5 Tax Law Notes

Mukesh Agarwa| kesearch Group
5UMMAk CI 1AkA1ICN ICk CC / ICC (CC NC1L5 2009)

ALCInd|a.Commerce, G M Lxt. |ace, 5h|nde k| Chhawan|, Gwa||or-474001 +91-751-2424240, 98930-16415
CA Culdance Classes Web: www.aeccsca.b|ogspot.com L-mall: aec.comamall.com age 1 of 37

CCN1LN15
FOR May 2009, June 2009, November 2009 & December 2009 Examination
$. h.
0hapIers Fage ho.
1. CCN1LN15 AND WLIGn1AGL IN kLVICU5 LkAM5 2
2. 8A5IC CCNCL15 AND DLIINA1ICN5 3
3. kL5IDLN1IAL 51A1U5 5
4. CALCULA1ICN CI INCCML 1Ak 6
5. INCCML UNDLk 1nL nLAD 5ALAk 7
6. IkINGL 8LNLII1 AND NLW LkCUI5I1L5 11
7. INCCML IkCM nCU5L kCLk1 13
8. INCCML IkCM 8U5INL55 & kCIL55ICN 15
9. INCCML IkCM CAI1AL GAIN5 17
10. INCCML IkCM C1nLk 5CUkCL5 21
11. CLU88ING CI INCCML5 22
12. 5L1 CII & CAkk ICkWAkD CI LC55L5 23
13. INCCML IkCM AGkICUL1UkL INCCML 24
14. DLDUC1ICN5 IkCM G1I 25
15. LkLM1LD INCCML5 27
16. A55L55MLN1 kCCLDUkL 28
17. ADVANCL 1Ak AND IN1LkL51 AA8LL 30
18. 1Ak DLDUC1LD A1 5CUkCL 31
19. CnAkI1A8LL Ck kLLIGICU5 1kU515 33
20. 5LkVICL 1Ak 34
21. VALUL ADDLD 1Ak (VA1) 37

0a|r
08 | 0...
...eth|az Bere


For PCC / IPCC

REVl8lON 8UMMAR OF TAXATlON

CCN1LN15 AND WLIGn1AGL IN kLVICU5 LkAM5

Cn. NC.

1CIC5
May
2007
Nov.
2007
May
2008
Nov.
2008
1 IN1kCDUC1ICN AND 8A5IC CCNCL15 CI 1Ak. 4 0 0 0
2 kL5IDLN1IAL 51A1U5 AND 1Ak INCIDLNCL 16 0 0 2
3 CCNCL1 AND CALCULA1ICN CI 1Ak 9 0 0 4
4 INCCML UNDLk 1nL nLAD 5ALAk 0 3 16 6
5 I81 AND NLW LkCUI5I1L5 0 0 0 0
6 INCCML UNDLk 1nL nLAD nCU5L kCLk1 0 0 8 9
7 INCCML UNDLk 1nL nLAD 8U5INL55 AND kCIL55ICN 10 27 0 8
8 INCCML UNDLk 1nL nLAD CAI1AL GAIN5 0 10 10 6
9 INCCML UNDLk 1nL nLAD CI C1nLk 5CUkCL5 0 0 0 0
10 CLU88ING CI INCCML5 4 3 13 0
11 5L1 CII AND CAkk ICkWAkD CI LC55L5 10 3 9 6
12 AGkICUL1UkL INCCML AND I15 1AkA8ILI1 0 0 0 0
13 DLDUC1ICN IkCM GkC55 1C1AL INCCML 2 10 2 4
14 LkLM1LD INCCML5 0 2 0 2
15 A55L55MLN1 kCCLDUkL 8 3 6 6
16 ADVANCL AMLN1 CI INCCML 1Ak 0 3 8 0
17 1Ak DLDUC1LD A1 5CUkCL 4 3 2 0
18 CnAkI1A8LL AND kLLIGICU5 1kU51 2 0 2 0
19 5LkVICL 1Ak 26 17 20 22
20 VALUL ADDLD 1Ak 4 13 10 8
21 A55L55MLN1 CI INDIVIDUAL5 20 20 0 20
22 A55L55MLN1 CI nUIs 0 0 20 8



For PCC / IPCC

SUMMARY OF 1
ST
CHAPTER
8A$I0 0h0LFT$ Ah LFIhATIh$

1) 1he lncome-Lax AcL, 1961 came lnLo force wlLh effecL from 1/4/1962. lL has xxlll chapLers and 298
secLlons ln all.
2) Ind|a: 5ect|on 2(25A) lndla means Lhe LerrlLorv of lndla as referred Lo ln ArLlcle 1 of Lhe ConsLlLuLlon,
lLs LerrlLorlal waLers, seabed and subsoll underlvlna such waLers, conLlnenLal shelf, excluslve
economlc zone or anv oLher marlLlme zone as referred Lo ln Lhe 1errlLorlal WaLers, ConLlnenLal
Shelf, Lxcluslve Lconomlc Zone and oLher marlLlme Zones AcL, 1976 and Lhe alr space above lLs
LerrlLorv and LerrlLorlal waLers.
3) erson: 5ect|on 2(31) lncludes seven Lvpes of persons namelv an lndlvldual, a Plndu undlvlded
famllv (Pul), A companv, A flrm, An assoclaLlon of persons (AC) or a bodv of lndlvlduals (8Cl), A
local auLhorlLv, Lverv arLlflclal [urldlcal person noL falllna wlLhln anv of Lhe precedlna sub clauses.
4) 1he 2 baslc dlfferences beLween AC and 8CI are:
a) ln 8Cl Lhere are onlv lndlvlduals buL ln AC Lhere can be anv Lvpe of persons.
b) 8Cl ls creaLlon of law whereas AC can be creaLed bv dlfferenL persons comlna LoaeLher for dolna
some lncome produclna acLlvlLv on Lhe volunLarv basls.
5) Assessee: 5ect|on 2(7) means anv person bv whom Lax, lnLeresL or penalLv ls pavable under anv
provlslon of Lhls acL and lncludes:
a) deemed assessee
b) assessee ln defaulL
c) erson aaalnsL whom anv lncome Lax proceedlnas have been sLarLed for Lhe assessmenL of hls
lncome or loss or Lhe lncome of some oLher person or Lhe loss for whom he ls llable.
6) Assessment year: 5ect|on 2(9) means Lhe perlod of 12 monLhs sLarLlna from 1
sL
Aprll everv vear and
endlna on 31
sL
march of Lhe succeedlna vear.
7) rev|ous year: 5ect|on 2(34) means Lhe vear lmmedlaLelv preceedlna Lo assessmenL vear. lncome
for Lhe prevlous vear ls alwavs Laxed ln Lhe assessmenL vear. 1he followlna are Lhe excepLlons Lo Lhe
aeneral rule LhaL lncome of everv prevlous vear ls charaeable Lo Lax ln Lhe relevanL assessmenL vear.
SecLlon 172: Shlpplna buslness of a non-resldenL,
SecLlon 174: erson leavlna lndla,
SecLlon 174A: An AC formed for Lhe purpose of a parLlcular evenL.
SecLlon 173: ersons llkelv Lo Lransfer properLv Lo avold Lax,
SecLlon 176: ulsconLlnued buslness or professlon
8) Income |nc|udes the g|fts recelved ln excess of 8s.30000. lf anvone has recelved alfL ln cash
exceedlna 8s.30000 from a non-relaLlve Lhen whole of such amounL recelved shall be consldered hls
lncome.
9) Powever alfLs recelved from relaLlves shall noL be covered ln Lhe sald 8) polnL above.
10) 5ect|on 14: Cross LoLal lncome ls Lhe aaareaaLe of lncome from all flve heads of lncome, namelv
lncome under Lhe head salarv
lncome under Lhe head house properLv
lncome under Lhe head buslness and professlon
lncome under Lhe head caplLal aalns
lncome under Lhe head oLher sources
11) 5ect|on 14A: whlle compuLlna LoLal lncome no deducLlon shall be allowed for LhaL expendlLure
whlch has been lncurred Lo earn exempLed lncome.

12) 5ect|on 2(45): 1oLal lncome ls lncome afLer reduclna Lhe deducLlon under chapLer vl-A from Lhe
aross LoLal lncome. 1hls lncome ls also called Laxable lncome on whlch Lax has Lo be lmposed.
13) 5ect|on 288A: 1he LoLal lncome shall be rounded off ln Lhe mulLlples of 8s. 10.
14) ALICA1ICN CI INCCML V/5 DIVLk5ICN CI INCCML: AppllcaLlon of lncome means spendlna Lhe
monev afLer lL has been earned bv Lhe assessee. Such an amounL ls alwavs lncluded whlle
compuLlna Laxable lncome ln Lhe hands of assessee. ln oLher words once an lncome has been
earned lL could noL be excluded on Lhe arounds LhaL lL has been applled for some purpose. Cn Lhe
oLher hand dlverslon of lncome ls Lhe process of dlverLlna Lhe lncome before lL ls earned bv Lhe
assessee.

ICk LkAMLL: ! LLd. sells a unlL of a producL aL 8s.100 wlLh verv clear messaae Lo cusLomer LhaL ouL of
8s.100 8s.3 wlll ao Lo Lhe charlLable lnsLlLuLlon. now onlv 8s.93 shall be reaarded as Lhe lncome ln Lhe
hands of companv and 8s.3 wlll be known as dlverslon of lncome.

ICk LkAMLL: Mr. ! lnherlLed properLv from hls faLher buL sub[ecL Lo Lhe rlahL of resldence ln favour of
moLher of Mr. !. 1hls means LhaL Mr. ! has Lhe rlahL over Lhe ownershlp of Lhe properLv buL moLher has
rlahL over resldence ln Lhe house. lf Lhe house ls Lo be sold Lhen for Lhe effecLlve sale of house boLh
should Lransfer Lhelr rlahLs ln house. lrom Lhe LoLal sales conslderaLlon Mr. ! can noL be held llable for
Lhe Lax on LhaL porLlon whlch represenLs Lhe rlahL of hls moLher.

15) kLVLNUL V5 CAI1AL: Anv recelpL of monev can elLher be caLeaorlzed as revenue or caplLal.
8evenue recelpLs are alwavs fullv Laxable unless speclflc exempLlon has been provlded for LhaL.
CaplLal recelpLs are never Laxable. 1haL's whv amounL recelved from lnsurance companv aL Lhe Llme
of maLurlLv ls noL Laxed u/s 10(10u). Slmllarlv loan Laken ls also noL Laxed. Powever, some of Lhe
caplLal recelpLs are Laxable slnce Lhev have been speclflcallv provlded ln Lhe deflnlLlon of lncome
such as Lax on CaplLal aalns on sale of CaplLal asseL.

DIIILkLNCL 8L1WLLN CAI1AL kLCLI1 AND kLVLNUL kLCLI1
Cap|ta| kece|pt kevenue kece|pts
CaplLal recelpL ls aenerallv referable Lo flxed caplLal. lor
ea. Sale prlce on Lhe sale of asseLs, whlch assessee uses
as a flxed asseL ln hls buslness ls a caplLal recelpL
8evenue recelpL refers Lo clrculaLlna caplLal. lor ea. Sale
prlce of Lhe sLock ln Lrade ls a revenue recelpL
avmenL recelved Lowards Lhe compensaLlon for Lhe
exLlncLlon of a proflL earnlna source ls a caplLal recelpL
avmenL recelved Lo compensaLe loss of earnlnas ls a
revenue recelpL
A recelpL ln lleu of source of lncome ls a caplLal recelpL.
lor ea. CompensaLlon for Lhe loss of emplovmenL ls a
caplLal recelpL.
A recelpL ln lleu of lncome ls a revenue recelpL
CaplLal recelpLs are exempL from Lax unless Lhev are
expresslvelv Laxable llke ln Lhe case of caplLal aalns
8evenue recelpLs are alwavs Laxable unless expresslv
exempL from Lax under secLlon 10

16) lor Lhe purposes of lncome 1ax AcL Companv has verv wlde meanlna as compared Lo whaL has
been deflned under Lhe companv law. 1he Lerm companv has been deflned under secLlon 2(17)
and lL has been furLher classlfled lnLo:
(a) uomesLlc companv : SecLlon 2(22A)
(b) lorelan companv : SecLlon 2(23A)
(c) lndlan companv : SecLlon 2(26)
(d) A Companv ln whlch publlc ls subsLanLlallv lnLeresLed : SecLlon 2(18)



For PCC / IPCC

SUMMARY OF 2
ND
CHAPTER
L$ILhTIAL $TAT$

1) 5ect|on 6(1): An lndlvldual can be resldenL or a non resldenL ln lndla. 1o be a resldenL he has Lo
saLlsfv one of Lhe followlna condlLlons:
a) SLav ln lndla >/= 182 davs ln a ? C8
b) SLav ln lndla >/= 60 davs ln a ? and SLav ln lndla >/= 363 davs ln preceedlna 4 ?s.
2) lor Lhe b) condlLlon above, we have 3 excepLlonal cases. ln all Lhese 3 cases 60 davs shall be Laken
as 182 davs:
(a) A clLlzen of lndla who leaves lndla for Lhe emplovmenL purposes.
(b) A clLlzen of lndla who leaves lndla as a member of crew of lndlan shlp.
(c) An lndlvldual who ls a clLlzen of lndla C8 ls a person of lndlan orlaln who comes Lo lndla on a
vlslL.
3) 5ect|on 6(6)(a): A 8esldenL lndlvldual can be 8C8 or nC8. 8C8 ls one who saLlsfles boLh of Lhe
followlna condlLlons
a) 8esldenL ln 2/10 preceedlna ?s.
b) SLav ln lndla >/= 730 davs ln a 7 precedlna ?s.
4) lor an lndlvldual, resldenLlal sLaLus ls deLermlned based on Lhe perlod of sLav ln lndla. Powever, for
Pul, llrm, AC and oLher non-corporaLe enLlLles Lhe conLrol and manaaemenL ls crlLlcal ln
deLermlnlna resldenLlal sLaLus.
5) Whlle deLermlnlna resldenLlal sLaLus of Pul perlod of sLav of karLa ls noL aL all relevanL. WhaL ls
lmporLanL ls wheLher conLrol and manaaemenL of such Pul ls slLuaLed ln lndla or noL. lurLher Lo
check wheLher Pul ls 8C8 or nC8 resldenLlal sLaLus of karLa as an lndlvldual becomes relevanL.
6) An lndlan companv ls alwavs reaarded as a uomesLlc Companv. A companv lncorporaLed ouLslde
lndla mav also be LreaLed as a domesLlc companv lf cerLaln condlLlons are fulfllled.
7) An lndlan companv ls alwavs a resldenL. A Companv lncorporaLed ouLslde lndla ls LreaLed as
`resldenL' onlv lf conLrol and manaaemenL ls whollv ln lndla.
8) 8esldenL and ordlnarllv resldenL ls Laxed on hls alobal lncome.
9) noL ordlnarllv resldenL ls Laxed ln respecL of lndlan lncome. ln respecL of forelan lncome he ls Laxed
onlv lf lL ls from buslness conLrolled ln lndla or professlon seL up ln lndla.
10) non resldenL ls Laxed ln respecL of lndlan lncomes onlv.
11) 8emlLLance ln lndla ls never Laxed ln lndla, slnce lL ls Lhe second recelpL.
12) AarlculLure lncome from a land ln lndla ls alwavs exempL from Lax. Powever, lf land ls noL ln lndla
Lhen aarlculLure lncome wlll be Laxed ln lndla.
13) ulvldend from uomesLlc Companv ls noL Laxed buL from forelan companv lL ls fullv charaeable Lo Lax.
ulvldends from cooperaLlve socleLles are fullv Laxable.



For PCC / IPCC

SUMMARY OF 3
RD
CHAPTER
0AL0LATIh F Ih0NL TAX

1) lncome of everv person ls charaeable Lo Lax aL Lhe raLes prescrlbed ln Lhe llnance AcL such as slab
raLes. Powever some of Lhe lncome Lax raLes are noL menLloned ln llnance AcL buL Lhev have been
menLloned ln AcL lLself, such as 1ax on loLLerv lncome ls 30 as per secLlon 11388 and Lax on lona-
Lerm caplLal aalns ls 20 as per secLlon 112 and lf equlLv shares are sold afLer 1/10/2004 Lhe S1CC
are Laxable aL 13 as per secLlon 111A.
2) lndlvlduals, Pul, AC, 8Cl and everv arLlflclal [urldlcal person aeL Lhelr lncome Laxable on Lhe basls
of slab raLe.
3) Surcharae 10 ls levlable on Lhe Lax llablllLv ln Lhe case of lndlvldual and Pul where Lhelr Laxable
lncome exceeds 8s. 10 lakhs and 8s. 100 Lakhs ln case of flrms and companles for Lhe A? 2009-2010.
4) llrms & domesLlc companles are charaeable aL a flaL raLe of 30.
5) Surcharae levlable for Lhe A? 2009-2010 has been 10 excepL ln case of forelan companles where lL
ls 2.3.
6) no surcharae ls lmposed on local auLhorlLv and co-operaLlve socleLles.
7) Lverv person whose LoLal lncome of Lhe assessmenL vear exceeds Lhe maxlmum amounL noL
charaeable Lo Lax shall pav Lhe Lax as per Lhe raLes menLloned ln Lhe flnance acL, ln Lhe prevlous vear
lLself. Such LoLal lncome ls Lo be calculaLed on Lhe basls of Lhe resldenLlal sLaLus of a person.
8) LducaLlon cess for Lhe A? 2009-2010 ls 2 for prlmarv educaLlon and 1 for hlaher and secondarv
educaLlon. We should noL calculaLe and charae educaLlon cess aL 3, lL would be prlnclpallv wrona.



For PCC / IPCC

SUMMARY OF THE 4
TH
CHAPTER
Ih0NL hL ThL hLA $ALAY

1) Lmp|oyer - Lmp|oyee re|at|onsh|p: lncome ls Laxable as lncome from salarv lf Lhere ls an emplover -
emplovee relaLlonshlp beLween 2 persons. arLners are noL emplovees of parLnershlp flrm and
LhaL's whv salarv recelved from Lhe flrm ls noL Laxable as salarv lncome buL lL ls Laxable as lncome
from buslness and professlon. Slmllarlv members of parllamenL have no emplover and Lherefore
slLLlna fees recelved bv Lhem for aLLendlna parllamenL sesslon shall be Laxable as lncome from oLher
sources.
2) Contract of serv|ce vs Contract for serv|ce: Wherever Lhere exlsLs emplover-emplovee relaLlonshlp
Lhere ls a "contract of serv|ce". ln Lhls emplover can conLrol and dlrecL Lhe work Lo be performed bv
emplovee. ln Lhls case lncome recelved bv a person shall be reaarded as salarv. Where Lhere ls no
emp|oyer-emp|oyee re|at|onsh|p Lhen Lwo people en[ov Lhe relaLlonshlp of "contract for serv|ce".
ln Lhls Lhe conLracLee can onlv be Lold whaL ls Lo be done. 1here can be no speclflc lnsLrucLlons
abouL how lL ls Lo be done. ln Lhls case lncome shall be Laxable as lncome of buslness and professlon
or lncome of oLher sources.
3) `ConLracL of Servlce' creaLes emplover - emplovee relaLlonshlp whereas `conLracL for servlce'
doesn'L resulL ln such a relaLlonshlp. 1herefore anv lncome from such relaLlon ls noL Lo be Laxed
under Lhls head of lncome.
4) 1D5 on sa|ary vs 1ax free sa|ary: under Lhe concepL of 1uS emplover wlll calculaLe and deducL Lax
on Lhe monLhlv basls before handlna over salarv Lo emplovee. 8uL ln case of Lax free salarv
emplover wlll pav Lax on Lhe salarv lncome of emplovee ouL of hls own pockeL and Lherefore such
amounL of Lax ls added ln Lhe salarv of Lhe emplovee.
5) Advance sa|ary vs advance aga|nst sa|ary: under Lhe concepL of advance salarv emplovee aeLs
salarv from Lhe emplover before salarv aeLs due Lo hlm. 8uL ln case of advance aaalnsL salarv
emplover alver loan Lo emplovee on a condlLlon LhaL lnsLallmenL of such loan would be deducLed
from Lhe monLhlv salarv of emplovee.
6) 5ect|on 15: Salarv lncome ls Laxable on due or recelpL basls whlchever ls earller. 8uL lf lL ls Laxed on
due basls lL wlll noL be aaaln Laxed when lL ls recelved.
7) 5ect|on 9(1): Salarv ls alwavs accrued aL a place where Lhe servlces are rendered. Powever ln case of
aovernmenL emplovee who ls worklna ouLslde lndla, hls salarv shall alwavs be accrued ln lndla.
8) 5urrender and forgo|ng of sa|ary: ls salarv ls surrendered ln favor of Lhe aovernmenL Lhen such
salarv ls noL Laxed. Powever lf emplovee foraoes hls salarv ln favor of some oLher emplovee Lhen
such salarv ls Laxable ln hands of emplovee.
9) 5a|ary from more than 1 emp|oyer: lf salarv ls recelved from more Lhan 1 emplover Lhen aaareaaLe
of salarv from all emplovers shall be Laxed.
10) rof|ts |n ||eu of sa|ary: AmounL of compensaLlon from anv person before assessee [olnlna anv
emplovmenL wlLh LhaL person or afLer cessaLlon of hls emplovmenL wlLh LhaL person ls proflL ln lleu
of salarv and Laxable u/s 17(3).
11) 1ax pa|d by emp|oyer on the perqu|s|te va|ue of non-monetary perqu|s|tes: lf emplover pavs Lax on
behalf of emplovee Lhen salarv pald Lo emplovee wlll know as Lax free salarv. Such amounL of Lax
pald bv emplover on behalf of emplovee shall be emplovee's lncome and wlll be added Lo hls aross
salarv. Powever lf emplover pavs such amounL of Lax on non moneLarv perqulslLes Lhen so much of
Lax shall nC1 be lncluded ln aross salarv of emplovee---SecLlon 10(10CC).

12) Lnterta|nment a||owance ls alven a deducLlon onlv Lo aovernmenL emplovees. CovernmenL
emplovees mean emplovees of CenLral CovernmenL and SLaLe CovernmenL---SecLlon 16(ll).
13) rofess|ona| tax ls lmposed bv Lhe SLaLe CovernmenL and never bv CenLral CovernmenL.
rofesslonal 1ax ls allowed as deducLlon u/s 16(lll) on Lhe pavmenL basls and noL on accrual basls.
rofesslonal 1ax ls alven a deducLlon even lf amounL has been pald bv emplovers alLhouah lL wlll be
flrsL lncluded ln Lhe aross salarv.
14) Gratu|ty5ect|on 10(10) lor aovernmenL emplovees, araLulLv ls fullv exempL from Lax aL Lhe Llme of
reLlremenL. CovernmenL emplovees mean emplovees of CenLral CovernmenL, SLaLe CovernmenL,
Local AuLhorlLv. lor oLher maxlmum exempLlon for Lhe llfe Llme ls 8s.330000. CraLulLv recelved
anvLlme before reLlremenL shall be fullv Laxable and araLulLv aL deaLh ls exempL from Lax.
15) Commuted ens|on5ec 10(10A): lor aovernmenL emplovees or non aovernmenL emplovees
uncommuLed penslon ls alwavs fullv Laxable. enslon ls allowed Lo be commuLed Lo Lhe maxlmum of
40 of Lhe fuLure 100 monLhs. CommuLed penslon ls alwavs fullv exempL from Lax for aovernmenL
emplovees buL for non aovernmenL emplovees lLs exempLlon depends on wheLher assessee has
recelved araLulLv or noL aL reLlremenL. CovernmenL emplovees mean emplovees of CenLral
CovernmenL, SLaLe CovernmenL, Local AuLhorlLv and SLaLuLorv CorporaLlon.
16) Iam||y pens|on: AfLer Lhe deaLh of Lhe emplovee penslon shall be pald Lo hls famllv members and
such penslon ls called famllv penslon. AfLer deaLh of member of armed forces who was wlnner of
aallanLrv award penslon alven Lo hls famllv members shall be fullv exempL from Lax under secLlon
10(18). lf member of armed forces dle durlna combaL duLles Lhen penslon alven Lo hls famllv
members shall be fullv exempL from Lax under secLlon 10(19). ln all oLher cases famllv penslon ls
reaarded as lncome from oLher sources and ls exempL from Lax under secLlon 37 Lo Lhe lower of:
a) 1/3 of famllv penslon recelved.
b) Maxlmum llmlL of 8s. 13000/
17) Leave sa|ary--5ec10(10AA): LncashmenL of leave durlna Lenure of [ob ls alwavs fullv Laxable for all
klnds of emplovees wheLher aovernmenL or non aovernmenL. LncashmenL of leave aL reLlremenL ls
exempL for maxlmum of 8s.300000. CovernmenL emplovee means emplovee of CenLral
CovernmenL and SLaLe CovernmenL. Leave encashmenL alven Lo famllv members afLer Lhe deaLh of
Lhe emplovee shall be fullv exempL from Lax.
18) rov|dent Iund: ConLrlbuLlon of emplover Lo Sl ls fullv exempL from Lax. lurLher lnLeresL accrued
on Sl ls also fullv exempL from Lax under secLlon 10(11). ConLrlbuLlon of emplover Lo 8l accounL
of emplovee ls exempL up Lo 12 of salarv and lnLeresL Lhereon ls exempL up Lo 9.3 of LoLal
conLrlbuLlon. ConLrlbuLlon Lo u8l and lnLeresL Lhereon ls fullv Laxable aL Lhe Llme of reLlremenL or
wlLhdrawal.
19) L1C: LxempLlon u/s. 10(3) ln respecL of leave Lravel concesslon or allowance ls wlLh reference Lo 2
Lrlps ln a block of 4 calendar vears.
20) Iore|gn a||owances and perqu|s|tes: Anv allowances or perqulslLe alven Lo emplovee of aovernmenL
ouLslde lndla shall be fullv exempL from Lax under secLlon 10(7). Such an allowance ls also known as
forelan allowance.
21) L5Cs are noL Laxable as perqulslLe lf lssued ln accordance wlLh Lhe auldellnes speclfled bv Lhe
CenLral CovernmenL.

22) 1he followlna ls Lhe Lax LreaLmenL for varlous allowances:

A) nkA u/s 10(13A) kWk 2ALxempL up Lo Lhe leasL of
1. AcLual P8A recelved.
2. 8enL pald ln excess of 10 of salarv l.e. renL pald -10 of salarv.
3. 30 of Lhe salarv ln meLros and 40 ln oLher places.

Salarv would mean 8S+uA(8)+commlsslon on flxed basls of sales.
8) Cfflclal allowances u/s 10(14): a|| these a||owances are exempt up to the |ower of:
a) amount rece|ved or
b) Actua| amount spent for the off|c|a| purposes
Conveyance A||owance, Academ|c A||owance, 1rave||ng A||owance, ne|per A||owance, Un|form
A||owance, Da||y A||owance

C) A||owances wh|ch are exempt to the |ower of amount rece|ved and ||m|t set by |aw.
(|) PosLel LxpendlLure Allowance: exempL up Lo 8s.300 p.m. per chlld up Lo a maxlmum of Lwo
chlldren. Chlldren wlll lnclude adopLed and sLep chlldren buL shall noL lnclude arand-chlldren. 1haL
means allowance for arand-chlldren shall be fullv Laxable.
(||) underaround Allowance: exempL up Lo 8s.800 er monLh.
(|||) 1rlbal Area Allowance: lL ls exempL up Lo 8s.200 per monLh.
(|v) Chlldren LducaLlon Allowance: lL ls exempL up Lo 8s.100 p.m. per chlld for maxlmum of 2 chlldren.
Chlldren mav lnclude adopLed or sLep chlldren buL shall noL lnclude arandchlldren. Chlldren can be
anv 2 chlldren.
(v) CounLer lnsuraencv allowances: LxempL up Lo 8s.3900 pm.
(v|) 1ransporL Allowance: LxempL Lo Lhe exLenL of 8s.800 p.m. buL lf Lhe emplovee ls phvslcallv
handlcapped Lhen Lhe amounL exempL ls 8s.1600 pm.
(v||) CuLsLaLlon allowance: 1he amounL of exempLlon shall be: (a) 70 of such allowance or (b) 8s.6
000 p.m. Whlchever ls less.

D) A||owances wh|ch are fu||y taxab|e are
uearness allowances (uA), CverLlme allowance, ClLv compensaLorv allowance (CCA), ServanL allowance/
warden allowance, Lunch allowance/1lffln allowance, lamllv allowance, Medlcal allowance ls alwavs
fullv Laxable lrrespecLlve of anv amounL spenL on medlcal LreaLmenL, LnLerLalnmenL allowance,
uepuLaLlon allowance, SpllL duLv allowance, daLlna allowance eLc.

23) 1he fo||ow|ng are exempt perqu|s|tes:
(|) lnLeresL free loan ln respecL of medlcal LreaLmenL for speclfled allmenLs.
(||) Polldav home PealLh club sporLs and slmllar faclllLles made unlformlv avallable Lo all
emplovees.
(|||) PoLel accommodaLlon up Lo 13 davs on Lransfer.
(|v) MoLorcar and Convevance faclllLv.
(v) Medlcal faclllLv ln own hosplLal, publlc hosplLal, CovernmenL hosplLal or approved hosplLal.
(v|) Car credlL card and club faclllLv.
(v||) use of compuLers and lapLop.
(v|||) Lxpenses on phones lncludlna moblle phones l.e. Lelephone faclllLv.
(|x) newspapers and perlodlcals.
(x) Meals 1ea coffee snacks eLc provlded.
(x|) AmounL spenL on Lhe Lralnlna of emplovee or on refreshmenL course.
(x||) Anv klnd of aood of whlch emplover ls a producer and ls supplled bv hlm Lo hls emplovee aL
concesslonal raLe.
(x|||) 8ecreaLlonal faclllLv provlded bv emplover Lo emplovee.

(x|v) erqulslLes ouLslde lndla Lo clLlzen of lndla who ls aovernmenL emplovee.
(xv) avmenL of Lhe premlum on Lhe accldenLal pollcv of emplovee.
(xv|) 8lA provlded Lo [udaes of PC or SC or offlclal of parllamenL or unlon mlnlsLer or leader of
opposlLlon ln parllamenL.
(xv||) Convevance provlded Lo [udaes of PC or SC.

24) 1he fo||ow|ng perqu|s|tes are exempt |f the va|ue does not exceed the prescr|bed ||m|t.
1. lnLeresL on peLLv loans noL exceedlna 8s. 20000 ln aaareaaLe
2. LducaLlonal beneflL noL exceedlna 8s. 1000 per chlld per monLh.
3. Medlcal relmbursemenL up Lo 8s. 13000 ln a vear.
25) erqu|s|tes taxab|e on|y for spec|f|ed emp|oyees-----sect|on 17(2) (|||)
1. Cardner, waLchman, sweeper or anv oLher personal aLLendanL--------8ule 3(3).
2. Cas, elecLrlclLv, waLer faclllLv---------8ule 3(4).
3. LducaLlonal faclllLv---------------------8ule 3(3).
26) Lmp|oyee |s spec|f|ed emp|oyee |f he fa||s under any 1 of the fo||ow|ng 3 categor|es:
(a) Pe ls anv dlrecLor of Lhe companv and ls also emplovee of companv.
(b) Pe ls Lhe emplovee wlLh Lhe subsLanLlal lnLeresL ln Lhe companv l.e. he holds 20 or more of
Lhe voLlna power.
(c) Pls lncome under Lhe head salarles" excludlna non moneLarv perqulslLes exceeds 8s.30000.

27) erqu|s|tes taxab|e for a|| k|nds of emp|oyees:
1. 8lA----------------------------------------------------SecLlon 17(2)(l) 8W8 3(1).
2. AccommodaLlon aL concesslonal raLe --------SecLlon 17(2)(ll) 8W8 3(1).
3. Lmplovee's obllaaLlon meL bv emplover-----------------SecLlon 17(2)(lv)
4. AmounL of premlum pald bv emplover on behalf of emplovee--------SecLlon 17(2)(v)
5. lrlnae beneflLs---------SecLlon 17(2)(vl) 8W8 3(7)
a) lnLeresL free or concesslonal loan
b) use of movable asseL belonalna Lo emplover
c) 1ransfer of a movable asseL bv emplover Lo emplovee.



For PCC / IPCC

SUMMARY OF THE 5
TH
CHAPTER
FIhL 8LhLFIT Ah hLw FLI$ITL$

1) 1hls chapLer relaLes Lo Lhe frlnae beneflLs provlded bv emplover Lo emplovee and up on whlch
emplover wlll be llable Lo pav Lax.
2) A companv, parLnershlp flrm, AC, 8Cl, local auLhorlLv and arLlflclal [udlclal person arLe reaarded as
emplovers and l81 ls levled on Lhem.
3) An lndlvldual, a Pul, cenLral aovernmenL, sLaLe aovernmenL, a pollLlcal parLv and LrusLs shall noL be
reaarded as emplover and no l81 ls levled on Lhem..
4) Lverv emplover shall be llable Lo pav l81 of 30 on Lhe value of frlnae beneflLs provlded Lo
emplovee or deemed Lo have been provlded Lo emplovee durlna Lhe ?. lurLher surcharae shall be
appllcable lf Lhe value of frlnae beneflLs exceeds 8s. 100 lakhs and educaLlon cess shall also be
appllcable.
5) SecLlon 113W8 (1) and (2) deflnes Lhe naLure of frlnae beneflLs and secLlon 113WC deflnes Lhe value
of frlnae beneflLs.
6) WLl A? 2008-2009, Lhe concepL of advance Lax has been made appllcable Lo l81 also. 1he amounL
of l81 shall be pald ln lnsLallmenLs ln Lhe prevlous vear lLself under secLlon 113W!(2).
7) lf advance Lax of l81 ls noL pald Lhen assessee shall be charaed slmple lnLeresL of 1 pm for Lhe
delav ln Lhe pavmenL of l81 under secLlon 113W! (3), (4) and (3).
8) 1he perqulslLe of car shall be Laxable for emplovee lf emplover ls noL llable for l81.
9) 1he perqulslLe value of car Laxable for emplovee wlll depend on Lhe ownershlp of car and who has
lncurred expenses for Lhe runnlna and malnLalnce of car.
10) lf car ls used excluslvelv for Lhe offlclal purposes Lhen perqulslLe value of car shall be nll and noLhlna
shall be Laxable for emplovee buL for Lhls few documenLs have Lo be malnLalned.
11) lf emplover has provlded more Lhan 1 car Lo emplovee and all cars are used parLlv for offlclal and
parLlv for personal purposes Lhen one car shall be Laxable as per Lhe rules of C purposes and all
oLher cars shall be Laxable as per Lhe rules of car used for personal purposes.
12) lck and drop faclllLv provlded bv Lhe emplover Lo emplovee shall be fullv exempL from Lax for
emplovee.
13) laclllLv of Lravelllna, Lourlna and accommodaLlon shall be Laxable for emplovee and for Lhls v shall
be Lhe value aL whlch Lhese faclllLles are avallable Lo aeneral publlc.
14) v of Lhe meals provlded shall be Lhe acLual expendlLure lncurred bv Lhe emplover buL 8s. 30 per
meal shall be exempL from Lax.
15) v of Lea and snacks provlded bv Lhe emplover durlna offlce hours shall be fullv exempL from Lax buL
whlch are provlded afLer offlce hours shall be fullv Laxable.
16) ClfLs recelved from emplover bv Lhe emplovee ln klnd are exempL up Lo 8s. 3000 pa. 8uL alfL ls cash
or ln converLlble ln cash shall be fullv Laxable.
17) erqulslLe value of credlL card and club shall be fullv exempL from Lax for emplovee lf use of card or
club ls for excluslve for offlclal purposes. 8uL ls use ls personal or parLlv offlclal and parLlv personal
Lhen lL shall be fullv Laxable.
18) 1he car ls Laxable for Lhe emplovee ls emplover ls llable for l81 and emplovee ls a s speclfled
emplovee. 1he deLalled LaxablllLv of moLor car provlded Lo Lhe emplovee ls as follows

1. II 1nL CAk I5 CWNLD/nIkLD 8 LMLCLk AND I5 U5LD 8 LMLCLL

1.1 CAk II U5LD CNL ICk 1nL CIIICIAL UkC5L5: lLs v shall be nlL provlded some speclfled
documenLs have been malnLalned.
1.2 CAk I5 U5LD CNL ICk 1nL kIVA1L UkC5L5: lLs v shall be aaareaaLe of followlna:
AcLual runnlna and malnLalnce charaes
Auu AcLual chauffer charaes (drlver's salarv)
Auu Wear and Lear charaes, whlch shall be 10 of Lhe hlsLorlcal cosL of car.
1.3 CAk I5 U5LD Ak1L ICk CIIICIAL AND Ak1L ICk Lk5CNAL UkC5L5: lLs v value shall
be calculaLed as follows:
A) II kUNNING AND MAIN1AINCL CnAkGL5 AkL ML1 8 LMLCLk 1nLN:
|) lf car's enalne capaclLv ls of 1600 cc or less: 8s. 1200 pm.
||) lf car's enalne capaclLv ls of more Lhan 1600 cc-8s.1600 pm.
8) II kUNNING AND MAIN1AINCL CnAkGL5 AkL ML1 8 LMLCLL 1nLN:
|) lf car's enalne capaclLv ls of 1600 cc or less-----8s. 400 pm
||) lf car's enalne capaclLv ls of more Lhan 1600 cc-8s.600 pm
NC1L5:
1) lf alona wlLh car chauffer ls also provlded Lhen 600 pm has Lo be added ln boLh of Lhe above cases.
2) ower of car can be deflned ln Lerms of cc (cublc capaclLv) or ln Lerms of llLers. 1herefore 1600 cc
mav be sald as 1.6 llLers of enalne capaclLv.

2. II LMLCLL CWN5 CAk AND I5 U5LD 8 LMLCLL nIM5LLI AND LkLN5L5 AkL ML1 8
LMLCLk Ck kLIM8Uk5LD 8 nIM
2.1 CAk II U5LD CNL ICk 1nL CIIICIAL UkC5L5: lLs v shall be nlL provlded some speclfled
documenLs have been malnLalned.
2.2 CAk I5 U5LD CNL ICk 1nL kIVA1L UkC5L5: lLs v shall be Laxed under secLlon 17(2)(lv) l.e.
lL shall be fullv Laxable for boLh speclfled as well as non speclfled emplovees.
2.3 CAk I5 U5LD Ak1L ICk CIIICIAL AND Ak1L ICk Lk5CNAL UkC5L5: lLs v value shall be
calculaLed as follows:
AcLual expendlLure done bv emplover
LLSS 1200 pm C8 1600 pm as Lhe case mav be dependlna upon cublc capaclLv of car
LLSS 600 pm for chauffer

NC1L5
1) Iract|on of month: lor compuLlna Lhe v of a car Lhe fracLlon of Lhe monLh shall be excluded.
2) Mean|ng of month: MonLh has Lo be reckoned ln respecL Lo Lhe 8rlLlsh calendar. lor Lhls purpose monLh shall be
undersLood ln Lhls manner: 13/3/2009 Lo 14/6/2009 or 19/8/2009 Lo 18/9/2009 or 2/10/2009 Lo 1/11/2009 and llkewlse.
3) Amount recovered by emp|oyer from emp|oyee: lf an emplovee has pald anv amounL back Lo Lhe emplover Lhen lL shall
noL be reduced from Lhe v of car, lf Lhe car has been used for C purposes. 8uL lf Lhe car has been used for Lhe
personal purposes Lhen Lhe amounL reLurned bv emplovee Lo emplover shall be reduced Lo calculaLe Lhe v.
4) oo| of cars: lf Lhe emplover has provlded more Lhan 1 car for parLlv offlclal and parLlv personal purposes Lhen lL wlll be a
case of ools of Car. ln such a case anv one car wlll be Laxed as per Lhe rules of C and remalnlna car(s) wlll be Laxed as
per Lhe rules of personal use.
5) Veh|c|e other than car: lf emplover has provlded anv oLher vehlcle oLher Lhan car Lhen lLs v shall be 600 pm.
6) |ck and drop fac|||ty: lf emplover has provlded plck and drop faclllLv Lhen lLs v shall be exempL from Lax.
7) 5pec|f|ed documents means:
1) A Loabook, whlch conLalns compleLe deLalls of [ournev underLaken for Lhe offlclal purpose, whlch mav
lnclude daLe of [ournev, desLlnaLlon, mlleaae and Lhe amounL of expendlLure, lncurred Lhereon.
2) 1he emplover alves a cerLlflcaLe LhaL Lhe expendlLure was lncurred whollv and excluslvelv for Lhe offlclal
purposes.
8) ersonal purposes lnclude Lhe beneflL Lo members of household of emplovee. Members of household mean spouse,
chlldren, spouse(s) of chlldren, parenLs, servanLs and dependenLs


For PCC / IPCC

SUMMARY OF THE 6
TH
CHAPTER
Ih0NL FN h$L FFLTY

1. Pouse properLv musL comprlse of bulldlna C8 lands aLLached Lo such bulldlna Lo aLLracL LaxablllLv
under Lhls head of lncome.
2. 1hls ls Lhe onlv head of lncome where lncome mav aeL compuLed on noLlonal basls and Laxed.
3. 1axablllLv arlses ln Lhe hands of Lhe owner or deemed owner as deflned under secLlon 27.
4. nAv ls compuLed u/s 23 and for Lhls purposes Lhe followlna sLeps are followed:
a) SLep 1: Plaher of Munlclpal value and lalr 8enL.
b) SLep 2: Lower of SLandard renL and value aL sLep 2.
c) SLep 3: value of sLep 2 less Loss of renL due Lo vacancv of properLv.
d) SLep 4: Plaher of value aL sLep 3 and acLual renL recelved ls CAv.
e) SLep 3: lrom CAv calculaLed aL sLep 4 we reduce munlclpal Laxes pald bv landlord on or
before 31/3/?
5. Munlclpal Laxes are deducLed on pavmenL basls and noL on Lhe accrual basls. lurLher Laxes whlch
are pald bv landlord are Lo be reduced and noL whlch have been pald bv LenanL.
6. SecLlon 24(a) allows 30 flaL deducLlon on nAv and secLlon 24(b) allows lnLeresL on caplLal
borrowed.
7. ln case of one self occupled properLv, neL annual value ls nll buL lnLeresL on borrowed caplLal u/s
24(b) ls allowed as a deducLlon up Lo 8s. 30,000, lf loan was Laken before 1/4/99.
8. lf loan ls Laken on or afLer 1/4/99 and purchase or consLrucLlon of house ls compleLed wlLhln 3 vears
from Lhe end of Lhe flnanclal vear of obLalnlna Lhe loan, Lhen Lhe llmlL of 8s. 30000 ls subsLlLuLed bv
8s. 1,30,000.
9. lnLeresL on loan borrowed whlch ls pavable ouLslde lndla shall be allowed as deducLlon onlv lf Lax ls
deducLed or pald aL source.
10. ln case of house properLv whlch ls vacanL, munlclpal Laxes are allowed Lo be reduced and Lhus we
can have neaaLlve nAv.
11. unreallzed renL does noL form parL of acLual renL lf all Lhe condlLlons of 8ule 4 are saLlsfled.
12. lf subsequenLlv unreallzed renL ls recelved lL ls Laxed u/s. 23AA ln Lhe vear of recelpL wlLhouL anv
deducLlon u/s. 24.
13. Arrears of renL recelved from a LenanL shall be Laxed u/s. 238 buL sub[ecL Lo 30 deducLlon of such
arrear.
14. Co-owner's share of lncome from properLv ls lncluded ln each co-owners lndlvldual assessmenL and
ls noL assessable as on AC.
15. ln case where Lhe properLv ls parLlv self occupled and parLlv leL ouL on Lhe basls of area Lhen Mv, l8,
S8,M1 pald and lnLeresL on borrowed caplLal has Lo be blfurcaLed on Lhe basls of area. Powever, lf
properLv ls LC/SC on Lhe basls of Llme perlod Lhen noLhlna has Lo be blfurcaLed.
16. neL annual value of a properLv can be neaaLlve provlded munlclpal Laxes pald are hlaher Lhan Lhe
amounL of CAv.
17. lf assessee has Lhe maln buslness of leLLlna ouL properLv or deallna ln properLv even Lhen Lhe renLal
lncome ls Lo be Laxed under Lhls head of lncome and noL under Lhe head of C8.
18. ln case assessee recelved composlLe renL for leLLlna ouL Lhe properLv as well as faclllLles alona wlLh
such properLv Lhen lL has Lhe followlna Lax LreaLmenL:
a) lf leLLlna ouL of bulldlna and faclllLles ls separable Lhen renL of Lhe properLv ls Lo be Laxed under
Lhe head of P and renL of faclllLles under Lhe head C8 or CS as Lhe case mav be.

b) lf leLLlna ouL of bulldlna and faclllLles ls noL separable Lhen renL of Lhe properLv as well as renL of
faclllLles ls Lo be Laxed under Lhe head C8 or CS as Lhe case mav be.
19. lollowlna P are noL charaeable Lo Lax under Lhe head of P:
a) lncome from a farmhouse.
b) roperLv held bv a charlLable LrusL
c) roperLv used for own buslness or professlon.
d) A SC or a vacanL house.
e) A palace of ex ruler.
20. Advance renL recelved bv Lhe assessee shall be Laxable ln Lhe vear Lo whlch lL relaLes.
21. ln Lhe case of house properLv whlch ls vacanL, munlclpal Laxes are allowed Lo be reduced.



For PCC / IPCC

SUMMARY OF THE 7
TH
CHAPTER
Ih0NL FN 8$IhL$$ & FFL$$Ih

1) 5ect|on 145: roflLs and aalns of 8uslness or rofesslon shall be compuLed elLher on cash basls or mercanLlle
basls of accounLlna.
2) SpeculaLlon 8uslness lncome should Lo be compuLed separaLelv as loss from such buslness cannoL be seL off
aaalnsL anv oLher buslness lncome.
3) 8evenue loss or expendlLure lncldenLal Lo buslness ls excludable ln Lhe compuLaLlon even Lhouah Lhere ls no
speclflcaLlon provlslon. lor example expendlLure on sLaLlonerv ls deducLlble even Lhouah Lhere ls no speclflc
secLlon for Lhls.
4) All Lhe asseLs use for buslness can be classlfled as under:
1ang|b|e: (a) Land - lL ls noL ellalble for depreclaLlon.
(b) 8ulldlna, machlnerv, planL and furnlLure are ellalble for depreclaLlon.
Intang|b|e: know-how, paLenLs, copvrlahLs, Lrademarks, llcenses, franchlses are ellalble for depreclaLlon.
5) 8evenue expenses lncurred ln relaLlon Lo Lhe asseLs menLloned ln polnL 4) should be consldered for
deducLlon u/s. 30, 31 and 37(1). CaplLal expendlLure noL quallfvlna under Lhese provlslons mav be caplLallzed
and depreclaLlon u/s. 32 can be clalmed lf ellalble.
6) Cnlv ln Lhe case of underLaklnas enaaaed ln Lhe buslness of aeneraLlon or aeneraLlon and dlsLrlbuLlon of
power, Lhere ls an opLlon Lo avall depreclaLlon on sLralahL-llne meLhod. 1hls opLlon ls for onlv Lhose asseLs,
whlch have been purchased afLer 31/3/98. ln all oLher cases depreclaLlon ls deducLlble onlv on wrlLLen down
value meLhod. 1he opLlon has Lo be exerclsed ln Lhe bealnnlna and shall applv Lo all Lhe subsequenL
assessmenL vears.
7) lf depreclaLlon has been charaed as per SLM basls as menLloned ln 6) above and Lhen block of asseL has been
sold:
(a) lor Lhe value less Lhan Lhe value of block Lhen we aeL Lermlnal depreclaLlon, whlch can be deblLed, Lo L
accounL.
(b) lor Lhe value more Lhan Lhe value of block Lhen up Lo Lhe amounL of depreclaLlon deblLed Lo Lhe dav ls
LreaLed as C8 lncome and balance lf anv ls LreaLed as S1CC.
8) lnLeresL on loan borrowed for acqulrlna on asseL used ln Lhe buslness has Lo be LreaLed as under:
a) 8efore Lhe commencemenL of producLlon/8uslness has Lo be caplLallzed.
b) lnLeresL relaLlna Lo Lhe perlod afLer Lhe asseL ls flrsL puL Lo use shall never form parL of Lhe cosL of Lhe
asseL. As per Sec. 43(1) lL shall be allowed as revenue expendlLure.
9) unabsorbed depreclaLlon ls LreaLed as parL of currenL vear depreclaLlon and Lherefore, can be seL off aaalnsL
lncome under oLher heads of lncome as well (excepL lncome of salarv and casual lncomes). lL can be carrled
forward lndeflnlLelv even lf Lhe buslness ls dlsconLlnued.
10) As per secLlon 30 Lhere shall be alwavs S1CC on sale of a depreclable asseL.
11) ln case of asseL belna desLroved and lnsurance companv alves a slmllar asseL Lo assessee Lhen Lhe value of
such asseL desLroved shall noL be reduced from Lhe block as per Lhe SC case of CI1 vs kastur| and 5ons Ltd..
12) 1he deducLlon of sclenLlflc research expendlLure u/s. 33 shall be as follows:
arLlculars ueducLlon permlsslble.
1 LxpendlLure lncurred for own buslness:
- u/s. 33(2A8) - speclal acLlvlLles such as pharmaceuLlcals, blo-Lechnoloav, compuLers
eLc.
- u/s. 33 - CLher cases

WelahLed deducLlon of 130
ueducLlon of 100
2 ConLrlbuLlon Lo CovernmenL's, approved unlverslLv's, colleae or lnsLlLuLlon's laboraLorv WelahLed deducLlon of 123
13) Cenerallv, revenue expendlLure ls deducLlble ln Lhe vear when expendlLure has been lncurred and
caplLal expendlLure ls caplLallzed. 1he concepL of deferred revenue expendlLure ls noL prevalenL ln
lndlan lncome Lax sLrucLure. Powever, such prlnclple ls made appllcable under Lhe followlna
secLlons:

A) 5ect|on 35D - AmorLlzaLlon of prellmlnarv expendlLure - wrlLe lL off over 3 vears. Cuallfvlna
amounL shall be follows:
a. lor non-corporaLe assessee lL cannoL exceed 3 of cosL of pro[ecL
b. lor a Companv lL cannoL exceed 3 of cosL of pro[ecL C8 3 caplLal emploved whlch ever ls hlaher.
8) 5ect|on 35DD - Lxpenses lncurred for amalaamaLlon and demeraer - wrlLe off over 3 vears.
C) 5ect|on 35DDA - volunLarv 8eLlremenL Servlce compensaLlon - wrlLe off over 3 vears.
D) 5ect|on 37(1) - ulscounL/ premlum on redeemable preference shares or bonds or debenLures can
be spread over Lhe llfe of Lhe lnsLrumenL - Madras Industr|a| Investment Corporat|on Ltd..
14) 1he bad debLs wrlLLen off durlna precedlna prevlous vears and whlch are recovered durlna Lhe
prevlous vear Lhen recoverv ls fullv Laxable ln Lhe vear of recoverv provlded lL ls recovered bv Lhe
same assessee who has lncurred such bad debL as was declded bv 5C |n the case of .k.ka|ma|.
15) LxpendlLure on adverLlsemenL ln souvenlr, brochure, pamphleL eLc. publlshed bv a pollLlcal parLv ls
noL allowed as deducLlon. Powever a deducLlon for Lhe same or/and slmllar expendlLure ls allowed
as deducLlon under secLlon 80CC8 and 80 CCC.
16) Lxpenses noL deducLlble are as follows:
1. 5ec. 40(a) -Anv pavmenL ouLslde lndla on whlch no 1uS has been done or has been pald.
2. 5ec. 40A(2) - Lxcesslve and unreasonable expendlLure where a relaLlve and subsLanLlal lnLeresL holdlna ls lnvolved.
3. 5ec. 40A(3) - LxpendlLure pald ln excess of 8s.20000 oLherwlse Lhan bv accounL pavee cheque or bank drafL sub[ecL
Lo rule 6uu.
4. 5ec. 40A(7) - rovlslon for araLulLv.
5. 5ec. 40A(9) - ConLrlbuLlon Lo unapproved funds.
6. 5ec. 438 - CerLaln expenses noL pald wlLhln Lhe sLlpulaLed Llme llmlL. 1hls applles lrrespecLlve of meLhod of
accounLlna.
17) Where Lhe parLnershlp deed sLlpulaLes Lerms of lnLeresL and salarv Lo parLners, Lhe amounL
auLhorlzed bv Lhe deed or Lhe llmlL prescrlbed bv Sec. 40(b), whlchever ls lower, shall be allowed as
deducLlon. 1hls llmlL ls as follows:
8CCk kCII15 CI kCIL55ICNAL IIkM5 8CCk kCII15 CI
C1nLk IIkM5
kLMUNLkA1ICN A5 CI 8CCk
kCII15
Cn flrsL 8s.100000 or
ln case of Loss
Cn flrsL 8s.73000 or
ln case of Loss
8s.30000 or 90 of book proflLs whlch
ever ls hlaher
Cn nexL 100000 Cn nexL 73000 60
Cn 8alance Cn 8alance 40

18) U/s. 44AA Lhe assessee needs Lo malnLaln books of accounL ln Lhe followlna cases:
a) noLlfled professlons - Cross recelpLs exceed 8s. 1.3 lakhs.
b) CLher professlons/buslness- lncome exceeds 8s. 12 lakhs or Lurnover exceeds 8s. 10 lakhs.
19) U/s.44A8 AudlL ls mandaLorv lf
(a)rofesslon aross recelpLs exceed 8s. 10 lakhs.
(b) resumpLlve cases covered bv 44Au, 44AL & 44Al. 4488 and 44888, where Lhe lncome ls less
Lhan prescrlbed llmlL.
20) resumpLlve buslness lncome provlslons are as follows:
rov|s|on 5ec. 44AD 5ec. 44AL 5ec. 44AI
naLure &
LllalblllLv
Clvll consLrucLlon buslness havlna
1urnover 40 lakhs.
1ransporL buslness-havlna no. of
vehlcles 10
8eLall 1raders havlna
1urnover 40 lakhs.
ueemed
lncome
8 or more of Lurnover. Peavv vehlcle - 8s. 3,300 or more.
CLhers 8s. 3,130 or more (p.m. or parL
of Lhe monLh)
3 or more of 1urnover.



For PCC / IPCC

SUMMARY OF THE 8
TH
CHAPTER
Ih0NL FN 0AFITAL AIh$

1) ln order Lo aLLracL LaxablllLv under Lhls head of lncome Lhere musL be `caplLal asseL' and lL musL be
covered under Lhe Lerm of `Lransfer'.
2) As per secLlon 2(14) sLock ln Lrade, personal effecLs and aarlculLural land ln rural area are noL
consldered as caplLal asseL and hence Lhere shall be no caplLal aalns on Lhelr Lransfer.
3) 1ransacLlons consLlLuLlna `Lransfer' are lllusLraLed u/s. 2(47) some of whlch are as follows:
a. Sale, exchanae or rellnqulshmenL of a caplLal asseL.
b. LxLlnaulshmenLs of anv rlahL ln asseL.
c. Compulsorv acqulslLlon bv of caplLal asseL bv aovernmenL
d. Converslon of caplLal asseL lnLo sLock ln Lrade.
e. Anv LransacLlon as referred as Lo ln SecLlon 33A of 1ransfer Cf roperLv AcL 1882.
4) 1hese LransacLlons are noL reaarded as `Lransfer' u/s. 47, Lherefore no caplLal aalns shall be charaed
|. 1ransfer under alfL or wlll
||. ulsLrlbuLlon of asseLs on parLlLlon of Pul
|||. 1ransfer of Lhe arLlsLlc, sclenLlflc work eLc. Lo Lhe aovernmenL, unlverslLv, museum eLc.
|v. Converslon of Lhe bonds, debenLures, deposlLs eLc lnLo shares or Lhe debenLures of LhaL companv.
v. 1ransfer of shares held bv shareholders under Lhe amalaamaLlon lf:
1. AmalaamaLed companv ls an lndlan companv.
2. 1ransfer ls made ln conslderaLlon of alloLmenL Lo hlm of Lhe shares ln Lhe amalaamaLed companv.
5) A caplLal asseL ls LreaLed as lona-Lerm caplLal asseL on Lhe basls of perlod of holdlna as follows:
(a) Shares, llsLed securlLles, unlLs of u1l and muLual funds recoanlzed u/s. 10(23u) - 12 monLhs or
more.
(b) All oLher caplLal asseLs-36 monLhs or more (uepreclable asseLs are alwavs LreaLed as S1CA)
6) ln case of L1CA, CCA ls Lo be lndexed wlLh Lhe facLor for LhaL vear ln whlch Lhe asseL was for Lhe flrsL
Llme acqulred bv Lhe assessee.
7) SecLlon 48's provlsos:
a) 1sL rovlso applles Lo non resldenLs on Lransfer of shares and debenLures onlv.
b) 2nd provlso applles Lo all klnds of L1CA.
c) 3rd provlso applles Lo bonds and debenLures and lndexaLlon ls noL done.
8) 8eneflL of lndexaLlon ls noL avallable ln case of:
a) ShorL Lerm caplLal asseLs,
b) 8onds and debenLures slnce 3
rd
provlso Lo secLlon 48 ls appllcable.
c) Slump sale u/s. 308
9) 1here are 8 self aeneraLed asseLs ln respecL of whlch Lhe cost of acqu|s|t|on shall be adopLed as n|| ln
case an assessee has noL lncurred anv cosL for acqulslLlon Lhem. 1hese asseLs are self aeneraLed
aoodwlll, Lenancv rlahL, rouLe permlL, Loom hours, 8lahL Lo manufacLure, produce or process anv
arLlcle or Lhlna, 8onus shares acqulred afLer 1/4/81, 8lahL Lo subscrlbe Lo shares , Lrademark or
brand name.
10) ln Lhe case of bonus shares acqulred before 1/4/1981, lL ls posslble Lo avall falr markeL value as on
1/4/1981 as Lhe cosL of acqulslLlon. ln facL, lL ls Lhe onlv asseL, amona Lhe 8 asseLs referred Lo above
for whlch falr markeL value as on 1/4/1981 can be avalled lf Lhe bonus shares have been acqulred
prlor Lo LhaL daLe. In the case of the other assets, even |f they are acqu|red pr|or to 1/4/1981, cost
w||| be taken as n||.

11) ln case of alfL or wlll or lnherlLance cosL of acqulslLlon shall be Lhe cosL aL whlch Lhe prevlous owner
acqulred Lhe asseL. lurLher ln whlle calculaLlna Lhe perlod of holdlna Lhe perlod for whlch Lhe asseL
was held bv prevlous owner and currenL owner shall be added LoaeLher.
12) 1he dlfferenLlal LreaLmenL beLween lona Lerm and shorL Lerm caplLal asseLs shall be as follows:-
art|cu|ars Long 1erm 5hort 1erm
lndexaLlon beneflL Avallable noL avallable
LxempLlon u/s 34, 34LC,34l & 34C
LxempLlon u/s 348, 34u, 34C & 34CA
Avallable
Avallable
noL avallable
Avallable
Concesslonal Lax raLe u/s. 112 Avallable ln case of securlLles noL avallable
8aslc exempLlon llmlL
(lndlvldual & Pul)
Avallable Lo resldenLs lf
lncomes excepL L1CC are
less Lhan baslc exempL llmlL
Avallable
ueducLlons of secLlon 80C Lo 80u noL avallable Avallable

13) 5ect|on 45(1A): CaplLal aalns Lax normallv arlses ln Lhe vear of Lransfer excepL ln Lhe case of
lnsurance compensaLlon where lL ls Laxed ln Lhe vear of recelpLs.
14) 5ect|on 45(2): Converslon of caplLal asseL lnLo sLock-ln-Lrade ls Laxed ln Lhe vear of sale of such
sLock-ln-Lrade buL whlle lndexlna Lhe cosL of acqulslLlon shall Laken for Lhe vear ln whlch converslon
Look place.
15) 5ect|on 45(5): ln case of compulsorv acqulslLlon caplLal aaln ls Laxed ln Lhe vear of recelpL of
compensaLlon or parL of Lhe compensaLlon. ln case of enhanced compensaLlon CC shall have Lhe
same naLure as LhaL of orlalnal compensaLlon. ln case of reducLlon of compensaLlon, Lhe Lax on
orlalnal compensaLlon or enhanced compensaLlon shall be revlsed.
16) values Lo be consldered for Lhe adopLlon for compuLaLlon of caplLal aalns are as:
a) 5ect|on 45(2) Converslon of caplLal asseL lnLo sLock - lalr markeL value on daLe of converslon.
b) 5ect|on 45(3) arLner or member lnLroduclna asseL Lo flrm or AC - 8ook value recorded ln flrm.
c) 5ect|on 45(4) ulssoluLlon of flrm and dlsLrlbuLlon of asseLs - lalr markeL value on Lhe daLe of
dlsLrlbuLlon. ln oLher cases, acLual conslderaLlon Lo be adopLed.
17) CompuLaLlon of caplLal aalns ln case of non-depreclable asseLs shall be calculaLed u/s. 48 and ln Lhe
case of depreclable asseLs lL shall be as under:
(|) 5ect|on 50: ln case of depreclable asseLs used for Lhe buslness and professlonal purposes.
(||) 5ect|on. 50A, where sLralahL-llne meLhod ls adopLed bv power secLor underLaklna.
(|||) 5ect|on. 508, where slump sale ls affecLed.
18) 5ect|on. 50C of valuaLlon for Lhe SLamp uuLv AcL we have Lo Lake hlaher of:
a) Sale conslderaLlon
b) value as flxed under LhaL acL.
19) 8eneflL of lndexaLlon ls noL avallable ln case of:
a) ShorL Lerm caplLal asseLs,
b) 8onds and debenLures slnce 3
rd
provlso Lo secLlon 48 ls appllcable.
c) Slump sale u/s. 308
20) Lxempt|ons of cap|ta| ga|ns ava||ab|e on|y to |nd|v|dua| and/or nUI assessees: 5ect|on 54, 548 and 54I
rov|s|ons Cap|ta| ga|ns on sa|e of
res|dent|a| property used
for res|dent|a| property:
5ect|on 54
Cap|ta| ga|ns on sa|e of
urban agr|cu|tura| |and and
used for another agr|cu|ture
|and
5ect|on 548
Cap|ta| ga|n on sa|e of L1CA
not to be charged |n case of
|nvestment |n res|dent|a|
house: 5ect|on 54I
a) Assessee lndlvldual/Pul lndlvldual lndlvldual/Pul
b) Asset transferred 8esldenLlal house AarlculLural land used bv Anv caplLal asseL noL belna

properLv belna bulldlnas
or lands appurLenanL
LhereLo.
lndlvldual or hls parenL for
aarlculLural purposes durlna
2 vears precedlna daLe of
Lransfer
resldenLlal house properLv.
LxempLlon ls noL avallable lf
assessee owns more Lhan 2
resldenLlal houses lncludlna
a new house.
c) Nature of Asset L1CA L1CA / S1CA L1CA
d) New Asset to be
purchased/constructed
8esldenLlal house
properLv l.e. bulldlnas or
lands appurLenanL LhereLo
AarlculLural land (ln urban
or rural area)
8esldenLlal house properLv
l.e. bulldlnas or lands
appurLenanL LhereLo
e) 1|me-||m|t for
purchase/construct|on
urchase: WlLhln 1 vear
before or 2 vears afLer Lhe
daLe of Lransfer.
ConsLrucLlon: compleLe
consLrucLlon wlLhln 3
vears vear from daLe of
Lransfer
urchase wlLhln 2 vears
from Lhe daLe of Lransfer
urchase: WlLhln 1 vear
before or 2 vears afLer daLe
of Lransfer, and
ConsLrucLlon: CompleLe
consLrucLlon wlLhln 3 vear
from daLe of Lransfer
f) Depos|t scheme (D|scussed |ater) Appllcable Appllcable Appllcable
g) Amount of Lxempt|on Lower of - CaplLal aalns or
lnvesLmenL ln new asseL
Lower of - caplLal aalns or
cosL of new asseL
CosL of new house x CaplLal
Calns - neL conslderaLlon
belna lull value of
conslderaLlon less Lxpenses
on Lransfer
h) W|thdrawa| of Lxempt|on on lf Lransfer of Lhe new
asseL wlLhln 3 vears from
lLs purchase/ consLrucLlon
lf Lransfer of Lhe new asseL
wlLhln 3 vears from lLs
purchase
(a) lf assessee purchases
wlLhln 2 vears or consLrucLs
wlLhln 3 vears from daLe of
Lransfer of orlalnal asseL, a
resldenLlal house oLher Lhan
new house, or
(b) Lransfer new asseL
lLs purchase/ consLrucLlon
|) 1axab|||ty on W|thdrawa| AmounL of exempLlon
clalmed earller shall be
reduced from Lhe cosL of
acqulslLlon of new asseL.
LxempLlon clalmed earller
shall be reduced from cosL
of acqulslLlon of new asseL.
AmounL exempLed earller
shall be Laxable as lona-
Lerm caplLal aalns ln
prevlous vear ln whlch - (a)
anoLher resldenLlal house ls
purchased or consLrucLed,
or (b) Lhe new asseL ls
Lransferred.

21) Lxempt|ons |n respect of cap|ta| ga|ns ava||ab|e to a|| assessees: 5ect|on 54D, 54LC, 54G and 54GA
rov|s|ons Compu|sory acqu|s|t|on
of |and & bu||d|ngs
5ect|on 54D
Investment |n certa|n
bonds:
5ect|on 54LC
5h|ft|ng of undertak|ng
to rura| area:
5ect|on 54G
5h|ft|ng of
undertak|ng to 5L2:
5ect|on 54GA
a) Assessee Anv person Anv person Anv person Anv person
b) Asset
transferred
Compulsorv acqulslLlon
of land or bulldlna
whlch was used ln Lhe
buslness of lndusLrlal
underLaklna durlna 2
vears prlor Lo daLe of
Lransfer.
Anv lona Lerm caplLal asseL 1ransfer of planL,
machlnerv or land or
bulldlna for shlfLlna
lndusLrlal underLaklna
from urban area Lo
rural area
1ransfer of planL,
machlnerv or land or
bulldlna for shlfLlna
lndusLrlal underLaklna
from urban area Lo
Speclal Lconomlc Zone
c) Nature of
Asset
ShorL Lerm/ Lona Lerm Lona Lerm ShorL Lerm/ Lona Lerm ShorL Lerm/ Lona Lerm
d) New Asset to new land or bulldlnas 8onds, redeemable afLer 3 (a) urchase/ (a) urchase/

be purchased/
constructed
for Lhe lndusLrlal
underLaklna.
vears lssued -
(a) bv naLlonal Plahwav
AuLhorlLv of lndla, or
(b) bv 8ural LlecLrlflcaLlon
CorporaLlon, maxlmum
exempLlon llmlL belna 8s. 30
lakhs (Amended bv lA, 2007
w.e.f. 1-4-08)
ConsLrucLlon of planL,
machlnerv, land or
bulldlna ln such rural
area or, (b) ShlfLlna
orlalnal asseLs Lo LhaL
area or, (c) lncurrlna
noLlfled expenses
ConsLrucLed of planL,
machlnerv, land or
bulldlna ln such SLZ or,
(b) ShlfLlna Lhe orlalnal
asseLs Lo SLZ or, (c)
lncurrlna noLlfled
expenses.
e) 1|me-||m|t for
purchase/
construct|on
of new asset.
WlLhln 3 vears from
daLe of recelpL of lnlLlal
compensaLlon.
WlLhln 6 monLhs from Lhe
daLe of Lransfer of orlalnal
asseL.
WlLhln 1 vear before or
3 vears afLer Lhe daLe
of Lransfer.
WlLhln 1 vear before
or 3 vears afLer Lhe
daLe of Lransfer.
f) Depos|t
scheme
Appllcable - Appllcable Appllcable
g) amount of
Lxempt|on
Lower of - caplLal aalns
or lnvesLmenL ln new
asseL.
Lower of - caplLal aalns or
lnvesLmenL ln new asseL
Lower of - CaplLal
aalns, or CosL lncurred
for (a) Lo (c) of polnL 4.
Lower of CaplLal aalns,
or CosL lncurred for (a)
Lo (c) of polnL 4.
h) W|thdrawa|
exempt|on
1ransfer of new asseL
wlLhln a perlod of 3
vears from Lhe daLe of
lLs acqulslLlon or
consLrucLlon.
1ransfer of new asseL,
converslon Lhereof ln
monev of Laklna loan or
advance on lLs securlLv
lLs acqulslLlon
1ransfer of new or
shlfLed asseL wlLhln a
perlod of 3 vears from
Lhe daLe of lLs
acqulslLlon or
consLrucLlon or shlfLlna
1ransfer of new or
shlfLed asseL wlLhln a
perlod of 3 vears from
Lhe daLe of lLs
acqulslLlon or
consLrucLlon or
shlfLlna
|) 1axab|||ty on
W|thdrawa| of
Lxempt|on
AmounL of exempLlon
reduced from Lhe cosL
of acqulslLlon of new
asseL.
LxempLed caplLal aaln wlll
Laxable as lona-Lerm caplLal
aalns ln prevlous vear ln
whlch such
Lransfer/converslon Lakes
place.
AmounL of exempLlon
of acqulslLlon of new or
shlfLed asseL.
AmounL of exempLlon
of acqulslLlon of new
or shlfLed asseL.
Note: lf exempLlon has been clalmed u/s 34LC ln respecL of lnvesLmenL ln a new asseL, no deducLlon shall be allowed u/s 80C
wlLh reference Lo Lhe amounL of lnvesLmenL for whlch exempLlon has been clalmed.

22) lndexaLlon facLors Lo be used for lndexaLlon of L1CA are:
rev|ous ear Indexat|on
factor
factor
factor
1981-1982 100 1991-1992 199 2001-2002 426
1982-1983 109 1992-1993 223 2002-2003 447
1983-1984 116 1993-1994 244 2003-2004 463
1984-1983 123 1994-1993 239 2004-2003 480
1983-1986 133 1993-1996 281 2003-2006 497
1986-1987 140 1996-1997 303 2006-2007 319
1987-1988 130 1997-1998 331 2007-2008 331
1988-1989 161 1998-1999 331 2008-2009 382
1989-1990 172 1999-2000 389
1990-1991 182 2000-2001 406



For PCC / IPCC

SUMMARY OF THE 9
TH
CHAPTER
Ih0NL FN ThL $0L$

1) 1he followlna lncomes are alwavs Laxable as lncome from oLher sources:
(a) ulvldend lncome from forelan companv.
(b) Casual lncome such as wlnlna from loLLerv, crossword puzzles, aambllna, card aames, wlnnlna from horse races eLc.
(c) ConLrlbuLlon of l recelved bv Lhe emplovee and noL deposlLed wlLh Lhe l.
(d) lnLeresL on securlLles.
(e) 8enL from leLLlna of planL and machlnerv alona wlLh bulldlna.
(f) Sum recelved bv kevman from kevman lnsurance pollcv lf emplover and emplovee relaLlon ls absenL.
(g) lncome from subleLLlna of house properLv.
(h) ClfLs ln cash recelved exceedlna 8s. 30000 from non relaLlves. 8uL alfLs on Lhe occaslon of marrlaae are noL Laxable.
Slmllarlv alfLs alven ln anLlclpaLlon of deaLh shall noL be Laxable.
2) 5ect|on 145: lncome under Lhe head of oLher sources shall be calculaLed on Lhe cash basls or accrual
basls of accounLlna whlchever ls followed bv Lhe assessee.
3) lollowlna are some of Lhe lncomes whlch are Laxable under Lhe head of oLher sources:
a) ulrecLor's fee.
b) AarlculLure lncome from ouLslde lndla.
c) 8enL of open ploL of land.
d) Salarv pavable Lo members of parllamenL.
e) lamllv penslon recelved bv famllv members of deceased emplovee ls Laxable as lncome from oLher sources. 8uL an
exempLlon of 13000 or 1/3 of such lncome shall be allowed as per secLlon 37.
f) lnLeresL on emplovee's own conLrlbuLlon ln u8l when he aeLs reLlred.
g) Anv lncome from undlsclosed sources.
h) Anv oLher casual lncome.
|) lncome from rovalLv.
[) Cround renL.
k) LxamlnaLlon fees recelved bv a Leacher from a person oLher Lhan hls emplover.
4) ulvldends recelved bv shareholders from a domesLlc companv oLher Lhan Lhose covered bv secLlon
2(22)(e) ls exempL from Lax u/s. 10(34) for shareholder slnce companv has Lo pav Cu1.
5) lncome from CLher Sources ls a reslduarv head of lncome, whlch lncludes all lncome whlch ls noL
covered bv oLher heads of lncome and whlch are noL exempL from Lax.
6) Whlle lncome from bulldlna properLv and land appurLenanL LhereLo ls Laxable under Lhe head
`lncome from house properLv', lf vacanL land ls leL ouL, Lhe renL ls assessable under Lhe head
`lncome from oLher sources'.
7) lncome from aarlculLural acLlvlLles ls exempL from Lax u/s 10(1), lf aarlculLure land ls slLuaLed ln lndla
buL lf land ls ouLslde lndla Lhen lncome shall noL be exempL buL lL wlll be Laxable as Lhe lncome from
oLher sources.
8) AparL from Lhe speclflc deducLlons permlsslble u/s. 37, anv expendlLure whollv and excluslvelv
lncurred for Lhe purpose of earnlna anv lncome assessable under Lhls head ls also allowable and
deducLlon.
9) lf Lhe assessee recelves penslon afLer reLlremenL, Lhe same ls assessable under Lhe head `Salarles'.
Whereas, lf famllv penslon ls recelved bv Lhe leaal helr of Lhe deceased emplovee, lL ls Laxable under
Lhls head sub[ecL Lo 1/3 of famllv penslon or 8s. 13,000 whlchever ls less.
10) Wlnnlnas from loLLerv, crossword puzzles, races, eLc. shall be Laxed aL Lhe raLe of 30 (plus
surcharae and educaLlon cess) u/s. 11388.
11) lrom Lhe casual lncomes no klnd of expenses are allowed Lo be deducLed and aross amounL ls
Laxable.


For PCC / IPCC

SUMMARY OF THE 10
TH
CHAPTER
0L88Ih F Ih0NL$

1) 5ect|on 60: lf lncome ls Lransferred wlLhouL Lransfer of Lhe asseL Lhen such lncome shall be Laxable
for Lhe Lransferred and noL for Lhe Lransferee.
2) 5ect|on 61: ln Lhe case of revocable Lransfer, lncome from Lhe asseL shall be Laxable for Lhe Lransfer
and noL for Lhe Lransferee buL lf Lhe Lransfer ls noL revocable Lhen lL shall be Laxable for Lhe
Lransferor.
3) 5ect|on 64(1)(||): An lndlvldual ls charaeable Lo Lax ln respecL of anv salarv, commlsslon, fees or anv
oLher form of remuneraLlon recelved bv Lhe spouse from a concern ln whlch Lhe lndlvldual has
subsLanLlal lnLeresL excepL ln case where lncome of spouse ls earned onlv due Lo appllcaLlon of
Lechnlcal or professlonal knowledae or experlence.
4) 5ect|on 64(1)(|v): lf person has Lransferred an asseL Lo spouse and spouse earns some lncome from
such asseL Lhen such lncome shall be Laxable for Lhe Lransferor of Lhe asseL.
5) lncome on Lhe asseL Lransferred ls clubbed buL noL Lhe lncome on accreLlon Lo Lhe asseL.
6) 5ect|on 64(1A): Anv lncome accrulna or arlslna Lo a mlnor chlld ls llable Lo be clubbed wlLh Lhe
lncome of faLher or moLher whose so ever has hlaher LoLal lncome before such clubblna.
7) lncome derlved bv a mlnor chlld ouL of sklll and LalenL or bv wav of salarv and waaes shall noL be
clubbed. Powever, lf such lncome ls lnvesLed and lncome ls earned Lhereon, such lncome shall be
clubbed.
8) Clubblna ceases Lo operaLe when Lhe mlnor becomes a ma[or.
9) 1here ls no clubblna of lncome ln Lhe case of a mlnor chlld who ls ellalble for deducLlon u/s. 80u.
10) Slmllarlv, where a mlnor chlld does noL have parenLs, clubblna of lncome does noL arlse. 1he mlnor
chlld wlll be assessable ln hls own case. Cuardlan wlll be represenLaLlve assessee for assessmenL
purposes.
11) lf Lhe lncome ls Lo be clubbed Lhen lL shall be compuLed flrsL ln Lhe hands of recelver under relevanL
head and Lhen lL shall be lncluded ln Lhe LoLal lncome lndlvldual under same head.



For PCC / IPCC

SUMMARY OF THE 11
TH
CHAPTER
$LT FF & 0AY FwA F L$$L$

1) 5ect|on 70: Loss from one source can be seL-off aaalnsL lncome from anoLher source under Lhe same
head ln Lhe same vear excepL
a. SpeculaLlon loss.
b. Lona-Lerm caplLal loss.
c. Loss from ownlna and malnLalnlna racehorses.
d. no loss Lo be seL off from lncome, whlch ls exempL from Lax.
e. no loss Lo be seL off from lncome of loLLerles, card aames, races eLc.
f. Loss of C8 can noL be seL off from salarv lncome
2) 5ect|on 71: Loss under one head of lncome can be seL-off aaalnsL lncome under anoLher head of
lncome ln Lhe same vear excepL Lhose whlch are menLloned ln 1) above.
3) 1he quesLlon of compuLlna loss under Lhe head `salarles' does noL arlse. under all oLher heads,
Lhere ls a posslblllLv LhaL Lhe neL resulL of compuLaLlon ls a loss. Such loss remalnlna unabsorbed
afLer seL-off can be carrled forward up Lo 8 assessmenL vear (4 vears ln Lhe case of loss from Lhe
acLlvlLv of owlna and malnLalnlna race horses and speculaLlon buslness loss) Lo be seL-off aaalnsL
lncome under Lhe same head.
4) SpeculaLlon loss, lona-Lerm caplLal loss and loss from Lhe acLlvlLv of ownlna and malnLalnlna
racehorses can be seL-off onlv aaalnsL lncome of Lhe same naLure.
5) 5ect|on 72A: ln Lhe case of amalaamaLlon Lhe unabsorbed loss and depreclaLlon ls LreaLed as LhaL of
Lhe amalaamaLed companv. 1herefore, carrv forward of loss ls avallable for subsequenL 8
assessmenL vears and depreclaLlon can be carrled forward lndeflnlLelv. 1hls perlod of 8 vears ls
lrrespecLlve of Lhe perlod of loss, whlch has been, carrv forwarded bv amalaamaLlna companv.
6) ln Lhe case of demeraer, Lhe loss aLLrlbuLable Lo Lhe resulLlna companv shall be carrled forward for
Lhe unexplred perlod of 8 vears.
7) lf buslness ls succeeded bv wav of lnherlLance, loss of Lhe predecessor from such buslness can be
carrled forward bv Lhe successor.
8) 5ect|on 79: Closelv held companv can carrv forward loss onlv lf 31 of voLlna rlahL ls held bv Lhe
same shareholders.
9) Carrv forward beneflL of buslness loss, speculaLlon loss, loss under `caplLal aalns' and loss from Lhe
acLlvlLv of ownlna and malnLalnlna race horses can be avalled onlv lf Lhe reLurn of loss ls furnlshed
wlLhln Lhe due daLe u/s. 139(1). 1hls condlLlon does noL applv Lo unabsorbed depreclaLlon u/s.
32(2) and loss from house properLv u/s. 718.



For PCC / IPCC

SUMMARY OF THE 12
TH
CHAPTER
Ih0NL FN AI0LTL Ih0NL

1) As per secLlon 10(1) aarlculLure lncome ls exempL from lncome Lax lf aarlculLural land ls slLuaLed ln
lndla. lf aarlculLure land ls ouLslde lndla Lhen Lhe aarlculLural lncome shall be Laxable.
2) ower Lo Lax aarlculLure lncome has been alven Lo sLaLe aovernmenLs bv Lhe consLlLuLlon of lndla.
3) ueflnlLlon of aarlculLure lncome ls alven ln secLlon 2(1A).
4) 1o Lerm anv acLlvlLv as aarlculLural acLlvlLv boLh baslc condlLlons and subsequenL condlLlons have Lo
be saLlsfled as was declded bv SC ln Lhe case of 8a[a 8lnov kumar Sahas 8ov.
5) AcLlvlLles whlch are allled acLlvlLles Lo aarlculLure such as anlmal husbandrv, dalrv farmlna, flsherv eLc.
are noL reaarded as aarlculLural acLlvlLles and Lherefore lncome from Lhese sources are noL exempL.
1hev are Laxable as lncome from buslness and professlon.
6) lf a parLnershlp ls havlna maln acLlvlLv of aarlculLure Lhen remuneraLlon and lnLeresL recelved bv Lhe
parLners from such flrm shall be reaarded as aarlculLure lncome and hence noL charaeable Lo Lax buL
share ln Lhe posL Lax proflLs of flrm ls noL aarlculLure lncome as was declded bv Lhe ln Lhe case of 8.
M. Chldambaram lllal.
7) lncome from sale of rubber, coffee and Lea shall be blfurcaLed as buslness lncome and aarlculLure
lncome as per rule 7, rule 78 and rule 8.
8) ln case of lndlvldual, Pul, AC and 8Cl aarlculLure lncome and non aarlculLure lncome have Lo be
clubbed LoaeLher Lo calculaLe Lax on Lhe non aarlculLure lncome. 1hls shall be done when aarlculLure
lncome exceeds 8s. 3000 pa and non aarlculLure lncome exceeds baslc exempL llmlL. 1hls leads Lo
parLlal LaxaLlon of aarlculLure lncome.
9) We can sav LhaL aarlculLure lncome ls noL fullv exempL from Lax buL lL ls parLlallv Laxable ln some
speclal cases.



For PCC / IPCC

SUMMARY OF THE 13
TH
CHAPTER
L0TIh$ FN TI

1) ueducLlons under secLlon 80C Lo 80u are noL allowed Lo be deducLed from Lona 1erm CaplLal Caln and
casual lncomes such as wlnnlna of LoLLerles, races eLc.
2) AaareaaLe of all deducLlons cannoL exceed C1l. ln oLher words we can noL have loss due Lo deducLlons.
3) Under sect|on 80C deducLlon shall be allowed Lo an lndlvldual (wheLher resldenL or non resldenL) or Pul
(wheLher resldenL or non resldenL). lndlvldual can be a forelan naLlonal.
4) ueducLlon under secLlon 80C ls allowed for savlnas and lnvesLmenLs done. 1hese savlnas and
lnvesLmenLs can be made from Laxable lncome or from exempLed lncome. Powever maxlmum
deducLlon allowed ls 8s. 100000.
5) Under sect|on 80CCC ueducLlon ls avallable onlv Lo an lndlvldual who can be elLher resldenL or can be a
non-resldenL or can be a forelan naLlonal. ueducLlon ls avallable lf lndlvldual has ln Lhe ? deposlLed anv
amounL ouL of hls Laxable lncome (whlch can be from currenL vear's lncome or preceedlna vear's
lncome) Lowards annulLv plan of LlC or anv oLher lnsurer for recelvlna penslon. Maxlmum deducLlon
allowed ls 8s. 100000.
6) Under sect|on 80CCD deducLlon ls allowed Lo lndlvldual who ls emplovee of cenLral aovernmenL or anv
oLher emplover, for Lhe conLrlbuLlon Lo new penslon scheme. ueducLlon ls allowed sub[ecL Lo maxlmum
conLrlbuLlon of 10 of salarv bv emplovee and emplover.
7) As per sect|on 80CCL, aaareaaLe deducLlon under secLlon 80C, 80CCC, 80CCu can noL be more Lhan 8s.
100000.
8) Under sect|on 80D deducLlon ls allowed Lo lndlvldual and Pul wheLher resldenL or non resldenL for Lhe
medlcal lnsurance premlum pald bv anv mode oLher cash. ueducLlon allowed shall be maxlmum of 8s.
13000 buL ln case of senlor clLlzen 8s. 20000.
9) Under sect|on 80DD deducLlon ls allowed Lo lndlvldual and Pul wheLher resldenL or non resldenL for Lhe
medlcal, rehablllLaLlon, nurslna expenses lncurred for Lhe dependenL who ls sufferlna form dlsablllLv.
ueducLlon allowed ls 8s. 30000 buL ln case of severe dlsablllLv deducLlon allowed ls 8s. 73000.
10) Under sect|on 80DD8 deducLlon ls allowed Lo resldenL lndlvldual or resldenL Pul for Lhe medlcal
expenses lncurred on Lhe LreaLmenL of dependenL. ueducLlon allowed ls maxlmum of 8s. 40000 buL ln
case of senlor clLlzen deducLlon allowed ls maxlmum of 8s. 60000.
11) Under sect|on 80L deducLlon ls allowed Lo resldenL or non resldenL lndlvldual for Lhe lnLeresL pald on
Lhe loan Laken for Lhe hlaher educaLlon for Lhe sLudles of self, spouse or chlldren. Cnlv lnLeresL ls
allowed as a deducLlon for Lhe consecuLlve perlod of 8 vears.
12) Under sect|on 80G deducLlon ls allowed Lo all assessees wheLher resldenL or non resldenL for Lhe
donaLlons alven. no deducLlon ls allowed for Lhe donaLlons alven ln klnd. Some donaLlons alven are
allowed 100 deducLlon and some oLher are allowed 30 deducLlon.
13) Under sect|on 80GG deducLlon ls allowed Lo lndlvldual who ls resldenL or a non resldenL for Lhe renL
pald for a self occupled resldenLlal house where he ls noL enLlLled Lo P8A from hls emplover. Maxlmum
deducLlon allowed ls 8s. 2000 pm.
14) Under sect|on 80GGA deducLlon ls allowed Lo all assesses wheLher resldenL or non resldenL for Lhe
100 of donaLlons alven for sclenLlflc research where assessee ls noL havlna lncome from buslness or
professlon.
15) Under sect|on 80GG8 and 80GGC deducLlon ls allowed for Lhe donaLlons alven Lo pollLlcal parLv bv
lndlan companv and oLher assessees.

16) Under sect|on 80IIA deducLlon ls allowed for 100 of proflLs earned from Lhe buslness of collecLlon and
processlna of blo-dearadable wasLe. ueducLlon ls allowed Lo all assessees for consecuLlve perlod of 3
vears.
17) Under sect|on 80IIAA deducLlon ls allowed onlv Lo lndlan Companv whlch has Lhe buslness of
manufacLurlna anv arLlcle or Lhlna. ueducLlon allowed ls 30 of Lhe salarv for 3 vears pald Lo workmen
who have been emploved afLer lnlLlal 100 workmen.
18) Under sect|on 80LA deducLlon ls allowed Lo banklna companles havlna branch locaLed ln offshore area
or SLZ. ueducLlon allowed ls 100 of Lhe proflLs earned for flrsL 3 vears and 30 of Lhe proflLs earned for
nexL 3 vears.
19) Under sect|on 80 deducLlon ls allowed Lo co-operaLlve socleLv.
20) Under sect|on 80CC8 deducLlon ls allowed Lo resldenL lndlvldual who ls a professlonal auLhor.
ueducLlon allowed ls for Lhe rovalLv lncome earned from sale of books sub[ecL Lo maxlmum of 8s.
300000.
21) Under sect|on 80kk8 deducLlon ls allowed Lo resldenL lndlvldual who ls an lnvenLor of a Lechnoloav
whlch ls realsLered under aLenLs AcL 1970. ueducLlon allowed ls for Lhe rovalLv lncome earned from
such lnvenLlon sub[ecL Lo maxlmum of 8s. 300000.
22) Under sect|on 80U deducLlon ls allowed Lo resldenL lndlvldual who ls sufferlna from a phvslcal dlsablllLv.
ueducLlon allowed ls 8s. 30000 buL ln case of severe dlsablllLv deducLlon allowed ls 8s. 73000.



For PCC / IPCC

SUMMARY OF THE 14
TH
CHAPTER
LXLNFTL Ih0NL$

1) 5ect|on 10: All of Lhe followlna lncomes are exempL from Lax
a) AarlculLure lncome from land ln lndla.
b) Share of lncome of Pul for member of Pul.
c) Share of lncome of flrm for Lhe parLner of flrm.
d) CompensaLlon from dlsasLers [w.e.f secLlon 10 (108C)].
e) AmounL recelved on Lhe maLurlLv of llfe lnsurance pollcv.
f) Scholarshlps recelved for meeLlna cosL of educaLlon.
g) lncome from awards.
h) lncome from dlvldends from shares and unlLs of muLual funds.
|) lncome from lnLernaLlonal sporLlna evenLs.
2) 5ect|on 10A: rovlslons for newlv esLabllshed underLaklnas ln free Lrade zones, or speclal economlc
zone.
3) 5ect|on 10AA: Speclal provlslons ln respecL of newlv esLabllshed unlLs ln speclal economv zone.
4) 5ect|on 108: rovlslons ln respecL of newlv esLabllshed 100 exporL orlenLed underLaklna.
5) 5ect|on 108A: ueducLlon ln respecL of exporL of arLlsLlc handmade wooden arLlcles



For PCC / IPCC

SUMMARY OF THE 15
TH
CHAPTER
A$$L$$NLhT F0LL

1) 5LC1ICN 139(1): lL ls compulsorv for everv companv and a parLnershlp flrm Lo flle lLs reLurn of
lncome on or before due daLe lrrespecLlve of level of lncome. lurLher ln case of loss also Lhev have
Lo flle reLurn of lncome ln Lhe prescrlbed formaL.
2) lL ls compulsorv for everv person oLher Lhan a companv and parLnershlp flrms Lo flle reLurn of
lncome on or before Lhe due daLe lf hls LoLal lncome or LoLal lncome of some oLher person ln
respecL of whlch he ls assessable durlna Lhe vear exceeds Lhe baslc exempL llmlL.
3) Where Lhe assessee ls companv, parLnershlp flrm, a person (oLher Lhan companv) whose accounLs
are requlred Lo be audlLed, a co-operaLlve, Lhe person ls worklna parLner of a flrm whose accounLs
are requlred Lo be audlLed, due daLe ls 31/SepLember/A? and ln anv oLher case due daLe ls 31/
!ulv/A?.
4) lf an assessee has defaulLed ln flllna reLurn of lncome Lhen he shall be llable Lo pav lnLeresL under
secLlon 234A and Lo pav penalLv under secLlon 271l.
5) lf Lhe 8Cl ls furnlshed afLer Lhe due daLe or ls noL furnlshed aL all Lhen assessee has Lo pav lnLeresL
under secLlon 234A 1 pm or parL of Lhe monLh. lnLeresL shall be pald for Lhe perlod sLarLlna
from Lhe daLe nexL Lo Lhe due daLe of 8Cl and endlna on Lhe daLe when 8Cl ls flled.
6) 5ect|on 139(3): lL ls noL mandaLorv Lo flle a reLurn of loss, as Lhere ls no Laxable lncome. Powever
losses of non speculaLlve buslness under secLlon 72(1)" , SpeculaLlve buslness under secLlon 73(2)
, CaplLal Calns under secLlon 74" , losses from Lhe acLlvlLv of ownlna and malnLalnlna of race
horses under secLlon 74A" can be carrled forward onlv lf a reLurn of loss ls flled. Powever, Loss
under Pouse roperLv" and unabsorbed uepreclaLlon" can be carrled forward even lf reLurn of
loss ls flled afLer due daLe.
7) 5ect|on 139(4): lf 8Cl ls noL flled wlLhln Lhe Llme allowed u/s 139(1) Lhe AC can lssue a noLlce
requlrlna Lhe assessee Lo furnlsh 8Cl wlLhln Lhe Llme speclfled bv hlm. lf Lhe reLurn ls noL furnlshed
wlLhln Llme allowed u/s 139(1) or wlLhln Lhe Llme allowed under noLlce lssued bv AC sLlll assessee
can flle 8Cl and such 8Cl shall be know as belaLed reLurn. 8elaLed 8Cl can be flled before:
(|) Lnd of one vear from Lhe end of relevanL A? or
(||) 8efore compleLlon of assessmenL wh|chever |s ear||er.
8) 5ect|on 139(5): lf assessee dlscovers anv omlsslon or wrona sLaLemenL ln reLurn flled u/s 139 (1) or
u/s142 (1) he mav furnlsh a revlsed reLurn. 8Cl can be revlsed
|) 8efore Lhe end of one vear from Lhe end of Lhe relevanL assessmenL vear C8
||) 8efore Lhe compleLlon of assessmenL wh|chever |s ear||er.
9) 8elaLed reLurn can'L be revlsed as was declded bv SC ln case of kUMAk IAGDI5n CnANDkA 5INnA.
10) 8eLurn of loss can be revlsed and as manv number of Llmes as one deslres buL lf done wlLhln Lhe
Llme llmlL speclfled
11) Lverv person who has been alloLLed An shall quoLe lL:
(a) Whlle recelvlna lncome on whlch 1uS has Lo be done and shall be Lold Lo Lhe person dolna 1uS.
1hls ls noL requlred where lncome ls noL charaeable Lo Lax.
(b) ln all reLurn and correspondence wlLh lncome Lax depL.
(c) Sale/urchase of MoLor vehlcle (Lxcludlna 2 wheelers).
(d) Sale/urchase of anv lmmovable properLv for 3 lakhs or more.
(e) Sale/urchase of securlLles exceedlna 8s. 1 lakhs.
(f) AppllcaLlon for Lelephone connecLlon.

(g) Cpenlna of a 8ank AccounL.
(h) avmenL Lo hoLels or resLauranL of blll exceedlna 8s. 23,000 aL one Llme.
(g) 1lme deposlLs wlLh a bank or posL offlce exceedlna 8s.30,000.
(h) avmenL ln cash for Lhe bank drafL for 8s. 30000 or more.
(|) Cash deposlL of 8s. 30000 or more ln a bank ln one dav.
([) avmenL ln cash exceedlna 8s. 23000 ln connecLlon wlLh Lhe Lravel Lo Lhe forelan counLrv.
12) 1vpes of reLurn forms appllcable are:
Iorm no. lorm appllcable Lo
I1k 1 lndlvldual havlna lncome from one or more of Lhe followlna sources:
a) Salarv.
b) lamllv penslon.
c) lnLeresL lncome charaeable as lncome from oLher sources.
I1k 2 An lndlvldual or Pul noL havlna lncome under Lhe head of C8
I1k 3 An lndlvldual or Pul belna a parLner ln a parLnershlp flrm and whose lncome under Lhe
head C8 comprlses onlv of lnLeresL or remuneraLlon recelved or recelvable from LhaL
flrm.
I1k 4 lndlvldual or Pul derlvlna lncome from proprleLarv buslness or professlon.
I1k 5 Anv person oLher Lhan
a) lndlvldual
b) Pul
c) Companv.
d) erson for whom l18& ls appllcable
ln oLher words Lhls form ls appllcable Lo parLnershlp flrms, AC/8Cl and arLlflclal [urldlcal
persons.
I1k 6 Companv excepL LhaL companv for whlch l187 ls appllcable.
I1k 7 Anv person lncludlna companv (wheLher or noL realsLered under secLlon 23 of Lhe
companles acL 1936) requlred Lo flle a reLurn under secLlon 139(4A), (48), (4C) or (4u)
I1k 8 A person who ls noL requlred Lo furnlsh Lhe reLurn of lncome buL ls requlred Lo furnlsh Lhe
reLurn of frlnae beneflLs.



For PCC / IPCC

SUMMARY OF THE 16
TH
CHAPTER
AVAh0L TAX Ah IhTLL$T FAYA8LL

1) 5ect|on 207: Advance Lax ls pavable on Lhe lncome of Lhe currenL vear lncludlna on Lhe lncome of
caplLal aalns and casual lncomes.
2) 5ect|on 208: Advance Lax ls pavable lf Lhe lncome Lax afLer 1uS ls 8s. 3000 or more.
3) 5ect|on 209: lrom Lhe lncome Lax llablllLv, 1uS has Lo be reduced and Lhe balance shall be pavable as
per lnsLalmenLs menLloned ln secLlon 211.
4) 5ect|on 210: lncome Lax ls pavable bv Lhe assessee lf assesslna offlcer sends hlm a noLlce for Lhe
same. 1hls noLlce can be senL laLesL bv Lhe lasL dav of Lhe lebruarv of Lhe prevlous vear.
5) 5ect|on 211: Advance Lax shall be pavable as per followlna lnsLalmenLs.
Due date of |nsta||ment Amount payab|e
Compan|es
Cn or before 13/06/?

13 of advance Lax pavable
43 of advance Lax pavable as reduced bv anv amounL alreadv pald.
100 of advance Lax pavable as reduced bv Lhe amounL alreadv pald.
Cther than Compan|es

30 of advance Lax pavable
100 of advance Lax pavable as reduced bv Lhe amounL alreadv pald

6) 5ect|on 2118: lf assessee does noL pav advance Lax when he ls llable Lo pav Lhen he wlll be deemed
Lo be assessee ln defaulL.
7) Consequences for non-pavmenL of advance Lax shall be
a) Assessee ls known as assessee ln defaulL.
b) Assessee shall be llable Lo pav lnLeresL under secLlon 234C and secLlon 2348.
c) Assessee shall be llable Lo pav penalLv under secLlon 140A(3) whlch can be maxlmum of 100
of such Lax.
8) 5ect|on 234A: lf Lhe 8Cl ls furnlshed afLer Lhe due daLe or ls noL furnlshed aL all Lhen assessee has Lo
pav lnLeresL under secLlon 234A 1 pm or parL of Lhe monLh. lnLeresL shall be pald for Lhe perlod
sLarLlna from Lhe daLe nexL Lo Lhe due daLe of 8Cl and endlna on Lhe daLe when 8Cl ls flled.

9) 5ect|on 2348: lf assessee has pald advance Lax less Lhan Lhe 90 of Lhe assessed Lax Lhen he shall be
llable Lo pav lnLeresL under secLlon 2348 aL raLe of lnLeresL pavable shall be 1 pm or parL of Lhe
monLh. lnLeresL shall be pald for Lhe perlod sLarLlna from Lhe 1/4/A? and endlna on Lhe daLe when
such Lax ls pald.
10) 5ect|on 234C: lf anv person has noL pald hls advance Lax on Lhe due daLes as menLloned ln secLlon
211 Lhen such person has Lo pav lnLeresL under secLlon 234C aL Lhe raLe of lnLeresL shall be 1 per
monLh or for parL of Lhe monLh. 1he perlod of lnLeresL shall be 3 monLhs buL for Lhe lasL lnsLallmenL
Lhe perlod shall be onlv 1 monLh.



For PCC / IPCC

SUMMARY OF THE 17
TH
CHAPTER
TAX L0TL AT $0L

1) 1ota| |ncome of the assessee for the prev|ous year |s taxab|e |n the assessment year. nowever
|ncome tax |s recovered from the assessee |n the manner of advance payment of taxes |n d|fferent
|nsta||ments or by tax deducted at source.
2) 1uS on salarles: SecLlon 192: 1D5 to be done by emp|oyer at the t|me of payment of sa|ary except
|n case where sa|ary |ncome |s |ess than bas|c exempt ||m|t. 8efore deduct|ng 1D5 the emp|oyer
shou|d ca|cu|ate the tota| |ncome of emp|oyee and for th|s deduct|on under sect|on 80C,80CCC,
80D, 80DD, 80L, 80G, 80GG and 80U shou|d be a||owed. 5a|ary |ncome sha|| be reduced by |oss of
house property before 1D5 |f emp|oyee dec|ares such |oss. nowever he can't dec|are any other
|oss.
3) 1uS on lnLeresL on securlLles: SecLlon 193: 1D5 |s to be done at t|me of cred|t or payment
wh|chever |s ear||er. No 1D5 |s to be done on debenture |nterest of |f |nterest does not exceed
ks.2500 for the prev|ous year. 1D5 sha|| be done by the payer @ 10 |n case of ||sted debentures
and |n case of non-||sted debentures @ 20. If the rec|p|ent |s a domest|c company then 1D5 sha||
be done @ 20. 5urcharge and educat|on cess as app||cab|e sha|| a|so be charged.
4) 1uS on dlvldends: SecLlon 194: 1he domest|c company-pay|ng d|v|dend of sect|on 2(22)(e) to a
res|dent shareho|der sha|| do 1D5 @ 20 and no 1D5 on d|v|dend |ncome of res|dent |nd|v|dua| |f
|t |s pa|d by A/C payee cheque and amount does not exceed ks.2500 dur|ng the prev|ous year.
5) 1uS on lnLeresL oLher Lhan securlLles: SecLlon 194A: 1D5 sha|| be done at the t|me of cred|t or
payment wh|chever |s ear||er @ of 20 |f rec|p|ent |s company and |f rec|p|ent |s a res|dent non-
company assessee then 1D5 sha|| be done @ 10. No 1D5 sha|| be done |f |nterest payab|e by a
bank, co-operat|ve soc|ety and post off|ce |s ks. 10000 or |ess , |n other cases where |nterest
payab|e |s ks. 5000 or |ess.
6) 1uS on wlnnlna of loLLerv/aames: SecLlon 1948: 1D5 sha|| be done at the t|me of payment and sha||
be done @ 30. 8ut |f the w|nn|ng are ks. 5000 or |ess then no 1D5 |s requ|red to be done.
7) 1uS on wlnnlna from horse races: SecLlon 19488: 1D5 sha|| be done at the t|me of payment and
sha|| be done @ 30 but |f the w|nn|ng are ks. 2500 or |ess then no 1D5 |s requ|red to be done.
8) 1uS on pavmenL Lo conLracLor/sub-conLracLor: SecLlon 194C: In case of spec|f|ed payers 1D5 sha||
be done at the fo||ow|ng rates:
a. 1 and surcharae and educaLlon cess of aross recelpL ln case of adverLlslna and
b. 2 and surcharae and educaLlon cess of aross recelpL ln anv oLher case
avmenLs covered are Lhe pavmenL for work conLracL and shall be done aL Lhe Llme of pavmenL or
credlL whlch ever ls earller. no 1uS shall be done lf Lhe slnale pavmenL ls 8s. 20000 or less and Lhe
aaareaaLe pavmenL does noL exceed 8s. 30000 durlna Lhe flnanclal vear. Where a resldenL
conLracLor has Lo make a pavmenL Lo anoLher resldenL conLracLor Lhe 1uS has Lo be done ln everv
case 1 plus surcharae and educaLlon cess as appllcable. no 1uS shall be done lf Lhe slnale
pavmenL ls 8s. 20000 or less and Lhe aaareaaLe pavmenL does noL exceed 8s. 30000 durlna Lhe
flnanclal vear.
9) 1D5 on |nsurance comm|ss|on: 5ect|on 194D: 1uS shall be done aL Lhe Llme of pavmenL or credlL of
commlsslon whlchever ls earller and shall be done 10 lf reclplenL ls resldenL non-corporaLe
assessee and lf reclplenL ls resldenL companv Lhen 1uS shall be done 20. 1here shall be no 1uS lf
pavmenL ls 8s. 3000 or less.

10) 1D5 on payment to nr sportsmen and sports |nst|tut|ons: 5ect|on 194L: Anv person maklna a
pavmenL Lo a non resldenL sporLsman or a sporLs assoclaLlon. Shall do 1uS aL Lhe Llme of maklna
pavmenL or aL Lhe Llme of credlL whlch ever ls earller. 8aLe of 1uS shall be 10.1here ls no
exempLlon llmlL under Lhls secLlon.
11) 1D5 on payment |n respect of nat|ona| sav|ng scheme: 5ect|on 194LL: 1uS has Lo be done bv posL
offlce for Lhe pavmenL of nSS Lo anv person. 1uS shall be done on boLh prlnclpal and lnLeresL. 1uS
has Lo be done bv posL offlce aL Lhe Llme of maklna pavmenL of 20. no 1uS has Lo be done bv
posL offlce ls Lhe pavmenL ls less Lhan or equal Lo 8s. 2300 or avmenL ls made Lo leaal helrs of Lhe
deposlLor.
12) 1D5 on comm|ss|on on sa|e of |ottery t|ckets: 5ect|on 194G: 1uS has Lo be done bv anv person
pavlna commlsslon on sale of loLLerv LlckeLs Lo anv oLher person. 1uS has Lo be done aL Lhe Llme of
pavmenL or credlL whlchever ls earller aL Lhe raLe of 10. no 1uS has Lo be done where Lhe pavmenL
ls less Lhan or equal Lo 8s. 1000.
13) 1D5 on comm|ss|on on brokerage: 5ect|on 194n: 1uS has Lo be done bv anv person pavlna
commlsslon or brokeraae. 1uS has Lo be done aL Lhe Llme of pavmenL or credlL whlchever ls earller.
1uS has Lo be done aL 10.no 1uS has Lo be done where Lhe pavmenL ls less Lhan or equal Lo 8s.
2300. lurLher no 1uS shall be done on Lhe pavmenLs of commlsslon or brokeraae pavable bv 8SnL
or M1nL Lo Lhelr publlc call offlce franchlsees.
14) 1D5 on rent: 5ect|on 194-I: 1uS has Lo be done aL Lhe Llme of pavmenL or credlL whlchever ls earller
buL no 1uS has Lo be done where Lhe pavmenL ls less Lhan or equal Lo 8s. 10000 pm and no 1uS lf
Lhe pavee ls a aovernmenL or a local auLhorlLv. 1uS shall be done aL raLe of 10 on renL of planL and
machlnerv. 1uS shall be done aL Lhe raLe of 13 on Lhe renL of land, bulldlna, furnlLure and flLLlna lf
Lhe reclplenL ls lndlvldual or Pul buL aL Lhe raLe of 20 ln case of anv oLher reclplenL.
15) 1D5 on fee of profess|ona| or techn|ca| serv|ces: 5ect|on 194-I: 1uS shall be done on fees for
Lechnlcal, professlonal servlces or on rovalLv lncome, aL Lhe Llme of pavmenL or credlL whlchever ls
earller. no 1uS shall be done lf Lhe pavmenL for Lechnlcal, professlonal servlces or of rovalLv lncome
ls 8s. 20000 or less durlna Lhe flnanclal vear. kate of 1D5: 1uS has Lo be done aL 10. rofesslonal
servlces means servlces of leaal, medlcal, enalneerlna, accounLancv, lnLerlor decoraLlon and
1echnlcal servlces means servlces of manaaerlal, consulLancv servlces.
16) In a|| of the above cases the rate of 1D5 sha|| be |ncreased by surcharge and educat|on cess.



For PCC / IPCC

SUMMARY OF THE 18
TH
CHAPTER
0hAITA8LL LLII$ T$T$

1) 1rusL means obllaaLlons aLLached Lo Lhe ownershlp of Lhe properLv whlch arlses ouL of Lhe
confldence reposed bv one person Lo some anoLher person. 1he person who lmposes such
confldence ls called AuLhor of LrusL and who accepLs such confldence ls called 1rusLee and Lhe
properLv ln respecL of whlch obllaaLlon ls aLLached ls called 1rusL properLv.
2) 1he lncome of caplLal aalns, volunLarv conLrlbuLlons recelved bv LrusL and slmllar lnsLlLuLlons whlch
are realsLered as companles under secLlon 23 of companles acL shall be exempL from Lax lf LrusLs ls a
realsLered LrusL and lLs accounLs are audlLed.
3) 1rusL musL uLlllzed 83 of lLs lncome wlLhln Lhe same prevlous vear for acqulrlna asseLs or Lo
promoLe Lhe ob[ecLs of Lhe LrusL. A LrusL can use Lhe monev for revenue or caplLal expendlLure
provlded Lhe expendlLure ls done for Lhe purpose of promoLlna Lhe ob[ecLs of LrusL.
4) lf Lhe funds can noL be used Lhen funds can be accumulaLed buL accumulaLlon ls noL allowed for Lhe
perlod exceedlna 3 vears. lurLher Lhe amounL so accumulaLed should be lnvesLed ln Lhe speclflc
lnvesLmenLs such as ln anv accounL ln Lhe posL offlce, deposlL ln anv accounL of a scheduled bank,
unlLs of u1l, SecurlLles lssued bv cenLral or sLaLe aovernmenL.
5) Anonvmous donaLlons (when name and address of donor ls noL malnLalned) shall noL be exempL
and hence shall be Laxable aL Lhe raLe of 30. Powever ln Lhe case of rellalous LrusL lL shall noL be
Laxable.
6) 1rusL has Lo submlL appllcaLlon for realsLraLlon Lo Cl1 before Lhe explrv of 1 vear from Lhe daLe of
creaLlon of LrusL. Cl1 afLer saLlsfvlna hlmself abouL Lhe aenulneness of Lhe acLlvlLles of Lhe LrusL shall
pass Lhe orders ln wrlLlna realsLerlna Lhe LrusL. 1he Llme llmlL for passlna Lhe orders ls 6 monLhs
from Lhe end of Lhe monLh ln whlch Lhe appllcaLlon was made.



For PCC / IPCC

SUMMARY OF THE 19
TH
CHAPTER
$LVI0L TAX

1) Servlces Lax was lmposed bv chapLer v of llnance AcL 1994 and Lhere ls no separaLe Servlce 1ax
AcL". Servlce Lax ls lmposed everv vear bv maklna amendmenL Lo Lhe llnance AcL 1994. CenLral
exclse deparLmenL has been enLrusLed Lo look afLer Lhe admlnlsLraLlon of servlce Lax.
2) Servlce Lax exLends Lo whole of lndla excepL Lhe sLaLe of !ammu and kashmlr. 1here shall be no
servlce Lax on Lhe servlces provlded/consumed ln Lhe sLaLe of !ammu and kashmlr. Powever lf
servlce provlder ls ln Lhe sLaLe of !ammu and kashmlr and provldes servlces Lo anvone ouLslde Lhe
sLaLe of !ammu and kashmlr Lhen servlce Lax shall be lmposed on such servlces rendered.
3) Servlce Lax ls lmposed on Laxable servlces provlded or Lo be provlded ln fuLure bv Lhe servlce
provlder. Servlces Lo be provlded ln fuLure shall be charaeable Lo servlce Lax onlv lf Lhe advance
pavmenL for lL ls recelved.
4) 1axable servlces are menLloned ln secLlon 63(103) of llnance AcL 1994.
5) Servlce Lax ls charaed aL Lhe raLe of 12 and educaLlon cess as appllcable.
6) WLl 1/4/2008 a Lhreshold llmlL of 8s. 10 Lakhs has been prescrlbed. 1lll Lhls llmlL value of all Laxable
servlces provlded bv Lhe servlce provlder ls fullv exempL from servlce Lax.
7) 1he meLhod of pavmenL of servlce Lax ls menLloned ln Servlce 1ax 8ules 1994. Servlce Lax has Lo be
pald bv Lhe servlce provlder on Lhe recelpL of conslderaLlon. lf anv advance has been recelved Lhen
servlce Lax shall be lmposed on such advance amounL.
8) Va|uat|on of taxab|e serv|ces: sect|on 67
a) Servlce Lax shall be charaed on aross amounL charaed. lL shall mean onlv Lhe amounL recelved
from Lhe servlce recelver and noL Lhe amounL whlch has been bllled Lo hlm.
b) 1he servlce provlder ls requlred Lo show Lhe servlce Lax separaLelv ln Lhe lnvolce/blll. lf lL ls noL
shown separaLelv Lhen Lhe value of Lhe servlces shall be Laken as an lncluslve of servlce Lax.
c) lf Lhe servlce provlder has pald anv excess servlce Lax Lo Lhe aovernmenL, ln respecL of LhaL
servlces whlch have noL been provlded for anv reason Lhen such excess servlce Lax pald can be
ad[usLed aaalnsL servlce Lax pavable bv hlm for anv subsequenL perlod. 1hls shall be appllcable
onlv lf Lhe servlce provlder has refunded servlce Lax Lo Lhe person from whom lL was recelved.
d) lf Lhe amounL charaed bv Lhe servlce provlder lncludes value of Lhe aoods and maLerlal sold Lhen
servlce Lax ls noL pavable on Lhe value of such aoods sold. 1here should be proper documenLarv
evldence showlna value of Lhe aoods and maLerlal sold. Powever ln some cases supplv of aoods
ls lnLearal parL of Lhe servlces and supplv of aoods can'L be separaLed from Lhe servlces
rendered. ln such case servlce Lax shall be charaed on Lhe full amounL lncludlna Lhe value of
aoods.
e) 1he servlce provlder ofLen clalms relmbursemenL of cerLaln expenses lncurred bv hlm (llke
expenses on Lravelllna, boardlna and loadlna eLc) whlle provldlna a Laxable servlce. 1hese are
ofLen Lermed as ouL of pockeL expenses. All such expenses wlll be lncludlble ln Lhe value of
Laxable servlces.
f) Lxpenses whlch are lncurred bv Lhe servlce provlder on Lhe behalf on servlce recelver (as a pure
aaenL) shall noL be parL of value of Lhe servlces.
g) lf Lhe servlces are provlded free of cosL, Lhere shall be no servlce Lax pavable even lf servlces are
Laxable.
h) Servlce provlded durlna Lhe warranLv perlod of Lhe aoods ls Laxable servlces and lL ls sub[ecL Lo
servlce Lax.

|) lf conslderaLlon of servlces has been recelved ln klnd Lhen Lhe servlce Lax shall be lmposed and
for Lhls Lhe value of Lhe ldenLlcal servlces provlded shall be deemed Lo be Lhe value of such
servlces whlch have been provlded and for whlch conslderaLlon has been recelved ln klnd.
9) Lxempt|on from serv|ce tax
(a) Small servlce provlders provldlna aaareaaLe servlces up Lo 8s. 10 lakhs are exempL from pavlna
servlce Lax.
(b) Lven lf Lhe servlce provlder crosses Lurnover of 8s. 10 lakhs ln currenL vear, he wlll be llable Lo
servlce Lax onlv on Lurnover exceedlna 8s. 10 lakhs and noL on enLlre Lurnover. Powever, lf
Laxable Lurnover ln currenL exceeds 8s. 10 lakhs, Lhere wlll be no exempLlon from servlce Lax ln
nexL flnanclal vear.
(c) 1here ls no servlce Lax on exporL of servlces, lf servlce ls exporLed
(d) Servlces provlded Lo unlLed naLlons & lnLernaLlonal Aaencles ls exempL from servlce Lax.
(e) All servlces provlded Lo forelan dlplomaLlc mlsslons or consular posLs ln lndla are fullv exempL
provlded servlces are use for Lhelr offlclal purposes.
(f) LxempLlon from servlce Lax has been provlded Lo all Laxable servlces provlded bv 8eserve 8ank
of lndla
(g) SomeLlmes Lhe aross amounL of conLracL shall lnclude Lhe amounL charaed for servlces as well
as some oLher faclllLles provlded. ln such case servlce Lax ls pavable aL lower raLes, l.e. parLlal
abaLemenL ls avallable from aross value.
10) keg|strat|on under 5erv|ce 1ax
(|) no realsLraLlon ls requlred Llll Lurnover exceeds 8s. 9 lakhs.
([) 1lme llmlL Lo applv for realsLraLlon ls 30 davs from Lhe levv of servlce Lax or sLarL of Lhe buslness
as Lhe case mav be.
(k) 8ealsLraLlon ls provlded ln 7 davs and lf noL Lhen deemed Lo have been provlded afLer 7
Lh
dav.
(|) no documenL excepL An lssued bv Lhe lncome Lax uepLL ls requlred.
(m) Servlce Lax realsLraLlon no ls 13 dlalLs alphanumerlcal no.
(n) 8ules for cenLrallzed realsLraLlon and non cenLrallzed realsLraLlon exlsL.
(o) ln case of more Lhan 1 servlce, slnale realsLraLlon coverlna all servlces ls done.
11) ayment of serv|ce tax
(a) Servlce Lax ls pavable aL Lhe Llme of reallzaLlon of Lhe amounL for servlces from Lhe cllenL.
(b) Servlce Lax ls pavable on Lhe advance monev recelved.
(c) Where Lhere ls shorL recoverv of Lhe bllled amounL, servlce provlder should revlse Lhe blll
oLherwlse he shall be llable Lo pav servlce Lax on Lhe full amounL whlch has been bllled Lo
servlce recelver.
(d) Where Lhere ls excess recoverv from a cllenL or cusLomer Lhen such excess amounL can be
refunded Lo such cllenL or cusLomer
12) Due dates for the payment of serv|ce tax
(a) lf Lhe assessee ls an lndlvldual or proprleLarv flrm or parLnershlp flrm, Lhe servlce Lax shall be
pald Lo Lhe CenLral CovernmenL bv Lhe 3
Lh
of Lhe nexL monLh lmmedlaLelv followlna Lhe quarLer
ln whlch Lhe pavmenLs are recelved, Lowards Lhe value of Laxable servlces. In case e-payment |s
made, due date |s 6
th
.
(b) ln all oLher cases servlce Lax recelved durlna anv calendar monLh shall be pald Lo Lhe CenLral
CovernmenL bv Lhe 3
Lh
of Lhe monLh lmmedlaLelv followlna Lhe calendar monLh ln whlch
pavmenLs are recelved, Lowards value of Laxable servlces. In case e-payment |s made, due date
|s 6
th
.
(c) lf Lhe servlce Lax on Lhe value of Laxable servlces ls recelved durlna Lhe monLh of March, or Lhe
quarLer endlna ln March, as Lhe case mav be, shall be pald Lo Lhe CovernmenL bv Lhe 31
sL
dav of
March of Lhe calendar vear.

13) 5erv|ce 1ax 1o 8e a|d L|ectron|ca||y: Where Lhe assessee has pald servlce Lax of 8s. 30 lakhs or
more durlna Lhe preceedlna flnanclal vear or has alreadv pald servlce Lax of 8s. 30 lakhs ln currenL
flnanclal vear, he shall deposlL Lhe servlce Lax llable Lo be pald bv hlm elecLronlcallv, Lhrouah
lnLerneL banklna.
14) 5pec|a| prov|s|on for the payment of serv|ce tax |n case of ||fe |nsurance bus|ness: An lnsurer
carrvlna on llfe lnsurance buslness who ls llable for pavlna servlce Lax has Lhe opLlon Lo pav an
amounL calculaLed 1 of Lhe aross amounL of premlum charaed bv hlm Lowards Lhe dlscharae of
hls servlce Lax llablllLv lnsLead of pavlna servlce Lax 12.
15) Servlce Lax reLurn shall be submlLLed on half vearlv basls on 23
Lh
CcLober and 23
Lh
Aprll everv vear.
16) Servlce Lax reLurn can be revlsed wlLhln 90 davs from fllllna of orlalnal reLurn.
17) 8elaLed servlce Lax reLurn ls also allowed upon Lhe pavmenL of prescrlbed fees whlch ls as follows:
1. lf delav ls up Lo 13 davs from Lhe due daLe of reLurn: less of 8s. 300 ls Lo be pald.
2. lf delav ls bevond 13 davs buL up Lo 30 davs from due daLe: lees of 8s. 1000 ls Lo be pald.
3. lf delav ls bevond 30 davs from Lhe due daLe: lees of 8s. 1000 ls Lo be pald + rs. 100 for everv
dav from Lhe 31
sL
dav Llll Lhe daLe of furnlshlna of reLurn buL sub[ecL Lo Lhe maxlmum of 8s.
2000.



For PCC / IPCC

SUMMARY OF THE 20
TH
CHAPTER
VALL AL TAX (VAT)

1) under Lhe svsLem of vA1 Lhe sales Lax levled and collecLed aL each sLaae of sale onlv Lhe value
added aL everv sLaae.
2) As commonlv undersLood Lhls ls a meLhod bv whlch flnal consumer shall be Laxed aL dlfferenL sLaaes
of producLlon and dlsLrlbuLlon ln varlous lnsLallmenLs. lor Lhls dlfference beLween Lhe sale prlce and
purchase prlce ls Laken as value added and a Lax ls lmposed aL everv level where Lhere ls some value
addlLlon.
3) Need for VA1 |n Ind|a
(a) Avolds dlsLorLlons ln Lhe economv due Lo unlformlLv all across Lhe channel.
(b) revenLs cascadlna effecL (mulLlple LaxaLlon) bv provldlna credlL of lnpuL LaxaLlon.
(c) vA1 ls [usL and loalcal wav of Laxlna all dealers ln equlLable manner wherebv all dealers share
burden of Lax.
(d) 1hls svsLem leads Lo easv compuLaLlon and compllance.
(e) CredlL of lnpuL LaxaLlon leads Lo cosL efflclencv.
4) Mer|ts of VA1
(a) LllmlnaLes mulLlple LaxaLlon.
(b) no Lax evaslon.
(c) Slmple meLhod.
(d) Lowerlna Lax burden.
(e) 1ransparencv.
(f) 8eLLer revenue collecLlon and sLablllLv.
(g) 8eLLer accounLlna svsLems.
5) Demer|ts of VA1
(a) vA1 does noL cover servlces.
(b) non lnLearaLlon of cenLral vA1 wlLh sLaLe vA1.
(c) AccounLlna burden.
(d) CosL of admlnlsLraLlon for aovernmenL.
(e) LxempLlons on aoods.
6) Concept of |nput tax cred|t: 1he maln feaLure of svsLem of vA1 ls LhaL lL provldes Lhe beneflL of seL
off of lnpuL Lax from Lhe maln ouLpuL Lax. 1he value added Lax ls based on Lhe value addlLlon Lo Lhe
aoods, and Lhe relaLed vA1 llablllLv of Lhe dealer ls calculaLed bv deducLlna lnpuL Lax credlL from Lhe
Lax collecLed on sales durlna a parLlcular perlod.
7) Var|ants of VA1: vA1 could be levled under Lhree varlanLs. Cross producL varlanL, lncome varlanL,
ConsumpLlon varlanL. 1hese varlanLs could be furLher dlsLlnaulshed accordlna Lo Lhelr meLhods of
calculaLlon and Lhev are addlLlon meLhod and subLracLlon meLhod. 1he subLracLlon meLhod could be
furLher dlvlded lnLo dlrecL subLracLlon meLhod, lnLermedlaLe subLracLlon meLhod, and lndlrecL
subLracLlon meLhod.
8) Methods for computat|on of VA1: vA1 ls form of a sales Lax and ls charaed aL each sLaae on Lhe
'value Added' Lo Lhe aoods. 'value Added' ls Lhe dlfference sales and purchases of Lhe buslness.
1here are several meLhods Lo calculaLe Lhe 'value Added' Lo Lhe aoods for levv of Lax. 1he Lhree
commonlv used meLhods are addlLlon meLhod, lnvolce meLhod (Lax credlL meLhod) and subLracLlon
meLhod.

5 Tax Law Notes

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Mukesh Agarwa| kesearch Group

5UMMAk CI 1AkA1ICN ICk CC / ICC (CC NC1L5 2009)

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