Assessment Year u/s 2(9) means, the period of 12 months commencing on the 1 st April every year. It is the year (just after previous year) in which income is earned is charged to tax. The current Assessment is 2009-2010.
Previous Year u/s 2(34) means, the year in which income is earned.
The residential status of individual will be determined as under-
08/07/2009 Assessee Basic Condition Additional Condition Resident He must satisfy at one of the basic conditions. Not required. Not Ordinarily Resident He must satisfy at least one of the basic conditions. He must satisfy either one or both the additional conditions given u/s 6(6). Non-Resident Should not satisfy any of the basic conditions. Not required.
According to section 6(3) an Indian Company is always Resident in India. A foreign Company will be resident in India if Control or Management of its affairs is wholly situated in India.
Residential Status of a firm or AOP or other person depends upon control and management of its affairs.
Resident : If the control and management of the affairs of a firm or AOP or other person is situated wholly or partly in India then such a firm or AOP or other person is said to be resident in India.
Non-Resident : If the control and management of the affairs of a firm or AOP or other person is situated outside India then such a firm or AOP or other person is said to be non-resident in India.
Incidence of Tax Index 08/07/2009 Particulars Tax Incidence R NOR NR Income received in India by or on behalf of assessee Yes Yes Yes Income deemed to received in India by or on behalf of assessee Yes Yes Yes Income accruing or arising in India Yes Yes Yes Income deemed to accrue or arise in India Yes Yes Yes Income which accrues or arise outside India Yes No No
In case of resident senior citizen i.e. age of 65 years or above
08/07/2009 INCOME (A.Y. 2009-10) INCOME (A.Y. 2010-11) TAX RATE Up to 225000 Up to 240000 NIL Next 75000 Next 60000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30%
Contd… 08/07/2009 PERSONS TAX RATE FIRMS 30% DOMESTIC COMPANY 30% FOREIGN COMPANY 40% LOCAL AUTHORITIES 30% CO-OPERATIVE SOCIETIES Up to 10000 10000-20000 Above 20000 10% 20% 30%
Surcharge & Cess Index 08/07/2009 PERSON RATE OF SURCHARGE Individual / AOP / BOI / HUF / Artificial Juridical Person 10% of tax liability if Income Exceeds Rs 10 Lacs Firm 10% of tax liability, if Income exceeds Rs. 1 Crore Domestic Company 10% of tax liability, if Income exceeds Rs. 1 Crore Foreign company 2.5% of tax liability, if Income exceeds Rs. 1 Crore Co-operative Society N.A. Local Authority N.A. Education Cess and Secondary & Higher Education Cess is applicable on every person @ 2% & 1% respectively on tax liability and surcharge applicable, if any.
Income is taxable under head “Salaries”, only if there exists Employer - Employee Relationship between the payer and the payee. The following incomes shall be chargeable to income-tax under the head “Salaries”:-
Advance Salary [u/s 17(1)(v)]
Arrears of Salary
(i)Salary is chargeable on due basis or receipt basis, whichever is earlier.
(ii)Advance salary and Arrears of salary are chargeable to tax on receipt basis only.
Allowance is generally defined as a fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by the employee or as compensation for unusual conditions of that service.
Dearness Allowance - It is Always Taxable .
City Compensatory Allowance - It is Always Taxable .
Exemption In Respect Of House Rent allowance is regulated by rule 2A. The least of the three given below is Exempt from Tax.
08/07/2009 1 An Amount Equal to 50 % of Salary. Where Residential House in situated at Bombay, Calcutta, Delhi or Madras and An Amount Equal to 40 % of Salary where Residential House is situated at any Other Place. 2 House Rent Allowance Received by The Employee in Respect of The Period during which Rental Accommodation is Occupied by the Employee during the Previous Year. 3 The Excess of Rent Paid over 10 % of Salary.
Entertainment allowance is first included in salary in come under the head “salaries” and thereafter a deduction is given on the basis enumerated below:
Government Non- Government Least of the Following is deductible : 1. Rs. 5000 2. 20 % of basic salary 3. Amount of entertainment allowance grated during the previous year Nothing is deductible Status of Employee 08/07/2009
Exemption is available on the aforesaid basis in the case of following allowances :-
kamal maghani 08/07/2009 NAME OF ALLOWANCE NATURE OF ALLOWANCE Travelling Allowance/ Transfer Allowance Any allowance granted to meet the cost of travel on tour or on transfer (including sum paid in connection with transfer, packing and transportation of personal effects on such transfer). Conveyance Allowance Conveyance allowance granted to meet the expenditure on conveyance in performance of duties of an office (expenditure for covering the journey between office and residence is not to be included). Daily Allowance Any allowance whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from this normal place of duty.
When exemption does not depend upon expenditure - In the cases given below, the amount of exemption does not depend upon expenditure incurred by the employee. Regardless of the amount of expenditure, the allowances given below are exempt to the extent of –
the amount of allowance ; or
the amount specified in rule 2BB,
Whichever is lower.
Contd… 08/07/2009 Name of allowance Exemption as specifiedin rule 2BB Special Compensatory (Hill Areas) Allowance Amount exempt from tax varies from Rs. 300 per mount to Rs. 7,000 per month Border area allowance The amount of exemption varies from Rs. 200 Per month to Rs. 1,300 per month Tribal areas/ scheduled areas allowance Rs. 200 Per Month Allowance for transport employees
The amount of exemption is-
70 per cent of such allowance; or
Rs. 6,000 per month, whichever is lower.
Children education allowance The amount exempt is limited to Rs. 100 per month per child up to a maximum of two children. Hostel expenditure allowance It is exempt from tax to the extent of Rs. 300 per month per child up to a maximum of two children. Compensatory field area allowance Exemption is limited to Rs. 2,600 per month in some cases.
Contd… 08/07/2009 Name of Allowance Exemption as Specified in Rule 2BB Compensatory modified area allowance Exemption is limited to Rs.1,000 per month in some cases. Counter insurgency allowance Exemption is limited to Rs.3,900 per month in some cases. Transport allowance It is exempt up to Rs. 800 per month (Rs. 1,600 per month in the case of an employee who is blind or orthopedically handicapped) Underground allowance Exemption is limited to Rs. 800 per month. High altitude allowance It is exempt from tax up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month (for altitude above 15,000 feet). Highly active field area allowance It is exempt from tax up to Rs. 4,200 per month. Island duty allowance It is exempt up to Rs. 3,250 per month.
Allowance to Government employees outside India [Sec. 10( 7)] - Any allowance paid or allowed outside India by the Government to an Indian citizen for rendering service outside India is wholly exempt from tax.
Allowance to High Court and Supreme Court Judges - Any allowance paid to High Court Judges under section & 22C of the High Court Judges (Conditions of Service) Act, 1954 is not chargeable to tax.
Allowance received from a United Nations Organization - Allowance paid by a United Nations Organization to its employees is not taxable by virtue of section 2 of the UN (Privileges and Immunities) Act, 1974.
Perquisite may be defined as any Casual Emolument or Benefit attached to an office or position in Addition to Salary or Wages . It also denotes something that benefits a man by going in to his own pocket. Perquisites may be provided in cash or in kind. Perquisites are included in salary income only if they are received by an employee from his employer.
The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases :
By a company to an employee who is a director thereof ;
By a company to an employee, being a person who has substantial interest in the company ;
By any employer (including a company) to an employee to whom provisions of (i) and (ii) above do not apply and whose income under the head “salaries” exclusive of the value of all benefits or amenities not provided for by way of monetary benefits, exceeds Rs. 50,000
Any sum paid by the employer in respect of any obligation which but for such payment would have been payable by the assessee. Obligation of Employee met by Employer.
Any sum payable by the employer, whether directly or through a fund other than a recognized provident fund or approved superannuation fund or a deposit-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity
The value of any other fringe benefits or amenity as may be prescribed
Gratuity [Sec.10(10)] – Gratuity is a retirement benefit. It is generally payable at the time of cessation of employment and on the basis of duration of service. Tax treatment of gratuity is given below :
Status of Employee Government Employee Non-government employee covered by the payment of Gratuity Act, 1972 Non-government employee not covered by the payment of Gratuity Act, 1972 08/07/2009 It is fully exempt from tax under section 10(10)(i )
PENSION [SEC. 17(1)(ii)] - Pension is chargeable tax as follows :-
Government Employee Non-Government Employee If Gratuity Received If Gratuity not Received 08/07/2009 PENSION Taxable for Government as well as Non-Government employees Entire Commuted Pension is exempt whether or not Gratuity received . UNCOMMUTED COMMUTED 1/3 of commuted pension is exempt 1/2 of commuted pension is exempt
Annuity [Sec. 17(1)(ii)] – An annuity payable by a present employer is taxable as salary even if it is paid voluntarily without any contractual obligation of the employer. An annuity received from an ex-employer is taxed as profit in lieu of salary.
Retrenchment compensation [Sec. 10(10B)] – Compensation received by a workman at the time of retrenchment is exempt from tax to the extent of the lower of the following:
a. an amount calculated in accordance with the provisions of sec. 25F(b) of the Industrial Disputes Act, 1947; or
b. such amount as notified by the Government (i.e., Rs, 5, 00, 000); or
Compensation received at the time of Voluntary Retirement [sec.10 (10C)] - Compensation received at the time of voluntary retirement is exempt from tax, subject to certain conditions. Maximum amount of exemption is Rs. 500000.
Provident Fund Scheme is a welfare scheme for the benefit of employees. The employee contributes certain sum to this fund every month and the employer also contributes certain sum to the provident fund in employees A/c. the employers contribution to the extent of 12% is not chargeable to tax.
Encashment of leave by surrendering leave standing to one’s credit is known as “leave salary ”.
LEAVE ENCASHMENT During Employment Retirement / Leaving the Job Chargeable to Tax Non-Government Employee Government Employee Fully Exempt
Least of following is exempt :-
Earned Leave on the basis of Average Salary
10 x Average monthly salary
Leave Salary Received
Deductions Admissible in Computing Income under head ‘SALARIES’
Entertainment allowance granted by employer [Sec.16(ii)] : This deduction is available in case of Government employees only.
Employment Tax / Professional Tax [Sec.16(iii)] : Any sum paid by assessee on account of a tax on employment within the meaning of Article 276(2). Under the said article employment tax cannot exceed Rs. 2500 p.a.
Relief in respect of Advance or Arrears of Salary u/s 89
When an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, Relief is granted on an application made by the assessee to the assessing officer.
The basis of charge of income under the head ‘income from house property’ is the Annual Value of the property. Annual Value is inherent capacity of the property to earn an income. It is the amount for which the property might reasonably be expected to let from year to year.
Income from house property is charged to tax on Notional Basis , as generally tax is not on receipt of income but on the inherent potential of the house property to generate income.
The property must consist of buildings or lands appurtenant to such buildings.
The assessee must be the owner of such house property.
The property should not be used by the owner thereof for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax.
Computation of Gross Annual Value (GAV) Step 1 : Calculate Expected Rent as follows:- 08/07/2009 Particulars Amount Amount (a) Fair Rent of the House xxx (b) Municipal Value of House xxx (c) Whichever is more of (a) and (b) XXX (d) Standard Rent xxx Expected Rent [whichever is less of (c) and (d)] XXX
Municipal Valuation :- For collecting municipal taxes, local authorities make a periodical survey of all building in their jurisdiction. Such valuation may be taken as strong evidence representing the earning capacity of a building.
Fair Rent of the Property :- Fair rent of the property can be determined on the basis of a rent fetched by a similar property in the same or similar locality.
Standard Rent :- Standard rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act.
Property is considered to be self – occupied where,
the property consisting of house or part thereof is in the occupation of the owner for the purposes of his own residence; or
such property cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him.
Statutory deduction :- 30% of Annual Value (i.e. 30% of NAV)
Interest payable on capital borrowed for acquisition, construction, repair, renewal or reconstruction of house property :- Actual amount of interest for the year on accrual basis plus 1/5 th of the interest, if any, pertaining to the pre- acquisition or pre-construction period.
Deduction for Interest on Capital Borrowed in case of SOP
Maximum limit of deduction in respect of interest on capital borrowed in case of a Self-occupied property whose annual value is assessed at NIL, is Rs. 1,50,000
08/07/2009 CASE MAXIMUM DEDUCTION Interest on capital borrowed on or after 1-4-1999 for acquisition or construction of house 1,50,000 In any other case 30,000
Any amount of rent realized by the assessee during the previous year, which he could not realize from a property let to a tenant, shall be deemed to be income chargeable under the head “Income from house property”.
100% of the amount actually received is taxable in the previous year in which it is realized.
any profit on transfer of the Duty Entitlement Pass Book Scheme.
Any profit on the transfer of the duty free replenishment certificate;
Export incentive available to exporters;
Any interest, salary, bonus, commission or remuneration received by a partner from firm; Any sum received for not carrying out any activity in relation to any business or not to share any know-how, patent, copyright, trademark, etc.
Expenditure on raising equity share capital and preference share capital. However, expenditure on issue of bonus shares id deductible.
Amount paid for acquiring technical know-how which is to be utilized for the purpose of manufacturing any new article and such know-how is to become the property of the assessee at the end of the stipulated period.
Amount expended for acquiring a business or a right of permanent character or an asset which generates income or for avoiding compensation in business.
Interest paid by an AOP/ BOI to its members is not allowed as deduction by virtue of sec. 40(ba)
Payment to relatives in excess of fair value – not deductible [Section 40A(2)]
Expenditure in excess of Rs. 20,000 in aggregate in a day paid otherwise than by account payee cheque drawn on a bank or account payee bank draft – Not allowable [Section 40A(3))]
Amount not deductible in respect of certain unpaid liabilities [Sec.43B]
Books of Accounts to be maintained [Section 44AA]
The persons carrying on specified professions are required to maintain specified books of account only if the gross receipts of their profession have exceeded Rs. 1,50,000
Every other person carrying on business or profession shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
If his income from business or profession exceeds Rs. 1,20,000;
Total sales/turnover/gross receipts thereof exceeds Rs.10,00,000
the assessee has claimed his income lower than deemed profits
The assessee is required to get his accounts of such previous year audited by a Chartered Accountant before 30 th September of the assessment year.
08/07/2009 Person carrying on - Accounts are to be audited for previous year in which - Business Total sales, turnover or gross receipts exceed Rs. 40,00,000 Profession Gross receipts exceed Rs. 10,00,000 Business covered u/s 44AB, 44AE, 44AF, 4BB and 44BBB He has claimed his income to be lower than the profits or gains so deemed under the respective section.
Special Provisions for Computing Income on Estimated Basis 44AD, 44AE & 44AF
Not withstanding anything contained in Sections 28 to 43C, the following provisions will apply .
kamal maghani Sec. 44 AD Sec. 44 AE Sec. 44AF Business of Assessee Civil construction or supply of labour for it. Plying, hiring or leasing goods carriages owned by him. Retail trade in any goods or merchandise. This Section applies if Gross receipts of such business during the previous year do not exceed Rs. 40 lacs. Goods carriages owned by assessee at any time during previous year doesn’t exceed 10 lacs Total business turnover in that previous year doesn’t exceed Rs. 40 lacs. Deemed Profits 8% of Gross receipts (No. of heavy goods vehicle x Rs. 3500 x NM) + (No. of other vehicles x Rs. 3150 x NM) NM = No. of months 5% of Gross receipts or such higher sum as declared by him in his Return of Income.
Written Down Value [Sec. 43(6)] - Written down value for the assessment year 2009-10 will be determined as under:
08/07/2009 Step 1 Find out the depreciated value of the block on the April 1, 2008. Step 2 To this value, add “actual cost” of the asset (falling in the block) acquired during the previous year 2008-09. Step 3 From the resultant figure, deduct money received/receivable (together with scrap value) in respect of that asset (falling within the block of assets) which is sold, discarded demolished or destroyed during the previous year 2008-09.
Meaning of “Actual Cost” [Sec. 43(1)] - It means the actual cost to the assessee as reduced by the proportion of the cost thereof, if any, as has been met, directly or indirectly, by any other person or authority.
If written down value of the block of asset is reduced to zero, though the block is not empty - No depreciation is admissible.
If the block of assets is empty or ceases to exist on the last day of the previous year though the written down value is not zero - No depreciation is admissible.
Additional depreciation @ 20% is available on new plant or machinery acquired & installed after 31.03.05, if used in production or manufacturing.
If asset is used for less than 180 days during the previous year, in which its purchased, then deprecation & additional depreciation is restricted to 50% of actual depreciation. However in subsequent year full depreciation is allowed irrespective of use.
When a depreciable asset(on which depreciation is claimed on straight line basis) of a power generating unit is disposed in a previous year, then terminal depreciation (loss) is deductible or balancing charge (gain) is taxable.
The maximum amount of salary paid to all the partners during the previous year should not exceed the limits given below :-
kamal maghani In case of a firm carrying of a profession referred to in section 44AA On the first Rs. 1,00,000 of the book profit or in case of a loss Rs. 50,000 or at the rate of 90 percent of the book profit, whichever is more On the next Rs. 1,00,000 of the book profit At the rate of 60 percent On the balance of the book profit At the rate of 40 percent In the case of any other firm On the first Rs. 75,000 of the book profit or in case of a loss Rs. 50,000 or at the rate of 90 percent of the book profit, whichever is more On the next Rs. 75,000 of the book profit At the rate of 60 percent On the balance of the book profit At the rate of 40 percent
“ Capital asset” is defined to include property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible. However, following are excluded from the definition of “capital assets”:
Any stock-in-trade, consumable stores or raw material held for the purposes of business or profession.
Personal effects of the assessee, that is to say, movable property including wearing apparel and furniture held for his personal use or for the use of any member of his family dependent upon him. However, Jewellery, Archaeological Collections, Drawings, Paintings, Sculptures, or Art Work will not be considered as “personal effects”.
“ Short term capital asset” means a capital asset held by an assessee for not more than 36 months, immediately prior to its date of transfer. In other words, if a capital asset is held by an assessee for more than 36 months, then it is known as “long term capital asset.”
However in following cases 36 months will be replaced by 12 months :-
Equity or preference shares in a company
Units of UTI
Units of a mutual fund specified under section 10(23D)
Transfer of Capital Asset :- Transfer, in relation to capital asset, includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law [sec. 2(47)].
Full Value of Consideration :- The expression “full value” means the whole price without any deduction whatsoever.
Expenditure on Transfer :- The expression “expenditure on transfer” means expenditure incurred which is necessary to effect the transfer.
Cost of Acquisition :- Cost of acquisition of an asset is the value for which it was acquired by the assessee. In case of Depreciable Asset COA is the WDV of asset in the beginning of the year. In case of Slump Sale COA is the Net Worth of the undertaking.
Cost of improvement :- Cost of improvement is capital expenditure incurred by an assessee in making any additions/ improvement to the capital asset.
Indexed Cost of Acquisition :- the amount which bears to the COA, the same proportion as CII for the year in which the asset is transferred bears to the CII for the first year in which the asset was held by the assessee or on 01.04.1981, whichever is later.
Indexed Cost of Improvement :- an amount which bears to the COI, the same proportion as CII for the year in which the asset is transferred bears to the CII for the year of improvement.
Profit on sale of property used for residence [S. 54] :- Available to Individual & HUF on transfer of Long-term Residential Property and new residential House property is purchased or constructed.
Capital gains on transfer of agricultural land [S.54B] :- Available to Individual on transfer of Agricultural land used by individual or his parent for agricultural purposes during 2 year preceding date of transfer and Agricultural land (urban or rural) is purchased.
Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house [S. 54F] :- Available to Individual & HUF on transfer of Long-term Asset other than Residential house Property and residential House property is purchased or constructed.
Compulsory acquisition of land & building [S.54D] :- Available to all assesses on Compulsory acquisition of land or building which was used in the business of industrial undertaking during 2 years prior to date of transfer, if New land or building for the industrial undertaking is purchased or constructed.
Shifting of undertaking to rural area [Sec.54G] :- Available to all assesses on Transfer of plant, machinery or land or building for shifting industrial undertaking from under area to rural area, if (a) Purchase/ Construction of plant, machinery, land or building in such rural area or, (b) Shifting original assets to that area or, (c) Incurring notified expenses.
Shifting of undertaking to SEZ [Sec.54GA] :- Available to all assesses on Transfer of plant, machinery or land or building for shifting industrial undertaking from urban area to special Economic Zone, if (a) Purchase/ Construction of plant, machinery, land or building in such SEZ or (b) Shifting the original asset to SEZ or, (c) Incurring notified expenses.
Computation of Short-term Capital Gains 08/07/2009 Particulars Amount Full Value of Consideration XXX Less: Expenses incurred wholly and exclusively for such transfer xxx Net Consideration XXX Less: Cost of Acquisition xxx Less: Cost of Improvement xxx Less: Exemption u/s 54B, 54D, 54G, 54GA xxx Taxable Short -term Capital gains XXX
Computation of Long-term Capital Gains 08/07/2009 Particulars Amount Full Value of Consideration XXX Less: Expenses incurred wholly and exclusively for such transfer xxx Net Consideration XXX Less: Indexed Cost of Acquisition xxx Less: Indexed Cost of Improvement xxx Less: Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA xxx Taxable Long- term Capital gains XXX
Indexed Cost Indexed Cost of Acquisition / Improvement Cost of acquisition / improvement x Cost inflation Index of the year of transfer Cost Inflation Index (CII) for the first year in which the asset was held by the assessee or for the year beginning on 1.4.1981, whichever is later / the year of improvement 08/07/2009 Index
Income from letting on hire of Plant, machinery or furniture belonging to the assessee, if not chargeable to under the head ‘Profits and Gains of Business or Profession’.
Income from letting on hire of machinery, plant or furniture and also buildings, and the letting of buildings is inseparable from letting of such machinery, plant or furniture, if the same is not chargeable to income tax under the head ‘Profits and Gains of Business or Profession.’
Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy, if the same is not chargeable to income-tax under the head ‘Profits and Gains of Business or Profession’ or under the head “Salaries.”
Transfer of income without transfer of asset [Sec. 60] :– The income from the asset would be taxable in the hands of the transferor.
Revocable transfer of assets :- Income from such asset is taxable in the hands of the transferor.
An individual is assessable in respect of remuneration of spouse [Sec. 64(1)(ii)] :- When Spouse is employed in the concern without any technical or professional knowledge or experience or when he/ she has substantial interest in that concern.
An individual is assessable in respect of income from assets transferred to spouse :- When the asset is transferred otherwise than (a) for adequate consideration, or (b) in connection with an agreement to live apart.
An individual is assessable in respect of income from assets transferred to son’s wife [Sec. 64(1)(vi)] :- When the asset is transferred otherwise than (a) for adequate consideration
An individual is assessable in respect of income from assets transferred to a person for the benefit of spouse [Sec. 64(1)(vii)] :- It is transferred for the immediate or deferred benefit of his/her spouse. The transfer is without adequate consideration.
An individual is assessable in respect of income from assets transferred to a person for the benefit of son’s wife [Sec. 64(1)(viii)] :- It is transferred for the immediate or deferred benefit of his/her son’s wife. The transfer is without adequate consideration.
An individual is assessable in respect of income of his minor child [Sec. 64(1A)] :- The income of minor will be included in the income of that parent whose total income [excluding the income includible under section 64(1A)] is greater.
Clubbing in case of transfer of property to HUF [Section 64(2)] :- When Income from asset transferred to HUF for inadequate consideration.
Cash credit [Sec. 68 ] - Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
Unexplained investments [Sec.69] – Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account maintained by him and the assessee offers no explanation about the nature and source of the investments, the value of the investments may be deemed to be the income of the assessee of such financial year.
Unexplained money, etc [sec. 69A] - Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery, or other valuable article which are not recorded in the books of account maintained by him and the assessee offers no explanation about the nature and source of acquisition then value of such things may be deemed to the income of the assessee for such financial year.
Amount of investments, etc., not fully disclosed in books of account [Sec.69B] – Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the A.O. finds that the amount expended on making such investments or in acquiring such things exceeds the amount recorded in the books of account maintained by the assessee, and he offers no explanation about such excess amount, the excess amount may be deemed to be the income of the assessee, for such financial year.
Unexplained expenditure, etc. [Sec. 69C] – Where in any financial year an assessee has incurred any expenditure & he offers no explanation about the source of such expenditure, the amount covered by such expenditure, may deemed to be the income of the assessee for such financial year.
Amount borrowed or repaid on hundi [Sec. 69D] – Where any amount is borrowed on a hundi, or any amount due thereon is repaid otherwise than through an account payee cheque, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying for the previous year in which the amount was borrowed or repaid.
The process of setting off of losses and their carry forward may be covered in the following steps :
08/07/2009 Step 1 Inter-source adjustment under the same head of income Step 2 Inter-head adjustment in the same assessment year. Step 2 is applied only if a loss cannot be set off under Step 1. Step 3 Carry forward of loss. Step 3 is applied only if a loss cannot be set off under Steps 1 and 2.
While dealing with unabsorbed depreciation one should keep in mind the following points :
08/07/2009 Step 1 Depreciation allowance of the previous year is first deductible from the income chargeable under the head “Profits and gains of business or profession”. Step 2 If depreciation allowance is not fully deductible under the head “Profits and gains of business or profession” because of absence or inadequacy of profits, it is deductible from income chargeable under other heads of income [except income under the head “Salaries”] for the same assessment year. Step 3 If depreciation allowance is still unabsorbed, it can be carried forward to the subsequent assessment year(s) by the same assessee.
Loss arising from one source of income under a head can be set off against income arising from any other source under the same head, except in the following cases –
08/07/2009 Loss Set-off allowed against Long-term capital Loss Long-term Capital Gain Speculation business loss Speculation business gain Loss from business of owning and maintaining race horse Income from business of owning and maintaining race horse Loss from lottery, card games, gambling betting etc. Income from lottery, card games, gambling betting etc.
Loss arising under one head of income can be set off against income under any other head, except in the following cases –
Loss arising under the head capital gain cannot be setoff from income under any other head
Losses under the head “Profits and gains of business or profession” cannot be set off against income under the head “Salaries”.
Note: Unabsorbed depreciation of past year(s) is carried forward u/s 32(2); therefore, the same can be set-off against income under the head ‘Salaries’.
Provisions relating to carry forward and setoff of losses Index 08/07/2009 Sec. Loss to be carried forward Income against which the loss can be setoff No. of years for which it can be carried forward 71B Loss from house property Income from house property 8 years from the end of the relevant A.Y. 72 Losses under ‘Profits & Gains of Business or Profession’, except speculation business loss. Profits of any Business/Profession (including speculation business profits also) 8 years from the end of the relevant A.Y. 73 Losses in speculation business. Income from speculation business 4 years from the end of the relevant A.Y. 74 Losses under the head Capital gains. Capital Gains 8 years from the end of the relevant A.Y. 74A Loss incurred in activity of owning and maintaining race horses. Income from owning and maintaining race horses 4 years from the end of the relevant A.Y.
Any rent or revenue derived from land which is situated in India and used for agricultural purposes [sec. 2(1A) (a)].
Any income derived from such land by agricultural operations including processing of the agricultural produce, raised or received as rent-in-kind so as to render it fit for the market or sale of such produce [sec. 2(1A)(b)].
Income attributable to a farm house subject to certain conditions.
With effect from the assessment year 2009-10, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
Partially Agricultural & Partially Business Income [Rules 7, 7a, 7b And 8] 08/07/2009 INCOME BUSINESS INCOME AGRICULTURAL INCOME Growing and manufacturing tea in India 40% 60% Sale of centrifuged latex or cenex or latex based creps (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India 35% 65% Sale of coffee grow and cured by seller 25% 75% Sale of coffee grown, cured, roasted and grounded by seller in India with or without mixing chicory or other flavoring ingredients 40% 60%
The Scheme of Partial Integration of Non-Agricultural Income with Agricultural Income
The scheme of partial integration of non-agricultural income with agricultural income is applicable if the following conditions are satisfied –
08/07/2009 Condition 1 The taxpayer is an individual, a Hindu undivided family, a body of individual, an association of persons or an artificial juridical person. Condition 2 The taxpayer has non-agricultural income exceeding the amount of exemption limit [i.e., Rs. 1,80,000(in case a resident woman below 65 years), Rs. 2,25,000 (in case of a resident senior citizen 65 years or more) and Rs. 1,50,000 (in case of any other individual or every HUF for the assessment year 2009-10] Condition 3 The agricultural income of the taxpayer exceeds Rs. 5,000.
Income-tax will be computed for the assessment year 2009-10 in the following manner:
Index 08/07/2009 Step 1 Net agricultural income is to be computed as if it were income chargeable to income-tax. Step 2 Agricultural & non-agricultural income of the assessee will then be aggregated & income-tax is calculated on the aggregate income. Step 3 The net agricultural income will then be increased by the amount of exemption limit and income-tax is calculated on net agricultural income, so increased, as if such income was the total income of the assessee. Step 4 The amount of income-tax determined at Step two will be reduced by the amount of income-tax determined under Step three. Step 5 Find out the balance. Add surcharge; education cess & SHEC. Step 6 The amount so arrived will be the total income-tax payable by the assessee.
Every person is liable to pay tax on income in advance i.e. from completion of the previous year (advance tax) if tax payable is Rs. 5,000 or more. All items of income are liable for payment of advance tax.
However, from Assessment 2010-2011 liability to pay advance tax arises, if the tax payable is Rs. 10,000 or more
Due Dates 08/07/2009 Due Date Amount payble by Corporate Assessee Amount payble by Non-Corporate Assessee On or before June 15 of the previous year Up to 15 percent of advance tax payable - On or before September 15 of the previous year Up to 45 percent of advance tax payable Up to 30 percent of advance tax payable On or before December 15 of the previous year Up to 75 percent of advance tax payable Up to 60 percent of advance tax payable On or before March 15 of the previous year Up to 100 percent of advance tax payable Up to 100 percent of advance tax payable
Default in payment of Advance Tax [Sec. 234B]
Under section 234B(1), interest is payable as follows:
08/07/2009 When interest is payable Interest is payable on Rate of interest Period for which interest is payable An assessee who is liable to pay advance tax, has failed to pay such tax Interest is payable on accessed tax Simple interest @ 1 percent for every month or part of month From April 1 of the assessment year to the date of determination of income under section 143(1) or where regular assessment is made to the date of regular assessment An assessee who has paid advance tax but the amount of advance tax paid by him is less than 90 percent of assessed tax. Assessed tax minus advance tax Simple interest @ 1 percent for every month or part of month From April 1 of the assessment year to the date of determination of income under section 143(1) or where regular assessment is made to the date of regular assessment
Interest is payable under section 234C if an assessee has not paid advance tax or underestimated installments of advance tax. Simple Interest at the rate of 1% per month is payable for period 3 months for each installment due.
Time for filing Return of Income [Sec. 139(1)] 08/07/2009 Different Situations Due Date for filing Return 1. Where the assessee is a company September 30
2. Where the assessee is person other than a company –
In case where accounts of the assessee are required to be audited under any law
Where the assessee is “working partner” in a firm whose accounts are required to be audited under any law
In any other case
September 30 September 30 July 31
Filing of Return in Electronic Form [Sec. 139D]
Section 139D has been inserted from June 1, 2006. It provides that the Board may make rules providing for the class or classes of persons who shall be required to furnish the return of income in electronic form; the form and the manner in which the return of income in electronic form may be furnished; the documents, statements, receipts, certificates or audited reports which may not be furnished along with the return of income in electronic form but shall be produced before the Assessing Officer on demand; the computer resource or the electronic record to which the return of income in electronic form may be transmitted.
Filing of Return after Due Date [Sec. 139(4)]
If the return is not furnished within the time allowed under section 139(1) or within the time allowed under section 142(1), the person may (before the assessment is made), furnish the return of any previous year at any time before the end of one year from the end of relevant assessment year.
If return is submitted after the due date of submission of return of income, the following consequences will be applicable. These rules are applicable even if a belated return is submitted within the time-limit given above –
The assessee will be liable for penal interest u/s 234A.
A penalty of Rs. 5,000 may be imposed u/s 271F if belated return is submitted after the end of assessment year.
If return of loss is submitted after the due date, a few losses cannot be carried forward.
If return is submitted belated, deduction under section 10A, 10B, 80-IA, 80-IB, 80IC, 80-ID and 80-IE will not be available.
Interest for defaults in furnishing Return of Income [Section 234A]
If any person fails to furnish his return of income u/s 139 for any assessment year or furnishes such return after due date specified in section 139(1), then, he will liable to pay interest at the rate of 1% per month for the period beginning from the date immediately following the due date of furnishing return of income and ending on the Date of furnishing the return or completion of assessment, whichever is earlier, calculated on the amount of self-assessment tax payable.