Income Tax Overview


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Income Tax Overview

  1. 1. Income Tax(A.Y. 2009-10 & 2010-11)
  2. 2. INDEX1. Introduction2. Residential Status3. Tax Rates4. Income from Salary5. Income from House Property6. Income from Business & Profession7. Capital Gains8. Income from Other Sources9. 03/24/12 Clubbing of Income 2
  3. 3. Contd…1. Set-off Carry Forward2. Deductions from Gross Total Income3. Agricultural Income4. Advance Tax5. Assessment Procedures 03/24/12 3
  4. 4. 03/24/12 4
  5. 5. Charge of Income Tax Income tax is charged in assessment year at rates specified by the Finance Act applicable on 1st April of the relevant assessment year. It is charged on the total income of every person for the previous year. Total Income is to be computed as per the provisions of the Act. Income tax is to be deducted at source or paid in advance wherever required under the provision of the Act.03/24/12 5
  6. 6. Important Definitions1. Person u/s 2(31) includes, i. An Individual, ii. Hindu Undivided Family (HUF), iii. A Company, iv. A Firm, v. An Association of Persons(AOP) or Body of Individuals (BOI), vi. A Local Authority, vii. Every other Artificial Juridical Person03/24/12 6
  7. 7. Contd… ssessment Year u/s 2(9) means, the period of 12 months commencing on the 1st 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. revious Year u/s 2(34) means, the year in which income is earned.03/24/12 7
  8. 8. Contd…• Gross Total Income (G.T.I) :- The aggregate income under the 5 heads of income (viz. Salary, House Property, Business or Profession, Capital Gains & Other Sources) is termed as “Gross Total Income”.• Total Income (T.I) :- Total Income of assessee is gross total income as reduced by the amount permissible as deduction under sections 80C to 80U. Index03/24/12 8
  9. 9. 03/24/12 9
  10. 10. Types of Residential StatusThe different types of residential status are:- Resident(R) Not Ordinarily Resident (NOR) Non-Resident (NR)03/24/12 10
  11. 11. Residential Status of IndividualThe residential status of individual will be determinedas under- Assessee Basic Condition Additional Condition He must satisfy at one Resident Not required. of the basic conditions. He must satisfy either He must satisfy at least one or both theNot Ordinarily Resident one of the basic additional conditions conditions. given u/s 6(6). Should not satisfy any Non-Resident Not required. of the basic conditions.03/24/12 11
  12. 12. Contd…Basic Conditions u/s 6(1):ii. He must be in India for a period of 182 days or more during the previous year; oriii. He must be in India for a period of 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year.Additional Conditions u/s 6(6):v. He must be a non-resident in India in nine out of the ten previous years preceding that year; orvi. He must be in India during 7 preceding previous years for aggregate period of 729 days or less. 03/24/12 12
  13. 13. Residential Status of HUFThe residential status of HUF depends upon the control andmanagement of its affairs. – Resident HUF: If the control and management of the affairs of HUF is situated wholly or partly in India then HUF is said to be Resident in India. – Non- Resident HUF: If the control and management of the affairs of HUF is situated wholly outside India then HUF is said to be Non- Resident in India. – Not Ordinarily Resident HUF: A resident HUF is said to be ‘Not Ordinarily Resident’ in India if Karta or manager thereof, satisfies any of the additional conditions u/s 6(6). 03/24/12 13
  14. 14. Residential Status 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. 03/24/12 14
  15. 15. Incidence of Tax Tax Incidence Particulars R NOR NR Income received in India by or on behalf of Yes Yes Yes assessee Income deemed to received in India by or Yes Yes Yes on behalf of assessee 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 Yes No No India Index03/24/12 15
  16. 16. 03/24/12 16
  17. 17. RATES OF INCOME TAX (Assessment Year 2009-10)1. In case of every Individual/ HUF/ AOP/BOI artificial juridical Person. INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 20010-11) Up to 150000 Up to 160000 NIL Next 150000 Next 140000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30%03/24/12 17
  18. 18. Contd…1. In case of resident women below 65 years of age. INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 2010-11) Up to 180000 Up to 190000 NIL Next 120000 Next 110000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30%03/24/12 18
  19. 19. Contd…1. In case of resident senior citizen i.e. age of 65 years or above INCOME INCOME TAX RATE (A.Y. 2009-10) (A.Y. 2010-11) Up to 225000 Up to 240000 NIL Next 75000 Next 60000 10% Next 200000 Next 200000 20% Above 500000 Above 500000 30%03/24/12 19
  20. 20. Contd… PERSONS TAX RATE FIRMS 30% DOMESTIC COMPANY 30% FOREIGN COMPANY 40% LOCAL AUTHORITIES 30% CO-OPERATIVE SOCIETIES Up to 10000 10% 10000-20000 20% Above 20000 30%03/24/12 20
  21. 21. Surcharge & Cess PERSON RATE OF SURCHARGEIndividual / AOP / BOI /HUF / Artificial Juridical 10% of tax liability if Income Exceeds Rs 10 LacsPersonFirm 10% of tax liability, if Income exceeds Rs. 1 CroreDomestic Company 10% of tax liability, if Income exceeds Rs. 1 CroreForeign company 2.5% of tax liability, if Income exceeds Rs. 1 CroreCo-operative Society N.A.Local Authority N.A.Education Cess and Secondary & Higher Education Cess is applicable onevery person @ 2% & 1% respectively on tax liability and surcharge applicable,if any. Note: surcharge on personal income-tax will be eliminated from A.Y. 2010-11 Index 03/24/12 21
  22. 22. 03/24/12 22
  23. 23. MeaningSalary includes [section17(1)] :-ii. Wagesiii. Any annuity on pensioniv. Any gratuityv. Any fees, commission, bonus, perquisite on profits in lieu of or in addition to any salary on wagesvi. Any advance of salaryvii. Any earned leaveviii.Employers contribution (taxable) towards recognized provident fund. 03/24/12 23
  24. 24. BASIS OF CHARGEIncome is taxable under head “Salaries”, only if thereexists Employer - Employee Relationship between thepayer and the payee. The following incomes shall bechargeable to income-tax under the head “Salaries”:-2.Salary Due3.Advance Salary [u/s 17(1)(v)]4.Arrears of Salary Note: (i)Salary is chargeable on due basis or receipt basis, whichever is earlier. (ii)Advance salary and Arrears of salary are chargeable to tax on receipt basis only.03/24/12 24
  25. 25. AllowancesAllowance is generally defined as a fixed quantity ofmoney or other substance given regularly in addition tosalary for the purpose of meeting some particularrequirement connected with the services rendered bythe employee or as compensation for unusualconditions of that service.•Dearness Allowance - It is Always Taxable.•City Compensatory Allowance - It is Always Taxable.03/24/12 25
  26. 26. Contd…1. House Rent Allowance Exemption In Respect Of House Rent allowance is regulated by rule 2A. The least of the three given below is Exempt from Tax. n Amount Equal to 50 % of Salary. Where Residential House 1 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. House Rent Allowance Received by The Employee in Respect 2 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.03/24/12 26
  27. 27. Contd…• Entertainment allowance [sec.169(ii)]- Entertainment allowance is first included in salary in come under the head “salaries” and thereafter a deduction is given on the basis enumerated below: Status of Employee Non- Government Government Least of the Following is deductible : Nothing is deductible 1. Rs. 5000 2. 20 % of basic salary 3. Amount of entertainment allowance grated during the previous year03/24/12 27
  28. 28. Contd…• Special allowances prescribed as exempt under section 10(14) – In the cases given below the amount of exemption under section 10(14) is :– i. The amount of the allowance ; or ii.The amount utilized for the specific purpose for which allowance is given. Whichever is lower.03/24/12 28
  29. 29. Contd…Exemption is available on the aforesaid basis in the caseof following allowances :-NAME OF ALLOWANCE NATURE OF ALLOWANCETravelling Allowance/ Any allowance granted to meet the cost of travel onTransfer Allowance 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 03/24/12 29 on account of absence from this normal place of duty.
  30. 30. Contd…• 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 – i. the amount of allowance ; or ii. the amount specified in rule 2BB, Whichever is lower.03/24/12 30
  31. 31. Contd… Name of allowance Exemption as specifiedin rule 2BBSpecial Compensatory Amount exempt from tax varies from Rs. 300 per mount to(Hill Areas) Allowance Rs. 7,000 per month The amount of exemption varies from Rs. 200 Per monthBorder area allowance to Rs. 1,300 per monthTribal areas/ scheduled Rs. 200 Per Monthareas allowance The amount of exemption is-Allowance for transport b.70 per cent of such allowance; oremployees c.Rs. 6,000 per month, whichever is lower.Children education The amount exempt is limited to Rs. 100 per month perallowance child up to a maximum of two children.Hostel expenditure It is exempt from tax to the extent of Rs. 300 per monthallowance per child up to a maximum of two children.Compensatory field area Exemption is limited to Rs. 2,600 per month in someallowance cases. 03/24/12 31
  32. 32. Contd… Name of Allowance Exemption as Specified in Rule 2BBCompensatory modified Exemption is limited to Rs.1,000 per month in somearea allowance cases.Counter insurgency Exemption is limited to Rs.3,900 per month in someallowance cases. It is exempt up to Rs. 800 per month (Rs. 1,600 perTransport allowance month in the case of an employee who is blind or orthopedically handicapped)Underground allowance Exemption is limited to Rs. 800 per month. It is exempt from tax up to Rs. 1,060 per month (forHigh altitude allowance altitude of 9,000 to 15,000 feet) or Rs. 1,600 per month (for altitude above 15,000 feet).Highly active field area It is exempt from tax up to Rs. 4,200 per month.allowanceIsland duty allowance It is exempt up to Rs. 3,250 per month. 03/24/12 32
  33. 33. Contd…• 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.• Tiffin allowance - It is taxable.• Fixed medical allowance – It is taxable.• Servant allowance - It is taxable.03/24/12 33
  34. 34. Contd…• 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. 03/24/12 34
  35. 35. PERQUISITESPerquisite may be defined as any Casual Emolumentor Benefit attached to an office or position in Addition toSalary or Wages. It also denotes something thatbenefits 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 theyare received by an employee from his employer.03/24/12 35
  36. 36. “Perquisites” as defined u/s 17 (2)The term “perquisites” is defined by section 17 (2)as including the following items:•The value of Rent-free Accommodation provided tothe assessee by his employer•The value of any concession in the matter of rentrespecting any accommodation provided to theassessee by his employer03/24/12 36
  37. 37. Contd…• The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases : i. By a company to an employee who is a director thereof ; ii. By a company to an employee, being a person who has substantial interest in the company ; iii. 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 03/24/12 37
  38. 38. Contd…• 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 03/24/12 38
  39. 39. TERMINAL BENEFITS • 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 Non-government Non-government Employee employee covered by employee not covered the payment of by the payment ofIt is fully exempt Gratuity Act, 1972 Gratuity Act, 1972from tax undersection 10(10)(i) Least of following is exempt: Least of following is exempt: 2)“15 days’ salary” x “Length 3)“½ month avg. salary” x of service” “Length of service” 3)Rs. 3, 50, 000 4)Rs. 3, 50, 000 4)Gratuity actually received. 5)Gratuity actually received. 03/24/12 39
  40. 40. Contd… • PENSION [SEC. 17(1)(ii)] - Pension is chargeable tax as follows :- PENSION COMMUTED UNCOMMUTED Government Non-Government Employee Employee Taxable for Government as If Gratuity If GratuityEntire Commuted well as Non- Received not ReceivedPension is exempt Government whether or not 1/3 of 1/2 of employeesGratuity received. commuted commuted pension is pension is exempt exempt 03/24/12 40
  41. 41. Contd…• 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 c. the amount received. 03/24/12 41
  42. 42. Contd…• 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. 500000.03/24/12 42
  43. 43. Provident FundProvident Fund Scheme is a welfare scheme for thebenefit of employees. The employee contributescertain sum to this fund every month and the employeralso contributes certain sum to the provident fund inemployees A/c. the employers contribution to theextent of 12% is not chargeable to tax.03/24/12 43
  44. 44. LEAVE SALARYEncashment of leave by surrendering leave standing toone’s credit is known as “leave salary”. LEAVE ENCASHMENT Retirement / Leaving the Job During Employment Government Non-Government Chargeable Employee Employee to Tax Least of following is exempt :- 4)Earned Leave on the basis of Fully Average Salary Exempt 5)10 x Average monthly salary 6)Rs. 300000 7)Leave Salary Received03/24/12 44
  45. 45. 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.03/24/12 45
  46. 46. 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.03/24/12 Index 46
  47. 47. 03/24/12 47
  48. 48. Basis of Charge• 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.03/24/12 48
  49. 49. Conditions to be Satisfied• 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.03/24/12 49
  50. 50. Computation of Gross Annual Value (GAV) Step 1 : Calculate Expected Rent as follows:- 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)] XXX03/24/12 50
  51. 51. Contd…Step 2 : Compare Expected Rent & Actual Rent Receivable (ARR). Where the property or any part thereof is let out, If ARR is more than ER referred to in Step 1, then, GAV = ARR If ARR is less than ER and it is due the vacancy of property then, GAV = ARR If ARR is less than ER not owing to vacancy GAV = ER Note: ARR = Rent Received / Receivable less Unrealized Rent03/24/12 51
  52. 52. Net Annual Value (NAV) Net Annual Value is the sum computed after deducting from Gross Annual Value, the taxes levied by any local authority in respect of the property. NAV = GAV – Municipal Taxes Paid03/24/12 52
  53. 53. Meaning• 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. 03/24/12 53
  54. 54. Self-occupied Property [Sec. 23(2)]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.03/24/12 54
  55. 55. Contd… In case of Self-occupied House Property Net Annual Value is always Zero. Since NAV is zero, the municipal taxes paid by the owner of the house are not deductible.03/24/12 55
  56. 56. Deduction Admissible u/s 24• 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 1/5th of the interest, if any, pertaining to the pre- acquisition or pre-construction period.03/24/12 56
  57. 57. Deduction for Interest on Capital Borrowed in case of SOPMaximum limit of deduction in respect of interest oncapital borrowed in case of a Self-occupied propertywhose annual value is assessed at NIL, is Rs. 1,50,000 MAXIMUM CASE DEDUCTION Interest on capital borrowed on or after 1-4-1999 for acquisition or construction 1,50,000 of house In any other case 30,00003/24/12 57
  58. 58. Recovery of Unrealized Rent [Section 25AA] 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.03/24/12 58
  59. 59. Arrears of Rent [Section 25B] Arrears of rent shall be deemed to be income chargeable under the head “Income from house property”. It shall be charged to income tax as income of previous year in which it is received. Taxable amount is computed as under :- PARTICULARS AMOUNT The amount received as arrears of rent XXX Less: 30% of such amount xxx Amount taxable as arrears of rent XXX03/24/12 Index 59
  60. 60. 03/24/12 60
  61. 61. Basis of Charge [sec. 28]The following income is chargeable to tax under the head“Profits and gains of business or profession”:2.Profits and gains of any business or profession;3.Any compensation or other payments due to or receivedby any person specified in section 28(ii);4.Income derived by a trade, professional or similarassociation from specific services performed for itsmembers;5.The value of any benefit or perquisite, whether convertibleinto money or not, arising from business or the exercise of aprofession; 03/24/12 61
  62. 62. Contd…1. any profit on transfer of the Duty Entitlement Pass Book Scheme.2. Any profit on the transfer of the duty free replenishment certificate;3. Export incentive available to exporters;4. 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.03/24/12 62
  63. 63. Contd… 1. Any sum received under a Keyman insurance policy including bonus; 2. Profits and gains of managing agency; and 3. Income from speculative transaction. Income from the aforesaid activities is computed in accordance with the provisions laid down in section 29 to 44D.03/24/12 63
  64. 64. Expenses Expressly Allowed1. Rent, rates, taxes, repairs and insurance for building [Sec. 30]2. Repairs and insurance of machinery, plant and furniture [Sec. 31]3. Depreciation allowance [Sec. 32]4. Tea/coffee/rubber development account [Sec. 33AB]5. Expenditure on acquisition of patent rights and copyrights [Sec. 35A]6. Insurance premium [Sec. 36 (1) (i)]7. Premier for insurance on health of employees [Sec. 36(1) (ib)] 03/24/12 64
  65. 65. Contd…1. Bonus or commission to employees [Sec. 36(1)(ii)]2. Interest on borrowed capital [Sec. 36(1)(iii)]3. Employer’s contribution to recognized provident fund and approved superannuation fund [Sec. 36(1)(iv)]4. Contribution towards approved gratuity fund [Sec. 36(1)(v)]5. Employee’s contribution towards staff welfare schemes6. Bad debts [Sec. 36(1)(vii)]7. Family planning expenditure [Sec. 36(1) (ix)]03/24/12 65
  66. 66. Contd…1. Banking cash transaction tax, securities transaction tax and commodities transaction tax.2. Advertisement expenses [Sec. 37(2B)].3. General Deduction [Sec. 37(1)].03/24/12 66
  67. 67. EXPENSES NOT DEDUCTIBLE [Section 37(1)]1. Damages and penalty paid for transgressing the terms of agreement with the State.2. Penalty and damages paid in connection with infringement of law.3. Litigation expenditure incurred for curing any defect in the title of assets or completing that title.4. Litigation expenses for registration of shares.5. Fees paid for increase of authorized capital.03/24/12 67
  68. 68. Contd…1. Expenditure on raising equity share capital and preference share capital. However, expenditure on issue of bonus shares id deductible.2. 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.3. Amount expended for acquiring a business or a right of permanent character or an asset which generates income or for avoiding compensation in business. 03/24/12 68
  69. 69. Contd…1. Payments made for acquisition of good will.2. Expenditure incurred for acquiring right over or in land to win minerals.3. Fees paid to obtain license to investigate and search minerals.4. Payment made in consideration of acquiring a monopoly right to manufacturer a producer (royalty payable on the basis of goods produced under the same arrangement is, however, deductible).03/24/12 69
  70. 70. Contd…1. Tax paid by the assessee (who is defaulter by not deducting tax at source under section 195) on behalf of non-resident.2. Compensation paid to contracting party with the object of avoiding an unnecessary investment in capital assets.3. Expenditure on shifting of registered office.4. Insurance premia paid by a firm on life insurance policies of its partners.5. Amount paid by liquor contractor to police staff and other officer to enable it to make unauthorized purchases and sales of liquor. 03/24/12 70
  71. 71. Contd…1. Amount paid by a company to the Registrar of Companies as filing fee for enhancement of capital base of the company.2. Payment made by assessee company which was partner in a firm, to outgoing partners of firm on account of their agreeing to restrain from carrying on similar business for a period of 15 years.03/24/12 71
  72. 72. Specific Disallowances1. Interest, Royalty, fees for Technical Services payable outside India,if on such amount tax is deductible but tax has not been deducted or deposited with Government. [Sec. 40(a)(i)]2. Fringe Benefit Tax [Sec. 40(a)(ic)]3. Income-Tax [Sec. 40(a)(ii)]4. Salary Payable Outside India without Tax Deduction [sec. 40(a)(iii)]5. Provident Fund Payment without tax Deduction at Source [Sec. 40(a)(iv)]6. Certain specified expenses in case of Partnership Firm 03/24/12 72
  73. 73. Contd…1. Interest paid by an AOP/ BOI to its members is not allowed as deduction by virtue of sec. 40(ba)2. Payment to relatives in excess of fair value – not deductible [Section 40A(2)]3. 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))]4. Amount not deductible in respect of certain unpaid liabilities [Sec.43B]03/24/12 73
  74. 74. Books of Accounts to be maintained [Section 44AA]The persons carrying on specified professions are requiredto maintain specified books of account only if the grossreceipts of their profession have exceeded Rs. 1,50,000Every other person carrying on business or professionshall keep and maintain such books of account and otherdocuments as may enable the Assessing Officer tocompute his total income in accordance with the provisionsof 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 profits03/24/12 74
  75. 75. Tax Audit u/s 44AB This section applies to following :- 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 He has claimed his income to be lower than the 44AB, 44AE, 44AF, profits or gains so deemed under the respective 4BB and 44BBB section.• The assessee is required to get his accounts of such previous year audited by a Chartered Accountant before 30th September of the assessment year. 03/24/12 75
  76. 76. Special Provisions for Computing Income on Estimated Basis 44AD, 44AE & 44AFNot withstanding anything contained in Sections 28 to43C, the following provisions will apply. Sec. 44 AD Sec. 44 AE Sec. 44AFBusiness of Civil construction or Plying, hiring or leasing Retail trade inAssessee supply of labour for it. goods carriages owned any goods or by him. merchandise.This Gross receipts of such Goods carriages owned Total businessSection business during the by assessee at any time turnover in thatapplies if previous year do not during previous year previous year exceed Rs. 40 lacs. doesn’t exceed 10 lacs doesn’t exceed Rs. 40 lacs.Deemed 8% of Gross receipts (No. of heavy goods 5% of GrossProfits vehicle x Rs. 3500 x receipts or such NM) + (No. of other higher sum as vehicles x Rs. 3150 declared by him x NM) in his Return of03/24/12 NM = No. of months Income. 76
  77. 77. DEPRICIATION [Sec. 32]• Depreciation allowance [Sec. 32] - Depreciation shall be determined according to the provisions of section 32.• Conditions for claiming Depreciation - In order to avail depreciation, one should satisfy the following conditions: – Asset must be owned by the assessee. – It must be used for the purpose of business or profession. – It should be used during the relevant previous year. – Depreciation is available on tangible as well as intangible assets. 03/24/12 77
  78. 78. Contd…• Block of Assets [Sec. 2(11)] - The term “block of assets” means a group of assets falling within a class of assets comprising – – tangible assets, being buildings, machinery, plant or furniture; – intangible assets, being know-how, patents, copyrights, trade marks, licenses, franchises or any other business or commercial rights of similar nature. – In respect of which the same percentage of depreciation is prescribed.03/24/12 78
  79. 79. Contd…• Written Down Value [Sec. 43(6)] - Written down value for the assessment year 2009-10 will be determined as under: Find out the depreciated value of the block on the Step 1 April 1, 2008. To this value, add “actual cost” of the asset (falling Step 2 in the block) acquired during the previous year 2008-09. From the resultant figure, deduct money received/receivable (together with scrap value) in Step 3 respect of that asset (falling within the block of assets) which is sold, discarded demolished or destroyed during the previous year 2008-09.03/24/12 79
  80. 80. Contd…• 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. 03/24/12 80
  81. 81. Contd…Additional depreciation @ 20% is available on new plant ormachinery acquired & installed after 31.03.05, if used inproduction or manufacturing.If asset is used for less than 180 days during the previous year,in which its purchased, then deprecation & additionaldepreciation is restricted to 50% of actual depreciation.However in subsequent year full depreciation is allowedirrespective 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.03/24/12 81
  82. 82. PartnershipDeductibility of interest paid to partners by firm dependsupon following :- – Payment of interest should be authorized by the partnership deed – Payment of interest should pertain to the period after the partnership deed. – Rate of interest should not exceed 12 percentDeduction of Remuneration to Partners can be claimedif paid :- – to a Working Partner – According to the Partnership Deed – Does not exceed the Permissible Limits.03/24/12 82
  83. 83. Contd… The maximum amount of salary paid to all the partners during the previous year should not exceed the limits given below :-In case of a firm carrying of a profession referred to in section 44AAOn the first Rs. 1,00,000 of the book Rs. 50,000 or at the rate of 90 percentprofit or in case of a loss of the book profit, whichever is moreOn the next Rs. 1,00,000 of the book At the rate of 60 percentprofitOn the balance of the book profit At the rate of 40 percentIn the case of any other firmOn the first Rs. 75,000 of the book Rs. 50,000 or at the rate of 90 percentprofit or in case of a loss of the book profit, whichever is moreOn the next Rs. 75,000 of the book At the rate of 60 percentprofitOn the03/24/12 balance of the book profit At the rate of 40 percent 83
  84. 84. Minimum Alternate Tax (MAT)Applicability of Minimum alternate tax (MAT) sec. 115JB :-•Minimum alternate tax (MAT) sec. 115 JB MAT isapplicable in case of companies only.•If tax liability of a company under normal provision islower than 10% of book profit.•In such case, book profit shall be deemed as total income& 10% of book profits should be deemed as tax liability.•Up to assessment year 2001-02 these provisions werecovered by sec. 115 JA. 03/24/12 84
  85. 85. Contd…• A company is allowed credit of tax paid u/s 115- JB for the assessment year 2006-07 and onwards in accordance with the provisions of section 115-JAA.• MAT credit can be carried forward for a period of seven years. Index03/24/12 85
  86. 86. 03/24/12 86
  87. 87. Basis of ChargeCapital Gain’s tax liability arises only when thefollowing conditions are satisfied:•There should be a capital asset.•The capital asset is transferred by the assessee•Such transfer takes place during the previous year.•Any profit or gains arises as a result of transfer.•Such profit or gains is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, and 54GA03/24/12 87
  88. 88. Capital Assets“Capital asset” is defined to include property of any kind,whether fixed or circulating, movable or immovable, tangible orintangible. However, following are excluded from the definitionof “capital assets”:2.Any stock-in-trade, consumable stores or raw material held forthe purposes of business or profession.3.Personal effects of the assessee, that is to say, movableproperty including wearing apparel and furniture held for hispersonal 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”. 03/24/12 88
  89. 89. Contd…1. Agricultural land in India provided it is not situated – – in any area within the territorial jurisdiction of a municipality or cantonment board, having a population of 10,000 or more; or – in any notified area.2. 6½ percent Gold Bonds, 1977 or 7 percent Gold Bonds, 1980 or National Defense Gold Bonds, 1980 issued by the Central Government.3. Special Bearer Bonds, 1991.4. Gold Deposit Bonds issued under Gold Deposit Scheme, 1999. 03/24/12 89
  90. 90. Short-term / Long-term Capital Assets“Short term capital asset” means a capital asset held by anassessee for not more than 36 months, immediately prior toits date of transfer. In other words, if a capital asset is heldby an assessee for more than 36 months, then it is knownas “long term capital asset.”However in following cases 36 months will be replaced by12 months :-• Equity or preference shares in a company•Listed Securities•Units of UTI•Units of a mutual fund specified under section 10(23D)•Zero coupon bonds 03/24/12 90
  91. 91. Important Terms• 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. 03/24/12 91
  92. 92. Contd…• 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.03/24/12 92
  93. 93. Contd…• 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.03/24/12 93
  94. 94. Capital Gain Exemption• 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. 03/24/12 94
  95. 95. Contd…• Investment in certain bonds [S.54EC] :- Available to all assesses on transfer of any long-term capital asset for purchase of Bonds, redeemable after 3 years issued by(a) National Highway authority of India; or(b) Rural Electrification Corporation,03/24/12 95
  96. 96. Contd…• 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.03/24/12 96
  97. 97. Contd…• 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.03/24/12 97
  98. 98. Contd…• 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.03/24/12 98
  99. 99. Contd…• 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.03/24/12 99
  100. 100. Computation of Short-term Capital Gains Particulars AmountFull Value of Consideration XXX xxx ess: Expenses incurred wholly and exclusively for such Consideration Net transfer XXXLess: Cost of Acquisition xxxLess: Cost of Improvement xxxLess: Exemption u/s 54B, 54D, 54G, 54GA xxx Taxable Short -term Capital gains XXX03/24/12 100
  101. 101. Computation of Long-term Capital Gains Particulars AmountFull Value of Consideration XXX xxx ess: Expenses incurred wholly and exclusively for such Consideration Net transfer XXXLess: Indexed Cost of Acquisition xxxLess: Indexed Cost of Improvement xxxLess: Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, xxx54GA Taxable Long- term Capital gains XXX03/24/12 101
  102. 102. Indexed Cost Cost Inflation Index (CII) for the Cost of first year in which acquisition / the asset was heldIndexed Cost improvement of by the assessee or x CostAcquisition / for the year inflationImprovement Index of the beginning on year of 1.4.1981, transfer whichever is later / the year of improvement03/24/12 Index 102
  103. 103. 03/24/12 103
  104. 104. General [Section 56(1)] Income of every kind, which is not to be excluded from the total income and not chargeable to tax under any other head, shall be chargeable under the head “Income from Other Sources”.03/24/12 104
  105. 105. Specific Income [Section 56(2)]• Dividends.• Lottery winnings etc.: Winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.• Any sum received by an employer-assessee from his employees as contributions to any welfare fund, if the same is not chargeable under the head ‘Profits and Gains of Business or Profession.’• Income by way of interest on securities if not chargeable as Profits and Gains of Business or Profession 03/24/12 105
  106. 106. Contd…1. 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’.2. 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.’3. Interest on bank deposits and loans03/24/12 106
  107. 107. Contd…1. 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.”2. Cash Gifts exceeding Rs. 50,0003. Interest on foreign government securities4. Agricultural income received from outside India5. Income from sub-letting6. Director’s fee7. Income of race establishment03/24/12 Index 107
  108. 108. 03/24/12 108
  109. 109. Cases where Clubbing Applies• 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. 03/24/12 109
  110. 110. Contd…• 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 consideration03/24/12 110
  111. 111. Contd…• 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.03/24/12 111
  112. 112. Contd…• 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.03/24/12 112
  113. 113. Undisclosed Income / Investments• 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.03/24/12 113
  114. 114. Contd…• 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.03/24/12 114
  115. 115. Contd…• 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.03/24/12 115
  116. 116. Contd…• 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. 03/24/12 116
  117. 117. Contd…• 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. 03/24/12 Index 117
  118. 118. 03/24/12 118
  119. 119. Process of Set-off & Carry ForwardThe process of setting off of losses and their carryforward may be covered in the following steps: Inter-source adjustment under the same head of Step 1 income Inter-head adjustment in the same assessment Step 2 year. Step 2 is applied only if a loss cannot be set off under Step 1. Carry forward of loss. Step 3 is applied only if a Step 3 loss cannot be set off under Steps 1 and 2.03/24/12 119
  120. 120. Unabsorbed DepreciationWhile dealing with unabsorbed depreciation oneshould keep in mind the following points: Depreciation allowance of the previous year is first Step 1 deductible from the income chargeable under the head “Profits and gains of business or profession”. If depreciation allowance is not fully deductible under the head “Profits and gains of business or profession” because of absence or inadequacy of Step 2 profits, it is deductible from income chargeable under other heads of income [except income under the head “Salaries”] for the same assessment year. If depreciation allowance is still unabsorbed, it can be Step 3 carried forward to the subsequent assessment year(s) by the same assessee.03/24/12 120
  121. 121. Inter-Source Set Off [Section 70]Loss arising from one source of income under a head canbe set off against income arising from any other sourceunder the same head, except in the following cases – 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 Income from business of owning maintaining race horse and maintaining race horse Loss from lottery, card games, Income from lottery, card games, gambling betting etc. gambling betting etc. 03/24/12 121
  122. 122. Inter-Head Set-off [Section 71]Loss arising under one head of income can be set offagainst income under any other head, except in thefollowing cases –2.Loss arising under the head capital gain cannot be setofffrom income under any other head3.Losses under the head “Profits and gains of business orprofession” cannot be set off against income under thehead “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’. 03/24/12 122
  123. 123. Provisions relating to carry forward and setoff of losses No. of years for Loss to be carried Income against whichSec. which it can be forward the loss can be setoff carried forward71B Loss from house property Income from house 8 years from the end property of the relevant A.Y.72 Losses under ‘Profits & Profits of any Business/ 8 years from the end Gains of Business or Profession (including of the relevant A.Y. Profession’, except speculation business profits also) speculation business loss.73 Losses in speculation Income from 4 years from the end business. speculation business of the relevant A.Y.74 Losses under the head Capital Gains 8 years from the end Capital gains. of the relevant A.Y.74A Loss incurred in activity of Income from owning 4 years from the end owning and maintaining and maintaining race of the relevant A.Y. race horses. horses03/24/12 Index 123
  124. 124. 03/24/12 124
  125. 125. Meaning“Agricultural Income” means:2. Any rent or revenue derived from land which is situated in India and used for agricultural purposes [sec. 2(1A) (a)].3. 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)].4. Income attributable to a farm house subject to certain conditions.5. 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.03/24/12 125
  126. 126. Partially Agricultural & Partially Business Income [Rules 7, 7a, 7b And 8] BUSINESS AGRICULTURAL INCOME INCOME INCOMEGrowing and manufacturing tea in India 40% 60%Sale of centrifuged latex or cenex orlatex based creps (such as pale latex 35% 65%crepe) or brown crepes (such as estatebrown crepe, remilled crepe, smokedblanket crepe or flat bark crepe) ortechnically specified block rubbersmanufactured or processed from fieldlatex or coagulum obtained from rubberplants grown by the seller in IndiaSale of coffee grow and cured by seller 25% 75%Sale of coffee grown, cured, roasted 40% 60%and grounded by seller in India with orwithout mixing chicory or otherflavoring ingredients03/24/12 126
  127. 127. The Scheme of Partial Integration ofNon-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 – The taxpayer is an individual, a Hindu undivided family, a Condition 1 body of individual, an association of persons or an artificial juridical person. 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 Condition 2 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. 03/24/12 127
  128. 128. Contd… Income-tax will be computed for the assessment year 2009-10 in the following manner: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. Index 03/24/12 128
  129. 129. 03/24/12 129
  130. 130. Introduction• Deductions to be made [Section 80A] :• The total income of an assessee is to be computed after making deductions permissible u/s 80C to 80U. However, the aggregate amount of deductions cannot exceed the Gross Total Income.• No deduction from certain (following) Incomes : Long term Capital Gains referred u/s 112, and Short Term Capital gains referred u/s 111A. Winnings from lotteries, races, etc. as referred to in section 115BB. Incomes referred to in section 115A (1) (a), 115AC, 115ACA, 115AD, 115BBA and 115D. 03/24/12 130
  131. 131. Deduction for Payment ofLife Insurance Premia, etc., [Section 80C]Deduction under this section is allowed as follows –Deduction is available only in respect of ‘specifiedsums’ actually paid or deposited during the previousyear (sum not actually paid and outstanding is notallowed)Specified sums must have been paid/deposited by anIndividual or HUF; andThe total amount of deduction under this section is subject to a maximum limit of Rs.1,00,000.03/24/12 131
  132. 132. Contribution To Certain Pension Funds [Section 80CCC]• Amount paid or deposited by individual in the previous year – – out of his income chargeable to tax – to effect or keep in force a contract for any annuity plan of LIC or any other insurer – for receiving pension from the fund referred to in section 10(23AAB).• Quantum of Deduction: Deduction shall be allowed to the extent of lower of the following – – Amount so paid or deposited; or – Rs. 1,00,000 03/24/12 132
  133. 133. Contribution to Pension Scheme of CentralGovernment or any Other Employer [Sec. 80CCD]• Deduction in respect of: Deduction is available in respect of both of the following – – Sum deposited by assessee in his account in notified pension scheme; and – Contribution made by Central Govt. or any other employer to assesse’s A/c.• Quantum of Deduction: Deduction shall be allowed to the extent of aggregate of the following - Sum paid/deposited by assessee to the credit of his a/c or 10% of salary, whichever is lower Sum contributed by the employer in assesse’s A/c or 10% of salary, whichever is lower 03/24/12 133
  134. 134. Aggregate Limit u/s 80C, 80CCC & 80CCD The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs.1,00,000. 03/24/12 134
  135. 135. Deduction In Respect Of Health Insurance Premia [Sec. 80D]• Deduction is available in respect of the amount paid to effect or to keep in force health insurance under a scheme – – made by General Insurance Corporation of India (GIC) and approved by Central Government; or – made by any other insurer and approved by Insurance Regulatory and Development Authority.• Deduction shall be to the extent of lower of – – Health insurance premia paid in respect of health of any member of that HUF; or – Rs. 15,000 (Rs. 20,000 in case the insured is a senior citizen). 03/24/12 135
  136. 136. Maintenance of A Dependant Being Person With Disability [Section 80DD]• Deduction is available in respect of – – expenditure incurred for medical / treatment / nursing / training/ rehabilitation, or – amount paid under scheme LIC / UTI other insurer approved by CBDT for maintenance, of a “dependant”, being a person with disability.• Deduction shall be allowed to the extent of – – Rs. 50,000 (Rs. 75,000 in case of dependant suffering with severe disability), irrespective of expenditure incurred or sum paid. 03/24/12 136
  137. 137. Deduction in respect of Medical Treatment, etc. [Sec. 80DDB]• Deduction is available in respect of sum actually paid during previous year for medical treatment of prescribed disease or ailment for the following – – In case of individual: himself or his spouse, children, parents, brothers and sisters, – In case of HUF: its member(s), – dependant mainly on such individual or HUF for his support and maintenance.• Deduction shall be available to the extent of lower of the following – – sum actually paid; or – Rs. 40,000 (Rs. 60,000 in case of a senior citizen). 03/24/12 137
  138. 138. Deduction in respect of Interest on Loan taken for Higher Education [Sec.80E]• Deduction in available in respect of sum paid by the assessee in the previous year, out of his income chargeable to tax, by way of interest on loan taken – – for his higher education, or – for the higher education of his relative.• 100% of the amount of interest on such loan Deduction will be admissible.03/24/12 138
  139. 139. Deduction in respect of Donations [Section 80G]• Deduction is allowed under this section to all assesses in respect of donations of sum of money in the following manner – – 100% deduction will be allowed if donations are given to any of the 19 specified funds. – 50% deduction will be allowed if donations made to any of the 5 specified funds. – 100% deduction shall be allowed subject to the qualifying amount if donations are made for promoting family planning. – 50% deduction shall be allowed subject to the qualifying amount if donations are made towards any of the 5 specified purposes.03/24/12 139
  140. 140. Deductions in respect of Rents Paid [Sec.80GG]• Rent actually paid for any furnished or unfurnished residential accommodation occupied by the Individual, who is not in receipt of any House Rent Allowance (HRA).• The deduction shall be allowed to the extent of least of the following – – Rs. 2,000 per month; – 25% of adjusted total income; – Rent paid less 10% of adjusted Total Income.03/24/12 140
  141. 141. Deduction in respect of person with Disability [Section 80U]• Eligible Assessee: Individual resident in India, who, at any time during the previous year, is certified by the medical authority to be a person with disability• Deduction: Rs. 50,000 (Rs. 75,000 for severe disability). Severe disability means 80% or more of disability.03/24/12 141
  142. 142. Other Deductions Deduction in respect of certain Donations for Scientific Research or Rural Development [Sec.80GGA] Deduction in respect of Contribution to Political Parties [Sec. 80GGB & 80GGC] Profits & Gains from Industrial Undertaking engaged in Infrastructure Development [Sec. 80 IA] Profits & Gains from Undertaking engaged in Development of SEZs [Sec. 80IAB] Profits & Gains from Industrial Undertaking engaged in other than in Infrastructure Development [Sec.80IB]03/24/12 142
  143. 143. Contd… Deduction available to certain Undertakings in certain Special category States [Sec.80IC] Profits & Gains from business of Hotels & Convention Centre in Specified Areas [Sec. 80ID] Special provisions in respect of certain Undertakings in North-Eastern States [Sec. 80IE] Deduction available to assessee in the business of Collecting & Processing Bio-Degradable Waste [Sec.80JJA] Deduction in respect of Employment of New Workmen [Sec. 80JJAA]03/24/12 143
  144. 144. Contd… Deduction from incomes of Off-shore Banking Units & International Financial Services Centre [Sec.80LA] Deduction in respect of income of Co-operative Society [Sec. 80P] Deduction in respect of Royalty Income, etc. of Author of certain Books other than Text Books [Sec.80QQB] Deduction in respect of Royalty Income of Patents [Sec. 80 RRB] Index03/24/12 144
  145. 145. 03/24/12 145
  146. 146. Liability to pay Advance Tax 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 more03/24/12 146
  147. 147. Due Dates Amount payble by Amount payble by Due Date Non-Corporate Corporate Assessee AssesseeOn or before June 15 of Up to 15 percent of -the previous year advance tax payableOn or before September Up to 45 percent of Up to 30 percent of15 of the previous year advance tax payable advance tax payableOn or before December Up to 75 percent of Up to 60 percent of15 of the previous year advance tax payable advance tax payableOn or before March 15 Up to 100 percent of Up to 100 percent ofof the previous year advance tax payable advance tax payable03/24/12 147
  148. 148. Default in payment of Advance Tax [Sec. 234B] Under section 234B(1), interest is payable as follows:When interest is Interest is Rate of interest Period for which interest is payable payable on payableAn assessee who Interest is Simple interest @ 1 From April 1 of the assessmentis liable to pay payable on percent for every year to the date ofadvance tax, has accessed tax month or part of determination of income underfailed to pay such month section 143(1) or where regulartax assessment is made to the date of regular assessmentAn assessee who Assessed tax Simple interest @ 1 From April 1 of the assessmenthas paid advance minus percent for every year to the date oftax but the advance tax month or part of determination of income underamount of month section 143(1) or where regularadvance tax paid assessment is made to the dateby him is less of regular assessmentthan 90 percent ofassessed tax. 03/24/12 148
  149. 149. Deferment of Advance Tax [Sec. 234C]Interest is payable under section 234C if anassessee has not paid advance tax orunderestimated installments of advance tax.Simple Interest at the rate of 1% per month ispayable for period 3 months for each installmentdue. Index03/24/12 149
  150. 150. 03/24/12 150
  151. 151. Time for filing Return of Income [Sec. 139(1)] Different Situations Due Date for filing Return1. Where the assessee is a company September 302. Where the assessee is personother than a company –b)In case where accounts of theassessee are required to be audited September 30under any lawc)Where the assessee is “workingpartner” in a firm whose accounts September 30are required to be audited under anylawd)In any other case July 3103/24/12 151
  152. 152. Filing of Return in Electronic Form [Sec. 139D]Section 139D has been inserted from June 1, 2006. Itprovides that the Board may make rules providing for theclass or classes of persons who shall be required to furnishthe return of income in electronic form; the form and themanner in which the return of income in electronic form maybe furnished; the documents, statements, receipts,certificates or audited reports which may not be furnishedalong with the return of income in electronic form but shall beproduced 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. 03/24/12 152
  153. 153. Filing of Return after Due Date [Sec. 139(4)] If the return is not furnished within the timeallowed under section 139(1) or within the timeallowed under section 142(1), the person may(before the assessment is made), furnish the returnof any previous year at any time before the end ofone year from the end of relevant assessmentyear.03/24/12 153
  154. 154. Consequences of Late SubmissionIf return is submitted after the due date of submission ofreturn of income, the following consequences will beapplicable. These rules are applicable even if a belatedreturn 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. 03/24/12 154
  155. 155. Interest for defaults in furnishing Return of Income [Section 234A]If any person fails to furnish his return of income u/s139 for any assessment year or furnishes such returnafter due date specified in section 139(1), then, he willliable to pay interest at the rate of 1% per month for theperiod beginning from the date immediately followingthe due date of furnishing return of income and endingon the Date of furnishing the return or completion ofassessment, whichever is earlier, calculated on the amount of self-assessment tax payable. Index03/24/12 155
  156. 156. DISCLAIMEROur views expressed herein are based on the facts andassumptions indicated above. The views cannot beconsidered as an authorized representation, warranty orguarantee that the revenue authorities or the courts willconcur with the same. The views are based on the existingprovisions of law and its interpretation, which are subject tochange from time to time. The views contained may not beused or reproduced in whole or in part or otherwise referredto in any document or delivered to any one without our prior written consent.03/24/12 156
  157. 157. 03/24/12 157