For Simple Understanding of Procedure that has to be Applied in Management Accounting and Income Tax-II

1. 6th
Semester B.Com
Management Accounting
Hand Book
Compiled By
Sanjay Sharma.K.R

2. Financial Statement Analysis
Financial Statements Analysis
Financial Statements Analysis is a process of methodical classification of the data given in financial
statements into the desired homogeneous and comparable component parts and study and
explanation of the relationship between them to provide a full picture of the profitability and
financial position of the organization.
Methods of Financial Analysis:
The important techniques or methods of financial analysis include the following:-
1) Comparative Statements, 2) Common size Statements, 3) Trend Analysis, 4) Ratio Analysis
5) Fund Flow Analysis, 6) Cash Flow Analysis, 7) Break Even Point.
Comparative Financial Statement Analysis
Comparative Financial Statements are prepared to reflect the financial data for two or more
periods.
Comparative Financial Statements includes:
a) Comparative Income Statement: It is prepared to compare the various items of income
statements of different periods to ascertain the changes from one period to another.
b) Comparative Balance Sheet: It is prepared to facilitate the comparison of assets and liabilities
of a business on two different balance sheet dates to find out the changes in them.
Comparative Income Statement
For the year ended___________
Particulars 2013
(Rs)
2014
(Rs)
Increase/Decrease
(Amount)
Increase/Decrease
(Percentage)
Sales
Less: Cost Of Goods Sold
Gross Profit
Less: Indirect Expenses
/Operating Expenditure
Profit Before Tax
Less: Income Tax
Net Profit After Tax

3. Comparative Financial Balance Sheet
Particulars 2013
(Rs)
2014
(Rs)
Increase/Decrease
(Amount)
Increase/Decrease
(Percentage)
ASSETS
Fixed Assets
Land & Building XXX XXX XXX XX
Plant & Machinery XXX XXX XXX XX
Furniture & Fixtures XXX XXX XXX XX
Other Fixed Assets XXX XXX XXX XX
Total Fixed Assets (A) XXX XXX XXX XX
Add: Current Assets
Cash in hand & at Bank XXX XXX XXX XX
Bills Receivable XXX XXX XXX XX
Sunday Debtors XXX XXX XXX XX
Stock XXX XXX XXX XX
Prepaid Expenses XXX XXX XXX XX
Total Current Assets (B) XXX XXX XXX XX
Total Assets (A+B) XXXX XXXX XXXX XXX
LIABILITES
Proprietor’s Capital
Preference Share Capital XXX XXX XXX XX
Equity Share Capital XXX XXX XXX XX
Reserves & Surplus XXX XXX XXX XX
Profit & Loss a/c XXX XXX XXX XX
Total Proprietor’s Capital (X) XXX XXX XXX XX
Add: Loan’s Capital
Long term Loans XXX XXX XXX XX
Debentures XXX XXX XXX XX
Total Loans ’s Capital (Y) XXX XXX XXX XX
Add: Current Liabilities
Bills Payable XXX XXX XXX XX
Sundry Creditors XXX XXX XXX XX
Bank Overdraft XXX XXX XXX XX
Other Current Liabilities XXX XXX XXX XX
Total Current Liabilities (Z) XXX XXX XXX XX
Total Liabilities (X+Y+Z) XXXX XXXX XXXX XXX
Interpretation:
(1) Long Term Solvency = Increase or Decrease of (Fixed Assets – Share Capital).
(2) Short Term Solvency = Increase or Decrease in Working Capital (Current Assets – Current
Liabilities). (3) Profitability = Increase or Decrease of Reserves and Surplus.

4. Trend Analysis (Performa)
Year Sales Stock Profit before Tax
Amount Trend
Percentage
Amount Trend
Percentage
Amount Trend
Percentage
2003 XXX XX XXX XX XXX XX
2004 XXX XX XXX XX XXX XX
2005 XXX XX XXX XX XXX XX
2006 XXX XX XXX XX XXX XX
2007 XXX XX XXX XX XXX XX
2008 XXX XX XXX XX XXX XX
Common size Financial Statement Analysis
Common size Financial Statements are the statements to which the dates given in financial
statements are converted into (%) percentages of a Common base amount. Common Size
Statements are also known as component (%) Percentage Statements or 100% statements.
It is a statement in which the sales is taken as 100% and all other items in given data are expressed
are expressed in percentage (%) of sales
Common size Financial Statements includes:
1) Common size Income Statement: It is a statement in which the sales is taken as 100% and
all other items in the given data are expressed are expressed in Percentage of Sales.
2) Common size Balance Sheet: It is a statement in which the total Assets or Liabilities is
taken as 100% and all the items of the balance sheet are expressed as a 100% and all the
items of the balance sheet are expressed as a percentage to the total Assets or Liabilities.
Common size Income Statement
Particulars 2013 2014
Amount Percentage Amount Percentage
Sales XXX XX XXX XX
Less: Cost Of Goods Sold XXX XX XXX XX
Gross Profit XXX XX XXX XX
Less: Indirect Expenses/ Operating
Expenditure
XXX XX XXX XX
Profit Before Tax XXX XX XXX XX
Less: Income Tax XXX XX XXX XX
Net Profit After Tax XXX XX XXX XX

5. Common Size Financial Balance Sheet
Interpretation:
(1) Long Term Solvency = Increase or Decrease of (Fixed Assets – Share Capital).
(2) Short Term Solvency = Increase or Decrease in Working Capital (Current Assets – Current
Liabilities). (3) Profitability = Increase or Decrease of Reserves and Surplus.
Particulars 2013 2014
Amount Percentage Amount Percentage
ASSETS
Fixed Assets
Land & Building XXX XX XXX XX
Plant & Machinery XXX XX XXX XX
Furniture & Fixtures XXX XX XXX XX
Other Fixed Assets XXX XX XXX XX
Total Fixed Assets (A) XXX XX XXX XX
Add: Current Assets
Cash in hand & at Bank XXX XX XXX XX
Bills Receivable XXX XX XXX XX
Sunday Debtors XXX XX XXX XX
Stock XXX XX XXX XX
Prepaid Expenses XXX XX XXX XX
Total Current Assets (B) XXX XX XXX XX
Total Assets (A+B) XXXX XXX XXXX XXX
LIABILITES
Proprietor’s Capital
Preference Share Capital XXX XX XXX XX
Equity Share Capital XXX XX XXX XX
Reserves & Surplus XXX XX XXX XX
Profit & Loss a/c XXX XX XXX XX
Total Proprietor’s Capital (X) XXX XX XXX XX
Add: Loan’s Capital
Long term Loans XXX XX XXX XX
Debentures XXX XX XXX XX
Total Loans ’s Capital (Y) XXX XX XXX XX
Add: Current Liabilities
Bills Payable XXX XX XXX XX
Sundry Creditors XXX XX XXX XX
Bank Overdraft XXX XX XXX XX
Other Current Liabilities XXX XX XXX XX
Total Current Liabilities (Z) XXX XX XXX XX
Total Liabilities (X+Y+Z) XXXX XXX XXXX XXX

6. Fund Flow Analysis
Fund:Fund:Fund:Fund: Fund in fund flow statement refers to net working capital.Net working capital
refers to excess of current assets and liabilities.
Net Working Capital = Total Current Assets – Total Current Liabilities.
Funds flow:Funds flow:Funds flow:Funds flow: It refers to inflow or outflow of working capital.
Inflow of fund:Inflow of fund:Inflow of fund:Inflow of fund: It refers to any transactions which increase net working capital of a
firm.
Outflow of fund:Outflow of fund:Outflow of fund:Outflow of fund: It refers to any transactions which reduce net working capital of a
firm.
Fund Flow Statement:Fund Flow Statement:Fund Flow Statement:Fund Flow Statement: It refers to a statement which shows ‘Sources’ and
‘Application’ of a firm during an accounting year.
Current Assets:Current Assets:Current Assets:Current Assets: These are the assets which are realized within duration of one year.
For example: Cash in hand, Cash at Bank, Debtors, Bills Receivable, Accounts
Receivable, Stock, Prepaid Expenses.
NonNonNonNon----CurrentCurrentCurrentCurrent AssetsAssetsAssetsAssets:::: These are also called as fixed assets, which are employed and
realized for more than one year. For example: Land and Building, Plant and Machinery,
Furniture and Fixtures, Livestock.
Current Liabilities:Current Liabilities:Current Liabilities:Current Liabilities: These are those liabilities which are paid within duration of one
accounting year. For example: Creditors, Bills payable, Provision for Taxation, Bad
Debts, and Bank Overdraft.
NonNonNonNon----CurrentCurrentCurrentCurrent Liabilities:Liabilities:Liabilities:Liabilities: These are those liabilities, which are borrowed and repaid
for more than one accounting year. For example: Share Capital, Debenture, Long Term
Loan
Statement of Changes in Working Capital:Statement of Changes in Working Capital:Statement of Changes in Working Capital:Statement of Changes in Working Capital: It refers to statements which shows net
Increase or Decrease in Working Capital when the Total Current Assets are compared
to Total Current Liabilities between two accounting years

7. (1) Preparation of Statement in Changes in Working Capital
Particulars Previous
Year
Current
Year
Effects on Working Capital
Increase Decrease
A. Current Assets
Bank
Bills Receivable
Cash
Debtors
Stock
Total Current Assets (A)
B. Current Liabilities
Bank Overdraft
Bills payable
Creditors
Total Current Liabilities (B)
C=(A-B) = Working Capital
Net Increase or decrease of
Working Capital
Total
(2) Working Note:
Preparation of APreparation of APreparation of APreparation of Assets or Liabilitiesssets or Liabilitiesssets or Liabilitiesssets or Liabilities accounts (only in case of adjustments)accounts (only in case of adjustments)accounts (only in case of adjustments)accounts (only in case of adjustments)
Asset a/c
Particulars Amount Particulars Amount
To balance b/d xxx By Cash / Bank
(Asset Sold)
xxx
To Cash/ Bank a/c
(Asset Purchased)
xxx By Adjusted P&L a/c
(Deprecation)
xxx
To Profit on Sale of Investment xxx By Loss on sale of Asset xxx
By balance c/d xxx
XXXX XXXX

8. Provision for Taxation a/c
Particulars Amount Particulars Amount
To Cash/ Bank
(Tax Paid)
xxx By balance b/d xxx
To balance c/d xxx By Adjusted P&L
(New Provision)
xxx
XXXX XXXX
Proposed Dividend a/c
Particulars Amount Particulars Amount
To Cash/ Bank
(Dividends Paid)
xxx By balance b/d xxx
To balance c/d xxx By Adjusted P&L
(New Provision Created)
xxx
XXXX XXXX
(3) Calculation of Funds from Operation (FFO)
Particulars Amount
Net Profit of the Current Year XXX
Add: Non-Operating Expenditure
Depreciation XXX
Dividends/ Interest Provision XXX
Goodwill/Preliminary Expenses Written Off XXX
Loss on sale of Asset/Investment XXX
Tax Provision XXX
XXX
Less : Non-Operating Income
Profit on Sale of Investment / Fixed Assets XXX
Dividend / Interest Received XXX
XXX
Less: Net Profit of Last Year XXX
Fund from Operation(FFO) XXXX

9. (4) Preparation of Fund Flow Statement (F.F.S)
In the books of___________________
Fund Flow StatementFund Flow StatementFund Flow StatementFund Flow Statement
For the year ended_____________
Particulars Amount
Sources of Fund :
Issue of Shares XXX
Issue of Debentures XXX
Sale of Fixed Assets / Investments XXX
Raising of long term loans XXX
Funds From Operation XXX
Net Decrease in Working Capital XXX
Total Sources (A) XXXX
Applications of Fund:
Purchase of Fixed Assets / Investments XXX
Redemption or Repayment of Shares or Debentures or
Long term Loan
XXX
Tax Paid XXX
Dividends Paid XXX
Net Increase in Working Capital XXX
Total Applications (B) XXXX

10. Fund:Fund:Fund:Fund: Fund in Cash flow statement refers to cash and cash equivalents.
Cash refers to Cash in Hand & Cash at Bank.
Cash equivalents refer to those assets which can be converted into cash easily
without much loss.
Cash flow:Cash flow:Cash flow:Cash flow: It refers to inflow or outflow of cash and cash equivalent balance in an
accounting year.
Cash Inflow:Cash Inflow:Cash Inflow:Cash Inflow: It refers to any transactions which increase cash and cash equivalent
of a firm.
Cash Outflow:Cash Outflow:Cash Outflow:Cash Outflow: It refers to any transactions which reduce cash and cash equivalent
of a firm.
Cash Flow Statement:Cash Flow Statement:Cash Flow Statement:Cash Flow Statement: It refers to a statement prepared to show inflow or outflow
of cash and cash equivalent balance due to changes in transaction of operating,
investing & financing activities of a firm.
Cash flow from activitiesCash flow from activitiesCash flow from activitiesCash flow from activities
In the cash flow statement the business activities are classified into:
Operating Activities
Investing Activities
Financing Activities
a) Operating Activities:Operating Activities:Operating Activities:Operating Activities: These are principles or primary revenue generally
activities which involves consideration of operating Sales Income or increase or
decrease in current assets or current liabilities.
b) Investing Activities:Investing Activities:Investing Activities:Investing Activities: These are those activities which make increase or decrease
in cash balances due to acquisition (purchase) and disposal (sale) of Fixed Assets
and Long Term Investments.
c) Financing Activities:Financing Activities:Financing Activities:Financing Activities: These are those activities involved in issue or repayment
of shares, debentures and long term loans.

11. Performa of Cash Flow Statement (AS-3)
(Indirect Method)
Particulars Amount Amount
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit for the Current Year xxx
Add: Non Cash and Non-Operating Expenses
Depreciation xxx
Loss on Sale of Fixed Assets or Investments xxx
Goodwill Written off xxx
Preliminary Expenses Written off xxx
Provision for Taxation xxx
Provision for Dividend xxx
Transfer to Gross Profit xxx
Dividends, Interest Paid xxx
XXX
Less: Non Cash and Non-Operating Income
Dividend, Interest Received xxx
Profit on Sale of Fixed Assets or Investments xxx
Operating Profit before adjustment of changes in
Current Assets and Current Liabilities XXX
Add: Increase in Current Liabilities xxx
Decrease in Current Assets xxx
XXX
Less: Decrease in Current Liabilities xxx
Increase in Current Assets xxx
Operating profit before extra-ordinary items
adjustment XXX
Less: Extra Ordinary Items:
Income Tax Paid xxx
Cash flow for used in Operating Activities XXXX
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed Assets or Investments xxx
Sale of fixed Assets or Investments xxx
Dividend or Interest Received xxx
Cash flow for used in Investing Activities XXXX

12. CASH FLOW FROM FINANCING ACTIVITIES
Issue of Shares or Debentures xxx
Raising of long term loan xxx
Redemption of Shares or Debentures xxx
Repayment of LLT xxx
Payment of Interest, Dividend xxx
Cash flow used in Financing Activities XXXX
Net Cash Flow used XXXX
Add: Opening balance of Cash and Cash Equivalent XXXX
Closing balance of Cash and Cash Equivalent XXXX
Difference between Fund Flow Statement and Cash Flow Statement
Advantages of Cash flow Statement:
It reveals the causes of change in cash position.
It is helpful in understanding the current cash position of the business
It helps the Management in demerging policies regarding Financial Management
It facilities effective and efficient cash planning
It helps the management to understand the cycle of the business and to control the
cash in future
Disadvantages of Cash flow Statement:
It may not represent the real liquidity of a business
It cannot help to replace an income statement or a Fund Flow Statement.
It is very difficult to define the term cash precisely and hence cash analysis may not be
useful under all the circumstance
Basis of difference Fund Flow Statement Cash Flow Statement
Basis of concept It is based on a wide concept of funds It is based on a narrow Concept
of fund
Basis of Accounting
It is based on accurate basis of
accounting
It is based on cash Basis of
accounting
Schedule of changes
on W.C
Schedule of changes in W.C prepared to
show changes in CA and CL
No such Schedule of changes in
W.C prepared
Method of
Preparing
F.F.S reveals the sources and application
of funds.Net diff b/w sources &
application of funds represent net
increase or decrease in Working Capital
It is prepared by classifying all
cash inflows & out flows in terms
of operating, investing &
financing activities
Basis of Usefulness
It is useful in planning intermediate and
long term financing
It is more useful for short term
and cash planning

13. Rule of Thumb= 2:1
Rule of Thumb= 1:1
Rule of Thumb= 1:2
or 0.50:1
Ratio Analysis
Liquidity ratio
1) Current Ratio/Working Capital Ratio:-
Current Ratio is called as Working Capital ratio. This ratio expresses relationship between Current Assets
and Current liabilities.
Current Ratio =
େ୳୰୰ୣ୬୲ ୅ୱୱୣ୲ୱ
େ୳୰୰ୣ୬୲ ୐୧ୟୠ୧୪୧୲୧ୣୱ
Where; Current Assets= 2
Current Liabilities= 1
2) Quick /Acid Test/Liquid Ratio:-
Quick Ratio expresses relationship between Quick Assets and Current Liabilities.
Quick Assets refer to current assets which are excluded Inventory and Prepaid Expenses.
Quick Ratio =
୕୳୧ୡ୩ ୅ୱୱୣ୲ୱ
େ୳୰୰ୣ୬୲ ୐୧ୟୠ୧୪୧୲୷
OR
Quick Ratio =
େ୳୰୰ୣ୬୲ ୅ୱୱୣ୲ୱିሺ୍୬୴ୣ୬୲୭୰୷ା୔୰ୣ୮ୟ୧ୢ ୉୶୮ୣ୬ୱୣୱሻ
େ୳୰୰ୣ୬୲ ୐୧ୟୠ୧୪୧୲୧ୣୱ
Where; Quick Assets= 1
Current Liabilities= 1
3) Absolute Liquid Ratio / Cash Ratio:-
Absolute Liquid Ratio is also called as Cash ratio the expresses relationship between Absolute Liquid Assets
and Current liabilities. Absolute Liquid Assets are Cash in hand, Cash at Bank & Marketable Securities
Absolute Liquid Ratio =
୅ୠୱ୭୪୳୲ୣ ୐୧୯୳୧ୢ ୅ୱୱୣ୲ୱ
େ୳୰୰ୣ୬୲ ୐୧ୟୠ୧୪୧୲୧ୣୱ

14. Turnover Ratios
1) Stock/Inventory turnover /Velocity Ratio
It is a ratio which shows the speed at which the stock or Inventory is converted into Sales. It can be
calculated by using the following formula
Inventory Turnover Ratio =
େ୭ୱ୲ ୭୤ ୋ୭୭ୢୱ ୗ୭୪ୢ
୅୴ୣ୰ୟ୥ୣ ୱ୲୭ୡ୩/୍୬୴ୣ୬୲୭୰୷
OR
Inventory Turnover Ratio =
୒ୣ୲ ୗୟ୪ୣୱ
୍୬୴ୣ୬୲୭୰୷
OR
Inventory Turnover Ratio =
୒ୣ୲ ୗୟ୪ୣୱ
୅୴ୣ୰ୟ୥ୣ ୗ୲୭ୡ୩/ ୍୬୴ୣ୬୲୭୰୷
Where:
Cost of Goods Sold (COGS) = Sales – Gross Profit
Average Stock =
୓୮ୣ୬୧୬୥ ୗ୲୭ୡ୩ାେ୪୭ୱ୧୬୥ ୗ୲୭ୡ୩
ଶ
Inventory or Stock Conversion Period:
Inventory Conversion Period =
୒୭ ୭୤ ୢୟ୷ୱ ୧୬ ୟ ୷ୣୟ୰
ୗ୲୭ୡ୩ ୘୳୰୬୭୴ୣ୰ ୖୟ୲୧୭
2) Debtors Turnover Ratio (Velocity)
Debtors Turnover Ratio is a ratio which indicates the speed at which the average debtors are turnover into
sale during the year.
Debtors Turnover Ratio =
୒ୣ୲ ୅୬୬୳ୟ୪ େ୰ୣୢ୧୲ ୗୟ୪ୣୱ
୅୴ୣ୰ୟ୥ୣ ୈୣୠ୲୭୰ୱ
(Sundry Debtors = Average Debtors – Bills Receivable)

15. Where: Net Annual Credit Sales = Total Sales – Cash Sales – Return Inwards.
Average Debtors =
୓୮ୣ୬୧୬୥ ୈୣୠ୲୭୰ୱାେ୪୭ୱ୧୬୥ ୈୣୠ୲୭୰ୱା୆୧୪୪ୱ ୖୣୡୣ୴ୟୠ୪ୣ
ଶ
Debtors Collection Period or Average Collection Period:
Debtors Collection Period =
୒୭ ୭୤ ୵୭୰୩୧୬୥ ୢୟ୷ୱ ୧୬ ୟ ୷ୣୟ୰
ୈୣୠ୲୭୰ୱ ୘୳୰୬୭୴ୣ୰ ୖୟ୲୧୭
Or
Debtors Collection Period =
୅୴ୣ୰ୟ୥ୣ ୈୣୠ୲୭୰ୱ
୒ୣ୲ େ୰ୣୢ୧୲ ୗୟ୪ୣୱ ୮ୣ୰ ୈୟ୷
3) Creditors Turnover Ratio (Velocity):
Creditors Turnover Ratio =
୒ୣ୲ ୅୬୬୳ୟ୪ େ୰ୣୢ୧୲ ୔୳୰ୡ୦ୟୱୣୱ
୅୴ୣ୰ୟ୥ୣ େ୰ୣୢ୧୲୭୰ୱ
Average Creditors =
୓୮ୣ୬୧୬୥ େ୰ୣୢ୧୲୭୰ୱାେ୪୭ୱ୧୬୥ େ୰ୣୢ୧୲୭୰ୱା୆୧୪୪ୱ ୔ୟ୷ୟୠ୪ୣ
ଶ
4) Creditors Payment Period or Average Payment Period:
Creditors Payment Period =
୒୭ ୭୤ ୵୭୰୩୧୬୥ ୢୟ୷ୱ
େ୰ୣୢ୧୲୭୰ୱ ୘୳୰୬୭୴ୣ୰ ୖୟ୲୧୭
Or
Average Payment Period =
୅୴ୣ୰ୟ୥ୣ େ୰ୣୢ୧୲୭୰ୱ
୒ୣ୲ େ୰ୣୢ୧୲ ୔୳୰ୡ୦ୟୱୣୱ ୮ୣ୰ ୈୟ୷
5) Working Capital Ratio:
Working Capital Ratio =
େ୭ୱ୲ ୭୤ ୗୟ୪ୣ ୭୰ େ୓ୋୗ
୅୴ୣ୰ୟ୥ୣ ୛୭୰୩୧୬୥ େୟ୮୧୲ୟ୪

16. Rule of Thumb= 1:1
SOLVENCEY RATIOS
1) Debt Equity Ratio: It is a ratio which expresses the relationship between Debt Capital and Own
Capital.
Debt Equity Ratio =
ୈୣୠ୲ େୟ୮୧୲ୟ୪
୉୯୳୧୲୷ େୟ୮୧୲ୟ୪
Where, Debt Capital = Total Liabilities – Shareholders fund.
Equity Capital = Share Capital (Equity+ Preference) + Reserves & Surplus
2) Funded Debt to Total Capitalisation:
Funded Debt to Total Capitalisation =
୊୳୬ୢୣୢ ୈୣୠ୲
்௢௧௔௟ ஼௔௣௜௧௔௟௜௦௔௧௜௢௡
X 100
Where, Funded Debt = Total liabilities – Shareholder’s Fund - Current Liabilities
Total Capitalisation= Total liabilities - Current Liabilities
3) Proprietary (or) Equity Ratio:
Proprietary Ratio =
ୗ୦ୟ୰ୣ୦୭୪ୢୣ୰ୱ ୊୳୬ୢ
୘୭୲ୟ୪ ୅ୱୱୣ୲ୱ
Where, Shareholders Fund = Share Capital + Reserves & Surplus
Total Assets = Fixed Assets + Current Assets
4) Solvency Ratio:
Solvency Ratio =
୘୭୲ୟ୪ ୐୧ୟୠ୧୪୧୲୧ୣୱ ୲୭ ୓୳୲ୱ୧ୢୣ୰ୱ
୘୭୲ୟ୪ ୅ୱୱୣ୲ୱ
Where, Total Liabilities to Outsiders = Total Liabilities – Shareholders fund
Total Assets = Fixed Assets + Current Assets

17. 5) Fixed Assets to Proprietors Fund (or) Net Worth Ratio:
Net Worth Ratio: It is a ratio express relation between Fixed Assets after depreciation and
Proprietor’s fund.
Proprietors Fund =
୊୧୶ୣୢ ୅ୱୱୣ୲ୱ ሺୟ୤୲ୣ୰ ୢୣ୮୰ୣୡ୧ୟ୲୧୭୬ሻ
ୗ୦ୟ୰ୣ୦୭୪ୢୣ୰ୱ ୊୳୬ୢ
6) Fixed Assets to Long Term Funds Ratio:
Fixed Assets to Long Term Funds Ratio =
୊୧୶ୣୢ ୅ୱୱୣ୲ୱ ሺୟ୤୲ୣ୰ ୢୣ୮୰ୣୡ୧ୟ୲୧୭୬ሻ
୐୭୬୥ ୘ୣ୰୫ ୊୳୬ୢୱ
7) Current Assets to Shareholders Funds Ratio:
Current Assets to Shareholders Funds Ratio =
େ୳୰୰ୣ୬୲ ୅ୱୱୣ୲ୱ
ୗ୦ୟ୰ୣ୦୭୪ୢୣ୰ୱ ୊୳୬ୢୱ
8) Interest Coverage Ratio:
Interest Coverage Ratio =
୒ୣ୲ ୮୰୭୤୧୲ ሺୠୣ୤୭୰ୣ ୍୬୲ୣ୰ୣୱ୲ ୟ୬ୢ ୘ୟ୶ሻ
୊୧୶ୣୢ ୍୬୲ୣ୰ୣୱ୲ େ୦ୟ୰୥ୣୱ
Profitability ratios
Profitability Ratios: These are the ratios used to measure the profitability of a firm.
1) Gross Profit Ratio:
Gross Profit Ratio =
ୋ୰୭ୱୱ ୔୰୭୤୧୲
୒ୣ୲ ୗୟ୪ୣୱ
X 100
Net Sales = Credit Sales + Cash Sales – Sales Returns

18. 2) Operating Ratio:
Operating Ratio =
୓୮ୣ୰ୟ୲୧୬୥ େ୭ୱ୲
୒ୣ୲ ୗୟ୪ୣୱ
x 100
Operating Cost = Cost of Goods Sold + Operating Expenses
3) Operating Profit Ratio:
Operating Profit Ratio =
୓୮ୣ୰ୟ୲୧୬୥ ୔୰୭୤୧୲
୒ୣ୲ ୗୟ୪ୣୱ
X 100
4) Expenses Ratios:
a) Cost Of Goods Sold Ratio:
Cost Of Goods Sold Ratio =
େ୭ୱ୲ ୭୤ ୋ୭୭ୢୱ ୗ୭୪ୢ
୒ୣ୲ ୗୟ୪ୣୱ
X 100
b) Office and Administration Expenses Ratio:
Office and Admin Expenses Ratio =
Office and Administration Expenses
Net Sales
x100
c) Selling and Distribution Expenses Ratio:
Selling and Distribution Expenses Ratio =
Selling and Distribution Expenses
Net Sales
x100
d) Non-Operating Expenses Ratio:
Non-Operating Expenses Ratio =
୒୭୬ ୓୮ୣ୰ୟ୲୧୬୥ ୉୶୮ୣ୬ୱୣୱ
୒ୣ୲ ୗୟ୪ୣୱ
x 100
5) Cash profit Ratio:
Cash Profit Ratio =
େୟୱ୦ ୔୰୭୤୧୲
୒ୣ୲ ୗୟ୪ୣୱ
x 100
Were, Cash Profit = Net Profit + Depreciation

19. 6th
Semester B.Com
Income Tax-II
Hand Book
Compiled By
Sanjay Sharma.K.R

20. Income from BusinessIncome from BusinessIncome from BusinessIncome from Business (Sec 28 to 44D)
Computation of Taxable Income from Business.
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount Amount
Net profit as per Profit & Loss a/c XXXX
Add: Inadmissible expenses debited to P & L a/c
1. Bad debts recoverable XXX
2. Bearer Cheque or Cash Payment above (Rs 20,000) XXX
3. Capital expenses like purchase of machinery, Extension of Building,
cost of permanent sign board fixed on office premises
XXX
4. Charities and Donation XXX
5. Contribution to Staff Welfare fund XXX
6. Contribution to unapproved or unrecognized fund or political party XXX
7. Difference In trial balance XXX
8. Direct Taxes like Income Tax, Advance tax, Wealth Tax, Interest on
loan for payment of IT
XXX
9. Employee’s contribution to P.F or not paid or before the due date
filing returns
XXX
10. Excess Depreciation XXX
11. Excessive and unreasonable Payments made to relatives XXX
12. Expense relating to other heads of Income such as Municipal taxes of
H.P let out
XXX
13. Expenses incurred to earn tax free Incomes like Cultivation Expenses,
Agricultural Expenses
XXX
14. Fines and Penalties XXX
15. Fringe benefit Tax XXX
16. Gift & Presents (Non Publicity) XXX
17. Illegal Expenses XXX
18. Interest on Capital XXX
19. Legal Expenses to acquire a title or cure a defect in Assessee in title of
Assets
XXX
20. Loss from discontinued Business XXX
21. Loss on sale of Asset (Plant, Machinery, Car, etc.) XXX
22. Preliminary Expenses(Expenses relating to preparation of feasibility
report, Conducting market survey)
XXX
23. Provision for Bad Debts XXX

21. 24. Provisions or Reserves like Reserves for future losses, Provision for
Bad debts & Doubtful debts.
XXX
25. Salary or Interest on Loan Payable outside India without T.D.S XXX
26. Sales Tax, Excise duty, custom duty, local taxes of premises used for
business not paid or before due date.
XXX
27. Speculation Losses XXX
28. Personal expenses like LIC premium paid, NSC, NSS,PPF, Proprietor’s
(salary, bonus) Drawings ,theft from residence, rent paid for self,
household expenses
XXX
XXXX
Less: In Admissible Incomes
1 Agricultural Income XXX
2 Bad Debts recovered but disallowed earlier XXX
3 Customs Duty or Excise Duty recovered but disallowed earlier XXX
4 Dividend from Indian Company or UTI XXX
5 Dharmada Mandir and Gruhashala receipt u/s 113 ITR.579(Allahabad) XXX
6 Gift from friends above (Rs.50,000) XXX
7 Interest from post Savings Bank a/c XXX
8 Income Tax Refund XXX
9 Refund from L.I.C XXX
10 Withdrawal from PPF XXX
11 Depreciation (*) XXX
XXXX
Add: Overvaluation of Opening Stock XXX
Undervaluation of Closing Stock XXX
XXXX
Less: Overvaluation of Closing Stock XXX
Undervaluation of Opening Stock XXX
Taxable Income from Business XXXX

22. (*) Depreciation rates for the Assessment year 2012-13
Particulars Rate
Buildings
a) Residential Buildings except hotel and Boarding Houses 5%
b) Non Residential Building or factory or godens buildings 10%
c) Furniture and fittings 10%
Plant and Machinery
General Plant and Machinery 15%
Motor Car 15%
Airplane 40%
Motor Buses, Lorries & Motor Taxies used in Business 30%
Computers 60%
P&M used in Weaving, Processing & Govt sector or
Textile Industry Purchased
50%
Books; If owned by Assessee : Carrying Profession
Annual Publication 100%
Other books 60%
If books owned by Assessee carrying on Lending business 100%
Typewriter 15%
Surgical Instruments 15%
Intangible Assets (such as patents, Copyrights, Trademarks,
license, franchise or Technical knowhow or Commercial rights)
25%

23. Income from Profession
Medical Practitioner / Doctor
Computation of Taxable Income from Profession (Doctor)
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount
Professional Receipt
Consulting Fees XX
Examiner’s fees XX
Fees for Conducting Operation XX
Gift received from patient for professional services rendered XX
Nursing Home Receipt XX
Sale of Medicine XX
Visiting Fees XX
Any other Professional Receipt XX
Total Professional Receipt XXX
Professional Payments
Less: Professional Expenses or Payments
Rent, Light , Water charges, Salary to staff, Telephone
Expenses of Clinic and hospital
XX
Cost of Medicine(it is calculated in two different scenarios)
a) If accounts are maintained in Cash Basis:
cost of Actual Medicine Purchased during the year
b) If accounts are maintained in Mercantile Basis (P&L) :
Opening Stock + New Purchase – Closing Stock
XX
Depreciation on Books at Prescribed rates XX
Depreciation on Surgical Equipment’s and X-Ray machine at
Prescribed rates
XX
Expenditure incurred to increase professional knowledge XX
Motorcar Expenses –Depreciation relating to Profession work XX
Any other expenditure incurred during the year pertaining to
Profession
XX
Taxable Income from Profession XXXX

24. Note: If Consultation Fees and Rent given in problem has values more than
one year values then:-
In case if the problem is in Cash Basis (consider all year’s Values).
In case if it is in Mercantile Basis (Consider only Financial Year value)
Chartered Accountant / Auditor
Computation of Taxable Income from Profession (Auditor)
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount
Professional Receipt:
Audit Fees XX
Consultancy Services XX
Examiners Fees XX
Gain from Accountancy Work XX
Gift from Client XX
Institute Fees XX
Any other Professional Receipt XX
Total Professional Receipt XXX
Professional Payments:
Less: Professional Expenses or Payments
Audit office Expenditure XX
Depreciation on Books at Prescribed rates XX
Depreciation on Office Equipment or Vehicles XX
Depreciation on office furniture XX
Expenditure incurred to increase professional knowledge XX
Membership Fees XX
Motorcar Expenses –Depreciation relating to Profession work XX
Stipend to trainees XX
Subscriptions XX
Taxable Income from Profession XXXX

25. Advocate / Lawyer
Computation of Taxable Income from Profession (Lawyer)
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount
Professional Receipt:
Arbitration fees XX
Examiners Fees XX
Legal Fees XX
Practicing Fees XX
Present from Client XX
Special Commission XX
Any other Professional Receipt XX
Total Professional Receipt XXX
Professional Payments:
Less: Professional Expenses or Payments
Depreciation on Books at Prescribed rates XX
Expenditure incurred to increase professional knowledge XX
Office Expenditure XX
Purchase of Stamp Paper & Court fees XX
Salary to Staff (if any) XX
Subscriptions XX
Travelling Expenses XX
Taxable Income from Profession XXXX

26. Income from Capital Gain (Sec 45 to 55a)
Capital Assets
Specified Assets Non-Specified Assets
Shares of Company (Preference
or Equity)
Listed Securities (i.e. Debenture
and Govt Securities) quoted on a
listed stock exchange
Specified units of UTI, Mutual
Funds.
All those assets other than
specified assets. (Includes
Jewelry)
Non-Specified assets =
(From the date of Acquisition to
the date of Sale)
Short Term Assets = < 36 Months
Long Term Assets = > 36 Months
Non-Specified assets =
(From the date of Acquisition to
the date of Sale)
Short Term Assets = < 12 Months
Long Term Assets = > 12 Months

27. Computation of Income from Capital Gain (Short Term Capital Gain)
Particulars Amount Amount
Sale Consideration / Full Value Consideration xxxx
Less: Expenses relating to Consideration
i.e. (Brokerage, Commission, Stamp Duty, etc.) xxx
Net Sale Consideration xxxx
Less: Cost of Acquisition xxx
Less: Cost of Improvement xxx
Short Term Capital Gain xxxx
Less: Exemption u/s 54,54B,54D,54G,54GA xxx
Taxable Income From Short Term Capital Gain XXXX
Computation of Income from Capital Gain (Long Term Capital Gain)
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount Amount
Sale Consideration / Full Value Consideration xxxx
Less: Expenses relating to Consideration
i.e. (Brokerage, Commission, Stamp Duty, etc.) xxx
Net Sale Consideration xxxx
Less: Indexed Cost of Acquisition
a) If asset purchased before 1981
Cost of Asset or Fair Market Value (WEH)
Cost of Acquisition X Indexed value of 2012-13
Indexed value (CII)
xxx
Less: Indexed Cost of Improvement
Cost of Acquisition X Indexed value of 2012-13
Indexed value (CII)
xxx
Long Term Capital Gain xxxx
Less: Exemption u/s 54,54B,54D,54G,54GA xxx
Taxable Income From Long Term Capital Gain XXXX
Note: There will be no indexingno indexingno indexingno indexing of cost for bondsbondsbondsbonds and debenturesdebenturesdebenturesdebentures

28. Exemptions U/S 54Exemptions U/S 54Exemptions U/S 54Exemptions U/S 54
U/S 54: a) Capital Gain arising on transfer of Purchase of Residential House. (If
Assessee acquires another HP within one year before or within two years from the date
of transfer or constructs another residential HP within three years from the date of such
transfer). b) Deposited Capital Gain Account Scheme, 1988 opened in any branch of
the nationalized banks before the last date of filing returns that is 31st
July of every
year.
U/S 54 B: Capital Gain arising on transfer to purchase of Agricultural Land.
U/S 54 D: Capital Gain arising on transfer of Industrial Undertaking (i.e. Land, Building,
Plant which is being part in Industrial Undertaking).
U/S 54 EC: Capital Gain arising on purchase of Long Term Specified Capital Asset such
as R.E.C = Rural Electrification Corporation. NHAI = National Highway Authority of India.
Note: i) The investments in long term specified assets should be made within six
months from the date of the date of transfer of original asset.
ii) Long-term specified assets means ANY bond redeemable after three
years and issued after 01-04-2006 by NHAI or the REC
U/S 54 F: Capital Gain arising on transfer to purchase of other than Residential
House.(i.e. Land, Gold, Jewelry,)
Formula: L.T.C.G X Purchase of Asset
N.S.C
U/S 54 G: Capital Gain on the transfer of shifting Industrial Undertaking from Urban
Area to Rural Area.
U/S 54 GA: Capital Gain on the transfer of shifting Industrial Undertaking from Urban
Area to Specialized Economic Zone (S.E.Z).

29. Transactions not regarded as Transfer [sec 47]
1. Any transfer by way of conversion of bonds or debentures, certificates in any form
of a company.
2. Any transfer of a capital asset being any work of national importance notified by the
government
3. Any transfer of capital asset by the predecessor co -operative bank to the successor
co -operative bank in a business re-organization
4. Any transfer of foreign currency bonds or global depository receipts held by a non-
resident to another non-resident, where the transfer is made outside of India.
5. Capital assets derived from total or partial partition of HUF
6. Transfer of capital asset under Amalgamation in India
7. Transfer of capital assets by a Holding company to its Subsidiary in India
8. Transfer of capital assets by a Subsidiary company to its Holding company in India
9. Transfer of land by sick company to its workers
10.Transfer of membership in a registered Stock Exchange
11.Under a will or gift or irrevocable trust
COST INFLATION INDEXCOST INFLATION INDEXCOST INFLATION INDEXCOST INFLATION INDEX
Sl No Financial
Year
CIICIICIICII Sl No Financial
Year
CIICIICIICII
1 1981-82 100100100100 19 1999-00 389389389389
2 1982-83 109109109109 20 2000-01 406406406406
3 1983-84 116116116116 21 2001-02 426426426426
4 1984-85 125125125125 22 2002-03 447447447447
5 1985-86 133133133133 23 2003-04 463463463463
6 1986-87 140140140140 24 2004-05 480480480480
7 1987-88 150150150150 25 2005-06 497497497497
8 1988-89 161161161161 26 2006-07 519519519519
9 1989-90 172172172172 27 2007-08 551551551551
10 1990-91 182182182182 28 2008-09 582582582582
11 1991-92 199199199199 29 2009-10 632632632632
12 1992-93 223223223223 30 2010-11 711711711711
13 1993-94 244244244244 31 2011-12 785785785785
14 1994-95 259259259259 32323232 2012201220122012----13131313 852852852852
15 1995-96 281281281281 33 2013-14 939939939939
16 1996-97 305305305305
17 1997-98 331331331331
18 1998-99 351351351351

30. Income from Other Sources (Sec.56 to 59)
Computation of Taxable Income from Other Sources
Assessee: ___________ Assessment Year: 2013-14,
Status: ____________ Previous Year: 2012-13
Particulars Amount
Agricultural Income from a place outside India XXX
Any Annuity (or)Pension received from L.I.C XXX
Bank Interest on Fixed Deposit XXX
Casual Income XXX
Composite Rent XXX
Deemed Income XXX
Directors fees (or) Commission XXX
Dividend XXX
Examination Fees received by a teacher (not from the Employer) XXX
Gift XXX
Income from Family Pension XXX
Income from Subletting XXX
Insurance Commission XXX
Interest on employees contribution to an URPF XXX
Interest on securities XXX
Mining rent (or) Royalty(or) Ground Rent XXX
Remuneration for lectures delivered XXX
Remuneration received for writing articles in Journals XXX
Rent from land XXX
Rental income from Machinery, Plant, Furniture XXX
Salaries received by a member of parliament (or)M.L.A (or) M.L.C’s XXX
Withdrawal from National Saving Scheme XXX
Other Incomes XXX
Less: Exemptions U/s 57
(Any expenditure incurred wholly for the purpose of earning the
income is deductible )
XX
Taxable Income from Other Sources XXXX

31. Generally What‘s Income from Other Sources?
Ans: This is the last and residual head of any income which is taxable under Act, but does
not find place under any head of Income [Income from Salary, H.P, Business and Capital
Gains] will be Assessable under this Head Income from Other Sources.
If the Assessee is getting Family Pension
1/3 (or) 33.33 % of Family Pension Received
(Or) (Which Ever is Less)
Rs 15,000
Types of SecuritiesTypes of SecuritiesTypes of SecuritiesTypes of Securities
Government Securities
Non- Government Securities /
Commercial Securities
Tax-free Government Securities
(Fully Exempted)
Tax-free Commercial Securities
(Always to be Grossed up)
a) Either the rate of Interest is given
(Or)
b) Interest Amount is given.
Less Tax-free Commercial Securities
a) If Interest Amount is given then
Gross Up
b) If Interest Rate is given do not
Gross Up
Less Tax-free Government Securities
{Fully Taxable without deducting T.D.S}
(No Grossing Up)

32. Tax-free Government Securities: These securities are those, then interested on
which is fully exempt from tax U/S 10(15). Interest on such securities is neither
included in Total Income nor is taxed.
Interest on the following securities, bonds, deposits, etc., is fully exempt from tax:Interest on the following securities, bonds, deposits, etc., is fully exempt from tax:Interest on the following securities, bonds, deposits, etc., is fully exempt from tax:Interest on the following securities, bonds, deposits, etc., is fully exempt from tax:
12-Year National Savings Annuity Certificate
Bonds issued by local authority and specified by the Central Government.
Capital Investment Bonds
Fixed Deposit Scheme governed by the Government Savings Certificate (Fixed
Deposit) Rules, 1968
Fixed Deposit Scheme governed by the Post Office (Fixed Deposit) Rules, 1968
Gold Deposits Bonds, 1999
Interest on 7% Capital Investment Bonds
Interest on notified bonds or debentures of Public Sector Companies
Interest on securities held by the Welfare Commissioner of Bhopal Gas
Victims in the Reserve Bank
N.R.I bonds issued by R.B.I
National Defense Gold Bonds, 1980
National Plan Certificate (10 Years)
National Plan Savings Certificate (12 Years)
Non Resident Rupee Deposit Scheme
Post Office Cash Certificates (5 Years)
Post Office Cumulative Time Deposit Account (15 Years)
Post Office National Savings Certificate (12 Years / 7 Years)
Post Office Savings Bank Account:-
a) Individual Account = Maximum exemption limit = Rs 3,500
b) Joint Account = Maximum exemption limit = Rs 7,000
Public Account in Post Office. (Upto Rs 5,000)
Relief Bonds
Special Bearer Bonds, 1991
Special Deposit Scheme, 1981
Treasury Savings Deposit Certificates (10 Years)
Dividend
In case Dividend from Indian Company Not Taxable
In case Dividend from Foreign Company Taxable
In case Dividend from Cooperative Societies Taxable

33. No T.D.S made for the following
4 ¼ % of National Defense Bonds
6 ½ % Gold Bonds 1977 or 7 % Gold Bonds 1980.
Debenture issue by Cooperative Society
Interest in Government Securities
Interest on Foreign Govt Securities is not grossed up has no TDS on Income.
Seven Year National Saving Certificate.
Rates of TDS:-
Particulars Rate
Bank Interest 10%
Casual Income 30%
Insurance Commission 10%
Interest Received on Securities issued by Stationery bodies
(or) Local Authority
10%
Listed Securities and Unlisted Securities 10%
Grossing Up
Formula for Grossing Up of Income
Net Income X 100
100 – Tax Rate
Rules of Grossing Up of Interest
If The Interest is paid to the Assessee after T.D.S, Such interest should be Grossed Up
because the amount of T.D.S is considered to be a part of the income of the assesse.
The following are:
In case Government Securities “tax is not deducted at Source”. Therefore securities should
not be grossed up .In case of less Tax Securities the amount of interest id given problem
such interest should be assumed to be net interest it should be grossed up.
On other hand if amount of investment and rate of interest id given gross interest
calculated straight away.
In case of tax free commercial securities the interests should always be grossed up
irrespective of fact the amount of investment is given.

34. Very Important Points to remember when grossing up:
Particulars Rate Amount
Income from Crossword Puzzle, Lottery Winnings,( Other than
Horse Race )
30% Above 10,000
Income from Horse Race 30% Above 5,000
Interest on Bank Deposits 10% Above 10,000
Insurance Commission received 10% Above 5,000
If commission is more than apply gross up 5,000
Gift received from relative Exempt
Gift received from Non relative (Fully Taxable if) Above 50,000
Bank Interest on fixed deposit if T.D.S taxable, if income
exceeding
Rs 10,000 p.a
Allowable Expenses under Section 57
1. Bank commission, collection charges
2. Interest on loan taken to acquire an asset whose income is taxable under this head.
3. Standard deduction @ 1/3 of family pension or 15,000 whichever is less
4. Amount paid towards provident fund or ESI authorities by appropriate date by the
employer
5. Depreciation and expenses on repairs, fire insurance premium, local taxes etc., relating
to let out period
6. Any other expenses which is not a personal expenditure or is of capital expenditure and
is incurred to earn an income taxable under this head.
Note 1: there is no deduction of any expenditure out of casual incomes, races, puzzles etc.,
u/s 56(2)
Note 2: Interest on loan payable outside India without TDS is not deductible.

35. Total Income
Quick look at Deductions from 80C to 80U.
Deduction Applicable for Short Detail
80C Individual and HUF Contributing/Investing/Depositing in
the P.Y approved
80CCC Individual only Contribution towards Pension Fund of
LIC or any other Income
80CCD Individual (central govt employees
only)
Contribution for Pension Scheme of
Central Govt by Central Govt
Employee
80D Individual and HUF Contribution towards Medical
Insurance Premium
80DD Individual and HUF Medical Treatment of a dependent
who is a person with Disability
80DDB Individual and HUF Contribution towards any Expenditure
incurred for Medical Treatment of
Assessee or his dependents
80E Individual only Interest paid on Higher Educational
loan taken for Assessee Higher
Education
80G All Assesses For Approved Donation
80GG Individual only For Rent paid of the Residence
80GGA All Assesses Contribution made(Scientific Research
association or University ,Approved
Association, intuitions, Colleges)
80GGC All Assesses( other than local authority
& every artificial judicial person)
Contribution to any Political Party
80U Individual only
For Assessee suffering with Disability
such as (Blindness, Low Vision,
Leprosy cured, Hearing Impairment,
Locomotory Disability, Mental
Retardation, Mental Illness)

36. Deduction U/S 80C
OR
Note: LIC premium on the life of the own or minor restricted to 20% of sum assured or
Spouse Life.
• Approved Super Anuation Fund
• Employees Contribution for SPF,RPF,PPF,(PPF minimum Rs 500 Maximum Rs 7000)
• Housing loan, Principal Amount (including Accrued Interest) (Upto Rs 100,000 per
annum)
• Investment in a term deposit for a period less than 5 Years with any scheduled Bank
• Investment in Shares and Debentures in Public Company engaged in creation of New
80 C
Applicable from A.Y 2006-07
Applicable for Individual &HUF
Contributing/Investing/Depositing in the P.Y for approved
Total Amount Contributed Rs 100,000
Which Ever is Less
Deduction Amount

37. Infrastructure facility.
• Jeevan Dhara, New Jeevan Dhara, New Jeevan Dhara 1, Jeevan Akshay ,New Jeevan
Akshay of LIC
• Non commutable Deferred Annuity Approved
• Notified Mutual Fund
• Notified Pension fund setup by Mutual Fund
• Subscription to National Saving Certificate VI, VII, VIII issue
• Tuition fees for full time education
• Unit Linked Insurance plan of UTI (ULIP of UTI) and (ULIP of LIC , Mutual funds)
Note : The total amount of deduction U/S 80C, 80CCC, and 80CCD cannot exceed
Rs100,000
Deduction U/S 80 CCC
OR
80 CCC
Applicable for Individual only
Contribution towards Pension Fund of LIC or any other Income
Total Amount Contributed Maximum Limit:
Rs 100,000
Which Ever is Less
Deduction Amount

38. Deduction U/S 80 CCD
Note 1 : The deduction is available for both Employee and Employer Contribution
Note 2 : Salary include :- Basic Salary + D.A (if enters) + Total Amount of Deductions U/S
(80C + 80CCC+ 80CCD) [Cannot Exceed Rs 100,000].
80 CCD
Applicable for Individual only (Central Govt Employees)
Contribution for Pension Scheme of Central Government
by Central Govt Employee
Total Amount Contributed 10% of Salary
Which Ever is Less
Deduction Amount
Applicable from A.Y 2006-07

39. Deduction U/S 80D
Note 1: The Deduction is available only of Premium is paid through Cheques
Note 2: Deduction is Increased to Rs 15,000 in case of Non Senior Citizen.
And Rs 20,000 in case of Senior Citizen .Applicable from Assessment Year 2008-09,
80 D
Applicable for Individual and HUF
Contribution towards Medical Insurance Premium Income
Insurance Premium Paid A ) In case of Non Senior Citizen: Rs 15,0000
B ) In case of Senior Citizen: Rs 20,0000
Which Ever is Less
Deduction Amount

40. Deduction U/S 80DD
Note: Amount actually spent is irrelevant (i.e. Rs 5,000 is fixed for deduction)
In case of Severe Disability deductions will be Rs 100,000.
80 DD
Applicable for Individual and HUF
Deduction is in respect of maintenance including Medical
Treatment of a dependent who is a person with Disability
(Spouse, children, parents, Brothers and Sisters)
Maximum Limit:
Rs 50,000
Deduction Amount

41. Deduction U/S 80 DDB
Note: Contribution towards any Expenditure incurred for Medical Treatment of Assessee
or his dependents such as Spouse, or Children, Brother or Sister Suffering from Specified
Disease
Certificate is prescribed from a Specialist, Government Document Is a Must.
80 DDB
Applicable for Individual and HUF
Contribution towards any Expenditure incurred for Medical Treatment
treatmentTreatment of Assessee or his dependents
Insurance Premium Paid A ) In case of Non Senior Citizen: Rs 15,0000
B ) In case of Senior Citizen: Rs 20,0000
Which Ever is Less
Deduction Amount

42. Deduction U/S 80 E
Note:
a) The deduction will be extended to only 8 Assessment Year from the Assessment Year in
which Assessment Year in which Assessee starts paying Interest
b) Preceding to A.Y. 2006-07 even Principle Amount was also eligible for deduction.
But A.Y .2006-07 onwards only Interest amount is eligible.
c) From A.Y. 2008-09 the Benefit extended to Spouse and Children Also.
80 E
Applicable for Individual Only
Interest Paid on Higher Education Loan Taken for Assessee Higher Education
Full Amount Paid as Interest
Only
Deduction Amount

43. Deduction U/S 80 G
Note 1: 100 % Deduction
1. Africa (Public Contribution-India) Fund
2. Andhra Pradesh Chief Minister Cyclone Relief Fund
3. Any fund set up by the Govt of Gujarat for providing Relief to Victims earthquake in
Gujarat
4. Any sum towards 5 Years Time deposit of Post Office from (2008-09)
5. Chief Minister Relief Fund or Governor Relief Fund
6. Fund Central Welfare Fund of the Army, Air force and The Indian Naval Benevolent
funds.
7. Fund set up by a State Government for the Medical Relief to the poor.
8. National Blood transfusion Council for blood transfusion
9. National Defense Fund set up by Central Government
10. National Foundation for Communal Harmony
11. National Illness Association Fund
12. National Sports Fund or National Cultural Fund or Fund for Technology development &
Application
13. National Trust for Welfare of Autism, Mental Retardation & Multiple disabilities.
80 G
Applicable for All Assessee
Interest Paid on Higher Education Loan Taken for Assessee Higher Education
100% Donation
Deduction Amount
50% Donation
Other than
100% & 50% but
approved

44. 14. Prime Minister Earthquake Relief Fund
15. Prime Minister National Relief Fund
16. The Maharashtra Chief Minister Relief Fund
17. University or any other Institute of National Importance
18. Zilla Shakarta Samithi
Note 2: 50% Donation
Indira Gandhi Memorial Fund
Jawaharlal Nehru Memorial Fund
National Children Fund
Prime Minister Drought Fund
Rajiv Gandhi Foundation
Note 3: Other than 100% & 50% but approved
Donation Approved by commissioner of Income Tax which satisfy U/S 80 F(5)(6)
Particulars Amount
Total other than 100% & 50% Donation XXX
OR
10% of GTI for this purpose (WEL) XXX
XXX
Calculation of GTI
Particulars Amount
GTI XXX
Less: Long Term Capital Gain XXX
XXX
Less: Short Term Capital Gain
(Only Sale of Share subject to STT)
XXX
XXX
Less: All Deduction U/S 80C to 80U
(Other than 80G)
XXX
GTI XXXX
Note:
Out of Deduction Amount Donation for Family Planning & Donation to Indian Olympic
Association is eligible for 100% Deduction.
The Balance deductible Amount is eligible for 50% Deductions

45. Deduction U/S 80 GG
Note 1: The GTI calculation same as in the above calculation but deduction U/S 80C to 80U
(other than 80GG)
Note 2: Assessee should not be getting any benefits of H.R.A or Similar helping money for
Paying Rent.
80 GG
Applicable for Individual only
For Rent paid of the Residence
Rs 2000 per Month
(Specified Limit)
25% of GTI for this
Purpose
Rent Paid – 10% of GTI for
this purpose
Deduction Amount
Which Ever is Less

46. Deduction U/S 80 GGA
Note 1): Contribution for Scientific Research Association or University or College or other
Institution for the purpose of Scientific research
2) Approved Association or Institution or Colleges or University or Statistical Research
or Social Sciences
3) National Urban Poverty Eradication Fund
4) Any approved Association Undertaking Rural Development Program (eligible project,
conservation of Natural Resources).
Note: Assessee should not have Income from Business & Profession to claim this deduction
Deduction U/S 80 GGC
80 GGA
Applicable for All Assessee
100% Contribution made
Contribution Made
80 GGC
Applicable for All Assessee other than Local authorities &
Every Artificial Juridical person wholly by Government
100% Contribution made
Contribution to Political Parties
Amount of Deduction

47. Deduction U/S 80 U
Note:
1) In case of severe disability deduction of Rs 100,000 is allowed
2) A Certificate from any hospital or Institution specified by notification by the appropriate
government for the purpose of person with disabilities.
80 U
Applicable for Individual only
For Assessee Suffering with disability such as (Blindness,
Low Vision, Leprosy Cured ,Hearing Impairment, Locomotors
Disability ,Mental Retardation, Mental Illness)
Fixed Amount of
Rs 50,000
Deduction Amount

48. Set Off of Losses & Carry Forwards
Set off of Losses means sitting off of Losses against Income of the same year.
Carry Forward:- If it is not possible to set off the losses during the same Assessment Year in
which they accrued so much of Losses can be carry forward for being Set off against his
income In succeeding years.
Set off of Losses at Glance:
Loss Set Off
1) Loss from House Property a) Income from any other House Property.
b) Any other Heads of Income
2) Loss from Business or Profession a) Income from any other Business or
Profession
b) Any other Heads of Income except salaries
3) Loss from Speculation Business a) Income from Speculation Business
4) Short Term Capital Loss a) Income from Short Term Capital Gain
b) Long Term Capital Gain
5) Long Term Capital Loss a) Income from Long Term Capital Gain Only
6) Loss from activity of owing &
Maintaining Race Horses
a) Income from activity of owing & Maintaining
Race Horses
7) Loss of Lottery, Crossword Puzzles,
Gambling, Card Games or Betting’s
a) Cannot be set off against any Income
Carry Forward And Set off of Losses At Glance
Loss Set Off and Carry Forward
1) Loss from House Property Income from any other House Property in the
following 8 Years
2) Loss from Business or Profession Income from any other Business or Profession in
Following 8 Years
3) Loss from Speculation Business Income from Speculation Business & Following
4 Years
4) Short Term Capital Loss Income from Short Term Capital Gain and Long
Term Capital Gain in following 8 Years
5) Long Term Capital Loss Income from Long Term Capital Gain in following
8 Years
6) Loss from activity of owing &
Maintaining Race Horses
Income from activity of owing & Maintaining Race
Horses in following 4 Years