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FAST REVISION NOTES FOR INCOME TAX FOR | CA | CS|
CA AND CS - DIRECT TAX | INCOME TAX | COMPLETE NOTES
LIST OF IMPORTANT SECTIONS
IMPORTANT DEFINITIONS & BASIC CONCEPTS
| Sections | Provisions |
| 2(31) | Person |
| 3 | P.Y. |
| 2(9) | A.Y. |
| 2(7) | Assessee |
| 2(24) | Income |
| 2(45) | Total Income |
RESIDENTIAL STATUS
| Sections | Provisions |
| 2(26) | Indian Company |
| 2(30) | NR – Individual |
| 5(1) | Incidence of tax on R/ROR/RNOR |
| 5(2) | Incidence of tax on NR |
| 6(2) | HUF/Firm/AOP/BOI-R/S |
| 6(3) | Company – R/S |
| 6(4) | Other persons (Local authority/Artificial juridical person etc.) – R/S |
| 6(6)(a) | RNOR – Individual |
| 6(6)(b) | RNOR – HUF |
| 115C | Person of Indian origin |
RESIDENTIAL STATUS
| Sections | Provisions |
| 22 | Basic of charge (i.e. Changing Section) |
| Exp. to Sec 23(1) | Unrealised rent |
| 24(a) | Statutory deduction |
| 24(b) | Interest on borrowed capital |
| 25(A) & 25AA | Recovery of unrealized rent |
| 25B | Arrears of rent received i.e. outstanding rent received |
| 26 | Property owned by Co-owners |
| 27(i) | Deemed ownership – Transfer to spouse /minor child |
| 27(ii) | Deemed ownership – Holder of an impartible estate |
| 27(iii) | Deemed ownership – Member of co-operative society etc. |
| 27(iiia) | Deemed ownership – Person in possession of property as per Section 53A of TP Act |
| 27(iiib) | Deemed ownership – Person having right in a property for a period not less than 12 years |
INCOME FROM SALARIES
| Sections | Provisions |
| 9(1) | Salary will be deemed to accrue or arise at a place where services are rendered. |
| 10(7) | Exemption – Perquisite/allowances received outside India by an employee who is citizen of India + Government employee + renders services outside India. |
| 15 | Basis of charge (i.e. Charging Section) |
| 17(1)(ii) | Annuity |
| 10(10)(i) | Exemption – Gratuity received by employees of Govt./Local Authorities |
| 10(10)(ii) | Exemption – Gratuity received by employees covered under Payment of Gratuity Act, 1972. |
| 10(10)(iii) | Exemption – Gratuity received by other employees. |
| 10(10)AA)(ii) | Exemption – Encashment of leave salary at the time of retirement by other employees (including employees of Local Authorities and Public sector Undertakings) |
| 10(10B) | Exemption – Retrenchment compensation |
| 10(10C) & Rule 2BA | Exemption – VRS (Golden Handshake Scheme) |
| 10(13A) & Rule 2A | Exemption – HRA |
| 10(14) & Rule 2BB | Exemption – Special allowances |
| 16 (ii) | Deduction for Entertainment Allowance |
| 16 (iii) | Deduction for Professional Tax |
| 17(2)(i) & Rule 3(1) | Value of rent free accommodation provided by the employer |
| 17(2)(ii) & Rule 3(1) | Value of rent-free accommodation provided at concessional rate |
| 17(2)(iii) | The value of any benefit provided free of cost or concessional rate to Specified employees |
| 17(2)(iii) & Rule 3(2) | Valuation of motor car/other vehicles |
| 17(2)(iii) & Rule 3(3) | Value of benefit from service of a sweeper, a gardener, a watchman or personal attendant |
| 17(2)(iii) & Rule 3(4) | Value of benefit resulting from supply of gas, electricity or water |
| 17(2)(iii) & Rule 3(5) | Value of free/concessional education facilities |
| 17(2)(iii) & Rule 3(6) | Valuation of perquisite in respect of free transport or private journey provided by an undertaking engaged in carrying of passengers or goods to any employee(or to any member of his household) |
| 17(2)(iv) | Employee’s obligation met by the employer |
| 17(2)(v) | Value LIP/Deferred Annuity Premium paid/payable by the employer |
| 17(2)(vi) | the value of any specified security or sweat equity shares allotted or transferred, by the employer, or former employer, free of cost or at concessional rate to the employee |
| 17(2)(vii) | the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds Rs. 1,00,000 |
| 17(2)(viii) & Rule 3(7) | Value of any other fringe benefit |
| 17(2)(viii) & Rule 3(7)(i) | Value of interest free loan/concessional loan |
| 17(2)(viii) & Rule 3(7)(ii) | Value of travelling, touring, accommodation and any other expenses paid or reimbursed by the employer for any holiday availed of by the employee |
| 17(2)(viii) & Rule 3(7)(iii) | Value of free food and non-alcoholic beverages |
| 17(2)(viii) & Rule 3(7)(iv) | Value of any gift, voucher or token |
| 17(2)(viii) & Rule 3(7)(v) | Value of expenses on credit card |
| 17(2)(viii) & Rule 3(7)(vi) | Value of club membership and expenses incurred in a club |
| 17(2)(viii) & Rule 3(7)(vii) | Value of use of movable assets |
| 17(2)(viii) & Rule 3(7)(viii) | Value of transfer of any moveable asset |
| Rule 3(7)(ix) | Valuation of other perquisites, benefits, amenities etc. |
| 10(5) & Rule 2B | Exemption – Leave Travel Concession/Assistance (LTC) |
| 17(3) | Profits in lieu of salary |
CAPITAL GAINS
| Sections | Provisions |
| 45(1) | Basis of charge (i.e. Charging Section) |
| 2(14) | Meaning of capital asset |
| 2(42A) | Short-term capital asset |
| 2(29A) | Long-term capital asset |
| 2(42B) | Short-term capital gain |
| 2(29B) | Long-term capital gain |
| 2(47) | Definition of transfer |
| 48 | Method of computation of capital gain |
| First Proviso to Section 48 | Computation of capital gain from transfer of shares or debentures of Indian company held by a NR assessee and purchased in foreign currency |
| Rule 115A | Method of conversion |
| Second Proviso to Section 48 | Indexation |
| 55 | Cost of acquisition |
| 47 | Certain transactions not regarded as transfer |
| 49(1) | Cost with reference to certain modes of acquisition |
| 49(2AA) | Where the capital gain arises from the transfer of specified security or sweat equity shares referred to in Section 17(2)(vi), the COA of such security or shares shall be the FMV which has been taken into account for the purposes of the said Section 17(2)(vi) |
| 49(4) | Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under Section 56(2)(vii), the COA of such property shall be deemed to be the value which has been taken into account for the purposes said Section 56(2)(vii). |
| 2(42A) | Period of holding |
| 55 | Cost of improvement |
| 50C | Adoption of stamp duty for transfer of land or building or both |
| 111A | STCG on transfer of equity shares or units of equity-oriented mutual fund taxable @ 15% |
| 112 | Tax on LTCG @ 20% |
| Proviso to Section 112 | In case of listed securities or units (units may be listed or unlisted) or zero coupon bonds, Tax on LTCG shall be lower of the following:(a) 20% of LTCG after Indexation(b) 10% of LTCG before Indexation |
| 51 | Advance money forfeited |
| 45(1A) | CG shall not be taxable in the year in which the asset is destroyed but shall be taxable in the year in which money is received from the insurance company |
| 45(2) | CG arising from the transfer (conversion) of a capital asset into stock-in-trade shall be charged to tax in the P.Y. in which stock-in-trade is sold or otherwise transferred |
| 45(2A) | CG from transfer of securities held in DEMAT form shall be taxable as the income of beneficial owner in the P.Y. in which transfer took place. |
| 45(3) | Where a partner of a firm transfers an asset to the firm by way of capital contribution or normal sale, CG shall be chargeable to tax in the P.Y. in which transfer took place |
| 45(4) | CG arising from the transfer of a capital asset by way of distribution of capital asset to partners on dissolution or “otherwise” |
| 45(5) | Where a capital asset is compulsorily acquired under any law or where the consideration for transfer of capital asset is to be determined or approved by the Central Government/RBI |
| 145A(b) | Interest received on original/enhanced compensation shall be deemed to be the income of the year in which it is received, irrespective of the method of accounting followed by the assessee |
| 56(2)(viii) | Interest received on original/enhanced compensation is taxable under the head “IOS”. |
| 57(iv) | In case of Interest received on original/enhanced compensation, a deduction of a sum equal to 50% of such income shall be allowed. |
| 54 | Exemption – Residential house property |
| 54B | Exemption – Agricultural land |
| 54D | Exemption – Land or building compulsorily acquired by the Government |
| 54EC | Exemption – Any capital asset |
| 54F | Exemption – Any long-term capital asset other than residential H.P. |
| 54G | Exemption – Land, building, plant or machinery in order to shift an industrial undertaking from urban area to rural area |
| 54GA | Exemption – Land, building, plant or machinery in order to shift an industrial undertaking from urban area to any special economic zone. |
| 10(33) | Exemption – US, 1964 |
| 10(37) | Exemption – Urban agricultural land compulsorily acquired by Government |
| 10(38) | Exemption – Equity shares or units of an equity oriented fund. |
INCOME FROM OTHER SOURCES
| Sections | Provisions |
| 56(1) | Basis of charge (i.e. Charging Section) |
| 145 | Method of accounting |
| 8 | Basis of charge of dividend income |
| 56(2) | Specific incomes chargeable under the head IOS |
| 57 | Deduction of expenses from specific incomes chargeable under the head IOS |
| 58 | Amount not deductible in computing the income under the head IOS |
| 59 | Deemed income chargeable under the head IOS |
| 115BB | Special rate of income-tax in case of Winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever |
| 56(2)(vii) | Income to include gift of money and or property |
| 56(2)(viia) | Income to include transfer of shares in case of recipient firms and companies |
DEDUCTIONS FROM GROSS TOTAL INCOME
| Sections | Provisions |
| 80C | Deduction in respect of LIP, contribution to P.F. etc. |
| 80CCC | Deduction in respect of LIP, contribution to P.F. etc. |
| 80CCD | Deduction in respect of contribution to pension scheme of Central Government |
| 80CCE | Aggregate amount of deduction under Sections 80C, 80CCC and 80CCD cannot exceed Rs. 1,00,000 |
| 80D | Deductions in respect of medical insurance premium |
| 80DD | Deduction in respect of maintenance including medical treatment of a dependent being person with disability |
| 80DDB | Deduction in respect of medical treatment, etc. |
| 80E | Deduction in respect of the repayment of loan taken for higher education. |
| 80G | Deduction in respect of donations to certain funds, charitable institutions etc. |
| 80GG | Deduction in respect of rent paid |
| 80GGB | Deduction in respect of contributions given by Indian companies to political parties. |
| 80GGC | Deduction in respect of contributions given by any person to political parties. |
| 80JJA | Deduction in respect of profits and gains from the business of collecting and processing of bio-degradable waste. |
| 80U | Deduction in case of a person with disability |
PROFITS & GAINS FROM BUSINESS OF PROFESSION
| Sections | Provisions |
| 28 | Basis of charge (i.e. Charging Section) |
| 43(5) | Speculative transaction |
| Explanation 2 to Section 28 | Where the speculative transactions carried on by an assessee are of such a nature as to constitute a business, such business (i.e. “Speculation business”) shall be deemed to be distinct and separate from any other busieness. |
| 29 | PGBP – How computed? |
| 43(2) | For the purposes of Section 28 to 43, the word “paid” mean “actually paid” or “incurred” according to the method of accounting upon the basis of which income is computed under the head PGBP. |
| 145 | Method of accounting |
| 30 | Rent, rates, taxes, repairs and insurance for buildings |
| 31 | Repairs and insurance of machinery, plant & furniture |
| 32 | Depreciation |
| 2(11) | Block of Assets |
| 50 | Special provision for computing CG in case of depreciable assets |
| 38(2) | Disallowance in respect of assets used both for business and personal purposes |
| 32(2) | Unabsorbed depreciation |
| 35D | Amortization of preliminary expenses |
| 35DD | Amortization of expenditure in case of amalgamation or demerger |
| 35DDA | Amortization of expenses incurred under VRS |
| 35 | Expenditure on scientific research |
| 35(2AA) | Contribution to National Laboratory etc |
| 35(2AB) | Expenditure on in-house research and development facility |
| 35A | Expenditure on acquisition of Patent Rights or Copyrights |
| 35AB | Expenditure on Know-how |
| 36 | Other Deductions |
| 36(1)(ix) | Any revenue expense bonafide incurred by a company for the purposes of promoting family planning amongst the employees |
| 36(1)(va) | Any sum received by assessee from any of his employees as contribution to any fund for welfare of employees is deductible provided such sum is credited by the assessee to employee’ account in the relevant fund on or before due date |
| 37(1) | General Clause for deduction |
| 37(2B) | Expenses on advertisement in any souvenir, brochure, tract, pamphlet or the |
| 40 | Amount specifically not deductible |
| 40A(2) | Where the assessee incurs any expenditure in respect of which payment has been made to certain specified person, the A.O. may disallow so much of the expenditure as he considers to be excessive or unreasonable |
| 40A(3) | Where any expenditure is incurred in a sum exceeding Rs. 20,000/- and payment is made otherwise than by an account payee cheque or account bank draft, 100% of such expenditure shall be disallowed |
| 40A(3A) | Where an allowance has been made in the |
| Rule 6DD | No disallowance under Section 40A(3) shall be made if payment is made otherwise than by an account payee cheque or bank draft in cases referred in Rule 6DD |
| 43B | Certain deduction on actual payment basis |
| 36(1)(vii) | Bad Debts |
| 41(4) | Bad Debt Recovery |
| 41(1) | Recovery of loss or expenditure allowed as deduction & Remission and cessation of the trading liability |
| 35AD | Deduction in respect of capital expenditure of certain specified business, e.g., Setting up and operating a Cold Chain Facility |
| Section 2(29BA) | Definition of manufacture |
CLUBBING OF INCOME
| Sections | Provisions |
| 60 | Transfer of income when there is not transfer of asset |
| 61 | Revocable transfer of asset |
| 62 | Transfer of asset which is not revocable during the life time of the beneficiary/transferee |
| 63 | Meaning of “revocable transfer” |
| 64(1)(ii) | Clubbing of income of spouse |
| 64(1)(iv) | Clubbing of income from asset transferred to spouse |
| 64(1)(vi) | Clubbing of income from asset transferred to son’s wife for inadequate consideration |
| 64(1)(vii) | Clubbing of income from asset transferred for inadequate consideration to any person for the benefit of the spouse |
| 64(1)(vii) | Clubbing of income from asset transferred for inadequate consideration to any person on or after 1-04-1973 for the benefit of the son’s wife |
| 64(1A) | Clubbing of income of minor child |
| 10(32) | Exemption of Rs. 1,500/- for each minor child to the parent whose TI(excluding minor’s income) is greater |
| 64(2) | Conversion of self-occupied property into HUF property |
| 288A | Rounding off of Total Income |
| 288B | Rounding off of tax etc. |
SET OFF CARRY FORWARD E SET OFF OF LOSSES
| Sections | Provisions |
| 70 | Set –off loss from one source against income from other source under the same head of income (i.e. Inter –head adjustment). |
| 71 | Set-off of loss from one head against income from other head (i.e. Inter-head adjustment). |
| 71B | C/F&S/O of Loss from House Property. |
| 72 | C/F & S/O of losses of non-speculative business. |
| 72A | Unabsorbed losses and unabsorbed depreciation of Amalgamating Co./Pvt. Co./Unlisted Public Co. shall be deemed to be the losses and depreciation of Amalgamated Co./LLP of the P.Y in which amalgamation/confession took place. |
| 41(5) | “Loss” of business or profession of the P.Y** in which business was discontinued can be S/O against the income U/S 41 (1), 41 (30) and 41 (4) arising subsequent to discontinuance of busses. |
| 41(1) | Recovery of loss or expenditure allowed as deduction & Remission and cessation of the trading liability. |
| 41(3) | Profit on sale of scientific research asset. |
| 41(4) | Bad debt recovery. |
| Proviso to Section 72 (1) | Where business is discontinued due to flood, cyclone, earthquake, riots etc. and reestablished before the expiry of 3 years from the P.Y.in which business discontinued, then loss of such business including the B/F loss can be S/O against non-speculative business income in the A.Y. relevant to the year in which business is re-established and the balance in 7 succeeding A.Y. |
| 73 | Losses of Speculation Business. |
| 74 | Losses under the head CG. |
| 74A | Losses from activity of owning and maintaining of race horses. |
| 80 | Return of loss should be filed on or before the due of furnishing of return as prescribed under section 139 (1). |
| 73A | S/O, or C/F & S/O of losses by specified business referred to in section 35D. |
AGRICULTURAL INCOME
| Sections | Provisions |
| 2 (1A) (B) | Any rent or revenue derived from land which is situated in India and is used for agricultural purposed. |
| 2 (1A)(b) | Any income derived from such land by agricultural operations including processing of the agricultural produce, raised or received as rent-in-kind so as to render it fit for the market, or sale of such produce. |
| 2(1A)(c) | Income attributable to a farm house subject to the conditions that the building is situated on or, in the immediate vicinity of the land and is used as a dwelling house store house other outbuilding and the land is assessed to land revenue or a local rate or, alternatively, the building is situated on or in the immediate vicinity of land which (though not assessed to land revenue or local rate ) is situated out said the urban areas. |
| 10(1) | Exemption of agricultural income. |
| Rule 7 | Any other case (e.g. sugarcane) :Market value of any agricultural produce, raised by the assessed or received by him as rant-in-kind and utilized as raw material in his business, is deducted. |
| Rule 7A | Income derived from sale of centrifuged latex or cenex or latex based crepes or brown crepes or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants by the seller in India. |
| Rule 7B | Income derived from the coffee grown and cured by the seller in India. |
| Rule 7B (1A) | Income derived from the of coffee grown, cured roasted and grounded by the seller in India, with or without mixing chicory or other flavoring ingredients. |
| Rule 8 | Income from sale of tea grown and manufactured by the assessee in India. |
RETURN OF INCOME
| Section | Provisions |
| 139 (1) | Company, firm and other person (if total income exceeds maximum amount which is not chargeable to tax)are required to file ROI on before due date. |
| Expl.2to 139(1) | Due date of filing ROL. |
| Rule 12 | Forms for filing ROL. |
| 4th Proviso to 139(1) | Individual, HUF, AOP/BOI and Artificial person required to file ROI on or before due date if GTI before claiming deduction under Section 10A, 10B and 10BA exceeds maximum amount not chargeable to tax. |
| 139 (3) | Loss return. |
| 80 | Notwithstanding anything contained in chapter vi, the loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139 (3), shall not be allowed to be “carried forward and set off” under section 72, or section 73, or section 74, or section 74A. |
| 139(4) | Belated Return. |
| 139(4A) | If the Total Income of a charitable or religious trust or institution,before exemption under Section 11 & Section 12, exceeds the maximum amount not chargeable to tax, them the trust or institution is under an obligation to furnish the return of income within the time allowed under section 139(1). |
| 139(4B) | If the Total Income of a political party, before exemption under Section 13A exceeds the maximum amount not chargeable to tax, then the political party is under an obligation to furnish the return of income within the time allowed under Section 139 (1). |
| 139 (5) | Revised Return. |
| 139 (9) | Defective Return |
| 139B | New scheme to facilitate submission of returns through Tax Return Preparers. |
| 139C | Power of CBDT to dispense with furnishing of documents |
| 139D | Power of CBDT to make rules for filing of return in electronic form |
| 140 | Who shall sign the return? |
ASSESSMENT OF FIRMS
| Sections | Provisions |
| 184 | Partnership from assessed as such. |
| 144 | Best judged Assessment. |
| 10 (2A) | The share of the partners in the total income of the firm is exempt in the hands of the partners. |
| 40 (b) | Conditions for Allow ability of remuneration and interest paid by firm to its partners. |
MISEELLANEOUS
| Sections | Provisions |
| 2 (48) | Definition of zero coupon Bond. |
| 2 (36A) | Meaning of Public Sector Company. |
| 36 (1) (iiia) | Tax treatment in the hands of company issuing zero coupon Bonds. |
| Rule 8B | Guidelines for ZCB issued by central Government. |
| 32 (1) (iia) | Additional Depreciation. |
| 2 (42c) | Definition of slump sale |
| 50B | Special provision for computation of Capital Gain in case of slump sale. |
| 43(6)(c)(i)(C) | Reduction of WDV of the transferor’s total assets, in case of slump sale. |
| 44AA | Compulsory maintenance of books of accounts. |
| 44AB | Compulsory Tax Audit |
| 44AD | Presumptive Taxation : Any business except the business of plying, hiring or lasing goods carriages to in section 44AE |
| 44AE | Presumptive Taxation : Business of plying, hiring or leasing goods carriages |
| 10(2) | The share of profit of the members in the total income of the HUF is exempt in the hands of the members. |
| 10(26AAA) | Exemption to Sikkimese. |
| 80-IB(10) | Deduction to an undertaking engaged in developing and billowing housing projects. |
| 10(43) | Sum received (either in lump sum or in installments) under a reverse mortgage scheme is exempt in the hands of the borrower. |
| 10(35) | Like section 10(34) (which exempts dividend received from domestic companies), section 10(35) exempts income received on units of UTI and Mutual covered under section 10(23D). |
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