I

NCOMETAX(AY-2018-
19)

Taxesar ecompul sorycont ri

but i
onbyaper sontot hegov ernment
Directt axisonepai ddi rectlyt ot hegov ernmentbyt heper sonson
whom i tisimposedE. g.incomet ax,weal thtaxandgi fttax.
Incomet axisadi r
ectt axlev iedandcol lectedbyCent ralGov t
.
Ther atesoft axforaf inanci alyearar edet erminedbyt heFi nanceAct s.
IncomeTaxi sanannual taxont otal i
ncomeofanassessee.
Thet otal i
ncomei sclassi fi
edi ntof oll
owi ng5heads.
I ncomef rom sal aries
I ncomef rom housepr oper ty
 Pr of itsorgainsofbusi ness/pr ofessi
on
 Capi talgains
I ncomef rom ot hersour ces
Thet otalofassessabl ei ncomeundereachoft heabov eheadsi s
knownasGr ossTot alIncome( GTI).
Ift hededuct ionsper mi ssibleundert heActar esubt ractedf rom GTI,
thebal ancel eftiscall
edTot alIncome.
Tax l i
abili
tyi s calculated on Tot alI ncome accor di
ng t ot he r
at es
prescribed
Assessmenty earisaper i
odof12mont hsstart
ingon1stApr i
lofev ery
year
Prev i
ous y ear i s the f inancial y ear i mmedi atel
y pr eceding the
assessmenty ear.

RESI
DENTI
ALSTATUS

Ther esidentialst at usofi ndividuali sdet er

minedwi t
hr eferencetohis
stayinIndi adur i
ngt hepr eviousy ear .
Ther esident i
al stat usofaper sonmaychangey eart oyear.
Typesofr esi
dent s
1.Or dinaril
yr esident
2.Notor dinaril
yr esi dent(forindividual sandHUFonl y)
3.Nonr esident
Ani ndivi
duali sr esi denti fhesat i
sf iesanyoneoft hef ol
lowingbasic
conditi
ons.
 Hei sinI ndiadur i
ngt hepr ev i
ousyearf oraperiodof182day s
ormor e
 Hei si nI ndiadur i
ngt hepr evi
ousy ear60day sormor eand
365day sormor edur ingt he4y earsprecedingthePY.
Ifar esidentsat isfiesbot ht headdi ti
onalcondi t
ionsbel ow,hei san
ordi
naryr esident .
 Hehasbeenr esidenti nI ndiaatl east2outof10pr evi
ous
yearspr ecedi ngther elevantPY.
 Hehasbeeni nI ndiaatl east730day si nal lduringthe7

1
 previ
ousyearsprecedingtherelevantPY.
HUFi sr esi
dentift
hecont rolandmanagementofi tsaff
air
sissi
tuat
ed
whol l
yorpar tl
yinI
ndiaduringtherelevantprevi
ousyear
.
AnI ndi
ancompanyi salwaysresident.
Af orei
gncompanyi sresi
dentonl yifitscontrolandmanagementis
whol l
ysituatedinI
ndiaduringthepreviousy ear
.
Typesofi ncome
I
ndiani ncome: Incomer ecei
ved/deemedt obereceiv
edinI
ndia

I
ncomeaccr
ued/
deemedt
obeaccr
uedi
nIndi
a

For
eigni
ncome: I
ncome accrued/
deemed to be accrued and
r
ecei
ved/deemedtoberecei
vedout
sideIndi
a

Indianincome: I
ti st
axableirrespect
iveofr esi
denti
alstatus.
Foreignincome
I tisnotatalltaxabletononr esidents
I tisful
lytaxabletoor di
nari
lyresidents
I tis nott axablet o‘ notordinaril
yr esi
dents’exceptwhen
i
ncome i sf r
om a busi ness whi ch is contr
olled f
rom or
pr
ofessionsetupi nIndia.

I
NCOMEFROM SALARI
ES(
Sect
ion15-
17ofI
TAct
)

Amountr eceivedbyanempl oyeef rom hisempl oyerwhil

eoccupy i
ng
thepositi
onofhi sempl oymenti st axabl
eunderSal ar
y.
Salaryaccruedi nI ndiaonl yistaxabl eunderthehead.Salaryaccr ues
wher eserv
iceisr ender ed.Butsal aryofgovt.employeespostedabr oad
accruesinIndia.
Adv ancesalar
yist axabl einthey earofreceipt
SalaryofMP,MLAi snotchar geabl eunderthehead“ sal
ary”(buttaxed
asincomef rom ot hersour ce).
SalaryofaPar tnerf rom firmi snotchar geableunderthehead“ salary
”
(taxableasincomef r
om pr ofi
torgai nsfrom busi
nessorprofession)

ALLOWANCES: Pay
mentincashmadebyempl oyert
ohisemploy
ee.
Full
yexempt ed
 For ei
gnal l
owancegi venbygov t.t
oi tsemployeespost
ed
abroad.
 Al l
owancesf r
om UNO.
 Sumpt uar
yall
owance
 Perdi em al
lowance(dail
yal
lowance)
Full
ytaxable
All al
lowances unl ess specifi
cal
l
y exempt ed are ful
ly t
axabl
e
al
lowances.
2
  Dear nessal lowanceorDear nessPay
 CityCompensat oryAllowance
 Lunch/Ti ffi
nal l
owance
 Mar ri
age/ f
ami lyallowance
 Deput at ion/ projectallowance
 Nonpr act i
cingal l
owance
 Over ti
meal l
owance
 Medi cal all
owance
 Servantal l
owance
 Hillallowance
 War denal l
owance
 Entert ainmentAl l
owance( adeduct i
oni sgivenu/s16f r
om
grosssal aryforGov t
.Employ eesonly
)
Part
lytaxable
HRA: Exempt edupt ol eastoft hefol
lowi ng
 Actual HRA
 Excessr entpai dov er10%ofsal ary
 40%ofsal ar y(50%i nMumbai , Calcut
ta,Del
hiandChennai
).
(Sal
ary=Pay+DA( enters)+Commi ssiononturnoverdue)

All
owancescov eredu/ s10( 14):Exempt edupt otheextentt owhich
suchexpensesar eactuall
yincurredf ort
hatpur
pose.
 Helperallowance
 Uniform all
owance
 Academi cr esearchall
owance
 Conv eyanceal l
owance
 Travell
ingal l
owance
 Dail
yallowance
Running fl
ightal lowance gr ant
ed t o an employ
ee wor ki
ng in any
tr
ansportsy stem:70% ofsuchal lowanceorRs.10, 000permont h
whicheverislessisexempt .
Chil
dreneducat i
onal l
owanceRs. 100permont hupt omaximum of2
chil
drenstudyinginIndiaisexempt .
Hostelexpendi t
ur e all
owance Rs.300 p. m.Up t o maximum of2
chil
drenisexempt .
Transportall
owance:Rs. 800p. m.( Rs.1600fordisabl
edper sons.
)is
exempt .

PERQUISITES:Thet erm per

quisi
temeansanybenef i
tattachedtoan
off
iceorpositi
oninaddit
iontosalar
y.
Taxfreeperqui
sites
 Free medi calbenefits( i
ft reat
ment i
sf rom a pr iv
at e
unrecognisedhospi
talbenefi
tisexempt
eduptoRs. 15000p.a.)
 Freer ef
reshmentduri
ngoffi
cehour s
 Freemeal sexemptedupt oRs.50permeal.
3
  Pr ov i
si onoft elephoneandmobi lephone.
 Schol ar shi pst oempl oy eesort hei rchildren/ Costofr efresher
cour se.
 Per qui si test ogov templ oy eesabr oad.
 Fr eeconv ey ancef orcommut i
ngbet weenhomeandof f
ice.
 Comput er sgi venf orof fici
al/per sonaluse( nott ransf er)t o
empl oy ee
 Tr ansf erofusedasset( othert hancar ,el ectronici t
emsand
comput er )usedbyempl oy erf oraper i
odofmor et han10
year s.
 Per iodi cal sandj ournal sf ordischar geofwor k.
 Leav eTr av el Concessi on
I nter estf reeorconcessi onall oant akenbyt heempl oy ee,if
amountofl oandoesnotexceedRs. 20,000orl oani stakenf or
medi cal treat ment
Taxableper qui sitesi nal lcases
 Rentf reeaccommodat i
on
 Obl igat ionofempl oyeemetbyempl oyeri.e.bi ll
sissuedi nthe
nameofempl oyeebutpai dbyempl oyer.
Perquisitest axabl ef orspeci fiedempl oyeesonl y
Aspeci fiedempl oy eei saper sonwhoi sei ther
 Adi rect oroft hecompanyor
 Hol ds20%ormor eequi t
yshar esoft hecompanyor
 Whosesal ar yi ncomei smor et hanRs.50, 000.
 Faci lityofcar .
 Fr eedomest icser vantsl i
kesweeper ,gar dener ,wat chmanand
per sonal att endant .
 Gas, elect ricener gyandwat er
 Educat i
onf aci l
itytot hemember sofempl oyee’ shousehol d
 Tr anspor tf aci lity
Valuationofper qui sites
RentFr eeAccommodat ion
 Gov t.Empl oy ees- l
icensef eesf i
xedbyt hegov t.
 Ot herempl oy ees-
Ifthehousei sownedbyempl oy er
 15%ofsal ar yi nci ti
eswi thapopul at ionofmor et han25l akhs.
 10% ofsal ar yi fpopul ationi smor et han10l akhs( butnotmor e
than25l akhs)
 7. 5%ofsal ar yi fpopul ationi supt o10l akhs
I fhousei shi redbyempl oy er
 15% ofsal ar yoract ualhi rechar geswhi chev eri slowerwi l
lbe
taxabl e
I fhousei sf ur nished,
I ff urnitur ei sownedbyempl oyeradd10%ofcostoff urniture
I ff urnitur ei shi redact ual hirechar gesi stobeadded
 Anypay mentmadef ort hesef acil
it
iescanbededuct edf rom t he
4
 valuesocomput ed.
Sal
aryforrentf
reehouse
Pay+DA ( ent
ers)+f ee+commi ssi
on+bonus+allful
l
ytaxabl
e
all
owances+t axableport
ionofot
herall
owances+ot
hermonetar
y
pay ments

Gas,l
ightandwater
:Actual
costofsuchbenefi
t
Domesticser v
ant
s:Totalamountofsal ar
ypaid orpayabl
ebyt he
employer
MotorCar : Expensesmetbyempl oyer Expenses metby
employee
Smal lcar 1,
800p.m. 600p.m.

Lar
gecar 2,
400p.
m. 900p.m.

I
fchauffeurisalsoprovidedadd 900p.m.
Deduct
ionsu/ s16
 Pr ofessi
onaltax
 Ent ertai
nmental l
owance(
forgov
t.Empl
oyees)
Leastofthefollowi
ngisal
l
owedasdeducti
on

 Rs.5,000
 20%ofbasicsalar
y
 ActualamountofEAgr
ant
ed.

I
NCOMEFROM HOUSEPROPERTY

Thei ncomef rom house,bui l

dings,bungal ows,godownset c.ist obe
comput edandassessedt ot axundert hehead“ I
ncomef r
om house
proper ty”.
Thei ncomeundert hi
sheadi sbasedupont heannualv alueoft he
buildi
ng.
Ther entf i
xedunderRentcont rolActiscalledt heStandardrent.
Expect edr entalv alue( ERV)Fi r
stlycompar emuni ci
palrentalvalueand
fairrent alv alue and f ind outt he higherone and t he amountso
calculatedcannotexceedamountofst andar drent.
Todet ermi netheannualv alue,allmunicipaltaxesact ual
lypaidbyt he
ownerdur ingthepr ev i
ousy eararetobededuct ed.
Housewhi chr emai nsv acantf orwhol eoft hepr ev
iousy ear:Gross
annual val
ueshal lbeNI L
Housewhi chnei therr emai nsv acantdur inganypar toft hepr evi
ous
yearnort herei sanyunr eali
zedr ent:Grossannualv alueshal lbet he
expect edr entoract ualrentwhi chev eri
sgr eater .
Houser emai nsv acantf orapar tofthepr ev i
ousy ear:Theact ualrent
received/ r
eceiv ablewi llbet hegr ossannual value.
Housewhi chdoesnotr emai nv acantdur i
nganypar toft hepr evi
ous
5
 yearbutt herei s unr ealized r ent :Gr oss annualv alue shal lbe t he
expect edr entoract ualr entr eceiv ablewhi chev erisgr eat er.From gr oss
annualv aluemuni cipalt axpai dandunr eal izedr entshal lbededuct ed
andt hebal anceshal l bet heannual val ueoft hepr oper ty
.
Housesel foccupi edf orpar toft hepr ev i
ousy earandl etoutf orpar tof
thepr ev i
ousy ear:Tr eati tasl etoutf orf ully earandcomput eARVi n
samemanner .
Selfoccupi edorunoccupi edhouse: Annual valuet akent obeNI L.
Mor et hanonehousei nt heoccupat ionoft heowner :Ifassesseeowns
mor et hanonehousef orhi sr esidencef orf ullprev i
ousy ear,onl yone
houseofhi sownchoi ceshal lbeexempt edandot herhousesshal lbe
deemedt obel etout .
Deduct ionsf rom annual value:
 St andar ddeduct ion@ 30%ofnetannual valueev eryyear .
I nt ereston l oan t aken t o pur chase,const ruct,r epai ror
renov atet hehousei sallowabl easdeduct i
ononaccr ual basis.
ForSel foccupi edhouse,i nterestonl oant akent opur chase,const ruct,
repair,renov ate,thehousei sonl yal l
owedasdeduct i
onupt oRs. 30,000
oract uali nter estwhi chev erisl ess. (Rs. 2,00, 000 i floan i st aken f or
st
acquiringorconst ruct ingonoraf tert he1 dayofApr il1999)
Int
erestonl oanf ort heper i
odpr i
ort ot hepr ev i
ousy eari nwhi cht he
housei scompl etedi sal l
owabl einf iveequal annual instal ment s.
Treatmentofunr eal izedr entr ecov eredDeemedasi ncomeoft hey ear
i
nwhi chi tisr ecov er ed.
Arrearsofr ent :Deemedasi ncomef rom housepr oper tyoft hey earin
whichi tisr ecov ered( aft
eral lowi ngst andar ddeduct ion@ 30%ofsuch
amount ).

PROFI
TSANDGAI
NSOFBUSI
NESSORPROFESSI
ON

Businessi ncl
udesanytr
ade,commer ce,manuf actur
eoranyadvent
ure
orconcer ninthenat
ureoftr
ade,commer ceofmanuf act
uri
ng.
Profi
tsorGai nsofBusi
nessorProfessi
oni ncludes,
 Bu si
nessIncomeorIncomefrom Professioncarri
edonduri
ngthe
previ
ousy ear.

 Cashassistancer ecei
vedagai nstexpor tsunderanyscheme.
 Profi
tonsal eofli
censegr antedundert heImportenti
tl
ement
l
icenses.
 Cu stomsorexci sedutyr epaidorr epayableasdr awback.
 An ysum r ecei
vedunderKeymanI nsurancePolicy,i
ncl
udingbonus.
 Interest,
Salary,Remuner ationtoPar t
nerofaf ir
m.
DEDUCTI BLEBUSI NESSEXPENSES:
 Expensesinr espectofbuildingsu/s30
 Expensesinr espectofplant, machinery,f
ur ni
tur
eu/ s31

6
 Depreciati
onu/ s32
 Depositi nTeaDev elopmentAccount ,Cof feeDev elopmentAccount ,
RubberDev elopmentAccountu/ s33AB:Deduct ion-amountdeposi ted
or40%oft hepr ofitsofsuchbusi ness, whichev erisless.
 Depositi n Si t
er est orat i
on fund   u/ s 33 ABA:Deduct ion shallbe
al
lowedont heamountdeposi t
edor20%oft hepr ofitsofsuchbusi ness,
whicheverisl ess.
 Expenses onsci entificr esearch u/s35
Costofl andi snott hepar tofsci entif
icr esearch.
Rev enueorcapi talexpendi t
ur ei ncurredbyassesseehi msel fin
relationt ohi sownbusi nessi sal l
owedasdeduct i
on.
Anyexpensesi ncur r
edbef or e3y earsf rom thecommencement
ofbusi nessar ededuct i
ble.
Cont ributionf orsci enti
fi
cr esear cht oacompanyorf orsocialor
statisticalresear chi sall
owedat100%ofsum pai d.
Cont ributionf orsci enti
fi
cr esearchwi l
l beal l
owedat150%oft he
amounti fcont ribut edtoappr ovedsci ent if
icresear chassociation
ornat i
onal labor at oryoruni versi
ty .
 I
n-house  devel opment  
orr esear ch expensesdeduct ionallowed
at150%ofex pendi t
ureincurred.

 Telecommuni cationl icensef eeu/ s35ABB

 Preliminar yexpensesu/ s35D.Thi sdeduct i
oni sal l
owedonl ytoIndi
an
companyornon- cor por at
er esidentassesseeonl y.
t
h
 Deduct ionanamountequal to1/ 5 ofsuchex pendit
ur e.
 Maxi mum el igible amount :5% ofcostoft he project.(ForIndi
an
company ,5% ofcostoft hepr ojector5% oft hecapi t
alempl oy
ed
whichev eri shi gher )
 Expendi turef oramal gamat ionordemer gerofanunder t
aki
ngu/ s35DD
-Deduct ablei nf iv
eequal inst al
lment s.
 Expendi turei ncur red on v oluntaryr et
irementscheme u/ s 35DDA-
Deduct iblei nf i
veequal inst al
lment s
 Expendi tureonpr ospect ingofmi neral
su/ s35E-Deduct i
bleinten
i
nst al
lment sannual ly.
 Otherdeduct i
onu/ s36
I nsur ancepr emi um
I nsur ancepr emi um f orcat t
le
I nsur ancepr emi um f ortheheal t
hofempl oyee
 Bonusorcommi ssion
I nt erestonbor rowedcapi t
al
 Di scountonzer ocouponbonds
 Cont ribut i
ont opr ov i
dentf und
 Appr ov edgr atuityfund
 Baddebt s
 Pr ovisionf orbaddebt sinr espectoffinancialinsti
tut
ions
 Forf or eignbanks-5%ofadj ust
edt otalincome

7
  Forot herbanks–8. 5%ofadj ust edt otal income
 Expendi tureonf ami lypl anni ng
 Expensesi nconnect ionwi t
hi ncomet axpr oceedi ngs
 Gener al Deduct ionu/ s37
I tisnotbei ngpar tofot hersect ion.
 Notofcapi tal orper sonal nat ure.
I ncur reddur ingpr eviousy ear .
 Connect edwi tht hebusi nessorpr ofession
I tisexpendedwhol lyandexcl usivelyf ort hepur poseofbusi ness
orpr of essiondur ingpr ev i
ousy ear
EXPENSESNOTDEDUCTI BLE
Forallassessees:
Expendi t
ur eonanyadv ertisementi nanysouv eni rpubl i
shedbypol it
ical
party
.
Paymentmadet onon- residentwi t houtdeduct ingTDS
IncomeTax, Weal tht ax
Anyexcessi veamountpai dt or elativeort oaper sonofsubst ant i
al
i
nterest
Expensesexceedi ngRs. 20, 000-i fpay mentmadeot herwiset hanby
account pay ee cheque ordr af t
.(i.
e.pay menti n cash exceedi ng
Rs.20,000/ 35000)
DEDUCTI ONSALLOWABLEONACTUALPAYMENTU/ S43B
 Tax, dut y,cesset c
 Empl oyer’scont ri
but i
ont oempl oy eeswel faref und
 Bonusorcommi ssi ont oempl oy ees
I nt
erestonl oant akenf rom f inanci al i
nst i
tut i
ons
 Encashmentofear nedl eav e
 Deduct ional l
owedi nt her elev antpr ev i
ousy eari f
Pay mentmadei nt hepr ev iousy earorbef or et hedat eoff i
li
ng
ret urn.
Ev idenceat tachedwi tht her et urnofi ncome.
I ft heamounti spai daf t ert heduedat eoff ilingr etur ndeduct i
onwi l
l
beal l
owedont hey earofact ual pay ment .
DEEMEDPROFI TS
1. 
   Anyamountr ecov ereddur i
ngt hepr ev i
ousy earwhi chearlierall
owed
as deduct ionwi llbet axabl ei nt hey earofr ecei pt.
2. Pr ofitonsal eofasset sonwhi chdepr eciationcl aimedonst rai
ght
l
inemet hod
3. Sal eofassetusedf orsci ent ifi
cr esear ch
4. Baddebtr ecov ered( i
fbaddebtal lowedasdeduct ioninanear l
ier
year)
5. Recov er yaf terdi scont inuanceofbusi nessorpr of essi on
6. Wi thdr awal from speci al reser ve

 PROFI
TSANDGAI
NSOFELI
GIBLEBUSI
NESSU/
S44AD
8
  Grossrecei
ptsdonotexceedRs. 1cr
ore.
 Totali
ncomeofbusi nesswillbedeemedat8%oft ot
alrecei
pts.
 PROFI
TSANDGAI NSOFBUSI NESSOFPLYI NGOFTRUCKS, ONLEASE
ORONHI REU/S44AE
 Numberofv ehiclesshoul
dnotexceed10.
 Totali
ncomeofbusi nesswillbedeemedat 
I ncaseheav ygoodsvehicle@ Rs.5,
000p.m.pervehicl
e
 Forothervehicl
es@ Rs.4,500p.m.pervehi
cle.

DEPRECI ATION
Assetsaredi vi
dedi ntobl ockofasset s( Ablockofasset sconsistsofa
classofasset si nr espectofwhi cht hesamer ateofdepreciati
oni s
admissibl
e)
Depreciat
ioniscal culatedonwr ittendownv alueofabl ockofasset sat
theprescri
bedr ateofdepr eciation.
50%ofnor maldepr eciationisal l
owedonanassetacqui redandused
i
nt hebusinessdur ingthepr eviousy earforlessthan180day s.
Nodepr eciati
oni sal l
owedi fasont helastdayoft hepr evi
ousyear
 Phy sicallynoasseti nt hebl ock,or
 Zer oWDVi nt hebl ockorbot h
WRI TTENDOWNVALUE=Openi ngWDVofasset sintheblock+Act ual
costofasset sacqui reddur i
ngt hepr eviousy ear–Netsal econsiderati
on
oftheassetol d/discar ded/ obsoletei ncludingscr apvalue

ACTUALCOSTOFANASSET
 Thecostbor nebyanassesseei nt heacqui si
ti
onofanasseti scal l
ed
i
tsact ualcost.
I nthecaseofacqui sit
ionofanassetbywayofgi ftorinheri
tance–
Actualcostofpr evi
ous ownerl ess depr eci
ati
on which has been
all
owed
 Wher eapor t
ionoft hecostofanassethasbeenmeti nt heform of
subsidyorgr antorr eimbursementt hen,somuchofcostshal lnotbe
i
ncludedi ntheact ualcostoftheasset.
Additi
onal depreciati
ononpl antandmachi nery
1. 
  
Assesseeengagedi nmanuf act
ureorpr oducti
on
2. 
 Anew pl antormachi neryacquir
edandi nstal
ledduri
ngt hepr ev
ious
year.
3. 
  
Rateofaddi tionaldepreciat
ion20%p.a.(10%i fl
essthan180day s)
4. 
Notal lowedi finstall
edi nanyguesthouse,of fi
ceappli
ancesorr oad
tr
anspor tvehicl
e

CAPI
TALGAI
N

Gainontransf
erofcapit
alasset
siscal
ledcapit
algai
n.
Profi
torlossfr
om thetr
ansferofacapit
alasseti
schar
geabl
etot
axi
n
theprev
iousyearoftr
ansfer
.
9
TRANSFERi ncl udessal e,exchangeandr elinqui shmentoft heassetor
thecompul sor yacqui siti
onbyt hegov t.underanyl aw.
Conv er sionofaper sonalef fecti ntost ocki nt r adeal soshal lbet reated
ast ransf er .
Anypr of itorgai noutofcl aimr ecei vedondest ructionofacapi t
alasset
from ani nsur anceco.shal lalsobechar gedt ot axundert hi shead.
Tr ansact ionsnotr egardedast ransfer
Tr ansf erofcapi t
al assetbyacompanyt oi tsshar ehol dersatt he
ti
meofl iqui dati
on
Dist ribut i
onofcapi tal assetont ot al orpar ti
al partit
ionofHUF.
Anyt ransf erofassetundergi ftorwi llorunderani rr
ev ocabl e
trust .
Tr ansf erofassetbyacompanyt oi tssubsi diaryIndi ancompany
orv i
cev er sa.
CAPI TAL ASSET meanspr oper tyofanyki nd hel d byt he assesse
whet herconnect edwi thhi sbusi ness, prof essi onornot .
Capi tal assetmaybemov ableori mmov able, tangi bleori nt angi blef i
xed
orf loat ing.
Thef ol l
owi ngar eexempt edf rom t hedef i
nitionofcapi talasset .
 Rur al agr icul t
uralland
 Moveabl eper sonal ef fect s( exceptj ewel ler y)
 Any st ock i nt rade,r aw mat erial,consumabl es hel d by t he
assesseef orhisbusi nessorpr of essi on.
Shor tt er m capi talasset sar ehel dbyt heassesseef orl esst hanor
equalt o36mont hsi mmedi atel ypr ecedi ngt hedat eoft ransf er.Any
gai nont ransf erofsuchasset sshal lbeknownasSTCG.
Long t er m capi talasset s ar e hel d by t he assessee f ora per i
od
exceedi ng36mont hsimmedi atel yprecedi ngdat eoft r
ansf er.Anygai n
orl ossaccr ui ngonsuchassetshal lbeknownasLTCG.
Shar esorl i
st edsecur iti
esoruni tsofUTIorMut ualFund shal lbe
treat edasLongTer m Capi talasset si fhel df oraper iodexceedi ng12
mont hs.
Fordepr eciabl ecapi talasset st hegai norl ossshal lalway sbeSHORT
TERM.
Costofacqui si ti
onofanassetacqui redbef or e1- 4-2001shal lbe:
∞ t hecostofacqui sitionoft heasset
∞ Fai rmar ketv alueason1- 4- 2001whi chev erishi gher
In case asseti s acqui red wi thoutpay ing any pr i
ce t he costof
acqui sitionshal lbedeemedt obet hecostatwhi cht hepr ev iousowner
hadacqui r
edt hesame
Whenacapi talasseti sconv er tedt ot radingassetorst ocki nt r
ade, t
he
costmaybet akenast hemar ketv alueoft hoseasset sont hedat eof
suchconv er sion.
Incaseanyadv ancemoneyi sr eceiv edbyt heassesseeandt hatwas
for f
ei ted,t hecostofsuchassetshal lber educedbysuchadv ance
moneyr ecei vedandf orfeitedbyt heassessee.
10
 Whencostofapar t
icul
arassetcannotbeascer tained,thecostof
acquisit
iontotheownershallbet heFai
rMar ketValueont hedat eof
acquisit
ion.
Indexedcostofacquisi
ti
onist hecostofacquisit
ionmul ti
pli
edbyt he
CostI nfl
ati
onIndexofthey earofsaledi v
idedbyCI Iofthey earof
acquisit
ion.
Costofi mprov
ementisnotconsideredi
fincurr
edbefor e1-
4-2001.

EXEMPTEDCAPI
TALGAI
N

UnderSect ion54:
LTCGar isesont ransf erOfResi dent ialHouse
All
owedonl ytoI ndiv i
dualorHUF.
Amountexempt ed: 100%oft heamounti nv estedorLTCG( whi cheveri
s
l
ower )
Assesseeshoul d:
* Pur chaseahouseoney earbef oreorwi thintwoy earoftransfer,or
* Cons tructahousewi thinaper iodoft hr eeyear sfrom thedat eof
tr
ansf er,or
* De posi taspeci fiedamounti nCapi talGai nAccount( CGA)
Undersect ion54B
AnyCapi tal Gainont ransf erofAgr i
culturalLand.
Onlyindividual cancl aim exempt i
onundert hissection
UnderSect ion54D
AnyCapi talgainoncompul sor yacqui siti
onofLandandBui l
dingwhich
i
st hepar tofindust rial under t
aki ng.
UnderSect ion54EC
LTCGar isesont ransf erofanycapi talasset .
Amountshoul dbei nv estedi n:
* BondsofRur al Elect ri
ficationCor porationLi mited(RECL)
* BondsofNat ional Hi ghwayAut hor i
tyofI ndia(NHAI )
Suchamounti sr equi redt obei nvest edwi thinsixmont hsfrom thedate
oftransfer .
Amountexempt ed: 100%oft heamounti nv estedorLTCG( whi cheveri
s
l
ower )
Maxi mum amountofexempt ion per mi ssi
blei s 
Rs.50l akh.
UnderSect ion54F
LTCGf r
om t r
ansf erofanycapi talassetot herthanResi dentialHouse
Property.
All
owedonl ytoI ndiv i
dualorHUF
Amountexempt ed:    
    
   Longt erm Capi tal gai
nXCostofNewHouse
 
  
  
   
  
   
  
  
  
  
  Netsales
considerati
on
UnderSect ion54G
Capitalgai nont ransf erofcapi talasset sduet oshi f
tingofi ndustri
al
11
 undertakingt oanyar eaot herthanur banar ea.
Theassesseeshoul dpur chasewi t
hi naper i
odofoney earbef oreor
thr
eey earsaf tert hedat eoft r
ansf erMachi ner y,plant
,oracqui red
bui
ldingorl andorconst r uctedbui l
di ngandcompl etedshifti
ngt othe
newar ea.
Theexpensesi ncur r
edonshi fti
ngal soal l
owed.
 
UnderSect i
on54GA
Shif
ti
ngofi ndust r
ialunder takingt oSEZar ea.
 
UnderSect i
on54GB
Capit
al gainont ransf erofr esidenti
al property
All
owedonl ytoI ndivi
dualorHUF.
Netconsi derati
oni sr equiredt obei nv estedineligibl
eequi tyshares
TAXONCAPI TALGAI N
 TaxonLTCGi slevied@ 20%
 LTCGonsecur i
tiessubj ectt oSecur i
ti
est ransacti
ont ax(STT)is
exempt
 STCGonsecur iti
essubj ecttoSTT -15%
 LTCGonsecur iti
esnotsubj ectt oSTT–
I fcapital gainhav ebeencomput edwithoutindexing–10%
I fitiscomput edaf terindexing–20%

I
NCOMEFROM OTHERSOURCES

I
tisal soknownasr esi duaryheadofi ncome.
Everyi ncomewhi chdoesnotspeci fical l
yfal
lunderanyoft hepreceding
fourheadsshal l beincl udedint hi
shead.
I
nter estonsecur i
ti
esshal lbet axabl eundert heheadi ncomef rom
othersour cesi fsecur i
tiesareheldasi nvest
ment s.
I
nter estonsecur iti
esshal lbet axabl eundert heheadI ncomef rom
businesspr of essi oni fsecur i
ti
esar ehel dasst ocki ntrade
Bondwashi ngt ransact ionsareadev icet oavoidt ax.
Exampl esofi ncomesf rom othersour ce:
* Di rect ors’ feesr ecei ved
*I ncomer ecei vedonsubl et
tingoft hehouse
* Fami l
y pensi on r ecei v
ed by l egalhei rs ofempl oyee (Howev er
,
Rs.15, 000 or1/ 3rd ofpension whi cheveri sl essi sal l
owed as
standar ddeduct i
on)
*I ncomeofot herper sonstobei ncl udedi nthei ncomeofi ndi
vidual
s.
*I ncomef rom agr iculturall
andsi tuat edoutsideI ndia.
* Casuali ncomessuchaswi nningf rom lott
eries,cr osswordpuzzles,
racesi ncludi nghor ser aces,car dgames,i ncomef rom gambl i
ngor
bettinget c.
*I ncomer ecei v edunderKeyMani nsurancepol i
cyi fnottaxableas
busi nessi ncome.
* Sal ar yofM. P.orM. L.A.
12
 EXEMPTEDI NCOMES:
* Divi
dendsfrom domest i
ccompany
*I nt
erestonPostOffi
ceSav i
ngsBankAccount
* Dearnessal
lowances-MP, MLAet c
* Gif
tsrecei
vedfrom rel
atives
* Gif
tsrecei
vedonmar r
iage(cash/kind)
* Cashgiftr
eceiv
edRs.50, 000orlessthanRs.50,
000
*I nt
erestonmutualfunds
Taxt
reat
mentofdi
vi
dend

Di
videnddecl aredordistr
ibutedbyanI ndiancompany ,
byUTIorbyany
ot
hersMut ual Fundoni t
sUni tsisful
lyexempt ed.
Di
videndfrom anondomest i
ccompanyi sful
lytaxable.
Di
videndfrom aco- operati
vesoci et
yisfull
ytaxable.
Normaldividendi sdeemedt obei ncomeoft hepr evi
ousyearinwhi ch
i
tisdeclar
ed.
I
nteri
m dividendi sdeemedt obet heincomeoft heprev
iousy earin
whichtheamountofsuchdi videndisuncondi t
ional
lymadeav ai
lableto
asharehol
der .
Bonussharesal lot
tedtopr ef
erenceshar eholdersshallbef
ull
ytaxable.

TYPESOFSECURI
TIES

Taxf r
eeGov ernmentsecur it
ies:Int erestonthesesecur it
iesi sf
ull
y
exemptf r
om t ax
LessTaxGov ernmentsecur i
ties:Interestont hesesecur i
ti
esi sf
ull
y
taxabl
e. Not axi sdeduct edatsour ce( TDS)ont hesesecurit
iesand
hencei nter
estont hesesecur i
tiesisnott obegr ossedup.
Taxf reeNon-Gov er
nmentsecur iti
es:Secur i
tiesissued byNon-
Gov er
nmentor ganizati
onsl i
kel ocalaut hori
ty,companyet c.Inf
act
thesesecur iti
esar enott ax-
free.Thecompanypay staxonbehalfof
invest
orandi nvestorgetsinterestatt heratest atedonthef aceof
securi
ty .
Grossinterest=I nterestreceivedbyt heassessee+Taxpai dbythe
companyonbehal fofassessee

Less t
ax Non-Governmentsecur i
ti
es:On t hi
s securi
ti
es bef
ore
makingthepaymentofinterestthetaxattherateinfor
ceshallbe
deduct
edatsource.
Grossi
nter
est=Inter
estreceivedbytheassessee+Taxdeductedat
sourceonbehalfof assessee.

For
mul
aforGr
ossi
ngup

I
nter
estr
ecei
vedont
axf
reegov
ernmentsecur
it
ies–EXEMPT
13
 I
nterestr
ecei
vedonLesst axcent
ralorstat
egover
nmentsecur
it
ies–
NOTTOBEGROSSEDUP
I
nterestr
ecei
vedonothercommerci
alsecuri
ti
es–
INTERESTRECEIVEDx100÷90

I
ncomefr
om wi
nni
ngsfr
om l
ott
eri
esandcr
osswor
dpuzzl
es:
WINNI
NGRECEIVEDx100÷70

ClubbingofI
ncome:I
ncomeofotherper
sonsi
sincl
udedi
ntheassessee’
s
total
incomeinthef
oll
owi
ngcases:

Transferofincomewi t
houttransferoftheasset .
Rev ocabl
etransferoftheasset .
Income oft he spouse bywayofsal ary,commi ssion,et c.f rom a
concer ni
nwhi chindivi
dualhasasubst anti
alint
erest
Whenani ndivi
dualtransfer
sanassett ohi sorherspouseordaught er-
in-law withoutadequat econsiderat
ion
Anyi ncomeofami norchil
dshal lbei ncludedi nthei ncomeoft hat
parentwhoset otalincomei sgreater(Howev er,exemptionsisal lowed-
incomesoi ncludedorRs.1500permi norchild,whicheverisl ess)
Theincomeofphy sicall
yorment al
lyhandi cappedmi norchi l
dcannotbe
cl
ubbed

Set
-of
fandCar
ryf
orwar
dofLosses

Int
er-sourceset
-off
:Lossesfrom onesourceofi
ncomecanbeset-
off
againstincomefrom ot
hersourceofincomeundert
hesamehead

Int
er-headset-
off:Lossesf r
om oneheadofi
ncomecanbeset
-of
f
againstincomeunderotherheadofi
ncome

 Lossundert
hehead‘Businessorpr
ofessi
on’cannotbeset
-of
fagai
nst
i
ncomeunderthehead‘Salar
ies’
.

 Specul
ati
onl
osscanbeset
-of
fagai
nstspecul
ati
onpr
ofi
tsonl
y.

 Shor
tter
m capit
all
ossescanbeset
-of
fagai
nstshor
tter
m capi
tal
gai
ns
andl
ongterm capi
tal
gai
nsonly
.

 Longter
m capi
tall
ossescanbeset
-of
fagai
nstl
ongt
erm capi
talgai
ns
onl
y.

 Carryfor
wardofLosses:Lossescanbecarr
iedfor
wardtobeset-
offin
subsequentyear
siftheycannotbe set-of
fful
lyintheyeari
nwhi ch
theyoccurr
ed.
 Lossofhousepropert
ycanbecar ri
edfor
wardfor8year
sanditcanbe

14
 set-
offonl yagainsti ncomef rom housepr operty .
 Losses ofnon- specul ati
ve busi ness orpr of ession can be car ri
ed
for
war df or8y ear sandi tcanbeset -
offagai nstanybusi nessincome.
Theycanbeset -of fagai nstspecul at i
onpr ofi
tal so.
 Lossesofspecul ationbusi nesscanbecar ri
edf orwardf or4y earsand
i
tcanbeset -of
fagai nstspecul at
ionpr ofi
tsonl y.
 Shortterm capitall ossescanbecar riedforwar df or8y ear sanditcan
beset-offonlyagai nstcapital gainswhet hershor tterm orl ongter
m.
 Longter m capitallossescanbecar r
iedforwar df or8y earsandcanbe
set-
offonl yagainstl ongt erm capi talgains.
 Lossf rom act ivityofowni ng and mai ntaining r ace hor sescan be
carr
iedf orwardf or4y earsandi tcanbeset -offagainsti ncomef r
om
thesamesour ceonl y .
 Nolosscanbesetof ff
rom casual incomes.

 Lossofdi
scont
inuedbusi
nessal
l
owedbecar
ryi
ngf
orwar
dandset
ti
ng
off
.

 Unabsorbeddepr eci
ati
on:Depr eci
ati
onwhi chremainsunadjust
edas
ei
therthereisnoincomeorl essincomeint herel
evantPY.
 Unabsorbeddepr eci
ati
oncanbecar ri
edf orwardti
lli
tisful
l
yadj ust
ed
fr
om anyi ncomedur i
ngt hesucceedingPY’ s.Itshallbetreat
edas
depreci
ati
onoft hesucceedingPY.
 Unabsorbeddepr eci
ati
oncanbeset -
offagainsti
ncomeundert hehead
‘
Salari
es’.

DEDUCTIONU/ S80
 Deducti
onu/ s80Ct o80Uar enotal l
owedf r
om LTCG
 Aggregat
eofal ldeducti
onu/ s80cannotexceedGTI .
 80C
 ForI ndividualandHUF
 Regar dingpay mentt oLI P,Contri
buti
ont oPF(S/
R/P)
,Pensi
on
Fund,ULI P ofUTIorLI C MF,Subscr i
pti
on ofNSS,NSC ,
RepaymentofLoan( Pri
ncipl
e)forconst ruct
ionofResi
dent
ial
House, Tuiti
onFees( ForonlyTwoChi l
dr en)
 Deduct i
onupt oRs.1,
50,000.
 80CCC
 ForI ndividual
 Regar dingcont r
ibuti
ontoLI Cpensi
onf und
 Deduct i
onupt oRs.1,
50,000.
15
 80CCD
 ForIndi vi
dual
 Regar dingpay mentt opensi onschemeofcent ralGovt.
 Deduct ion:Act ual amountor10%ofsal arywel ess
 80CCE:Maximum deduct i
onu/ s80Ct o80CCDi sRs. 1,50,000
 80CCG
 ForIndi vi
dual
 Regar dinginv est menti nli
stedequi tyshar es( RajivGandhiEqui ty
Savi
ngsScheme)
 Deduct ion:50%ofamounti nvestedorRs25, 000wel ess
 80D
 ForIndi vi
dual andHUF
 Regar dingpay mentofmedi calinsurancepr emi um
 Deduct ion up t o Rs. 25,000 + (par ent s)upt o Rs. 25,000(senior
ci
ti
zenRs. 30,000)
 80DD
 ForIndi vi
dual andHUF
 Regar ding expendi ture on medi cal t r
eat ment of Di sable
DependentRel ative
 Deduct i
on:Di sabi l
it
yRs. 75,
000( sever edi sabi lit
yRs. 1,
25,000)
 80DDB
 ForIndi vi
dual andHUF
 Regar dingexpendi tureonmedi cal tr
eat mentofspeci fi
eddi sease
 Deduct ionupt oRs. 40, 000(seniorci tizenRs. 60,000,v er
yseni or
ci
ti
zenRs. 80000)w. el ess
 80E
 ForIndi vi
dual
 Regar dingpay mentofi nt
erestonl oant akenf orhi gherstudies
 Deduct ion:Act ualamountupt o7AYorFul lPay menti nLump
Sum.
 80EE
 ForIndi vi
dual
 Regar dinginter estonl oantakenf orr esident ial house
 Deduct ion:upt oRs. 50,000
 80G
 Forall assessee
 Regar dingdonat iont oappr ovedf undsori nst itutions
 Deduct ion:100% of QA i f donat ed t o f unds of nat i
onal
i
mpor tanceot her wise50%.
 80GG

16
  Forindividual
 Regardingex pendi t
ureonhouser entpaid
 Deduct i
on:
 10%ofAGTI
 Rentpai d-10%ofAGTIRs
 5, 000p. m.whi chev erisless.
 80GGA
 Forallassessee
 Regarding pay ment t o Sci entifi
c Resear ch Associ
ati
on or
Universi
ty
 Deduct i
on: 100%ofamountpai d
 80GGB
 ForIndiancompani es
 Regardingcont ri
but i
ont oPol i
ti
cal par
ty
 Deduct i
on: 100%ofamountpai d
 80GGC
 Forassessesot herthanI ndiancompani es,Localauthori
tyand
jur
idi
cal persons
 Regardingcont ri
but i
ont oPol i
ti
cal par
ty
 Deduct i
on: 100%ofamountpai d
 80I
A
 Forallassessee
 Regardingpr ofitsf r
om i nfrastructurefaci
lit
y
 Deduct i
on: 100%ofI ncomef or10AY.
 80I
AB
 Forallassessee
 Regardingdev elopmentofSEZ
 Deduct i
on: 100%ofpr ofitf or10AY
 80I
B
 Forallassessee
 Regardingpr ofitsofnewi ndust r
ialundert
aki ngorhotel
 Deduct i
on: varyingf r
om 20%t o100%ofpr ofit
 80I
C
 Forallassessee
 Regardingpr ofitsf r
om ent erpri
sei nspecialcategor
ystates
 Deduct i
on:100%ofI ncomeup- to5PYand25%f orNext5Years
(Company30%)
 80I
E
 Forallassessee
 Regardingunder takinginNor t
hEast ernstates

17
  Deduct
ion:
100%ofI
ncomeup-
to10PY

 80JJA
 Foral lassessee
 Regar dingpr ofi
tsf rom busi nessofcol l
ectingandpr ocessi
ngbio
degradablewast e
 Deduct ion:100%ofpr ofi
tf orini
tial 5y ears
 80JJAA
 ForI ndianCompani es
 Regar dingempl oymentofnewwor kmen.
 Deduct ion:30% ofaddi tionalWagesPai dup( Fi
rst3AYf r
om
suchEmpl oy ment )
 80LA
 ForSchedul edbanks
 Regar dingincomeofof fshor ebanki nguni t
 Deduct ion:100%ofI ncomeup- t
o5PYand50%f orNext5Years
 80P
 ForCo- Oper ativesoci et y
 Regar dingincomeco- oper at i
vesoci ety
 Deduct ion:100%ofI ncome( agri
cul tur
al,mar ketingandbanking)
Rs.50,
000i ncaseofot heract i
vi
ties
 80QQB
 Forr esidentindividual
 Regar dingroy alt
yi nrespectofbooks( calculated@ 15%)
 Deduct ionupt oRs. 3,00,000
 80RRB
 Forr esidentindividual
 Regar dingroy alt
yi nrespectofpat ent
 Deduct ionupt oRs. 3,00,000
 80TTA
 Fori ndivi
dual andHUF
 Regar dinginterestonsav ingsaccount
 Deduct ionupt oRs. 10,000
 80U
 Forr esidentindividual
 Regar dingincomeofdi sabl edper son
 Deduct ion:Disabilit
yRs. 75,000( sev eredisabil
ityRs.1,25,
000)

18