PROJECT REPORT ON

“Direct Tax Study & Overview”Submitted in partial fulfillment of the requirements

For

Master of Commerce

(2015-2016)

By

Prashant M. Rawal

Roll No.: 12

Under the Guidance of

Ms. Anuradha Parmar

University of Mumbai

Sheth T.J. Education Society’s

SHETH N.K.T.T. COLLEGE OF COMMERCE &

SHETH J.T.T. COLLEGE OF ARTS,

THANE (W)

University of Mumbai

Sheth T.J. Education Society’s

SHETH N.K.T.T. COLLEGE OF COMMERCE &

SHETH J.T.T. COLLEGE OF ARTS,

THANE (W)

CERTIFICATE

OF

PROJECT WORK

This is Certify that PRASHANT M. RAWAL of M.Com-2 (Semester-3) Roll

No.12 has undertaken & completed the project work title “Direct Tax

Study & Overview”. During the academic year 2015-2016 under the Ms.

Anuradha Parmar Submitted on ___________ to this college in fulfillment of

the curriculum of Master of Commerce, University of Mumbai. This is

confiding project work and the information presented is True and Original to

the best of or knowledge and belief.

Project Guide External Examiner

Course Coordinators PRINCIPAL

DECLARATION

I, PRASHANT M. RAWAL hereby declare that the project report entitled “Under

Guidance of Ms. Anuradha Parmar, submitted in partial fulfillment of the

requirement for the award of the Degree of Master of Commerce to Mumbai

University is my Original work.

Signature:

Date:

Place: Thane

ACKNOWLEDGEMENT

I take this opportunity to express and record my thanks and gratitude to Sheth

N.K.T.T. College of Commerce and sheth J.T.T. College of Arts, Thane (w) and

also the entire Faculty of Semester III of M.com-2 Course in the College. Further, I

also knowledge my sincere and special thanks and gratitude to my project Guide

Ms. Anuradha Kayasth, without whose continuous guidance and encouragement

it would not have been possible for me to completed this project work.

I express my thanks to all my colleagues, with whom I have had debates and

discussions on the on the subject, which also helped me to acquire better

understanding and clarity on the subject.

Indian Tax Guide:

An initiation to get general public aware about Income Tax In India and also help people to

satisfy their queries:

Archive for the ‘Heads of Income’ Category

Defination of Income:

August 12, 2008

In order to tax the income of a person the term itself is designed under the Income Tax Act. As

per the Act the term Income includes:

A. Profits and gains of Business or Profession: This includes income from carrying on a

business or income earned by doing any profession.

B. Dividend:

C. Profit in lieu of Salary, perqusite: This includes any amount received by an employee

from his employer other then the salary amount.

D. Allowances granted to the assesse to meet his expenses incurred for performance of his

duties: This includes allowances such as HRA, Medical allowance, etc given by an

employer to his employee.

E. Any capital gains: This means any profit dericed on sale of any capital asset.

F. Winning from lotteries, crossword puzzles, races, card game, T.V. Show , etc

G. Any sum received for fund created for welfare of employees.

One interesting thing in the definition of income is that it can be received in cash or in

kind. More over the Income Tax Act does not make distinction between legal source of

income or illegal source of income. This means that gambling, smugling income is also

chargeable to tax under the Income Tax act. More over gifts of personal nature for eg.

birthday/ marriage gifts are not treated as income (but there are some exceptions in this ).

In all ties one more thing is that the term income does not only means profits but there is

a concept of negative income also.

Heads of Income:

August 8, 2008

In the Income Tax any income earned by a person is broadly categorised into five heads of

income. Any income earned to be taxed must come under any of the five heads of income. The

five heads of income are:

1. Income under Head Salaries: This head taxes the income earned by an individual

as salary from any firm or organisation.

2. Income from House Property: This head taxes rental income received by any

person from way of renting of any immoveable property.

3. Profits and Gains of Business or Profession: This head of income broadly

covers income earned by a person as a result of some business or professional set‑up by

him.

4. Capital Gains: This head of income taxes the income earned on sale of any investment

in form of gold, precious ornaments, shares, etc or immoveable property.

5. Income from other Sources: This head of income covers any income which is not

chargeable to tax under any of the above heads of income. Any income including

gambling or profit/loss on running of race horses, camels, interest income , etc are

chargeable to tax under this head of income.

We will take each Head of Income one by one but first in the next post we will

understand meaning of the term “Income” itself:

OBJECTIVES:

After reading this lesson, you should be able to understand:

Classification of income into various heads.

Concept of salary income

Incomes forming part of salary

The computation of basic salary in grade system

Types of commission an employee can get

The concept of allowances

Various income tax provisions for computing taxable value of allowances

Computation of taxable value of allowances

Income tax in India

The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of

the Constitution of India to levy tax on all income other than agricultural income (subject to

Section 10(1)). The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules

1962, Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual

Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The government

of on taxable income of all persons including individuals, Hindu Undivided Families (HUFs),

companies, firms, association of persons, body of individuals, local authority and any other

artificial judicial person. Levy of tax is separate on each of the persons. The levy is governed by

the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and

is part of the Department of Revenue under the Ministry of Finance, Govt. of India. Income tax

is a key source of funds that the government uses to fund its activities and serve the public. The

Income Tax Department is the biggest revenue mobilize for the Government. The total tax

revenues of the Central Government increased from ₹1392.26 billion (US$21 billion) in 1997-98

to ₹5889.09 billion (US$89 billion) in 2007-08.

Residential status, Scope of taxable income & Charge

Charge to income-tax

Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an

assesses, and shall be chargeable to the income tax at the rate or rates prescribed under the

finance act for the relevant assessment year, shall be determined on basis of his residential status.

Income tax is a tax payable, at enacted by the Union Budget (Finance Act) for every Assessment

Year, on the Total Income earned in the Previous Year by every Person. The chargeability is

based on nature of income, i.e., whether it is revenue or capital. The rates of taxation of income

are-:

Income Tax Rates/Slabs Rate (%) (Applicable for assessment year 2015-16.)

Net income range(Individual resident(Age below60 Yrs.) or any NRI

/ HUF / AOP / BOI

/ AJP)

Netincomerange (Forresident

senior

citizen1)

Net income range(Forsuper senior

citizen2)

Net income range(For any otherpersonexcludingcompanies and co-operativesocieties)

IncomeTaxrates3

Up to ₹250,000 Up to

₹300,000

Up to ₹500,000 Up to ₹200,000 NIL

₹250,001–500,000 ₹300,001–

500,000

_ ₹200,001–500,000 10%

₹500,001–1,000,000 ₹500,001–

1,000,000

₹500,001–

1,000,000

₹500,001–1,000,000 20%

Above ₹1,000,000 Above

₹1,000,000

Above ₹1,000,000 Above ₹1,000,000 30%

A. Senior citizen is one who is 60 years or more at any time during the previous year but

not more than 80 years on the last day of the previous year.

B. Super senior citizen is one who is 80 years or more at any time during the previous year.

C. These slab-rates aren't applicable for the incomes which are to be taxed at special rates

under section 111A, 112, 115, 161, 164 and 167. For instance, long-term capital gains

(except the one mentioned in section 10(38))for all assesses is taxable at 20%. For

individual assesses whose total income does not exceed ₹500,000 after providing for any

deduction under Chapter VI A are eligible for a rebate of up to ₹2,000 under section 87A

(applicable from assessment year 2014-15 onwards). A surcharge of 10% on income tax

payable is applicable for every non-corporate assesses, whose total income exceeds ₹10

million (applicable for assessment year 2014-15).

About 1% of the national population, called the upper class, fall under the 30% slab. It grew 22%

annually on average during 2000-10 to 0.58 million income taxpayers. The middle class, who

fall under the 10% and 20% slabs, grew 7% annually on average to 2.78 million income

taxpayers.

Residential status

Residential status of a person other than an individual:

Type of person Control &management of affairsofthe taxpayer is wholly

in India

Control &management of affairsof thetaxpayer is wholly

outside India

Control &management of affairsof the taxpayeris partly in India

partly outside India

HUF Resident Non-resident Resident

Firm Resident Non-resident Resident

Association ofPersons

Resident Non-resident Resident

Indian company Resident Resident Resident

Foreign company Resident Non-resident Non-resident

Any other personexcept an individual

Resident Non-resident Resident

1. HUF is resident or non-resident, the additional conditions (as laid down for an individual)

should be checked for the karta to determine whether the HUF is ordinary or not-ordinary

resident.

2. An Indian company is the one which satisfies the conditions as laid down under section

2(26) of the Act.

3. Foreign company is the one which satisfies the conditions as laid down under section

2(23A) of the Act.

Scope of total income:

Indian income is always taxable in India not withstanding residential status of the taxpayer.

Foreign income is not taxable in the hands of a non-resident in India. For resident (in case of

firm, association of persons, company and every other person) or resident & ordinarily resident

(in case of an individual or an HUF), foreign income is always taxable. For resident but not

ordinarily resident foreign income is taxable only if it is business income and business is

controlled wholly or partly in India or it is a professional income and profession is set up in

India.

A. Foreign income is the one which satisfies both the following conditions:-

Income is not received (or not deemed to be received under section 7) in India, and

Income doesn't accrue (or doesn't deemed to be accrued under section 9) in India.

If such an income satisfies one or none the above conditions then it is an Indian income.

Heads of income:

The total income of a person is segregated into five heads:-

Income from salaries

Income from house property

Profits and gains of business or profession

Capital gains and

Income from other sources

Income from salaries:

All income received as salary under employer-employee relationship is taxed under this head, on

due or receipt basis, whichever arises earlier. Employers must withhold tax compulsorily

(subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at

Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and

net paid income. The Act contains exemptions including (the list isn't exhaustive):-

Particulars Relevant section for computing exemptionLeave travel concession 10(5)Death-cum-Retirement Gratuity 10(10)Commuted value of Pension (not taxable forspecified Government employees)

10(10A)

Leave encashment 10(10AA)Retrenchment Compensation 10(10B)Compensation received at time of VoluntaryRetirement

10(10C)

Tax on perquisite paid by employer 10(10CC)Amount received from SuperannuationFund to legal heirs of employee

10(13)

House Rent Allowance 10(13A)

Some Special Allowances 10(14)

The Act contains list of perquisites which are always taxable in all cases and a list of perquisites

which are exempt in all cases (List I). All other perquisites are to be calculated according to

specified provision and rules for each. Only two deductions are allowed under Section 16, viz.

Professional Tax and Entertainment Allowance (the latter only available for specified

government employees).

Computation of exemption for gratuity [Section 10(10)]In case of Government employee it is fully exempt from tax.In case of non-government employee covered by Payment of Gratuity Act, 1972 it is exemptfrom tax up to the least of the following:-

15 days' salary for each year of service or part thereof exceeding six months(i.e.,15/26*last drawn salary*completed year of service or part thereof exceeding 6months), or

₹ 1 million, or Gratuity actually received

In case of non-government employee not covered by Payment of Gratuity Act, 1972 it isexempt from tax up to the least of the following:-

₹ 1 million, and Half month's salary for each completed year of service(i.e.,15/30*Average

salary*completed year of service), or Gratuity actually received

Average salary for above purpose is average salary drawn during 10 months immediatelypreceding the month in which the employee retired or ceased to exist.

Computation of exemption of House Rent Allowance(HRA) [Section 10(13A)]The least of the following is exempt:-

Allowance actually received 40 per cent of salary (50 per cent in case of Bombay/Calcutta/Delhi/Madras) Rent paid in excess of 10% of salary

Salary for this purpose means basic plus dearness allowance (if terms of employment soprovide) plus fixed percent commission on turnover.

Computation of exemption for pension [Section 10(10A)]Uncommuted pension is taxable in all cases. Commuted pension is exempt for specifiedGovernment employees. In any other case, commuted pension is exempt to the extent givenbelow:-1/3 of normal pension is exempt if the employee is in receipt of gratuity1/2 of normal pension is exempt if the employee is not in receipt of gratuity

Computation of exemption for Leave encashment [Section 10(10AA)]It is fully exempt in case of specified Government employeesIn other case, it is exempt from tax to the extent of least of the following:-

Amount actually received at the time of retirement ₹ 300,000 10 months average salary Cash equivalent of leave salary in respect of the period of earned leave at the credit

of the employee at the time of retirement, but it cannot exceed 30 days of averagesalary forevery completed year of service

Average salary for the above purpose means average salary drawn during 10 monthsimmediately preceding retirement

Computation of exemption for Retrenchment compensation [Section 10(10B)]It is exempt to the extent of least of the following:-

₹ 500,000, or Amount calculated under section 25F(b) of the Industrial Disputes Act

Computation of exemption for Voluntary Retirement Scheme [Section 10(10C)]Least of the following three amounts is exempt in case of approved/recognized scheme:-

Actual received Rs500,000, Last drawn salary*3*Completed years of service, or, last drawn salary*remaining

months of service; whichever is lower

Computation of deduction for Entertainment Allowance [Section 16 (ii)] and Professional Tax[Section 16 (iii)]Section 16(ii) a deduction in respect of any allowance in the nature of an entertainmentallowance specifically granted by an employer to the assessee is in receipt of a salary fromthe Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefitor other perquisite) or five thousand rupees, whichever is less.Section 16 (iii) a deduction of any sum paid by the assessee on account of a tax onemployment within the meaning of clause (2) of article 276 of the Constitution, leviable byor under any law.

Professional tax is allowed as a deduction to all the employees. It is allowed as a deduction when actually paid.

Income from house property:

Income under this head is taxable if the assessee is the owner of a property consisting of building

or land appurtenant thereto and is not used by him for his business or professional purpose. An

individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Self-

occupied if it is used for own or family's residential purpose. In that case, the Net Annual Value

(as explained below) will be nil. Such a benefit can only be claimed for one house property.

However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as

deduction under section 24, subject to some conditions. In the case of a self occupied house

deduction on account of interest on borrowed capital is subject to a maximum limit of ₹150,000

(if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and

₹30,000 (if the loan is taken before 1 April 1999). For let-out property, all interest is deductible,

with no upper limits. The balance is added to taxable income.

The computation of income from let-out property is as under:-

Gross annual value (GAV) xxxx

Less: Municipal Taxes paid (xxxx)

Net Annual value (NAV) xxxx

Less: Deductions under section 24 (xxxx)

Income from House property xxxx

1) The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable

during the year. The ALV is higher of fair rent and municipal value, but restricted to

standard rent fixed by Rent Control Act.

2) Only two deductions are allowed under this head by virtue of section 24, viz.,

30% of Net annual value as Standard deduction

Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals

or reconstruction of property (subject to certain provisions).

Profits and Gains of business or profession:

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or

Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D.

However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except

sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section

44C is a disallowance provision in the case non-residents. Section44AA deals with maintenance

of books and section 44AB deals with audit of accounts.

In summary, the sections relating to computation of business income can be grouped as under: -

Specific

deductions

Sections 30 to 37 cover expenses which are expressly allowed as

deduction while computing business income.

Specific

disallowance

Sections 40, 40A and 43B cover inadmissible expenses.

Deemed Incomes Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.

Special provisions Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA,

44DB.

Presumptive

Income

Sections 44AD, 44AE 55.

The computation of income under the head "Profits and Gains of Business or Profession"

depends on the particulars and information available.

If regular books of accounts are not maintained, then the computation would be as under: -

Income (including deemed income) chargeable as income

under this head

xxx

Less: Expenses deductible (net of disallowances) under this

head

(xx)

However, if regular books of accounts have been maintained and profit and loss account has

been prepared, then the computation would be as under: -

Net Profit as per profit and loss account xxx

Add : Inadmissible expenses debited to profit and loss account xx

Add: Deemed incomes not credited to profit and loss account xx

Less: Deductible expenses not debited to profit and loss account (xx)

Less: Incomes chargeable under other heads credited to Profit & Loss A/c (xx)

Income from capital gains:

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of

the I.T. Act, 1961 as property of any kind held by an assesses such as real estate, equity shares,

bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for

businesses and personal effects. Transfer has been defined under section 2(47) to include sale,

exchange, relinquishment of asset extinguishment of rights in an asset, etc. Certain transactions

are not regarded as 'Transfer' under section 47. Computation of Capital Gains:-

Full value of consideration xxx

Less: Cost of acquisition (xx)

Less: Cost of improvement (xx)

Less: Expenditure pertaining to transfer incurred by the transferor (xx)

1) In case of transfer of land or building, if sale consideration is less than the stamp duty

valuation, then such stamp duty value shall be taken as full value of consideration by

virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation

before the Assessing Officer.

2) Cost of acquisition & cost of improvement shall be indexed in case the capital asset is

long term.

For tax purposes, there are two types of capital assets: Long term and short term. Transfer of

long term assets gives rise to long term capital gains. The benefit of indexation is available only

for long term capital assets. If the period of holding is more than 36 months, the capital asset is

long term, otherwise it is short term. However, in the below mentioned cases, the capital asset

held for more than 12 months will be treated as long term:-

Any share in any company

Government securities

Listed debentures

Units of UTI or mutual fund, and

Zero-coupon bond

Also, in certain cases, indexation benefit is not be available even though the capital asset is long

term. Such cases include depreciable asset (Section 50), Slump Sale (Section 50B),

Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the

Act. There are different scheme of taxation of long term capital gains. These are:

1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securitiesor mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no taxis payable. STT has been applied on all stock market transactions since October 2004 but doesnot apply to off-market transactions and company buybacks; therefore, the higher capital gainstaxes will apply to such transactions where STT is not paid.

2. In case of other shares and securities, person has an option to either index costs to inflationand pay 20% of indexed gains, or pay 10% of non indexed gains. The cost inflation index ratesare released by the I-T department each year.

3. In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.

All capital gains that are not long term are short term capital gains, which are taxed as such:

Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from

Assessment Year (AY) 2005-06 as per Finance Act 2004. With effect from AY 2009-10

the tax rate is 15%.

In all other cases, it is part of gross total income and normal tax rate is applicable.

For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not

paid). Besides exemptions under section 10(33), 10(37) & 10(38) certain specific exemptions are

available under section 54, 54B, 54D, 54EC (http://topcafirms.com/index.php/whitepaper/ 4376-

capital-gains-exemption-us-54ec-of-income-tax-act-1961), 54F, 54G & 54GA.

Section

54

Section54B

Section54D

Section54EC

Section

54F

Section 54G Section

54GA

Section54GB

Who iseligibletoclai

Individual

/HUF

Indiv

idual

Any

perso

n

Any

perso

n

Individual

/HUF

Any person Any person Indivi

dual/H

UF

mexe

mpti

on

Whichasset iseligibleforexe

mpti

on

Aresidentialhousepropertyor landappurtenant thereto(long

term)

Agriculturalland(ifusedbyindividualor hisparents foragriculturalpurposeduring atleast2yearsimmediatelypriortotrans

fer)

Land/buildingformingpartof anindustrialundertakingwhichiscompulsorilyacquired bytheGovernment&whichisusedduring 2yearsforindustrialpurposespriortoacqui

sition

Anylongtermcapitalasset

Any longtermcapitalasset(otherthanhouseproperty)providedthat on thedate oftransfertheassesseedoes notown morethan oneresidentialhouse

property

Land/building/plant/machineryin order toshift anindustrialundertakingfrom urbanareato rural area

Land/building/plant/machineryin order toshift anindustrialundertakingfrom urbanareato anySpecialEconomicZone

Long-termresidentialproperty iftransfer takesplacebetweeniftransfer takesplaceduring1April2012and31March2017

Whichasse

Residential house

Agricultural

Land/building

BondsofNatio

Aresidentialhouse

Land/building/plant/machinery

Land/building/plant/machinery

Equitysharesin

tshouldbeacquiredtoclaimexe

mpti

on

property landinruralorurbanarea

forindustrialpurpo

se

nalHighwaysAuthority ofIndiaorRuralElectrificationCorporationLimited;Maximumexemptioninonefinancialyearis ₹5

millio

n

property in order toshiftundertakingto rural area

in order toshiftundertakingto any SEZ

eligiblecompa

ny

What isthetimelimitforacquiringthenewasse

t

Purchase:1-yearbackwardor 2 yearsforward;Construction:3years

forward

2yearsforw

ard

3yearsforwa

rd

6monthsforwa

rd

Purchase:1-yearbackwardor 2 yearsforward;Construction:3years

forward

1-yearbackward or3 yearsforward

1-yearbackward or3 yearsforward

Equitysharesinaneligiblecompany tobeacquired onorbeforeduedate of

filing

Howmuch isexe

mpt

Investment in thenewasset orcapitalgain,whicheveris lower(The newassetshouldnot betransferredwithin 3years ofitsacquisitio

n)

Investmentin thenewassetorcapitalgain,whicheverislower(Thenewassetshould notbetransferredwithin 3yearsof itsacqui

sition

)

Investmentinthenewassetorcapitalgain,whicheverislower(Thenewassetshould notbetransferredwithin 3yearsof itsacqui

sition

)

Investmentinthenewassetorcapitalgain,whicheverislower(Thenewassetshould notbetransferredwithin3yearsof itsacquisition);Thenewassetshouldnot beconvertedintomoneyor anyloan/advanceshould notbe

Investment in thenewasset÷Netsaleconsideration×Capitalgain; Theassesseeshould notcompleteconstruction ofanotherresidentialhousepropertywithin 3yearsfrom thedate oftransfer oforiginalasset norshould hepurchasewithin 2yearsfrom thedate oftransfer oforiginalassetanotherhouseproperty

Investment inthe new assetor capitalgain,whichever islower (Thenew assetshouldnot betransferredwithin 3years of its

acquisition)

Investment inthe new assetor capitalgain,whichever islower (Thenew assetshouldnot betransferredwithin 3years of its

acquisition)

Investmentinthenewasset ×capitalgain ÷netsaleconsideration.(Theexemptionisrevoked ifequitysharesaresold/transferredwithin5 yearsfromacquisition orthenewasset issold/transferredby thecompanywithin5 yearsfromacquisi

tion)

Income from other sources:

This is a residual head, under this head income which does not meet criteria to go to other headsis taxed. There are also some specific incomes which are to be always taxed under this head.

1. Income by way of Dividends.

2. Income from horse races/lotteries.

3. Employees' contribution towards staff welfare scheme/ provident fund/ superannuation fund or

any fund set up under the provisions of ESIC Act, received from the employees by the employer.

4. Interest on securities (debentures, Government securities and bonds).

5. Any amount received from keyman insurance policy including the sum allocated by way of

bonus on such policy.

6.Gifts(subject to certain condition and

exemptions)(http://www.indiantaxupdates.com/2012/10/21/tax-on-gift-received-cash-or-non-

cash/).

7. Interest on compensation/enhanced compensation.

8. Income from renting of other than house property.

9. Family pension received by family members after the death of the pensioner.

10. Income by way of interest on other than securities.

takenon thesecurity ofthenewassetwithin3yearsfromthedateof itsacquis

ition

Agricultural income:

Agricultural income is exempt from tax by virtue of section 10(1). Section 2(1A) defines

agricultural income as:-

Any rent or revenue derived from land, which is situated in India and is used foragricultural purposes.

Any income derived from such land by agricultural operations including processing ofagricultural produce, raised or received as rent-in-kind so as to render it fit for the marketor sale of such produce.

Income attributable to a farm house (subject to some conditions). Income derived from saplings or seedlings grown in a nursery.

Income partly agricultural and partly business activities:

Income in respect of the below mentioned activities is initially computed as if it is businessincome and after considering permissible deductions. Thereafter, 40,35 or 25 percent of theincome as the case may be, is treated as business income, and the rest is treated as agriculturalincome.

Income Businessincome

AgriculturalIncome

Growing & manufacturing tea in India 40% 60%Sale of latex or cenex or latex based crepes or brown crepesmanufactured from field latex or coalgum obtained from rubberplants grownby a seller in India

35% 65%

Sale of coffee grown & cured by seller in India 25% 75%Sale of coffee grown, cured, roasted & grounded by seller inIndia

40% 60%

For apportionment of a composite business-cum-agricultural income, other than the

above-mentioned, the market value of any agricultural produce, raised by the assesses or

received by him as rent-in-kind and utilized as raw material in his business, should be

deducted. No further deduction is permissible in respect of any expenditure incurred by

the assesses as a cultivator or receiver of rent-in-kind.

Permissible deductions from Gross Total Income:

Deductions allowed under Chapter VI-A i.e., sections 80C to 80U, cannot exceed gross total

income of an assesses excluding short term capital gains under section 111A and any long term

capital gains. Some deductions under sections 80C to 80DDB are listed below.

Section 80C deductions:

Deduction under this section is available only to an individual or an HUF.

Section 80C of the Income Tax Act allows certain investments and expenditure to be deducted

from total income up to the maximum of Rs 1,50,000 from the Financial Year 2014-15.

Section 80CCC (pension):

Contribution made by the assesses and by employer to New Pension Scheme is admissible for

deduction under this section. The assesses should be an individual who is employed on or after 1

January 2004. The deduction shall be equal to the amount contributed by the assesses and/or by

the employer, not exceeding 10% of his salary (basic dearness allowance). Even a self-employed

person can claim this deduction which will be restricted to 10% of gross total income.

The total deduction available to an assesses under sections 80C, 80CCC & 80CCD is restricted

to 150,000 per annum. However, employer's contribution to Notified Pension Scheme under

section 80CCD is not a part of the limit of 150,000.

Sec 80D:

(1) In computing the total income of an assesses, being an individual or a Hindu undivided

family, there shall be deducted such sum, as specified in sub-section (2) or sub-section

(3), payment of which is made by any mode 95[as specified in sub-section (2B),] in the previous

year out of his income chargeable to tax.

(2) Where the assesses is an individual, the sum referred to in sub-section (1) shall be the

aggregate of the following, namely:- (a) the whole of the amount paid to effect or to keep in

force an insurance on the health of the assesses or his family 96[or any contribution made to the

Central Government Health Scheme] 96a[or such other scheme as may be notified by the Central

Government in this behalf] 97[or any payment made on account of preventive health check-up of

the assesses or his family]as does not exceed in the aggregate fifteen thousand rupees; and (b) the

whole of the amount paid to effect or to keep in force an insurance on the health of the parent or

parents of the assesses 97[or any payment made on account of preventive health check-up of the

parent or parents of the assesses]as does not exceed in the aggregate fifteen thousand rupees.

(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1) shall

be the whole of the amount paid to effect or to keep in force an insurance on the health of any

member of that Hindu undivided family as does not exceed in the aggregate fifteen thousand

rupees.

(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) or in sub-section (3) is

paid to effect or keep in force an insurance on the health of any person specified therein, and

who is a senior citizen, the provisions of this section shall have effect as if for the words "fifteen

thousand rupees", the words "twenty thousand rupees" had been substituted. Explanation:-For

the purposes of this sub-section, "senior citizen" means an individual resident in India who is of

the age of 60[sixty years] or more at any time during the relevant previous year.

(5) The insurance referred to in this section shall be in accordance with a scheme99 made in this

behalf by— (a) the General Insurance Corporation of India formed under section 9 of the

General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the

Central Government in this behalf; or (b) any other insurer and approved by the Insurance

Regulatory and Development Authority established under sub-section (1) of section 3 of the

Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

Amount of Deduction U/Sec 80D

HUF Individual

On whose health insurance

policy can be taken

Any

member

Individual

himself, spouse,

Dependent

children

Parents whether

dependent or not

Total

General deduction 15000 15000 15000 30000

Additional deduction if

insured is a senior citizen

5000 5000 5000 10000

Total 20000 20000 20000 40000

Deduction under Section 80D (http://caknowledge.in/deduction-for-medical-insurance-premium-

usec-80d/) is also available in respect of contribution to Central Government Health Scheme.

However this deduction is not available to HUF. Deduction is available to an individual and only

in respect of health insurance policy taken for Individual himself, spouse and dependent children.

If an individual takes an insurance policy on health of Parents whether dependent or not,

deduction under this Section will not be available.

Deduction under this section within the existing limit, in respect of any payment or contribution

made by the assesses to such other health scheme as may be notified by the Central Government.

Section 80DDB: Deduction in respect of medical treatment, etc:

Deduction is allowed to resident individual or HUF(Hindu Undivided Family ) in respect of

expenditure actually during the PY incurred for the medical treatment of specified disease or

ailment as specified in the rules 11DD for himself or a dependent relative or a member of a HUF.

Section 80E: Education loan interest:

Interest payment on education loan for education in India gets deduction under this section.

Education loan should be for self, spouse, child or the whose legal guardian the assesses is.

Financial institute must be gazette company by the Central Government of India.

Section 80TTA: Interest on Savings Account:

Up to Rs 10,000 earned as interest from savings account in bank, post office or a co-operative

society can be claimed for deduction under this section. This rebate is applicable for individuals

and HUFs.

Section 80U: Disability:

Disabled persons can get a flat deduction on Income Tax on producing their disability certificate.

If disability is severe Rs 1,00,000 can be claimed else Rs 50,000.server here mean disability 80%

or more as per this section.

Section 24: Interest on housing loans:

80CCF and 80D. However, this is only applicable for a residence constructed within three

financial years after the loan is taken and also the loan if taken after 1 April 1999.

If the house is not occupied due to employment, the house will be considered self occupied.

For let out properties, the entire interest paid is deductible under section 24 of the Income Tax

act. However, the rent is to be shown as income from such properties. 30% of rent received and

municipal taxes paid are available for deduction of tax.

P. Chidambaram while announcing his Budget 2013 speech on 28 Feb 2013 also announced that

for the year 2013-14, an additional deduction of ₹ 100,000 would be allowed to be deducted for

the payment of Interest on Home Loan u/s 80EE.[11] This deduction would be allowed provided

that the total value of the loan is not more than ₹ 25,00,000 and the total value of the house is not

more than ₹ 40,00,000 and the loan should be a fresh loan taken during the financial year 2013-

14. This deduction would be over and above the ₹ 150,000 deduction.

The losses from all properties shall be allowed to be adjusted against salary income at the source

itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be

necessary.

Due date of submission of return:

The due date of submission of return shall be ascertained according to section 139(1) of the Act

as under:-

30 September of the Assessment

Year(AY)

If the assesses is a company (not having any inter-nation transaction), or

If the assesses is any person other than a companywhose books of accounts are required to be auditedunder any law, or

If the assesses is a working partner in a firm whose

books of accounts are required to be audited under

any law.

30 November of the AY If the assesses is a company and it is required to furnish

report under section 92E pertaining to international

transactions.

31 July of the AY In any other case.

If the Income of a Salaried Individual is less than ₹ 500,000 and he has earned income through

salary or Interest or both, such Individuals are exempted from filing their Income Tax return

provided that such payment has been received after the deduction of TDS and this person has not

earned interest more than ₹ 10,000 from all source combined. Such a person should not have

changed jobs in the financial year.

CBDT has announced that all individual/HUF taxpayers with income more than ₹ 500,000 are

required to file their income tax returns online. However, digital signatures won't be mandatory

for such class of taxpayers.

Advance tax:

Under this scheme, every assessee is required to pay tax in a particular financial year, preceding

the assessment year, on an estimated basis. However, if such estimated tax liability for an

individual who is not above 60 years of age at any point of time during the previous year and

does not conduct any business in the previous year, and the estimated tax liability is below ₹

10,000, advance tax will not be payable. The due dates of payment of advance tax are:-

In case of corporate assesses Otherwise

On or before 15 June of the

previous year

Up to 15% of advance tax

payable

-

On or before 15 September

of the previous year

Up to 45% of balance of

advance tax payable

Up to 30% of advance tax

payable

On or before 15 December

of the previous year

Up to 75% of balance of

advance tax payable

Up to 60% of advance tax

payable

On or before 15 March of

the previous year

Up to 100% of balance of

advance tax payable

Up to 100% of advance tax

payable

Tax deducted at source (TDS):

The general rule is that the total income of an assesses for the previous year is taxable in the

relevant assessment year. However, income-tax is recovered from the assesses in the previous

year itself by way of TDS. The relevant provisions therein are listed below. (To be used for

reference only. The detailed provisions therein are not listed below.)

Section Nature of payment Threshold limit (upto which no tax isdeductible)

TDS to be deducted

192 Salary to any person Exemption limit As specified for individual

in Part III of I Schedule

193 Interest on securities to any

resident

Subject to detailedprovisions of givenSection

10%

194A Interest (other than interest on

securities) to any resident

₹ 10000 (forBank/cooperativebank) & ₹5000 otherwise

10%

194B Winning from lotteries etc. to

any person

₹ 10000 30%

194BB Winning from horse races to any

person

₹ 5000 30%

194C Payment to resident contractors ₹ 30000 (for singlecontract) & ₹ 75000

2% (for companies/firms)

(foraggregate

consideration in a

financial year)

& 1% otherwise

194D Insurance commission to

resident

₹ 20000 10%

194E Payment to non-resident

sportsmen or sports association

Not applicable 10%

194EE Payment of deposit under

National Savings Scheme to any

person

₹ 2500 20%

194G Commission on sale of lottery

tickets to any person

₹ 1000 10%

194H Commission/brokerage to a

resident

₹ 5000 10%

194-I Rents paid to any resident ₹ 180000 2% (forplant,machinery,equipment)& 10% (forland,building,furniture)

194IA Payment for Purchase of

Immovable Property

₹ 5000000 1%

194J Fees for professional/technical

services; Royalty

₹ 30000 10%

At what time tax has to be deducted at source and some other specifications are subject

to the above sections.

In most cases, these payments shall not to deducted by an individual or an HUF if books

of accounts are not required to be audited under the provisions of the Income Tax Act,

1961 in the immediately preceding financial year.

Income tax slab for FY 2010-11 / A.Y. 2011-12:

New Income tax slab proposed in budget 2010-11 and its impact on Male individual,

Female Individual, HUF and senior citizen

The Finance Minister, in the Budget today, changed the tax slabs for men, women and senior

citizens. The highest tax slab has now been raised from Rs 5 lakh to Rs 8 lakh.

The FM has also increased the limit of deduction available under section 80C. He has allowed an

additional investment of Rs 20,000 for infrastructure bonds taking the total of the limit under

section 80C from the current Rs 1 lakh to Rs 1.2 lakh.

Male individual below the age of 65 years& HUF tax payers :

New tax slabs:

Slabs (Rs) Rate

0 – 160000 0

160001 – 500000 10

500001 – 800000 20

800001 and above 30

Old tax slabs:

Slabs (Rs) Rate

0-160000 0

160001-300000 10

300001-500000 20

500001 and above 30

Impact:

Taxable income(Rs)

Tax -before budget

(Rs)

Tax after budget

(Rs)

Saving (Rs)

200000 4120 4120 0

500000 55620 35019 20601

1000000 210120 158619 51501

1200000 271919 220419 51500

1500000 364619 313119 51500

2000000 519119 467619 51500

2500000 673619 622119 51500

4000000 1137119 1085619 51500

Female individual taxpayer:

New tax slabs:

Slabs (Rs) Rate

0-190000 0

190001-500000 10

500001-800000 20

800001 and above 30

Old tax slabs:

Slabs (Rs) Rate

0-190000 0

190001-300000 10

300001-500000 20

500001 and above 30

Impact:

Taxable income(Rs)

Tax -before budget

(Rs)

Tax after budget

(Rs)

Saving (Rs)

200000 1029 1029 0

500000 52529 31929 20600

1000000 207029 155529 51500

1200000 268829 217329 51500

1500000 361529 310029 51500

2000000 516029 464529 51500

2500000 670529 619029 51500

4000000 1134029 1082529 51500

Senior Citizens

New tax slabs:

Slabs (Rs) Rates

0-240000 0

240001-500000 10

500001-800000 20

800001 and above 30

Old tax slabs:

Slabs (Rs) Rates

0-240000 0

240001-300000 10

300001-500000 20

500001 and above 30

Impact:

Taxable income(Rs)

Tax -before budget

(Rs)

Tax after budget

(Rs)

Saving (Rs)

200000 0 0 0

500000 47379 26780 20599

1000000 201879 150379 51500

1200000 263679 212179 51500

1500000 356379 304879 51500

2000000 510879 459379 51500

2500000 665379 613879 51500

4000000 1128879 1077379 51500

Income Tax Slabs for FY 2011-12 (AY 2012-13):

In Case of General Assesses:

Income Bracket Rate

0 to Rs. 1,80,000 0%

Rs. 1,80,001 to Rs. 5,00,000 10%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

In Case of Women Assesses:

Income Bracket Rate

0 to Rs. 1,90,000 0%

Rs. 1,90,001 to Rs. 5,00,000 10%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

In Case of Senior Citizens (> 60 Years but less than 80 Years):

Income Bracket Rate

0 to Rs. 2,50,000 0%

Rs. 2,50,001 to Rs. 5,00,000 10%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

In Case of Very Senior Citizens (80 Years and above):

Income Bracket Rate

0 to Rs. 5,00,000 0%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

Income tax slab 2012-2013:

The latest income tax slab to calculate your tax for Year 2012-2013

based on budget 2012 budget.

Tax exemption limit raised to Rs 2 lakhs and tax rates has changed for other slabs too. Use our

Free income tax calculator for getting an idea of how much tax you will be saving compared to

last year per the latest tax rates.

India Income tax slabs 2012-2013 for General tax payers:

Income tax slab (in Rs.) Tax

0 to 2,00,000 0%

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

India Income tax slabs 2012-2013 for Female tax payers:

Income tax slab (in Rs.) Tax

0 to 2,00,000 0%

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

India Income tax slabs 2012-2013 for Senior citizens (Aged 60 years but less than 80 years):

Income tax slab (in Rs.) Tax

0 to 2,50,000 0%

2,50,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

India Income tax slabs 2012-2013 for very senior citizens (Aged 80 and above)

Income tax slab (in Rs.) Tax

0 to Rs. 5,00,000 0%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

India Income tax slabs for Assessment Year 2013-14 (Financial Year 2012-2013):

General tax payers:

Income tax slab (in Rs.) Tax

0 to 2,00,000 0%

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

Education Cess: 3% of the Income-tax.

Female tax payers:

Income tax slab (in Rs.) Tax

0 to 2,00,000 0%

2,00,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

Education Cess: 3% of the Income-tax.

Senior citizens (Aged 60 years but less than 80 years at any time during the previous year):

Income tax slab (in Rs.) Tax

0 to 2,50,000 0%

2,50,001 to 5,00,000 10%

5,00,001 to 10,00,000 20%

Above 10,00,000 30%

Education Cess: 3% of the Income-tax.

Senior citizens (Aged 80 and above at any time during the previous year):

Income tax slab (in Rs.) Tax

0 to Rs. 5,00,000 0%

Rs. 5,00,001 to Rs. 8,00,000 20%

Above Rs. 8,00,000 30%

Income Tax Slab Rates for 2014-15 & 2015-16:

The Income Tax Slab Rates for 2014-15 & 2015-16 are the same. The Income Tax Slab Rates

are different for different categories of taxpayers.

The Income Tax Slab Rates can be divided in the following categories:-

A. INDIVIDUALS & HUF:

For Male Individuals below 60 Years of Age and HUF

For Female Individuals below 60 Years of Age

For all Senior Citizen above 60 years of Age

For all Super Senior Citizen above 80 years of Age

B. BUSINESSES:

Co-operative Society

Firms, Local Authority & Domestic Company

Income Tax Slab Rates:

FOR INDIVIDUALS & HUF:

1. For Male Individuals below 60 years of age & HUF:

Income tax slab (in Rs.) Tax

Where Total Income does not exceed Rs. 2,50,000 NIL

Where the Total Income exceeds Rs. 2,50,000 butdoes not exceed Rs. 5,00,000

10% of the Amount by whichit exceeds Rs. 2,50,000

Where the Total Income exceeds Rs. 5,00,000 butdoes not exceed Rs. 10,00,000

20% of the Amount by whichit exceeds Rs. 5,00,000

Where the Total Income exceeds Rs. 10,00,000 30% of the Amount by whichit exceeds Rs. 10,00,000

2. For Female Individuals below 60 years of Age:

Income tax slab (in Rs.) Tax

Where Total Income does not exceed Rs. 2,50,000 NIL

Where the Total Income exceeds Rs. 2,50,000 butdoes not exceed Rs. 5,00,000

10% of the Amount by whichit exceeds Rs. 2,50,000

Where the Total Income exceeds Rs. 5,00,000 butdoes not exceed Rs. 10,00,000

20% of the Amount by whichit exceeds Rs. 5,00,000

Where the Total Income exceeds Rs. 10,00,000 30% of the Amount by whichit exceeds Rs. 10,00,000

3. For all Senior Citizens above 60 years of Age:

Income tax slab (in Rs.) Tax

Where Total Income does not exceed Rs.

3,00,000

NIL

Where the Total Income exceeds Rs. 3,00,000but does not exceed Rs. 5,00,000

10% of the Amount by which it exceedsRs. 3,00,000

Where the Total Income exceeds Rs. 5,00,000but does not exceed Rs. 10,00,000

20% of the Amount by which it exceedsRs. 10,00,000

Where the Total Income exceeds Rs. 10,00,000 30% of the Amount by which it exceedsRs. 10,00,000

4. For all Senior Citizens above 80 Years of Age:

Income tax slab (in Rs.) Tax

Where Total Income does not exceed Rs.

5,00,000

NIL

Where the Total Income exceeds Rs. 5,00,000but does not exceed Rs. 10,00,000

20% of the Amount by which it exceedsRs. 5,00,000

Where the Total Income exceeds Rs. 10,00,000 30% of the Amount by which it exceedsRs. 10,00,000

I. SLABS FOR BUSINESS:

a. For Co-operative Society:

Income tax slab (in Rs.) Tax

Where the Total Income does not exceed Rs.

10,000

10% of the Income

Where the Total Income exceeds Rs. 10,000 butdoes not exceed Rs. 20,000

20% of the Amount by which it exceedsRs. 10,000

Where the Total Income exceeds Rs. 20,000 30% of the Amount by which it exceedsRs. 20,000

b. For Firms, Local Authority and Domestic Company:

Income Tax Slab Rates won’t apply in this case and Tax @ 30% flat shall be computed on the

Total Income. Surcharge shall not be levied on Income of Firms and Local Authorities but shall

be levied on the Total Income Tax of Domestic Companies @ 5% provided that the Total

Income of the Domestic Company exceeds Rs. 1 Crore.

References:

1. Institute of Chartered Accountants of India (2011). Taxation. ISBN 978-81-8441-290-1.

2."Growth of Income Tax revenue in India"

(http://shodhganga.inflibnet.ac.in/bitstream/10603/2876/12/12_chapter%205.pdf) (PDF).

Retrieved 16 November 2012.

3. http://www.thetaxinfo.com/2013/12/income-tax-rebate-of-2000-calculation-sec-87a/

4.The Indian upper class grew rapidly during the Noughts

(http://www.financialexpress.com/news/evasion-of-personal-tax-dips-to-59-of-mopup/1096336)

5. Business Income (http://www.v-krishnan-and-company.com/business_income.html)

6. 80C limit Increased from 1,00,000 to 1,50,000 (http://www.thetaxinfo.com/2014/12/80c-tax-

deductions/)

7. The institute of Cost accountants of India (Jan 2012). Applied direct taxation. Directorate of

Studies,The Institute of Cost accountants of India. p. 238.

8. http://www.tax.fintotal.com/Sections/80E-Tax-Rebate/5913/68

9. http://www.tax.fintotal.com/Sections/80TTA-Tax-Rebate/6212/68

10. http://www.tax.fintotal.com/Sections/80U-Tax-Rebate/5916/68

11. http://www.thetaxinfo.com/2014/01/additional-deduction-on-interest-on-housing-loan/

12.http://www.incometaxindia.gov.in/publications/1_Compute_Your_Salary_Income/2_Income_

from_house_property.asp

13. http://www.caclubindia.com/articles/e-filing-is-mandatory-income-is-more-than-5-lacs-

17646.asp

14. Income Tax rates Companies (http://businesssetup.in/blog/view/Income-Tax-rates-for-

Companies)

15. Finance Act 2010