up to 100 pm is exempt. Max 2 child
*Hostel - up to 300 pm is exempt. Max 2 child
*Transport Allowance - Up to Rs. 3,200 per month for blind and handicapped employees
*Outstation allowances - Amount of exemption shall be lower of following:
70% of such allowance; or
Rs. 10,000 per month.
HOUSE RENT ALLOWANCE (HRA) -10(13A) 10(13A)
Computation of income under the head “Salaries”

Particulars Amt
Basic Salary ***

Fees/Commission ***
Taxable Allowances:
1. Dearness Allowance ***
2. House Rent Allowance (HRA) ***

Less: Least of the following is exempt [Section 10(13A)]
*HRA actually received
* Rent paid (-)10% of salary for the relevant period
*50% of salary, if accommodation is located in Mumbai,
Kolkata, Delhi or Chennai or 40% of salary in any other
city for the relevant period
3. Children Education Allowance ***

Less: R 100 per month per child upto maximum of two children is exempt
4. Children Hostel Allowance ***

Less: R 300 per month per child upto maximum of two children is exempt
5. Transport allowance ***

Less: R 3,200 per month is exempt in case of blind ,like others
In case of other employees, transport allowance is fully taxable
6. Entertainment Allowance ***
6. Other Allowances including overtime allowance, city ***

compensatory allowance etc
Taxable Perquisites:
1.Valuation of rent free accommodation ***

1 Where the accommodation is provided by the Govt. to its employees
License fee determined by the Govt. ***
Less: Rent actually paid by the employer **
2 Where the accommodation is provided by any other employer
If accommodation is owned by the employer
(i) Cities having population > 25 lakh as per 2001 census
15% of salary in respect of the period of occupation (–) rent
recovered from employee
(ii) Cities having population >10 lakh ≤ 25 lakh as per 2001
census
10% of salary in respect of the period of occupation (–) rent
(iii) In other cities
7.5% of salary in respect of the period of occupation (–) rent
3.If accommodation is taken on lease by the employer

Lower of lease rental paid or payable by the employer (or) 15% of salary
Less: Rent actually paid by the employee.
2. Obligation of employee discharged by employer. For e.g. ***

Professional tax paid by the employer
3. Any sum payable by the employer to effect an assurance on the ***

life of the employee or to effect a contract for annuity.
Actual expenditure incurred by the employer
4. Value of use of motor car ***
5. Any other perquisite: For example, ***
a. Provision of services of a sweeper, gardener, watchman or ***

personal attendant : Actual cost (-) amount paid by the employee
b. Gas, electricity, or water supplied by employer for ***

household consumption of the employee
c. Provision of free or concessional education facilities for any ***

member of employee’s household
Sum equal to the expenditure incurred by the employer (-) amount
paid or recovered from the employee
Where educational institution is maintained and owned by employer: Cost
of such education in institution in or near the locality (-) amount paid or
recovered from employee [However there would be no perquisite if the value of
benefit per child does not exceed R 1,000 p.m.] Note: Above perquisites are
taxable only in case of specified employees.
d. Interest-free or concessional loan exceeding R 20,000 : Interest computed ***

at the rate charged by SBI as on 1st day of relevant PY in respect of loans for
similar purposes on the maximum outstanding monthly balance (-) interest
actually paidby employee
e. Value of gift, voucher: Sum equal to the amount of such gift [If value of gift, ***
voucher is below Rs5,000, there would be no perquisite]
f. Use of moveable assets ***

*Use of laptops and computers – Nil
*other Movable assets - 10% p.a. of the actual cost of such asset
g. Transfer of movable assets: Actual cost of asset to employer – cost of normal ***
wear and tear –amount paid or recovered from employee
Assets transferred depreciation
Computers and electronic items @50% on WDV
Motor cars @20% on WDV
Any other asset @10% of actual cost
SLM
6. Leave travel concession ***

Less: Exempt u/s 10(5)
7. Gratuity ***
a. Received during the tenure of employment (fully taxable)
b. Received at the time of retirement or otherwise
Less: Exempt u/s 10(10)
8. Uncommuted pension (fully taxable) ***
9. Commuted pension ***

Less: Exempt u/s 10(10A)
10. Leave encashment ***

* Received during the employment (fully taxable)
* Received at the time of retirement or otherwise
Less: Exempt u/s 10(10AA) ***
11. Voluntary retirement compensation ***

Less: Exempt u/s 10(10C) - Least of the following:
* Rs 5,00,000
* Compensation received/ receivable on voluntary retirement
* 3 months’ salary x completed years of service
* Last drawn salary x remaining months of service left
12. Retrenchment compensation etc. ***

Less: Exempt u/s 10(10B)] – Least of the following:
* Rs 5,00,000
* Compensation actually received
* 15 days average pay x completed years of service and part thereof in
excess of 6 months
Gross Salary ****
Less: Deduction under section 16

1.Standard deduction u/s 16(ia) upto R 40,000 or amount of salary, ***
whichever is lower
2. Entertainment allowance u/s 16(ii) (only for Govt. employees) ***
Least of the following is allowable as deduction:
*Rs 5,000
* 1/5th of basic salary ***
* Actual entertainment allowance received
3. Professional Tax (paid by employer/ employee)
Income under the head salary ****

Retirement Benefits
GRATUITY 10(10).
During continuation of service - fully taxable in the hands of all employee

On termination of Service - taxable in the hands of Pvt Employees
a) Covered by the Payment
of Gratuity Act 1972
Actual gratuity received *****
Less: least of the following
Maximum 20,00,000 (life time exemption ) ***
Actual :- ***
Formula :-BS + 100% of DA x 15/26 CYS *** ***
Taxable gratuity *****
Other Employees (as per terms of contract of employment)

Actual gratuity received ***
Less: least of the following
Maximum 20,00,000 (life time exemption ) ***
Actual :- ***
Formula :-BS + 100% of DA x CYS *** ***
Taxable gratuity ****
LEAVE SALARY ENCASHMENT

Government Employee:
The entire amount received as leave encashment is tax free.
Non Government Employee:
The leave encashment for private sector employees is stated in Section 10 (10AA) and is minimum of the
following 4 factors:
1.Amount received as leave encashment
2.Maximum cap as stated by government – Rs 3 Lakhs
3.Last 10 months average basic salary & dearness allowance before leaving the job
4.Cash equivalent of the leave balance, subject to maximum of 30 days for each completed year of service
commuted pension u/s 10(10A)
Un-commuted Pension -It is a periodic payment of pension - It is taxable as salary

Commuted Pension - It is lump sum payment in exchange for periodical payment
1. For government employee - It is exempted
2. in other cases
a) Taxable to the extent of
1. Commuted pension less1/3rd of total commuted value (If gratuity received)
2. Commuted pension less 1/2 of total commuted value [If gratuity is not received
Perquisite Value of Motor Car
Provident fund
1. Statutory PF (SPF)
It is for government employees. Any contribution by the govt. to SPF is fully exempt. Interest on SPF
is also exempt.
2. Recognized PF (RPF)
Any contribution
bution by employer in excess of 12% of salary of employees is taxable.
Interest on RPF balance up to 9.5% p.a is exempt. Excess is taxable
3. Unrecognized PF(URPF)
Contribution by the employer and interest on URPF Balance shall not be added with salary from yyear
to year.
4. Public PF (PPF)
This fund shall not come as a part of income while computing income from salary.
Determination of the term salary for various purposes.
1.entertainment allowance Basic salary

2.gratuity (covered) Basic pay +DA+ Commission on turnover
3. gratuity (Not-covered) Basic pay +DA(part of pay)+ Commission on turnover
4.encashment of earned leave Basic pay +DA(part of pay)+ Commission on turnover
5.HRA Basic pay +DA(part of pay)+ Commission on turnover
6.VRS Basic pay +DA(part of p
pay)+
ay)+ Commission on turnover
7.RPF Basic pay +DA(part of pay)+ Commission on turnover
8.RFA Basic pay +Taxable Allowances + Bonus+ DA(part of
pay)+any other monetary payments (excluding perks)
Chapter 4
Income from house property -section 22 to 27
Chargeability Annual Deductions Amount not Taxability of

[Section 22] Value [Section 24] Deductible Arrears of rent
[Section 23] [Section 25] And unrealized rent
[Section 25A]
Taxability of Deemed
Co-owned Ownership
Property [Section 27]
[Section 26]
Conditions for taxing income under the head house property.

Ø There should be a building or a land appurtenant there to.
Ø The property should be owned by the assessee.
Ø Such building should not be used for own business or profession.
The Assessee must be the Owner/ Deemed owner of the Property.
Deemed Owner
— Transfer to Spouse /Minor Child.
— Holder of impartible estate.
— Member of Co-operative society.
— Person is possession of property through attorney.
— Person having right in property for not less than 12 years.
Property Income which are Exempt
— Farm House
— Palace of Ex-Ruler.
— Self occupied House Property.
— Property used for Charitable Purpose.
— House Property used for own Business or Profession.
— House Property of registered Trade Union/Local Authority.
Section 23 (Annual Value)
It represents the earning capacity of building
NOTE:
• Net annual value is always ZERO for 100% self occupied property.(throughout the year the house
occupied by the owner)
• If owner stays in more than one house the owner can choose any one of the houses (he can choose
different houses for different previous year) which will reduce overall tax liability.
Computation of Gross Annual Value Note – Actual rent received/receivable should not
Step 1: Higher of fair rent and municipal value include unrealized rent (i.e. any amount of rent not
Step 2: Lower of step 1 and standard rent is Expected Rent capable of being realized)
Step 3: Compare the Expected rent determined above with actual rent
Actual rent > Expected Actual rent < Expected
Actual rent is GAV Actual rent < Expected Rent

Actual rent < Expected Rent because of vacancy
not because
Computation of income from HP

Particular Amount (Rs)
Gross Annual Value (G.A.V) ***

Less: Municipal Taxes (***)
Net Annual Value (N.A.V) ***
Less: Deduction under section 24 :

(a) Standard Deduction – 30% (***)
(b) Interest On Borrowed Capital Of PY (***)
(c) 1/5 Of Pre Construction Period Interest
(***)
INCOME FROM HP ***
Deductions from Net Annual Value [Section 24]
Deductions allowed from NAV
Let out/ deemed let out property Self occupied property
Standard deduction Interest on borrowed

u/s 24(a) Capital u/s 24(b) Where loan is taken for Where loan is taken for
repair, renewal or acquisition or construction
reconstruction of house of house property
property
Maximum R 30,000
If loan is taken before If loan is taken on or
1.4.1999 after 1.4.1999
Maximum R 30,000
Acquisition or construction completed within 5 years from

The end of the FY in which the capital was borrowed
+
Certificate from lender specifying interest payable
No Yes
Maximum R 30,000 Maximum R 200,000
Pre-construction interest allowable as dedn in 5 equal installments from the P.Y. of completion of
construction. In case of self-occupied property, the total interest (including pre-construction interest)
cannot exceed R 30,000/ R 2, 00,000, as the case may be.
Chapter 5
Profit or gains of business or profession
As per section 28, income from any Business / Profession shall be taxable under the head Business /
Profession.
BUSINESS [Sec. 2(13)]
Includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or
manufacture.
Profession [Sec. 2(36)]

“Profession” includes Vocation
COMPUTATION OF INCOME UNDER THE HEAD BUSINESS / PROFESSION
SECTION 29
Particulars Amount
Net profit as per profit and loss account *****
Less :allowable expenditure and not debited to profit and loss account
Sec:30 Rent ,rates, taxes, repair and insurance for building (capital nature not allowed as ***
a deduction)
Sec:31 repair and insurance for machinery, plant furniture(capital nature not allowed as a ***
deduction)
Sec:32 depreciation ***
Conditions for claiming depreciation 1. Asset is owned wholly or partially
by the assessee.
2.put to use in the relevant previous
year
3. Put to use for the purpose of
business or profession.
Method SLM optional for tangible assets of
power sector units. WDV method in all
other cases.
Newly acquired asset Asset is purchased and put to use in the
same previous year for less than 180
days.
Additional depreciation A) 20% of actual cost of machinery or
plant(All taxpayers engaged in:
a) manufacture or production of any
article or thing; or
b) generation, transmission or
distribution of power (if taxpayer is not
claiming depreciation on straight line
basis )
B)35%20% of actual cost of machinery
or plant (All taxpayers setting-up an
undertaking or enterprise for production or
manufacture of any article or thing in any
notified backward area in the state of

Andhra Pradesh, Bihar, Telangana or West
Bengal.)
Block of assets It means a group of assets falling or
included in same category and having
same rate of depreciation.
Sec:32AC Investment allowance ***
Applicability: Company engaged in
business of manufacturing or production of
any article or thing.
Investment: Deduction shall be available if
actual cost exceeds Rs. 25/100 Crores, as the
case may be
Deduction: 15% of actual cost of new asset
acquired and installed by a company engaged in
business or manufacturing or production of any
article or thing
Sec:33AD Investment allowance ***
Applicability: acquire new plant and machinery
for purpose of setting-up manufacturing unit in
notified backward areas in the State of Andhra
Pradesh, Bihar, Telangana or West Bengal
Deduction: 15% of actual cost of new asset
acquired and installed by a company engaged in
business or manufacturing or production of any
article or thing
Periods: 1. New asset should be acquired and
installed on or after April 1, 2015 but before
April 1, 2020.
2. Manufacturing unit should be set-up on or
after April 1, 2015.
3. Deduction shall be allowed under section
32AD in addition to deduction under section
32AC if assessee fulfils the specified conditions.
Sec:33AB Tea/Coffee/Rubber Development Account ***

Amount deposited in account with National
Bank (Special Account) or in Deposit Account
of Tea Board, Coffee Board or Rubber Board in
accordance with approved scheme or 40% of
profits of business, whichever is less
Assessees engaged in business of growing and
manufacturing tea/Coffee/Rubber in India
Sec:33ABA ***
Amount deposited in Special Account with
SBI/Site Restoration Account or 20 per cent of
profits, whichever is less
Assessee carrying on business of prospecting for,
or extraction or production of, petroleum or
natural gas or both in India
Sec:35 Expenditure on scientific research ***
Expenditure incurred/ Contribution made to Deduction (as a % of

expenditure
incurred/contribution
made)
Revenue expenditure incurred on scientific research related to 100%
the assessee’s business
Any sum paid to a notified approved research association/ 150%
university/ college/
other institutions for scientific research
Any sum paid to an approved Indian company for scientific 100%
research
Any sum paid to a notified approved research association/
university/ college/other institutions for research in social 100%
science or statistical research
Capital expenditure (other than expenditure on acquisition of 100%
land) incurred on scientific research related to the assessee’s
business
Any sum paid to an approved National Laboratory/ University/ 150%
IIT/ specified person for scientific research undertaken under
an approved programme
Expenditure (other than cost of Land & Building) incurred by a 150%
company engaged in the business of Bio-technology or any
business of production or manufacture of article or thing, not
being an article or thing listed in Eleventh Schedule, on
scientific research on approved in-house R & D facility
Sec:35AD Investment linked tax deduction ***
100% of following capital expenditure incurred wholly and exclusively for the specified business
allowable as deduction
Expenditure incurred during the P.Y. Expenditure incurred prior to commencement
Allowed as deduction in the same P.Y. of operations
- allowed as deduction in the year of
commencement of operations
- if the amount incurred is capitalized in the books
of account on the date of commencement of
operations
Sec:35D Amortization of certain preliminary expenses ***
deductible in 5 equal annual installments
Applicability Amount of deduction
1 Indian 5% of cost of project or 5% of capital employed whichever is
company higher or
eligible expenses whichever is lower divided by five
2 Other residents 5%of cost of project or eligible expenses whichever is lower

is divided by five
Sec:36 Amount Expressly Allowed As Deduction ***

1.Insurance Premium Of SIT
2.Insurance Premium On Health Of Employees
3.Bonus Or Commission To Employee

4.Interest For The Borrowed Capital Used For The Purpose Of Business
5.Contribution To RPF
6.Contribution Towards Pension Scheme Referred In Sec 80CCD
7.Contribution Paid Towards An Approved Gratuity Fund
8.Bad Debts
9. Promotion Of Family Planning Amongst Employees.
Sec37: General Deduction ***

1.expenditure not covered u/s 30 to 36
2.expenditure is incurred wholly and exclusively for the purpose of business
3.expenditure is not of capital in nature
4.expenditure is not personal nature
5.expenditure should not be in nature of offence or prohibited by law
Add deemed business income ***
Less: income credited in P/L account not chargeable to tax under this head ***
1.agriculture income
2.exempted income u/s 10
3.income chargeable under the head salary, house property, capital gain, or other source
4.dividend income
5.bad debts recovered not allowed as deduction
Add: Expenditure debited to profit and loss account but not deductable under this head ***
1.expenditure on agricultural income
2.expenditure incurred in relation to exempt income
3.expenditure incurred in relation to other heads of income like salary, HP, Capital gain,
or other source
4.any reserve created other than allowable statutory reserve
5.capital expenditure
6.personal expenditure
7.charities and donations
8.depreciation as per books
9.prelimimary expenses in excess of permissible limit
Income chargeable under the head PGBP ****
Chapter 6
Capital gain
Sec: 45(1) charge
Profit arising from transfer of capital asset is chargeable under the head capital gain in the year of
transfer.
Sec: 2(14) capital assets
Means property of any kind held by the assessee whether or not connected to his business or
profession.
But exclude
- Stock in trade
- Personal effects of movable nature held for personal use. Does not include jewelry, archeological
collections, paintings, any work of art.
- Rural agricultural land
- Gold bond issued by the Govt of India.
- Special bearer bond
- Gold deposit bond notified by Govt of India.
Sec: 2(47) transfer
Sales, exchange, relinquishment of CA, Compulsory acquisition under any law, conversion of CA into
SIT, Zero coupon bond redemption.
Capital gain = Sec: 2(14) + sec 2(47)
Sec: 47. What is not transfer – Gift, Will or Inheritance of Property, on liquidation of company,
between holding company and subsidiary company Etc
Types of CA
1. STCA, if held for ≤ 12 months • Security (other than a unit) listed in a recognized stock exchange
LTCA, if held for > 12 months • Unit of equity oriented fund/ unit of UTI
• Zero Coupon bond
2. STCA, if held for ≤ 24 months • Unlisted shares
LTCA, if held for > 24 months • Land or building or both
• Unit of debt oriented fund

3. STCA, if held for ≤ 36 months • Unlisted securities other than shares
LTCA, if held for > 36 months • Other capital assets
Section 48 computation of STCG Section 48 computation of LTCG

Particulars Amount Particulars Amount
Full value of consideration **** Full value of consideration ****
Less: expense on transfer (***) Less: expense on transfer (***)
Net consideration **** Net consideration ****
Less: cost of acquisition (***) Less: Indexed cost of acquisition (***)
Cost of improvement (***) Indexed Cost of improvement (***)
STCG *** STCG ***
Less: expense u/s 54B/54D (***) Less: expense u/s (***)
Taxable STCG **** 54/54B/54D/54EC/54EE/54F

Taxable LTCG ****
Formula for indexation

Sec: 55 cost of acquisition of special category
Indexed COA= Index value of transfer year
assets
---------------------------------------- X COA
General Purchase price +
Index value of acquisition year brokerage
Assets acquired PP + Brokerage or FMV
Indexed COI= Index value of transfer year before1-4-2001 as on 1-4-2001
---------------------------------------- X COA whichever is higher
Self generated Nil
Index value of Improvement year goodwill
Brand name & trade Nil
mark
Tenancy right Nil
Goodwill of a business Nil
Patent Nil
Right to carry on any Nil
business
Exemption of capital gain

Particulars Section 54 Section 54B Section 54D Section 54EC Section 54EE Section 54F
Eligible Individual / Individual / Any assessee Any assessee Any assessee Individual /
Assessee HUF HUF HUF
Asset Residential Urban Land & LTCA, being Any LTCA Any LTCA
transferred House Agricultural building Land or other
(LTCA) Land forming part building than Residential
of an or both House.
industrial
undertaking
Other Income from Land has L & B have Assessee should
Conditions such house been used for been used for not own more
should be agricultural business of than one
chargeable purposes by undertaking residential house
under the assessee or for at least 2 on the date of
head his parents or years transfer.
“Income HUF for 2 immediately He should not
from house years preceding the purchase within
property” immediately date of 2
preceding date transfer. years or
oftransfer - The transfer construct
should be by within 3 years
way of after the date of
compulsory transfer, another
acquisition of residential house
the industrial
undertaking
Qualifying One Land for Land or Bonds of Unit issued One Residential
asset Residential being used for Building or NHAI before the House situated
i.e., asset in House agricultural right in land or RECL or 1.4.2019 of in
which situated in purposes or building any other Specified India
capital India bond Fund
gains has to notified by notified by

be invested Central Govt Central Govt
(Redeemable
after 5 years)
Time limit Purchase Purchase within Purchase/ Purchase Purchase Purchase within
for within a construct within within 1 year before or
purchase/ 1 year before period of 2 within 3 years a period of 6 a period of 6 2years after the
constructio or 2 years years after the after months after months after date of transfer
n after the date date of transfer the date of the date of the date of or Construct
of transfer transfer, transfer such transfer within 3 years
(or) for shifting or after the date of
construct reestablishing transfer
within the existing
3 years after undertaking or
the date of setting
transfer up a new
industrial
Undertaking.
Amount of Cost of new Cost of new Cost of new Lower of CG Lower of CG Cost of new
Exemption Residential Agricultural asset or or amount or Amount Residential
House Land or CG, CG, invested in invested House ≥ Net
or CG, whichever whichever is Specified in notified sale
whichever is lower, is lower. bonds. units of consideration of
is lower, is exempt Maximum specified original asset,
exempt permissible fund. entire
investment out Maximum CG is exempt.
of CG arising permissible Cost of new
in investment in Residential
any FY is such units out House < Net
R 50 lakhs, of CG arising sale
whether such in any FY is consideration of
investment is R 50 lakhs, original asset,
made in the whether Proportionate
current FY or such CG is exempt.
next FY or investment
both is made in the
current FY or
Subsequent
FY.
or both
Rates of tax on STCG
Section Rates of tax

111A • STCG arising on transfer of listed equity shares and units of equity oriented fund -
15%, if STT has been paid on such sale.
• STCG arising from transaction undertaken in foreign currency on a Recognized Stock
Exchange (RSE) located in an International Financial Services Centre (IFSC) taxable @
15% even though STT is not paid in respect of such transaction.
Note – STCG arising on transfer of other STCAs would be chargeable at normal rates of tax.
Rates of tax on LTCG
Section Rates of tax
112A • Tax @10% on long-term capital gains exceeding R 1, 00,000 on the transfer of following long-term
capital assets.
- listed equity shares, if STT has been paid on acquisition and transfer of such shares
- units of equity oriented fund, if STT has been paid on transfer of such units
• If such transaction undertaken on a RSE located in an IFSC, LTCG would be taxable at a
concessional rate of 10% where the consideration for transfer is received or receivable in foreign
currency, even though STT is not paid in respect of such transaction.
• Benefit of indexation and currency fluctuation would not be available in respect of LTCG taxable u/s
112A.
112 LTCA Applicable rate of tax on LTCG
Unlisted securities or shares Non-corporate non-resident / foreign company - 10% without
of a the benefit of indexation and currency fluctuation
closely held company Other Assessees - 20%, with indexation benefit
Listed securities (other than a -10%, without the benefit of indexation or
unit) or a zero-coupon bond - 20%, availing the benefit of indexation
whichever is more beneficial to the assessee
Other Assets 20%
Chapter 7
Income from other source
Computations of income from other sources Amount

Income from other sources u/s 56 ****
Less: allowable expenses u/s 57 (***)
Add: inadmissible expenses u/s 58 ***
Deemed income u/s 59 ***
Income from other sources ****
Sec: 56 Chargeability: - income not related to any other head.

Specific income taxable: - dividend, betting income, interest on securities, composite rent, letting of
machinery or furniture, gifts
GIFTS
Consideration Particulars Taxable amount
Nil Money and aggregate value > 50,000 Aggregate value
Nil Immovable property with stamp duty value Stamp duty value
>50,000
Inadequate Consideration of immovable property Stamp duty value (-)consideration
<stamp duty value by 50,000
Nil Other property with FMV >50,000 FMV
Inadequate Consideration of other property < FMV by FMV(-) Consideration
50,000
Deductions Sec: 57:

· General: commission or brokerage for interest or other taxable dividend.
· For family pension : 33.33% of family pension or 15,000, whichever is less
· Any other expenditure : other than capital nature
· For interest on compensation or enhanced compensation: 50 % of the interest received will be
allowed as deduction.
Note:
Grossing up: - interest
Net
Gross = ----- X 100
90
Lottery
Net
Gross = ----- X 100
70
Chapter 8
Clubbing of income
Transfer of income without transfer of asset[Section 60]

Income arising from revocable transfer of assets [Section 61]
Spouse's Income
*Remuneration to spouse from a concern in which individual has a substantial interest

[Section64(1)(ii)]
Exception
Where spouse possesses technical or professional qualification, clubbing provisions will not apply
*Income arising to spouse from an asset* transferred Without adequate consideration or not in connection
*With agreement to live apart[Section64(1)(iv)] Income arising to any person or AOPs from assets transferred
without adequate consideration for the benefit of spouse[Section64(1)(vii)]
Minor's income
All income of a minor is clubbed in the income of parent, whose total income excluding minor's income, is
greater. Exemption of upto R1,500 per child is available u/s 10(32)
Exceptions
* Income from manual work or from skill, talent or specialist knowledge or experience will not be clubbed
* Income of a minor child suffering from disability mentioned u/s 80U shall not be clubbed
Income of son's wife
* Income arising to son's wife from an asset transferred without adequate consideration[Section64(1)(vi)]
* Income arising to any person or AOPs from assets transferred without adequate consideration for the benefit of
son’s wife[Section64(1)(viii)]
Chapter 9
Set Off And Carry Forward & Set Off Of Losses
Inter-source and Inter-head set-off of losses [Sections 70 & 71]
Section Provision Exceptions
70 Inter-source set-off of losses under the i Loss from speculation business can be set off
same head of income only Against profits from another speculation
Any loss in respect of one source shall be business.
set off against income from any other ii Loss from specified business u/s 35AD can be
source under the same head of income. For set off only against profits from any other
specified business.
example,
iii Long term capital loss (LTCL) can be set off
- Loss from textile business can be set only Against LTCG.
off against profit from printing iv Loss from the activity of owning and
business. maintaining race horses can be set off only
- Loss from one house property can be against income from the activity of owning and
set off against income from another maintaining race horses.
house property.
- short-term capital loss (STCL) can be set
off against both
STCG and LTCG.
71 Inter head adjustment i Loss under the head “PGBP” cannot be set off
Loss under one head of income can be set- against income under the head “Salaries”.
off against income assessable under any ii Loss under the head “Capital gains” cannot be
other head of income. For example, set off against income under any other head.
Iii Speculation loss, losses from specified business
business loss can be set-off against income
u/s 35AD and loss from the activity of owning
from house property.
and maintaining race horses cannot be set off
against income under any other head.
iv Loss from house property can be set off against
income under any other head only to the extent
of Rs 2 lakhs. The remaining loss can be c/f for
set off against income from house property of
the succeeding year(s).
Losses which cannot be set off or carried forward

(i) Loss from gambling, betting, card games etc.
(ii) Loss from an exempt source [i.e., share of loss of partnership firm cannot be set off against any other
income]
Maximum period of carry forward of losses & Manner of set off of brought forward losses
Section Nature of loss to be Income against which the Maximum period [from the end of
carried forward brought forward loss the relevant A.Y.] for c/f of losses
can be set off
32(2) Unabsorbed depreciation Income under any head other Indefinite period
than salaries
71B Unabsorbed loss from Income from house property 8 AYs
house property
72 Unabsorbed business loss PGBP 8 AYs
73 Loss from speculation Income from any speculation 4 AYs
business business
73A Loss from specified Profit from any specified Indefinite period
business u/s 35AD business

74 LTCL LTCG 8 AYs
STCL STCG/LTCG 8 AYs
74A Loss from the activity of Income from the activity of 4 AYs
owning and maintaining owning and maintaining race
race horses horses.
Order of set off of losses
1. Current year depreciation / Current year capital expenditure on scientific research and current year
expenditure on family planning, to the extent allowed.
2. Brought forward loss from business/profession [Section 72(1)]
3. Unabsorbed depreciation [Section 32(2)]
4. Unabsorbed capital expenditure on scientific research [Section 35(4)]
5. Unabsorbed expenditure on family planning [Section 36(1)(ix)]
Note - As per section 80, filing of loss return under section 139(3) within the due date specified under section 139(1)
is mandatory for carry forward of the above losses except loss from house property and unabsorbed depreciation.
Chapter 9
Deductions from GTI
Section Deduction on Allowed Limit

(maximum) FY 2018-19
80C Investment in PPF Rs. 1,50,000
– Employee’s share of PF contribution
– NSCs
– Life Insurance Premium payment
– Children’s Tuition Fee
– Principal Repayment of home loan
– Investment in Sukanya Samridhi Account
– ULIPS
– ELSS
– Sum paid to purchase deferred annuity
– Five year deposit scheme
– Senior Citizens savings scheme
– Subscription to notified securities/notified deposits scheme
– Contribution to notified Pension Fund set up by Mutual Fund or
UTI.
– Subscription to Home Loan Account scheme of the National
Housing Bank
– Subscription to deposit scheme of a public sector or company
engaged in providing housing finance
– Contribution to notified annuity Plan of LIC
– Subscription to equity shares/ debentures of an approved
eligible issue
– Subscription to notified bonds of NABARD
80CCC For amount deposited in annuity plan of LIC or any other insurer -
for a pension from a fund referred to in Section 10(23AAB)
80CCD(1) Employee’s contribution to NPS account (maximum up to Rs -
1,50,000)
80CCD(2) Employer’s contribution to NPS account Maximum up to 10% of
salary
80CCD(1B) Additional contribution to NPS Rs. 50,000
80TTA(1) Interest Income from Savings account Maximum up to 10,000
80TTB Exemption of interest from banks, post office, etc. Applicable Maximum up to 50,000
only to senior citizens
80GG For rent paid when HRA is not received from employer Least of :
– Rent paid minus 10% of
total income
– Rs. 5000/- per month
– 25% of total income
80E Interest on education loan Interest paid for a period of

8 years
80EE Interest on home loan for first time home owners Rs 50,000
80CCG Rajiv Gandhi Equity Scheme for investments in Equities Lower of
– 50% of amount invested
in equity shares; or
– Rs 25,000
80D Medical Insurance – Self, spouse, children – Rs. 25,000
Medical Insurance – Parents more than 60 years old or (from FY – Rs. 50,000
2015-16) uninsured parents more than 80 years old
80DD Medical treatment for handicapped dependent or payment to – Rs. 75,000
specified scheme for maintenance of handicapped dependent – Rs. 1,25,000
– Disability is 40% or more but less than 80%
– Disability is 80% or more
80DDB Medical Expenditure on Self or Dependent Relative for diseases – Lower of Rs 40,000 or
specified in Rule 11DD the amount actually paid
– For less than 60 years old – Lower of Rs 1,00,000 or
– For more than 60 years old the amount actually paid
80U Self-suffering from disability: – Rs. 75,000
– An individual suffering from a physical disability (including – Rs. 1,25,000
blindness) or mental retardation.
– An individual suffering from severe disability
80GGB Contribution by companies to political parties Amount contributed (not
allowed if paid in cash)
80GGC Contribution by individuals to political parties Amount contributed (not
allowed if paid in cash)
80RRB Deductions on Income by way of Royalty of a Patent Lower of Rs 3,00,000 or
income received
Chapter 10
Rate of tax
RATES OF INCOME TAX [A.Y. 2019-20]
I Individual (other than a resident individual of the age of 60 years or more)
[The same rates are also applicable for HUF/AOPs/ BOIs/Artificial Juridical Person]
Total Income (TI) Income-tax payable
≤ R 2,50,000 Nil
> R 2,50,000 but ≤ R 5% of the amount by which the total income exceeds R 2,50,000
5,00,000
> R 5,00,000 but ≤ R R 12,500 plus 20% of the amount by which the total income exceeds R
10,00,000 5,00,000
> R 10,00,000 R 1,12,500 plus 30% of the amount by which the total income
exceeds R 10,00,000
II Resident individual of the age of 60 years or more but less than 80 years at any time during the
previous year 2018-19
≤ R 3,00,000 Nil
5,00,000
> R 5,00,000 but ≤ R R 10,000 plus 20% of the amount by which the total income exceeds R
10,00,000 5,00,000
exceeds R 10,00,000
III Resident individual of the age of 80 years or more at any time during the previous year 2018-19
≤ R 5,00,000 Nil
10,00,000
exceeds R 10,00,000
Rebate under section 87A in case of an individual resident in India
Lower of tax payable or R 2,500, where total income does not exceed R 3,50,000
Note : An additional 4% Health & education cess will be applicable on the tax
amount calculated as above.
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.
TAX SLABS FOR FIRMS AND DOMESTIC COMPANIES FY 2019-20
Tax Head Firms Domestic Companies
Income Tax for turnover upto 30% 25%
Rs. 400 crores
Income Tax for turnover 30% 30%
above Rs. 400 crores
Surcharge as % of income tax 12% of tax in case the total income · 7% of tax in case income is more
exceeds Rs. 1 crore than Rs. 1 crore but less than Rs. 10
crore.
· 10% of tax in case income is more
than Rs. 10 crore.
Cess as % of tax and 3% of tax plus surcharge 3% of tax plus surcharge
surcharge
Chapter 11
Agricultural income
10(1) Agricultural income
Agricultural income, however, has to be aggregated with TI (non-agricultural income) for determining the rate
at which non-agricultural income would be subject to tax, in case of individuals, HUF, AOPs & BOIs etc.,
where
the –
• Net agricultural income exceeds R 5,000 p.a. and
• non-agricultural income exceeds basic exemption limit.
The following are the steps to be followed in computation of tax -
Step 1: Compute tax on non-agricultural income plus agricultural income
Step 2: Compute tax on agricultural income plus basic exemption limit
Step 3: Tax payable by the assessee = Step 1 – Step 2
Step 4: Add Surcharge/Deduct Rebate u/s 87A, if applicable.
Step 5: Add Health and Education Cess@4%.
“Be prepared always, so that when the opportunity comes knocking, you can
take its full advantage. Good luck and all the best for the future”
jishnucheeroli@gmail.com

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Indian tax system

1. Direct Tax 2.Indirect Tax

Satisfied - Additional Condition No. 1 Resident in India for at least NO

Note: Residential Status of Indian Company is always resident irrespective of control

1. Income from salary section 15,16,17

Chargeability (Section 15) Deduction (Section 16) Meaning (Section 17)

· All receipts from employer to emplo

ALLOWANCES = CASH + PARTICULAR PURPOSE + FIXED

2. Fully Taxable Allowances (SCOPE

4. Exemption as specified in Income Tax Rules

Computation of income under the head “Salaries”

Basic Salary ***

2. House Rent Allowance (HRA) ***

3. Children Education Allowance ***

4. Children Hostel Allowance ***

5. Transport allowance ***

6. Entertainment Allowance ***

6. Other Allowances including overtime allowance, city ***

1.Valuation of rent free accommodation ***

3.If accommodation is taken on lease by the employer

2. Obligation of employee discharged by employer. For e.g. ***

3. Any sum payable by the employer to effect an assurance on the ***

4. Value of use of motor car ***

5. Any other perquisite: For example, ***

a. Provision of services of a sweeper, gardener, watchman or ***

b. Gas, electricity, or water supplied by employer for ***

c. Provision of free or concessional education facilities for any ***

d. Interest-free or concessional loan exceeding R 20,000 : Interest computed ***

f. Use of moveable assets ***

6. Leave travel concession ***

8. Uncommuted pension (fully taxable) ***

9. Commuted pension ***

10. Leave encashment ***

11. Voluntary retirement compensation ***

12. Retrenchment compensation etc. ***

Gross Salary ****

Less: Deduction under section 16

Income under the head salary ****

During continuation of service - fully taxable in the hands of all employee

Other Employees (as per terms of contract of employment)

LEAVE SALARY ENCASHMENT

commuted pension u/s 10(10A)

Un-commuted Pension -It is a periodic payment of pension - It is taxable as salary

Perquisite Value of Motor Car

1.entertainment allowance Basic salary

Chargeability Annual Deductions Amount not Taxability of

Conditions for taxing income under the head house property.

Actual rent > Expected Actual rent < Expected

Actual rent is GAV Actual rent < Expected Rent

Computation of income from HP

Gross Annual Value (G.A.V) ***

Less: Deduction under section 24 :

Deductions from Net Annual Value [Section 24]

Deductions allowed from NAV

Let out/ deemed let out property Self occupied property

Standard deduction Interest on borrowed

Acquisition or construction completed within 5 years from

Maximum R 30,000 Maximum R 200,000

Profession [Sec. 2(36)]

notified backward area in the state of

Sec:33AB Tea/Coffee/Rubber Development Account ***

Sec:35 Expenditure on scientific research ***