Income From Five Heads are as Follows1. Income from salary2. Income from house property3. Income from profit or gain from business or profession.4. Income from capital gain.5. Income from other sources.
Complete Process of Computation of Taxable Income & Tax1) Determine the residential status of the assesse2) Determine the incidence of tax3) Classify income after considering specific exemption into respective head.4) Aggregate the income.5) Apply clubing Provision.6) Setoff/Carry forward losses (if any)7) Balance shall be gross total income.
Cont8. Allow deduction 80C to 80U chpt VI A.9. Balance shall be total income.10. Determine the tax payable, applying the rates applicable.11. Deduct rebate/relief of tax.12. Add surcharge.13. Add educational cess.14. Balance is tax payable.15. File return of income before the due date of filing.
Income From SalarySalaries U/S 17(1) include following:-1. Wages2. Pension3. Gratuity4. Any fees, Commission, Perquisite,Profit in lieu of salary5. Any advance salary etc
List of Allowance exempted from tax1. Conveyance allowance .2. Children education allowance .3. Any allowance granted to an employee to meet the hostel expenditure of his child .4. Transport allowance .5. House rent allowance .6. Provident Fund .7. Gratuity .8. Leave travel concession .9. Compensation received at the time of voluntary retirement .10. Encashment of earned leave at the time of retirement .11. Computation of pension .12. Entertainment allowance .
Statement of total income from salary Particular Rs Rs Basic salary XXX Dearness Allowances (DA) XXX House Rent Allowances xxxLess :- Exemptions Under sec10 (13 A) xxx XXX Eduacation Allowances XXXLess :- Exemptions Under sec10 (14) xxx XXX Conveyance Allowance xxxLess :- Exemption Under sec 10(14) xxx XXX Bonus XXX Gratuity xxxLess:- Exemption Under sec 10(10) xxx XXX Perquisities (Taxable) XXX Entertainment Allowances XXX Gross Salary XXXLess :- Deductions U/S 16 xxx U/S 16(2) xxx U/S 16(3) xxx XXX Taxable Income from Salary XXX
INCOME FROM HOUSE PROPERTYSec 22 of Income Tax Act 1961Income from houses, buildings, bungalowsTax is based on Annual value.
POINTS TO BE REMEMBEREDAssessee should be the Owner of the PropertyShould be not be used for Own Business or ProfessionIn Case of Dispute Regarding TitleProperty Let Out along with other AssetsIn case of sub-Letting
ANNUAL VALUE (SEC 23)EXPECTED RENTMunicipal Rent Value (MRV) XXXFair Rental Value (FRV) XXXWhichever is higher (ER) X X X ( If no SR)Standard Rent (SR) ( If available) XXXWhichever is less (ER) XXXFAIR RENTThe rent which a similar property will fetch at the same or nearby similar locality.
MUNICIPAL RENTThe value fixed by the municipal or local authoritySTANDARD RENTRent fixed by the Rent Control ActMax rent an owner can claim from his tenant as rentACTUAL RENTRent for which property has been let out
CALCULATION OF GAV Particular House 1 House 2MRV 1,05,000 1,05,000FRV 1,07,000 1,07,000Whichever is higher 1,07,000 1,07,000SR 1,35,000 1,35,000ER (Whichever is Less) 1,07,000 1,07,000AR 1,12,000 98,000GAV 1,12,000 1,07,000
COMPUTION OF HOUSE PROPERTYINCOME Particulars amount amount Gross Annual Value xxx Less: Municipal tax -Paid by owner xxx Net Annual Value xxx Deduction U/S 24 1. Standard deduction -30% of NAV xxx 2. Int. on borrowed capital- Paid or due xxx xxx Income from House Property xxx
Income from Profit/Gain from Business/ProfessionChargeability Under sec 281. Profit/Gain from any business/Profession2. Profit on sale of import entitlement license3. Duty drawback4. Value of benefit arising from any business/profession5. Income derived by trade/profession6. Income from speculative transaction7. Income received under keyman insurance policy8. Any interest,salary, Bonus, commision or remuneration received by partner of a firm.
Case business income is not taxable u/s 28• Rental business• Dividend on share• Speculative transactions excluded :-Hedging contracts and derivative transaction.
How to compute PGBPU/S 30 Deductions allowedRent takenRepairs not in a nature of capexInsurance premiumU/S 31 Deductions allowed w.r.t plant & machinery.Sec 32 Depreciation
Income from Capital GainChargeability U/S 45 (1)Capital Gain tax liability arises when following conditions get satisfied:-• There should be a Capital Asset• There should be a Transfer• Transfer should be in previous year• Result of transfer should be profit or gain• Such Profit/Gain is not exempt.
Exemption for Capital Assets• Any Stock-in-Trade.• Movable Property (excludes jewellery archeological, Drawings, Paintings, Sculpture).• Agricultural Rural Land.• 65% Gold Bond -1977 / 7% Gold Bonds-1980/ National Defense Gold Bond issued by Central Government.• Special Bearer Bonds 1991.• Gold Deposit Bond issued under Gold deposit scheme 1999.
Types of Capital AssetsThere are two types of Capital AssetsI. Short Term Capital AssetII. Long Term Capital Asset
Income from Other SourcesChargeability U/S 56(2)It includes the following• Dividend.• Windfall from lotteries crossword gambling.• Income by way of interest on securities.• Income from Royalty• Director fees• Income from investment