IT All Modules 1,2,3,4 and 5

Profit & Gains from Business & Profession - Part 1
Module -I
Income Tax – II
ASSESSMENT YEAR: 2020-21
Compiled by :
Dr. Srinidhi, Dr.Umakanth, Dr Supriya Rai & Prof. Avinash Raj D
For Private Circulation Only, JU-CMS.

Module -I
Profits and Gains of Business or Profession
1. Business and Profession

Business' is defined as any trade, commerce or manufacture or any
adventure or concern like trade, commerce or manufacture. (SEC
2(31))
The profession is defined as a vocation or a job requiring either

intellectual skill or manual skill, thought or special knowledge. EG:
Painter, Lawyer, Doctor, Chartered Accountant, Engineer, Architect,
etc. (SEC 2(36))
2. INCOME CHARGED TO TAX
a) Any Salary, Bonus, Commission, Interest or remuneration received by

a partner from a firm
b) Any sum received for not carrying out any activity concerning any business
c) Any sum received for not sharing know-how, patent, copyright,
trademark, etc.
d) Value of any benefit or perquisite, whether convertible into money or
not, arising from business or the exercise of a profession
e) Any compensation or other payments due to or received by any person
specified in section 28(ii)
i. any person, by whatever name called, managing the whole or substantially the
whole of the affairs of an Indian company, at or in connection with the
termination of his management or the modification of the terms and conditions
relating thereto;
ii. any person by whatever name called, managing the whole or substantially the
whole of the affairs of India, at or in connection with the termination of his
office or the modification of the terms and conditions relating thereto;
iii. any person, by whatever name called, holding an agency in India for any part
of the activities relating to the business of any other person, at or in connection
with the termination of the agency or the modification of the terms and
conditions relating thereto;
Profit & Gains from Business & Profession –Part 1 INCOME TAX-II [AY: 2020-2021]
iv. any person, for or in connection with the vesting in the Government, or in any
corporation owned or controlled by the Government, under any law for the time
being in force, of the management of any property or business.
3. Depreciation
Block of Assets:-The expressions Assets and Blocks of Assets with effect from (w.e.f.)
1-4-1999 shall mean a group of assets falling within a class of assets comprising:–
a. Tangible Assets being buildings, machinery, plant or furniture;

b. Intangible Assets being know-how, patents, copyrights, trademarks,
licenses, franchises or any other business or commercial rights of similar
nature; in respect of which the same percentage of depreciation is
prescribed.
c. Franchises or any other business or commercial rights of similar nature
Rules:
1. Depreciation is calculated on a block asset basis
a. Deduct money realized
b. Compute half years depreciation on any new asset used or installed

for less than 180 days during the previous year
c. Out of total WDV deduct the cost of a new asset used for less than
180 days and the balance amount calculate depreciation for a full
year
d. Deduct total depreciation out of WDV and balance is the opening

WDV as on 1-4-2019
JU-CMS, Compiled by : Dr. Srinidhi, Dr. Umakanth.S, Supriya Rai & Prof. Avinash Raj D 3
2. Additional Depreciation - With effect from AY 2007-2008 an

additional deduction @ 20% of the actual cost of plant and machinery
is allowed in the following conditions:
a) The assessee is engaged in the business of manufacture or

production of goods
b) In case any Plant or Machinery is acquired and installed during

the previous year can claim additional depreciation.
c) The machine must be used for 180 days. If not used for 180 days,
10% depreciation will be allowed.
3. Special rate of Additional Depreciation for Machinery or Plant used in

Backward areas of Andhra Pradesh or Bihar or Telangana or West
Bengal state :
Date of commencement On or after 1.04.2015.
Period of Acquisition & 1.04.2015 to 31.03.2020
Installation
Rate 35%
Usage In case of less than 180 days, only
50% of 35% shall be considered
and the balance 50% is allowed
in the immediately succeeding
previous year
3.1. Computation of Depreciation
Particulars
WDV as on 01-04- 2019
Add: Any additions (Actual Cost)
Less: Deduction
(Money realized +Scrap Value)
Less: Depreciation for FY 2020-2120
WDV as on 31-3- 2020
DEPRECIATION RATES AS PER I.T ACT FOR MOST COMMONLY

USED ASSETS
Rates have been changed for the financial year 2017-18 and onwards. Now the
maximum rate of depreciation is 40%.
S Asset Class Asset Type Rate of
No. Depreciation
1. Residential buildings except for hotels and
Building boarding houses 5%
2. Building Hotels and boarding houses 10%

Purely temporary erections such as wooden
3. Building 40%
structures
Furniture – Any furniture/fittings including

4. Furniture 10%
electrical fittings and air conditioners
The motor car, motorcycle, bike, scooter other

Plant &
5. than those used in a business of running them on
Machinery 15%
hire, Mobile phone
Plant & Motor buses/taxies/lorries used in a business of

6. 30%
Machinery running them on hire
Plant & Computers, Laptops, computer software, Printer,

7. 40%
Machinery Scanner, UPS and other peripheral devices
Plant & Books owned by the assessee, carrying on

8. 40%
Machinery profession being annual publications
Plant & Books owned by the assessee, carrying on a

9. 40%
Machinery profession not being annual publications
Plant & Books owned by the assessee, carrying on

10. 40%
Machinery business in running lending libraries
Know-how, patents, copyright, trademark,

Intangible
11. license, franchise or any other business or
Assets 25%
commercial rights of similar nature
1. Mr Singh is the owner of a factory. The following particulars are furnished for
its depreciation claim for the year ended 31st March 2020. Calculate
depreciation for AY 2020-2021.
Amount Rate
Particulars
` (%)
Buildings
80,000 10%
WDV of factory building
New additions on 1/9/2019 40,000
WDV of office building 50,000 10%
Machinery:
1,00,000 15%
WDV of machinery
A new machine purchased & installed on 60,000
1/4/2019
An old machine purchased and installed in 50,000
the production department on 1/11/2019
Sold an old machine on 1/11/2019 40,000
Furniture
10%
WDV of furniture 15,000
New additions to furniture on 1/12/2019 5,000
2. A new industrial undertaking set up on 1/4/2019 has acquired the following
assets as per dates mentioned against each:
Additions
WDV on Scrap
during the Rate of
S.no Assets 1/4/2019 value
year Dep.
(`) (`)
(`)
1 Plant & Machinery 42,20,000 6,90,000 2,10,000 15%
2 Aircraft 34,50,000 - - 40%
Motor Buses & lorries

3 6,40,000 2,80,000 4,15,000 30%
(used for hiring)
4 Imported car - 3,60,000 - 15%
5 Patent Rights - 8,00,000 - 25%
6 Technical Know –How - 6,00,000 - 25%
Calculate the amount of depreciation which firm can claim for the assessment year
2020-2021 and also calculate the WDV on 1/4/2021. New Bus was brought into use
from 1/12/2019, Plant & Machinery on 1/7/2019 and Patent Rights and Technical
Know-How on 1/11/2019 and Imported Car on 1/6/2019.
3. A new industrial undertaking set up on 1/4/2019 has acquired the following
assets as per dates mentioned against each:
Assets Date of Date of Use Cost Rate of

acquisition Depreciation
(`)
Machinery 31/3/2019 5/9/2019 6,00,000 15%
Electric motor 1/7/2019 1/10/2019 78,000 15%
Plant 12/11/2019 15/12/2019 12,00,000 15%
Calculate the amount of admissible depreciation and WDV down value as on

1/4/2020.
4. From the following data calculate the depreciation admissible to an individual

carrying on a manufacturing business for the assessment year 2020-21:
Particulars Amount
(`)
10,00,000
Factory building WDV on 1-4-2019 (Rate 10%)
Plant and machinery (Rate 15%) and the written down

8,00,000
value as on 1-4-19
1,00,000
Additions on 30-6-2019
6,00,000
Sale of old plant on 1-12-19
Motor car (Rate 15%):

1,20,000
the Written down value on 1-4-2019
1,50,000
Sale of car on 30-9-2019
Profit & Gains from Business & Profession-Part 2
Income Tax-II
FINANCIAL YEAR: 2019-2020
Compiled by :
Dr Srinidhi, Dr Umakanth, Dr Supriya Rai & Prof. Avinash Raj D
For Private Circulation Only, JU-CMS

COMPUTATION OF INCOME FROM BUSINESS

Indirect Method (sec 30-43D)
Particular `
NET PROFIT AS PER PROFIT AND LOSS A/C
ADD: INADMISSIBLE EXPENSES
(Expenses Debited To P/L A/c But Not Allowed As Per IT Act)
Any provision and reserves
Any Capital Loss
Any Donations
Personal Expenses
Any Gift (except business gift)
Fine/Penalty
Past losses
Any personal savings
Expenses on illegal business
Interest on capital
Payment exceeding Rs.10,000, not by cheque (100% of such amount
disallowed)
Income tax and Wealth tax
Charity and Donations
Household expenses
Legal expenses for the criminal case
Legal expenses on acquiring an asset
Patents purchased
Drawings
Excess Depreciation
Life Insurance Premium
Salary paid outside India without TDS
Tax on perquisites paid by the employer
Contribution to Un-recognized gratuity fund, URPF and Welfare fund
Advertisement in magazines, brochure, pamphlet, etc of the political

party
Over-Valuation of opening stock
Undervaluation of closing stock
ADD: Business income
(not credited to P/L account)
2
Amount of liability foregone by the creditor/ Sales / Commission /

sundry receipts received.
Bad debts recovered but fully allowed earlier
Cash assistance received by the assessee against exports under any
scheme of government of India or export incentives
Interest from debtors for delayed payments
Profit on sale import license
Rent received from employees
Rent received from paying guest
Profit on sale of license
Custom/excise duties recovered but earlier allowed as deduction.
LESS: ADMISSIBLE EXPENSES NOT DEBITED TO P/L A/C

Under-Valuation of opening stock
Overvaluation of closing stock
Advertisements expenses/ (Advertisement given in magazines or
souvenir of a political party is inadmissible)
Rent rates and repairs and insurance for the building
Audit fees
Bad debts
Contribution towards rural development program and conservation
of natural resources
Demurrage paid to railways (allowance for undue detention of railway
wagon or ship)
Discount and allowances
Depreciation allowable
Unabsorbed depreciation
Establishment expenses
Expenditure on the guest house or holiday home facility
Electricity bill/land revenue/repairs/Fire insurance premium/rent of the
premises, which is used for business
Entertainment expenses
Expenditure by way of payment to association and institutions for rural
development programme
Expenditure on scientific research
Revenue expenditure on research carried on by the assessee is fully
deductible if such research relates to the assessee business, 150%
3
Capital expenditure on research carried on by the assessee is fully

deductible If such research relates to the assessee's business. (Deduction
is available even if the asset is not put into use for research by the
assessee during the previous year)
Contribution to an approved scientific research association
or university or company registered in India is admissible to the extent
of 100% of actual contribution
Contribution to an approved university, college or other
institutions for the purpose of research in social sciences is admissible
to the extent of 100% of actual contribution
Contribution to the National Laboratory is admissible to the extent of
100% of actual contribution
Festival expenses
Gifts and presents not made in a personal capacity
Expenditure on promoting family planning among the employee's
Income tax expenses
Loss of stock due to theft by an employee
Legal expenses for filing an income tax appeal
Legal expenses to defend an existing title to a capital asset
Municipal taxes of quarters let out to employees
Other expenses incurred according to provisions of law
Postage and telegrams
Printing and stationery
Railway freight and octroi expenses
Services charges
Subscription to a trade or professional association
Salaries/wages/perquisites/allowances to employees
Staff welfare expenses
Tournament expenses
Telephone installation charges under OYT scheme
Travelling expenses related to business
Training expenses
1/5th of Preliminary expenses
LESS: INCOME NOT TAXABLE UNDER THIS HEAD
Interest on Government securities
Dividend on shares
A gift from Father or Relative
Bad debts recovered but disallowed earlier
4
Agricultural Income ( India)

The gift from father/ Relatives
Income tax refund
Withdrawal From PPF
Rent from House Property
Income tax refund
Sale of a car
Customs duty/excise duty recovered but disallowed earlier
Dividend from an Indian company / UTI
Interest from PO savings bank account
Refund from LIC
INCOME FROM BUSINESS
1. Following is the profit & loss account for Mr.Chikku for the year ending 31.3.2020.
Particulars ` Particulars `
To Salaries 3,30,000 By Gross Profit 5,00,000
To Office expenses 36,000 By Bad debts recovered 20,000
To Depreciation 28,000 By Dividends 6,000
To Sales Tax 18,000 By Rent from House property 18,000
To Legal expenses 16,000 By Commission 20,000
To Income Tax 14,000 By Brokerage 20,000
To Exp. On acquisition . of 24,000 By Sundry Debtors 10,000

Patent rights ½ of `48000
being the cost of patent
To Repairs 12,000 By Share of Income from HUF 6,000
To Donation 4,000
To Provision for bad debts 6,000
To General expenses 24,000
To Net Profit 88,000
6,00,000 6,00,000
5
Additional Information:
1) Salaries include ` 12,000 paid to workers employees at home.

2) Depreciation of ` 6,000 being unabsorbed depreciation of earlier years, not recorded in
P&L a/c.
3) Legal expenses include ` 2,000 paid to the lawyer in connection with the personal case.
4) General expenses include ` 8,000 as a contribution to staff welfare Fund.
5) Out of bad debts recovered only ` 8,000 were allowed as a deduction earlier
6) Depreciation on patents has not been recorded in Books of Accounts.
Calculate the income of Mr.Chikku from the Business for AY 2020-2021.
2. From the P& L account of Mr Raj for the year ended 31/3/2020, compute the income from
Business for the AY 2020-2021.
To Office expenses 40,000 By Gross profit b/d 6,40,000
Interest on Govt
General expenses 16,000 11,200
Securities
Bad debts Recovered
Interest on bank o/d 4,000 (not written off earlier 800
year)
Audit Fees 4,000 Sundry Receipts 16,000
Interest on Capital 12,000 Dividend 16,000
Rent 20,000
Provision for Income
16,000
Tax
Charity 8,000
Legal expenses 4,000
Compensation to
20,000
retrench employees
Extension of Building 36,000
Sales Tax 8,000
Net profit 5,12,000
7,00,000 7,00,000
1) General Charges included `8,000 towards Purchase of a Computer
6
2) Legal expenses include `1,600 penalties by the customs authority.
3) Rent includes `8,000 paid as the rent of the house in which the assessee lives.
4) Depreciation allowed `12,000 as per Income Tax rules. (Excluding depreciation on Computer
Purchased)
5) Income Tax Provision is excessive to the extent of `5,000.
7
3. Mr Prasad has prepared the following P& L Account for the year ending 31.3.2020.
To Salary to Employees 8,000 By Gross profit 1,37,300
Advertisement expenses 4,000 Dividends from Indian Company 4,000
Sundry expenses 4,500 Interest on Securities(Non-Trade) 92,000
Lottery Winning
Interest on Capital 2,000 15,000
(TDS ` 3,000)
Fire Insurance Premium
3,000
(`1000 relates to HP)
Income tax 7,000
Household expenses 2,500
Bad debts 1,000
Provision for Bad debts 500
Repairs for HP 1,000
Municipal Tax of HP 3,600
Life Insurance Premium 6,000
Donation to Congress
2,000
party
Depreciation (allowable) 3,700
Net Profit 2,16,000
2,64,800 2,64,800
1) Mr Prasad owns a house property, which is used as follows:

2) 25% of carpet area for his own Business, 25% for his own residence, 50% is let out.
3) Advertising expenses include the expenditure of `3,000 on Neon signboard.
Compute his Taxable income from Business for AY 2020-2021.
8
4. From the following Profit & Loss account of Mr Sachin, compute his income from the business for
the AY 2020-2021.
To salaries 6,000 By gross Profit 1,22,000
Purchase of Machinery
11,000 Interest on Debentures 2,000
for research
Life insurance
6,000 Dividend from UTI 2,000
premium
Bonus to staff 12,000 Discount received 6,000
Printing & Stationery 4,000 Horse race gains (gross) 32,000
Household expenses 15,000 Refund of IT 7,500
Miscellaneous
5,000 Cash assistance from Govt. 6,000
expenses
Advertisement paid in
22,000
cash
To car expenses
Petrol ` 12000 18,000
Drivers salary `6000
Property tax (Realtes to
4,000
HP)
Medical expenses of
3,000
his wife
Provision for sales tax 10,000
Depreciation 10,000
Gifts & Presents from
2,000
relatives
Net profit 49,500
1,77,500 1,77,500
Adjustment Information:
1) ½ of the car expenses are for personal use

2) Depreciation on all assets is ` 7,200
3) Research conducted by Mr.Sachin is related to his Business.
9
5. Mr.Sairam, a trader furnishes the following information.
To General expenses 4,80,000 By Gross Profit 22,00,000
Salary of staff 2,40,000 Commission 40,000
Salary to Sairam 1,20,000 Bad debts recovered 60,000
(earlier allowed)
Interest on Capital 60,000 Interest on listed 1,00,000
debentures
Interest on overdraft 40,000
To extension of 1,50,000
building
Interest on loan 40,000
Depreciation 1,20,000
Travelling expenses 80,000
Audit fees 72,000
Fire insurance 78,000
Bonus to staff 1,00,000
Contribution to RPF 1,22,000
Advertisement 2,00,000
Reserve for bad debts 60,000
Bad debts are written 90,000
off
Net Profit 3,48,000
24,00,000 24,00,000
1) Depreciation was allowable as per IT rules `1, 40,000excludes depreciation on a permanent
signboard. Advertisement includes `50,000 being the cost of Permanent signboard; Income of
`60,000 accrued the previous year not entered into P& L Account, Loan was taken to pay Income
tax arrears.
2) `40,000 paid as damages for failure to fulfil a contract in time are included in general expenses.
Compute taxable income from Business.
10
6. From the following compute Business Income
To Rent 60,000 By Gross profit 5,23,000
Rates 6,000 Interest on Debentures 28,000
Salary to staff 54,000 Rent from property 24,000
Diwali puja expense 2,000 Sunday Income 16,000
Interest on Loan 1,25,000 Commission 37,000
Bad debts recovered
Sundry expenses 55,000 10,000
(Disallowed Earlier)
Bad debts 6,000
Charity 1,000
Reserve for Bad debt 2,000
Entertainment 8,500
Loss by theft 14,000
Sales Tax penalty 10,000
Net profit 2,94,500
6,38,000 6,38,000
1) Rent includes `12,000 of a shop belonging to assessee himself
2) Salary of staff includes a salary of `24,000 of a son who is a B.com student and who casually
helps in the business and proprietors salary `1,000 p.m
3) A loan of ``60,000 at 15% p.a. is taken from his wife out of funds advanced by him and
interest is included in interest on the loan.
4) Sundry expenses include `9,000 being expenses incurred on Pilgrimage to Haridwar.,
5) Entertainment expenses `1,500 spent on tea of the same guests of a local MLA. ,
6) Loss by theft took place when somebody pretending to be a customer stole a necklace worth
`6,000 in his shop, `8,000 was stolen from his house. He earned `40,000 in gold smuggling
not shown in books.
7) Rates include `4,000 for the Property let out.
8) Sales tax paid and depreciation not taken to Profit and loss account `8,000 and `5,000.
11
7. Mr Dravid presents a Trading & P& L Account for the previous year ended 31st March 2019 and
requires you to compute from Business for the Assessment year 2020-2021.
To opening stock 85,000 By sales 394000
To purchases 2,40,000 By Closing stock 1,10,000
To wages 35,000
To carriage forward 12,000
To Gross profit 1,32,000
5,04,000 5,04,000
To staff salary 18,750 By Gross Profit 1,32,000
By interest on
To bank cash transaction tax 12,000 17,800
Debentures(net)
By bad debts
To audit fee 5,500 recovered 5,200
(Previously allowed)
To income tax 32,000 By Sundry Income 2,650
By Rent from House
To car expense 15,000 90,000
let out
To Office expense 40,000
To Donation 2,500
To general expense 18,650
T o sales tax provision 16,000
To Technical Know-How
30,000
purchased during the year
To interest on capital 16,000
To Depreciation on car 18,000
To provision for Bad debts 6,500
To net Profit 16,750
2,47,650 2,47,650
1) Opening stock is undervalued by 15%

2) Closing stock is overvalued by 10%
3) Purchase includes a cash payment of `30,000 towards raw materials
4) 20% of car expenses are attributable to the use of the car for personal purposes.
5) Out of the income tax and sales tax provision, Income tax of `6,250 and sales tax of `1,250
were paid before filing the return of Income.
6) Donation of `5,000 to Delhi University for carrying on research in Social Sciences.
12
8. Dr.Ram has prepared the following P/L account for the assessment year 2020-2021.
To Salary 48,000 By Gross profit 2,37,000
Advertisement expenses 24,000 Rental Income 1,65,000
Dividends from Indian
Sundry expenses 54,500 24,000
Company
Fire insurance (`10000 relates Winnings from Lottery
30,000 1,15,000
to HP) (Gross)
Interest on Non-
Income tax 27,000 1,92,000
Government Securities.
Contribution to National
Laboratory for carrying on 11,000
Research
Provision for bad debts 10,500
Repairs to HP 10,000
Municipal Taxes of House
36,000
Property
Insurance Premium on own
6,000
life
Donation to Political Party 12,000
Depreciation (Allowable) 23,800
Net Profit 3,86,000
7,33,300 7,33,300
Dr.Ram owns a house property having 4 units out of which Unit –I: having 25% carpet area is used for
own business purpose. Determine the income under the head profits and gains from Business or
Profession for the year FY 2019-2020.
13
FORMAT FOR COMPUTATION OF INCOME FROM PROFESSION
PARTICULARS AMOUNT AMOUNT

Add: PROFESSIONAL RECEIPTS --
LESS: PROFESSIONAL EXPENSES --
INCOME FROM PROFESSION --
Problems on Profession:
1. Dr Gupta is a Medical Practitioner of Lucknow. Calculate his income from profession.
Particulars `
Gross receipts from dispensary 2,35,000
Gross receipts from Consultation 1,65,000
Operation fees 2,50,000
Visiting Fees 50,000
Gifts from patients 30,000
Medicines Purchased 1,25,000
Closing stock of Medicine 35,000
Salaries paid to the employee 1,50,000
Surgical equipment Purchased 48,000
Attended a medical seminar in Germany to update
25,000
Knowledge
He owns a house whose municipal value is `50000.
Half portion of the house is used for the profession.
Expenses paid on the house is municipal tax 10% of M.V
Repairs `10000
Medical books purchased 20,000
14
2. Shri. Som is a leading lawyer of Mumbai. He deposits in the Bank all the receipts and always
pays all the expenses by cheque. The analysis of his bank account for the year ending 31.3.2020
is as follows
Balance b/d 58,340 Salaries 14,000
Professional fees 3,90,000 Rent of Chamber 9,500
Dividend 7,160 Telephone Expenses 1,000
House rent 22,500 Magazine Subscription 3,000
Income from Horse Race (Gross 10,000 Motor car exp. 28,000
15000)
Share of Income from HUF 7,110 Misc.office Expenses 5,500
Purchase of motor Car 2,00,000
Advance Payment of Income 40,000
Tax
Donation to Bombay 10,000
University
Personal Exp. 1,45,500
HP expenses 10,000
Taxes: `5000
Repairs `1500
Insurance `1500
Collection charges `2000
Balance c/d 28,610
4,95,110 4,95,110
Compute his Income from Profession after taking into account the following information:
1) 1/4th of the Motor car expenses related to Personal use.

2) Rate of Depreciation of Motor car is 15%
3) Shri. Som stays in his own house, the gross annual value is `9,800 which includes
Insurance Premium `500 Municipal Taxes `2,400
15
3. Shri. Naik is a Chartered Accountant. He has prepared the following Income and expenditure
account for the year ending 31.3.2020.
Office expenses 10,000 Audit fees 1,70,500
Employees salary 5,000 A gift from Father-in-law 5,050
Books other than annual 5,500 Dividend 8,000

Publication
Personal expenses 1,02,000 Profit from sale of 6,450

Investments
Donations to NDF 500
Interest 700
Income tax 13,300
Car expenses 2,000
Net surplus 51,000
1,90,000 1,90,000
Additional Information
1) The car is used equally in official and personal purpose and allowed depreciation for
official work is `500.
2) `1000 is a domestic servant salary is included in employees salary. The loan has been
taken for personal purposes.
16
4. Krishna is a Chartered Accountant in Bhopal. Compute his Professional Income.
Office rent 33,000 Audit fees 3,00,000
Financial
Salary to Staff 75,000 Consultancy 60,000
service
Interest on
Charities 5,000 deposits in a 22,000
bank
Dividends on
Gifts to relatives 6,000 6,000
Units of UTI
Accountancy
Subscription for journals 2,400 32,000
Works
Drawings 16,000
Car expenses 24,000
NSC purchased 20,000
Net income 2,30,000
4,20,000 4,20,000
1) Office rent `3000 though paid is not recorded
2) Depreciation of Car during the year is `6000
3) 30% of car expenses are related to personal purposes.
17
5. Mr.Nariman lives in Delhi is an advocate and his receipt and payment accounts as follows:
Receipts ` Payments `
Books purchased
Balance b/d 1,892 800
(Annual Publication)
Sitting fee 40,000 Repairs to godown 1,200
Municipal tax on
Salary as a part-time lecturer 3,600 600
godown
Exam remuneration from Maintenance expenses
2,300 2,000
University of car
Telephone installation
Interest on fixed deposits 1,200 4,000
charges
Sale proceeding of car 18,000 Domestic expenses 20,000
Plant purchased for
Sale proceeds of shares 16,000 700
office
Dividends received 1,540 Car purchased 25,000
Life insurance premium 5,000
Donation to
1,200
Recognized Institution
Gift to Father 400
Income Tax 3,500
Assessment Expenses 200
Bank deposit 13,000
Public provident fund 4,000
Balance c/d 2,932
84,532 84,532
Additional information:
1) 1/3 part of godown is used for profession and 2/3 for self-occupation.
2) Books purchased for teaching `200 and remaining for the profession
3) Car is used 50% for professional purpose.
Compute Mr.Hari’s Professional Income.
18
6. Shri Pandey is a lawyer from Bikaner. Based on the following details prepare his income
from profession.
House hold expenses 1,12,000 Legal fees 3,26,000
Office expenses 7,000 Special Commission 1,400

appointment fees
Charity 500 Cash gift received from 2,000

clients
Telephone expenses 500 House rent 15,000
Income Tax 900 Int. on Govt.Securities 3,000
Rent 4,000 Salary as a part-time lecturer 6,000

in law
Gifts to Daughter 2,000
Electricity Charges 1,000
Donation to NDF 1,000
Contribution to PPF 2,400
Books used in the 3,000

profession (Annual
Publications)
Salaries 15,000
Purchase of Motor Car 60,000
Purchase of Furniture 2,000
Life Insurance Premium 5,000
Motor car Expenses 6,000
Purchase of Typewriter 6,000
Expenses of Income over 1,25,100

expenditure
3,53,400 3,53,400
19
Additional Information
1) He lives one half of the house and the other half is used for the office. Rent &
electricity charges are with respect to the house.
2) One-half of car expenses are for personal use.
3) Depreciate motor car @15% ,Typewriter @15% and furniture @ 10%.
7. From the following income and expenditure account and additional information of
Dr.Deva who maintains books of accounts under mercantile system of accounting,
compute taxable income from profession for the assessment year 2020-21
Expenditure Rs. Income Rs.

Rent of clinic Consultation fees
18-19 1,000 18-19 5,500
19-20 20,000 19-20 85,000
2020-21 2,000 2020-21 10,000
Electricity and water 2,200 Visiting fees 65,000
House hold expenses 15,000 Loan from bank (for 1,25,000
profession)
Municipal taxes on house 3,000 Loan from bank (for 50,000
property personal)
Purchase of motor car 1,20,000 Gifts from patients 20,000
Laptop purchased (on 1- 30,000 Remuneration for articles 8,000
3-2017) published in professional
journal
Income tax 12,000 Gift from medical 60,000
representatives
Salary to compounder 24,000 Operation theatre rent 15,000
Purchase of books 6,000 Rent from house property 12,000
Expenses on IT 8,000 Interest on post office NSC 2,000
proceedings
Life insurance premium 15,000 Income from horse race 30,000
Gift to wife 10,000
(profession)
(personal)
Loan installment paid 25,000
(profession)
Donation to a notified 10,000
temple
20
Car expenses 20,000

Purchase of surgical 30,000
equipment
Purchase of medicines 35,000
Excess of income over 85,300
expenditure
4,87,500 4,87,500
Additional information
a. 40% of car expenses are for personal use
b. Depreciation on car and surgical equipment is @ 15% and on laptop and books
is @ 40%
c. Income tax includes Rs. 2,000 professional tax paid to state government
d. Gifts from patients include Rs. 8,000 receiver on the occasion of marriage from
friends
e. Closing stock of medicines is Rs. 7,500 and the opening stock was Rs. 34,000
8. Dr.Lakshmi is a renowned medical practitioner. He furnishes his receipts and

payments account for the financial year 2019-2020
Receipts Rs. Payments Rs.
To balance b/d 35,000 By electric & water 12,000
To consultation fees By rent of clinic
2018-2019 50,000 2018-2019 1,600
2019-2020 70,000 2019-2020 14,800
2020-2021 12,000 2020-2021 16,600
To visiting fees 30,000 By purchase of professional 18,000
books
To loan from bank for 1,75,000 By household expenses 17,800
professional purposes
To sale of medicines 70,000 By municipal taxes paid on 2,000
property
To sales tax on medicine 3,000 By sales tax on medicine 2,800
To gift from patient 50,000 By purchase of motor car 1,45,000
To remuneration from 16,000 By fire insurance on the 2,000
articles published in property
professional magazine
To rent from house property 11,000 By surgical equipment 4,700
To interest on post office 7,000 By advance income tax 13,000
national saving certificate
21
By salary to nurse 40,000

By entertainment expenses 6,000
By purchase X-ray machine 1,00,000
By expenses on income tax 15,000
proceedings
By life insurance premium 15,000
By gift to wife 5,000
By interest on loan 2,000
By loan a/c – instalment paid 15,000
By donation to a political 13,700
party
By car expenses 15,000
By the purchase of medicines
35,000
By balance c/d 17,000
5,29,000 5,29,000
Compute Dr.Lakshmi professional income for the assessment year 2020-2021 with
the help of the following additional information
a. One-third of car expenses is for personal use
b. Depreciation on the motor car is 15%,
c. Remuneration from articles includes Rs. 3,000 received for setting the question
paper.
--0--
22
INCOME TAX- II
CAPITAL GAINS
MODULE –3
COMPILED BY
Dr.SRINIDHI, Dr.UMAKANTH, Dr.SUPRIYA, Mr. Avinash raj
FOR PRIVATE CIRCULATION ONLY - JUCMS
i
Table of Contents
Module – 3: CAPITAL GAINS ............................................................................... 1
3.1 Meaning [sec. 45] ............................................................................................................................1
3.2 Capital Gain is charged to tax u/s. 45, ............................................................................................1
3.3 CAPITAL ASSETS ..............................................................................................................................1
3.3.1 However, the following items are excluded from the definition of "capital asset": ..............1
3.3.2 Types of Capital Assets............................................................................................................2
3.3.3 Determine Long or Short-Term Capital Asset .........................................................................2
3.4 Cost of inflation Index (CII) .............................................................................................................2
3.5 Indexing at a glance u/s 48 (ii) ........................................................................................................3
3.6 Statement showing taxable capital gain ........................................................................................4
3.7 Tax on Short-Term and Long-Term Capital Gains ...........................................................................4
3.8 Capital gain in case of Self-generated Assets .................................................................................5
3.9 Cost Inflation Index (CII)..................................................................................................................5
3.10 Capital Gain Exemptions .................................................................................................................6
3.11 Problems on Capital Gains ............................................................................................................14
Acronyms
CII
Cost of Inflation Index
u/s
under section
UTI
Unit Trust of India
STT
Security Transaction Tax
i
Module – 3: CAPITAL GAINS
3.1 Meaning [sec. 45]
Any profit or gain earned from the transfer/sale of a Capital Asset. Profit or gains arising from the
transfer of a capital asset during the previous year is taxable as "Capital Gains" under section
45(1) of the Income Tax Act.
3.2 Capital Gain is charged to tax u/s. 45,

Following conditions are necessary:
i. There must be a "capital asset".
ii. There must be a "transfer" of capital assets in the financial year.
iii. There must arise either profits/gains or loss out of such transfer.
3.3 CAPITAL ASSETS

Any asset/s held by an assessee, whether or not connected with the business or profession of the
assessee.
Capital assets include:
a) Asset/s held by an assessee, whether or not connected with business or profession.
b) Any securities held by an FII which has invested in such securities as per the regulations
made under the SEBI Act, 1992.
c) Jewellery, archaeological collections, drawings, paintings, sculptures, or any work of art
or art-effects held by the assessee.
d) Agricultural Land situated in India,
i. except those land situated Within the jurisdiction of the municipality, notified area
committee, town area committee, cantonment board and which has a population of not
less than 10,000;
ii. Within a range of the following distance measured aerially from the local limits of any
municipality or cantonment board:
iii. not being more than 2 KMs, if the population of such area is more than 10,000 but not
exceeding 1 lakh;
iv. not being more than 6 KMs, if the population of such area is more than 1 lakh but not
exceeding 10 lakhs; or
v. Not being more than 8 KMs, if the population of such an area is more than 10 lakhs.
3.3.1 However, the following items are excluded from the definition of "capital asset":
 Any stock-in-trade, consumable stores, or raw materials held by a person for his business or
profession.
 Personal effects: being a movable property (excluding Jewellery, archaeological collections,
drawings, paintings, sculptures, or any work of art) like Furniture, Motor Car, A/C, wearing
1
INCOME FROM CAPITAL GAINS [PY: 18-19 & AY: 19-20]
apparel, Refrigerator, etc., held for the personal use of the Assessee or his family assets that
are movable including wearing apparels and furniture held for personal use.
 Special Bearer Bonds-1991, National Defence Gold Bonds -1980, 61/2 % Gold Bonds-
1977, 7% Gold Bonds-1980 & Gold Deposit Bonds-1999
3.3.2 Types of Capital Assets

i. Long Term Capital Assets (LTCA) and
ii. Short Term Capital Assets (STCA)
3.3.3 Determine Long or Short-Term Capital Asset
Short-term Capital Long-term
Asset
Asset Capital Asset
Listed Equity or bonds of a company, Units of held for not more than held for more than 12
UTI / Equity oriented Mutual Funds & Zero- 12 months months
Coupon Bonds
Unlisted shares & held for not more than held for more than 24
Immovable property being land and building 24 months. months
or both MF(other than equity oriented funds)
Unlisted Bonds & other Assets (other than held for not more than held for more than 36
above) 36 months. months.
3.4 Cost of Inflation Index (CII)

CII is applicable for long term capital assets and the base year is applicable from 2001 & 2002.
In the case of assets acquired before 2001-2002, the cost of acquisition shall be compared
between the actual cost of acquisition and fair market value as of 1-4-2001. Further, the higher
value out these two shall be selected as the cost of acquisition.
2
3.5 Indexing at a glance u/s 48 (ii)

Sl No Situation Indexing Capital gain tax
1 Short term capital gain (STCG) No indexation benefit On financial assets (listed
shares & STT) tax rate is
15%. In case of other
financial assets will be
taxed at slab rates.
2 Repurchase of units acquired No indexation benefit
U/S 80 CCB
4 Long term capital asset Actual cost or FMV on 1-4-2001 Non-financial assets shall
acquired before 1-4-2001 (WEH) x CII of the year of sale ÷ be taxed at the rate of 20%
under gift, will partition HUF CII of 2001-02 i.e 100
inheritance i.e u/s 49(1)
5 Long term capital assets Actual cost x CII of the year of Non-financial assets shall
acquired on or after 1-4-2001 sale ÷ CII of purchase be taxed at the rate of 20%
6 Transfer of property in case of The cost of acquisition to the
a gift previous owner will be treated as
the cost of acquisition in the hands
of the receiver.
7 Long term financial assets (not Actual cost x CII of the year of the capital gain will be
subject to STT) (i.e. private sale ÷ CII of purchase taxed at 20%
company shares)
8 Bonus share If allotted before 1-4-2001 cost of
acquisition shall be = FMV as on
1-4-2001
If allotted after 2001 cost of
acquisition of bonus shares will be
nil
9 Rights issue If allotted by the company cost of
acquisition shall be = actual cost.
If purchased in favour of right
share was renounced then cost of
acquisition = purchase price paid
to the company + amount paid to
original shareholder.
10 Self-generated goodwill, The cost of acquisition will be nil
trademark,
11 Assets subjected to Cost of acquisition = WDV Short term capital gain =
depreciation net consideration (sale
price – selling expenses) –
(WDV + additions)
3
3.6 Statement showing a taxable capital

gain
Computation LTCG
Computation STCG
Assessee: A Y: 2020– 2021 Assessee: AY: 2020 – 2021

PY: 2019– 2020 PY:2020 - 2021
Particulars ` ` Particulars ` `
The full value of sale -- The full value of sale consideration --
consideration Less: 1 expense on transfer --
Less: 1 expense on transfer -- 2. Indexed cost of acquisition --
2. cost of acquisition -- 3. Indexed cost of improvement --
3. cost of improvement -- LTCG --
STCG -- Less: Exemption u/s 54 – 54 GB --
Less: Exemption u/s 54B, 54D, -- Taxable LTCG --
54G, and 54GA The formula for computing indexed cost is
Taxable STCG -- INDEX FOR THE YEAR OF SALE
{ } × COST
Deemed Transfer INDEX IN THE YEAR OF ACQUISITION
When an asset is converted into stock in trade, it is Note: cost of acquisition in case of assets acquired
termed as a deemed transfer. The difference between before 1.4.2001
the cost price and the price at which converted into Cost of the asset (before 1.4.2001) or Fair market
stock in trade is capital gain. value of the asset as of 1.4.2001), whichever is
higher. This shall not apply to the depreciable assets.
Index cost of improvement
INDEX FOR THE YEAR OF SALE
{ } × COST
INDEX IN THE YEAR OF IMPROVEMENT
3.7 Tax on Short-Term and Long-Term Capital Gains

Tax Type Condition Tax applicable
Short-term capital gains tax When securities transaction Taxed according to his income
tax is not applicable tax slab.
Short-term capital gains tax When securities transaction 15%
tax is applicable
Long-term capital gains tax Except on sale of listed 20%

equity shares/units of equity
oriented fund
Long-term capital gains tax On the sale of listed Equity 10% over and above ` 1 lakh and
shares/ units of equity indexing benefit is not available
4
oriented fund
3.8 Capital gain in case of Self-generated Assets

Nature of capital Asset Goodwill of Business/ Tenancy Rights /Route
Manufacturing Rights Permits/Loom Hours
` `
Gross sale consideration
Less: Realization expenses
Net Sale Consideration
Less: Cost of Acquisition Nil Nil
Less: Cost of Improvement Nil Nil
Indexed Cost of Improvement Nil Actual Indexed Cost
Gross Capital Gain/Loss
Less: Exemptions
Net Capital Gain/Loss
Note: 1. If Goodwill of a business or manufacturing rights is purchased and later on sold, the
purchase price will be taken as cost of Acquisition and the Cost of improvement will be nil.
2. Self –Generated assets like goodwill of a Profession.
3.9 Cost Inflation Index (CII)

2001-
Financial 02 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-
Years (Base 03 04 05 06 07 08 09 10
year)
Cost
Inflation 100 105 109 113 117 122 129 137 148
Index (CII)
Financial
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Years
Cost Inflation
167 184 200 220 240 254
Index (CII)
Financial
2016-17 2017-18 2018-19 2019-20
Years
Cost Inflation
264 272 280 289
Index (CII)
5
3.10 Capital Gain Exemptions

Asset Transferred Immovable Property (Land & Building)
Nature of the
Long Term Capital Asset
Asset
Asset
One Residential House Property or Two residential
house properties
New Asset to be
Two residential house properties option can be
acquired
exercised by the taxpayer only once in his lifetime
provided the amount of long-term capital gain does not
exceed Rs. 2 crores.
Amt to be invested Long Term Capita/ Gain on Transfer
in New Asset
Amount of Least (a) Amount invested in New
Exemption Residential House, or (b) Capital Gain
Sec. 54 (a) For Purchase: Within one year before or two years
Time Limit for
after the date of transfer
Individual/HUF LT Investment
(b) For Construction: Within three years after the date of
transfer.
(a) If the amount is not utilized before within the time

limit u/s 139, then the amount shall be kept in the
Capital Gain Account
Unutilized Amount (b)Scheme of a Nationalized Bank within the time limit
u/s 139(1). The amount should be utilized within the
prescribed period. The amount not utilized within the
prescribed period shall be treated as LTCG of the
previous year in which the prescribed period expires.
Holding Period of Two years from the date of acquisition or construction.

New Asset
Sale of New Asset Short Term Capital Gain computed as follows -Sale
within the holding Consideration of New Asset Less: Cost of Acquisition
period reduced by Capital Gains exempted u/s 54
Applicability Individual
Asset Transferred Urban Agricultural Land used for agriculture by him or by his
Sec. 54B parents for two years immediately before the date of transfer.
Individual
Nature of the Asset Long Term or Short Term Capital Asset
6
New Asset to be Agricultural Land

acquired (maybe in the urban area or rural area)
Amt to be invested in Capital Gain on Transfer
New Asset
Amount of (a) Amount invested in New Agricultural Land,
Exemption or
(b) Capital Gain W.E.L
LT/ST Time Limit for Within Two Years from the date of transfer.
Investment
Sec. 54B Unutilized Amount Ref Sec 54 unutilized amount
Individual Holding Period of Three Years from the date of acquisition
New Asset
Sale of New Asset
within holding period Short Term Capital Gain computed as follows: Sale
Consideration of New Asset Less: Cost of Acquisition
reduced by Capital Gains exempted u/s 54B
Applicability All persons

Asset Transferred Such land or building forming part of the industrial
undertaking was used by the assessee for at least 2 years
before the date of compulsory acquisition (transfer)
Nature of the Asset Short term or long term capital asset

New Asset to be Land and Building for Industrial purpose
Sec. 54D
acquired
LT/ST
Amt to be invested in Capital Gain on Transfer
Any Person
New
Amount
Asset of Exemption (a) Amount invested in New Land or building, or (b) Capital
Gain W.E.L
Time Limit for Within Three Years from the date of transfer.
Investment
Unutilized Amount Same as above
Holding Period of Three Years from the date of acquisition
New Asset
7
Sale of New Asset Short Term Capital Gain computed as follows: Sale
period reduced by Capital Gains exempted

Asset Transferred Any LTCAsset
Nature of the Asset Long term capital asset
New Asset to be The long term specified capital assets refers to
acquired investment in 1) National Highway Authority of India
(NHAI), 2) Rural electrification corporation (RECL)
3) Bonds issued by Power finance corporation Ltd
Amount to be Capital Gain on Transfer& Maximum amount
invested in New `50,00,000
Sec. 54EC Asset
LT Amount of Least of (a) Amount invested in Bonds
Any Person Exemption or (b) Capital Gain
Time Limit for Within six months from the date of transfer.
Investment
New Asset
Applicability All persons / any taxpayer

Asset Transferred Any LTCAsset
Sec. 54EE Nature of the Asset Long term capital asset
LT New Asset to be Units of such fund (Mutual Funds) may be notified by
Any Person acquired Central Government to finance start-ups.
Amount to be Capital Gain on Transfer & Maximum amount

invested in New `50,00,000
Asset
8
Amount of Least of (a) Amount invested in units max 50,00,000

Exemption or (b) Capital Gain
Time Limit for Within six months from the date of transfer.
Investment
New Asset
Asset Transferred Any LTC Asset other than Residential HP
Nature of the Asset Long term capital asset
Condition On the date of the transfer of LTCA, the assessee should not
own more than one residential house.
New Asset to be Residential house Property
acquired
Amt to be invested in Net consideration on the earlier asset transferred
New Asset
Sec. 54F
Amount of LTCG X amount invested in residential property
Individual/HUF LT Exemption Net consideration
Time Limit for (a) For Purchase: Within one year before or two years after
Investment the date of transfer
(b) For Construction: Within three years after the date of
transfer.
Unutilized Amount a) Same as above
b) The taxable amount for non-utilization of the deposit
will be
c) Amount not utilized x LTCG
Net consideration
Holding Period of Three Years from the date of acquisition or construction

New Asset
9
Sale of New Asset Short Term Capital Gain shall be tax separately
within the holding Long term Capital Gains exempted will be chargeable to tax
period as LTCG
10

Asset Transferred Such land or building, P&M forming part of industrial
undertaking and shifting of such undertaking from
urban to a rural area
Nature of the Asset Short term or long term capital asset
New Asset to be Land and Building, New P&M for Industrial purpose
acquired in a rural area or to meet expenses of shifting.
Amt to be invested Capital Gain on Transfer
in New
Sec. 54G Asset
Amount of Least of (a) Amount invested in New Land & building
LT/ST Exemption or P&M,
Any Person Time Limit for Within one year
or (b) Capital before the date of transfer or within
Gain
Investment Three Years after the date of transfer.
Unutilized Amount a)Same as above
b) The amount should be utilized within a prescribed
period
c) The amount not utilized within the prescribed period
shall be treated as LTCG or STCG of the previous year
Holding Period of Three Years
in which the from the date
prescribed of acquisition
period expires.
New Asset
Sale of New Asset Short Term Capital Gain computed as follows:
within the holding Sale Consideration of New Asset
period Less: Cost of Acquisition reduced by Capital Gains
exempted
11
LT/ST Applicability All persons

Land, building, plant or machinery used for an industrial
undertaking situated in an urban area.
Asset Transferred
Purchase or Construction: Land, Building plant or
machinery used for an industrial undertaking shifted from
urban area to any special economic zone.
Nature of the
Asset Short term or long term capital asset
New Asset to be Land and Building, New P&M for Industrial purpose in
acquired SEZ or as prescribed by the Central Govt. to meet expenses
of shifting can be claimed.
Amount to be
invested in New Capital Gain on Transfer
Asset
Amount of Least of (a) Amount invested in New Land & building or

Sec. 54GA Exemption New P&M and expenses incurred towards such transfer
or (b) Capital Gain
Any Person
Time Limit for

Within one year before the date of transfer or within Three
Investment
Years after the date of transfer.
a)Same as above
b) The amount should be utilized within the prescribed
Unutilized
period
Amount
c) The amount not utilized within the prescribed period shall
be treated as LTCG or STCG of the previous year in which
the prescribed period expires.
Holding Period of
New Asset Three Years from the date of acquisition
Sale of New Asset Short Term Capital Gain computed as follows:

within the holding Sale Consideration of New Asset
period Less: Cost of Acquisition reduced by Capital Gains
exempted
12
Applicability Individual or HUF

Sec. 54GB
Asset Transferred Residential Property or Plot of land
Individual or LTCG
HUF Nature of the Asset LT
New Asset to be acquired Equity Shares of eligible companies
Amt to be invested in New Net consideration of Residential

Asset Property or Plot of land
1) If net consideration is
more than the cost of a
new asset:
Amt of exemption:
Amount of Exemption 𝐋𝐓𝐂𝐆 𝐱 𝐂𝐨𝐬𝐭 𝐨𝐟 𝐧𝐞𝐰 𝐚𝐬𝐬𝐞𝐭
𝐧𝐞𝐭 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐚𝐭𝐢𝐨𝐧
2) If net consideration is Less or
equal to the cost of a new asset:
The whole amount of LTCG is
exempted
Three Years from the date of
Time Limit for Investment
acquisition
Includes new plant and machinery

New asset
which was not used before
Holding Period of New Asset 5 years from the date of new plant and
machinery acquired
The manufacturing sector (New SME
Applicability
at start-up stage)
13
3.11 Problems on Capital Gains
1. From the following particulars given by Suresh (Resident) Compute taxable gain
Sl. Name of the Asset Date of Cost Date of Sale Price Expenses
No purchase ` Sale ` on Sale
1. Government 1.10.19 10,000 30.12.2018 15,000 200

Securities
2. Furniture 15.2.2002 5,000 20.02.2018 3,000 -
(WDV on 1.4.2019
`4000)
14
2. Mr Parekh purchased a residential flat on 02.05.2016 for ` 10, 00,000. He paid on the same
day the stamp duty and registration charges of ` 48,750 on purchases of flat. He sold the said
flat on 17.03.2020 fo ` 42, 00,000. The cost inflation index for FY 16-17 is 264 and FY
2019-2020 is 289. Compute his capital gain.
15
3. Mr Shanta Kumar owns a house property which he acquired in April 1986 for ` 2, 50,000. The
cost of improvement incurred for this property in August 2006 was ` 3, 80,000. He sold this
property in October 2018 for ` 94, 00,000. He acquired a new house property during January
2020 for ` 3, 00,000. Compute his taxable capital gains for the AY 2020-21 on the assumption
that the F.M.V of the property on 1.4.2001 is ` 27, 00,000.CII 2001-02 = 100, 2006-07= 122, FY
2019-2020 = 286.
16
4. Ms Vimla sold a residential building at Jodhpur for ` 35,00,000 on 1-7-2019.

The building was acquired for ` 3, 50,000 on 01-6-2007. She paid brokerage ` 30,000 at the time
of sale of the building. She invested 7 lakhs in the purchase of a residential building in December
2019.CII: 2006-07 = 122 & 2019-2020 = 286. Compute taxable capital gain.
17
5. Agricultural land purchased by Mr Karan (resident) in 2004-05 for ` 90,000. Sold for
`17, 00,000 on 1-6-2019. The assessee purchased another piece of Agricultural land on 1-9-2019
for ` 10,00,000 and deposited ` 60,000 on 1-11-2019 in the Capital Gains Account Scheme.
Find out the Capital gain chargeable to tax for the AY 2020-21.
18
6. Mr Chandru transferred his residential house property on 28-10-2019 for 90 lakhs. The land
was acquired for ` 9, 99,300 on 30-6-2010. He deposited 50 lakhs in eligible bonds issued by
Rural Electrification Corporation (REC) on 20-03-2020. Again he deposited 20 lakhs in the
National Highways Authority of India (NHAI) bond on 26-03-2020. Compute Capital Gains of
Mr Chandru for the AY 2020-21.
19
7. Mr.Ram Kumar provides the following particulars of assets transferring by him during the PY
31-03-2020. Compute his capital gains for the AY 2020-21. A residential house in Delhi was
purchased on 11th November 2001 at a cost of ` 14,70,000 and was sold on 16th January 2020
for ` 1,56,50,000. He incurred transfer expenses of 56,000. He made the following
investments out of capital gains – Purchase of RECL Bonds for ` 10,00,000 on 16th Feb.2020;
Purchased a residential flat on 26th March 2020 for ` 75,00,000. CII 2001-02= 100 & 2019-
20= 286.
20
8. Compute the taxable capital gain from particulars given below:
Particulars Gold Shares Unlisted

` `
Date of Acquisition 10-6-2005 2-11-2005
FMV on the date of 6,00,000 3,00,000
transfer
Amounts recorded in the 5,90,000 8,50,000
books of the firm
Cost of Acquisition 2,10,000 2,70,000
On 10th December 2019, completed the construction of a residential house for which
he spends ` 10, 40,000.
21
9. Shri. Athmananda submits the following particulars of assets sold during the year
2019-20 :
Gold Securities Plot
Sale proceeds ` 7,00,000 ` 5,50,000 ` 80,00,000
Brokerage paid on sale - - 2%
Cost of acquisition ` 60,000 ` 40,000 ` 1,40,000
Year of acquisition 1988-89 2013-14 1984-85

Cost Inflation Index 161 220 125
Date of sale 1-6-2019 1-1-2020 30-8-2019
He has purchased a residential house for ` 27,00,000 on 25-3-2020 on which date

he did not own any other residential house. Whether Shri Athmananda is eligible to
claim exemption capital gain for the assessment year 2020-21. CII for the financial
year 2001-02 was 100 & 2019-20 = 286.
22
10. Mr Ghosh sold a house on 1-9-2019 for ` 15,00,000. This house was inherited by him during
2001-02 from his father who had constructed it in 1991-92 for ` 50,000. Mr Ghosh spent Rs.
50,000 on the renovation of the house in 2006-2007. The fair market value of the house as of 1-4-
2001 was ` 4,50,000. This house was under negotiations for sale in May 2011 & he received Rs.
30,000 as advance money. The contact could not materialize & the advance money was forfeited.
Compute the amount of capital gain assuming that he does not qualify for an exemption. (CII for
2001-02=100, 2006-2007-122, 2010-11=167 & 2019-20=286)
[Hint: Any advance money received & forfeited during P.Y 2013-2014 or before, shall be reduced
from the cost of acquisition, WDV/FMV even if such capital asset is sold/transferred during P.Y
2014-2015 or afterwards. Any advance received & forfeited during the previous year 2014-2015 or
afterwards (i.e, on or after 1-4-2014) will be taxable as income from other sources in the year in
which it is forfeited.]
23
11. Mr Singh sold a plot of land at Jaipur on 1-6-2019 (CII=286) for `17,40,000. He paid `
40,000 as selling expenses. The plot was received from his father on 15-3-2005 (CII=113). His
father had acquired it on 1-4-1990 for ` 1,00,000 & its FMV on 1-4-2001 was ` 4,10,000. On
1-10-2019 he invested ` 3,00,000 in bonds issued by Rural electrification corporation limited &
` 3,00,000 on 1-3-2020 in bonds of national highway authority of India. Compute his taxable
capital gain.
24
12. Mr. Harish submits the following particulars about the sale of assets during the year 2019-
2020
Jewellery Plot Gold

` ` `
Sale price 7,10,000 20,24,000 5,40,000
Expenses on sale 10,000 24,000 Nil
Cost of acquisition 2,50,000 8,00,000 80,000
Year of acquisition 2007-08 2004-2005 2009-2010
CII 129 113 148
He has purchased a house for ` 14,00,000 on 1-3-2020. Calculate the amount of taxable capital
gain if CII for 2019-20 is 286.
25
13. M/S. Brothers Ludhiana running an industrial unit was ordered by Municipal Corporation,
Ludhiana to shift their concern from an urban area of Ludhiana. They shifted their concern during
2019-2020 & in this process sold some of the assets whose details are given below:
P&M Land Building

Assets Acquired on 01-01-07 June 2003 12-12-2006
Sale proceeds 10,40,000 10,90,000 12,00,000
WDV on 1-4-2019 4,40,000 --- 7,32,500
Cost of acquisition 6,00,000 3,00,000 10,00,000
Shifting expenses ed on 30-Dec-2019 8,00,000 2,00,000 5,00,000
Compute the taxable capital gain for the assessment year 2020-2021, if (CII for 2003-2004 is 109,
2006-2007 is 122 & 2019-20 is 286).
26
This Module is for JU-CMS students
and for Private Circulation only.
INCOME
FROM
OTHER
SOURCES
Module – 4 & 5
INCOME TAX-II
VI SEM BBA , AY : 2020-2021
INCOME TAX-II [AY: 2020-21, PY: 19-20] VI SEM BBA
Module -4
Income from other sources

The income of every kind which is not to be excluded from the
total
Meaning u/s 56 (1) Income under this Act shall be chargeable to income-tax under
the head “Income from other sources” if it is not chargeable to
income-tax under any other heads of income.
a. Dividends, other than exempt, however dividends from
domestic company are exempt from tax upto Rs 10 Lacs
only.
b. Income by way of interest on securities
c. income from machinery, plant or furniture belonging to the
assessee and let on hire, if the income is not chargeable to
income-tax under the head “Profits and gains of business or
profession
d. Gift: where the aggregate value of cash or kind gift
exceeds fifty thousand rupees and is received without
consideration, by an individual or a Hindu undivided
family, on or after 1.10.2009 from other than relatives,
under the will of succession, by the local authority or trust
or institution registered under 12AA.
e. Income by way of winnings from lotteries, crossword
puzzles, races including horse race, card games and other
games of any sort, gambling, betting, etc. It requires
mention here that such winnings are chargeable to tax u/s
Chargeability u/s 56 (2) 115BB at a flat rate of 30% (if the amount exceeds Rs.
10,000 (in the case of games) and Rs. 5,000 in the case of
winning the race.
f. Any sum received under a Keyman insurance policy
including bonus is not chargeable under income from salary
g. Interest on bank deposits, loan and OD,
h. Agricultural income from outside India
i. Income by subletting
j. Income by way of royalty
k. Director fees
l. Examination fees received by a teacher from non-employer
m. Commission for an insurance transaction
n. Salary payable to MP
o. Family pension received by a member of the deceased
employee. (Max deduction: Rs.15,000 or 331/3 whichever
is low )
p. Interest received on own contribution to Unrecognised
provident fund (URPF)
q. Income from undisclosed sources.
r. Stipend to an article clerk
For Private Circulation Only, JU-CMS - Compiled by : Dr.Srinidhi, Dr.Umakanth.S, Dr.Supriya Rai & Prof. Avinash 2
s. Bank interest if exceeds Rs. 10,000 then 10%TDS shall be

charged
Note : If Horse is owned and expenditure is incurred by the assessee,

can be claimed against winning a horse race.
1. Bank charges or commission for releasing dividend or
interest on securities.
Deductions allowed under 2. Interest on borrowings (loan must be taken to purchase
IFOS securities)
3. Repairs/depreciation/ insurance in case of letting assets
4. Expenditure made to earn a Royalty
1. Dividends from a domestic company
2. Interest on PO S/B A/c.
3. Dearness allowances - MP, MLA etc.
4. Cash /kind gifts received from relatives.
Exempted Incomes 5. Gifts received on marriage (cash/kind).
6. Cash or Kind gift received from non-relatives is not
exceeding Rs. 50,000/-
7. Interest received on specified Government bonds/securities.
8. Interest on mutual funds / Government securities.
The tax shall be deducted at source only if winnings from the
lottery, crossword puzzles, card game or TV game shows
exceed Rs.10,000 (w.e.f 1-7-10) and winnings from races
Casual income (TDS) Sec. exceed.Rs.5,000 (w.e.f 1-7-10)
56(2)(iv) Income tax 30%
Total TDS 30%
Gross amount [ ] 100
Winning from Casual income always be taken at gross
Note
winning, not the net amount (sec 115BB)
a) 12 year National Savings annuity certificate
b) National defence Gold bonds, 1980
c) Special bearer bonds, 1991
d) Treasury savings deposit certificates (10 years)
e) Post office cash certificates (5 years)
f) National plan certificates (10 years)
Tax-free Government g) National plan savings certificates (12 years)
securities: Interest on these h) Post office national savings certificates (7 years / 12 years)
securities is fully exempt from i) Post office savings bank account
tax U/s 10 (15). j) The public account of post office savings accounts rules
(k) Post office cumulative time deposit account
l) Fixed deposit of Post office
m) Special deposit scheme 1981
n) Interest on 7%. Capital investment bonds
o) Interest on Relief bonds & savings bond.
p) Notified NRI bonds.
Less Tax-Free Govt. Securities issued by a state or Central Govt. No tax is deducted
securities at source (TDS 10%) on these securities and hence interests on

these securities are not to be grossed up since interests received
on these securities are always gross. (sec10(15))
Securities issued by Non-Govt. organisations like the local
authority, company etc. it is called tax free securities since tax
Tax-free Non-Govt.
due on its interest is payable by the company.
securities (TDS 10%)
Gross interest = Interest received by the assessee + Tax paid by
the company on behalf of the assessee.
Interest is paid on these securities after deducting tax at source.
Interest payable after TDS = Gross interest as a % of security
invested - TDS
Less tax Non-Govt.
Note: if the rate of interest is given, then it is the gross amount
securities:
and hence does not requires grossing up.
If the net amount of interest received is given then it should be
grossed up.
1. Interest on tax-free Non-Govt. securities are always net
Rules of Grossing up interest and hence it is to be grossed up irrespective of
or when to gross-up. whether interest rate or amount is given.
2. Interest on less tax non-Govt. securities are grossed up only
when the amount is given.
Income tax 10%
Grossing for Listed Total 10%
securities Gross amount [ ]
100
Income tax 10%

Grossing for Total 10.%
un- Listed securities Gross amount [ ]
100
The term relative means
a. Spouse of the individual

b. Brother or sister of the individual
c. Brother or sister of Spouse of the individual
d. Brother or sister of either parent of the individual
e. Any lineal ascendant or descendant of the individual
f. Any lineal ascendant or descendant of Spouse of the individual
Problems on Income from Other Sources
1. From the following particulars of Mr.Raju compute a number of taxable gifts chargeable
as “income under the head other sources”
a. He received a cheque of Rs. 1,00,000 as a gift from his grandfather on 15 May 2019
b. He received Rs. 21,000 from his friend from Canada as a gift on 31 May 2019
c. He received Rs. 5,00,000 under a will from his grandmother on 30 June 2019
d. He received Rs.50,000 from his father’s friend on 30 June 2019
e. He received Rs. 75,000 as a gift from his uncle on 30 September 2019 on his birthday
f. He received Rs. 20,000 as a gift from his employer on 1st October 2019
g. He received a gift of Rs. 51,000 from his father’s brother on 30th November 2019
2. From the following particulars of a gift received by Mr.Gangu compute the amount of
taxable gift chargeable under the head income from other sources for previous year 19-20
a. He received a plot worth Rs. 6,00,000 as a gift from his grandfather under a will
(stamp duty value is determined at Rs. 3,50,000) on 25th May 2019
b. He received a house as a gift on 15th June 2019 from his uncle, on his birthday worth
Rs. 15,00,000 (stamp duty value is Rs. 10,00,000)
c. He received a plot from his friend as a gift whose F.M.V as on 30th September 2019
was Rs. 75,000 and stamp duty value was Rs. 40,000
d. He purchased a house from Mr.Rambu for Rs. 2,50,000 on 1st Oct 2019 and the stamp
duty value of the house was Rs. 4,00,000
3. Mr Moola received the following gifts during the previous year 19-20. Compute his
taxable income under the head income from other sources
a. Received Rs. 1,00,000 as a gift from Yashu (friend) on 1-6-2019
b. Received a microwave costing Rs. 14,500 as a gift from his other friend Zulfi
c. Received Rs. 50,000 as a gift from another friend Amrit on 1-12-19
d. Received Rs. 30,000 as a gift from his sister on 1-1-2020
e. Received Rs. 40,000 as a gift from his friend Mr.D on 1-12-19
f. Received Rs. 1,60,000 as gift from his non-resident friend on 1-2-2020
4. V. Shruti has the following investments and incomes in the previous year ended
31.3.2020. Calculate her income from other sources:
a) Dividend from a company 7,800
b) Examinership remuneration 2,000
c) Royalty from the publication of a book 48,000
d) Winning from the lottery (Net amount) received on 1.3.2020, 35,000
e) Rs. 40,000, 10% Debentures of Company (listed)
f) Rs. 40,000, 12% Tax-free Punjab Govt. Securities
g) Rs. 50,000, 13% Less Tax commercial securities
h) Rs. 40,000, 10% Tax-Free debentures of a Company
i) Rs. 4,050 as interest on Tax-free Debentures (Listed) received on 1.3.2019
She claims the following deductions:

Collection charges for interest and dividend @ 2% of the gross amount realised.
Purchase of lottery tickets Rs. 2,000.
5. Diwakar who is a resident of India furnishes the following particulars of his investments
for the previous year ended 31st March 2020
a) Rs. 10,000 units of Mutual Fund (Gross Income Rs. 1,200)
b) Rs. 10,000 in POSB A/C which earns interest @ 3.5% p.a.
c) Rs. 45,000 in Fixed deposit account with Allahabad Bank on which interest @9% is
payable
d) 12% Rs.40,000 Debentures (Listed) of Tea Company
e) Rs. 2,000 interest received on National Development Bonds
f) Rs. 1,000 interest received on the Debentures of a Co-operative Society
g) 10% U.P. State Electricity Board Bonds Rs.20,000
h) Rs. 10,000 in 7-year PONSC interest @ 7% p.a. is payable the same year
i) Rs. 36,000, 10% Tax-free Debentures of Agra Municipal Corporation. Interest is
payable on 31st December
j) Rs. 900 received by an A/C Payee cheque as interest on Debentures (Listed) of a
company in which public are substantially interested.
He collected the entire interest himself and claimed Rs. 200 as his own fees for
collection of interest.
k) Interest on PONSC VIII issue Rs. 5,000
Calculate the taxable income under the head Income from other sources for the assessment
year 2020-21
6. Compute income from another source from particulars given below.

 Interest on deposit with a company 10,000
 University remuneration for working as examiner 6,000
 Royalty for writing books 60,000
He claims to have spent Rs 20,000 on writing books
 Dividends declared on 1-3-18 but paid on 1-5-19 Rs 6,000
 Interim dividends paid on 1-5-2019 Rs 3,000
 Stake money on racehorses 1,50,000, horses are maintained by him and expenses on
maintenance of these horses are 2,40,000
 Family pension received 36,000
7. Sri Neera furnishes the following particulars of the incomes for the previous year 2019-
2020. Compute his total income
 Dividend on equity shares 600
 Dividends on preference share 3,200
 Income from letting on hire of building and machinery composite lease 17,000
 Interest on bank deposit 2,500
 Directors sitting fees 1,200
 ground rent 600
 Income from undisclosed sources 10,000
 Income from lotteries (gross) 10,000
The following are the deductions claimed by him
 Collection charges of dividend Rs 20
 Allowable charges of building and machinery 4,000
 Fire insurance on building and machinery 100
8. From the particulars of the income of Jigar Dil, compute income for other sources for the
assessment year 2020- 2021
I. He owns an agriculture land in Bangladesh for which he earned an income of Rs 6,500
II. He owns a plot of land in Dharwad which is let out for Rs 1,200 p.m. for trading
purpose
III. He has a building near agricultural land in a village in India, it is let out for Rs 900
p.m and used for storing agriculture equipment and for the supervision of agricultural
work
IV. He received Rs 12,500 during the year as management consultation fee
V. He has a quarry in Ankola. He has let it on a royalty of 50 paise per tonne of stone
raised during the year 14600 tonnes of stone was raised, he spent 450 to earn royalty
VI. He has let machinery and furniture at Rs 3,000 p.m, He spent Rs 1,000 on the repair of
these assets, and depreciation allowed on these assets is Rs 6,000.
VII. He lives in a rented house paying a rent of Rs 2,000 p.m, he has sublet 49% of this
house at a rent of 1,500 p.m he paid Rs 1,000 as the municipal tax on the house and
spent Rs 500 on the repairs of the whole house
VIII. He has received an amount of Rs 70,000 as lottery prize on 1-11-2019
IX. He borrowed Rs 30,000 on 1-6-2019 from a bank at 15% interest p.a. he invested the
money in the purchase of equity shares of the public limited company. During the year
he has not received any dividends from the company.
9. Dr Ankit Agarwal is a professor of Economics. He submits before you the following under
the head “Income from Other sources” for the A.Y. 2020-21
a) He is the author of a book which fetched him a gross royalty of Rs. 15,000.
b) Income from articles published in economic times & eastern economics Rs. 3,000
c) He is an examiner of a number of Universities. This source gave him a remuneration
of Rs. 2,000
d) His other incomes were:
Winning from card games and betting Rs. 6,500
Winning from chess Rs. 1,000
Received interest on Govt. of England Bonds Rs. 500
10. Mr Amit Sharma furnishes the following particulars of his income:

a) Dividend received from UTI on unit 1964 scheme Rs. 17,000 p.a.
b) Dividends (gross) from Tea Company. 60% of the income of the company is
agricultural income Rs. 3,000 p.a.
c) Interim dividend @ 10% on shareholding Rs. 15,000 in a Textile Mill Rs. 1,500
d) Dividend from a foreign company in Germany Rs. 4,000 p.a.
e) Interest on Term deposits with Bank (Net) Rs. 10,800 p.a.
f) Director’s fees Rs. 2,000 p. m.
g) Income from letting out of machinery & plant, after cessation of Business Rs. 30,000
h) Royalties from mining Rs. 10,000 p.a.
i) Rent received from subletting a house Rs. 1,000 p.m.
j) Winning from lotteries Rs. 25,000p.a.
He claims the following Expenses
Collection charges for UTI dividend 300
Interest on money borrowed to purchase shares of Textile Mill Rs. 1,000
Depreciation and other expenses in respect of Plant & Machinery Rs. 5,000
11. Mr Girish furnished the following particulars of his income for FY 2019-20. Compute his
income from other sources
a) Dividend received from UTI Rs. 10,000
b) The net amount received as winning from horse race Rs. 21,000
c) Winning from camel race (Net) Rs. 15,000
d) Winning from lottery (Net) Rs. 70,000
e) Income tax refund Rs. 10,000
f) Interest on income tax refund Rs. 1,000
g) Amount won from “Kaun Banega Crorepati” Rs. 2,00,000
h) Interest on 8% Tax-free Relief Bonds issued by RBI Rs. 5,000
i) Interest on Punjab Govt. Loan Rs. 20,000
j) A gift received from father Rs. 50,000
k) Family pension received Rs. 48,000
12. Kumar furnished the following particulars of his house for the assessment year 2020-21.
Compute his income from other sources
a) He had the following investments as on 1-4-2019
 50,000 5% central Govt loan
 40,000 6% Govt securities
 20,000 8% preference share of a paper mill
 20,000 equity shares of a tea company whose 61% income is deemed to be an
agriculture income, dividend received on 1-5-2019 are Rs 4,000
 60,000 15% debenture of a limited company (unlisted)
 10,000 10% securities issued by Govt of Nepal
 50,000 national saving certificate (VII issue) acquired on 1-11-2017, interest
accrued for the financial year is Rs 4,520
 18,000 10% ( Tax-free) debentures of a limited company ( listed)
 5,000 debenture of a co-operative society, interest received during the year Rs.
450
 140000, fixed deposit in SBI for five years, the interest accrued for the year
Rs. 14000
b) On 1st September 2019, he bought Rs 50,000. 10 % Punjab Govt loan, the interest on
which is payable on 31st December for this purpose he took a loan from his banker for
Rs 40,000 at 10% p.a and the balance Rs 10,000 were financed out of a personal loan
taken for the purchase of motor car@10% p.a
c) Bank collection charges amounted to Rs 800 and a commission of Rs 1800 was paid
on the purchase of securities
13. Dr Arihant is a professor and a resident of India. Compute his income from other sources
for AY 2020-21
a) Salary Rs. 15,600 p.m. from “Commerce College”
b) He is the author of a text Book “Imagining world” which fetches him a Royalty of
Rs. 20,000
c) Income from articles which were published in the magazine “Disturbance” Rs. 4,000
d) He is an examiner for an All-Women University. The source gave him a remuneration
of Rs. 12,600
e) Rs. 1,800 p.m. scholarship for research work from UGC
f) Income from Agricultural land in Jaipur Rs. 7,000
g) Received Rs. 2,000 as dividend from an Indian Company
h) His other incomes were
Win from card games & betting Rs. 6,500
Wins from chess Rs. 1,000
Received interest of Nepal Govt. Bonds Rs. 1,500
14. Dr Raja (Resident), a professor in a college furnishes the following information
i. Salary 6,000
ii. Wardenship allowance 1,000
iii. Examination remuneration from a University 8,000
iv. Royalty for books and articles 20,000
v. Winning for card games in a club 90,000
vi. Winning from Rajasthan state lottery (Gross) 50,000
vii. Expenditure on purchase of lottery 6,000
viii. Interest on 8.5% RBI relief bond 8,500
ix. Cash gift from his father cousin 30,000
x. Cash gift from the elder brother of his grandfather 30,000
Compute his Total Income.
15. Mr.Rahul investment during the year ended 31-3-2020 consisted of the following
i. 9% Tax free Government securities 25,000
ii. 11% Delhi corporation bonds 20,000
iii. 12% Bombay port trust bonds 30,000
iv. 7 year Post office National saving certificate (NSC) 5,000
v. 7% Nation plan certificate 10,000
vi. Government of England bonds 15,000
vii. Bank commission paid on collection of Interest 150
viii. Saving bank interest from SBI 19,500
Compute his income from other sources
Module - 5
Set Off and Carry Forward of Losses
(Theory only) [Sec.70-80]
Introduction A Person may incur a loss from a source in a

year. Under the Income-tax Act, the concession
is available to such person incurring a loss.
There are provisions for set-off of such loss

against income from any other source or any
other head of income.
Further, if the loss cannot be set-off in the

same year, it can be carried forward to
subsequent years for set-off.
Set Off and Carry forward of Losses:
Intra Head / Within the Head Inter Head / With other heads
Nature of Set off Carry No of Nature of Set off Carry No of
loss Under forward to Years loss Under forward to Years
Subsequent for Subsequent for
Assessment which it Assessment which it
Year can be Year can be
carried carried
forward forward
AY AY
Speculation Only Only House Income Only against
Business against against Property from Income
Loss Speculation Speculation 4 Any from House 8
Profit. Profit. Let Out Head of Property.
Property Income.
Long Term Only Only Self Income Only against
Capital against against Occupied from Income
Gains Long term Long term 8 Property Any from House 8
Capital Capital Head of Property.
Gains. Gains. Income.
Any Loss Any Only against
from Income Profit or
Business except Gains from
or Salary. Business or
8
Profession Profession.
(other than
Speculation
Loss)
Intra Head / Within the Head Inter Head / With other heads
Nature of Set off Carry No of Nature of Set off Carry No of
loss Under forward to Years loss Under forward to Years for
Subsequent for Subsequent which it
Assessment which Assessment can be
Year it can Year carried
be forward
carrie
d
forwa
rd
Short Only Only Unabsorbed Any Any Head No time
Term against against Depreciatio Head of of Income limit.
Capital Capital Capital n Income except
Gains Gains Gains (Both except Salary. Shall be
(Both Short Term Salary carried
Short & Long and forward to
Term & Term). income Subsequen
Long taxed at t
8
Term). special assessmen
rates. t year and
shall be
deemed to
be the
Depreciati
on of that
year.
Loss from Only Only Business: Any Shall be
owning against against Income carried
and Income Income Scientific forward to
maintainin from from and Subsequent
g Race owning owning and Research assessment
Horses and maintaining Expenditure year and
maintainin Race 4 shall be
g Race Horses. deemed to
Horses. be the
Scientific
Research
Expenditure
of that year.

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Profit & Gains from Business & Profession - Part 1

For Private Circulation Only, JU-CMS.

Profits and Gains of Business or Profession

1. Business and Profession

The profession is defined as a vocation or a job requiring either

2. INCOME CHARGED TO TAX

a) Any Salary, Bonus, Commission, Interest or remuneration received by

a. Tangible Assets being buildings, machinery, plant or furniture;

1. Depreciation is calculated on a block asset basis

a. Deduct money realized

b. Compute half years depreciation on any new asset used or installed

d. Deduct total depreciation out of WDV and balance is the opening

2. Additional Depreciation - With effect from AY 2007-2008 an

a) The assessee is engaged in the business of manufacture or

b) In case any Plant or Machinery is acquired and installed during

3. Special rate of Additional Depreciation for Machinery or Plant used in

WDV as on 01-04- 2019

Add: Any additions (Actual Cost)

WDV as on 31-3- 2020

DEPRECIATION RATES AS PER I.T ACT FOR MOST COMMONLY

2. Building Hotels and boarding houses 10%

Furniture – Any furniture/fittings including

The motor car, motorcycle, bike, scooter other

Plant & Motor buses/taxies/lorries used in a business of

Plant & Computers, Laptops, computer software, Printer,

Plant & Books owned by the assessee, carrying on

Plant & Books owned by the assessee, carrying on a

Plant & Books owned by the assessee, carrying on

Know-how, patents, copyright, trademark,

1 Plant & Machinery 42,20,000 6,90,000 2,10,000 15%

2 Aircraft 34,50,000 - - 40%

Motor Buses & lorries

4 Imported car - 3,60,000 - 15%

5 Patent Rights - 8,00,000 - 25%

6 Technical Know –How - 6,00,000 - 25%

Assets Date of Date of Use Cost Rate of

Machinery 31/3/2019 5/9/2019 6,00,000 15%

Electric motor 1/7/2019 1/10/2019 78,000 15%

Plant 12/11/2019 15/12/2019 12,00,000 15%

Calculate the amount of admissible depreciation and WDV down value as on

4. From the following data calculate the depreciation admissible to an individual

Plant and machinery (Rate 15%) and the written down

Motor car (Rate 15%):

For Private Circulation Only, JU-CMS

COMPUTATION OF INCOME FROM BUSINESS

Advertisement in magazines, brochure, pamphlet, etc of the political

Amount of liability foregone by the creditor/ Sales / Commission /

LESS: ADMISSIBLE EXPENSES NOT DEBITED TO P/L A/C

Capital expenditure on research carried on by the assessee is fully

Agricultural Income ( India)

To Office expenses 36,000 By Bad debts recovered 20,000

To Depreciation 28,000 By Dividends 6,000

To Sales Tax 18,000 By Rent from House property 18,000

To Legal expenses 16,000 By Commission 20,000

To Income Tax 14,000 By Brokerage 20,000

To Exp. On acquisition . of 24,000 By Sundry Debtors 10,000

To Repairs 12,000 By Share of Income from HUF 6,000

To Provision for bad debts 6,000

To General expenses 24,000

To Net Profit 88,000

1) Salaries include ` 12,000 paid to workers employees at home.

1) General Charges included `8,000 towards Purchase of a Computer

2) Legal expenses include `1,600 penalties by the customs authority.

1) Mr Prasad owns a house property, which is used as follows: