Professional Documents
Culture Documents
Acknowledgement 2
Introduction to Tax 3
Residential Status 6
Heads of Income 9
Capital Gains 19
Assessment of Firms 72
Assessment of Companies 74
1
Acknowledgement
I owe a great many thanks to a great many people who helped and supported me during
the writing of this book.
My deepest thanks to Prof. (Professor’s Name), the Guide of the project for guiding me
throughout the project and make necessary correction as and when needed.
My deep sense of gratitude to (Name and Position of the Work Guide) support and
guidance. Thanks and appreciation to the helpful people at (Name of the Office where the
Project was done) for their support.
I would also thank my Institution and my faculty members without whom this project
would have been a distant reality. I also extend my heartfelt thanks to my family and well
wishers.
2
Tax:
Tax is nothing but the Money people have to pay to the government which is used to provide
Public Services.
Direct tax is the charge that is paid directly to the government by the persons on whom it is
imposed.
1. Income Tax,
2. Wealth Tax and
3. Corporate Tax.
Indirect tax is the charge that is paid by one individual at the beginning, but the burden of which
will be passed over to some other individual, who eventually holds the burden.
1. Sales Tax,
2. Excise Duty and
3. Custom Duty.
3
Income Tax Introduction
The direct tax which is paid by individual to the Central Government of India is known as
Income Tax. It is imposed on our income and plays a vital role in the economic growth &
stability of our country. For years the Government is generating revenue through this tax system.
The word 'Tax' originated from the 'Taxation.' which mean 'Estimate.' Hence, 'Income Tax' mean
'Income Estimate,' which helps the government to know the actual economic strength of a
person. It is also a way to set up an economic standard for general people. It helps the
Government to know the distribution of money among country's people.
Income Tax has been in force in different forms since years. If we go through the history of
India, we get relevant information regarding the taxation system of India. In ancient history, it is
mentioned that at about such system which were imposed on the income, expenditure and other
subject. Even information of such is given Manu Smriti and Arthasatra which confirms its
existence at that time.
In modern India, Income Tax came into existence in 1860 with the implementation of first
Income Tax Act. After implementation of this Act, people became aware of the actual meaning
of Income Tax. This act was in force for first five years. After this, in 1865, second Act came
into force. There were major changes in this Act relative to the first. It proved itself as a good
factor for the growth of our economy. With this Act a new concept of Agriculture Income came
into existence.
After this, different new Act was also implemented. The most important of them is the Income
Tax Act, 1961. According to ruling of Income Tax Act, 1961, any person whose salary from any
source of income is more than the maximum limit of unchargeable amount will be liable to pay
Income Tax. There is also a provision of deduction and exemptions in Income Tax, depending
upon the type of assessee, source of income, residential status and investment in saving schemes.
Income tax rates are a matter of chang, which is declared by Ministry of Finance, Government of
India regularly, usually on annual basis.
4
Assessee [Sec. 2(7)]
Assessee means a person by whom income-tax or any other sum of money is payable under the
Act. It includes every person in respect of whom any proceeding under the Act has been taken
for the assessment of his income or loss and the amount of refund due to him. It also includes a
person who is assessable in respect of the income or loss of another or who is deemed to be an
assessee or an assessee in default under any provision of the Act.
1. An Individual,
2. A Hindu Undivided Family,
3. A Company,
4. A Firm,
5. An Association of Persons or A Body of Individuals,
6. A Local Authority and
7. Every Artificial Juridicial Person not falling within any of the preceding categories.
Assessment Year may be defined as a year in which the income of the previous year is to be
assessed. In some countries it is called “Tax Year”. It always starts on April 1st and ends on
March 31st of the next year.
Income of the previous year is taxed in the immediately following assessment year. In some
countries it is called “Income Year”.
In the case of a newly set up business or profession or a source of income newly coming into
existence, the first previous year will be the period commencing from the date of setting up of
the business/ profession, or as the case may be, the date on which the source of income newly
comes into existence and ending on the immediately following March 31st.
5
The exceptions to the rule that the income of the previous year, is not taxable in the immediately
following assessment year are
1. Resident in India, or
2. Non-Resident in India
The Residential status of each assesse is to be determined for each previous year.
6
Additional Conditions [Sec. 6(6)]
An Individual is said to be a Resident and Ordinary Resident in India in any previous year, if he
satisfies at least one of the basic conditions, and both the additional conditions.
An Individual is said to be a Resident but not Ordinary Resident in India in any previous year, if
he satisfies one or more of the basic conditions, but does not satisfy the two additional
conditions.
Non-Resident
A Hindu Undivided Family is said to be a Resident and Ordinary Resident in India if the control
and management of its affairs are wholly or partly situated in India and if it satisfies both the
additional conditions.
7
Resident but not Ordinary Resident
A Hindu Undivided Family is said to be a Resident but not Ordinary Resident in India if the
control and management of its affairs are wholly or partly situated in India but does not satisfy
the two additional conditions.
Non-Resident
A Hindu Undivided Family is said to be a Non-Resident in India, if its control and management
is situated wholly outside India.
Resident
Non-Resident
Resident
A Foreign Company is said to be a Resident in India, if its control and management is situated
wholly within India during the relevant previous year.
Non-Resident
8
A Foreign Company is said to be a Non-Resident in India, if its control and management is
situated wholly outside India.
The Aggregate Income under these Heads is Termed as “Gross Total Income”.
9
Income From Salaries
Income under heads of salary is defined as remuneration received by an individual for services
rendered by him to undertake a contract whether it is expressed or implied.
Basis of Charge
According to Income Tax Act there are following conditions where all such remuneration are
chargeable to income tax:
1. When due from the former employer or present employer in the previous year, whether
paid or not.
2. When paid or allowed in the previous year, by or on behalf of a former employer or
present employer, though not due or before it becomes due.
3. When arrears of salary is paid in the previous year by or on behalf of a former employer
or present employer, if not charged to tax in the period to which it relates.
Under section 17 of the Income Tax Act, 1961 the following incomes comes under the head of
salary:
1. Basic Salary
2. Dearness Allowance
3. Advance Salary
4. Arrears of Salary
5. Leave Encashment
6. Salary in Lieu of Notice
7. Salary to Partner
8. Fees and Commissions
9. Bonus
10. Gratuity
11. Pensions
12. Annuity from Employer
10
13. Annual Accretion to the Credit Balance in a Recognised Provident Fund
14. Contribution by Central Government towards Pension Fund
15. Retrenchment Compensiation
16. Remuneration for Extra Work
17. Voluntary Payment
18. Salary from a United Nations Organisatin
19. Salary to a Foreign Citizen
20. Payment Received at the Time of Voluntary Retirement
Basic Salary
Dearness Allowance
Advance Salary
Arrears of Salary
Leave Encashment
In case of a Government Employee, any amount received is fully Exempted [Sec. 10(10AA)(i)].
In case of a Non-Government Employee, the least of the following is Exempted [Sec. 10(10AA)
(ii)]
1. Cash Equivalent of the Leave Salary in respect of the Period of Earned Leave to the
Credit of an Employee only at the Time of Retirement whether on Superannuation or
Otherwise
11
2. 10 months Average Salary
3. Rs.3,00,000
4. Actual Leave Encashment.
Salary to Partner
Not chargeable under Salaries but Taxable under Profits and Gains from Business or Profession.
Bonus
Gratuity
In case of a Government Employee, any amount received is fully Exempted [Sec. 10(10)(i)].
In case of a Non-Government Employee covered under The Payment of Gratuity Act,1972, the
least of the following is Exempted [Sec. 10(10)(ii)]
1. 15 days’ salary.
2. Rs.3,50,000.
3. Actual Gratuity.
In case of a Non-Government Employee, the least of the following is Exempted [Sec. 10(10AA)
(ii)]
12
2. Rs.3,50,000.
3. Actual Gratuity.
Pension
Any Uncommuted Pension is Taxable as Salary under Sec. 15 in the hands of a Government as
well as a Non- Government Employee.
Any Commuted Pension received by a Government Employee is wholly Exempted from Tax
Under Sec. 10(10A).
1. In case where the Employee receives Gratuity, the Commuted value of 1/3 of the Pension
he is normally entitled to receive,
2. In any other case, the Commuted value of ½ of such Pension
1. Amount equal to 50% of salary, where the Residential house is situated at Bombay,
Calcutta, Delhi or Madras; and an amount equal to 40% of salary, where the Residential
house is situated at any other place.
2. Actual House Rent Allowance Received.
3. Excess of Rent paid over 10% of Salary.
Entertainment Allowance is first included in Salary Income and there after a deduction is given.
13
In case of a Government Employee, the least of the following is deducted,
1. Rs. 5,000
2. 20% of Basic Salary or
3. Actual Entertainment Allowance received
Perquisites are any casual emolument or benefit attached to an officer or a position in addition to
salary or wages
1. Medical facility
2. Medical reimbursement
3. Refreshments
4. Subsidised Lunch/ Dinner provided by employer
5. Facilities For Recreation
6. Telephone Bills
7. Products at concessional rate to employee sold by his/ her employer
8. Insurance premium paid by employer
9. Loans to employees by given by employer
10. Transportation
11. Training
12. House without rent
13. Residence Facility to member of Parliament, judges of High Court/ Supreme Court
14. Conveyance to member of Parliament, judges of High Court/ Supreme Court
15. Contribution of employers to employee's pension, annuity schemes and group insurance
14
Income From House Property
Under the Income Tax Act the owner of a House property is taxed on the income in the form of
its annual value under the head “Income from House Property”.
Owner
It is the Legal Owner of the house property who is chargeable to tax in respect of property
income.
In the following cases enumerated by Sec. 27, persons are deemed to be owners of the house
property for the purpose of computing income from house property,
1. An individual, who transfers house property otherwise than for adequate consideration to
his or her spouse or to his minor child, is treated as deemed owner of the house.
2. The holder of an impartible estate is treated as deemed owner of the house property.
3. A member of a co-operative society, company or other association of persons, to whom a
building or a part thereof is allotted or leased under a house building scheme of the
society, company or association of persons, is treated as deemed owner of such property.
4. A person who comes to have control over the property in part performance of a contract
of the nature referred to in Sec. 53A of the Transfer of Property Act or by virtue of such
transaction are referred to in clause (f) of Sec. 269UA is deemed as owner of such
property.
15
Less: Deductions
Though the tax under the head “Income from House Property” is a tax on income, yet it is not a
tax upon rent but upon inherent capacity of a building to yield income. The standard selected as a
measure of income to be taxed is Annual Value.
Reasonable Expected Rent is deemed to be the sum for which the property might reasonably be
expected to be let out from year to year.
Reasonable Expected Rent of the Property can be determined by taking into consideration the
following factors
1. Municipal Value
2. Fair Rent
16
3. The higher value of (1) and (2) is the Expected Rent
Municipal Value
For collecting Municipal Taxes, the Local Authority makes a periodic survey of all buildings in
its jurisdiction. The value estimated is the Municipal Value.
Fair Rent
This is estimated on the basis of the rent collected for a similar property in a similar location.
Standard Rent
If a property is covered under a Rent Control Act, its reasonable expected rent cannot exceed the
standard rent fixed in the Act.
This is the rent collected in the previous year for which the property is available for letting out
less the unrealised rent.
Municipal Taxes
17
Standard deduction
It is 30% of Net Annual Value irrespective of any Expenditure incurred by the Taxpayer.
It is deducted if the capital is borrowed for the purpose of purchase, construction, repair, renewal
or reconstruction of the house property.
Interest payable by an assessee in respect of funds borrowed for the acquisition or construction
of a house property and pertaining to a period prior to the previous year in which such property
has been acquired or constructed.
18
Capital Gains
Capital Asset is defined to include property of any kind held by assessee whether fixed or
circulating, movable or immovable, tangible or intangible.
1. Any stock-in-trade, consumable stores or raw materials held for the purpose of business
or profession;
2. Personal effects of the assessee;
3. Agricultural land in India.
4. 6.5% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Gold Bonds, 1980
issued by the Central Government.
5. Special Bearer Bonds, 1991; and
6. Gold Deposit Bonds, issued under the Gold Deposit Scheme, 1999.
Short Term Capital Asset means a capital asset held by an assessee for not more than 36 months
immediately prior to its date of Transfer. However, in a few cases, an asset held for not more
than 12 months, is treated as Short Term Capital Asset.
Any Asset other than a Short Term Capital Asset is regarded as a Long Term Capital Asset.
19
Determining the Period of Holding
Computation of Capital Gains depends upon the Nature of Capital Assets transferred.
XXX
XXX
Benefit of Indexation
1. Bonds or Debentures
2. Shares in or debentures of an Indian Company acquired by utilizing Convertible Foreign
Exchange
3. Depreciable Assets
4. Undertaking or Division transferred by way of Slump Sale
5. Units purchased in Foreign Currency
6. Global Depository Receipts purchased in Foreign Currency
Cost of Acquisition
Cost of Acquisition of an asset is the value for which it was acquired by the assessee. Expenses
of the Capital nature for completing or acquiring the title to the property are includible in the
Cost of Acquisition.
Cost Inflation Index for any year means such index as the Central Government ma, having regard
to 75% of the average rise in the Consumer Price Index for Urban Non-Manual Employees, for
22
the immediately preceding previous year to such previous year, by notification in the Official
Gazette, specify in this behalf.
The Central Government has notified the Cost Inflation Index for the purpose of Long-Term
Capital Gain
Financial Year Cost Inflation Index Financial Year Cost Inflation Index
1981 – 82 100 1995 – 96 281
1982 – 83 109 1996 – 97 305
1983 – 84 116 1997 – 98 331
1984 – 85 125 1998 – 99 351
1985 – 86 133 1999 – 2000 389
1986 – 87 140 2000 – 01 406
1987 – 88 150 2001 – 02 426
1988 – 89 161 2002 – 03 447
1989 – 90 172 2003 – 04 463
1990 – 91 182 2004 – 05 480
1991 – 92 199 2005 – 06 497
1992 – 93 223 2006 – 07 519
1993 – 94 244 2007 – 08 551
1994 – 95 259 2008 – 09 582
Situation 1:
Fair Market Value of the Asset on Cost Inflation Index for 1981 – 82
1.4.81 X or Cost of Acquisition,
whichever is more
23
Cost Inflation Index for the year Transferred
in which the Asset is
Situation 2:
Situation 3:
24
Capital Asset is Acquired by the Assessee, before 1.4.81 in one of the
circumstances specified in Sec. 49(1) and originally Acquired by the
Previous Owner before 1.4.81
Fair Market Value of the Asset on Cost Inflation Index for the year
1.4.81 X or Cost of Acquisition in which the Asset is
to the Previous Owner, whichever Transferred
is more .
Situation 4:
Fair Market Value of the Asset on Cost Inflation Index for the year
1.4.81 or Cost of Acquisition, in which the asset was first held
whichever is more X by the Assessee
25
Cost Inflation Index for the year Transferred
in which the Asset is
Situation 5:
Under the First Provision in Sec. 48, Capital Gain is calculated in Foreign
Currencies in some Cases
Conditions
Conditions
Sec. 55 has been amended with effect from the Assessment year 1996 – 97
so as to specify that the Cost of Acquisition of any Additional Financial
Asset as Bonus Shares or Security or otherwise which is received without
any payment by the Assessee on the basis of his Holding any financial Asset
shall be taken to be Nil.
Bonus – Nil
If Original and Bonus Shares are Acquired Original – Actual Cost
28
after 1.4.81
Bonus – Nil
Income Tax on Long Term Capital Gain Sec. 112 (B) XXX
Income Tax for Short Term Capital Gain Sec. 111A (C) XXX
Surcharge XXX
30
Profits and Gains of Business or Profession
The following Incomes are chargeable under the head “Profits and Gains of
Business and Profession.
31
11. Any sum received, on account of any capital asset being demolished,
destroyed, discharged or transferred, if the whole of the expenditure
on such capital asses has been allowed as a deduction under Sec.
35AD.
Rent, Rates, Taxes, Repairs and Insurance for Buildings [Sec. 30]
In case of premises taken out in rent, the actual rent paid by the assessee
and, if he has undertaken to bear cost of repairs, the expenditure on repairs
are permissible deductions. In respect of premises owned by the assessee, no
deduction is allowable on account of notional rent; amount spent on current
repairs is however, allowed as deduction. Besides, the amount paid on
account of Land Revenue, Local Rates and Insurance Premium against the
risk of damage or destruction of the business premises are also allowed as
business deduction under this Sec.
Disallowance of Depreciation
The term Block of Assets has been defined as a Group of Assets falling
within a class of assets, comprising
2. Temporary Erections
Block 4 Furniture – Any Furniture or Fittings including Electrical 10%
Fittings
Block 5 Plant and Machinery – Any Plant or Machinery and Motor Cars 15%
acquired or put to use on or after 1.4.90
Block 6 Ocean-going Ships, Vessels ordinarily Operating on Inland 20%
waters including Speed Boats
Block 7 Plant and Machinery – Buses, Lorries and Taxies used in the 30%
business of running them on hire, Machinery used in Semi-
Conductor Industries, Moulds used in Rubber and Plastic Goods
Factories
Block 8 Plant and Machinery – Aeroplanes – Besides, it includes 40%
Commercial Vehicles which is acquired after 30.9.98 but before
1.4.99 and it is put to use for any period prior to 1.4.99, Life
Saving Medical Equipment
Block 9 Plant and Machinery – Containers made of Glass and Plastics 50%
34
used as Refills, Plant and Machinery which satisfy Conditions of
rule 5(2) an the following:
Add: Actual Cost of the Asset acquired during the Previous Year ending
31.3.09 XXX
XXX
XXX
36
Tea or Coffee or Rubber Development Account [Sec. 33AB]
37
2. The Central Government has entered into an agreement with the
Taxpayer for such Business
3. It must
38
The deduction in respect of expenditure on scientific research may be
grouped as under:
Where the Assessee himself carries on the Scientific Research and incurs
Revenue Expenditure, deduction is allowed for such expenditure only if
such Research relates to his Business. Further, where Salary has been paid to
an Employee engaged in Scientific Research or any Expenditure has been
incurred on purchase of Materials used in Scientific Research such Salary or
Expenditure, paid or incurred after 31.3.73, but within 3 Years immediately
preceding the Commencement of the Business, is deemed to have been paid
or incurred in the previous year in which the Business is commenced to the
Extent it is Certified by the Authority prescribed for the purpose under Rule
6.
Where the Assessee does not himself carry on Scientific Research but makes
Contribution to other Institutions for this purpose, a Weighted Deduction is
allowed of One and One-Fourth times of Payment if:
39
Amount Paid to an Approved Scientific Research Company [Sec. 35(1)(iia)]
Conditions
Amount of Deduction
If the above Conditions are satisfied, then the Taxpayer can claim a
Weighted deduction of 125% of the Amount paid by him to the Payee-
Company.
40
With a view to Avoid Multiple claims of deduction, it has been provided that
the Payee-Company approved under the Provision of Sec. 35(2)(iia) will not
be entitled to claim Weighted deduction to the extent of 150% under Sec.
35(2AB). However, deduction to the extent of 100% of the sum spent as
Revenue Expenditure or Capital Expenditure on Scientific Research which
is available under Sec. 35(1) will continue to be allowed.
a. National Laboratory
b. University
c. Indian Institute of Technology
d. Specified Person as Approved by the Prescribed Authority.
Amount of Deduction
Amount of Deduction
If all the above Conditions are Satisfied, then a Sum Equal to One and One-
Half times of the expenditure so incurred shall be allowed as deduction.
Conditions
If all the above Conditions are Satisfied one can Claim Deduction under this
Sec.
Amount of Deduction
44
Who Can Claim Deduction
45
4. The National Urban Poverty Eradication Fund
46
Amortisation of Expenditure Incurred under Voluntary Retirement
Scheme [Sec. 35DDA]
47
Employer’s Contribution to Recognised Provident Fund and Approved
Superannuation Fund [Sec. 36(1)(iv)]
48
1. The Debt has been taken into account in computing the Income of
the Assessee of the previous year or of an earlier previous year, or
represents money lent in Ordinary Course of Business of Banking or
Money-Lending which is carried on by the Assessee.
2. It has been written off as Irrecoverable in the Accounts of the
Assessee of that previous year.
Amount of Deduction
Any Bona Fide expenditure Incurred by the Company for the purpose of
promoting Family Planning among its Employees is allowable as deduction.
49
This is applicable only if expenditure is incurred by an Assessee during 99 –
2000.
50
5. The Expenditure should not have been incurred for any purpose
which is an Offence or is Prohibited by any Law.
The following expenses are disallowed by the act while computing income
chargeable under the head “Profits and Gains of business or profession”.
Besides these provisions, no deduction is permissible in respect of any
expenditure or allowance under section 28 to 44C in respect of income
referred to in sections 115A, 115AB, 115AC, 115BBA and 115D.
In the case of any assessee, the following expenses are expressly disallowed
Any sum paid on account of income tax is not deductible. Similarly, any
interest or penalty or fine for non-payment or late payment of income-tax is
not deductible. This rule is applicable whether income-tax is payable in
India or outside India.
Any sum paid on account of Wealth-Tax under the Wealth Tax -Act, 1957,
or tax of a similar nature chargeable under any law outside India is not
deductible.
Conditions
3. Tax has not been paid to the Government nor deducted at source
under the Income –Tax Act
If the aforesaid conditions are satisfied, then the payment is not allowed as
deduction.
Any payment to a provident fund is not deductible if the assessee has not
made effective arrangements to secure that tax shall be deducted at source
52
from any payments made from the fund which are chargeable to tax under
the head Salaries.
Provisions
53
without attracting the disallowance. Even payment made for purchase of
goods falls with in the expression expenditure occurring in this section
Exceptions
54
contribution towards an approved gratuity fund or for the purpose of making
any payment on account of gratuity that has become payable during the
previous year is, however eligible for deduction
55
b. Has obtained some benefit in respect of such trading liability by
way of remission or cessation thereof
If the above two conditions are satisfied the amount obtained by such
persons shall be deemed to be profits and gains of business or profession
accordingly chargeable to tax as income of that previous year.
If the Sale Consideration is more than the Written Down Value, then the Tax
Treatment of Surplus is as follows
Where any capital asset used in scientific research is sold without having
been used for other purpose and the sale proceeds, together with the amount
of deduction allowed under section 35, exceeds the amount of the capital
expenditure, such surplus or the amount, whichever is less, is chargeable to
tax as income in the year in which the sale took place.
Where any bad debt has been allowed as deduction under section and the
amount subsequently recovered on such debt is greater than the difference
between the debt and the deduction so allowed, the excess realisation is
chargeable to tax as business income of the year in which the debt is
recovered.
Specified Profession
Non-Specified Profession
• Category A
57
Persons coming under this category are required to maintain such books of
account and other documents as may enable the assessing officer to compute
their taxable income under the income tax act.
• Category B
• Category C
Persons coming under this category are not required to maintain any books
of account.
• Category D
Persons falling under this Category are required to maintain such Books of
Account and Other Documents as may enable the Assessing Officer to
compute their Taxable Income.
58
Specified Books of Account
1. a cash book
2. a journal, if the accounts are maintained according to the mercantile
system of accounting
3. a ledger
4. carbon copies of copies of bills exceeding rs 25, issued by the person
and carbon copies or counterfoils of machine numbered or otherwise
serially numbered receipts issued by the person
5. original bills whenever issued to the person and receipts in respect or
expenditure incurred by the person or, where such bills and receipts
are not issued and the expenditure incurred does not exceed fifty
rupees, payment vouchers prepared and signed by the person.
59
Income From Other Sources
This residuary head of income would be invoked only if all the following
conditions are fulfilled
60
any other fund for the welfare of the employees, if such income is
not chargeable under the head “Profits and gains of Business or
Profession”- [Sec. 56(2)(ic)].
4. Income by way of interest on securities, if it is not chargeable as
Profits and gains of business i.e. where securities are held as
investments- Sec. 56(2)(id).
5. Income from machinery, plant or furniture belonging to the assessee
let on hire, if the income is not chargeable to income-tax under the
head, Profits and gains of Business or Profession - Sec. 56(2)(ii).
6. Income from letting of machinery, plant or furniture, if such income
is not chargeable under the head “Profits and gains of Business or
Profession”- Sec. 56(iii)
7. Any sum received under “Key man insurance policy including
bonus, if not charged under the head “Profits and gains of Business
or Profession”- Sec. 56(iv)
8. Gifts aggregating to more than Rs. 50,000 in a year on or after 1st
Day of April, 2006 - Sec. 56(vi)
It has to be remembered that any sum received by the assessee from his
employees as contributions to any provident fund or superannuation fund or
any fund set up under the provisions of the Employees’ State Insurance Act,
1948 or any other fund for the welfare of such employees is income in the
hands of the assessee and is chargeable as income from other sources if not
chargeable as Profits and gains on Business or Profession [Sec. 2(24)(x)]
62
date. Here, the due date means the date by which the assessee is required as
an employer to credit an employees’ contribution to the employees’ account
in the relevant fund under an Act, rule, etc. issued in that behalf [Sec. 36(1)
(va)].
Interest on Securities
Basis of Charge
63
2. Interest to an individual or a HUF on 7% Capital investment Bond or
on notified Relief Bonds.
3. Interest to non-resident Indians on notified bonds.
4. Interest on securities held by issue Department of the Central Bank
of Ceylon.
5. Tax planning - Taxpayer is entitled to the deduction of any
reasonable sum paid as commission or remuneration to a banker or
any other person for the purpose of realizing interest on securities.
Similarly, he will also be entitled to the deduction of interest on
capital borrowed for investing in securities.
Gift
Now gift received during the previous year shall be included in the income if
the aggregate of the gifts received exceeds Rs. 50,000.
However, the following gifts are not included in taxable income, viz.
65
Advance Payment of Tax
66
Computation of Total Income
Basic Salary
XXX
Allowances
XXX
Perquisites
XXX
Profits
XXX
Gross Salary
XXX
Entertainment Allowances
XXX
Professional Tax
XXX XXX
67
Gross Annual Value
XXX
Business
Profession
Professional Receipts
XXX
Short Term
Sale Value
XXX
Net Consideration
XXX
Cost of Implantation
XXX
69
Less: Exemption u/s 54B, 54D, 54G
XXX XXX
Long Term
Sale Value
XXX
Net Consideration
XXX
Cost of Implantation
XXX
General Income
XXX
Special Income
XXX
70
Less: Deductions
XXX XXX
71
Computation of Tax Liability on Total Income
Individuals
Up to Rs. 150000
Nil
Women
Up to Rs. 180000
Nil
72
Senior Citizen
Up to Rs. 225000
Nil
Note
For the next assessment year 2010-11 income tax slabs have been increased
slightly (by Rs. 10,000 for men & women and Rs. 15,000 for Senior
Citizens).
Education
2%
73
Casual Income
30%
74
TDS Rates for Assessment Year 2009-10:
75
Section 194 B Winnings from Lotteries or Cross Word Puzzle or Card
Game or any other Game
Criterion of Deduction Deductible if payment exceeds Rs. 5,000/-.
Applicable TDS Rate Income Tax Surcharge Education Cess Total
If the recipient is an Individual or 30.00% 3.00% 0.99 33.99%
HUF and payment exceeds Rs. 10
lac per annum.
If the recipient is an Individual or 30.00% 0.00% 0.90 30.90%
HUF and payment does not exceed
Rs. 10 lac per annum.
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or Cooperative Society *
If the recipient is an Individual or 10.00% 1.00% 0.33% 11.33%
HUF and payment exceeds Rs. 10
lac per annum.
If the recipient is an Individual or 10.00% 0.00% 0.30% 10.30%
HUF and payment does not exceed
Rs. 10 lac per annum.
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lac per annum.
If the recipient is an Individual or 2.00% 0.00% 0.060% 2.06%
HUF and payment does not exceed
Rs. 10 lac per annum.
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lac per annum.
If the recipient is an Individual or 15.00% 0.00% 0.45% 15.45%
HUF and payment does not exceed
Rs. 10 lac per annum.
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(*) Surcharge is deductible if total payments to the payee during the
financial year exceed Rs. 1 Crore.
• If TDS amount is not deposited by the due date, then for each month
a penalty of interest equal to 1% of the TDS amount is to be paid.
• If the quarterly TDS return is not filed by the due date, a penalty of
Rs. 100 per day subject to maximum limit equal to the TDS amount
is chargeable.
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Assessment of Firms
Kinds of Partnership Firms For Taxation Purpose
According to the new schemes of taxation of firms, there will be two types
of firms, namely,
1. A firm assessed as such
2. A firm assessed as an association of person
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Section 40(b) deals with the amounts, which are not deductible in the case of
a firm assessable as such. Hence, deduction on account of interest and
remuneration to the partners is allowed to be claimed under section 36 and
37, but it will be subject to the condition prescribed by section 40(b) as
under:
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Assessment of Companies
A company has to pay tax on every rupee of its total income at a flat rate,
without any exemption limit. It is essential to understand the meaning of a
company for the assessment of companies.
From the gross total income a company is allowed the following deduction
under deduction 80:80G, 80GGA, 80GGB, 80-IA, 80-IAB, 80-IB, 80-IC,
80JJA, 80JJAA, 80LA.
Assessment of companies
For the assessment year 2009-10 the following rates of income tax are
applicable:
Domestic company Foreign company
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Short term capital gain on Sale of listed securities 15% 15%
Long term capital gain 20% 20%
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