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Ans:- The term 'House property' consists of buildings or land appurtenant to such buildings. Income from letting out of vacant plots of land when there is no adjoining building will not be taxed under this head (but will be taxed as income from other sources). The existence of a building is, therefore, an essential prerequisite for taxation of income from house property. 'Building' will include residential house (whether let out or self-occupied), office building, factory building, godowns, flats etc. But, the purpose for which the building is used by the tenant is also immaterial. It does not make any difference at all if the property is owned by a limited company or a firm. However, if the building or part thereof is used by the owner himself for the purpose of his own business then there will be no income from such portion of the house property. Under the Income-tax Act, the basis of calculating income from House property is the 'Annual Value'. This is the inherent capacity of the property to earn income and it has been defined as the sum for which the property might reasonably be expected to let from year to year. Where the actual rent received is more than the reasonable return, it has been specifically provided that the actual rent will be the annual value. Where, however, the actual rent is less than the reasonable rent , the latter will be the annual value. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner shall be subjected to Income Tax under the head 'Income from property' after claiming deductions (under section 24) provided such property, or any portion of such property is not used by the assessee for the purposes of any business or profession, carried on by him, the profits of which are chargeable to income tax. PROPERTY INCOMES EXEMPT FROM TAX Some incomes from house property are exempt from tax. They are neither taxable nor included in the total income of the assessee for the rate purposes. These are: i. ii. iii. iv. Income from any farmhouse forming part of agricultural income; Annual value of any one palace in the occupation of an ex-ruler; Property Income of a local authority; Property Income of an authority, constituted for the purpose of dealing with and satisfying the need for housing accommodation or for the purposes of planning development or improvement of cities, towns and villages or for both. (The Finance Act, 2002, w.e.f. 1.4.2003 shall delete this provision.); Property income of any registered trade union; Property income of a member of a Scheduled Tribe; Property income of a statutory corporation or an institution or association financed by the Government for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both;
v. vi. vii.
xi. xii. xiii. xiv.
Property income of a corporation, established by the Central Govt. or any State Govt. for promoting the interests of members of a minority group; Property income of a cooperative society, formed for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both; Property Income, derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities by an authority constituted under any law for the marketing of commodities; Property income of an institution for the development of Khadi and village Industries;' Self-occupied house property of an assessee, which has not been rented throughout the previous year; Income form house property held for any charitable purposes; Property Income of any political party.
Q2. Define the term tax holidays. What are the different tax incentives for new units established in SEZ? Ans:- A tax holiday is a temporary reduction or elimination of a tax. Governments usually create tax holidays as incentives for business investment. The taxes that are most commonly reduced by national and local governments are sales taxes. In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulating growth in selected industries.. The tax holiday has been often used by developing and transition countries. It is directed to new firms and is not available to existing operations. With a tax holiday, new firms are allowed a period of time when they are exempt from the burden of income taxation. Sometimes, this grace period is extended to a subsequent period of taxation at a reduced rate. For transition countries, one advantage of tax holidays is that they provide a simple regime for foreign investors because there is no need to calculate taxes in the early years of operation, at a time when the tax systems are not yet fully developed. This view is certainly not valid for long-term investors, for whom the tax treatment after the holiday has expired is as important as the treatment during the holiday in determining the after-tax profitability of the investment. In addition, the tax treatment of the initial capital expenditures made before and during the holiday period must be determined so that appropriate records will be available for the calculation of depreciation when the holiday ends. A number of technical issues are important in determining the impact of tax holidays on the return on investments. The first issue is determining when the holiday starts. It could be when production starts, the first year in which the firm makes a profit, or the first year that the firm achieves a positive cumulative profit on its operations. For large projects in particular, losses are usually generated in the early years of production, when the highest capital costs are incurred, including special costs that are linked to the start-up period, training the workforce, and
developing the local market. For such projects, a tax holiday that starts when production occurs may actually increase the taxes paid over the life of the project and so act as a disincentive for investment. If losses are experienced during the holiday period they may not be allowed to be carried forward beyond the holiday period (it would be overly generous to allow losses to be carried forward from a year in which income would not have been subject to tax). Thus, the holiday may occur when no taxes would have been paid in any event and taxes may be increased following the holiday because no losses are available to offset the profits. A similar situation can occur if the holiday starts when profits are first generated. Income may be sheltered that would have been eliminated in any case by the use of the tax losses. This may result in an overall increase in taxation in circumstances when the loss-carryforward period is short or the use of losses is restricted in some way. Tax laws usually specify that the holiday commences when profits first occur. However, they are often ambiguous as to whether this means the first year that is in itself profitable or the first year that cumulative net profits are positive.6 A related question is the treatment of depreciation during the holiday period. Should it be deducted during the holiday period or can it be deferred until after the holiday has terminated? Depreciation represents a cost in the calculation of income, and so its deduction is necessary to accurately measure the amount of income that should be subject to the holiday. Allowing a deferral of the deduction effectively overestimates the costs associated with the postholiday period and so leads to a further reduction in tax, which can result in a very generous incentive. The issue is more complicated if some form of accelerated depreciation is also offered with respect to the investment. Forcing the use of the accelerated deductions during the holiday period at the least reduces their value and can actually increase the level of taxation relative to the situation where no incentives are provided. A complete deferral of the deduction, however, can again lead to a generous incentive and an effective tax holiday that is much longer than intended. Another design question is the length of the holiday. Most of the holidays offered in transition countries have been of short duration, and, as discussed below, are of little benefit to long-term capital-intensive projects. Longer holidays would be of greater benefit; for example, there is some evidence in Asia and Hungary that the longer holidays succeeded in attracting some longterm investment.7 However, the longer the holiday, the higher the revenue cost and the greater the vulnerability to tax planning schemes.8 The opposite problem arises when a tax holiday provision providing a lengthy tax-free period is repealed. Because an existing company can continue to take advantage of the holiday for which it qualified, new investment can be structured so as to use the corporate form of these existing companies, sometimes by bringing new investors in or even by selling the holiday company to new investors planning a substantial investment. It is therefore desirable, on repeal of a tax holiday, to stipulate that companies currently taking advantage of a tax holiday will cease to quality if a substantial change in the ownership of the company takes place. Such a provision would prevent at least the most flagrant abuses. Tax incentives for new units established in SEZ:
as given in the 2nd Schedule of the SEZ Act. provides that in computing the total income of an entrepreneur. 2007. Exemption from State sales tax and other levies as extended by the respective State Governments. . Exemption from Service Tax. 2005 has been amended by the Finance Bill. • • • • • • The major incentives and facilities available to SEZ developers include:• • • • • Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.As per circular Epces circular no. Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. Single window clearance for Central and State level approvals. 2005. 39 dated 28-2-2007. Section 10AA of the Income Tax Act. Tax benefit has been provided only for new units in Special Economic Zones : Sections 10AA of the Income-tax Act. Exemption from Central Sales Tax. Exemption from Central Sales Tax (CST). issued by EXPORT PROMOTION COUNCIL FOR EOUs & SEZ UNITS (Ministry of Commerce & Industry. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. operation and maintenance of SEZ units 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years. The Finance Bill. External Commercial Borrowing by SEZ units up to US $ 12500 billion in a year without any maturity restriction through recognized banking channels. the following deduction shall be allowed:— • • Duty free import/domestic procurement of goods for development. Accordingly. 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. as given in 2nd Schedule of the SEZ Act. from his unit in the special economic zone. 2007. Government of India) SEZ units are provided exemption from Income Tax under Section 10AA of the Income Tax Act. Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
Donations to certain funds/charitable institutions etc.Few incomes of other persons (Sec. the balance of income is known as Total Income or Taxable Income.After the above steps.First of all to determine the residential status of the assessee. The list of deductions available to an individual are as follows: 1.For the calculation of the gross total income we should have to calculate the income of five heads according to the provisions of Income Tax Act. Deductions in respect of rent paid (sec 80GG) 10. Investments and deposits (sec 80C) Contribution to certain pension funds (sec 80CCC) Contribution of new pension scheme (sec 80CCD) Payment to medical insurance premium (sec 80D) Medical treatment of handicapped dependents and amount deposited for maintenance of handicapped dependents (sec 80DD) 6. or Non resident. 2. Profit and gains of new industrial undertakings (sec 80IB) . Expenditure on medical treatment of certain diseases (sec 80DDB) 7. 3. Contribution to political parties (80GGC) 12. the incomes which are exempted will not be included. Exempted Incomes. Resident in India. Calculation of gross total income. From the gross total income few deductions which are provided under section 80 of income tax act will be deducted. 5.If there is negative income in a particular head then it is to be set off according to the provisions of Income Tax Act. Profit and gain of new industrial undertaking set up for infrastructure development (sec 80IA) 13. Repayment of loan and interest thereon taken for higher education (sec 80E) 8.While calculating the incomes of the different heads. the aggregate amount of income is known as Gross Total Income. After deductions. Q3.e.Steps to calculate the tax liability of an individual are: Determine residential status. Donations for scientific research and rural development (sec 80GGA) 11.• Exemption from Service Tax (Section 7. Not Ordinarily resident. What are the key steps to calculate the tax liability of an individual ? Ans:. Set-off of losses. (sec 80G) 9. Deductions u/s 80. Income of other persons to be included in the income of assessee. The incomes are taxed according to residential status i. 4. 64) includes in the income of assessee. 26 and Second Schedule of the SEZ Act).
etc.Treatment of remuneration and interest to a partner as business income : Clause (v) of section 28 Section 28(v) provides that interest and remuneration received by a partner from his LLP shall be chargeable to income-tax as profits and gains of business. 5 will be treated as Rs. Deduction in respect of profits and gains from business of collecting and processing of bio gradable waste (sec 80JJA) 16. Income from Capital gainst 5. The proviso clarifies that where the remuneration. Ans:. 10. Income from house property 3. Deduction in respect of certain incomes of offshore banking unit (sec 80LA) 17. interest. Deduction in respect of royalty income to authors (80QQB) 18.10) xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx Q 4. For this rupee five or more than Rs. is in excess of the ceiling fixed under the new section 40(b) and is disallowed in part for that reason then the income under the head referred to in section 28(v) shall be adjusted to the extent of the amount not so allowed to be deducted. .14. 10 and less than Rs. Income from salaries 2. profit and specific industrial undertakings establish in specific states (sec 80IC) 15.80C to 80u (Chapter VI A) Total Income (Rounded off to the nearest Rs.. Income from other sources Total(1+2+3+4+5) Less:adjustment for set off and carry forward of losses Gross total income Less: Deductions under Sec. Key steps to calculate the tax liability of an individual 1. Define the treatment of remuneration paid to partners under income tax act. Deduction in respect of royalty on patent (sec 80RRB) 19. Profits and gains of business or profession 4. Deduction in case of person with disability (sec 80U) Total Income rounded off in the multiple of 10 – The total income calculated will rounded off in multiple of Rs. 5 will be deleted.
The Explanation 3 defines the term “book profit” which is relevant for computing the upper ceiling of remuneration payable to all the working partners put together. If the whole or a part of salary/interest is not allowed as deduction in the hands of the LLP. etc. In other words. whichever is more . but the interest paid by him on the borrowed money will have to allowed as a deduction. It also specifies as to how the matter of deductibility of interest and remuneration is to be dealt with where a partner is a partner in representative capacity. bonus. in the hands of partners the entire remuneration/ interest (excluding the amount disallowed under section 40(b) and/or section184 of the Act) is chargeable to tax. Ceiling as to remuneration payable to working partners and interest to partners : Section 40(b) Section 40(b) is a disallowance provision and disallows remuneration.Any expenditure incurred in order to earn such income can be claimed as a deduction from such income. Limits of Remuneration to Partners: The Income Tax Act prescribes the ceiling limit upto which any payment of salary..50. For example. interest. the limits of remuneration as proposed by budget are outlined below: On First Rs 3.00. than the whole or that part of salary/ interest is not taxable in the hands of the partners.000 or at the rate of 90% of the bookprofit. The Explanation 4 defines “working partners” who alone are made entitled to remuneration if the deductibility of the related amount in the hands of the LLP is not to be barred by section 40(b). the amount of such interest will be taxed under the head “Profits and gains of business or profession”. if a partner borrows money to make his capital contribution to the LLP and he is paid interest on his capital contribution.000 of book profit or in case of loss Rs 1. received by the partners from the firm provided the same exceeds the ceiling prescribed in the same provision. commission or remuneration will be allowed as deduction for income of LLP.
The IncomeTax Act. this loss can be set off only against business income and not against any other head of income. After such setting off. Speculation loss can be set off only against speculation profit in the same assessment year. 1961. Describe in brief the provisions for set off and carry forward of losses. From assessment . in the same assessment year. the provision of capital gain will apply. where for unavoidable reasons.On the balance of book profit at the rate of 60% Signing of Income tax Return: • The designated partner shall be responsible for signing the income tax return of LLP. Ans:.’ other than speculation loss and depreciation can be set off against any other business income or any other head of income. such designated partner is not able to sign the same or where there is no designated partner. No capital gain on conversion LLP and general partnership is being treated as equivalent (except for recovery purpose) in the Act. then it can be carried forward for set off in subsequent years up to four assessment years. if the rights and obligation of the partners remain the same after conversion and if there is no transfer of any asset or liability after conversion. then such loss can be carried forward up to eight assessment years. But even after such setting off if the resultant figure is a loss. if the resultant figure is yet a loss (business loss): If the loss in greater than income from any other business or income from any other head. except salary income. the conversion from a general partnership firm to an LLP will have no tax implication. allows set-off and carry-forward of the loss incurred by any assessee subject to some restrictions. On carrying forward to subsequent years. ‘profit and gain of business.‘Loss’ in common parlance is understood as excess of expenses over income. If there is a violation of these conditions . any partner will sign the return. Q 5. Let us see the relevant provisions relating to set-off of losses under the different heads of income: Provision relating to carry forward and set-off losses: Loss from Business/profession [Sec 72] • • • Any loss under the head.
depreciation can be carried forward indefinitely for set-off in subsequent years [Section 32(2)]. then such loss can be carried forward up to eight assessment years for set-off. • • Loss from a house property [Sec 71B] • • Loss arising from a house property can be set off against income from any other house property or income from any other head in the same assessment year. Further. it can be set off against any capital-gain income. Speculative business loss can be set off against only speculative business income. setting-off of the loss is allowed only against speculation profit [Section 73]. It should be noted that such loss can be set off only against capital gain income and not against any other head of income. Thus. In subsequent years. long term or short term. In the subsequent years also. If income from house property is negative even after such set-off. it can be set off only against income from house property. such loss is to be treated in the same manner as ‘non speculative business loss’. Loss from capital gains (Section 70 & 74) • Short-term capital loss can be set off against any capital gain income. But nonspeculative business loss can be set off against any business income (whether speculative or non speculative). • Depreciation can be set off in the same assessment year as well as in the subsequent assessment years against business income or any other head of income except salary income. in the same assessment year. one must first set off current year’s depreciation. Continuity of business is now not necessary for the purpose of set-off and carry-forward. Transactions in derivatives entered into on recognised stock exchange through a broker or a Securities and Exchange Board of India (Sebi)-recognised intermediary and supported by a timestamped contract note is excluded from the definition of speculative transaction [Section 43(5) (d)]. then brought forward business loss and then the unabsorbed depreciation. But in subsequent years. Long-term capital loss • Long-term capital loss arising on sale of capital asset other than equity shares and units of equity-oriented mutual fund which are subject to securities transaction tax (STT) can be set off in the same assessment year as well as in subsequent assessment years (in case of . As unabsorbed depreciation can be carried forward for any number of years. In subsequent years.year 2006-07 up to assessment year 2005-06 such loss could be carried-forward for eight assessment year. Balance short-term capital loss if any can be carried forward up to eight assessments years.
races (including horse races). ‘Other sources’ can be set off in the same assessment year against income from any other source or income from any other head. Carry-forward of loss is allowed up to eight assessment years. Loss under the head ‘Other sources’ (Section 71) : Any loss under the head. loss under capital gain and loss from maintaining race horses can be set off only against the respective specific income. Q 6. But the reverse is not possible. The company is engaged in the jewellery business export and domestic sales . However. Loss from speculation. is not allowed to be either set off or carried forward (as income from such source is exempt from tax) [Section 14A]. it is allowed to be carried forward up to four assessment years. A loss from any source cannot be set off against winnings from lotteries. Loss from capital gain can be set off only against capital gains income and so on. crossword puzzles.• carry-forward) only against long-term capital gain income. Loss from owning and maintaining race horses [Section 74A] : Any loss arising from owning and maintaining race horses can be set off against income from such activity only in the same assessment year or in subsequent assessment years (in case of carry. Compute the net wealth and wealth tax liability of Golden Jewellers ltd. capital gain income. which is subject to securities transaction tax (STT). Loss under any head can be set off against speculative income. this condition does not apply in case of house property loss and unabsorbed depreciation. as on 31-3-11. Salary. Long-term capital loss arising on sale of equity shares and units of equity-oriented mutual fund. card games. business/profession. Return of loss must be filed within due date of filing of return or else carry-forward of loss to the subsequent year is not allowed. income from maintaining race horses. The loss cannot be carried forward for set-off in future. loss from speculation can be set off only against speculation income. other games or any sort of gambling or betting.forward). In case of this loss. In other words. Loss on bonus stripping/dividend stripping cannot be set off against any income.
Factory buildings Bank Balance Unaccounted cash balance Silver ware Gold ornaments Motor cars Rs 520000 140000 25500 1200000 3500000 150000 The company has taken a loan of Rs. 600000. 520000 140000 25500 1200000 3.395.500 Reasons Asset u/s 2(ea) Not an asset under WT Act. . An asset u/s 2(ea) If Silver ware Not held as stock in trade If Gold ornaments Not held as stock in trade Not an asset under WT Act.00 for factory premise Ans:Assessee Valuation Date Assessment Year : : : Golden Jewelers Ltd 31-03-2011 2010-11 Nature of Asset Factory Building Bank Balance Unaccounted cash balance Silver Ware Gold Ornaments Motor cars Total Asset Rs.000 150000 5.500.
15. The recommended amendment will apply for the value of net wealth as on 31st March.000 4. 2. 12 Lacs are not part of stock in trade so accordingly it is treated as part of the asset of Golden Jewelers Ltd.00.955 Note: 1. 2010 and will apply in relation to assessment year 2010-11.795.000 1.00 lakhs because of inflation-adjustment.000. It is tendered to increase the threshold limit for payment of wealth tax from Rs. 30.500 3.Less: Debt incurred in relation to an asset: Loan for Factory premise Net Wealth Less: Basic Exemption Taxable Net Wealth Tax Payable @ 1 % 600. .795.500 17.While calculating the net wealth it is assumed that gold ornaments of Rs. lakhs to Rs. 35 Lacs and silver ware of Rs.
However. in the following cases the above meaning of cost of acquisition does not good and cost of acquisition is taken as a notional figure. Interest paid on money borrowed for the purchase of a cpital asset would constitute part of the cost of acquisition. Circumstances when cost to previous owner is taken as cost of acquisition of asset: sec.a) Cost of Acuisiton : Cost of acquisition of an asset is the value for which it is acquire by the assessee.Q1. If the asset is acquired by an assessee in the following circumstances the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. provided such interest has not been deducted under any other provision. Or under gift or will. Write a short note on : a) Cost of acquisition b) Cost of improvement c) Expenditure on transfer d) Transfer Ans:. Cost to the previous owner deemed to be the cost of acquisition. It means that whatever cost incurred for getting an asset plus all expenses incurred to acquire it is the cost of acquisition. It will be increased by the cost of any improvement of the assets incurred by the previous owner of the assessee. .49(1) On any distribution of asset on the total or partial partition of a Hindu undivided family.
Cost of acquisition of an asset acquired by the previous owner before 1 st April 1981 by any mode u/s 49(1) If the capital asset (other than asset on which depreciation has been allowed) became the property of the assessee by any of the modes specified in section 49(1) and the capital asset became the property of the previous owner before 1st April. Or on the transfer by a subsidiary company to its Indian holding company which owns the whole of the share capital of the subsidiary company.F. Cos of acquisition of a Capital asset acquired before 01-04-1981 Where capital asset became the property of the assessee before 1st April 1981. Or on any distribution of assets on the liquidation of a company. inheritance or devolution. at the option of the assessee. Or when any of the members of a H. Or an transfer of shares of an Indian company by amalgamated foreign company to the amalgamated foreign company. be taken to be any one of the following: i)The cost of acquisition of the asset to the previous owner. converts his self-acquired property into H. 1981. will be taken as the cost of the property to the individual converting the property).U.F.Or by succession. 1981. or ii)The fair market value of the asset on 1st April. or ii)The fair market value of the asset on 1st April 1981. at the option of the assessee.U. ( The cost of the property to the H. the cost of acquisition of the asset may. the cost of acquisition of the asset may. be taken to be any one of the following: i)The cost of the asset to the assessee.F. . property. Or on transfer by a parent company to its Indian subsidiary company which is wholly owned by the parent company.U. Or under a transfer to a revocable or an irrevocable trust. Or on the transfer of capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company.
b) Cost of improvement : Cost of improvement is capital expenditure incurred by an assessee in making any additions/improvement to the capital asset. To put it differently. 1981 is always taken as equal to zero. etc. any expenditure incurred to increase the value of the capital asset is treated as cost of improvement. COST OF IMPROVEMENT IN DIFFERENT SITUATIONS .Any cost of improvement incurred before April 1. Expenditure incurred on improvement of a capital asset before April 1. In other words. cost of improvement shall be determined in the different situations as follows: When the capital asset was Different Situations acquired by gift. • Double deduction not permitted . It also includes any expenditure incurred to protect or complete the title to the capital assets or to cure such title. under the provisions of section 49(1) Cost of improvement in relation to In any other case ..Cost of improvement does not include any expenditure which is deductible in computing the income chargeable under the heads “Interest on securities”. 1981 is not taken into consideration for calculating capital gain chargeable to tax. 1981 not considered . cost of improvement includes only expenditure on improvement incurred on or after April 1. This rule does not have any exception. “Profits and gains of business or profession” and “Income from other sources”. Special provisions under the Income-tax Act in respect of cost of improvement should be noted as under: • Expenditure incurred before April 1.Keeping in view the above provisions. will. 1981. “Income from house property”.
c) Expenditure on transfer : Expenditure incurred wholly and exclusively in connection with the transfer of a capital asset is deductible from full value of consideration. 1981 incurred by the assessee and the previous owner INDEXED COST OF IMPROVEMENT Indexed cost of improvement is defined as an amount which bears to the cost of improvement. traveling expenses incurred in connection with transfer. Examples of such expenses are brokerage or commission paid for securing a purchaser. litigation expenditure for claiming enhancement of compensation awarded in the case of compulsory acquisition of assets. . the same proportion as the cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the year in which the improvement to the asset took place. produce or process any article/thing or right to carry on any business • when these assets are self• generated when these assets are purchased NIL NIL NIL NIL and later on transferred Cost of improvement in relation to any other asset acquired Cost of improvement • Cost of improvement incurred by the assessee and incurred by the assessee before April 1. cost of stamp. 1981) Cost of improvement incurred by the assessee on or after April 1.good-will of a business or a right to manufacture. registration fees borne by the vendor. The expression “expenditure incurred wholly and exclusively in connection with such transfer” means expenditure incurred which is necessary to effect the transfer. 1981 the previous owner (ignoring (ignoring the expenditure the expenditure incurred before April 1. 1981) Cost of improvement • incurred before April 1.
the same cannot be allowed as deduction under section 48. inheritance etc. d) Transfer : Capital gain arises on transfer of capital asset. Whether the following transactions are transfer in relation to capital asset. Giving the rights to use the asset. As per section 2 (47) Transfer. 4. The word transfer occupy a very important place in capital gain. In simple words Transfer includes: • • • • • • Sale of asset Exchange of asset Relinquishment of asset (means surrender of asset) Extinguishments of any right on asset (means reducing any right on asset) Compulsory acquisition of asset. 2. Even if there is a capital asset and there is a capital gain. 1. transfer can take place only on these five ways. Bonus shares given by a company to its shareholders. 3. In other words. so it becomes important to understand what is the meaning of word transfer. in relation to a capital asset. Giving away jewellery for a piece of land. Getting money in lieu of shop in a shopping complex. it will not be termed as transfer. thus transfer includes only above said five ways. includes sale. exchange or relinquishment of the asset or extinguishments of any right therein or the compulsory acquisition thereof under any law. If there is any other way where an asset is given to other such as by way of gift. The definition of transfer is inclusive. Write a short note on deductions under section: a) 80 DD . The word transfer under income tax act is defined under section 2(47). If a sum has already been subject-matter of deduction under other heads. 5. because if the transaction involving movement of capital asset from one person to another person is not covered under the definition of transfer there will be no capital gain chargeable to income tax. Q 2.One should also keep in view the following propositions: • • • Vague claim for expenses is not allowable Expenditure in connection with transfer need not necessarily have been incurred prior to passing of title. A house transferred by way of will to son.
as specified in Persons with Disabilities Act 1995. the spouse children. parents. b) Section 80G To encourage donations for social cause all assessees are entitled to this deduction from their gross total income. a member of the HUF wholly or mainly dependent on such individual or HUF for support and maintenance. A person with disability means disabilities like autism. 50. etc. who is resident in India. sisters of the individual or any of them. mental retardation. The assessee has incurred expenditure by way of medical treatment (including nursing). training and rehabilitation of a disabled dependent: or/and He has paid or deposited any amount under any scheme framed by the LIC of India or any other insurer for the payment of an annuity or a lump sum amount for the benefit of such dependent in the event of the death of the assessee.000 irrespective of actual expenditure.000 shall be allowed irrespective of actual expenditure. ii) In case of HUF. 75. if the donation is made in the previous year to the following funds or . In case of a person with severe disability (over 80 %) a higher deduction of Rs.Deduction in respect of dependent relative Section Following are the provisions under this section: • • • • • • This deduction is available to only Individuals and HUF. Amount of Deduction If the above mentioned conditions are satisfied the amount of deduction is fixed at Rs. This deduction is given to the assessee if a person with disability is dependent upon him.b) 80 G c) 80 GG d) 80lb e) 80 U Ans:. Explanation: Dependent means i) In case of an individual.a) 80 DD. brothers. For claiming the deduction the assessee shall have to furnish a certificate by the prescribed medical authority with the return of income. cerebral palsy.
Donations made to the following are eligible for 50% deduction without any qualifying limit. 5. 6. 2. Amount of deduction The quantum of deduction is as follows :• Category A. Donations made to following are eligible for 100% deduction without any qualifying limit. 10. 8. Jawaharlal Nehru Memorial Fund Prime Minister’s Drought Relief Fund National Children’s Fund Indira Gandhi Memorial Trust The Rajiv Gandhi Foundation.100 % of amount donated • Category B -50 % of the amount donated in the funds . 4.charitable institutions. 1. Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning. 1. D. Donations to the Government or a local authority for the purpose of promoting family planning. 3. 4. 10% of adjusted gross total income). The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund. 2. Prime Minister’s National Relief Fund National Defence Fund Prime Minister’s Armenia Earthquake Relief Fund The Africa (Public Contribution . 9. Maharashtra Donations made to Zila Saksharta Samitis The National Blood Transfusion Council or a State Blood Transfusion Council.e. B. Donations to the following are eligible for 50% deduction subject to the qualifying limit (i.India) Fund The National Foundation for Communal Harmony Approved university or educational institution of national eminence The Chief Minister’s Earthquake Relief Fund. C. 10% of adjusted gross total income). 1. Sums paid by a company to Indian Olympic Association 1. For the sake of convenience we have divided the donations into four categories depending on the quantum of deduction. 5.e. Donations to the following are eligible for 100% deduction subject to qualifying limit (i. 3. 2. 7. A.
The assessee files a declaration in Form No. c) Section 80GG This deduction is allowed to an individual assessee in respect of rent paid by him for an accommodation used for his residential purposes provided the following conditions are fulfilled: • • • • The assessee is either a self-employed person or such a salaried employee who is not in receipt of house-rent allowance from any source. of which he is a member. Note: Deduction under this section can be claimed even if accommodation at concessional rent is provided by the employer. is allowed a deduction equal to least of the following three: • excess of actual rent paid over 10% of adjusted gross total income: • 25% of his adjusted gross total income. Amount of Deduction The assessee. performs the duties of his office or employment or carries on his business or profession. Where a rent-free house is provided to the employee. Category D – 50% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI.C. Where. The total of these deductions under categories A. do not own any residential accommodation at the place where the assessee resides. In such a case the deduction will be given if the actual rent paid by the employee exceeds 10% of his total income. who fulfils the above mentioned conditions. the assessee owns any residential accommodation at any other place and claims the concessions of self-occupied house property for the same. no deduction will be allowed under this section. The actual rent paid by him is in excess of 10% of his total income. he will not be entitled to any deduction u/s 80GG even if he does not own any residential accommodation at the place where he ordinarily resides.B. & D is the quantum of deduction under this section without any maximum amount. Adjusted gross Total income for this purpose means his gross total income minus long-term capital gain. however. and . and all deductions u/s 80CCC to 80U except any deduction under this section. He or his spouse or minor children or the HUF. 10BA regarding the payment of rent. short term capital gain taxable u/s 111A.• • Category C – 100% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI. performs the duties of his office or employment or carries on his business or profession.
m. short term capital gain taxable u/s 111A. Adjusted Gross Total income( Adj. 2. storage and transportation of food grains units Multiplex theatres Convention centre Operating and maintaining a hospital in rural area Case 1: Business of an industrial undertaking Amount of deduction Industrial Unit or Same in Cold Backward Storage in District Backward State Assessee SSI Cold Chain Any for Agri Other goods . preservation and packaging of fruits or vegetables or integrated handling.GTI) for this purpose means his gross total income minus long-term capital gain.• Rs. Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9 Case 10 Business of an industrial undertaking Operation of ship Hotels Industrial research Production of mineral oil Developing and building housing projects Business of processing.000 p. d) 80lb Deduction in respect of profits and gains from certain industrial undertaking othe than infrastructure development undertakings. and all deductions u/s 80CCC to 80U except any deduction under this section.
Case 3: Hotel Assessee % of deductible profit Period of deduction First 10 years First 10 years in a notified 50 area Any other 30 hotel Case 4: Engaged in Industrial Research Approved by the prescribed authority at any time before April 1. 2007 100 % of profit from such business 10 years beginning with 5 years beginning with the initial assessment the initial assessment year year Case 5 : Production of mineral oil:-Amount of deduction 100% of the profit is deductable for the first 7 years.30 percent of the profit is deductable for the first 10 years. 1999 100 % of profit from such Amount of deduction business Period of deduction If the company is approved by the prescribed authority after March 31. Case 6: Developing and building housing projects – If all the aforesaid conditions are satisfied .100% for 25% for first 5 Company first years and Same 12 years 25% for next 7 years 100% for first 25 % for Any Other 5 years and first Same Person 25% for 10 years next 5 years Same 25% for first 12 years 25 % for first 10 years Same Case 2: Operation of ship. 2000 but before April 1.
• He is certified by the medical authority to be a person with disability. this section has been incorporated. at any time during the previous year. Case 10: Operating and maintaining a hospital in a rural area – 100% of the profits and gains of such business is deductable for a period of 5 consecutive assessment years. preservation and packaging of fruits or vegetables or integrated handling. Case 7 : Business of processing. • He furnishes a certificate issued by the medical authority in the prescribed form along the return of income Amount of deduction A fixed deduction of Rs. e) SECTION 80U To help a disabled person by reducing his tax burden. Following are the provisions. • The assessee is an individual being a resident • He is a person with disability. storage and transportation of food grains units Enterprises Owned by a company % of profit deductable Period First 5 Next 5 years First 5 Next 5 years years years 100 30 Owned by any other 100 person 25 Case 8: Multiplex theatres.100% of the profit derived in any previous year relevant to any assessment year from such housing project is deductable. 50. Case 9: Convention centre-50% of the profits and gains derived from the business is deductable from the assessment year 2003-04 for a period of 5 consecutive years beginning from the initial year.000 in case of a person with severe disability.000 in case of a person with disability Rs.50% of the profits and gains derived from the business is deductable from the assessment year 2003-04 for a period of 5 consecutive years beginning from the initial year.( having any disability over 80%) Note: If deduction u/s 80DD is claimed no deduction is allowable under this section . 75.
3:. If the securities are held as stock in trade then the interest is taxable under the head profit and gains of business or profession. it should be grossed up in the hands of recipient if tax is deducted at source by the payer.Q.Rate of TDS . whichever is earlier Additional income-tax is not allowed as deduction : The company shall not be allowed any deduction on account of such additional income tax under any provisions of the income tax act. such dividend was included in the income of the shareholders under the head "income from other sources". However. Ans:. distributed or paid by such company by way of dividend (whether interim or otherwise) on or after 1-06-1997. whether out of current or accumulated profits. any dividends declared. Net interest X 100 100. interest and royalty. A) Tax on distributed profits of the Domestic company: The domestic company shall be liable to pay additional income tax on any amount declared. Time limit for deposit of additional income tax : Such additional tax will have to be paid by the principal officer of the domestic company within 14 days from the date of : a) Declaration of any dividend b) Distribution of any dividend c) Payment of any dividend. The finance act. distributed or paid by such company. B) Exemption of dividend in the hands of shareholders : In view of the income tax now payable by the domestic company.Explain the tax provisions for dividend . Thsi additional tax shall be payable even if no income tax is payable by such company on its total income. the company was not liable to pay any income tax on the amount of dividends declared. 1997 has introduced changes in this rule. The gross interest (net interest plus tax deducted at source) is taxable. If net interest is given. distributed or paid by such company. Tax Provision for Interest on securities Interest on securities is charged to tax under this head if the securities are held by the assessee as fixed assets. 1961 upto 31-05-1997. on or after 01-06-1997 shall be exempt in the hands of the shareholders.Tax provision for dividend In India as per Income tax Act. Such additional income tax shall be payable @ 10% of the amount so ditributed.
Non TDS iii.tax securities i. running royalties. statutory corporation and company issues in the from of debentures and bond ii. card games. Tax-free securities i. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such. Government securities: a. Taxable securities ii.000 for a resident individual.00. the securities can be classified into 1. crossword puzzles. Commercial securities a. 3. Issued by central govt. or state govt. Less. or private sector taxes are usage-based payments made by one party (the "licensee") and another (the "licensor") for ongoing use of an asset. Royalty income of authors [u/s Sec 80 QQB] : This deduction is allowable up to maximum Rs. Assessee should furnish a certificate in Form 10CCD from the person responsible for paying the person responsible for paying the income. sometimes an intellectual property (IP). Tax-free securities i. Less tax commercial securities i. TDS is collected iii. statutory bodies and local authority Any other interest on security[unlisted] Winnings from lottery. artistic or scientific . Interest should be grossed up b. Not included in the total income b. Tax is paid by the issuer iii. ii.No 1 2 3 4 Particulars Interest on any security of central or state government Interest on debentures listed in a recognized stock exchange. Interest should be grossed up if net amount is given Tax Provision for Royalties Sometimes. The book authored by him/her is a work of literary. Since tax is paid by the issuer it is termed as tax-free securities iv. Local authority. Interest fully exempted ii. Taxable securities iv. Interest received should not be grossed up 2. horse race etc TDS Rate No TDS 10% 20% 30% For the purpose of income tax purpose.
The assessee should furnish a certificate in Form 10 CCE duly signed by controller of Patents Act along with the return of income. Q. There has been (a) an amalgamation of a company owing an industrial undertaking or a ship or a hotel with another company or (b) an amalgamation of banking company referred to in section 5 (c) of the Banking Regulation Act. The amalgamated company continues to hold at least three-fourths in the book value of fixed assets of the amalgamating company which it has acquired as a result of amalgamation for five years from the effective date of amalgamation. Royalty on Patents [Sec 80 RRB]: This deduction is allowable up to. textbook of schools and other similar publication.Both of the benefit can be availed by the company and following conditions are satisfied. 145000. . or (c) (from the assessment year 2008-09) an amalgamation of a public sector airlines with another public sector airlines. b. d. then the unabsorbed loss & depreciation of the amalgamating company shall be deemed to be loss/depreciation of the amalgamated company for the previous year in which the amalgamation is effecteda.00 Consider which of the benefit can be availed of by the company and advice the latter on the conditions to be fulfilled to claim each such benefit. Ans:. The amalgamation company has been engaged in the business in which the accumulated loss occurred or depreciation remains unabsorbed for 3 years or more years.300000 or actual amount (which ever is less) for a resident individual. 4:. If it is received from outside India the income should brought into India in convertible foreign exchange within 6 months from the end of the relevant PY. The amalgamation company has held continuously as on the date of the amalgamation at least three –fourth of the book value of fixed assets held by it two years prior to the date of amalgamation. Rs. the following are the particulars of the former company Unabsorbed depreciation Unabsorbed business loss Rs.nature and it does not include guides.1949 with a specified bank. 45600000.00 Rs. c.Company A is proposed to be merged with company B .
But non-speculative business loss can be set off against any business income ii) Short term capital loss: Short-term capital loss can be set off against any capital gain income.The various provisions of the Income-tax Act of 1961 regarding set-off losses i) Speculation loss Speculation loss can be set off only against speculation profit in the same assessment year. and f. In subsequent years.Discuss the provisions relating to set off of losses in the following cases: i) Speculation loss ii) Short term capital loss iii) Long term capital loss iv) Losses from horse race. Speculative business loss can be set off against only speculative business income. The amalgamation company continues the business of the amalgamated company for a minimum period of 5years. setting-off of the loss is allowed only against speculation profit [Section 73]. in the same assessment year. Balance short-term capital loss if any can . It should be noted that such loss can be set off only against capital gain income and not against any other head of income. The amalgamated company fulfils such other conditions as may be prescribed to ensure the revival of the business of the amalgamating company or to ensure that the amalgamation is for genuine business purpose. In case the above specified conditions are not fulfilled. then it can be carried forward for set off in subsequent years up to four assessment years. 5:.e. then that part of brought forward loss and unabsorbed depreciation which has been set off by the amalgamated company shall be treated as the income of the amalgamated company for the year in which the failure to fulfill the conditions occurs. Q. But even after such setting off if the resultant figure is a loss. long term or short term. From assessment year 2006-07 up to assessment year 2005-06 such loss could be carried-forward for eight assessment year. gambling and cross word puzzeles Ans:.
be carried forward up to eight assessments years. Entertainment Allowance [ U/s 16(ii)] Some employees are required to incur expenditure on the entertainment ( tea etc. cannot be set off either against the income from the same source or against the income under any other head of income. clients etc. iii) Long term capital loss Long-term capital loss arising on sale of capital asset other than equity shares and units of equity-oriented mutual fund which are subject to securities transaction tax (STT) can be set off in the same assessment year as well as in subsequent assessment years (in case of carry-forward) only against long-term capital gain income. What are the deductions available from gross salary income? Ans:. iv) Losses from horse race. Entertainment Allowance Tax On Employment Deduction U/S 80c Out Of Gross Total Income Deduction Of Tax From The ‘Salary’ 1. gambling. Carry-forward of loss is allowed up to eight assessment years. 3.e.Deduction from gross salary income follows: 1. who came to meet them in connection with their official or business work. lotteries. In the subsequent years also. a deduction u/s 16(ii) shall be allowed only to Govt. But in case any amount is reimbursed against any expenditure incurred by employer. In case employee is given a fixed amount every month to meet this type of expenditure then it is fully added in salary and out of Gross total Salary . This is because each of these specified sources is regarded as separate from others (i. it is fully taxable. 2. This means that in case this allowance is given to employee working in private sector. Q6. other sources). it can be set off against any capital-gain income. . it shall be fully exempted. 4. gambling and cross word puzzles Losses from cross word puzzles. card games races including horse races. etc. employees.) of customers.
Life Insurance Premium 2. Contribution towards Statutory Provident Fund and Recognised Provident Fund. 2. 2. . Under Section 80C . Deduction is available on the basis of specified qualifying investments / contributions / deposits / payments made by the taxpayer during the previous year. Actual amount of entertainment allowance received during the previous year. 4. 1/5 th of Basic Salary 3. 2. an incentive in the form of a deduction out of one’s taxable income has been allowed. Deduction under section 80C is available only to individual or HUF. The following are the main provisions of the newly inserted Section 80C. Statutory Limit of Rs. 4. 3. Section 80C provides deduction i8n respect of specified qualifying amounts paid deposited by the assessee in the previous year. To encourage savings. deduction would be available from Gross Total Income. An Individual 2. Payment in respect of non-commutable deferred annuity. A Hindu Undivided Family (HUF) The Deduction is calculated as per the following steps – Step-1: Gross qualifying Amount which is the aggregate of the following… 1. Tax on Employment u/s 16(iii) In case any amount of professional tax is paid by the employee or by his employer on his behalf it is fully allowed as deduction. : 1. 80CCC.1 lakh.a. employee shall be an amount equal to least of following: 1. Section 80C has been inserted from the assessment year 2006-2007 onwards.000 p. Deduction U/S 80c Out Of Gross Total Income Savings play a vital role in the fast economic development of nay country. Deduction u/s 80C shall be allowed only to the following assessee : 1. a deduction shall be allowed. 3. and 80CCD can not exceed Rs. To channelise those savings. employee for the purpose of securing him a deferred annuity. various schemes have been framed and if the assessee deposits those savings in these approved saving schemes. The maximum amount deduction under section 80C .5. Any sum deducted form salary payable to Govt.Deduction u/s 16(ii) admission to govt. 3.
Subscription to National Saving Certificates.00. Subscription to any notified Bonds of National Bank for Agriculture and Rural Development ( NABARD) 19. Rs. VIII Issue. 80CCC. Contribution towards 15-year Public Provident Fund Contribution towards an Approved Superannuation Fund. 17. Step-3: Amount of Deduction: Amount Deduction u/s 80C is computed as under: 1. Gross Qualifying Amount . 9. 8. 7. Amount invested in approved Debenture of .00. 13. 15. 1. 10. Amount deposited in 5 Year Time Deposit in Post Office. 16. Any sum paid as Tuition Fees for full time education of any 2 children of an individual.000 Whichever is LESS.5. or 2. 12. public company engaged in infrastructure.000. Net Qualifying Amount . and 80 CCD can not exceed Rs. Contribution for participating in the Unit-linked Insurance Plan (ULIP) of UTI. 1. Subscription towards notified Units of Mutual Fund or UTI. 20. and equity shares in. 18. 6. Contribution to notified Pension Fund set up by Mutual Fund or UTI. Any sum paid as subscription to Home Loan Account Scheme of the National Housing Bank. Step-2: Net Qualifying Amount : Deduction u/s 80C is available on the basis of Net Qualifying Amount which is determined as under … 1. Amount deposited under Senior Citizens Saving Scheme. Contribution for participating in the Unit-linked Insurance Plan (ULIP) of LIC Mutual Fund. Any payment towards the cost of purchase / construction of a residential Property. 14. The aggregate deduction u/s 80C. 1. Amount deposited in as Term Deposit for a period of 5 years or more in accordance with a scheme framed by the Government. or 2. Payment to notified annuity plan of LIC 11.00. . Rs.000 Whichever is LESS.
80.50. Rs.000 for the assessment year 2009-10.000 is for Senior Citizen 65 years or more.000 / Rs.) Normal Rates applicable to an individual The employee can make an application in Is it possible to get the payment without tax Form No. ETC.25.1. 192 are given below : Who is the taxpayer Who is the recipient Payment covered At what time tax has to be deducted at source Maximum amount which can be paid without Tax Deduction Rate of tax deducted at source Employer Employee Taxable salary of the employee At the time of payment The amount of exemption limit ( i.25.89 .000 is for Resident Women below 65 years Rs. ADVANCE.e. DEDUCTION OF TAX FROM THE ‘SALARY’ [SECTION-192] The summarized provisions of Sec.4.000/Rs.2. If an individual receives any portion of his salary in arrears or in advance or receives profit in lieu of salary.-13 to the Assessing Officer to get a deduction or with lower tax deduction certificate of lower tax deduction or no tax deduction. he can claim relief in terms of Sec. Note: Rs. RELIEF IN RESPECT OF SALARY IN ARREARS.80. 1. 2.1.