Basic Concepts - E-Notes - PDF Only

1A Basic Concepts
CHAPTER
INTRODUCTION
In a Welfare State, the Government takes primary responsibility for the welfare of its citizens, as in matters of
health care, education, employment, infrastructure, social security and other development needs. To facilitate these,
Government needs revenue.
The taxation is the primary source of revenue to the Government for incurring such public welfare expenditure.
In other words, Government is taking taxes from public through its one hand and through another hand; it incurs
welfare expenditure for public at large.
However, no one enjoys handing over his hard-earned money to the government to pay taxes. Thus, taxes are compulsory
or enforced contribution to the Government revenue by public.
Government may levy taxes on income, business profits or wealth or add it to the cost of some goods, services, and
transactions.
DIRECT TAX & INDIRECT TAX

There are two types of taxes: Direct Tax and Indirect Tax
Tax, of which incidence and impact fall on the same person, is known as Direct Tax, such as Income Tax.
On the other hand, tax, of which incidence and impact fall on two different persons, is known as Indirect Tax, such as GST.
Direct Tax Indirect Tax

Incidence and impact fall on the same person Incidence and impact fall on two different persons
Assessee, himself bears such taxes. Thus, it pinches the Tax is recovered from the assessee, who passes such
taxpayer. burden to another person.
Levied on income Levied on goods and services.
E.g. Income Tax E.g. GST, Customs Duty, etc.
Progressive in nature i.e., higher tax are levied on Regressive in nature i.e., all persons will bear equal
person earning higher income and vice versa. wrath of tax on goods or service consumed by them
irrespective of their ability.
CONSTITUTIONAL VALIDITY OF TAXES

The Constitution of India is the supreme law of India. It consists of a Preamble, 22 parts containing 444 articles and 12
schedules. Any tax law, which is not in conformity with the Constitution, is called ultra vires the Constitution and held as
illegal and void. Some of the provisions of the Constitution are given below:
Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. It means
tax proposed to be levied must be within the legislative competence of the legislature imposing the tax.
Article 246 read with Schedule VII divides subject matter of law made by legislature into three categories:
Union list (only Central Government has power of legislation on subject matters covered in the list)
State list (only State Government has power of legislation on subject matters covered in the list)
Concurrent list (both Central &State Government can pass legislation on subject matters).
Entry 82 of Union List - Taxes on income other than agricultural income i.e. Income-tax.
CH-1A_Basic Concecpt.indd 1 02-08-2023 17:16:46

ADMINISTRATION OF TAX LAWS
Central Board of Direct

Taxes(CBDT)
Ministry of Finance Department of Revenue
Central Board of Indirect

Tax & Customs (CBIC)
Both of the Boards have been constituted under the Central Board of Revenue Act, 1963.
CBDT deals with levy and collection of all direct tax
CBIC Deals with levy and collection of Central indirect tax .
SOURCES OF INCOME TAX LAW IN INDIA

1. Income tax Act, 1961 (Amended up to date)
The provisions of income tax extends to the whole of India and became effective from 1/4/1962 (Sec. 1). It
contains sections 1 to 298 and schedules I to XIV. The Act contains provisions for determination of taxable income;
determination of tax liability; procedure for assessment, appeals, penalties and prosecutions; and powers and
duties of Income tax authorities.
2. The Finance Act (Annual Amendments)
Every year, a Finance Bill is presented before the Parliament by the Finance Minister. The Bill contains various
amendments which are sought to be made in the areas of direct and indirect taxes levied by the Central
Government.
When the Finance Bill is approved by both the Houses of Parliament and receives the assent of the President, it
becomes the Finance Act. The provisions of such Finance Act are thereafter incorporated in the Income Tax Act.
The First Schedule to the Finance Act contains four parts which specify the rates of tax –
Part I of the First Schedule to the Finance Act specifies the rates of tax applicable for the current Assessment
Year. Accordingly, Part I of the First Schedule to the Finance Act, 2022 specifies the rates of tax for A.Y. 2022-23.
Part II specifies the rates at which tax is deductible at source for the current Financial Year. Accordingly, Part II of
the First Schedule to the Finance Act, 2022 specifies the rates at which tax is deductible at source for F.Y. 2022-23
Part III gives the rates for calculating income-tax for deducting tax from income chargeable under the head
“Salaries” and computation of advance tax for F.Y. 2022-23.
Part IV gives the rules for computing net agricultural income.
3. Income tax Rules, 1962 (Amended up to date)
As per Sec. 295, the Board may, subject to the control of the Central Government, make rules for the whole or any
part of India for carrying out the purposes of the Act.
Such rules are made applicable by notification in the Gazette of India.
These rules were first made in 1962 and are known as Income tax Rules, 1962.
4. Circulars and Notifications
Circulars
Circulars are issued by the CBDT from time to time to deal with certain specific problems and to clarify doubts
regarding the scope and meaning of certain provisions of the Act.
Circulars are issued for the guidance of the officers and/or assessees.
The department is bound by the circular While such circulars are not binding on the assessees, they can take
advantage of beneficial circular
Notifications
Notifications are issued by the Central Government to give effect to the provisions of the Act. The CBDT is also
empowered to make and amend rules for the purposes of the Act by issue of notifications.
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5. Judicial decision
(a) Decision of the Supreme Court: Any decision given by the Supreme Court shall be applicable as law till there
is any change in law by the Parliament. Such decision shall be binding on all the Courts, Tribunals, Income tax
authorities, assessee, etc.
(b) Decisions given by a High Court or ITAT: Decisions given by a High Court or ITAT are binding on all assessees
and Income tax authorities, which fall under their jurisdiction, unless it is over ruled by a higher authority.
LEVY OF INCOME-TAX
As per Section 4, Income of the previous year of a person is charged to tax in the immediately following assessment year.
PREVIOUS YEAR [SECTION 3]

Previous Year means the financial year immediately preceding the Assessment Year.
Income earned in a year is assessed in the next year.
The year in which income is earned is known as Previous Year and the next year in which income is assessed is known
as Assessment Year.
It is mandatory for all assessee to follow financial year (from 1st April to 31st March) as previous year for Income-Tax
purpose.
Business or profession newly set up during the financial year

In such a case, the previous year shall be the period beginning on the date of setting up of the business or profession
and ending with 31st March of the said financial year.
If a source of income comes into existence in the said financial year, then, the previous year will commence from the
date on which the source of income newly comes into existence and will end with 31st March of the financial year.
ASSESSMENT YEAR (A.Y.) [SECTION 2(9)]

Assessment year means the period of 12 months commencing on the 1st day of April every year.
It is the year (just after the previous year) in which income earned in the previous year is charged to tax.
E.g., A.Y. 2023-24 is a year, which commences on April 1, 2023 and ends on March 31, 2024. Income of an assessee
earned in the previous year 2022-23 is assessed in the A.Y. 2023-24.
ASSESSEE [SECTION 2(7)]

“Assessee” means,
(a) a person by whom any tax or any other sum of money (i.e., penalty or interest) is payable under this Act
(b) every person in respect of whom any proceeding under this Act has been taken (whether or not he is liable for any
tax, interest or penalty) for the assessment of his income or loss or the Amount of refund due to him;
(c) a person who is assessable in respect of income or loss of another person;
(d) every person who is deemed to be an assessee under any provision of this Act; and
(e) a person who is deemed to be an ‘assessee in default’ under any provision of this Act. E.g. A person, who was liable
to deduct tax but has failed to do so, shall be treated as an ‘assessee in default’.
PERSON [SECTION 2(31)]

The term person includes the following:
(i) An Individual;
(ii) A Hindu Undivided Family (HUF);
(iii) A Company;
(iv) A Firm (Includig LLP);
(v) An Association of Persons (AOP) or a Body of Individuals (BOI), whether incorporated or not;
(vi) A Local authority; &
(vii) Every artificial juridical person not falling within any of the preceding categories.
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CERTAIN CASES WHEN INCOME OF A PREVIOUS YEAR WILL BE ASSESSED IN THE
PREVIOUS YEAR ITSELF
The income of an assessee for a previous year is charged to income-tax in the assessment year following the previous year.
However, in a few cases, this rule does not apply and the income is taxed in the previous year in which it is earned. These
exceptions have been made to protect the interests of revenue. The exceptions are as follows:
(a) Shipping business of non-resident [Section 172]
Where a ship, belonging to or chartered by a non-resident, carries passengers, livestock, mail or goods shipped at a
port in India, the ship is allowed to leave the port only when the tax has been paid or satisfactory arrangement has
been made for payment thereof. 7.5% of the freight paid or payable to the owner or the charterer or to any person
on his behalf, whether in India or outside India on account of such carriage is deemed to be his income which is
charged to tax in the same year in which it is earned.
(b) Persons leaving India [Section 174]
Where it appears to the Assessing Officer that any individual may leave India during the current assessment year
or shortly after its expiry and he has no present intention of returning to India, the total income of such individual
for the period from the expiry of the respective previous year up to the probable date of his departure from India is
chargeable to tax in that assessment year
(c) AOP/BOI/Artificial Juridical Person formed for a particular event or purpose [Section 174A]
If an AOP/BOI etc. is formed or established for a particular event or purpose and the Assessing Officer apprehends
that the AOP/BOI is likely to be dissolved in the same year or in the next year, he can make assessment of the income
up to the date of dissolution as income of the relevant assessment year.
(d) Persons likely to transfer property to avoid tax [Section 175]
During the current assessment year, if it appears to the Assessing Officer that a person is likely to charge, sell,
transfer, dispose of or otherwise part with any of his assets to avoid payment of any liability under this Act, the total
income of such person for the period from the expiry of the previous year to the date, when the Assessing Officer
commences proceedings under this section is chargeable to tax in that assessment year.
(e) Discontinued business [Section 176]
Where any business or profession is discontinued in any assessment year, the income of the period from the expiry
of the previous year up to the date of such discontinuance may, at the discretion of the Assessing Officer, be charged
to tax in that assessment year.
HEADS OF INCOME [SECTION 14]

According to Sec.14 of the Act, all income of a person shall be classified under the following five heads:
1. Salaries;
2. Income from house property;
3. Profits and gains of business or profession;
4. Capital gains;
5. Income from other sources.
For computation of income, all taxable income should fall under any of the five heads of income as mentioned above. If any
type of income does not become part of any one of the above mentioned first four heads, it should be part of the 5th head,
i.e. Income from other sources, which may be termed as the residual head.
DIFFERENCE BETWEEN HEADS OF INCOME AND SOURCES OF INCOME

There are only five heads of income as per Sec. 14 of the Act, but the assessee may generate the income from various
sources. In the same head of income, there may be various sources of income.
E.g. under the head ‘Income from house property’, there may be two or more house properties and each house property
shall be termed as a source of income.
The source of income decides under which head (among the five heads) income shall be taxable.
COMPUTATION OF INCOME
Step 1: Determine Residential Status
Step 2: Compute Income Under Each Head of Income

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Step 3: Apply Clubbing of Income Provisions
Step 4: Set-off/carry forward and set-off of losses as per the provisions of the Act
Step 5: After Applying Step 2, 3 & 4 You will arrive at Gross total Income
Step 6: Claim Deductions Under Section 80C to 80U (if any From GTI)
Step 7: Total Income (Taxable Income) is arrived after claiming deductions from GTI
Total Income shall be rounded off u/s 288A in the multiples of 10 and for this purpose, any paisa shall be ignored and if the
last digit is 5 or more, it will be rounded off to the higher multiple otherwise it will be rounded off to the lower multiple.
Example
(i) `5,28,456 shall be rounded off as 5,28,460
(ii) `5,28,455 shall be rounded off as 5,28,460
(iii) `5,28,454 shall be rounded off as 5,28,450
(iv) `5,28,454.88 shall be rounded off as 5,28,450
DEFAULT TAX REGIME

(To be Discussed After Completing Deductions under Chapter VI-A)
Tax On Income of Individuals / Hindu Undivided family / AOPs / BOIs / Artificial Judicial Person [Section 115BAC]
1. Individuals/ HUF/ AoPs/ BoIs or artificial judicial persons, other than those who exercise the option to opt out this
regime under section 115BAC(6), have to pay tax in respect of their total income (other than income chargeable
to tax at special rates under Chapter XII such as section 111A, 112, 112A, 115BB, 115BBJ etc.) at the following
concessional rates, subject to certain conditions specified under section 115BAC(2) –
Income Tax Rate

On First 3,00,000 Nil
Next 3,00,000 5%
Next 3,00,000 10%
Next 3,00,000 15%
Next 3,00,000 20%
Balance Income 30%
2. Conditions to be satisfied
The following are the conditions to be satisfied:
Certain deductions/exemptions not allowable: Section 115BAC(2) provides that while computing total income,
the following deductions/exemptions would not be allowed:
Under the Head Salaries

Leave Travel concession S. 10(5)
House Rent Allowance S. 10(13A)
Exemption in respect of special allowances or benefit to meet expenses relating to duties or personal expenses
(other than those as may be prescribed for this purpose) S.10(14)
Allowances Received By MPs and MLAs S.10(17)
No exemption of deductions from allowances or perquisites
No deduction u/s 16 Except Standard Deduction.
Under the Head House Property
Deduction of Interest on capital borrowed under S.24(b)
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Profits & Gains From Business & Profession
Additional Depreciation
Investment Allowance S.32AD
Donation for scientific research S.35
Deduction u/s 35AD
Clubbing of Income
Deduction of `1500 in respect of minor child S. 10(32)
Set Off & Carry Forward of Losses
While computing total income, set-off of any loss –
(i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable
to any of the deductions referred above; or
(ii) under the head house property with any other head of income; would not be allowed
Deductions Under Chapter VIA (Deduction u/s 80C to 80U)
Deductions under Chapter VI-A (other than employers contribution towards NPS under section 80CCD(2),
Central Government contribution towards Agnipath Scheme under section 80CCH(2) and deduction in respect
of employment of new employees under section 80JJAA).
3. Depreciation or additional depreciation: Depreciation u/s 32 is to be determined in the prescribed manner.

Depreciation in respect of any block of assets entitled to more than 40%, would be restricted to 40% on the
written down value of such block of assets. Additional depreciation u/s 32(1)(iia), however, cannot be claimed.
4. Additional points:
Total income under default tax regime should be computed without set-off of any loss brought forward or
depreciation from any earlier assessment year, where such loss or depreciation is attributable to any of the
deductions listed above. Such loss and depreciation would be deemed to have been already given effect to and no
further deduction for such loss or depreciation shall be allowed for any subsequent year.
` Where income-tax on total income of the assessee is computed under this section and there is a depreciation
allowance in respect of a block of asset from an earlier assessment year attributable to additional depreciation
u/s 32(1)(iia), which has not been given full effect to prior to A.Y. 2024-25 and which is not allowed to be set-off
in the A.Y. 2024-25 due to section 115BAC, corresponding adjustment shall be made to the WDV of such block of
assets as on 1.4.2023 in the prescribed manner i.e., the WDV as on 1.4.2023 will be increased by the unabsorbed
additional depreciation not allowed to be set-off.
Example: Let us consider the case of Mr. X, who carries on business of manufacturing of steel. He has unabsorbed
depreciation as on 1.4.2023, which includes amount attributable to additional depreciation u/s 32(1)(iia) of
P.Y.2022- 23 or any earlier previous year in respect of block of plant and machinery. If he pays tax under default tax
regime under section 115BAC for P.Y. 2023-24 relevant to A.Y. 2024-25, the amount so attributable to additional
depreciation of earlier year remaining unabsorbed as on 1.4.2023 would not be eligible for set-off against current
year income and no further deduction for such loss or depreciation shall be allowed for any subsequent year.
Accordingly, the WDV of the block as on 1.4.2023 has to be increased by the said amount not allowed to be set-off.
5. Time limit for exercising the option to shift out of the default tax regime
(a) In case of an assessee having no income from business or profession:
Where such individual/HUF/AoP/BoI or Artificial Juridical person is not having income from business or
profession, he/it can exercise an option to shift out/opt out of the default tax regime under this section and
such option has to be exercised along with the return of income to be furnished under section 139(1) for a
previous year relevant to the assessment year. In effect, such individual/HUF/AoP/BoI or Artificial Juridical
person can choose whether or not to exercise the option of shifting out of the default tax regime in each
previous year. He may choose to pay tax under default tax regime under section 115BAC in one year and
exercise the option to shift out of default tax regime in another year.

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(b) In case of an assessee having income from business or profession:
Such individual/HUF/AoP/BoI or Artificial Juridical person having income from business or profession has an
option to shift out/ opt out of the default tax regime under this section and the option has to be exercised on
or before the due date specified under section 139(1) for furnishing the return of income for such previous
year and once such option is exercised, it would apply to subsequent assessment years.
Such person who has exercised the above option of shifting out of the default tax regime for any previous
year shall be able to withdraw such option only once and pay tax under the default tax regime under section
115BAC for a previous year other than the year in which it was exercised.
Thereafter, such person shall never be eligible to exercise option under this section, except where such person
ceases to have any business income in which case, option under (i) above would be available.
Note: It may be noted that in case of Individual/HUF/AoP/BoI or Artificial Juridical person not having
income from business or profession, the total income and tax liability (including provisions relating to AMT,
if applicable under normal provisions) may be computed every year both in accordance with the regular
provisions of the Income-tax Act, 1961 and in accordance with the provisions of section 115BAC, in order to
determine which is more beneficial and accordingly such person may decide whether to pay tax under default
tax regime under section 115BAC or exercise the option to shift out and pay tax under normal provisions of
the Act for that year.
COMPUTATION OF TAX LIABILITY (OLD REGIME / ALTERNATIVE SCHEME / NORMAL

PROVISIONS)
A. In case of Individual / Hindu Undivided Family / AOP / BOI / Artificial Judicial Person / Local Authority
Resident individual of the age of 60 years or more at any time upto the end of relevant previous year but less than
eighty years (senior citizen)
Income Tax Rate

Next 2,00,000 5%
Next 5,00,000 20%
Balance Income 30%
Resident individual of the age of 80 years or more at any time upto the end of relevant previous year
(Very senior citizen)
Income Tax Rate

Next 5,00,000 20%
Balance Income 30%
Clarification regarding attaining prescribed age of 60 years/80 years on 31st March itself, in case of senior/very
senior citizens whose date of birth falls on 1st April [Circular No. 28/2016, dated 27-07-2016]
An individual who is resident in India and of the age of 60 years or more (senior citizen) and 80 years or more (very
senior citizen) is eligible for a higher basic exemption limit of `3,00,000 and `5,00,000, respectively.
A resident individual whose 60th birthday falls on 1st April, 2024, would be treated as having attained the age of
60 years in the P.Y. 2023-24, and would be eligible for higher basic exemption limit of `3 lakh in computing his tax
liability for A.Y. 2024-25. Likewise, a resident individual whose 80th birthday falls on 1st April, 2023, would be
treated as having attained the age of 80 years in the P.Y. 2023-24, and would be eligible for higher basic exemption
limit of `5 lakh in computing his tax liability for A.Y. 2024-25.
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Any other Individual & HUF or AOP/BOI or Artificial Judicial Person
Income Tax Rate

Next 2,50,000 5%
Next 5,00,000 20%
Balance Income 30%
HEALTH AND EDUCATION CESS

If any tax is charged for any specific purpose, it is called Cess. Health and Education Cess shall be charged @ 4% on the
Amount of income tax.
ROUNDING OFF OF TAX [SECTION 288B]

Any Amount payable, and the Amount of refund due, shall be rounded off in the multiples of `10 in the similar manner as
in case of total income under section 288A.
Question 1: Compute the income the tax liability Of Binod (Resident, 45 Years).
Particulars Amount (`)

Income Under The Head Salary 4,00,000
Income Under Head House Property 5,00,000
Profits & Gains From Business & Profession 6,10,603
Deductions U/s 80C to 80U 1,50,000
Question 2: Suppose Age of Binod Is 60 Years

Question 3: Suppose Age of Binod Is 80 Years
Question 4: Calculate tax liability in following cases:
(a) Mr. X (Resident Age 40 Years) has total income of `7,00,000
(b) Mr. X (Resident Age 60 Years) has total income of `7,00,000
(c) Mr. X (Resident Age 80 Years) has total income of `7,00,000
(d) MR.X (Non-Resident Age 40 Years) has total income of `7,00,000
(e) MR.X (Non-Resident Age 60 Years) has total income of `7,00,000
(f) MR.X (Non-Resident Age 80 Years) has total income of `7,00,000
SURCHARGE
Surcharge is an additional tax payable over and above the income tax. Surcharge is levied as a percentage of income-tax,
where total income exceeds `50 lakhs.
(a) In case the Individual/HUF/AOP /BOI and Artificial Juridical Person pays tax under default tax regime under
section 115BAC
Income Rate
Total income does not exceed ` 50 lacs Nil
Total income exceeds ` 50 lacs but does not exceed ` 1 crore 10% of tax
Total income exceeds ` 1 crore but does not exceed ` 2 crores 15% of tax
Total income exceeds ` 2 crores 25% of tax

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(b) In case the Individual/HUF/AOP /BOI and Artificial Juridical Person pays tax under default tax regime under
section 115BAC
Income Rate
Total income does not exceed ` 50 lacs Nil
Total income exceeds ` 50 lacs but does not exceed ` 1 crore 10% of tax
Total income exceeds ` 1 crore but does not exceed ` 2 crores 15% of tax
Total income exceeds ` 2 crores but does not exceed ` 5 crores 25% of tax
Total income exceeds ` 5 crores 37% of tax
Health & education cess shall be charged on the total of tax plus surcharge.
Note 1: Surcharge on Income tax payable on Capital gain u/s 112, 112A, 111A and dividend income shall not exceed 15%.
Note 2: If Total Income Exceeds 2 Crore Because of Income u/s 112, 112A, 111A or dividend income, then Maximum
Surcharge applicable is 15%.
Note 3: An AOP consisting of only companies as members then Maximum Surcharge applicable is 15%.
Question 5: Calculate Income tax Liability in Following Cases under both the Tax Regime:
(a) Mr. X (Resident Age 40 Years) has total income of `67,00,000
(b) Mr. X (Resident Age 60 Years) has total income of `1,67,00,000
(c) MR.X (Resident Age 80 Years) has total income of `3,67,00,000
(d) MR.X (Non-Resident Age 60 Years) has total income of `6,67,00,000
MARGINAL RELIEF
If due to applicability of surcharge (or higher surcharge is levied)
Tax liability increases more than the increase in income
Then assessee is eligible for Marginal Relief equals to Difference of Increase in Tax and Increase in Income.
Example:
If Mr. J has total income of `51,00,000, his tax liability if default scheme is not opted shall be computed in the
manner given below:
Particulars Tax
Tax On 51,00,000 as per Slab Rate 13,42,500
Add: Surcharge @ 10% of 13,42,500 1,34,250
Tax before Marginal Relief 14,76,750

Marginal Relief (64,250)
Tax on 50,00,000 Before Cess 14,76,500
Tax on 50,00,000 Before Cess 13,12,500
Increase In Tax 1,64,250
Increase in income 1,00,000
Marginal Relief (1,64,250 – 1,00,000) 64,250
Tax after marginal relief 14,12,500

Add 4% HEC 56,500
Tax Liability 14,69,000
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If Mr. J has total income of `1,02,00,000, his tax liability if default scheme is not opted shall be computed in the
manner given below:
Particulars Tax
Tax On ` 102,00,000 as per Slab Rate 28,72,500
Add: Surcharge @ 15% of 28,72,500 4,30,875
Tax before Marginal Relief 33,03,375
Marginal Relief (9,625)
Tax on 1,02,00,000 Including Surcharge @15% 33,03,375
Tax on 1,00,00,000 Including Surcharge @10% 30,93,750
Marginal Relief 9,625

Add 4% HEC 1,31,750
If Mr. J has total income of `5,05,00,000, his tax liability if default scheme is not opted shall be computed in the
manner given below:
Particulars Tax
Tax On ` 5,05,00,000 as per Slab Rate 1,49,62,500
Add: Surcharge @ 37% of 28,72,500 55,36,125
Tax before Marginal Relief 2,04,98,625
Marginal Relief (14,83,000)
Tax on 5,05,00,000 Including Surcharge @37% 2,04,98,625
Tax on 5,00,00,000 Including Surcharge @25% (1,85,15,625)
Marginal Relief (1,64,250 – 1,00,000) 14,83,000
Tax after marginal relief 1,90,15,625

Add 4% HEC 7,60,625
Tax Liability 1,97,76,250
REBATE [SECTION 87A]

(A) Rebate Under Default Regime (New Regime)
1. Applicable to: Resident Individual
2. Conditions to be satisfied: Total income of the assessee does not exceed ` 7,00,000.
3. Quantum of Rebate: Lower of the following:
(a) 100% of tax liability as computed above; or
(b) ` 25,000/-
(B) Rebate Under Old Regime (Normal Provisions)
1. Applicable to: Resident Individual
2. Conditions to be satisfied: Total income of the assessee does not exceed ` 5,00,000.

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3.
Quantum of Rebate: Lower of the following:
(a) 100% of tax liability as computed above; or
(b) ` 12,500/-
Question 6: Mr. J (Resident Age 40 Years) has gross total income ` 5,40,000 and deduction allowed under section 80C to
80U are ` 40,000. Compute his tax liability under Normal Provisions.
Question 7: Presume Age of Mr. J is 60 Years
Question 8: Presume Age of Mr. J is 82 Years and He is Non-Resident
TAXABILITY OF CASUAL INCOME

As per section 2(24)(ix), casual income means any winnings from lotteries, crossword puzzles, races including horse
races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.
Casual income shall be taxable under the head Other Sources and it will be included in the gross total income and also
total income but while computing tax liability, casual income shall be separated from total income and shall be taxable
@ 30%.
If any expense has been incurred to earn the casual income, then such expense shall not be allowed to deducted. For
Example, Mr. J purchased Lottery for `10,000 and won `1,00,000 from such lottery ticket, then in this case `10,000
shall not be allowed to deducted and whole winning Amount (`) of `1,00,000 shall be taxable @ 30%
As per section 58(4), deduction under section 80C to 80U shall not be allowed from casual income however as per
section 87A, rebate shall be allowed.
Question 9: Mr. X has income under the head Salary `5,00,000 and casual income `3,00,000 and deduction under section
80C to 80U `2,00,000. Calculate his tax liability
Question 10: If in the above case deduction allowed under section 80C to 80U is `6,00,000, tax liability shall be?
Question 11: Mr. J has casual income of `102,00,000 and deduction allowed under section 80C to 80U are `5,00,000, in
this case his tax liability shall be?
TAXABILITY OF CAPITAL GAINS

There are two Types of Capital Gains
(a) Long Term Capital Gains
(b) Short Term Capital Gains
Further Long term and Short Term capital gain is divided as follows:
Long Term Capital Gains Short Term Capital Gains
u/s 112A Special Income 10% on excess of `1Lakh u/s 111A Special Income 15%
u/s 112 Special Income 20% Other STCG Normal Income Slab Rate
If any person has transferred listed equity shares or listed units of equity oriented mutual funds or listed units of a
business trust and has paid securities transaction tax, in such cases long term capital gain shall be taxable @ 10%
on gain excess of `1,00,000 u/s 112A and short term capital gains shall be covered under section 111A and shall be
taxable @ 15%
Deduction u/s 80C to 80U shall not be allowed from capital gain u/s 112, 112A & 111A.
Rebate u/s 87A shall not be allowed from income u/s 112A.
Special provision for resident individual / HUF
In case of a resident individual / HUF if total income excluding
(a) long term capital gains u/s 112
(b) short term capital gain covered under section 111A, and
(c) LTCG u/s 112A
is below the Amount which is exempt from income tax (i.e.2,50,000/3,00,000/5,00,000), in such cases deficiency in the
exemption shall be allowed from long term capital gains or short term capital gain under section 111A or long term capital
gains under section 112A as the case may be.
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Question 12: From The Following Information Calculate tax liability of Mr. J (Resident Age 40 Years)

Income Under The Head Salaries 6,00,000
Long Term Capital Gain u/s 112 1,00,000
Long Term Capital Gain u/s 112A 1,50,000
Short Term Capital Gain 25,000
Short Term Capital Gain u/s 111A 1,25,000
Casual Income 2,00,000
Deductions u/s 80C to 80U 2,50,000
Question 13: From The Following Information Calculate tax liability of Mr.J (Resident Age 40 Years)
Long Term Capital Gain 6,00,000
Long Term Capital Gain u/s 112A 50,000
Deductions u/s 80C to 80U 2,50,000
Question 13A: Suppose In Above Question Mr.J is of 80 Year

Question 14: Calculate tax liability of Mr.J (Resident Age 40 Years), if he has Income From LTCG u/s 112A of
` 50,50,000
Question 15: Mr. X (Age 64 Years) is a resident individual, Details of his income is as follows:
(a) LTCG ` 30,00,000
(b) LTCG u/s 112A ` 10,00,000
(c) LTCG u/s 111A ` 3,00,000
(d) Other Income ` 28,00,000
(e) Deduction u/s 80C to 80U ` 2,00,000
Calculate His Tax Liability.
Question 16: Suppose in above question Other income is Rs 1,72,00,000. Calculate His Tax Liability.
Question 17: Mr. X (Age 64 Years) is a resident individual, Details of his income is as follows:
(a) LTCG ` 2,00,000
(b) LTCG u/s 112A ` 1,10,00,000
(c) LTCG u/s 111A ` 1,13,00,000
(d) Other Income ` 20,00,000
UNEXPLAINED MONEY, INVESTMENTS ETC. [SECTION 115BBE]

Such deemed income shall be taxed at the rate of 60% plus surcharge @25% of tax. Thus, the effective rate of tax
(including surcharge@25% of tax and cess@4% of tax and surcharge) is 78%.
No basic exemption or allowance or expenditure shall be allowed to the assessee under any provision of the Income-
tax Act, 1961 in computing such deemed income.
Further, no set off of any loss shall be allowable against such income.
(a) Cash Credits [Section 68] Where any sum is found credited in the books of the assessee and the assessee offers
no explanation about the nature and source or the explanation offered is not satisfactory in the opinion of the
Assessing Officer, the sum so credited may be charged as income of the assessee of that previous year.

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(b) Unexplained Investments [Section 69] Where in the financial year immediately preceding the assessment year,
the assessee has made investments which are not recorded in the books of account and the assessee offers no
explanation about the nature and the source of investments or the explanation offered is not satisfactory in the
opinion of the Assessing Officer, the value of the investments are taxed as deemed income of the assessee of such
financial year.
(c) Unexplained money etc. [Section 69A] Where in any financial year the assessee is found to be the owner of
any money, bullion, jewellery or other valuable article and the same is not recorded in the books of account and
the assessee offers no explanation about the nature and source of acquisition of such money, bullion etc. or the
explanation offered is not satisfactory in the opinion of the Assessing Officer, the money and the value of bullion
etc. may be deemed to be the income of the assessee for such financial year.
(d) Amount of investments etc., not fully disclosed in the books of account [Section 69B] Where in any financial
year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable
article and the Assessing Officer finds that the amount spent on making such investments or in acquiring such
articles exceeds the amount recorded in the books of account maintained by the assessee and he offers no
explanation for the difference or the explanation offered is unsatisfactory in the opinion of the Assessing Officer,
such excess may be deemed to be the income of the assessee for such financial year.
Example If the assessee is found to be the owner of say 300 gms of gold (market value of which is `25,000) during
the financial year ending 31.3.2023 but he has recorded to have spent `15,000 in acquiring it, the Assessing Officer
can add `10,000 (i.e,. the difference of the market value of such gold and `15,000) as the income of the assessee,
if the assessee offers no satisfactory explanation thereof.
(e) Unexplained expenditure [Section 69C] Where in any financial year an assessee has incurred any expenditure
and he offers no explanation about the source of such expenditure or the explanation is unsatisfactory in the
opinion of the Assessing Officer, Assessing Officer can treat such unexplained expenditure as the income of the
assessee for such financial year. Such unexplained expenditure which is deemed to be the income of the assessee
shall not be allowed as deduction under any head of income.
(f) Amount borrowed or repaid on hundi [Section 69D] Where any amount is borrowed on a hundi or any amount
due thereon is repaid other than through an account-payee cheque drawn on a bank, the amount so borrowed or
repaid shall be deemed to be the income of the person borrowing or repaying for the previous year in which the
amount was borrowed or repaid, as the case may be.
ANALYSIS OF TAXABILITY OF SPECIAL INCOME

Normal Income is taxable as per slab rate and also eligible for deduction u/s 80C to 80U. However Special income is
taxable at special rates as given under:
LTCG LTCG STCG Casual Income Net Winnings Unexplained money

Particulars From Online
Sec 112A Sec 112 Sec 111A Sec 115 BB Game Sec 115BBE
Rabate U/s 87A Not Allowed Allowed Allowed Allowed Allowed Not Allowed
Deduction Not Allowed Not Not Not Allowed Not Allowed Not Allowed
U/S 80C– 80 U Allowed Allowed
Rate 10% on income 20% 15% 30% 30% 78%

above ` 1 Lakh
B. In case of Partnership Firm Including LLP
Special Income Tax Rate

LTCG u/s 112A 10% of gain in excess of ` 1 Lakh
LTCG u/s 112 20%
STCG u/s 111A 15%
Casual Income 30%
Other Income 30%
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Surcharge 12% provided total income is exceeding ` 1 crore.
Marginal Relief Marginal relief shall be allowed if income has exceeded
` 1 crore.
Health & Education Cess 4%
C. In case of Domestic Company
If company Opts for Old Regime If company is a new If company Opts

manufacturing* for new Regime u/s
company and opts to pay tax 115BAA
under S. 115 BAB
If Total Turnover or gross receipts of the previous

25%
year 2021-22 does not exceed 400 Crore
In All other cases 30% 15% 22%
Manufacturing domestic company who opts
25%
to pay tax under section 115BA
Surcharge
Income Rate
10%
10%
Exceeds 1 Crore but upto 10 Crore 7% (Irrespective of
(Irrespective of Income)
Exceeds 10 Crore 12% Income)
Marginal Relief
Allowed Not Allowed Not Allowed
Health & Education Cess
4% 4% 4%

LTCG u/s 112A 10% of gain in excess of ` 1 Lakh
LTCG u/s 112 20%
STCG u/s 111A 15%
Casual Income 30%
*New manufacturing company means company registered on or after 1.10.2019 and starts production on or before
31.3.2024
Note: If Domestic company opts for S. 115BAA or S. 115BAB then deduction under chapter VI-A shall not be allowed
except u/s 80JJAA and 80M.
Example: Compute the tax liability of X Ltd., a domestic company, assuming that the total income of X Ltd. is
₹10,01,00,000 and the total income does not include any income in the nature of capital gains. Assuming, Total
Turnover or gross receipts of the previous year 2020-21 exceeds 400 Crore.
Total income 10,01,00,000

Tax on @ 30% 3,00,30,000
Add: Surcharge @ 12% 36,03,600
Tax before marginal relief 3,36,33,600

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Less: Marginal Relief (14,33,600)
Tax + surcharge @ 12% on income of `10,01,00,000 3,36,33,600
Tax + surcharge @ 7% on income of `10,00,00,000 (3,21,00,000)
Increase in tax 15,33,600
Marginal Relief (15,33,600 – 1,00,000) 14,33,600

Add: HEC @ 4% 12,88,000
Example: Suppose in above question if X ltd. Opted for new regime u/s 115BAA
Total income 10,01,00,000

Tax on @ 22% 2,20,22,000
Tax before cess 2,42,24,200
Add: HEC @ 4% 9,68,968
Round off 2,51,93,170
D. In Case of Foreign Company

LTCG u/s 112A 10% of gain in
excess of ` 1 Lakh
LTCG u/s 112 20%

STCG u/s 111A 15%
Casual Income 30%
Other income 40%
Surcharge
Income Rate
Exceeds 1 Crore but upto 10 Crore 2%
Exceeds 10 Crore 5%
Question 18: Compute tax liability of ABC Ltd. a domestic company. The company has income under the head Business/
Profession `5,00,00,000. Deduction under chapter VI-A available is ` 1,00,00,000.( Turnover for FY 2021-22 is 200 Crore)
Old Regime
Gross Total income 5,00,00,000
Less: Deductions under section 80C to 80 U 1,00,00,000
Total Income 4,00,00,000
Tax on @ 25% 1,00,00,000
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Add: HEC @ 4% 4,28,000
New Regime
Less: Deductions under section 80C to 80 U NIL
Tax on @ 22% 1,10,00,000
Add: HEC @ 4% 4,84,000
Question 19: Suppose ABC ltd. is a foreign company

Tax on @ 40% 1,60,00,000
Add: HEC @ 4% 6,52,800
Question 20: Suppose in above example assessee is partnership firm.

Tax on @ 30% 1,20,00,000
Add: HEC @ 4% 5,37,600
E. In case of Co-operative Societies
Old Regime
Income Tax Rate

On First 10,000 10%
Next 10,000 20%
Balance 30%

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Note – A manufacturing co-operative society, resident in India, can opt for concessional rates of tax under section 115BAE
and other co-operative societies, resident in India, can opt for concessional rates of tax under section 115BAD
Tax rate in case of a manufacturing co-operative society, resident in India (set up and registered on or after 1.4.2023 and
commences manufacture of article or thing before 31.3.2024) opting for concessional tax regime u/s 115BAE:
15% of income derived from or incidental to manufacturing or production of an article or thing
Tax rate in case of other resident co-operative society opting for concessional tax regime u/s 115BAD:
22% of total income
Surcharge:
Levied @ 7% if total income exceeds 50 lakhs but doesn’t exceed 10 crore
Levied @ 12% if total income exceeds 10 Crore
New Regime (i.e. opted for section 115BAD or section 115BAE)
If Co-operative society satisfy the conditions of S. 115BAD/115BAE then, Surcharge: Levied @ 10% compulsorily.
Marginal Relief: Not Applicable
Computation of Total Income
Particulars Amount
Income Under The Head Salaries –
Income Under The Head House Property –
Profits & Gains From Business and Profession –
Income Under The Head Capital Gains –
Income Under The Head Other Sources –
Gross Total Income –
Deductions from gross total income [Section 80C to 80U] –
Total Income –
Total Income shall be rounded off u/s 288A in the multiples of 10 and for this purpose, any paisa shall be ignored and if the
last digit is 5 or more, it will be rounded off to the higher multiple otherwise it will be rounded off to the lower multiple
Computation of Tax Liability (Old Regime)
Tax liability of an individual shall be computed at the slab rates given in the relevant Finance Act i.e. Finance Act, 2021 and
the rates are as given below:
Resident individual of the age of 60 years or more at any time upto the end of relevant previous year but less than eighty
years (senior citizen)
If Total Income Is Upto ` 3,00,000 Nil

On Next 2,00,000 5%
On Next 5,00,000 20%
On Balance Amount 30%
Resident individual of the age of 80 years or more at any time upto the end of relevant previous year (Very senior citizen)
On Next 5,00,000 20%
Any other Individual/ HUF/AOP/BOI/Artificial Judicial Person
P Basic Concepts 17
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Income shall be taxable at the slab rates given below:
On Next 2,50,000 5%
On Next 5,00,000 20%
Health and Education Cess

If any tax is charged for any specific purpose, it is called Cess. Health and Education Cess shall be charged @ 4% on the
amount of income tax.
Rounding off of Tax Section 288B

Any amount payable, and the amount of refund due, shall be rounded off in the multiples of ` 10 in the similar manner as
in case of total income under section 288A
Rebate Under Section 87A

Rebate shall be allowed only to RESIDENT INDIVIDUAL (not correct too non-resident individual or any other person).
Rebate shall be allowed only if total income is not exceeding ` 5,00,000.
Rebate shall be allowed upto ` 12,500.
Health & education cess shall be applied only after rebate under section 87A.
Taxability Of Special and Normal Income
Normal Income is taxable as per slab rate and also eligible for deduction u/s 80C to 80U. However Special income is
taxable at special rates as given under:
LTCG LTCG STCG Casual Income

Particulars
Sec 112A Sec 112 Sec 111A Sec 115 BB
Rate 10% on income above 20% 15% 30%
` 1 Lakh
Deduction Not Allowed Not Allowed Not Allowed Not Allowed

U/S 80C– 80 U
Rabate U/s 87A Not Allowed Allowed Allowed Allowed
Special provision for resident individual / HUF

In case of a resident individual / HUF if total income excluding
(a) long term capital gains u/s 112
(b) short term capital gain covered under section 111A, and
(c) LTCG u/s 112A
is below the amount which is exempt from income tax (i.e.2,50,000/3,00,000/5,00,000), in such cases deficiency in the
exemption shall be allowed from long term capital gains or short term capital gain under section 111A or long term capital
gains under section 112A as the case may be.

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ICAI QUESTIONS
ILLUSTRATIONS
Illustration 1: Mr. X has a total income of ` 12,00,000 for P.Y.2022-23, comprising of income from house property and
interest on fixed deposits. Compute his tax liability for A.Y.2023-24 assuming his age is
(a) 45 years (b) 63 years (c) 82 years
Assume that Mr. X has not opted for the provisions of section 115BAC.
Solution:
(a) Computation of Tax liability of Mr. X (age 45 years)
Tax liability:
First ` 2,50,000 - Nil
Next ` 2,50,001 – ` 5,00,000 - @5% of ` 2,50,000 = ` 12,500
Next ` 5,00,001 – ` 10,00,000 - @20% of ` 5,00,000 = ` 1,00,000
Balance i.e., ` 12,00,000 minus `10,00,000 - @30% of ` 2,00,000 = ` 60,000
= ` 1,72,500
Add: Health and Education cess@4% = `6,900
= ` 1,79,400
(b) Computation of Tax liability of Mr. X (age 63 years)
Tax liability:
First ` 3,00,000 - Nil
Next ` 3,00,001 – ` 5,00,000 - @5% of ` 2,00,000 = ` 10,000
Next ` 5,00,001 – ` 10,00,000 - @20% of ` 5,00,000 = ` 1,00,000
Balance i.e., ` 12,00,000 minus `10,00,000- @30% of ` 2,00,000 = ` 60,000
= ` 1,70,000
Add: Health and Education cess@4% = ` 6,800
= ` 1,76,800
(c) Computation of Tax liability of Mr. X (age 82 years)
Tax liability:
First ` 5,00,000 - Nil
Next ` 5,00,001 – ` 10,00,000 - @ 20% of ` 5,00,000 = ` 1,00,000
Balance i.e., ` 12,00,000 minus `10,00,000- @ 30% of ` 2,00,000 = ` 60,000
= ` 1,60,000
Add: Health and Education cess@4% = ` 6,400
= ` 1,66,400
Illustration 2: Compute the tax liability of Mr. A (aged 42), having total income of ` 51 lakhsfor the Assessment Year
2023-24. Assume that his total income comprises of salary income, Income from house property and interest on fixed deposit.
Assume that Mr. A has not opted for the provisions of section 115BAC.
Solution: Computation of tax liability of Mr. A for the A.Y.2023-24
(A) Tax payable including surcharge on total income of ` 51,00,000
` 2,50,000 – ` 5,00,000 @5% ` 12,500
` 5,00,001 – ` 10,00,000 @20% ` 1,00,000
` 10,00,001 – ` 51,00,000 @30% ` 12,30,000
Total ` 13,42,500
Add: Surcharge @ 10% ` 1,34,250 ` 14,76,750
(B) Tax Payable on total income of ` 50 lakhs (` 12,500 plus ` 1,00,000 plus ` 12,00,000) ` 13,12,500
(C) Total Income Less ` 50 lakhs ` 1,00,000
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(D) Tax payable on total income of ` 50 lakhs plus the
excess of total income over ` 50 lakhs (B + C) ` 14,12,500
(E) Tax payable: lower of (A) and (D) ` 14,12,500
Add: Health and education cess @4% ` 56,500
Tax liability ` 14,69,000
(F) Marginal Relief (A – D) ` 64,250
Alternative method
` 2,50,000 – ` 5,00,000@5% ` 12,500
` 5,00,001 – ` 10,00,000@20% ` 1,00,000
` 10,00,001 – ` 51,00,000@30% ` 12,30,000
Total ` 13,42,500
Add: Surcharge@10% ` 1,34,250 ` 14,76,750
(C) Excess tax payable (A)-(B) ` 1,64,250
(D) Marginal Relief (` 1,64,250 – ` 1,00,000, being the amount of income in excess of ` 50,00,000) ` 64,250
(E) Tax payable (A)-(D) ` 14,12,500
Illustration 3: Compute the tax liability of Mr. B (aged 51), having total income of ` 1,01,00,000for the Assessment Year
2023-24. Assume that his total income comprises of salary income, Income from house property and interest on fixed deposit.
Assumethat Mr. B has not opted for the provisions of section 115BAC.
Solution: Computation of tax liability of Mr. B for the A.Y. 2023-24
(A) Tax payable including surcharge on total income of ` 1,01,00,000
` 2,50,000 – ` 5,00,000@5% ` 12,500
` 5,00,001 – ` 10,00,000@20% ` 1,00,000
` 10,00,001 – ` 1,01,00,000@30% ` 27,30,000
Total ` 28,42,500
Add: Surcharge@15% ` 4,26,375
Tax liability without marginal relief ` 32,68,875
(B) Tax Payable on total income of ` 1 crore (` 12,500 plus ` 1,00,000 plus ` 27,00,000) ` 28,12,500
` 30,93,750
(C) Total Income Less ` 1 crore ` 1,00,000
(D) Tax payable on total income of ` 1 crore plus the excess of total income over ` 1 crore (B +C) ` 31,93,750
(E) Tax payable: lower of (A) & (B) ` 31,93,750
Add: Health and education cess @4% ` 1,27,750
(F) Marginal relief (A – D) ` 75,125
Alternative method:
` 2,50,000 – ` 5,00,000 @ 5% ` 12,500
` 5,00,001 – ` 10,00,000 @ 20% ` 1,00,000
` 10,00,001 – ` 1,01,00,000@30% ` 27,30,000
Total ` 28,42,500
Add: Surcharge @ 15% ` 4,26,375 ` 32,68,875
(B) Tax Payable on total income of ` 1 crore [(` 12,500 plus ` 1,00,000 plus ` 27,00,000)
plus surcharge@10%] ` 30,93,750

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(D) Marginal Relief (` 1,75,125 – ` 1,00,000, being the amount of income in excess of ` 1,00,00,000) ` 75,125
(E) Tax payable (A) – (D) ` 31,93,750
Illustration 4: Compute the tax liability of Mr. C (aged 58), having total income of ` 2,01,00,000 for the
Assessment Year 2023-24. Assume that his total income comprises of salary income, Income from house property and interest
on fixed deposit. Assume that Mr. C has not opted for the provisions of section 115BAC.
Solution: Computation of tax liability of Mr. C for the A.Y. 2023-24
` 2,50,000 – ` 5,00,000 @ 5% ` 12,500
` 5,00,001 – ` 10,00,000 @ 20% ` 1,00,000
` 10,00,001 – ` 2,01,00,000@30% ` 57,30,000
Total ` 58,42,500
Add: Surcharge @ 25% ` 14,60,625 ` 73,03,125
` 66,84,375
(D) Tax payable on total income of ` 2 crore plus the excess of total income over ` 2 crore (B + C) ` 67,84,375
(E) Tax payable (A) or (D), whichever is lower ` 67,84,375
(F) Marginal relief (A-D) ` 5,18,750
Alternative method
` 2,50,000 – ` 5,00,000 @ 5% ` 12,500
` 5,00,001 – ` 10,00,000 @ 20% ` 1,00,000
` 10,00,001 – ` 2,01,00,000@30% ` 57,30,000
Total ` 58,42,500
Add: Surcharge@25% ` 14,60,625 ` 73,03,125
(C) Excess tax payable (A)–(B) ` 6,18,750
(D) Marginal Relief (` 6,18,750 – ` 1,00,000, being the amount of income in excess of ` 2,00,00,000) ` 5,18,750
(E) Tax payable (A) – (D) ` 67,84,375
Add: Health and education cess@4% ` 2,71,375
Illustration 5: Compute the tax liability of Mr. D (aged 37), having total income of ` 5,01,00,000 for the
Assessment Year 2023-24. Assume that his total income comprises of salary income, Income from house property and interest
on fixed deposit. Assume that Mr. D has not opted for the provisions of section 115BAC.
Solution: Computation of tax liability of Mr. D for the A.Y. 2023-24
` 2,50,000 – ` 5,00,000 @ 5% ` 12,500
` 5,00,001 – ` 10,00,000 @ 20% ` 1,00,000
` 10,00,001 – ` 5,01,00,000@30% ` 1,47,30,000
Total ` 1,48,42,500
Add: Surcharge@37% ` 54,91,725 ` 2,03,34,225
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(B) Tax Payable on total income of ` 5 crore (` 12,500 plus
` 1,00,000 plus ` 1,47,00,000) ` 1,48,12,500
` 1,85,15,625
(D) Tax payable on total income of ` 5 crore plus the excess of total income over ` 5 crore (B + C) ` 1,86,15,625
(E) Tax payable (A) or (D), whichever is lower ` 1,86,15,625
Add: Health and education cess@4% ` 7,44,625
Tax liability ` 1,93,60,250
(F) Marginal Relief (A – D) ` 17,18,600
Alternative method
` 2,50,000 – ` 5,00,000@5% ` 12,500
` 5,00,001 – ` 10,00,000@20% ` 1,00,000
` 10,00,001 – ` 5,01,00,000@30% ` 1,47,30,000
Total ` 1,48,42,500
Add: Surcharge @ 37% ` 54,91,725 ` 2,03,34,225
(B) Tax Payable on total income of ` 5 crore
[(` 12,500 plus ` 1,00,000 plus ` 1,47,00,000)
plus surcharge@25%] ` 1,85,15,625
(D) Marginal Relief (` 18,18,600 – ` 1,00,000, being the amount of
income in excess of ` 5,00,00,000) ` 17,18,600
(E) Tax payable (A) - (D) ` 1,86,15,625
Tax liability ` 1,93,60,250
Illustration 6: Mr. Raghav aged 26 years and a resident in India, has a total income of ` 4,40,000, comprising his salary
income and interest on bank fixed deposit. Compute his tax liability for A.Y.2023-24.
Solution: Computation of tax liability of Mr. Raghav for A.Y. 2023-24
Particulars `
Tax on total income of ` 4,40,000
Tax@5%of ` 1,90,000 (` 4,40,000 – ` 2,50,000) 9,500
Less: Rebate u/s 87A (Lower of tax payable or ` 12,500) 9,500
Tax Liability Nil
Illustration 7: Mr. Dinesh aged 35 years and a resident in India, has a total income of ` 4,80,000, comprising of long term
capital gains taxable under section 112. Compute his tax liability for A.Y.2023-24.
Solution: Computation of tax liability of Mr. Dinesh for A.Y. 2023-24
Particulars `
Tax on total income of ` 4,80,000
Tax@20%of ` 2,30,000 (` 4,80,000 – ` 2,50,000, being unexhausted basic exemption limit) 46,000
Less: Rebate u/s 87A (Lower of ` 46,000 or ` 12,500) 12,500
33,500
Add: Health and education cess @4% 1,340
Tax Liability 34,840

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TEST YOUR KNOWLEDGE
1. Who is an “Assessee”?
Sol. As per section 2(7), assessee means a person by whom any tax or any other sumof money is payable under the
Income-tax Act, 1961.
In addition, the term includes
Every person in respect of whom any proceeding under the Act has beentaken for the assessment of
his income; or
the income of any other person in respect of which he is assessable; or
the loss sustained by him or by such other person; or
the amount of refund due to him or to such other person.
Every person who is deemed to be an assessee under any provision of theAct;
Every person who is deemed to be an assessee in default under anyprovision of the Act.
2. State any four instances where the income of the previous year is assessable in theprevious year itself instead
of the assessment year.
Sol. The income of an assessee for a previous year is charged to income-tax in the assessment year following the previous
year. However, in a few cases, the incomeis taxed in the previous year in which it is earned. These exceptions
have been made to protect the interests of revenue. The exceptions are as follows:
(i) Where a ship, belonging to or chartered by a non-resident, carries passengers, livestock, mail or goods
shipped at a port in India, the ship is allowed to leave the port only when the tax has been paid or
satisfactoryarrangement has been made for payment thereof. 7.5% of the freight paidor payable to the
owner or the charterer or to any person on his behalf, whether in India or outside India on account of
such carriage is deemed tobe his income which is charged to tax in the same year in which it is earned.
(ii) Where it appears to the Assessing Officer that any individual may leave India during the current assessment
year or shortly after its expiry and hehas no present intention of returning to India, the total income of such
individual for the period from the expiry of the respective previous year up tothe probable date of his
departure from India is chargeable to tax in that assessment year.
(iii) If an AOP/BOI etc. is formed or established for a particular event or purpose and the Assessing Officer
apprehends that the AOP/BOI is likely to be dissolved in the same year or in the next year, he can make
assessment ofthe income up to the date of dissolution as income of the relevant assessment year.
(iv) During the current assessment year, if it appears to the Assessing Officer that a person is likely to charge,
sell, transfer, dispose of or otherwise partwith any of his assets to avoid payment of any liability under this
Act, the total income of such person for the period from the expiry of the previous year to the date, when
the Assessing Officer commences proceedings underthis section is chargeable to tax in that assessment year.
(v) Where any business or profession is discontinued in any assessment year,the income of the period from
the expiry of the previous year up to the dateof such discontinuance may, at the discretion of the Assessing
Officer, be charged to tax in that assessment year.
3. Compute the tax liability of Mr. Kashyap (aged 35), having total income of ` 51,75,000 for the Assessment
Year 2023-24. Assume that his total income comprises of salary income, income from house property and interest
on fixed deposit. Assume that Mr. Kashyap has not opted for the provisions of section 115BAC.
Sol. Computation of tax liability of Mr. Kashyap for the A.Y.2023-24
` 2,50,000 – ` 5,00,000 @5% ` 12,500
` 5,00,001 – ` 10,00,000 @20% ` 1,00,000
` 10,00,001 – ` 51,75,000 @30% ` 12,52,500
Total ` 13,65,000
Add: Surcharge @ 10% ` 1,36,500 ` 15,01,500
(C) Total Income Less ` 50 lakhs ` 1,75,000
(D) Tax payable on total income of ` 50 lakhs plus the excess of
total income over ` 50 lakhs (B + C) ` 14,87,500
P Basic Concepts 23
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Alternative method

` 2,50,000 – ` 5,00,000@5% ` 12,500
` 5,00,001 – ` 10,00,000@20% ` 1,00,000
` 10,00,001 – ` 51,75,000@30% ` 12,52,500
Total ` 13,65,000
Add: Surcharge@10% ` 1,36,500 ` 15,01,500
(D) Marginal Relief (` 1,89,000 – ` 1,75,000, being the amount of income in excess of ` 50,00,000) ` 14,000
(E) Tax payable (A)-(D) ` 14,87,500
4. Compute the tax liability of Mr. Gupta (aged 61), having total income of ` 1,02,00,000 for the Assessment
Year 2023-24. Assume that his total income comprises of salary income, income from house property and interest
on fixed deposit. Assume that Mr. Gupta has not opted for the provisions of section 115BAC.
Sol. Computation of tax liability of Mr. Gupta for the A.Y.2023-24
` 3,00,000 – ` 5,00,000 @5% ` 10,000
` 5,00,001 – ` 10,00,000 @20% ` 1,00,000
` 10,00,001 – ` 1,02,00,000 @30% ` 27,60,000
Total ` 28,70,000
Add: Surcharge @ 15% ` 4,30,500 ` 33,00,500
` 30,91,000
(D) Tax payable on total income of ` 1 crore plus the excess of total
income over ` 1 crore (B +C) ` 32,91,000
Add: Health and education cess @4% 1,31,640
Alternative method
` 3,00,000 – ` 5,00,000@5% ` 10,000

` 5,00,001 – ` 10,00,000@20% ` 1,00,000

` 10,00,001 – ` 1,02,00,000@30% ` 27,60,000
Total ` 28,70,000
Add: Surcharge@15%
` 4,30,500 ` 33,00,500
(C) Excess tax payable (A)–(B) ` 2,09,500

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(D) Marginal Relief (` 2,09,500 – ` 2,00,000, being the amount of income in
excess of ` 1,00,00,000) ` 9,500
(E) Tax payable (A) – (D) ` 32,91,000
5. Mr. Agarwal aged 40 years and a resident in India, has a total income of ` 4,50,00,000, comprising
long term capital gain taxable under section 112 of ` 55,00,000, short term capital gain taxable under section
111A of ` 65,00,000 and other income of ` 3,30,00,000. Compute his tax liability for A.Y.2023-24. Assume that
Mr. Kashyap has not opted for the provisions of section 115BAC.
Sol. Computation of tax liability of Mr. Agarwal for the A.Y.2023-24
Particulars `
Tax on total income of ` 4,50,00,000
Tax@20% of ` 55,00,000 11,00,000
Tax@15% of ` 65,00,000 9,75,000
Tax on other income of ` 3,30,00,000
` 2,50,000 – ` 5,00,000 @5% 12,500
` 5,00,000 – ` 10,00,000 @20% 1,00,000
` 10,00,000 – ` 3,30,00,000 @30% 96,00,000 97,12,500
1,17,87,500
Add: Surcharge @15% on ` 20,75,000 3,11,250
@25% on ` 97,12,500 24,28,125 27,39,375
1,45,26,875
6. Mr. Sharma aged 62 years and a resident in India, has a total income of ` 2,30,00,000, comprising
long term capital gain taxable under section 112 of ` 52,00,000, short term capital gain taxable under section
111A of ` 64,00,000 and other income of ` 1,14,00,000. Compute his tax liability for A.Y.2023-24. Assume that
Mr. Sharma has not opted for the provisions of section 115BAC.
Sol. Computation of tax liability of Mr. Sharma for the A.Y.2023-24
Particulars `
Tax on total income of ` 2,30,00,000
Tax@20% of ` 52,00,000 10,40,000
Tax@15% of ` 64,00,000 9,60,000
Tax on other income of ` 1,14,00,000
` 3,00,000 – ` 5,00,000 @5% 10,000
` 5,00,000 – ` 10,00,000 @20% 1,00,000
` 10,00,000 – ` 1,14,00,000 @30% 31,20,000 32,30,000
52,30,000
Add: Surcharge @15% 7,84,500
60,14,500
P Basic Concepts 25
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PAST YEAR QUESTIONS
1. Mr. X Age 42 Years is resident in India and his incomes are as follows:
(a) Income under the head Salary ` 1,90,000
(b) Income under the head House Property ` 60,000
(c) Long term capital gains ` 2,30,000
(d) Short term capital gain under section 111A ` 2,40,000
(e) Casual Income ` 70,000
(f) Deduction under section 80C to 80U ` 2,00,000
Sol.
Particulars Amount
Income Under The Head House Property 60,000
Income Under The Head Capital Gains
LTCG u/s 112 2,30,000
STCG u/s 111A 2,40,000
Income Under The Head Other Sources (Casual Income) 70,000
Gross Total Income 7,90,000
Deductions from gross total income [Section 80C to 80U] 2,00,000
(Allowed from Normal Income)
Total Income 5,90,000
Computation of Tax
Particulars Amount
Tax on Normal Income ` 50,000 as per Slab rate Nil
Tax on Special Income
LTCG u/s 112 (2,30,000 -2,00,000) @ 20% 6,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Tax Liability Before Cess 63,000
Add: 4% HEC 2,520
2. Presume In Above Question Mr. X Is Non Resident.

Sol.
Computation of Tax
Particulars Amount
LTCG u/s 112 (2,30,000 @ 20%) 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Tax Liability Before Cess 1,03,000
Add: 4% HEC 4,120

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3. Presume in Ques. 1 Mr. X is of 62 Years Resident
Sol.
Computation of Tax
Particulars Amount
LTCG u/s 112 (2,30,000 -2,30,000) @ 20% Nil
STCG u/s 111A (2,40,000 – 20,000 @ 15%) 33,000
Casual Income 70,000 @ 30% 21,000

Add: 4% HEC 2,160
4. Presume in Ques. 1 Mr. X is of 82 Years Non-Resident
Sol.
Computation of Tax
Particulars Amount
LTCG u/s 112 (2,30,000 @ 20%) 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 4,120
5. Presume In question 1 his salary income is 90,000 Instead of 1,90,000. Calculate His Tax Liability. Assuming he is:
(a) Resident
(b) Non Resident
Sol.
(a) Resident
Particulars Amount
Income Under The Head Salaries 90,000
LTCG u/s 112 2,30,000
STCG u/s 111A 2,40,000
P Basic Concepts 27
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Computation of Tax
Particulars Amount
Tax on Normal Income Nil
LTCG u/s 112 (2,30,000 - 2,30,000) @ 20% NIL
STCG u/s 111A (2,40,000 - 20,000 @ 15%) 33,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 2,160
(b) Non-Resident
Computation of Tax
Particulars Amount
LTCG u/s 112 (2,30,000 @ 20%) 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 4,120
Surcharge
S. No Condition Surcharge Rate
1. Total Income Exceeds ` 50 Lakh but Upto ` 1 Crore
Including Income U/S 112A and 111A 10%
2. Total Income Exceeds ` 1 Crore but Upto ` 2 Crore
Including Dividend Income, income U/S 112A and 111A 15%
3. Total Income Exceeds ` 2 Crore but Upto ` 5 Crore 25 % on tax on other income
Excluding Dividend Income and income U/S 112A and 111A +
15% On tax on dividend income and
income u/s 112A & 111A
4. Total Income Exceeds ` 5 Crore 37 % on tax on other income
Excluding Dividend Income and income U/S 112A and 111A +
15% On tax on dividend income and
income u/s 112A & 111A
5. Total Income Exceeds ` 2 Crore
Including Dividend Income and income U/S 112A and 111A 15%
Not Covered under 3 & 4
6. Mr. X (Age 64 Years) is a resident individual, Details of his income for the Previous Year is as follows:
(a) LTCG ` 30,00,000
(b) LTCG u/s 112A ` 10,00,000
(c) STCG u/s 111A ` 3,00,000

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(d) Income under head salaries ` 28,00,000
(e) Casual Income ` 3,00,000
(f) Deduction u/s 80C to 80U ` 2,00,000
Sol.
Particulars Amount
Income under head salaries 28,00,000
Income Under head capital gains
LTCG 30,00,000
LTCG 112A 10,00,000
STCG 111A 3,00,000
Income from other sources (Casual Income) 3,00,000
Deductions u/s 80C to 80U (Allowed from normal income) 2,00,000
Calculation of Tax
Particulars Amount
Tax on Normal Income ` 26,00,000 as per Slab Rate 5,90,000
Tax on special income
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Tax Before Surcharge 14,15,000
Tax Before cess 15,56,500
Add: 4% HEC 62,260
7. Suppose in above question Income under head salaries is Rs 68,00,000. Calculate His Tax Liability.
Particulars Amount
LTCG 30,00,000
LTCG 112A 10,00,000
STCG 111A 3,00,000
Gross Total Income 1,14,00,000
P Basic Concepts 29
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Sol. Calculation of Tax
Particulars Amount
Tax on Normal Income ` 66,00,000 as per Slab Rate 17,90,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: 4% HEC 1,20,290
8. Suppose in above question Income under head salaries is Rs 1,72,00,000. Calculate His Tax Liability.
Sol.
Particulars Amount
Income under head salaries 1,72,00,000
LTCG 30,00,000
LTCG 112A 10,00,000
STCG 111A 3,00,000
Calculation of Tax
Particulars Amount
Tax on Normal Income ` 1,70,00,000 as per Slab Rate 49,10,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: Surcharge
25% of (49,10,000 + 6,00,000 + 90,000) = 14,00,000
15% of (90000 + 45000) = 20,250 14,20,250
Add: 4% HEC 2,86,210

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9. Suppose in above question Income under head salaries is ` 4,90,00,000. Calculate His Tax Liability
Sol.
Particulars Amount
LTCG 30,00,000
LTCG 112A 10,00,000
STCG 111A 3,00,000
Calculation of Tax
Particulars Amount
Tax on Normal Income ` 4,88,00,000 as per Slab Rate 1,44,50,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Tax Before Surcharge 1,52,75,000

Add: Surcharge
37% of (1,44,50,000 + 6,00,000 + 90,000) = 56,01,800
15% of (90000 + 45000) = 20,250 56,22,050
Tax Before cess 2,08,97,500
Add: 4% HEC 8,35,900
(a) LTCG ` 2,00,000
(b) LTCG u/s 112A ` 1,10,00,000
(c) STCG u/s 111A ` 1,13,00,000
(d) Salary (Computed) ` 20,00,000

P Basic Concepts 31
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Sol.
Computation of Total Income
Particulars Amount
Income under head Salaries 20,00,000

Income under head Capital Gain
LTCG u/s 112 2,00,000
LTCG u/s 112A 1,10,00,000
LTCG u/s 111A 1,13,00,000
Less: Deduction u/s 80C to 80U 2,00,000
Computation of Tax
Particulars Amount
Tax on Normal Income ` 18,00,000 as per Slab rate 3,50,000
LTCG (2,00,000 @ 20%) 40,000
LTCG u/s 112A (1,10,00,000 – 1,00,000) @ 10% 10,90,000
STCG u/s 111A (1,13,00,000 @ 15%) 16,95,000
Tax Before Cess 36,51,250
Add: 4% HEC 1,46,050
Marginal Relief
If Income exceeds certain specified limit, then surcharge is applicable or higher rate of surcharge is applicable.
However, if increase in income due to which surcharge becomes applicable or higher surcharge is applicable,
then in that case increase in tax liability including surcharge shall not be more than increase in income, otherwise
Marginal Relief is allowed.
Marginal Relief = Increase in tax liability – Increase in Income
Eg. Tax on ` 50 Lakh is ` 13,12,500
However if assessee earns ` 50,01,000, then his tax liability shall be as follows:
Upto ` 10,00,000 1,12,500

Balance Rs 40,01,000 12,00,300
Add: Surcharge @10% 1,31,280
Tax Including Surcharge 14,44,080
Less Marginal Relief (Working Note) 1,30,580
Working Note:
(a) Increase in income which levied Surcharge = ` 1000
(b) Increase in Tax Liability (14,44,080 – 13,12,500) = 1,31,580
(c) Relief (A-B) = (1,31,580 – 1000) i.e. 1,30,580
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11. Mr. J has income as given below:
Income under the head PGBP ` 300,00,000

LTCG 112A ` 51,00,000
STCG 111A ` 50,00,000
Dividend from domestic company ` 100,00,000
Compute his tax liability.
Sol.
Computation of Total Income and Tax Liability of Mr. X
Particulars Amount
Income under the head PGBP 300,00,000
LTCG 112A 51,00,000
STCG 111A 50,00,000
Dividend from domestic company 100,00,000
Less: Deductions u/s 80C to 80U Nil
Computation of Tax Liability
Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000

Tax on STCG 50,00,000 @15% u/s 111A 7,50,000
Tax on 4,00,00,000 at slab rate 118,12,500
Add: Surcharge @ 15% on 12,50,000 1,87,500
Add: Surcharge on Dividend Income
(1,18,12,500/4,00,00,000 × 1,00,00,000 = 29,53,125) X 15% 4,42,968.75
Add: Surcharge on PGBP Income
(1,18,12,500/4,00,00,000 x 3,00,00,000 = 88,59,375) X 25% 22,14,843.75
Tax Before cess 159,07,812.50
Add: Health and education cess @ 4% 6,36,312.50
Rounded off u/s 288B 165,44,130
12. Suppose income in Q.11 under the head PGBP ` 600,00,000
Sol.

LTCG 112A 51,00,000
STCG 111A 50,00,000
P Basic Concepts 33
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Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000

Tax on STCG 50,00,000 @15% u/s 111A 7,50,000
Add: Surcharge @ 15% on 12,50,000 1,87,500
(208,12,500/7,00,00,000 x 1,00,00,000=29,73,214.29) X 15% 4,45,982.14
(208,12,500/7,00,00,000 x 6,00,00,000 = 178,39,285.71) X 37% 66,00,535.71
Tax Liability 304,68,378.56
13. Suppose income in Q.11 under the head PGBP `90,00,000

Sol.
`
LTCG 112A 51,00,000
STCG 111A 50,00,000
Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000

Tax on STCG 50,00,000 @15% u/s 111A 7,50,000
Add: Health and education cess @ 4% 3,11,075
14. Mr. X has income as given below:
Income under the head Salary ` 150,00,000
LTCG 112A ` 21,00,000
STCG 111A ` 10,00,000
Dividend from domestic company ` 30,00,000
Compute his tax liability.

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Sol.
`
Income under the head Salary 150,00,000
LTCG 112A 21,00,000
STCG 111A 10,00,000
Tax on LTCG 20,00,000 (21,00,000-1,00,000) @ 10% u/s 112A 2,00,000

Tax on STCG 10,00,000 @15% u/s 111A 1,50,000
Add: Health and education cess @ 4% 2,55,875
15. Suppose in Q.14 income under the head Salary ` 300,00,000

Sol.
`
LTCG 112A 21,00,000
STCG 111A 10,00,000

Tax on LTCG 20,00,000 (21,00,000-1,00,000) @ 10% u/s 112A 2,00,000
Tax on STCG 10,00,000 @15% u/s 111A 1,50,000
Add: Surcharge @ 15% on 3,50,000 52,500
(97,12,500/3,30,00,000 x 30,00,000= 8,82,954.55) X 15% 1,32,443.18
Add: Surcharge on salary Income
(97,12,500/330,00,000 x 300,00,000 =88,29,545.45) X 25% 22,07,386.36
P Basic Concepts 35
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16. Suppose income in Q.14 under the head Salary ` 500,00,000
Sol.
`
LTCG 112A 21,00,000
STCG 111A 10,00,000
Tax on LTCG 20,00,000 (21,00,000-1,00,000) @ 10% u/s 112A 2,00,000

Tax on STCG 10,00,000 @15% u/s 111A 1,50,000
Add: Surcharge @ 15% on 3,50,000 52,500
(157,12,500/5,30,00,000 x 30,00,000 = 8,89,386.79) X 15% 1,33,408.02
Add: Surcharge on Salary Income
(157,12,500/530,00,000 x 500,00,000 = 148,23,113.21) X 37% 54,84,551.89
17. Mr. X has long term capital gain `31 lakh and normal income ` 70 lakh
18. Mr. X Age 42 Years is resident in India and his incomes are as follows:
(a) Income under the head Salary `1,90,000
(b) Income under the head House Property `60,000
(c) Long term capital gains `2,30,000
(d) Short term capital gain under section 111A `2,40,000
(e) Casual Income `70,000
(f) Deduction under section 80C to 80U `2,00,000
Calculate His Tax Liability If he has not opted for deault scheme.
Sol.
Particulars `
Income Under The Head Capital Gains 2,30,000
LTCG u/s 112 2,40,000
STCG u/s 111A

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Particulars `
Tax on Normal Income Rs. 50,000 as per Slab rate Nil
LTCG u/s 112 (2,30,000 -2,00,000) @ 20% 6,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 2,520
19. Presume In Above Question Mr. X Is Non Resident.
Sol.
Particulars `

LTCG u/s 112 (2,30,000 -2,00,000) @ 20% 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 4,120
20. Presume in Ques. 1 Mr. X is of 62 Years Resident
Sol.
Particulars `

LTCG u/s 112 (2,30,000 -2,30,000) @ 20% Nil
STCG u/s 111A (2,40,000 – 20,000 @ 15%) 33,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 2,160
P Basic Concepts 37
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21. Presume in Ques. 1 Mr. X is of 82 Years Non-Resident
Sol.
Particulars `

LTCG u/s 112 (2,30,000 @ 20%) 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 4,120
22. Presume In question 1 his salary income is 90,000 Instead of 1,90,000. Calculate His Tax Liability. Assuming he is:
(a) Resident
(b) Non Resident
Sol.
(a) Resident
Particulars `
Income Under The Head Salaries 90,000
LTCG u/s 112 2,30,000
STCG u/s 111A 2,40,000
Particulars `
Tax on Normal Income Nil

LTCG u/s 112 (2,30,000 - 2,30,000) @ 20% NIL
STCG u/s 111A (2,40,000 - 20,000 @ 15%) 33,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 2,160

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(b) Non-Resident
Particulars `
LTCG u/s 112 (2,30,000 @ 20%) 46,000
STCG u/s 111A (2,40,000 @ 15%) 36,000
Casual Income 70,000 @ 30% 21,000
Add: 4% HEC 4,120
(a) LTCG Rs. 30,00,000
(b) LTCG u/s 112A Rs. 10,00,000
(c) LTCG u/s 111A Rs. 3,00,000
(d) Income under head salaries Rs. 28,00,000
(e) Casual Income Rs. 3,00,000
(f) Deduction u/s 80C to 80U Rs. 2,00,000
Calculate His Tax Liability If he has not opted for default scheme.
Sol.
Particulars `
LTCG 30,00,000
LTCG 112A 10,00,000
LTCG 111A 3,00,000
Calculation of Tax Liability
Particulars `
Tax on Normal Income Rs. 26,00,000 as per Slab Rate 5,90,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: 4% HEC 62,260
P Basic Concepts 39
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24. Suppose in above question Income under head salaries is Rs 68,00,000. Calculate His Tax Liability.
Particulars `
LTCG 30,00,000
LTCG 112A 10,00,000
LTCG 111A 3,00,000
Particulars `
Tax on Normal Income Rs. 66,00,000 as per Slab Rate 17,90,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: 4% HEC 1,20,290
25. Suppose in above question Income under head salaries is Rs 1,72,00,000. Calculate His Tax Liability.
Sol.
Particulars `
LTCG u/s 112 30,00,000
LTCG 112A 10,00,000
LTCG 111A 3,00,000
Particulars `
Tax on Normal Income Rs. 1,70,00,000 as per Slab Rate 49,10,000
LTCG 30,00,000 @ 20% 6,00,000

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LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: Surcharge 57,35,000 x 15% 8,60,250
Add: 4% HEC 2,63,810
26. Suppose in above question Income under head salaries is Rs 4,90,00,000. Calculate His Tax Liability
Sol.
Particulars `
LTCG 30,00,000
LTCG 112A 10,00,000
LTCG 111A 3,00,000
Particulars `
Tax on Normal Income Rs. 4,88,00,000 as per Slab Rate 1,44,50,000
LTCG 30,00,000 @ 20% 6,00,000
LTCG 112A (10,00,000 – 1,00,000)@ 10% 90,000
STCG 111A 3,00,000 @ 15% 45,000
Casual Income 3,00,000 @ 30% 90,000
Add: Surcharge
37% of (1,44,50,000 + 90,000) = 53,79,800
15% of (90000 + 6,00,000 + 45000) = 20,250 54,00,050
Tax Before cess 2,06,75,050
Add: 4% HEC 8,27,002
(a) LTCG Rs. 2,00,000
(b) LTCG u/s 112A Rs. 1,10,00,000
(c) LTCG u/s 111A Rs. 1,13,00,000
(d) Salary (Computed) Rs. 20,00,000
(e) Deduction u/s 80C to 80U Rs. 2,00,000
P Basic Concepts 41
W

Sol.
Computation of Tax Income
Particulars `
Income under head Salaries 20,00,000
Income under head Capital Gain
LTCG u/s 112 2,00,000
LTCG u/s 112A 1,10,00,000
LTCG u/s 111A 1,13,00,000
Less: Deduction u/s 80C to 80U 2,00,000
Computation of Tax
Particulars `
Tax on Normal Income Rs. 18,00,000 as per Slab rate 3,50,000
LTCG (2,00,000 @ 20%) 40,000
LTCG u/s 112A (1,10,00,000 – 1,00,000) @ 10% 10,90,000
STCG u/s 111A (1,13,00,000 @ 15%) 16,95,000
Tax Before Cess 36,51,250
Add: 4% HEC 1,46,050

W

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1A Basic Concepts

DIRECT TAX & INDIRECT TAX

Direct Tax Indirect Tax

CONSTITUTIONAL VALIDITY OF TAXES

CH-1A_Basic Concecpt.indd 1 02-08-2023 17:16:46

Central Board of Direct

Ministry of Finance Department of Revenue

Central Board of Indirect

SOURCES OF INCOME TAX LAW IN INDIA

2 Taxation (Income Tax) P

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PREVIOUS YEAR [SECTION 3]

Business or profession newly set up during the financial year

ASSESSMENT YEAR (A.Y.) [SECTION 2(9)]

ASSESSEE [SECTION 2(7)]

PERSON [SECTION 2(31)]

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HEADS OF INCOME [SECTION 14]

DIFFERENCE BETWEEN HEADS OF INCOME AND SOURCES OF INCOME

4 Taxation (Income Tax) P

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DEFAULT TAX REGIME

Income Tax Rate

Under the Head Salaries

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3. Depreciation or additional depreciation: Depreciation u/s 32 is to be determined in the prescribed manner.

6 Taxation (Income Tax) P

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COMPUTATION OF TAX LIABILITY (OLD REGIME / ALTERNATIVE SCHEME / NORMAL

Income Tax Rate

Income Tax Rate

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Income Tax Rate

HEALTH AND EDUCATION CESS

ROUNDING OFF OF TAX [SECTION 288B]

Particulars Amount (`)

Question 2: Suppose Age of Binod Is 60 Years

8 Taxation (Income Tax) P

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Tax before Marginal Relief 14,76,750

Tax after marginal relief 14,12,500

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Tax after marginal relief 32,93,750

Tax after marginal relief 1,90,15,625

REBATE [SECTION 87A]

10 Taxation (Income Tax) P

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TAXABILITY OF CASUAL INCOME

TAXABILITY OF CAPITAL GAINS

Long Term Capital Gains Short Term Capital Gains

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Particulars Amount (`)

Question 13A: Suppose In Above Question Mr.J is of 80 Year

UNEXPLAINED MONEY, INVESTMENTS ETC. [SECTION 115BBE]

12 Taxation (Income Tax) P

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ANALYSIS OF TAXABILITY OF SPECIAL INCOME

LTCG LTCG STCG Casual Income Net Winnings Unexplained money

Rate 10% on income 20% 15% 30% 30% 78%

B. In case of Partnership Firm Including LLP

Special Income Tax Rate

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C. In case of Domestic Company