DT Part 2 - 18233359 - 2024 - 01 - 23 - 08 - 53

CS Vikas Vohra CA CS Harish A.
Mathariya
CS Vikas Vohra CA CS Harish A. Mathariya

Founders
INDEX
DIRECT TAX (PART - 2)
SN Chapter Name No of No of Page No
Illustrations Mcq’s
7 Capital Gain 9 112 7.1 - 7.63
8 Income from Other Source 7 76 8.1 – 8.32
9 Clubbing of Income 7 43 9.1 – 9.19
10 Set Off and Carry Forward of Losses - 48 10.1 – 10.21
11 Permissible Deduction from Total 9 129 11.1 - 11.67
Income
12 TDS And TCS 2 85 12.1 – 12.54
13 Advance Tax - 16 13.1 – 13.05
14 Regulatory Framework - 12 14.1 – 14.14
15 Assessment Procedure 7 96 15.1 – 15.63
16 Computation of Total Income 2 53 16.1 - 16.29
17 Appeal, Revision, Penalty and - 19 17.1 – 17.30
Prosecution
18 Collection and Recovery of Tax - 8 18.1 – 18.08
CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 CAPITAL GAIN
CHAPTER 7 CAPITAL GAIN
MEANING & BASIS OF CHARGE [SEC. 45]
Meaning As per section 45(1) profits or gain arising on transfer of a capital asset shall be
chargeable under the head capital gains.
Conditions
1 There should be capital Asset
2 The Capital Assets is Transferred By the Assessee
3 Such transfer takes place during the previous year
4 Such gain is not exempt u/s. 54.
CONDITION 1: THERE SHOULD BE CAPITAL ASSET [SEC. 2(14)]
(a) Property of any kind held by an assessee, whether or not connected with his business or
profession
(b) Any securities held by a Foreign Institutional investor which has invested in such securities
in accordance with the SEBI regulations.
(c) Any unit linked insurance policy (ULIP) issued on or after 1/2/2021 to which exemption
under section 10(10D) does not apply on account of – [Amendments Fin Act 2021]
i Premium payable exceeding ₹ 2,50,000 for any of the previous years during the term
of such policy; or
ii The aggregate amount of premium exceeding ₹ 2,50,000 in any of the previous years
during the term of any such ULIP(s), in a case where premium is payable by a person
for more than one ULIP issued on or after 1/2/2021.
1 Any stock-in-trade, consumable stores or raw material held for the purposes of business
or profession.
2 Personal effect means any movable property held for personal use of the assessee or for
any dependent member of his family but excludes.
a Jewellery
b Archaeological Collection
c Drawings.
d Paintings
e Sculptures
f Any work of art.
Note: House Property is immovable property hence shall not be treated as personal effect.
Explanation:
For the purpose of this sub-clause, “jewellery” includes –
YES ACADEMY FOR CS 8888 235 235 7.1

a Ornaments made of gold, silver, platinum or any other precious metal or any alloy
containing one or more of such precious metals, whether or not containing any precious
or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
b Precious and semi-precious stones, whether or not set in any furniture, utensil or other
articles or worked or sewn into any wearing apparel;
3 Rural agriculture land in India i.e., agricultural land in India which is not situated in any
specified area. As per definition, only rural agricultural lands in India are excluded from
the purview of the term ‘capital asset;. Hence urban agricultural lands constitute capital
assets.
4 6.5% gold bonds, 1977, 7% gold bonds, 1980 or National defence gold bonds, 1980 issued
by central government.
5 Special bearer bonds 1991 issued by central government.
6 Gold deposit bonds issued under the gold deposit scheme 1999.
Explanations: For the removal of doubts, it is hereby clarified that “property” includes and shall
be deemed to have always included any rights in or in relation to an Indian company, including
rights of management or control or any other rights whatsoever;
Examples of Capital Asset:

Asset Whether Reason
Capital
Asset?
Throne, made up of gold, Diamonds, Ruby YES It is Jewellery
& other precious stones
Gold Watch NO Personal effect
Gold Pen NO Personal effect
Mobile Phone NO Personal effect
House Property used for Personal YES Personal effect does not include
purpose immovable properties.
Shirt of Vipul Shah NO Personal effect
Shirt with Diamond buttons sewn into it. YES Jewellery
B.M.W bike used by brother, dependent NO Personal effect include assets used
by members of family dependent
upon him
Painting of M. F. Hussain YES Personal effect exclude painting
Agricultural land situated in urban area YES Not situated in rural area
Non-agricultural land in rural area YES Not an agricultural area
Agricultural land in rural area, used for YES Not used for agricultural purpose
non-agricultural purposes, permanently.

Agricultural land in rural area, used for NO Specifically excluded

agricultural purposes
House property sold by a Builder NO It is Stock in Trade
Shares, debentures, bonds etc. YES Except Gold Deposit Bonds.
Capital Indexed Bonds YES Not exclude in 2(14)
Goodwill YES Capital assets include intangible
assets.
MY NOTES
Important judicial pronouncement
Held that – the land is an independent and identifiable capital asset and it continues to remains
as an identifiable capital asset even after construction of building. In this case capital gain
calculation separately for land and building after splitting up the sale consideration for the land
and building.
TYPES OF CAPITAL ASSET & POH
1. This distinguishment depends upon the period of holding (POH) of the asset, as
summarized below –
No. Nature of asset STCA LTCA
1. A security (other than unit) listed in a recognized stock
exchange in India,
POH <= 12 POH <= 12
2. Units of UTI or Equity oriented Mutual Fund specified u/s
months months
10(23D),
3. Zero coupon bond
4. Unlisted shares Immovable property being land or building POH <= 24 POH > 24
or both months months
5. • Unit of debt oriented fund
POH <= 36 POH > 36
• Unlisted securities other than shares
months months
• Other capital assets
2. Period of holding applicable to different assets

Shares (equity or preference) or Debentures or bonds listed in RSE in India 12 months
Shares (equity or preference) or Debentures or bonds listed in SE outside 36 months
India
Unlisted Shares (equity or preference) 24 months
Units of UTI 12 months
Units of equity oriented MF 12 months
Units of Debts fund or money market mutual fund 36 months

Zero coupon Bonds 12 months

Land or Building or both 24 months
Debenture or bond 36 months
Any other Asset 36 months
3 Period of holding
It means the period for which the asset is held by the assessee. It starts from the day
following the date of acquisition and ends on the date of transfer
Day following the date

Period of holding Date of transfer
of acquisition
1. Illustration
State whether the following assets are short-term capital assets or long-term capital assets:
No. Particulars Nature
of Asset
1 Jewellery purchased on 1/7/2018 and sold on 7/3/2024
2 Shares in Walnut Ltd (unlisted) purchased on 7/7/2021 and sold on 14/9/2023.
3 Personal car purchased on 18/8/1997 and sold on 17/8/2023
4 A residential house used for own occupation constructed on 17/7/1992 & sold
on 15/04/23.
5 Units of UTI purchased on 14/5/2023 and sold on 1/1/2024.
6 Zero coupon bonds purchased on 6/6/2022 and sold on 11/11/2023.
7 Drawings purchased on 1/1/2016 and sold on 12/12/2024.
8 Shares purchased (listed) on 1/4/21 and sold on 15/09/23.
CONDITION B: THE CAPITAL ASSETS IS TRANSFERRED BY THE ASSESSEE
Transfer u/s. 2(47) means

a The Sale, exchange or relinquishment (to withdraw) of the asset.
b The compulsory acquisition of asset under any law.
c Conversion of asset into stock-in-trade.
d Redemption of Zero coupon bonds.
e Possession of property under part performance of contract of the nature referred in section
53A of the transfer of property Act 1882.
f Any transaction by which has the effect of transferring of any immovable property.

SALE
1. The term sale has not defined in the income tax act, as per its meaning can be applied as:
In case of movable property As per sale of Goods act, 1930
In case of Immovable property As per Transfer of property Act, 1992.
2. Sale
Sale means voluntary conveyance of ‘property’ in the goods by one person to another for
consideration in ‘money’
3. Exchange
Exchange means voluntary conveyance of Property in the goods by one person to another for
consideration in kind.
Transfer of loose diamonds
Mr. A Mr. B
Transfer of shares
Key Point: The sale consideration shall be the FMV of the thing received in kind.
4. Relinquishment: to give up
It means Voluntary conveyance of property in the goods without consideration. For example
gift, will or appointing a trust, etc.
5. Extinguishment: involuntary transfer of rights by one person to another
To extinguish means to put a total end to something. It indicates a complete wipe out,
destruction or annihilation of contract, rights, title, interest or a debt or other obligation
whether the effect is produced by the act of God, or by operation of law or by the act of
party.
Key Points:
1. There should be destruction or extinction of Rights and not Capital asset. (exception
45(1A))
2. If any asset is destroyed by any of the following reasons, destruction shall be deemed
to be transfer. Sec 45(1A):
a. Natural calamity,
b. Riot and civil disturbance,
c. Action taken by enemy or combating an enemy (with or without declaration of war),
d. Accident fire or war
3. In such cases, insurance compensation is deemed to be sale consideration,
4. Accident, Theft not covered by sec 45(1A) & hence insurance claim not be treated as
sale consideration,
5. Voluntary act of extinguishment of rights is not a transfer
6. Compulsory Acquisition under any Law
To be discussed later when we study section 45(5)

7. Conversion of capital asset into stock in trade

To be discussed later.
8. Part performance of contract
Any transaction involving the allowing of the possession of any immovable property to be
taken or retained in part performance of a contract of the nature referred on in section
53A of the Transfer of Property Act, 1882 subject to fulfilment of the following conditions:
• There should be a valid contract of sale
• Transfer should be of an immovable property
• Buyer must have paid the consideration or shall be ready to pay the same
• Seller has transferred the possession to the buyer.
9. Asset allotted by co – op society
Any transaction (whether by way of becoming a member of, or acquiring shares in a co-
operative society, company or other association of persons or by way of any agreement or
any agreement or in any other manner whatsoever.) which has the effect of transferring, or
enabling the enjoyment of any immovable property.
Key Points
1. The shareholder/ members are deemed owners
2. The legal owner is the co-operative society or company
3. There should be a transfer of right to use & enjoyment of any immovable property.
10. The maturity or redemption of Zero coupon bonds
Note: There is no interest payable on such bonds. Benefits are receivable only at the
time of maturity or redemption.
COMPUTATION OF CAPITAL GAIN [SECTION 48]
1. Computation of Short term Capital Gain

Particulars Rs.
Full value of consideration XXX
(-) Expenditure on transfer XXX
= Net sale consideration XXX
(-) Cost of acquisition XXX
(-) Cost of improvement XXX
= Short term capital gain XXX
(-) Exemption u/s. 54 XXX
= Taxable STCG XXX
2. Computation of Long term Capital Gain
Particulars Rs.
Full value of consideration XXX
(-) Expenditure on transfer XXX

= Net sale consideration XXX

(-) Indexed Cost of acquisition XXX
(-) Indexed Cost of improvement XXX
= Long term capital gain XXX
(-) Ded. u/s. 54 XXX
KEY NOTE
No deduction will be allowed in respect payment of securities transaction tax in computing
income under the head “Capital Gain”.
WHAT IS A FULL VALUE OF CONSIDERATION
a It is a full value of consideration received or receivable by the transferor.

b If consideration received in kind them fair market value of asset is considered as full value
of consideration.
c Even if a consideration received in instalments in different years full value of consideration
is important.
EXPENSES ON TRANSFER
Expenses on transfer include any expenditure incurred whether directly or indirectly for the
purpose of transfer like advertisement expenses, brokerage, and stamp duty. Registration fees,
legal expenses etc. However any expenses which have been claimed as a deduction under any
other provision of the act cannot be claimed as a deduction under this clause.
COST OF ACQUISITION [SEC. 55(2)]
COST OF ACQUISITION
Purchase Price of Asset +

Deemed cost of Indexed cost of
Expenditure incurred to
acquisition acquisition
purchase an asset
Inflation adjusted cost of

Cost to previous owner
asset

Cost of acquisition of an asset is the value for which it was acquired by the assessee.
Following points should be considered.
1 Cost of acquisition includes expenses incurred in acquiring the assets or completing the title.
2 Interest on money borrowed for acquiring capital asset will form part of cost of asset. But
after acquisition it will be treated as revenue expenditure.
3 Interest paid by firm to its partner capital contribution for the purchase of capital asset
cannot be treated as part of acquisition.
4 Deemed Cost of Acquisition [Section 49(1)]:
a On the distribution of the assets on total / partial partition of Hindu Undivided Family.
b Under a gift or will.
c By succession, inheritance or devolution;
d On any distribution of assets on the liquidation of a company;
e Under a transfer to a revocable or irrevocable trust;
f On a transfer by a wholly owned Indian subsidiary company to its holding company or vice
versa;
g On any transfer in a scheme of amalgamation of two Indian companies subject to certain
conditions u/s. 47(vi)
h On any transfer in a scheme of amalgamation of two foreign companies subject to certain
conditions.
i On any transfer of a capital asset by the banking company to the banking institution in a
scheme of amalgamation of a banking company with a banking institution;
j On conversion of self-acquired property of a member of a Hindu Undivided Family to the
joint family property.
INDEXED COST OF ACQUISITION (EXPLANATION (III) TO SECTION 48)
Cost inflation index for any year such index as the Central Government may specify after
considering 75% of the average rise in the consumer price index for urban non – manual employee
it will be computed on the basis of Consumer Price Index (Urban)) for the immediately preceding
previous year to such previous year by notification in the Official Gazette.
KEY NOTES
Indexed cost of acquisition has to be ascertained with reference to the date of acquisition and
not with reference to the date when such asset became a capital asset.
Cost Inflation Index for different financial years is as follows:

Financial year Index Financial year index
2001 – 02 100 2012 – 13 200
2002 – 03 105 2013 – 14 220
2003 – 04 109 2014 – 15 240

2004 – 05 113 2015 – 16 254

2005 – 06 117 2016 – 17 264
2006 – 07 122 2017 - 18 272
2007 – 08 129 2018 – 19 280
2008 – 09 137 2019 - 20 289
2009 – 10 148 2020 – 21 301
2010 – 11 167 2021 – 22 317
2011 – 12 184 2022 - 23 331
COST OF ACQUISITION OF ASSETS ACQUIRED BEFORE 1-4-2001 [SECTION 55(2) (B)]
Acquired by Cost of acquisition

Assessee himself Cost of acquisition or fair market value as on 01-04-2001
whichever is more
Acquired under section 49(1) Cost of acquisition to previous owner or fair market value
mentioned above. as on 01-04-2001 whichever is more.
[Finance Act 2020]
The above provision has been modified with effect from the Assessment Year 2021 – 22. The
modified version provides that in case of a capital asset (being land or building or both), the fair
market value of such an asset on April 1, 2001 shall not exceed the stamp duty value of such
asset as on April 1, 2001 where such stamp duty value is available.
KEY NOTES
The option in the above case is not available for depreciable assets.
COST OF ACQUISITION OF ASSETS ACQUIRED BEFORE 1-4-2001 [SECTION 55(2) (B)]
The cost of acquisition in relation to the long-term capital assets being

• Equity shares in a company on which STT is paid both at the time of purchase and transfer
or
• Unit of equity oriented fund or unit of business trust on which STT is paid at the time of
transfer.
Acquired before 1st February, 2018 shall be the higher of
i Cost of acquisition of such asset; and
ii Lower of
a The fair market value of such asset; and
b The full value of consideration received or accruing as a result of the transfer of the
capital asset.

• Benefit of Indexation not available

• Indexation not available
Notes
• Deduction u/s 80C to 80U is not available

• Rebate u/s 87A is not available
Meaning of fair market value

S N Circumstance Fair Market Value
1 In a case where the capital asset is If there is trading in such asset on such
listed on any recognized stock exchange on 31/01/2018
exchange as on 31/01/2018 The highest price of the capital asset quoted on
such exchange on the said date
If there is no trading in such asset on such
exchange on 31/01/2018
The highest price of such asset on such exchange
on a date immediately preceding 31/01/2018
when such asset was traded on such exchange
2 In a case where the capital asset is a The net asset value of such unit as on the said
unit which is not listed in any date
recognized stock exchange as on
31/01/2018
3 In a case where the capital asset is an An amount which bears to the cost of acquisition
equity share in a company which is the same proportion as CII for the financial year
• Not listed on a recognized stock 2017 – 18 bears to the CII for the first year in
exchange as on 31/01/2018 but which the asset was held by the assesse or on
listed on such exchange on the 01/04/2001, whichever is later.
date of transfer
• Listed on a recognized stock
exchange on the date of transfer
and which became the property of
the assesse in consideration of
share which is not listed on such
exchange as on 31/01/2018 by way
of transaction not regarded as
transfer under section 47
2. Illustration
Consider the following situations (1,000 shares are transacted by Bombay Stock Exchange but
value of 1 equity shares is given below) –
Particulars Situation Situation Situation Situation 4 Situation
1 Rs. 2 Rs. 3 Rs. Rs. 5 Rs.

Cost of acquisition on Sep. a 410 710 900 800 30

20, 2019
Fair market value as per b 730 780 300 1000 100
highest quotation on January
31, 2020
Sale consideration on march c 760 650 910 825 400
15, 2024
Fair market value for the purpose of calculating tax liability under section 112A shall be calculated
as follows-
Situation Situation Situation Situation Situation Situation
1 2 3 4 5 6
Rs. Rs. Rs. Rs. Rs. Rs.
Step 1 - Cost of (a) 410 710 900 800 30
acquisition on September
20, 2019
Step 2 - Fair market value
as per highest quotation on (b) 730 780 300 1,000 100
January 31, 2020
- Selling price on 15-03- (c) 760 650 910 825 400
2024
- [Lower of (b) or (c)] (d) 730 650 300 825 100
Cost of acquisition for the
purpose of section 112A [(a) (e) 730 710 900 825 100
or (d), whichever is higher]
Long – term capital gain u/s 30 (-) 60 10 Nil 300
112A [(c) – (e)]
The above mode of determining cost of acquisition is applicable only if shares/ units are acquired
prior to February 1, 2020. Suppose in Situation 1, the date of acquisition is February 10, 2020 (no
other change). “Cost of acquisition” will be taken as Rs. 410 (above rules are not applicable).
COST OF IMPROVEMENT [SEC. 55(1)]
Cost of improvement means expenditure incurred to increase the productive quality of the asset.
It includes all expenditure of a capital nature incurred in making any additions or alteration to
the capital asset.

INDEXED COST OF IMPROVEMENT
COST OF IMPROVEMENT
Capital Expenditure
Deemed cost of Indexed cost of
incurred by an assessee
improvement acquisition
in making any addition to
capital asset
Cost to Previous owner Inflation Adjusted Cost

Index cost of acquisition

It is an amount, which bears to the cost of improvement the same proportion as cost inflation
index for the year in which the asset is transferred bears to the cost inflation index for the
year in which the improvement to the asset book place.
• Cost of improvement does not include any expenditure which is deductible in
computing the income chargeable under the head income from house property.
KEY NOTES
‘Profits and gains of business or profession”, or “income from other sources”. Only
capital expenditure is considered as a cost of improvement Routine expenses on
repairs and maintenance do not form part of cost of improvement.
• Improvement cost incurred by previous owner & assessee before 1.4.2001 shall
be ignored.
HOW TO CLACULATE INDEXED COST OF ACQUISITION & IMPROVEMENT
Indexed cost of acquisition [Explanation (iii) to Section 48)

Cost of acquisition X Cost inflation index for the year in which the asset is transferred
Cost inflation index for the PY in which the asset was 1st held by the assessee
Indexed cost of improvement [Explanation (iv) to Section 48)
Cost of improvement X Cost inflation index for the year in which the asset is transferred
Cost inflation index for the year in which the improvement to the asset took place
NOTES
Indexation benefit in case of gifted assets shall be allowed from the date when
KEY
gifted asset is acquired by the previous owner. [CIT vs Manjula J Shah (Bom)]
INDEXATION OF COST NOT ALLOWED IN CERTAIN CASES
In the following cases, indexation of cost & improvement shall not be allowed for the assets
specified therein.
1 Transfer of bonds and debentures other than
• Capital indexed bonds issued by the Government.
• Indexation benefit shall be available in case of LTCG arising of transfer of Sovereign
Gold Bond.
2 Transfer of an undertaking or division in a slump sale.
3 Certain transaction by non-resident.
4 Transfer of global deposit receipts.

In case of depreciable assets, there is no question of any indexation as capital
NOTE
KEY
gain arising from the transfer of depreciable asset shall always be short-term
capital gain.
3. Illustration
1) Where a house property has been purchased by Vadapav on 1-1-1996 for Rs. 30,000 and the
fair market value of the house as on 1-4-2001 is Rs. 1,20,000, the assessee at to adopt Rs. 1,
20,000 as the cost of acquisition.
2) Where certain shares of a company were purchased by Vadapav on 1-1-1996 at the rate of Rs.
200 per share and the market value of the shares as on 31-01-2001 is Rs. 120 per share the
assessee may not opt for market value and adopt Rs. 200 per share as the cost of acquisition.
4. Illustration
Flop Imran purchased Land on 4-01-1998 for Rs. 60,000. This land was sold by him on 02-09-2023
for Rs. 18,00,000. The market value of the land as on 01-04-2001 was Rs. 1, 20,000. Expenses on
transfer were 2% of Sale price. Compute the capital gain for PY 23-24.
Solution
Period of holding
Nature of Capital Gain
Particulars WN RS
Sales consideration 18,00,000
(-) Expenses on transfer 36,000
= Net sales consideration 17,64,000
(-) Indexed cost of acquisition 1 397200
(-) Indexed cost of improvement - 0
Long term capital gain 1366800
Working Note 1: Index cost of acquisition

Cost of acquisition or FMV as on 1-4-2001
Whichever is higher
× Index of transfer
Base index
1,20,000
= × 331 = 397200
100

5. Illustration
Anna Hajare sells the following capital assets during the previous year 22 - 23
Particulars Non-Listed Shares House Property
Rs. Rs.
Sale consideration 34,00,000 18,00,000
Year of acquisition 03-04 06-07
Cost of acquisition 2,90,000 18,000
Cost of improvement incurred in 09-10 70,000
Compute Capital Gain for AY 23 - 24
Solution
Period of holding
Particular WN Non-listed shares House property
Rs Rs
Sales consideration 3400000 1800000
(-) Expenses of transfer 0 0
= Net sale consideration 3400000 1800000
(-) Indexed cost of acquisition 1&2 880642 48836
(- ) Indexed of improvement 3 0 156554
Long term capital gain 2519358 1594610
Working Notes:
1) Non-listed shares
COA
× Index of the year of transfer
Index of acquisition
2,90,000
× 331 = 880642
109
2) House property
COA
Index of acquisition
18,000
× 331 = 48836
122
3) Cost of improvement – House property

COI
× Index of the Year transfer
Index of improvement
70,000
× 331 = 156554
148

6. Illustration
Mr. Power acquired a land in 1998-99 for Rs. 2, 00,000 & gifted it to his major son Karamati on
16-01-2000, When the market value of the land was Rs. 2, 50,000. The FMV of land on 01-04-
2001 was Rs. 4, 00,000. Karamati sold the land on 14-09-2022 for Rs. 48,00,000. Compute the
capital gain for PY 22-23 assuming that the expenses on transfer were Rs. 1,00,000.
Solution
Period of holding
Particular WN Rs
Sales consideration 4800000
(-) Expenses on transfer 100000
= Net sales consideration 4700000
(-) indexed cost of acquisition 1 1324000
(-) indexed cost of improvement - 0
Long term capital gain 3376000
Working Note 1
COA to previous owner or FMV on 1 − 4 − 01 whichever is higher

index of acquisition of previous owner
4,00,000
× 331 = 1324000
100
7. Illustration
Lalu acquired a house property in 1997-98 for Rs. 2, 00,000 & gifted it to his major son kalu on
16-01-2011, When the market value of the land was Rs. 2,50,000. The FMV of land as on 01-04-
2002 was Rs. 4, 00,000. Mr. Lalu incurred following improvement expenditures:
a) Extension of first floor in June 1999 Rs. 55,000
b) Extension of second floor in June 2006 Rs. 65,000,
Mr. Kalu incurred following improvement expenditures.
c) Extension of Third – floor in June 2012 Rs. 75,000.
d) Extension of Fourth-floor in June 2022 Rs. 65,000, Mr. Kalu sold the land on 14-09-2022 for
Rs. 19,00,000. Compute the capital gain for AY 23-24 assuming that the expenses on transfer
were Rs. 1,00,000.
Solution
Assessee: Mr Kalu
Period of holding
Particular WN Rs


(-) Expense on transfer 100000
= Net sale consideration 1800000
(-) Indexed cost of improvement 2 0
(-) Indexed cost of improvement 5 65,000
Long term Capital Gain 78458
WN 1:
COA to the previous owner or
FMV on 1 − 4 − 01 whichever is higher
indexed on which acquisition
of previous owner
4,00,000
× 331 = 1324000
100
COST OF IMPROVEMENT
COI
× Index of transfer
Index of improvement year took place
WN 2: Improvement expenditure incurred before 1-4-2002 ignored

WN 3
65,000
× 331 = 183889
117
WN 4:
75,000
× 331 = 148653
167
WN 5:
65,000
× 331 = 65000
331
8. Illustration
Motabhai acquired the property in the PY 03-04 for Rs. 5,00,000 & paid Rs. 18,000 as registration
charges. Motabhai died on 14-09-06 & the property was transferred to his son Chotabhai through
inheritance. The market value of property as on 14-09-06 is Rs. 21,00,000. During PY 22 – 23 sold
this property for Rs. 65, 00,000. Compute the capital gain for AY 23 - 24
Solution
Period of holding

Particular WN Rs
(-) Expenditure on transfer 0
= Net sales consideration 6500000
(-) Indexed cost of improvement 0
= Long term capital gain 4926991
Working Note 1
COA to the previous owner

Indexed of acquisition to the previous owner
[5, 00,000 + 18,000]

5,18,000
× 331 = 1573009
109
9. Illustration
Mr. Shahrukh Joshi sold following assets during PY 22 - 23
Particulars HP Jewellery Debentures
Date of Purchase 01/07/14 04/01/10 11/07/98
Date of Sale 31/03/23 31/03/23 31/03/23
Purchase Price 1,14,000 2,00,000 95,000
Sale Price 7,00,000 10,00,000 6,00,000
Compute capital gain for AY 23-24.
Solution
Period of holding
Particular W N HP Jewellery Debenture
Sales consideration 700000 1000000 600000
(-) Exp. On transfer 0 0 0
= Net sales consideration 700000 1000000 600000
(-) Indexed cost of acquisition 1 171518 483212 95000
(-) indexed cost of improvement 0 0 0
= Long term capital gain 528482 516788 505000
Working Notes:
1) Indexed cost of acquisition for HP
1,14,000
× 331 = 171518
220
2) Indexed cost of acquisition for Jewellery

2,00,000
× 331 = 483212
137
Note: Benefit of indexation is not available for the debentures.
COMPUTATION OF CAPITAL GAIN IN CERTAIN CASES
CAPITAL GAIN IN CASE OF INSURANCE CLAIM RECEIVED ON DAMAGE OR

DESTRUCTION OF CAPITAL ASSET [SEC. 45(1A)]
INSURANCE CLAIMS
Before A.Y. 2000-2001 • Destruction should After A.Y. 2000-01

happen by way of
Flood, Typhoon,
CIT Vs. Vania silk Mills Hurricane Cyclone, Any compensation received
Pvt. Ltd. Earth quake or from an insurance company
other convulsion of for the specified damages is
nature treated as transfer.
• Riot or civil
disturbance
• Accidental fire
explosion
• Action by enemy or
action taken in
combating an
enemy
1 Conditions: As per provision of this section, any compensation received from an insurance
company for the specified damage is treated as transfer. Such transfers are liable to
capital gain in the year of the receipt.
Here specified damages mean flood, cyclone, earthquake, riot, civil disturbance,
accidental fire, enemy action etc.
2 Computation of Capital Gain
Condition Treatment
Sale consideration Compensation received or if it is received in
kind then FMV as on the date of the receipt.
Cost of acquisition / cost of improvement / As usual
expenses on transfer
Indexation benefit Available till the year of destruction
Taxable In the year of receipt of compensation.

• Compensation received for any damages to capital asset shall be treated as capital
receipt and shall not be taxable.
• Compensation received for any damages to non-capital asset may be chargeable u/s
KEY NOTES
28 or 56. E.g. Compensation received on theft of stock in trade shall be treated as

business income.
• Destruction of asset without insurance: where an asset is destroyed and there is no
insurance or insurance compensation is not received then it shall not be treated as
transfer. Cost of such asset is not allowed as deduction under Income tax Act.
UNIT LINKED INSURANCE POLICY RECEIPTS [SECTION 45(1B)]
[Amendments Fin Act 2021]

Where any person receives, at any time during any previous year, any amount, under a ULIP
issued on or after 1.2.2021, to which exemption under section 10(10D) does not apply on account
of –
a Premium payable exceeding ₹ 2,50,000 for any of the previous years during the term of such
policy; or
b The aggregate amount of premium exceeding ₹2,50,000 in any of the previous years during
the term of any such ULIP(s), in a case where premium is payable by a person for more than
one ULIP issued on or after 1.2.2021.
Then, any profits or gains arising from receipt of such amount by such person shall be chargeable
to income-tax under the head “Capital Gains” and shall be deemed to be the income of the such
person for the previous year in which such amount was received. The income taxable shall be
calculated in such manner as may be prescribed.
CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE [SECTION 45(2)]
Computation of Capital gain:

Conditions Treatment
Sale consideration FMV on the date of conversion
Cost of acquisition / cost of improvement / expenses on As usual
transfer
Indexation benefit Available till the year of conversion
Taxable In the year in which asset is sold
Difference between actual sale value & Fair value as on the Treated as business income.
date of conversion.

TRANSFER OF SECURITIES BY DEPOSITORY [SECTION 45(2A)]
Computation of capital gain

CONDITIONS TREATMENT
Sale consideration Value at which shares sold
Cost of acquisition Cost of acquisition & period of holding of any securities, shall be
determined on the basis of the FIFO method. This method is
applicable to dematerialized form. Securities held in physical forms
shall be dealt separately.
Indexation benefit As usual
Taxable In the year in which asset is sold
Expenses on transfer As usual
CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET BY A PARTNER/MEMBER TO

A FIRM/AOP/BOI AS CAPITAL CONTRIBUTION [SECTION 45(3)]
Sale consideration The amount recorded in the books of accounts of the
Firm/AOP/BOI as value of such assets.
Cost of acquisition / cost of As usual
improvement / expenses on
transfer
Taxable In the year in which asset is transfer.
FMV of such asset is irrelevant to decide sale consideration.
CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET ON ITS DISSOLUTION OF FIRM/AOP/BOI [SECTION 45(4)]
Computation of capital gain:

Sale consideration FMV on the date of dissolution
Cost of acquisition / cost of improvement / expenses As usual
on transfer
Taxable In the year in which asset is sold.

COMPULSORY ACQUISITION OF ASSET [SECTION 45(5)]
1 Where a capital asset has been compulsorily acquired (other than urban agricultural land)
under any law, it will be treated as a transfer of the previous year in which the asset is
compulsorily acquired, Indexation, if required, will be done till the previous year of
compulsory acquisition. However, the capital gain will be taxable in the previous year in which
the compensation is received.
2 Initial compensation / consideration:
Computation of capital gain when initial compensation received
Sale consideration Total compensation received or receivable
Cost of acquisition / cost of improvement / As usual
expenses on transfer
Indexation benefit Till the year of acquisition
Taxable In the year in which initial compensation is
received.
Computation of Capital gain when enhanced compensation received
Sale consideration Total enhanced compensation received.
Cost of acquisition / cost of improvement NIL
Indexation benefit NIL
Taxable In the year in which the compensation is
received & treated as STCG OR LTCG
depending upon original gain.
Interest on enhanced compensation Income from other source
Expenditure on transfer Litigation expenses incurred for receiving
enhanced compensation.
It is possible that the person may die before the enhanced compensation / consideration is
received and the enhanced compensation / consideration are received by his legal heirs.
Such enhanced compensation / consideration will be taxable in the hands of the person who
receives the same.

W.E.F. ASSESSMENT YEAR 2005 – 06 SECTION 10(37) HAS BEEN INSERTED, WHICH PROVIDES AS UNDER
• Applicable: An individual or an HUF.

• Conditions:
1 Assessee has transferred urban agricultural land (being a capital asset).
2 Such land was used for agricultural purposes by such HUF or individual or his parents
during the period of 2 years immediately preceding the date of transfer.
3 Such land is transferred:
a By way of compulsory acquisition under any law, or
b For a consideration to be determined or approved by the Central Government or
the RBI.
4 The compensation or consideration for such transfer is received by such assessee on
or after 1.1.04.
• Treatment: Income on such transfer shall be exempted.
SEC. 45(5A): CAPITAL GAIN ON TRANSFER OF LAND OR BUILDING OR BOTH, UNDER DEVELOPMENT AGREEMENT
1. Assessee
Individual or HUF,
2. Asset Transferred
Land or building or both, under a specified agreement
3. “Specified agreement”
means a registered agreement in which a person owning land or building or both, agrees to
allow another person to develop a real estate project on such land or building or both, in
consideration of a share, being land or building or both in such project, whether with or
without payment of part of the consideration in cash
4. PY of taxability
PY in which the certificate of completion for the whole or part of the project is issued by
the competent authority;
5. Full value of consideration
The stamp duty value, on the date of issue of completion certificate, of his share, being land
or building or both in the project, as increased by the consideration received in cash, if any.
6. Exception
provisions of this sub-section shall not apply where the assessee transfers his share in the
project on or before the date of issue of said certificate of completion, and the capital gains
shall be deemed to be the income of the previous year in which such transfer takes place
and the provisions of this Act, other than the provisions of this sub-section, shall apply for
the purpose of determination of full value of consideration received or accruing as a result
of such transfer.

7. Explanation
For the purpose of this sub-section, the expression –
i “Competent Authority” means the authority empowered to approve the building plan by
or under any law for the time being in force;
ii “Stamp Duty Value” means the value adopted or assessed or assessable by any authority
of Government for the purpose of payment of stamp duty in respect of an immovable
property being land or building or both.
BUY BACK OF SHARES [SEC.46A]
1. Transfer
Where a shareholder receives any consideration from the company for purchase of its own
shares Or other specified securities, it is a transfer chargeable under the head Capital
Gains.
2. Year of taxability
Such Capital Gain is chargeable to tax in the previous year in which the shares or securities
are purchased by the Company.
3. Capital Gains
Value of consideration received Less Cost of Acquisition or Indexed cost of Acquisition.
4. No Deemed Dividend
In case of buyback of shares, there is no question of Deemed dividend u/s 2(22) (d).
5. In case of shares (whether listed or unlisted)
In case of buyback of shares (whether listed or unlisted) by domestic companies, additional
income-tax @20% (plus surcharge @12% and cess @4%) is leviable in the hands of the
company.
6. Sec 115QA
Consequently, the income arising to the shareholders in respect of such buyback of shares
by the domestic company would be exempt under section 10(34A), since the domestic
company is liable to pay additional income-tax on the buy back of shares.
Taxation provisions in respect of buyback
(1) (2) (3) (4)
Taxability in the Buyback of shares by Buyback of shares by Buyback of specified
hands of domestic companies a company other than securities by any
a domestic company company
Company Subject to additional Not subject to tax in Not subject to tax in
income-tax the hands of the the hands of the
@23.296%. company. company.
Shareholder/holder Income arising to Income arising to Income arising to
of specified shareholders exempt shareholder taxable holder of specified
securities securities taxable as

under section as capital gains u/s capital gains u/s

10(34A) 46A. 46A.
CAPITAL GAINS IN THE CASE OF SLUMP SALE [SECTION 50B]
1 Meaning
Slump sale means the transfer of one or more undertakings for a lump sum consideration
without assigning values to the individual assets and liabilities in such sales.
Undertaking shall include any part of an undertaking or a unit or division of an undertaking
or a business activity taken as a whole but does not include individual assets or liabilities
or any combination thereof not constituting a business activity.
2 Tax treatment
Sale consideration As usual
Cost of Acquisition or improvement Net worth of the undertaking
Indexation Benefit Not available
Nature of gain whether short term or long If undertaking is owned and held by the
term. assessee for not more than 36 months, then
capital gain shall be deemed to be short-
term capital gain otherwise long-term capital
gain.
Note: Where an undertaking is owned and
held by an assessee for more than 36 months
immediately preceding the date of its
transfer, then it shall be treated as a long-
term capital asset. It makes no difference
that few of the assets of the undertaking
are newly acquired (i.e. for less than 36
months)
Net worth shall be the:
Aggregate value of total assets of the Xxxx
undertaking
Less: Value of liabilities of such undertaking Xxxx
as appearing in the books of account.
Net worth Xxxx
1. Effect of revaluation
If any change has been made in the value of assets on account of revaluation of assets etc.
then such change in value shall be ignored.

2. The aggregate value of total assets [Amendment Fin Act 21]

In case of
• The written down value of block of assets determined in accordance with the provisions
contained in sub-item (c) of section 43(6)(c)(i) in the case of depreciable assets;
• Nil in the case of capital assets in respect of which the whole of the expenditure has
been allowed or is allowable as a deduction under section 35AD;
• Nil in the case of goodwill of a business or profession (not acquired by the assesse by
purchase from a previous owner); and
• The book value for all other assets.
Moreover, fair market value of the capital assets as on the date of transfer (calculated
in the prescribes manner), shall be deemed to be the full value of the consideration
received/accruing as a result of the transfer of such capital asset.
3. Treatment of stock
In case of slump sale, no profit under the head ‘Profit & gains of business or profession’
shall arise even if the stock of the said undertaking is transferred along with other assets.
4. Carry-forward of losses
In case of slump sale, benefit of unabsorbed losses and depreciation of the undertaking
transferred shall be available to the transferor company and not to the transferee
company.
• Report of an Accountant The assessee is required to furnish along with the return of
income, a report of a chartered accountant in Form 3CEA
indicating the computation of the undertaking or division has
been correctly arrived at in accordance with the provisions
of this section.
VALUATION OF CONSIDERATION IN CASE OF LAND OR BUILDING OR BOTH [SECTION 50C]
In case of transfer of immovable capital asset being land or building or both, sale
consideration shall be higher of the following
1 Actual consideration received or accrued on such transfer; or
2 110% of the value adopted or assessed or assessable# by any authority of a State
Government (i.e. Stamp Valuation authority) for the purpose of payment of stamp duty.
3 Where date of agreement and date of registration are not same
Where the date of an agreement fixing the value of consideration and the date of
registration of immovable property are not same then the stamp duty value may be taken
as on date of the Agreement for transfer and not as on date of registration for such
transfer only if the amount of consideration or a part thereof has been received by way of
an account payee cheque or draft or by use of ECS to a bank account on or before the date
of agreement for transfer.

4 In order to promote digital transactions, the payments or receipts through other notified
electronic modes. Have been proposed to be included in the list of acceptable mode of
payment.
REFERENCE TO VALUATION OFFICER
1 The assesse may claim before any Assessing Officer that the stamp value exceeds the FMV
of the property as on the date of transfer provided the stamp value has not been dispute
in any appeal or revision or reference before any other authority, court or the High Court.
2 In such case the AO may refer the valuation of the capital asset to a VO.
Case Result
If the value determined by the Valuation Value adopted or assessed or assessable for
Officer exceeds the value adopted or the purpose of stamp duty shall be taken as
assessed or assessable for the purpose of full value of consideration.
stamp duty.
If the value determined by the Valuation Value determined by the Valuation Officer
Officer does not exceed the value adopted shall be taken as full value of consideration.
or assessed or assessable for the purpose of
stamp duty.
TREATMENT OF ADVANCE MONEY RECEIVED & FORFIETED [SECTION 51]
1 Where any capital asset, was on any previous occasion, the subject of negotiations transfer,
any advance or other money received and retained by the assessee in respect of such
negotiations, shall be deducted from the cost for which the asset was acquired or the
written down value or the fair market value, as the case may be, in computing the cost of
acquisition.
• Any advance money received and forfeited shall be treated as Income from other source
and hence shall not be deducted from the cost of asset.
• If advance money is received before 31-3-14 then it is to be reduced from the cost of
acquisition and if it is received on or after 1-4-14 then it shall be taxable as income from
other source.
Advance money received by:
Current owner Subtracted from the cost of acquisition
Previous owner Not to be subtracted
Advance money received & forfeited before 31- Subtracted from the cost of acquisition.
03-14

• In case, advance money received exceeds cost of acquisition, the excess will be a
NOTES capital receipt, hence not taxable.

KEY
• Forfeiture of advance money by the transferor due to default of transferee is not

allowed as capital loss in the hands of transferee.
EXEMPTIONS UNDER CAPITAL GAIN
CAPITAL GAIN ARISING FROM THE TRANSFER OF RESIDENTIAL HOUSE PROPERTY [SEC. 54]
1. Who can claim exemption

An individual or a HUF
2. Which asset is qualified for exemption?
Residential house property (SO & LO)
3. Which capital asset is eligible for exemption?
Long Term
4. Which asset should be purchased to claim exemption?
Only one / two [ FA 2019] RHP (Purchased or constructed, old or new) in India
Condition for Purchase of two RHP
1. LTCG does not exceeds 2 cr which means if LTCG exceeds 2cr then assessee can buy
only 1 RHP and not 2.
2. Above option of purchase of 2 RHP is available once in a lifetime which means in
subsequent years assesses can buy only 1 RHP irrespective of amount of Capital gain
5. What is the time limit for acquiring the new asset?
a. For purchase: 1 year backward or 2 year forward from the date of transfer of old
property.
b. For construction: 3 years from the date of transfer.
6. What is capital gain scheme?
a. If the new asset is not acquired up to the date of submission of return of income, then
taxpayer will have to deposit the money in “capital gain deposit account” with a
nationalized bank. If amount is not deposited then capital gain will be taxed in that
particulars year.
b. Even if amount deposited in the scheme, period of acquiring the new asset will be
applicable as above.
c. If amount deposited in scheme is not utilized within the 2/3 years from the date of
transfer of asset then unutilized amount at the end of specified period shall be treated
as LTCG
7. How much is exempt?
Amount invested or capital gains whichever is lower.
8. When exemption will be taken back?

If new asset is transferred within 3 years from the date of its acquisition.
9. What will be tax treatment if exemption is taken back?
In such case, the capital gain on transfer of the new residential property will be calculated
as follows:
Sale consideration of new HP
Less: Original Cost of acquisition minus exemption claimed U/s 54 earlier
= Short/ long term capital gain.
Notes
1 The utilized deposit amount in the Capital Gains Account Scheme, 1988 in the case of an
individual who dies before the expiry of the stipulated period cannot be taxed in the hands
of the deceased. This amount is not taxable in the hands of legal heirs also as the unutilised
portion of the deposit does not partake The character of income in their hands but is only a
part of the estate devolving upon them. [Circular No. 743, dated 06/05/1996]
2 The cost of the land is an integral part of the cost of the residential house, whether
purchased or built.
CAPITAL GAIN ARISING FROM THE TRANSFER OF LAND USED FOR AGRICULTURAL
PURPOSE [SEC. 54B]
1. Who can claim exemption?

An Individual
Agricultural land
Lon-g term as well as short term
Provided the agricultural land was used by the tax payer or his parents, for agricultural
purposes for a period of two years immediately preceding the date of transfer.
Agricultural land (rural or urban)
2 years from the date of transfer of agricultural land.
Applicable

In such case, the capital gain on transfer of the new agricultural land will be calculated as
follows.
Less: Original Cost of acquisition minus exemption claimed U/s 54B earlier
CAPITAL GAINS ON COMPULSORY ACQUISITION OF LAND AND BUILDING FORMING PART OF

INDUSTRIAL UNDERTAKING [SEC. 54D]

Any assesse
Land & Building forming part of industrial undertaking.
Long term as well as short term provided industrial undertaking which was compulsory
acquired by the government was used by the taxpayer for industrial purposes for a period
of two years immediately preceding the date of acquisition.
Land or Building for industrial purpose.
3 year from the date of receiving initial compensation.
Applicable
In such case, the capital gain on transfer of the new land and building will be calculated as
follows.
Less: Original Cost of acquisition minus exemption claimed U/s 54D earlier
CAPITAL GAINS ON TRANSFER OF ASSETS IN CASES OF SHIFTING OF INDUSTRIAL

UNDERTAKING [SECTION 54G]

Any person

Land, Building, plant or machinery in order to shift an industrial undertaking from urban
area to rural area.
Short term / Long term
Land, Building, plant or machinery in order to shift an industrial undertaking to rural area.
For purchase: 1 year backward or 3 year forward from the date of transfer
What is capital gain scheme?
a If the new asset is not acquired up to the date of submission of return of income, then
particulars year.
b Even if amount deposited in the scheme, period of acquiring the new asset will be
c If amount deposited in scheme is not utilized within 3 years from the date of transfer
of asset then unutilized amount at the end of specified period shall be treated as
STCG/LTCG depending upon original gain.
follows.
Less: Original Cost of acquisition minus exemption claimed U/s 54G earlier
CAPITAL GAINS ON TRANSFER OF ASSETS IN CASES OF SHIFTING OF INDUSTRIAL

UNDERTAKING FROM URBAN AREA TO ANY SEZ [SEC. 54GA]

Any person
Land, Building, plant or machinery in order to shift an industrial undertaking from urban
area to SEZ.
Short term / Long term

Land, Building, plant or machinery in order to shift an industrial undertaking to SEZ.

For purchase: 1 year backward or 3 year forward from the date of transfer.
a If the new asset is not acquired up to the date of submission of return of income, then
particulars year.
b Even if amount deposited in the scheme, period of acquiring the new asset will be
c If amount deposited in scheme is not utilized within 3 years from the date of transfer
of asset then unutilized amount at the end of specified period shall be treated as
STCG/LTCG depending upon original gain.
follows Sale consideration of new land.
CAPITAL GAINS NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS [SEC. 54EC]

Any assesse
There should be transfer of a long-term capital asset being Land or building or both.
Long term capital asset means specified bonds, redeemable after 5 years, issued on or
after 01/04/2018 by the national Highways Authority of India (NHAI) or the Rural
Electrification Limited (RECL) or any other notified by the Central Government in this
behalf.
Note: The investment made in the long term specified asset noted above by any assessee
during any financial year in which the original assets are transferred and in the subsequent
FY cannot exceed Rs. 50 lakhs.
6 months from the date of transfer of long term asset.
Not applicable.


If new asset is transferred or converted into money within 5 years from the date of its
acquisition.
In such case, the capital gain arising on transfer of original asset which was not charged
to tax, will be treated of long term capital gain of the respective year.
Note: Taking any loan or Advance on the security of the Specified Asset, is deemed to be
transfer of specified asset on the date on which such loan or advance taken.
EX EMPTIONS FROM CAPITAL GAINS ON INVESTMENT IN UNITS OF A SPECIFIED FUND [SEC. 54EE]
1. Applicability
All Assessee
2. Asset Transferred
Transfer of Long Term Capital Asset (Called Original Asset)
3. New Asset to be acquired
Long – Term Specified Asset, (notified by Central Government).
Not applicable.
5. Time Limit for Investment
6 months from the date of original transfer
6. Limit on Investment Amount in New Asset
• Investment made in the Long –Term Specified Asset by an Assessee during any
financial year does not exceed Rs. 50 Lakhs.
• Investment made by an assessee in the Long-Term Specified Asset, from Capital Gains
arising from the transfer of one or more Original Assets, during the financial year in
which the Original Asset or Assets are transferred and in the subsequent financial
year does not exceed Rs. 50 Lakhs.
7. Amount of Exemption
Amount invested or capital gain whichever is less
8. Holding Period of New Asset
Three Years from the date of its acquisition.
9. Sale of New Asset within holding period
Long Term Capital Gain exempted u/s 54EE shall be deemed to be Income (as LTCG) of the
previous year in which Long Term Specified Asset is transferred.
Note: Taking any loan or Advance on the security of the Specified Asset, is deemed to be
transfer of specified asset on the date on which such loan or advance taken.

CAPITAL GAINS ON TRANSFER OF A LONG TERM CAPITAL ASSET OTHER THAN

A HOUSE PROPERTY [SEC. 54F]

An Individual or HUF
Any long term capital asset other than a residential house property provided on the date
of transfer the taxpayer does not own more than one residential house property.
Long term.
One Residential house property (purchased or constructed, (old or new) in India.
A For purchase, 1 year backward or 2 year forward from the date of transfer of old
property.
B For construction: 3 years from the date of transfer.
C In case compulsory acquisition above period will start from the date of receiving initial
compensation.
A If the new asset is not acquired up to the date of submission of return of income, then
particulars year.
B Even if amount deposited in the scheme period of acquiring the new asset will be
C If amount deposited in scheme is not utilized within 2 years from the date of transfer
of asset then unutilized amount at the end of specified period shall be treated as LTCG
which will be calculated as under
Unutilised amount X Amount of original Capital gain
Net sale consideration
Cost of new house X Capital gains
Net Sale Consideration
Case 1 If new asset is transferred within 3 years from the date of its acquisition or
construction.
Case 2 If the assessee purchases, within a period of two years of the transfer of original
asset or constructs within a period of three years of the transfer of such asset,
a residential house other than new house.

Case 1 Capital gains which arise on the transfer of the new house will be taken as LTCG/
STCG & exemption which was allowed earlier shall be treated as LTCG of the year
in which the new asset is transferred.
Case 2 Exemption which was allowed earlier shall be treated as LTCG of the year in which
the new asset is purchased or constructed.
which LTCG such deduction should be claimed
DEDUCTION FROM CAPITAL GAIN ON TRANSFER OF RESIDENTIAL PROPERTY FOR INVESTMENT

IN ELIGIBLE COMPANY [SEC. 54GB]
1. Who can claim?

Individual & HUF
2. Which specified asset is Transfer
1. Assessee must have transferred a long-term eligible for exemption capital asset being
residential property (i.e. a house or a plot of land)
2. Such transfer should take place during 01-04-2013 and 31 03-2022. [Finance Act
2021]
Equity shares of Eligible company.
4. What is the time limit to acquire new asset
a. Assessee must subscribe in the equity shares of an eligible company within the due date
of furnishing income tax return for the relevant assessment year.
b. The company should purchase new asset within 1 year from the date of subscription
in equity shares by the assessee.
c. Capital Gain Deposit Scheme
The amount of the net consideration, which has been received by the company for issue
of shares to the assessee to the extent it is not utilized by the company for the
purchase of the new asset before the due date of furnishing of the return of income by
the assessee u/s. 139, shall be deposited by the company, before the said due date in
the Capital Gain Deposit Scheme.
5. How much is exempt
Minimum of the following:
Investment in the new asset by the
Eligible company
× 𝐶apital Gain
Net sale consideration
6. Is it possible to revoke the exemption
1 If the newly acquired asset is transferred by the eligible company within 5 years from
the date of its acquisition, benefit availed earlier shall be revoked.
2 If the equity shares of the eligible company is transferred by the assess within 5 years
& 3 years in case of computer or computer software by an eligible start up [ FA
2019] from the date of its acquisition, benefit availed earlier shall be revoked.

3 If the amount held in Capital Gains, Deposit Account Scheme (1988), is unutilized,
benefit availed earlier shall be revoked.
7. Treatment of revoked income
• Revocation due to case 1 & 2 above:
Such revoked income (exemption or proportionate thereof) shall be taxable in the hands
of the assessee (i.e., the person who has transferred residential property) as long-term
capital gain in the year of revocation of condition.
Note:
It is to be noted that capital gains, arising on transfer of shares or of the new asset, in
the hands of the assessee or the company, as the case may be is also taxable separately.
• Revocation due to case 3 above.
Chargeable amount in hands of the assessee (i.e. the person who has transferred
residential property) is:- (Unutilised amount for which benefit under section 54GB is
availed X Original capital gain) (Net sale consideration)
Taxation as long term capital gain of the previous year in which 1
year from the date of the subscription in equity shares by the assessee expires.
1. Meaning of Eligible Company:

a It is an Indian company:
The company should be incorporated during the period from the 1st day of April of the
previous year relevant to the assessment year in which the capital gain arises to the due
date of furnishing of return of income u/s. 139(1) by the assessee.
E.g. : If Mr. X has transferred his residential property as on 10/8/2020, then company
should be incorporated between 01/04/2020 and due date of furnishing return u/s.
139(1) by Mr. X (i.e. 31/07/2022 assuming his accounts are not liable for tax audit).
b The company is engaged in the business of manufacture of an article or a thing.
c It is a company in which the assessee has more than 25% share capital or more than
25% voting rights after the subscription in shares by the assessee; and
d It is a company which equalities to be a small or medium enterprise (i.e. SME) under the
Micro. Small and Medium Enterprises Act, 2006 (i.e. investment in plant and machinery
is more than Rs. 25 lakhs but does not exceed Rs. 10 crore). or is an eligible start up
New asset means new plant and machinery but does not include:
a Any machinery or plant which before its installation by the assessee, was used either
within or outside India by any other person (Second hand machine),
b Any machinery or plant installed in any office premises or any residential accommodation,
including accommodation in the nature of a guest-house.
c Any office appliances including computers or computer software;
Note: W.e.f. 1/4./2016, New Asset includes Computers or Computer Software in the
case of an Eligible Start-Up, being a technology driven Start-Up so certified by the
Inter-Ministerial Board of Certification notified by the Central Government.

d Any vehicle; or
e Any machinery or plant for which 100% deduction is allowed (whether by way of
depreciation or otherwise) in computing the income chargeable under the head “profits
and gains of business or profession” of any previous year.
2. What is eligible start up or eligible business
Eligible business means a business which involves innovation, development, deployment, or
commercialized of new products processes or service driven by technology or intellectual
property.
Eligible start-ups means a company engaged in eligible business and satisfies he following
conditions:
a It is incorporated during 1/4/2016 – 31/3/2022
b Total turnover of its business does not exceed Rs. 100 crore in any of the PY during
1/4/2016 to 31/3/2022
c It holds a certificate of eligible business from the enter – Ministerial Board of
certification notified by the CG]
EXEMPTION UNDER MORE THAN ONE PROVISION
An assessee can claim exemption under more than one section (from section 54 to 54GB) if
conditions of the respective sections are fulfilled. E.g. an assessee deriving long term capital
gain on sale of a residential house can claim benefit under section 54 by investing a part of the
capital gain in acquisition of a new residential house property and as well as claim benefit u/s
54E by investing remaining part of the capital gain in acquisition of specified securities.
EXTENSION OF TIME FOR ACQUIRING NEW ASSET OR DEPOSITING OR

INVESTING AMOUNT OF CAPITAL GAIN (SECTION 54H)
1. Applicability
• Where the transfer of the original asset is by way of compulsory acquisition under any
law, and
• Amount of compensation awarded for such acquisition is not received by the assessee on
the date of such transfer.
2. Treatment
The period for acquiring the new asset or the period available to the assessee for depositing
the amount of capital gain in relation to such compensation as is not received on the date of
the transfer, shall be reckoned from the date of receipt of such compensation.

KEY NOTE a It is irrespective of anything contained in section 54, 54B, 54D, 54EC and 54F.
Enhanced compensation: In case of enhanced compensation, the period for acquiring
b
the new asset shall commence from the date of receipt of such enhanced
compensation.
REFERENCE TO VALUATION OFFICER (SECTION 55A)
With a view to ascertaining the fair market value of a capital asset for the purpose of this
chapter (e.g. section 45(1A), 45(2), 45(4), 55 and 2(47)) the Assessing Officer may refer the
valuation of capital asset to a valuation officer. Cases where reference to valuation officer can
be made:
1. Where the value of the asset as claimed by the assessee is in accordance with the
estimate made by a registered value.
If the Assessing Officer is of opinion that the value so claimed is at variance with its fair
market value.
2. In any other case
If the Assessing Officer is of the opinion:
1 That the fair market value of the asset exceeds the value of the asset as claimed by
the assessee by more than
• 15% of the value of the asset as so claimed; or
• By more than Rs.25,000 whichever is less
2 That having regard to the nature of the asset and other relevant circumstances, it is
necessary to do so.

SUMMARY OF SECTION 54
Time limit
Applicabl Deposit Revocation of
Sec. Nature New Asset for Exemption
e scheme benefit
investment
54 Long term Individual A Within 1 Capital gains Yes If new asset
Residentia or HUF Residential year before or amount is sold within
l House House in or 2 years invested, 3 years, then
India after the whichever is benefit
( 1 or 2) date of less availed earlier
transfer in will be
case of revoked and
purchase, or shall be
within 3 reduced from
years after cost of new
the date of asset.
transfer, in
case of new
construction
.
54B Agricultur Individual Agricultural Within 2 Capital gains Yes If new asset
al land Land years after or amount is sold within
used for transfer invested. 3 years, then
agro Whichever benefit
purpose is less? availed earlier
for 2 will be
years by revoked and
him or his shall be
parents. reduced from
cost of new
asset.
54D Land and Any Land and Within 3 Capital gains Yes If new asset
building assessee Building for years after or amount is sold within
used for industrial receipt of invested, 3 years, then
industrial undertaking initial whichever is benefit
undertaki . compensatio less. availed earlier
ng for 2 n. will be
years. revoked and
shall be
reduced from

cost of new
asset.
54G Plant & Any Plant and Within one Capital gain Yes If new asset
machinery assessee. machinery year before or amount is sold within
or land & or land and or 3 year invested 3 years then
building building after the whichever is capital gain
for used for date of lower. will be
industrial industrial transfer. revoked and
under under shall be
taking in taking in reduced from
urban area non-urban cost of new
(LTCA or area or asset.
STCA) meeting
expenses of
shifting.
54G Plant & Any Plant and Within one Capital gain Yes If new asset
A machinery assessee. machinery year before or amount is sold within
or land & or land and or 3 year invested 3 years then
building building after the whichever is capital gain
for used for date of lower. will be
industrial industrial transfer. revoked and
under under shall be
taking in taking in reduced from
urban area SEZ area cost of new
(LTCA or or meeting asset.
STCA) expenses of
shifting.
54E Long term Any Specified Within 6 Capital gains No. If bonds are
C capital assessee bonds months or amount redeemed in 3
assets redeemable after invested. yrs from the
after 3 transfer Whichever date of acquis
years in Authority is less. ion then
National Rural benefit
Highways Electrificati Max. Rs. 50 availed earlier
Authority on Corp. Ltd. lacs shall be
or Rural revoked and
Electrificat deemed to be
ion Corp. LTCG in the
Ltd. year of
redemption.
54E Any long Any Long term Within 6 Capital gain NO If specified
E term assessee specified months from or amount assets is
assets invested transferred/l

capital the date of whichever is oan taken in 3

asset transfer lower yrs from the
date of acquis
ion then
benefit
availed earlier
shall be
revoked and
deemed to be
LTCG in the
year of
redemption.
54F Any LTCA Individual Residential Within 1 (Capital Yes If new asset
other than or HUF house year before Gain/Net is sold within
residentia Assessee or two years consideratio 3 years, or
l house. should not after n) * Amount new asset
own more transfer in invested acquired
than one case of within 3
house. purchase or years, then
3 years earlier
after exemption
transfer in shall be
case of revoked and
construction will be
. deemed to be
LTCG.
54G Long term Individual Equity Within due (Capital Yes If new asset
B residentia or HUF shares of date of Gain/ Net is sold within
l property eligible furnishing consideratio 5 years, then
company return of n *amount capital gain
income invested will be
Such revoked and
company Within 1 will be
shall year from deemed to be
acquire new the date of LTCG.
assets such
subscription
in equity
shares

TAX RATES APPLICABLE TO STCG & LTCG
SPECIAL RATES OF TAX

Sec. Natures of Income Tax Rate Basic Chapter VI-
exemption A Ded
111A STCG on @ 15% Allowed to Not Allowed
1 Equity shares or Resident
2 Units of equity oriented fund Individual /

HUF
3 Unit of business trust on which
STT is paid at the time of
transfer.
(In case of sale on a RSE in
International Financial Service
Centre in SEZ, payment of STT is
not required, if consideration is in
foreign currency)
Note: Short – term capital gains Normal As per the Allowed
arising on transfer of other short- assessee
term capital assets would be applicable
chargeable at normal rates of tax.
112 LTCG on any asset (STT not @ 20% Allowed to Not allowed
applicable) Resident
Individual /
HUF
LTCG on listed securities (other @ 20% after Allowed to ‘R’ Not Allowed
than a unit) STT not paid indexation, or Individual /
or @ 10% HUF
without
indexation,
112A Tax @ 10% on long-term capital 10% Allowed to ‘R’ Not allowed
gains exceeding Rs. 1,00,000 on the Individual /
transfer of following long-term HUF
capital asset.
Scheme for taxation of virtual digital assets (Secs. 115BBH and 2(47A)] - Income arising
from transfer of virtual digital asset will be taxable from the assessment year 2023-24
onwards. Any profit generated on transfer of a virtual digital asset on or after April 1, 2022
will be chargeable 10 tax according to the provisions which are given below WHAT IS VIRTUAL

DIGITAL ASSET-Clause (474) has been inserted in section 2 to define "virtual digital asset. By
virtue of the exclusive definition, "virtual digital asset' means –
a any information or code or number or token (not being Indian currency or foreign currency),
generated through cryptographic means (or otherwise), providing a digital representation
of value exchanged with (or without) consideration, with the promise (or representation)
of having inherent value (or functions as a store of value) or a unit of account including its
use in any financial transaction (or investment), but not limited to investment scheme; and
can be transferred, stored or traded electronically;
b a non-fungible token (or any other token of similar nature);
c any other digital asset, as notified by the Central Government.
Other points-The following points should be noted -
1 The Central Government may (by notification in the Official Gazette) exclude any digital
asset from the definition of virtual digital asset (subject to such conditions as may be
specified).
2 Non-fungible token" means such digital asset as notified by the Central Government.
TAX ON INCOME FROM VIRTUAL DIGITAL ASSET - Section 115BBH has been inserted to
tax income arising from transfer of virtual digital asset. The provisions of section 115BBH (given
below) are applicable notwithstanding anything contained in any other provision of the Act.
• Nature of income - Nothing is clear from the scheme of section 115BBH whether it is
business income or capital gains or income from other sources. Under section 2(14), a
capital asset means property of any kind of an assessee whether or not connected with his
business. Cryptocurrencies or NETS may be deemed as capital assets, if acquired by a
person for the purpose of investment. In such a case, any gain arising on the transfer of
such assets shall be taxable under the head "Capital gains". If, however, such transactions
are substantial and/or if such assets are held for trading purposes, income from
sale/purchase of virtual digital assets may be taxed as business income.
• Tax rate - By virtue of section 115BBH, income from transfer of virtual digital asset will
be taxable at the rate of 30 per cent (+SC+HEC). Tax rate is the same whether it is
business income or short-term capital gains or long-term capital gains.
How to compute income-Section 115BBH(2)(a) provides that no deduction in respect of any
expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall
be allowed to the assessee under any provision in computing the income arising from
transfer of virtual digital asset. To put it differently,
1 Cost of acquisition, if any, will be deducted from the full value of consideration. If income
is taxable under the head "Capital gains", indexation benefit will not be available.
2 No deduction will be allowed pertaining to cost of improvement, expenditure on transfer,
etc.

3 The definition of "transfer under section 2(47) shall apply for the purpose of computation
of tax under section 115BBH pertaining to income from transfer of any virtual digital asset
(whether capital asset or not).
4 Loss arising on transfer of virtual digital asset cannot be adjusted against any other
income.
5 Any loss incurred by an assessee (from any transaction) cannot be adjusted against income
from transfer of virtual digital asset.
Tax deduction at source-Section 1948 has been inserted with effect from July 1, 2022 for the
purpose of tax deduction at source by a person who is responsible for paying to a resident any
sum by way of consideration for transfer of virtual digital asset.

MULTIPLE CHOICE QUESTIONS
BASIC OF CHARGE, TRANSFER, CAPITAL ASSET
1. Capital gain arises on: 2. Capital gains is calculated when

a All type of asset a Any asset is transferred
b All type of capital asset b Any capital asset is transferred
c Land, Building and Shares only c Any asset is transferred or not
transferred
d All of the above d Any capital asset is transferred or not
transferred
3. Which of the following is not a capital 4. The following shall not be regarded as
asset: capital asset
a Jewellery a Jewellery
b Personal car b Rural agriculture Land
c Sculpture c Archaeological collections
d Paintings d personal residential house
5. Champak purchased a car for his 6. If unlisted debentures are sold after 36
personal use for Rs. 5,00,000 in months, the capital gain arising from such
April, 2022 and sold the same for Rs. sale is a:
5,50,000 in July, 2022. The taxable
capital gains would be - (Dec. 2016)
a Nil a Short term capital gain
b Rs. 5,50,000
c Rs. 50,000 b Long term capital gain
d Rs. 4,00,000
7. Period of holding for unlisted shares 8. In term of section 2(42A), listed

(STCA) securities are treated as long-term
capital asset, if they are held for a period
of more than
a 36m a 12 months
b 24m b 6 months
c 12m c 24 months
d 48 months

9. Which of the following is not a 10. Cost of improvement means capital

required for charging income tax on expenditure done on the value addition of
capital gains? capital asset. It shall be considered for
calculation of capital gains and
a The transfer must have been effected a It is always taken as Nil
in the relevant assessment year
b There must be a gain arising on transfer b Always considered irrespective of period
of capital asset when it was incurred
c Capital gains should not be exempt c Considered when incurred on or after
under section 54 1/4/2002
d Capital gains should not be exempt d Considered when incurred before
under section 54EC 1/4/2002
11. Which of the following is included in 12. Cost of acquisition of capital asset being
the definition of transfer u/s 2(47)? immovable property acquired through gift
covered under section 49(1) is
a Sale, exchange or relinquishment of the a Actual cost of acquisition to the previous
asset. owner
b Extinguishment of any rights therein. b Nil
c Compulsory acquisition thereof under c Stamp duty value of the property as
any law. considered while computing income under
section 56(2)(vii)
d All of the above. d Actual cost of acquisition to the assessee
13. Mr. Dosa incurred Rs. 5,000 as 14. While computing capital gain on sale of
Brokerage on sale of a gold ring. The immovable property, full value of
expense of Rs.5,000 will be consideration shall be:
considered as
a Cost of acquisition a Actual consideration
b Cost of improvement b Actual consideration less expenses on
transfer
c Expense on transfer c Actual consideration or stamp duty value of
the property transferred, whichever is
higher
d Part of sale consideration d Stamp value of the property transferred
15. Indexation benefit on Cost of 16. Mr. Pati has sold his land for a
acquisition is available on the long consideration of Rs. 25,00,000 to Mr.
term capital asset. However, in Lover. Mr. Lover has paid stamp duty of
certain cases, indexation benefit is Rs. 3,00,000 @ 10% of stamp value. The

not available. In which of the full value of consideration for computing

following cases, indexation benefit is capital gains in hands of Mr. Pati in
allowed? accordance with the provisions of Section
50C will be –
a Debentures issued by a company a Rs. 25 lakhs
b Self-generated goodwill of a b Rs. 30 lakhs
business
c Bonus shares allotted on 1.4.2006 c Rs. 28 lakhs
d Jewellery d Rs. 33 lakhs
17. In case of an investor in shares, in 18. Jetha entered into an agreement for sale
respect of shares sold, securities of his house property located at Jaipur to
transactions tax paid (at the time of Tappu on 1st August, 2021 for a total
purchase of the said shares earlier), sale consideration of Rs. 95 lakh. Tappu
is: paid an amount of Rs. 20 lakh by account
payee cheque to Jetha on 1st August,
2021 and balance was agreed to be paid
at the time of registration of the
Conveyance Deed which could only be
executed by Jetha on 1st September
2022. The Stamp Valuation Authority
determined the value of the house
property on the date of registration of
deed at Rs. 140 lakh. However, the value
determined by the Stamp Valuation
Authority of the house on the date of
agreement (1st August, 2021) was Rs.
110 lakh. The sale value for the purpose
of computing the capital gain of the
property in A.Y. 2023-24 to be taken by
Jetha shall be: (Dec.2019)
a Not deductible at all while computing a Rs. 95 lakh
capital gains
b To be deducted as an expenditure b Rs. 110 lakh
connected with transfer
c To be added to the cost of acquisition c Rs. 140 lakh
d None of the above d Rs. 120 lakh

19. Cost of acquisition of share purchased 20. Any gain on transfer of asset being house
before 31/1/18 but sold after property on which depreciation under
1/4/19 shall be section 32(1)(ii) is claimed, shall be
treated as
a Purchase price a Long term capital gain
b Cost of acquisition or FMV whichever is b Short term capital gain
higher
c higher of COA and lower of FMV as on c Income from other source
31/1/18 or full value of consideration
d FMV as on 1/2/19 d Income from house property
21. Cost of inflation Index for 2022 – 23 22. Capital gain on slump sale is:
is
a 254 a Always short term capital gain
b 331 b Always long term capital gain
c 260 c Depends on period which business
continues
d 100 d Not taxable
23. Short term capital gain is gain arising 24. The assessee is allowed to opt for market
from the transfer of an asset which value as on 1.4.2002 in case of:
is held by the assessee for not more
than:
a 36 months from the date of its a All capital assets
acquisition
b 12 months from the date of its b All capital assets other than depreciable
acquisition asset
c 12 months from the date its acquisition c All capital assets other than depreciable
in case of shares, units, zero coupon assets, goodwill of a business, right to
bonds and any other listed securities 24 manufacture, tenancy rights, loom hours and
months for immovable property and for route permits.
not more than 36 months in case of
other assets
25. Where the capital asset became the 26. In case of long – term capital – term gain,
property of the assessee in any mode the amount to be deducted from
given under section 49 (1), the cost consideration price shall be:
of acquisition of such assets shall be:
a The market value of the assets as on a Cost of acquisition
the date of acquisition by the assessee

b Cost for which the previous owner of b Indexed cost of acquisition

the property acquired it
c Nil c Market value as on 1.4.1981
27. Hey You Ltd. an unlisted company 28. If goodwill of a profession which is self-
bought back 10,000 shares (face generated is transferred, there will:
value Rs. 10 per share, issued on 1-
4-2019) from its shareholders on 15-
03-2023 for Rs. 60 per share. Find
out the taxable Capital gains in the
hands of shareholder. (Cost inflation
index for F.Y. 2019-20 = 272 and
2022-23 = 331)
a Rs. 5,00,000 a Be capital gain
b Rs. 6,00,000 b Not a capital asset
c Nil c Be a short term capital gain
d Rs. 4,93,750
29. Ms. Chudel inherited a vacant site 30. In which of the following transfer the
land consequent to the demise of her benefit of indexation is available in case
father on 10th June, 2012. The land of long term capital asset:
was acquired by her father on 10th
April, 1990 for Rs. 40,000. The fair
market value of the land on 1st April,
2001 was Rs. 2,55,000 and on the
date of inheritance, i.e., 10th June,
2012 was Rs. 3,50,000. The cost of
acquisition for Ms. Smita is - (June
2016)
a Rs. 40,000 a Transfer of securities by foreign
institutional investors u/s 115AD
b Nil b Transfer of undertaking or division in a
slump sale u/s 50B
c Rs. 2,55,000 c Transfer of a foreign exchange asset by a
non-resident Indian u/s 115D
d Rs. 3,50,000 d Transfer of equity or preference shares in
a company

EXEMPTION U/S 54
31. Under section 54, capital gain will be 32. When entire net consideration has been
allowed as exemption if the house invested by an individual towards
property under transfer is held for subscription of shares of an eligible
company the exemption under section
54GB of the Income Tax Act, 1961 would
be
a Less than 12 months preceding the date a 100% of capital gain
of transfer
b More than 12 months preceding the b 50% of capital gain
date of transfer
c Less than 24 months preceding the date c 10% of capital gain
of transfer
d More than 24 months preceding the d Nil
date of transfer
33. For availing exemption under section 34. The exemption under section 54, shall be
54, which amount is eligible for available
availing exemption?
a Purchase / Construction of a residential a To the extent of capital gain invested in the
house property upto due date of return house property
of income only
b Deposit in capital gain account scheme b Proportionate to the net consideration price
upto due date of return of income only invested
c Purchase / Construction of a residential c To the extent of amount actually invested
house property upto due date of return
of income and deposit in capital gain
account scheme upto due date of return
of income
d Purchase / construction after three d None of the above
years from the transfer date
35. Deduction under section 54F of 36. The capital gain on transfer of a long term
Income Tax Act, 1961 for capital capital asset other than a house is exempt
gains on transfer of a long term under section 54F of the IT Act, 1961
capital asset other than a house for
property is available only if

a On the date of transfer of original a An individual and a HUF

asset assessee does not own more than
one residential house property
b On the date of transfer of original b An individual
asset assessee does not own more than
one commercial house property
c On the date of transfer of original c A resident individual
asset assessee does not own any other
house property
d On the date of transfer of original d Any assesse
asset assessee owns at least one other
house property
37. New assets acquired for claiming 38. Deduction under section 54GB is available
exemption under section 54, 54B or against transfer of
54D, if transferred within 3 years,
will result in:
a Short term capital gain a Long term capital asset being residential
property
b Long term capital gain b Any capital asset being residential property
c Short term capital gain or long term c Any long term capital asset
capital gain depending upon original
transfer
d Income from other sources d Long term capital asset other than
residential property
39. For claiming exemption under section 40. In the above case, the residential house
54, the assessee should transfer: property should be transferred:
a Any house property a Before 36 months
b A residential house property b After 24 months
c A residential house property the income c After 12 months
of which is taxable under the head
income from house property
41. Exemption under section 54 is 42. For claiming exemption under section 54,
available to: the assessee should purchase residential
property:
a All assessee a 2 years after the date of transfer
b Individual only b 3 years after the date of transfer

c Individual as well as HUF c One year before or two years after the date
of transfer
d One year before and 3 years after the date
of transfer
43. For claiming exemption under section 44. Salman Joshi sells a plot of land on 8th
54, the assessee should construct the July, 2022 for Rs. 45 lakh and paid
residential property within: brokerage on its sale @1%. He purchased
this plot on 19th December, 1996 for Rs.
10,00,000. The fair market value of the
plot as on 1-4-2002 is 12,00,000. On 1st
February, 2023, he purchased a
residential house for Rs. 5 lakh. He owns
one residential house on 8th July, 2022.
The cost inflation index for 2003-04 was
100 and for 2022-23 is 317. Find out the
amount of capital gains chargeable to tax
for the assessment year 2023-24:
a One year before or 2 years after the a Rs. 1,32,000
date of transfer
b One year before or 3 years after the b Rs. 7,10,000
date of transfer
c Within 3 years after the date of c Rs. 1,51,000
transfer
d Within 2 years after the date of d Rs. 6,69,000
transfer
45. If the assessee wishes to deposit 46. Amount unutilized in the capital gain
money under capital gain scheme for scheme for which exemption was claimed
claiming exemption under section 54, u/s 54 shall be treated as long term
it should be deposited within: capital gain of:
a Six months from the date of transfer a Previous year in which period of 2 years has
expired from the date of deposit
b Within six months from the end of the b In which period of 2 years has expired from
relevant previous year the date of transfer
c Due date of furnishing the return of c In which period of 3 years has expired from
income u/s 139 (1) the date of deposit
d Six months or within due date of d In which period 3 years has expired from
furnishing the return of income the date of transfer
whichever is earlier

47. The new house purchased or 48. A residential house is sold for Rs. 90 lakh
constructed for which exemption was and the long-term capital gains computed
claimed under section 54, should not are Rs. 50 lakh. The assessee bought two
be transferred within 3 years: residential house for Rs. 30 lakh and Rs.
20 lakh respectively. The amount eligible
for exemption u/s 54 would be-
(Dec.2015)
a From the date of transfer of original a Rs. 50 lakh
house
b From the date of its purchase / b Rs. 20 lakh
construction
c From the end of the previous year c Rs. 30 lakh
d Nil
49. For claiming exemption u/s 54B, asset 50. The exemption u/s 54B is allowed to:
transferred should be:
a Urban agricultural land a Any assessee
b Any agricultural land b Individual only
c Rural agricultural land c Individual or HUF
51. For claiming exemption u/s 54B, the 52. For claiming exemption under section 54B
agricultural land must have been used the assessee should acquire:
for agricultural purpose by the
individual or his parents for at least:
a Any period of 2 years prior to the date a Urban agricultural land
of transfer
b A period of 2 years immediately b Rural agricultural land
preceding the date of transfer
c A period of 3 years immediately c Any agricultural land.
preceding the date of transfer
53. For claiming exemption under section 54. Amount unutilized in the capital gain
54B the new agricultural land should scheme for which exemption under section
be purchased: 54B was claimed shall be treated as:
a Within 3 years from the date of a Lon term capital gain
transfer
b Within 2 years from the date of b Short term capital gain
transfer

c Within 2 years from the end of the c Short term capital gain or Long term
relevant previous year. capital gain
55. If the new agricultural land purchased 56. Exemption u/s 54 D is available to:
u/s 54B is transferred within 3 year,
then:
a Capital gain exempt u/s 54B earlier a Any assessee
shall be taxable
b The entire capital gain on new transfer b Any assessee owning an industrial
shall be taxable undertaking
c For the purpose of computation of c An individual of HUF owning an industrial
capital gain, the cost of acquisition shall undertaking
be reduced by the amount of capital
gain exempt u/s 54B earlier
57. Exemption 54D is applicable if there 58. Exemption u/s 54D is applicable if there
is: is a compulsory acquisition of:
a A transfer a Any land and building used by an industrial
undertaking
b Compulsory acquisition by law b Land and building which has been used by the
industrial undertaking for at least 2 years
for its activities, immediately preceding the
date of compulsory acquisition
c Sale c Land and building used for at least 3 years
immediately preceding the date of
compulsory acquisition.
59. For claiming exemption u/s 54D, the 60. If the new land and building acquired for
assessee should purchase and / or claiming exemption u/s 54D, is
construct another land and building transferred within 3 years, then there will
within: be:
a 2 years from the date of compulsory a Short term capital gain
acquisition
b 3 years from the date of Receiving b Exemption claimed under section 54D
compensation earlier shall be withdrawn
c Within 3 years from the end of the c The cost of acquisition of the said asset
previous years of compulsory shall be reduced by the capital gain exempt
acquisition u/s 54D earlier

61. Ms. Shanta Bai sold a residential 62. Exemption under section 54EC shall be
building in Jodhpur for Rs. 15,00,000 available to:
on 01-7-2022. The building was
acquired for Rs. 1,50,000 on 1-6-
1997. The fair market value of the
building as on 01-04-2002 is
2,00,000. She paid brokerage @ 2%
at the time of sale of the building.
She invested Rs. 7 lakhs in purchase
of a residential building in December,
2021. Compute her taxable capital
gains for the A.Y. 2023-24. (Cost
inflation index : 2003-04 = 100;
2022-23 = 317)
a Rs. 5,70,000 a Any assessee
b Rs. 2,22,000 b Individual only
c Rs. 1,92,000 c Individual or HUF
d Rs. 1,36,000 d Company assessee only
63. Exemption under section 54EC shall be 64. Under section 54EC, the assessee shall be
available for transfer of: allowed exemption:
a Land or building a To the extent of capital gain invested
subject to maximum of Rs. 50 lacks per
financial year
b Any long term capital asset b Proportion to the net consideration price so
invested
c Any long term capital asset other than c To the extent of the capital gain invested
residential house property d To the extent of capital gain invested
subject to maximum of Rs. 50 lacks per
financial year
65. For claiming exemption under section 66. For claiming exemption under section
54EC, amount to the extent of the 54EC, the amount to the extent of capital
capital gain subject to maximum of gain subject to maximum 50 lacks should
Rs. 50 lacks should be invested: be in:
a Within 2 years from the date of a State bank of India
transfer
b Within 5 years from the date of b Notified securities
transfer

c Within six months from the date of c State bank of India or notified securities
transfer
d Within six months of transfer or d Bonds of the NHAI or RECL
before the due date of furnishing the
return of income, whichever is earlier
67. For claiming exemption u/s 54EC, the 68. If notified securities for which exemption
amount shall be invested in notified has been claimed u/s 54EC are
securities for: transferred or converted into money or
any loan is taken against the same within
5 years then the:
a A period of 5 years from the date of a Exemption allowed under section 54EC shall
transfer be withdrawn by opening the old assessment.
b A period of 5 years from the date of b Amount exempt under section 54EC earlier
acquisition of such securities shall be long term capital gain of the
previous year in which such transaction
takes place.
c A period of 7 years from the date of c The cost of acquisition of such securities
transfer shall be reduced by the amount of capital
d A period of 7 years from the date of its gain exempt u/s 54 EC earlier
acquisition
69. For claiming exemption under section 70. Exemption u/s 54F is available to:
54EC the investment must be made in
bonds of
a NHAI or NABARD a Any assessee
b REC or NABARD b An individual
c NABARD or PFC c An individual or HUF
d NHAI or RECL d
71. Exemption u/s 54F is available in 72. Exemption u/s 54F is available if the asset
respect of transfer of: is any
a Any capital asset a Long term capital asset other than
residential house property
b Residential house property b Short term capital asset other than
residential house property
c Any capital asset other than residential c Short term / long term capital asset other
house property than residential house property

73. Exemption u/s 54F is available: 74. Exemption under section 54F is available
if the new asset acquired is:
a To the extent of amount invested a Any residential house property
b Proportionate to the net consideration b Any house property
price so invested
c To the extent of amount actually c Residential house property for self-
invested occupation
75. Exemption under section 54F, the 76. For claiming exemption under section 54F,
amount to the extent of net the amount to the extent of consideration
consideration price is to be invested price is to be invested in the construction
in the purchase of residential house of the residential house property within:
property within:
a 2 years from the date of transfer a 3 years after the date of transfer
b 3 years from the date of transfer b 2 years after the date of transfer
c One year before or two years after the c One year before or 2 years after the date
date of transfer of transfer
d One year before 3 years after the date
of transfer
77. Exemption under section 54F shall not 78. Exemption u/s 54G is available on account
be allowed if the assessee; on the of transfer:
date of transfer owns:
a Any residential house a For any reasons
b A residential house which is let out b In pursuance of shifting from urban area to
any other area
c A house which is self-occupied c In pursuance of shifting from urban area to
d More than one residential house rural area
79. Exemption u/s 54G is available to: 80. For claiming exemption under section 54G,
such land, building or plant and Machinery
must have been used by the industrial
undertaking:
a Any assessee a For at least 2 years immediately preceding
the date of transfer
b Any assessee who owns an industrial b Any period of 2 years
undertaking
c Individual or HUF owns an individual c None of these two
undertaking

81. For claiming exemption u/s 54G, the 82. Exemption under section 54GB is available
assessee shall acquire the new asset to:
within:
a 2 years from the date of transfer a Any assessee
b 3 years from the date of transfer b An individual
c One year before or 2 years after the c An individual or HUF
date of transfer
d One year before or 3 years from the
date of transfer
83. Exemption under section 54GB is 84. Exemption under section 54GB is available:
available on account of transfer of:
a Any capital asset being long term a To the extent the capital gain is invested in
capital asset the subscription of equity shares of an
eligible company
b Any residential house property being b Proportionate to the net consideration price
long term capital asset so invested in the subscription of equity
shares of an eligible company within one year
before or two years after the date of
transfer
c Any residential property (a house or c Proportionate to the net consideration price
plot of land) being long term capital so invested in the subscription of equity
asset shares of a eligible company before the due
d Any residential land being long term date of furnishing the return of income
capital asset under section 139 (1)
85. For claiming exemption under section 86. The equity shares of the company or the
54GB, the eligible company should new asset (P&M) acquired by a company
utilize the above subscription for the should not be transferred by individual or
purchase of new eligible plant and HUF or the company, as the case may be,
machinery: within a period of
a Within two years from the date of a 2 years from the date of their acquisition
subscription in the equity shares
b Within one year from the date of b 3 years from the date of their acquisition
subscription in the equity shares
c Within one year before or two years c 5 years from the date of their acquisition
from the date of subscription in the
equity shares.

87. Where after depositing the amount 88. In case of compulsory acquisition, the
under capital gain scheme, the period for investment in specified assets
individual assessee had died, the u/s 54, 54B, 54D and 54F shall be
amount lying in the capital gain reckoned from:
scheme:
a Shall be taxable in the hands of legal a The date of transfer
heir
b Should be utilized by the legal heir for b The date when the part or full compensation
the specified purpose is received
c Shall be exempt in the hands of legal c The date as and when any compensation is
heir received
89. U/s 54EE the time limit for acquiring

new asset is ___________ from the
date of transfer
a 6m
b 1 years
c 2 years
d 3 years
COMPUTATION OF CAPITAL GAIN
90. Any short term capital gain arising 91. Long term capital gain on sale of equity
from the transfer of an equity share through stock exchange
shares in a company or a unit of an
equity oriented fund shall be liable
to tax at a concessional rate of
a 15% a Taxable u/s Section 112A
b 10% b Is exempt under section 10(37)
c 20% c Is covered under section 111A, hence liable
to tax @ 15%
d 18.5% d Is taxable @ 20% and @ 10% if index
benefit is not claimed
92. In respect of listed shares held for 93. Short term capital gain covered under
10 months sold during the previous section 111A is
year through stock exchange, the
rate of tax in respect of capital gain
is:
a 10% a Exempt

b 20% b Taxable at general rate applicable to the

assessee
c 15% c Taxable @ 15%
d Not determinable, as the capital gain d Taxable @ 10%
will form part of the total income
whose other component are not known
94. Securities transaction tax paid by 95. Securities transaction tax paid by the
the seller of shares and units shall purchaser of shares unit / shall
a Be allowed as deduction as expenses a Form part of the cost of such shares and
of transfer unit
b Not be allowed as deduction b Not form part of the cost of such shares
and units
96. Total income for assessment year 97. Total income of a resident individual aged
2021 – 22 of a non – resident 58 years including long term capital gain
individual including long term capital of Rs. 50,000 is Rs. 2,70,000, the tax
gain of Rs. 60,000 is Rs. 2, 60,000. in total income shall be:
The tax on total income shall be:
a Rs 12,480 a Rs. 1,030
b Rs. 6,180 b NIL
c Rs. 1,030 c Rs. 1,560
98. Long term capital gain on sale of 99. Long term capital gain from the sale of
equity shares and units of an equity units of equity oriented fund shall be
oriented fund shall be
a Taxable @ 10% without indexation a Taxable if sold through a recognized stock
exchange and securities transaction tax is
paid
b Exempt b Exempt if sold through a recognized stock
c Taxable @ 15% exchange or to mutual fund and securities
d Exempt if sold through a recognized transaction tax is paid
stock in India and such transaction is
chargeable to securities transaction
tax
100. Any short term capital gain arising 101. Compute the tax liability for assessment
for the transfer of equity shares year 2023-24 of resident individual who
and units of equity oriented fund is having long term capital gains of Rs.
shall be taxable 5,00,000 and has no other income –

Note: Rebate under section 87A shall be

admissible.
a At the normal rate a Rs. 1,04,000
b At the rate of 20% b Rs. 39,000
c At the rate of 10% if transferred c Rs. 51,500
though a recognized stock exchange
and such transaction is chargeable to
securities transaction tax
d At the rate of 15% if transferred d Rs. 52,000
through a recognized stock exchange
and such transaction is chargeable to
securities transaction tax
102. Compute the tax liability for 103. Compute the tax liability for assessment
assessment year 2023-24 of non- year 2023-24 of resident individual who
resident individual who is having long is having income from short term capital
term capital gains of Rs. 5,00,000 gains of Rs. 5,00,000 arising on transfer
and has no other income – of equity shares listed in recognized
stock exchange on which securities
transaction is paid and has no other
income :
a Rs. 1,04,000 a Rs. 33,800
b Rs. 49,440 b Rs. 36,930
c Rs. 51,500 c Rs. 26,000
d Rs. 23,690 d Rs. 39,000
104. Compute the tax liability for 105. When shares of a listed company held
assessment year 2023-24 of for more then 36 months are transferred
resident individual who is having privately for Rs. 8 lakh, with original
income from short term capital gains cost of acquisition of Rs. 1 lakh whose
of Rs. 2,00,000 arising on transfer indexed cost of acquisition is Rs. 2 lakh,
of equity shares listed in recognized the income-tax payable would be - (Dec.
stock exchange on which securities 2015)
transaction is paid and long term
capital gains of Rs. 3,00,000 on
transfer of land and has has no
other income –
a Rs. 39,140 a Rs. 1,45,600
b Rs. 28,600 b Rs. 72,800
c Rs. 49,440 c Rs. 1,24,800

d Rs. 41,600 d Rs. 61,800
106. Short-term capital gains arising 107. Mrs. Khira purchased shares of Aaloo
from the transfer of equity shares Ltd. for Rs. 5 lakhs on 3rd April, 2022.
in a company or units of an equity The shares were sold on 5th June, 2022
oriented fund or units of a business for Rs. 7 lakhs. She paid STT of Rs.
trust charged with security 700 and brokerage of Rs. 500. The
transaction tax are subject to amount chargeable to tax is: (June,
income-tax at the rate of - (June 2017)
2016)
a 10% a Rs. 2,00,000
b 15% b Nil
c 20% c Rs. 1,99,500
d Normal rate d Rs. 1,98,700
108. Mr. Pyarelal (age 70) received Rs. 109. Tarak, a retired person of 68 years of
30,000 every month during the age obtained Rs. 10,000 per month
financial year 2022-23 on reverse from. 1st April, 2022 on reverse
mortgage of his property with State mortgage of his self-occupied residential
Bank of India. The amount of property from a bank. The fair rent of
receipt liable to tax in the hands of the property is Rs. 15,000 per month.
Mr. Pyarelal is: (June, 2017) The income chargeable to tax in respect
of amount received on reverse mortgage
for his self-occupied house property for
the financial year 2022-23 would be:
(June. 2019)
a Rs. 2,60,000 a Rs. 1,20,000
b Rs. 2,52,000 b Rs. 1,26,000
c Rs. 40,000 c NIL
d Nil d (Rs. 15,000 - Rs. 10,000) × 12 = Rs.
60,000
110. Mr. Tamatar provides the following details regarding his transaction for the sale of
his residential house for the A.Y. 2023–24. Compute the amount of capital gain to
be included in the total income for the assessment year 2023 – 24 house purchased
in 08–09 for Rs.6,72,000 sold in November, 2022 for Rs. 42,00,000 (CII for 08 –
09: 129 & 22-23 – 331)
a Long term capital loss of Rs. 16,48,629
b Long term capital gain of Rs. 24,75,721
c Long term capital loss of Rs. 35,28,000

d None of the above gain
111. During the previous year 2022-23, Sri Bose sold his residential house. On the basis
of the following information determine the taxable capital gains of Sri Bose:
House purchased on 2/5/2000 at a cost of Rs.50,000 (Fair market value on 1.4.01
Rs.80,000). He constructed another floor during 11–12 at a cost of Rs.1,50,000.
He sold the entire building for Rs.20,00,000 on 8/8/2022. He paid brokerage @ 2%.
(CII for 11 - 12: 167 & 22 – 23 – 331)
a Long term capital gain of Rs.8,07,518
b Long term capital gain of Rs.6,26,195
c Long term capital gain of Rs. 13,97,895
d None of the above
112. Mr. Samosa a resident of Kolkata, sold his residential house on 25.6.2022 for
Rs.60,00,000. He had purchased this house on 1.9.2009 for Rs.2,40,000 and had
spent Rs.1,60,000 on improvement of the house during 2009–10. Compute capital
gains for the A.Y. 2023 – 24.
[CII 09–10 – 137, 10–11 – 148, 22–23 – 331]
a Long term capital gain of Rs.50,62,308
b Long term capital gain of Rs.24,88,686
c Long term capital gain of Rs.39,00,000
d None of the above

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 INCOME FROM OTHER SOURCES
CHAPTER 8 INCOME FROM OTHER SOURCES
INTRODUCTION
This is the last head of income. Any income which is not salary income, house property income,
business income, capital gain is treated as income from other source.
As per Section 56(1), any income, which is not specifically exempted and not chargeable under
any other heads of income, shall be chargeable under the head “Income from other sources”.
Tax point - A receipt shall be taxable under this head if the following conditions are satisfied:
Income
Basis of Charge Income shall not be exempt
Not covered by other head
Section 56(2) lays down a list of incomes, which are taxable under this head. Such list is not
exhaustive. Apart from the income stated in section 56(2) any other income, which is fulfilling
all the above conditions, shall be taxable under this head.

Income from other sources
General (Sec. 56(1)) Specific (Sec. 56(2))
Any income which is not Following incomes in particular

excluded from the total shall be chargeable to tax
income and not chargeable under the head income from
to tax under any other head other sources only
(All Inclusive)
Examples 1 Dividend
➢ Income from subletting;

➢ Interest on bank deposits 2 Wining from Lotteries
and loans;
➢ Income from royalty (if it is
not an income from Employee’s contribution towards staff
3
business/profession); welfare scheme
➢ Directors fee;
➢ Ground rent; 4 Interest from securities
➢ Agricultural income from a
place outside India; Rental income of Machinery, Plant and
➢ Director’s commission for 5
furniture
standing as a guarantor to
bankers;
➢ Director’s commission for Rental income of letting out of plant
underwriting shares of new machinery or furniture along with letting out
company; 6 of building and the two lettings are not
➢ Examination fees received separable
by a teacher from a person
other than his employer;
➢ Rent of plot of land; Sum received under Keyman insurance policy
7
➢ Insurance commission;
➢ Mining and royalties;
➢ Casual income; Interest on compensation or enhanced
8
compensation
9 Gift

DIVIDEND [SEC. 56(2) (I)]
Dividend, in general, means the amount received by a shareholder (whether in cash or in kind) in
proportion to his shareholding in a company whether out of past or present income; or taxable
or exempted income; or revenue or capital income. However, the Income Tax act gives an
inclusive definition of dividend.
Case Tax Treatment

a) Dividend from a domestic company including Taxable in the hands of shareholder
dividend u/s. 2(22)(e)
b) Dividend from a non-domestic company. Taxable in the hands of recipient.
c) Dividend from a co-operative society Taxable in the hands of recipient.
Dividend shall be taxable under the head “Income from other sources”, even when
NOTE
KEY
shares are held by the assessee as stock in trade.
Dividend
Dividend paid by Dividend from

Domestic Company Other company
Taxable
Normal Interim Deemed
Dividen Dividend Dividend
d
Taxable Taxable

DEEMED DIVIDEND 2(22)
Deemed dividend
Sec 2(22)
Sec 2(22)(a) Sec 2(22)(b) Sec 2(22)(c) Sec 2(22)(d) Sec 2(22)(e)
Any Any distribution Distribution Distributio Any payment by

distribution of debentures, on n or way of loan or
entailing debenture- liquidation reduction advance by a
the release stock, deposit of company of capital closely-held
of company certificates and company to a
assets bonus to shareholder, holding
substantial interest,
preference
provided the loan
shareholders should not have
been made in the
ordinary course of
business and money-
lending should not
Taxable in the hands of be substantial part
shareholder.e.f 1-4-20 of the company’s
business
Taxable in the hands of shareholder
Note: Any income by way of dividends received from a company, whether domestic or foreign,
is taxable in the hands of a resident shareholder at normal rates of tax.
1. 2(22)(a)
a. Any distribution of accumulated profits, whether capitalised or not, by a company to its
shareholders is deemed to be dividend if it entails the release of company’s assets.
b. Two conditions are essential for this clause.
• The should be distribution from accumulated profits and
• Such distribution must result in the release of the assets of the company.
c. In case of issue of bonus shares there is no release of assets hence issue bonus shares
are not deemed as dividend.
2. 2(22)(b)
Any distribution by a company
a) debenture stock or deposit certificate to any shareholder or

b) Bonus shares to preference shareholders

Is deemed as dividend to the extent of ACCUMULATED PROFIT, whether capitalised or not
(release of assets not necessary).
3. 2(22)(c)
Any distribution made by a company to its shareholders on its liquidation is treated as
dividend to the extent to which such distribution is attributable to the accumulated profits
capitalised or not).
Exception:
1 Redemption of preference shares issued for full consideration is not deemed to be
dividend.
2 Buy back of shares
4. 2(22)(d)
Any distribution to its shareholders by a company on the reduction of its capital to the
extent to which the company possess accumulated profits is deemed to be dividend.
[Same exception as in clause (c)].
5. 2(22)(e)
Any loan or advance (whether in cash or in kind) given by a closely held company, to the
extent of accumulated profit,-
a. To its specified member (i.e. shareholder who legally as well as beneficially holds not
less than 10% voting power in the company); or
b. To any concern (whether HUF, Firm, AOP, BOI or a company) in which such specified
member holds substantial interest; or
c. Substantial interest: A person shall be deemed to have substantial interest in any
concern if he beneficially holds not less than 20% of share of profit in such concern (or
20% of voting power in case of any company) at any time during the previous year
d. To any other person on behalf of specified member
6. Loan advanced by a banking company
If a banking company has advanced any loan in the ordinary course of business to specified
member then such loan shall not be treated as dividend.
APPLICABLE FROM THE ASSESSMENT YEAR 2021 – 22: [Fin. Act. 20]
Income by way of dividend is taxable in the hands of shareholders under section 56 under the
head “Income from other sources”. there is no special treatment of dividend income from the
assessment year 2021-22. however the following points should be noted:
1 if the shareholder is a domestic company deduction is available under the section 80M
2 if the shareholder is a is an individual HUF / AOP / BOI artificial judicial person surcharge
or income tax on dividend income cannot exceed 15%

BASIS OF CHARGE [SEC. 8]
Case Year of taxability

Normal Dividend Year in which it is declared by the company
Interim Dividend Year in which amount of dividend is unconditionally made available
Deemed Dividend Year in which it is distributed or paid by the company.
CASUAL INCOME [SEC. 56(2) (ib)]
1. It includes
1. Winning from Lotteries
2. Winning from Horse races, etc;
3. Winning from Crossword Puzzles
4. Winning from Gambling and Betting; or
5. Winning from game show or entertainment program on television or electronic mode e.g.,
Who wants to be a millionaire? Big Brother, etc
2. Features
• Allow ability of expenditure: No expenditures shall be allowed as deduction from Casual
Income even though such expenditure was incurred wholly and exclusively for the
purpose of earning such income
• Deduction under chapter VIA: No deduction u/s 80C to 80U shall be available from
such income
• Set-Off losses: Losses from any other source or under any other head of income cannot
be set-off from Casual Income.
• Exemption limit: shall not be applicable in case of Casual Income.
3. Tax rates
As per Sec. 115BB, casual income shall be taxable at a flat rate of 30% + Surcharge +
Education Cess
Example: Mr. Ritesh, aged 45 years, has won Rs. 2, 00,000 from lottery and he had no other
income.
In such case, amount of tax liability of Mr. Ritesh is Rs. 60,000 – 12500 = 47,500 + 4%
4. Basis of charge
Casual Income shall be taxable on the following basis.
Cases Treatment
In case the assessee maintains books of accounts As per the accounting method followed.
Where no books of accounts are maintained Taxable in the year of receipt
5. Key notes
Income of Jockey - Income of jockey shall be taxable under the head “Profits & Gains of
Business or profession”

Winning from a motor car rally - Winning from a motor car rally shall not be considered
as casual income because such an income is the result of application of skill and effort; it
shall be taxable as usual under the “Income from Other Sources”.
Activity of owning and maintaining race horse
• Activity of owning and maintaining race horse shall not be treated as casual income but
taxable under the head ‘Income from other sources’.
• Expenditure incurred in respect of such activity shall be allowed as deduction.
• Such income shall be taxable at the usual rate of tax.
TDS on casual income - As Per Sec. 194B lottery income in subject to TDS @ 30% +
Surcharge + cess if it exceeds Rs. 10,000 and as per Sec. 194BB Winning from horse race is
subject to TDS @ 30% + Surcharge + Cess if it exceeds Rs. 10,000.
GROSSING UP OF INCOME
GROSS INCOME Income before TDS

NET INCOME Income after TDS.
NOTE For computation of Income Always consider Gross Income:

Net Income
Gross Income =
1−TDS rate
INTEREST ON SECURITIES [SEC. 56(2) (id)]
1. Security means
a. Interest on any security of the Central Government or a state Government.
b. Interest on debentures or other securities issued by or on behalf of:
• A local authority.
• A company.
• A corporation established by a central or state government
2. Tax Treatment
Cases Taxable under the head
The securities are held as stock in trade “Profit & Gains of Business or Profession”
The securities are held otherwise than as “Income from Other Sources”
stock in trade
3. Chargeability
Interest on securities is taxable on the basis of method of accountancy regularly followed
by the assesse (i.e., cash or accrual basis). In case, the assesse does not follow any method
of accountancy such income shall always be taxable on due basis.
4. Expenses allowed as deduction
c. Expenditure allowed as deduction
Collection expenditure
Interest on loan.

INCOME FROM MACHINERY, PLANT OR FURNITURE LET OUT ON HIRE [SEC. 56(2) (ii)]
• Income from above is taxed under this head.

• If assets are let out as a part of business activity then shall be taxable as business income
INCOME FROM MACHINERY, PLANT OR FURNITURE LET OUT ON HIRE ALONG WITH BUILDING [SEC. 56(2) (iii)]
1. Feature
Generally income from letting of building is taxable under the head income from house
property, but if such letting is inseparable from letting of machinery, plant or furniture,
then income from such letting is charged to tax under the head income from other sources.
2. Deduction allowed
Deduction allowed against income u/s. 56(2) (ii) & 56(2) (iii):
• Current repairs.
• Insurance premium paid for machinery, plant, furniture or building.
• Depreciation and unabsorbed depreciation.
• Any other revenue expenditure in relation to above mentioned income.
ANY SUM RECEIVES UNDER A KEYMAN INSURANCE POLICY [SEC. 56(2) (iv)]
1. Meaning & features

Any sum received under a Keyman Insurance Policy including bonus, if not chargeable under
the head “PGBP” or “Salary”;
Keyman Insurance Policy:
• It is a life insurance policy.
• It is a policy taken by one person on the life of another person.
• The relationship between such persons should either be that of an employer – employee
or any other business relationship.
Explanation to section 10(10D)
2. Example
For example, Mr. A is the chief operating officer of XYZ Ltd. (the company). XYZ Ltd.
heavily dependent upon Mr. A for its business operations and, thus, Mr. A is ‘a key person’ or
a ‘Keyman’ of the company. Sudden death of Mr. A will seriously affect the business
operations of the company. To insure against such losses, the company may take out an
insurance policy on the life of Mr. A Such a policy is known as ‘Keyman Insurance Policy’.
3. Tax Treatment
In the hands of the person (employer company) taking the policy: Maturity proceeds are
taxable as business income. Premium paid on Keyman Insurance policy is an allowable
expenditure in the hands of the company u/s 37(1).

In the hands of Keyman: Ordinarily, a Keyman insurance policy can mature only in the hands
of the employer company. However, the employer company may assign the policy in favour of
the keyman or his family members.
If the policy is assigned to the employee (Keyman) then it comes within the ambit of ‘profits
in lieu of salary’ is] s 17(3)
if the policy is assigned in the hands of the family members then it is taxable within the
ambit of ‘income from other sources’ vi] s 56(2)(iv)
Note: After assignment, the policy will lose the character of a “Keyman Insurance Policy” and,
hence, the ultimate maturity in such a case will be covered by section (10D).
GIFT [SEC. 56(2) (vii)
1. Conditions
• Receipts by any assessee.
• It is received after 1st October 2009.
• It does not fall in exempted category.
• property includes –
a. Immovable property being land or building or both;
b. Share and securities
c. Jewellery
d. Archaeological collections;
e. Drawings
f. Paintings
g. Sculptures;
h. Any work of art; or
i. Bullion
j. Virtual Digital Asset (Covered in Capital Gain) [FA 2022]
2. Exceptions:
This section shall not apply to any sum of money or any property received:
1 From any relative#
# Relative here means.
a Spouse of the individual.
b Brother or sister of the individual.
c Brother or sister of the spouse of the individual;
d Brother or sister of either of the parents of the individual.
e Any lineal ascendant or descendant of the individual;
f Any lineal ascendant or descendant of the spouse of the individual;
g Spouse of the person referred to in clauses (ii) to (vi).

2 On the occasion of the marriage of the individual (whether gift is received from relative
or outsiders).
3 Under a will or by way of inheritance.
4 From local authority.
5 From any fund or foundation or university or other educational institutions or hospital
or other medical institutions or any trust or institution referred u/s. 10(23C).
6 W.e.f. 01/04/2017 Any gift received by way of transaction not regarded as transfer u/s
47(vicb) or (vid) or (vii)
Nature of Conditions to be satisfied for Extent of

Category Remarks
Receipt considering Income Income
A Any sum of a During the previous year, The whole of Aggregate
money assessee has received any sum of the aggregate amount of
money (cash, cheque, draft, etc.) value of such cash gift
from one or more persons. sum shall be received
b Such sum is received without considered as during the
consideration. income of period shall
c The aggregate value of such that previous be
receipt during the previous year year. considered.
exceeds Rs 50,000
1. Illustration
Compute amount of gift in following cases:
a. Kareena received cash gift of Rs. 50,000 from Shahid Kapoor on her birthday.
b. Kareena received cash gift of Rs. 80,000 from Shahid Kapoor and Shakti Kapoor on her
birthday.
Solution
a. As a cash gift not exceed Rs.50,000 hence the cash gift exempt.
b. As cash gift exceed Rs.50,000 so entire amount of Rs.80,000 is taxable.
B Immovable a During the previous year, Assessee has The whole of Aggregate
property received immovable property. the aggregate amount of
b Such immovable property is received value of such cash gift
without consideration. sum shall be received
c The stamp duty value of such property considered as during the
exceeds Rs. 50000. income of period shall
d Such asset is a capital asset in hands of that previous be
recipient. year. considered.

2. Illustration
a. Dipika received HP as a gift from Karan Stamp duty value Rs. 50000
b. Sonam received 2 HP as a gift from Karan stamp duty value Rs. 56,000 and from Vinod of Rs.
36,000.
Solution
a. Value of house property is Rs.50.000 hence exempt
b. Property received from karan is taxable because value of property exceeds Rs.50,000 and
property received from vinod is exempt because property does not exceed Rs.50,000/-.
C Any a During the previous year, Assessee Then The limit of
immovabl has received immovable property. difference Rs. 50000/-
e b Such immovable property is received between is applicable
property for inadequate consideration. stamp duty per incidence.
c Stamp duty value exceeds [Fin Act value and
21] 110% of consideration. considerations
d Difference between duty is chargeable
stamp
value and consideration exceeds Rs to tax.
50,000
Note 1 In case immovable property, being a residential unit fulfilling the stipulated conditions
mentioned below, is received for inadequate consideration from a person who holds
such property as his stock-in-trade, then, only if the stamp duty value and the actual
consideration be chargeable to tax in the hands of the recipient of immovable
property. The benefit of higher threshold of 20% of consideration via-a-vis 10% of
consideration shall be available, subject to the satisfaction of following Conditions-
i The residential unit is transferred during the period between 12.11.2020 and
30.6.2021.
ii Such transfer is by way of first time allotment of the residential unit and
iii The consideration paid or payable as a result of such transfer ≤ ₹ 2 crores.
Key Though the residential unit should be the stock in trade of the seller for applicability
Point of the higher threshold of 20%, it should be a capital asset in the hands of the buyer
in the first place for attracting the provisions of section 56(2)(x).
Meaning An independent housing unit with separate facilities for living, cooking and sanitary
of requirement, distinctly separated from other residential units within the building,
residen which is directly accessible from an outer door or through an interior door in a shared
tial unit hallway and not by walking through the living space of another household.
3. Illustration
a. Uday Shetty purchased HP for Rs. 25,12,000 from Majnu (stamp duty value Rs. 25,35,000).

b. Shilpa purchased 2 HP. First for Rs. 25,00,000 from Raj (stamp duty value Rs. 28,00,000) and
second for Rs. 26,00,000 from Dhoni (Stamp duty value Rs. 26,30,000)
Solution
a.
Sale consideration 25,12,000
110% of 25,12,000 27,63,200
Stamp duty value 25,35,000
As stamp duty value does not exceed 110% of sale consideration nothing is taxable.
b.
Particular H1 H2
Stamp duty value 28,00,000 26,30,000
Amount paid 25,00,000 26,00,000
110% of amount paid 27,50,000 28,60,000
Taxable 300000 Nil
4. Illustration
The data pertaining to stamp duty and actual purchase consideration paid by Arnold Joshi is given
below –
Situation 1 Situation 2 Situation 3 Situation 4
Rs. Rs. Rs. Rs.
Stamp duty value 32,00,000 5,40,000 1,45,000 30,90,000
Purchase consideration 28,00,000 4,90,000 1,30,000 30,00,000
110% of purchase consideration 30,80,000 5,39,000 1,43,000 33,00,000
Whether stamp duty value exceed Yes Yes Yes No
110% of purchase consideration
Stamp duty value minus purchase 4,00,000 50,000 15,000 90,000
consideration
Amount taxable in the hands of Arnold 4,00,000 Nil Nil Nil
Joshi under section 56(2)(x)
Cost of acquisition in the hands of 32,00,000 4,90,000 1,30,000 30,00,000
Arnold Joshi for calculating capital
gain (in future)
Full value of consideration in the hands 32,000 5,40,000 1,45,000 30,00,000
of transferor under section 50C
D Any movable a During the previous year, Assessee has The whole of Aggregate
property received movable property from one or the aggregate amount of gift
more persons. fair market received

b Such movable property is received value of such during the

without consideration. property shall period shall
c The aggregate fair market value of be considered be
such receipts during the previous year as Income of considered.
exceeds Rs. 50000. the previous
d Such asset is a capital asset in hands year.
of recipient.
5. Illustration
a. Aishwarya received gold necklace of (FMV Rs. 45,000) from Salman without any consideration.
b. Raveena received gold necklace of (FMV Rs. 55,000) from Salman without any consideration.
c. On 12-12-22, Sunidhi received shares from his friend of Rs. 36000 (FMV) as a gift. Further
as on 12-01-23, She also received gold chain from Bobby (FMV Rs. 30,000) without any
consideration.
Solution
a. Exempt because fair market value does not exceed Rs.50,000.
b. Taxable because fair market value exceed Rs.50,000.
c.
Shares FMV 36,000
(+) Gold necklace 30,000
Aggregate FMV 66,000
Aggregate FMV of shares and gold necklace exceeds Rs. 50,000 hence it is taxable
E Any movable a During the previous year Assessee has The whole of Aggregate
property received movable property from one or the aggregate amount of gift
more persons. fair market received
b Such movable property is received for value of such during the
a consideration. property shall period shall
c Such consideration is less than the be considered be
aggregate fair market value of the as Income of considered.
property by an amount exceeding Rs. the previous
50000. year.
6. Illustration
a. On 12-12-22 Jony purchased jewellery from Kishore (FMV Rs. 46,000) for Rs. 30,000.
b. On 12-12-22 Jony purchased jewellery from Kishore (FMV Rs. 96,000) for Rs. 30,000.

c. On 12-12-22, Kajol purchased jewellery from his friend Shahrukh (FMV Rs. 66,000) for Rs.
30,000. Further as on 01-01-23 she also acquired silver utensils (FMV Rs. 1,00,000) from
another friend for Rs. 70,000.
Solution
a.
FMV of jewellery 46,000
(-) amount paid 30,000
16,000
As difference between FMV and amount paid was not exceed Rs.50,000 hence not taxable.
b.
(-) amount paid 30,000
66,000
As difference between FMV and amount paid was exceeds Rs.50,000 hence it was taxable.
c.
FMS of Silver utensils 1,00,000
1,66,000
(-) Amount paid 1,00,000
66,000
As difference between FMV and amount paid was exceeds Rs.50,000 hence it was taxable.
Note 1: The limit of Rs. 50000/- is also for per category. In other words, one may receive
cash gift of Rs. 35000 and gift in kind of Rs. 36000 without attracting any tax.
COVID -19 MEDICAL TREATMENT EXPENDITURE [SEC.56(2)(x)]
The existing provisions of section 56(2)(x), inter alia, provide that where any person receives,
in any previous year, from any person any sum of money (without consideration) the aggregate
value of which exceeds Rs. 50,000, the whole of the aggregate value of such sum shall be the
income of the person receiving such sum. However, proviso to section 56(2)(x) provides for
certain exclusions.
• Amendment-Proviso to the aforesaid section has been modified (with effect from the
assessment year 2020-21) to provide that section 56(2)(x) will not be applicable in the
following cases
1. Any sum of money received by an individual, from any person, in respect of any
expenditure actually incurred by him on his medical treatment or treatment of any
member of his family, in respect of any illness related to Covid-19 subject to such
conditions, as may be notified by the Central Government in this behalf, shall not be the
income of such person.

2. Any sum of money received by a member of the family of a deceased person, from the
employer of the deceased person (without limit), or from any other person or persons to
the extent that such sum or aggregate of such sums does not exceed Rs. 10 lakh, shall
not be treated as income of recipient. However, the exemption will be available where
a. the cause of death of such person is illness relating to Covid-19;
b. the payment is received within 12 months from the date of death of such person, and
c. any other condition notified by the Central Government is satisfied.
"Family", for the aforesaid purpose, in relation to an individual means
a. spouse and children of the individual; and
b. Parents, brothers and sisters of the individual, wholly or mainly dependent upon the
individual.
COMPENSATION OR ANY OTHER PAYMENT RECEIVED IN CONNECTION WITH TERMINATION

OF HIS EMPLOYMENT [SECTION 56(2)(XI)]
Any compensation or any other payment, due to or received by any person, by whatever name
called, in connection with the termination of his employment or the modification of the terms
and conditions relating to thereto shall be chargeable to tax under this head.
SHARE PREMIUM IN EXCESS OF FMV OF SHARE [SEC. 56(2)(viib)]
Where a company not being a company in which the public are substantially interested, receives,
in any previous year from any person being a resident any consideration for issue of shares that
exceeds the face value of such shares, the aggregate consideration received for such shares as
exceeds the FMV of the shares shall be treated as income of the company.
7. Illustration
Face FMV Consideration Remarks
Value
10 15 11 Sec. 56(2)(viib) not applicable
10 5 10 Sec. 56(2)(viib) not applicable.
10 15 20 Rs. 5 per share shall be income of issuing company
10 20 35 Rs. 15 per share shall be income of issuing company.
INCOME BY WAY OF INTEREST RECEIVED ON COMPENSATION OR ON ENHANCED

COMPENSATION [SEC. 56(2)(viii)]
It is taxable under the head income from other sources after allowing standard deduction of
50% of such income.

SEC 56(2)(ix) ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF
NEGOTIATION FOR THE TRANSFER OF A CAPITAL ASSET IF ON OR AFTER 1-4-14
i Prior to A.Y. 2015-16, any advance retained or received in respect of a negotiation for
transfer which failed to materialise is reduced from the cost of acquisition of the asset or
the written down value or the fair market value of the asset, at the time of its transfer to
compute the capital gains arising therefrom as per section 51. In case the asset transferred
is a long-term capital asset, indexation benefit would be on cost so reduced.
ii With effect from A.Y. 2015.16, section 56(2)(ix) provides for the taxability of any sum of
money, received as an advance or otherwise in the course of negotiations for transfer of a
capital asset. Such sum shall be chargeable to income-tax under the head ‘income from other
sources’, if such sum is forfeited and the negotiations do not result in transfer of such
capital asset.
iii In order to avoid double taxation of the advance received and retained, section 51 was
amended to provide that where any sum of money received as an advance or otherwise in the
course of negotiations for transfer of a capital asset, has been included in the total income
of the assesse for any previous year, in accordance with section 56(2)(ix), such amount shall
not be deducted form the cost for which the asset was acquired or the written down value
or the fair market value, as the case may be, in computing the cost of acquisition.
iv It may be noted that advance received and forfeited up to 31.3.2014 has to be reduced from
cost of acquisition while computing capital gains, since such advance would not have been
subject to tax under section 56(2)(ix). Only the advance received and forfeited on or after
1.4.2014 would not be reduced from the cost of acquisition for computing capital gains.
DEDUCTION U/S 57
The income chargeable to tax under this head is computed after making the following deductions
1. Commission or remuneration for is releasing interest on securities (section 57(i)):
Any reasonable sum paid by Commission or remuneration to a Banker or any other person for
the purpose of releasing interest on securities on behalf of the assessee is deductible.
Though, unlike in section 43(2) to the word “paid” is not defined for the head “Income from
other sources”, the aforesaid expenditure is deductible on “due basis” in the case of
mercantile system of accounting or on “payment” basis in the case of cash system of
accounting (section 145).
2. Deduction in respect of employees’ contribution towards staff welfare schemes section
57 (ia):

Deduction in respect of any sum received by a taxpayer as contribution from his employees
towards any welfare fund of such employees is available only if such some is credited by the
taxpayer to the employee’s account in the relevant fund before the due date. for this
purpose “due date” is the date by which the assessee is required as employer to create such
contribution to the Employees account it in the relevant fund under the provisions of any law
terms of contract of service or otherwise.
3. Repairs, depreciation in the case of letting out of plant, machinery, furniture, building:
In the case of income chargeable under Section 56(2)(ii)/(iii) the following expenses are
deductible:
a current repairs in respect of building section 30(a)(ii);
b insurance premium in respect of insurance against the risk of damage or destruction of
the premises section 36(c);
c repairs and Insurance of machinery plant and furniture (section 31);
d depreciation (Section 32)
4. Standard deduction in the case of family pension section (57(iia)):
In the case of income in the nature of family pension, the amount deductible is Rs. 15000 or
33 1/3 present of such income, whichever is less.
for this purpose, “family pension” means a regular monthly amount payable by the employer
to a person belonging to the family of an employee in the event of his death.
Note: If an individual opts for the alternative tax regime under section 115 BAC, deduction
under section 57 (iia) is not available from the assessment year 2021 - 22.
[Finance Act - 20]
5. Any other expenses for earning income (section 57(iii)):
Any other expenditure is deductible under section 57(iii) if the following four conditions are
satisfied:
a the expenditure must be laid out or expanded wholly and exclusively for the purpose of
making or earning the income;
b The expenditure must not be the nature of capital expenditure;
c it must not be in the nature of personal expenses of the assesse;
d it must be laid out or expended in the relevant previous year and not in any prior or
subsequent year - see Virmati Ramkrishna v. CIT (1981) 131 ITI 659 (Gujarat)
DEDUCTION AVAILABLE FROM THE ASSESSMENT YEAR 2021 - 22: [fin.Act.20]
Dividend income (or income in respect of units of mutual fund / specified company) is taxable in
the hand of recipient from the assessment year 2021 - 22. From the assessment year 2021-22,
provision of section 57 has been amended to provide that no deduction shall be allowed from
dividend income (or income in respect of units of mutual fund or specified company), other than
deduction on account of interest expense and in any previous year such deductions shall not

exceed 20% of the dividend income for income from units included in the total income for that
Year Without deduction under section 57.
EXPENSES DISALLOWED SEC 58
a Personal expenses
b Interest payable outside India on which tax has not been deductible.
c Salary payable outside India on which tax has not been deductible.
d Wealth Tax
e Expenditure in respect of winnings from lottery etc.

DEFINITION
1. Which of the following income is not 2. While computing income from other
chargeable under Income from Other sources, deduction is not allowed to the
Sources assessee for:
a Dividend Income a Personal expenditure
b Lottery held as stock in trade b Direct tax
c Interest on bank deposits c Interest payable outside India without
TDS
d None of the above d All of the above
3. Which of the following is not an 4. Income under the head income from other
income taxable as income from other sources is taxable on:
sources?
a Family pension a Due basis
b Casual income b Receipts basis
c Director’s sitting fee for attending c On the basis of method of accounting
board meetings regularly employed by the assessee
d Rent received for house property
including use of plant and machinery,
where rent is separable between rent
for house property and rent for use
of plant and machinery
5. Royalty received from a publisher by 6. Interest on refund of Income Tax paid in

Nina was of Rs. 42,700. She spent excess is a ________________ receipt
Rs. 2,700 on books, stationery,
typing, etc. Calculate the amount of
income chargeable to tax under head
Income from other sources?
a Exempt a Taxable
b Rs. 42,700 b Not taxable
c Rs. 40,000 c Exempt
d Rs. 2,700 d None of the above

DIVIDEND SECTION 52(2)(1)
7. Generally, dividend is exempt from 8. A private limited company engaged in

tax. Exceptions to this rule is: manufacturing activity had general
reserve of Rs. 20 lakh. It granted a loan
of Rs. 5 lakh to a director who held 13%
shareholding cum voting rights in the
company. The said loan was re-paid by him
before the end of the year. The amount
of deemed dividend arising out of the
above transaction is - (Dec. 2015)
a Dividend distributed by foreign a Rs. 2,60,000
company
b Dividend above 10 lakhs b Rs. 2,40,000
c Dividend from co – operative society c Rs. 5,00,000
d Wrong statement d Nil
9. Dividend declared by a domestic 10. Dividends declared by unit trust of India

company is: is:
a Fully taxable in the hands of a Fully taxable in the hands of unit holders
shareholders
b Fully taxable in the hands of b Fully taxable in the hands of unit holders
shareholders
c Taxable but a deduction is allowed c Taxable but deduction is allowed under
under section 80L on account of such section 80L
dividend
11. Mr. Wadapav received dividend from 12. Mr. Feku aged, 61 years, received
domestic company Rs. 12 L. The dividend of Rs. 12,00,000 from a
taxable dividend shall be domestic company in AY 2023 - 2024 i.e.
PY 2022-2023. Income tax is payable on
a Nil a The entire amount of Rs. 12,00,000
b 12L b As per slab
c 2 L as per slab c Nil
d 12 L @ 10% d Rs. 9,00,000
13. In respect of dividend received from 14. A private limited company engaged in
domestic companies— manufacturing activity had general
reserve of Rs. 20 lakh. It granted a loan

of Rs. 5 lakh to a director who held 13%

shareholding cum voting rights in the
company. The said loan was re-paid by him
before the end of the year. The amount
of deemed dividend arising out of the
above transaction is:
a No deduction under Chapter VI-A is a Rs. 2,60,000
allowed but loss under other heads can
be set-off against such income
b Deduction allowed u/s 80M b Rs. 2,40,000
c Both deduction under Chapter VI-A and c Rs. 5,00,000
setoff of losses against such income are
allowed
d Deduction under Chapter VI-A is d Nil
allowed but set-off of losses under
other heads against such income is not
allowed
15. Ms. Dhakkan received dividend of Rs. 16. Chutki Ltd. reduced its share capital and
80,000 for her equity shareholding in for that distributed to its shareholders an
GGC Ltd. (a listed domestic company). amount of Rs. 55,00,000. The company
She paid interest of Rs. 12,500 for possessed accumulated profits of Rs.
the amounts borrowed for investment 35,00,000 as on the date of distribution.
in those shares. The taxable dividend What shall be the amount to be assessed
income in hands of Ramesh Ltd. would as deemed dividend?
be:
a Rs. 80,000 a Rs. 55,00,000
b Rs 12,500 b Rs. 35,00,000
c Rs. 67,500 c Rs. 20,00,000
d Rs. 92,500 d No deemed dividend
17. Surcharge of dividend cannot exceed 18. Deduction allowed against dividend income
shall be _______________
a 25% a Max 20% of dividend
b 10% b Actual expenditure
c 15% c Not allowed
d As per income d Amount of interest

19. An assessee received dividend from 20. Sabka Pvt. Ltd. gave a loan of Rs.
domestic company, at what rate shall 5,00,000 to its shareholder. The
tax be payable? shareholder was the beneficial owner of
equity shares of the company as he held
12% of the voting power of the Company.
The company possessed accumulated
profits of Rs. 3,00,000 as on the date of
advancement of loan. What shall be the
amount to be assessed as deemed dividend
in the hands of shareholder?
a Slab rate a Rs. 5,00,000
b As per rates applicable to him b Rs. 3,00,000
c 30% c Rs. 2,00,000
d Exempt under section 10(35) d Exempt in hands of shareholder
21. Dil Dooba Pvt Ltd. gives a loan of 22. Where a closely held company gives an
Rs.5,00,000 to X, who is not a loan /advance to a shareholders who has
shareholder. X gives the amount as 10% voting power in the company or to
loan to a who is shareholder in Dil concern in which such shareholder has 20%
Dooba Pvt Ltd. holding 15% shares. share in case such concern is a non-
In this case, amount taxable as company assessee or has substantial
deemed dividends in the hands of X interest (20% voting power) in case it is a
will be ___________ and that in hand company then loan / advance so paid shall
of A will be __________ be deemed dividend to the maximum
extent of:
a Nil, Nil a Accumulated profits whether capitalized
or not
b Nil, Rs.5,00,000 b Accumulated profits excluding
capitalized profits
c Rs.5,00,000, Nil c The loan or advance so paid
d Rs.5,00,000, Rs.5,00,000 d
CASUAL INCOME SECTION 56(2)(IB)
23. Tax is deducted source on winning 24. The rate of tax applicable on casual
from lottery, the rate for such income is
deduction in case of resident
individual deductee is:
a 31.2% a 30%
b Maximum marginal rate of tax b Slab rates

c 30% if such winning exceeds c Exempt

Rs.10,000
d 33.99% d 25%
25. In respect of winning from lottery, 26. For computing lottery, cross word puzzle
crossword puzzle or race including races, card games income etc, the
horse race or card game etc. assessee shall:
a No deduction under Chapter VIA is a Be entitled to deduction for purchases /
allowed and basic exemption limit any expenditure incurred for earning such
cannot be exhausted income
b No deduction under Chapter VIA but b Not entitled to any deduction for
unexhausted basic exemption can be purchase / any expenditure
exhausted
c Both deduction under Chapter VIA c Be entitled to deduction up to certain
and basic exemption are allowed limits
d None of the above
27. The lottery, cross word puzzles, 28. In respect of winnings from lottery,
races, card games incomes etc., are crossword puzzle or race including horse
taxable at: race or card game etc.
a Normal slab rate of income tax like a No deduction under Chapter VI-A is
any other income allowed and basic exemption limit cannot
be exhausted
b Flat rate of 20% plus H&EC 4% b No deduction under Chapter VI-A is
allowed but unexhausted basic exemption
can be exhausted
c Flat rate of 30% plus surcharge if c Both deduction under Chapter VI-A and
applicable plus H&EC 4% basic exemption are allowed
d Deduction under Chapter VI-A is allowed
but basic exemption limit cannot be
exhausted
29. Mr. Khajur is non-resident of India 30. For computing lottery, crossword puzzles
and has age of 65 years. He won a races, card games income etc., the
prize on lottery ticket on 30/8/2012. assesses shall:
The prize amount was Rs. 5,50,000.
He had bought lottery tickets for Rs.
75,000 during the year. Assuming
that he had no other income
chargeable to tax for the year

determine his income tax liability for

the AY 2023-2024 i.e. PY 2022-
2023
a Rs. 1,69,950 a Be entitled to deduction for any
expenditure incurred for earning such
income
b Rs. 1,71,600 b Not entitled to any deduction for any
expenditure
c Rs. 1,65,000 c Be entitled to deduction up to certain
limits
d Rs. 23,400 d Be entitled to deduction to the extent of Rs.
10,000
31. 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, taxable under the
head 'Income from other sources'
after grossing up is taxed without
allowing basic exemption limit at flat
rate of:
a 30%
b 20%
c 10%
d 15%
GIFT SECTION 56(2)(VIII)
32. The provision of section 56(2)(vii) is 33. An individual purchased a painting for
applicable on Rs.5,00,000 though fair market value of
the asset is Rs.5,25,000. Income taxable
under section 56(2)(vii) is:
a All assessee a Rs.25,000 i.e., difference between
market value and actual consideration
b Only on corporate assessee b Nil as this is not gift
c On an individual only c Nil as difference between market value
and actual consideration does not exceed
Rs.50,000

d On an individual and HUF only d The provision of section 56(2)(vii) is not

applicable for such transaction
34. Mr. Samosa gifts Rs.60,000 to the 35. On the occasion of marriage of Mr. A, he
HUF of which he is member. Said received a gift of Rs.60,00 from a
amount will be treated as income of: relative. Such amount shall be:
a Mr. Samosa a Taxable
b The HUF b Taxable subject to standard deduction @
50%
c Not taxable c Not taxable
d None of the above d None of the above
36. Gift received from one or more 37. Gift received by an individual in certain
unrelated persons during the previous circumstances is not taxable, one of them
year shall form part of an individual’s is”
income, if aggregate of gifts exceed:
a Rs.50,000 a Any gift received from family friend
b Rs.1,00,000 b Any gift received on the occasion of any
marriage in the family
c Rs.1,35,000 c Any gift received on the occasion of the
marriage of the individual assessee
d Rs.1,65,000 d All of the above
38. Mr. Gadha received the following 39. An individual has received a gift of Rs.
gifts during the previous year: 30,000 each during the previous year
(i) Rs. 50,000 from his employer from his two friends, the amount taxable
(ii) Rs. 1,00,000 from mother's sister under the head income from the other
(iii) Rs. 10,000 from his friend on the sources shall be:
occasion of his marriage
(iv) Rs. 60,000 in the form of
scholarship from a registered
charitable trust.
The amount of taxable gift under the
head 'income from other sources' is –
(June 2016)
a Nil a Rs. 10,000
b Rs. 50,000 b Rs. 60,000
c Rs. 1,50,000 c Nil
d Rs. 2,10,000

40. Gift of specified movable property 41. Gift, whether in cash or kind, received by
received by individual or HUF shall be an individual on the occasion of his / her
taxable in the hands of the recipient: marriage shall be:
a To the extent of market value of the a Fully exempt even if it exceeds Rs.
movable property as may be prescribed 50,000
provided if it exceeds Rs. 50,000
b To the extent of the cost of the b Fully taxable if it exceeds Rs. 50,000
movable property c Exempt upto Rs. 50,000 and balance
taxable
42. Gift exceeding Rs. 50,000 received 43. Gift exceeding Rs. 50,000 received by an
by HUF from relative of the member individual from his relative R shall be:
or HUF shall be:
a Fully taxable a Fully exempt
b Fully exempt b Fully taxable
c Taxable to the extent it exceeds Rs. c Exempt upto Rs. 50,000 and the balance
50,000 shall be taxable
44. Gift received by HUF from its 45. Gift of immovable property or specified
members shall be: movable property received by an individual
from unrelated person or HUF shall be:
a Fully exempt a Fully exempt whether the value of such
gift is less than or more than RS. 50,000
b Fully taxable b Fully taxable
c Taxable to the extent it exceeds Rs. c Fully taxable if the value of such gift
50,000 exceeds Rs. 50,000
46. Mr. Banjo received a gift of Rs. 47. Mr. Nirash received cash gift of Rs. 2
35,000 30/8/22 from each of his lakh on the occasion of his marriage. It
three friends. The amount chargeable includes gift from non- relative of Rs.
to tax in this case would be: 80,000. His income by way of lottery
winnings is Rs. 3 lakh on which TDS has
been done at 30%. He would be liable to
pay tax of:
a Rs. 50,000 a Rs. 87,500
b Rs. 1,05,000 b Rs. 90,000
c Nil c Nil
d Rs. 55,000 d Rs. 92,700

48. Mr. Bhaloo received Rs. 80,000 by 49. Gift of immovable property received by an
way of gift from friends upon individual from unrelated person shall be:
retirement from service. The amount
of gift chargeable to income-tax
would be
a Nil a Fully exempt whether the stamp duty
value of such gift is less than or more
than Rs. 50,000
b Rs. 30,000 b Fully taxable
c Rs. 70,000 c Fully taxable if the stamp duty value of
such gift exceeds Rs. 50,000
d Rs. 80,000 d None of the above
50. On 5th February 2023, Mr. Yeda gets 51. A watch has been gifted to an individual
a gift of motor car from his relative which has fair market value of
Mr. Peda. Fair market value of the
car is Rs. 3,60,000. The amount
taxable u/s 56(2) is
a Rs. 3,60,000 a Exempt since received from a relative
b Rs. 3,10,000 b Not taxable since watch is not movable
property within the definition of section
56(2) '
c Rs. 50,000 c Taxable under head other sources
d Nil d None of the above
52. Any immovable property received by 53. Where any sum of money, the aggregate
individual from unrelated person or value of which exceeds Rs. 50,000 is
HUF without consideration shall be received without consideration, the whole
taxable to the extent of: of the aggregate value of such sum shall
be taxable:
a Market value of the immovable a In the hands of all assessee
property
b Stamp duty value fixed by the stamp b In the hands of an individual
duty authority
c Stamp duty value by the stamp duty c In the hands of an individual or HUF
authority provided it exceed Rs. 50,000 d In the hands of all assessee other than a
company

54. Any immovable property acquired by 55. Where specified movable property is
an individual or HUF for a price less acquired during the previous year and its
than the stamp duty value shall: market value exceeds the purchase price
by more than Rs. 50,000, such exceeds
amount shall be taxable in the hands of
a Be taxable to the extent stamp duty a All assessee
value exceeds the purchase price by
moré than Rs. 50,000
b Not be taxable b All assessee other than company
c c Individual or HUF only
d d
56. Mr. Romio has acquired a building 57. Mr. Happy acquired a motor car for Rs.
from his friend on 10/10/2022 for 3,00,000 from his friend (non-relative)
Rs. 15,00,000. The stamp duty value when the fair market value of the motor
of the building on the date of car was Rs. 5,00,000. The amount liable
purchase is Rs. 15,70,000. Income to tax in the hands of Mr. Donkey from
chargeable to tax in the hands of Mr. the transaction is:
Romio is
a Rs. 70,000 a Rs. 3,00,000
b Rs. 50,000 b Rs. 2,00,000
c Nil c Rs. 1,50,000
d Rs. 20,000 d Nil
MISCELLANEOUS
58. Interest on delayed compensation or 59. While computing taxable interest on

enhanced compensation is taxable: delayed compensation, a standard
deduction is allowed @
a On accrual basis a 50%
b Exempt from tax b 15%
c As per method of accounting of the c 30%
assessee
d On receipt basis d Nil
60. Bul Bul received rent of Rs. 60,000 61. Where a firm or closely held company
from letting a residential building (in received from any person any property
Mumbai) along with plant and being shares of closely held company
machinery (letting out building is without consideration: (June, 2017)
inseparable from letting of plant and

machinery). She expended Rs. 6,000

for repairs and insurance of the
buildings and plant and machinery.
The WDV of building was Rs.
2,00,000 as on 1-4-2022 and the
plant and machinery was purchased on
9th May 2023 for Rs. 20,000.
Amount taxable is
a Rs. 54,000 a The whole of the fair market value of the
shares shall be taxable
b Rs. 31,000 b The whole of the FMV shall be taxable if
it exceeds Rs. 50,000
c Rs. 41,000 c The whole of FMV shall be exempt
d Rs. 44,000 d The whole of the cost of such shares shall
be exempt
62. If no system of accounting is 63. The legal heir of the deceased who
followed, interest on securities is receives family pension is allowed a
taxable on: standard deduction from such family
pension received to the extent of:
a Due basis a 1/3rd of such pension subject to maximum
of Rs. 20,000
b Receipts basis b 1/3rd of such pension or Rs. 15,000
whichever is less
c Due or receipts basis at the option of c 1/3rd of such pension or Rs. 12,000
the assesse whichever is less
64. Where a closely held company 65. Where an advance received for transfer
receives any consideration for issue of capital asset is forfeited on or after
of shares: 1-4-2015, such forfeited amount shall be
–
a Such consideration in excess of face a Deducted from the cost of the asset
value of shares shall be treated as
income under the head “income from
other sources”
b Such consideration in excess of fair b Exempt
market value of shares be treated as c Taxable as income under the head income
income under the head “income from from other sources
other sources”

66. Mrs. Chudel, 70 years old, received 67. Income from letting of machinery, plant
Rs. 30,000 every month from SBI and furniture is—
under reverse mortgage scheme by
mortgaging her residential house
property. She also received monthly
family pension of Rs. 15,000. Her
total income for the assessment year
2023-24 is - (June 2016)
a Rs. 5,40,000 a Always chargeable to tax under the head
“Profits and gains of business and
profession”
b Rs. 1,80,000 b Always chargeable to tax under the head
“Income from other sources”
c Rs. 1,65,000 c Chargeable under the head “Income from
other sources” only if not chargeable under
the head “Profits and gains of business and
profession”
d Rs. 3,60,000 d Chargeable to tax under the head “Income
from house property”
68. The deduction in respect of interest 69. Mr. Bhukkad received the following income
on enhanced compensation of Rs. during AY 2023-2024 i.e. PY 2022-2023.
1,50,000 received during the AY Determine his Income from other sources:
2023-2024 i.e. PY 2022-2023, would 1) Director’s fees Rs. 5,000
be 2) Income from agricultural land in Pakistan
Rs. 15,000
3) Rent from let-out land in Jaipur Rs.
20,000
4) Interest on deposit with HDFC Bank Rs.
1,000
Divided from Indian company Rs. 5,000.
a Rs. 1,50,000, being 100% of Rs. a Rs. 41,000
1,50,000
b Rs. 75,000, being 50% of Rs. b Rs. 45,000
1,50,000
c Rs. 45,000, being 30% of Rs. c Rs. 31,000
1,50,000
d Nil d Rs. 26,000

70. When Mr. Malamal retired from 71. Chacha Chachi Pvt. Ltd. issued equity
Kangal Ltd. on 1/1/2023, he was paid shares of Rs. 10 each at Rs. 40 per
Rs. 5,00,000 for not doing a share. The fair market value of the share
competing business for the next 5 on the date of issue was ascertained as
years. The amount so received by Mr. Rs. 25 per share. The company issued
Malamal is taxable as: 1,00,000 equity shares. The amount liable
to tax in the hands of the company would
be:
a Income from business and profession a Rs. 15,00,000
b Income from other sources b Rs. 30,00,000
c Income from salary c Nil
d Not taxable as it is a capital receipt d Rs. 40,00,000
72. If no regular system of accounting is 73. Mr. Chalu took a house on lease for 10
followed by the assessee then years and let it further to a tenant for
interest on securities is taxable on: his residence at a monthly rent of Rs.
2,400. He incurred following expenses
during year: Lease rent: Rs. 1000 p.m.,
Salary of Durban: Rs. 200 p.m. and
Interest on loan taken to pay for
acquisition of lease: Rs. 200 p.m. Compute
income chargeable under head Income
from other sources?
a Due basis a Rs. 12,000
b Receipts basis b Rs. 28,800
c Due or receipt basis at the option of c Rs. 16,800
the assesses
d None of the above d Nil
74. Family pension received by a widow of 75. Compute income taxable under head
a member of the armed forces where income from other sources:
the death of the member has Interest on bank deposits Rs. 3,000
occurred in the course of the Winnings from lotteries (net) Rs.
operational duties in the 33,936
circumstances and subject of Interest on Post office savings Rs. 500
prescribed conditions, is – bank account
a Exempt upto Rs. 3,00,000 a Rs. 51,480
b Exempt upto Rs. 3,50,000 b Rs. 51,980
c Totally exempt under section 10(19) c Rs. 36,936
d Totally chargeable to tax d Rs. 37,436

76. Compute income taxable under head

income from other sources:
Dividend from shares of Rs. 3,000
Indian company
Winnings from lotteries Rs.
(net) 70,000
Rental Income of Plant and Rs.
machinery 51,000
a Rs. 1,54,000
b Rs. 1,21,000
c Rs. 1,51,000
d Rs. 1,24,000

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 CLUBBING OF INCOME
CHAPTER 9 CLUBING OF INCOME
MEANING
When assessee is liable for Income earned by others it is called as clubbing of Income. Section
60 to 64 deals with such incomes.
SECTION CONTENTS
60 Transfer of income without transfer of asset
61 Revocable transfer of asset
62 Transfer irrevocable for a specified period
63 Definition of transfer & revocable transfer
64 Income of spouse, minor child etc. to be included in income of individual
65 Liabilities of person in respect of Income in duded in the income of another person.
GENERAL RULES
1. COMPUTATION OF INCOME TO BE CLUBBED

The income, which is to be clubbed, shall be first computed in the hands of recipient and
all expenditure related to such income shall be allowed as per the respective provisions of
the Act and thereafter the net income shall be clubbed.
E.g. Standard deduction u/s. 24(a) from income from house property shall be allowed in the
hands of the recipient and thereafter the net income shall be clubbed.
2. CLUBBING HEAD
Income shall be, first, computed in the hands of recipient and then clubbing shall be made
head wise e.g. Bank interest of minor child shall be clubbed under the head “Income from
other sources” of parent.
3. DEDUCTION UNDER CHAPTER VIA
If the clubbed income is eligible for deduction u/s. 80C, then such deduction shall be
allowed to the assessee in whose hands such income is clubbed e.g. if interest on NSC of
the minor is clubbed in the hands of parent u/s. 64(1A) then parent can claim deduction
u/s. 80C.
4. CLUBBING OF NEGATIVE INCOME
As per explanation 2 to sec. 64, clubbing of income includes clubbing of negative income
i.e., where an income is liable to be clubbed, loss from the same source shall also be clubbed.
Clubbing provisions is mandatory and shall be applied even in those cases where the
application of such provision causes loss of revenue to the Income Tax Department.

TRANSFER OF INCOME WITHOUT TRANSFERRING ASSETS [SEC. 60]
Where an income is transferred without transferring the asset yielding such income, then
income so transferred shall be clubbed in the hands of the transferor.
The above provision holds good:-
• Whether the transfer is revocable or not, or
• Whether the transaction is effected before or after the commencement of this Act.
1. Illustration
Pikachu owns 5,000, 15% debentures of Hungama LTD. of Rs. 100 each, (Annual Interest
Rs.75,000). On 1st April 2022, he transfers interest income to Doremon his friend, without
transferring the ownership of these debentures.
REVOCABLE TRANSFER [SEC. 61]
If an assessee transfers an asset under a revocable transfer, then income generated from such
asset, shall be clubbed in the hands of the transferor.
Revocable transfer
As per sec. 63(a), a transfer shall be deemed to be revocable if
• It contains any provision for the retransfer (directly or indirectly) of any part or whole of
the income/assets to the transferor, or
• It, in any way gives the transferor a right to re-assume power (directly or indirectly) over
any part or whole of the income/assets.
As per sec. 62(2), income, in any of the above exceptional case, shall be taxable as
under:
KEY NOTE
Situation Taxable in hands of

When the power to revoke the transfer arises (whether such power Transferor
is exercised or not)
When the power to revoke the transfer does not arise Transferee
2. Illustration
Discuss the tax treatment in the following cases:
a) Pony has transferred certain securities owned by him to a trust for his married sister. Pyari,
as on 1/7/22. He has the power to revoke the trust at his desire. On 31/3/2024 he revoked
such trust. Income accrued for the previous year 2022-23 and 2023-24 are Rs. 1,20,000 and
Rs. 1,40,000 respectively and such income is received and enjoyed by Pyari.
Solution
Taxable in the hands of Pony for PY 22-23 and 23-24.

b) Majnu transferred his property on 1/4/22 to Laila with a clause that, he will take property
back from Laila whenever he require. Manjnu was in need of money on 1/4/23 and he took back
property from Laila. The property yields annual income of Rs. 2,00,000.
Solution
Taxable in the hands of Saif for PY 22-23 and 23-24.
c) Seema transferred on 1/4/2020 her property to Neema for the life time of Neema with a
clause that after death of Neema property shall be back to Seema. Neema died on 1/4/22.
Seema has not taken back the property till 31/3/2023 Property yields annual income of Rs.
1,00,000.
Solution
Taxable in the hands of Neema for PY 21-22 and in the hands of Seema from PY 22 - 23.
REMUNERATION TO SPOUSE FROM A CONCERN IN WHICH THE ASSESSEE

HAS SUBSTANTIAL INTEREST [SEC. 64(1)(ii)]
1. Provision
The total income of an individual shall include income arising (directly or indirectly) to the
spouse by way of salary, commission, fees or any other remuneration (whether in cash or in
kind) from a concern in which such individual has substantial interest.
Note
Any other income, which is not specified above, even if it accrues to spouse from the concern
in which the assessee has substantial interest, shall not be clubbed
2. Meaning of Substantial interest
In case of Company
He beneficially holds not less than 20% of its equity shares at any time during the previous
year. Such share may be held by the assessee or partly by assessee and partly by one or
more of his relatives.
Other Concern
He is entitled to not less than 20% of the profits of such concern at any time during the
previous year. Such share of profit may be held by the assessee himself or together with
his relatives.
Note
Substantial interest need not to be held throughout the year. Even it was held for a day
during the previous year, clubbing provision would be attracted.
3. Meaning of Relatives
Relative here includes spouse, brother or sister or any lineal ascendant or descendant of
that individual [Sec. 2(41)].
4. No clubbing
Income generated through technical / professional qualification of the spouse is not to be
clubbed in the total income of the individual.

WHERE BOTH, HUSBAND AND WIFE, HAVE SUBSTANTIAL INTEREST IN A CONCERN SITUATION
When both, husband and wife, have substantial interest in a concern and both are drawing
remuneration from that concern without possessing any specific qualification.
Tax treatment
Remuneration from such concern will be included in the total income of husband or wife, whose
total income excluding such remuneration, is higher. Where such income is once included in the
total income of either of the spouse, then such income arising in any subsequent years cannot
be included in the total income of the other spouse unless the Assessing Officer is satisfied
that it is necessary to do so. However, Assessing Officer will do so only after giving to the
other spouse an opportunity of being heard.
WHEN BOTH, HUSBAND AND WIFE, ARE NOT HAVING ANY OTHER INCOME
When both, husband and wife, have substantial interest in a concern and both are
drawing remuneration from that concern without possessing any specific
Situation
qualification and both are not having any other income apart from the said
remuneration.
Tax
Remuneration from such concern will not be clubbed.
treatment
COMPUTATION OF SALARY, FEE, COMMISSION, REMUNERATION ETC.
Income prescribed in sec. 64(1)(ii) shall be first computed (allowing all deductions from the
respective income) in the hands of recipient and thereafter net income shall be clubbed in the
hands of the other spouse. E.g. salary remuneration, etc. shall be first calculated as per
provisions of sec. 15 to 17, in the hands of recipient and thereafter, net taxable salary shall be
clubbed in the hands of the other spouse.
3. Illustration
Ram and Mrs. Ram hold 20% and 30% equity shares in Anand Ltd. respectively. They are employed
in Anand Ltd. (monthly salary being Rs. 20,000 and Rs. 30,000 respectively) without any technical
/ professional qualification. Other incomes of Ram and Mrs. Ram are Rs. 70,000 and Rs. 1,00,000
respectively. Find out the net income of Ram and Mrs. Ram for the AY 23-24.
Solution
Computation of total income of Mr. Ram and Mrs. Ram
Particular Mr. Ram Mrs. Ram
Other income 70,000 1,00,000
Salary from Anand ltd - 2,40,000 [20,000 × 12]
Salary of Mrs. Anand ltd - 3,60,000 [30,000 × 12]
Net income 70,000 6,00,000

4. Illustration
Mr. and Mrs. Dharmendra both are working in Deol Ltd. Without possessing any technical or
professional qualification. From the following details compute their income for the AY 23-24.
Particulars Mr. Dharmendra Mrs. Dharmendra
Salary from Deol Ltd. Rs. 220000 Rs. 70000
Other income Rs. 50000 Rs. 80000
Share of holdings: Case 1 14% 6%
Case 2 3% 17%
Case 3 18% 1%
Solution
Particular Case A Case B Case C
Mr Mrs Mr Mrs Mr Mrs
Other income 50,000 80,000 50,000 80,000 50,000 80,000
Salary income
Deal Ltd
Mr D 2,20,000 2,20,000 2,20,000
Mrs D 70,000 70,000 70,000
= Total Income 50,000 3,70,000 50,000 3,70,000 2,70,000 1,50,000
INCOME FROM ASSETS TRANSFER TO SPOUSE [SEC. 64(1) (iv) & (vii)]
1. Provision
In computing the total income of an individual [subject to the provisions of sec. 27(i)]. Income
arising from assets transferred to spouse without adequate consideration, shall be included
in the income of that individual.
2. Marital Relationship
The relationship of husband and wife must subsist on the date of transfer of assets as well
as on the date of accrual of income i.e. no clubbing provision shall be attracted if:
• Transfer is made before marriage; or
• On the date of accrual of income, transferee is not the spouse of
transferor.
3. Form of Asset
There may be change in identity of transferred asset.
4. Investment in business
a. If the asset is invested in a business, the profit & gains arising from such business
shall be clubbed to the following extent:

Profits of the business X Value of the assets aforesaid as on the first day of the
previous year
------------------------------------------------------
Total investment in the business as on the said day
b. If the asset is invested as capital contribution in a firm, the interest received from
the firm shall be clubbed to the following extent.
Interest received X value of the asset aforesaid as on the first day of the previous
year
----------------------------------------------------------
Total investment by way of capital contribution in the firm as on the said day
Note: Remuneration and share of profit of partner will not be clubbed
5. Treatment of Exempt incomes
Exempt incomes are not to be clubbed.
• If money from husband is invested in agricultural land by wife, income from agriculture
shall not be clubbed.
• Loss from the asset is also required to clubbed.
6. No clubbing
In the following cases clubbing provision shall not be attracted on transfer of property
to spouse:
• When such transfer is for adequate consideration; or
• The transfer is under an agreement to live apart; or
• Where the asset transferred is house property (as such transfer will be governed by
Sec. 27).
• Where the asset is transferred before marriage.
• If on the date of accrual of income, transferee is not spouse of the transferor.
5. Illustration
Mr. Vaitagwadi started a Proprietary Business on 01/04/21 with a Capital of Rs.5,00,000. He
incurred a loss of Rs.2,00,000 during the year 2021 - 2022. To overcome the financial position, his
wife Mrs. Vichitra, a Software Engineer, gave a gift of Rs. 5,00,000 on 01/04/2022, which was
immediately invested in the business by Mr. Vaitagwadi. He earned a profit of Rs. 4,00,000 during
the year 2022 - 2023. Compute the amount to be clubbed in the hands of Mrs. Vichitra for the
Assessment Year 2023 - 2024.
If Mrs. Vichitra gave the said amount as Loan, what would be the amount to be clubbed?
Solution
1. The amount of profit to the extent of Gifted Amount to the Total Capital on the first day of
the PY must be clubbed in the hand of the Assessee. (Mohini Thapar vs CIT and R. Ganesan
vs CIT)
2. Income accruing or arising from transferred assets will along be clubbed.
Particulars Previous year 2022 – 2023

(a) Capital as on = Opening Capital as on 01/04/2021 - Loss for the FY 2021 - 2022.
01/04/2021
(b) (before Gift Rs. = Rs. 5,00,000 - Rs. 2,00,000 = Rs. 3,00,000
5,00,000) (Assuming that there is no Drawings in the Financial Year 2021 -
2022.
(c) Total capital after Gif As above Rs. 3,00,000 + Rs. 5,00,000 =Rs. 8,00,000
(d) Profit / (Loss) Rs.4,00,000
(e) Amount to be Clubbed Profit Earned ×
Gifted Amount 5,00,000
= 4,00,000 × 8,00,000 = Rs.2,50,000
Total Capital
Note: 1 Gift received from Spouse, i.e. Relative, is not taxable.

2 If the amount is received as loan, the clubbing provision would not be attracted.
TRANSFER TO SON’S WIFE [SEC. 64(1)(vi)]
In computing the total income of an individual, income arising (directly or indirectly) from assets
transferred to son’s wife (after 31.5.73), without adequate consideration, shall be included in
income of that individual. Afore said relationship must subsist on the date of transfer of assets
as well as on the date of accrual of income.
6. Illustration
Akela (or Mrs. Akeli) transfer a bank deposit of Rs. 25,000 in favour of his (or her) son’s wife
without adequate consideration. Income accrued to son’s wife shall be included in the income of
Mr. Akela.
INCOME FROM ASSETS TRANSFERRED TO A PERSON FOR THE BENEFIT OF SPOUSE [SEC. 64 (1)(vii)]
Such income shall be clubbed with the income of Individual who has transferred asset without
consideration.
INCOME FROM ASSETS TRANSFERRED TO A PERSON FOR THE BENEFIT OF SON’S WIFE [SEC. 64(1)(VIII)]
Such income shall be clubbed with the income of Individual who has transferred asset without
consideration.
INCOME OF MINOR CHILD [SEC. 64(1A)]
Income of a minor child shall be clubbed with income of the parent whose total income (excluding
this income) is higher. Where any such income is once clubbed with the total income of either
parent, then any such income arising in any subsequent years shall not be clubbed with the total
income of the other parent, unless the Assessing Officer is satisfied. However, the Assessing
Officer will do so only after giving an opportunity of being heard to the other spouse.

WHEN MARRIAGE DOES NOT SUBSIST BETWEEN PARENTS
In case marital relationship does not subsist at the time of accrual of income to the minor child,
income of minor child shall be clubbed with income of that parent who maintains the minor child
during the previous year.
1. Tax point
Income of the minor child shall be clubbed in hands of parent in the following manner:
Marital relation between parents Tax treatment
When marriage subsists With the income of that parent whose total income
excluding this income is greater.
When marriage does not subsist With the income of that parent who maintains the
minor child in the previous year.
2. Exceptions
The above clubbing provision shall not apply in the following cases:-
1 The income arises or accrues to the minor child due to any manual work done by him; or
2 The income arises or accrues to the minor child due to his skill, talent, specialized
knowledge or experience; or
3 The minor child is suffering from any disability of nature specified u/s. 80U.
3. Exemption [Sec. 10(32)]
In case income of a minor child is clubbed in hands of parent as per provision of Sec. 64(1A),
the assessee (parent) can claim exemption of an amount being minimum of the following:
a) Rs. 1500; or
b) Income so clubbed.
4. Tax Point
Such exemption shall be available for each child (irrespective of the number of children)
whose income is so clubbed.
5. Meaning of child
Child in relation to an individual includes a stepchild & adopted child but does not include a
grandchild [Sec. (14B)]
6. Treatment of income of married daughter
Though sec. 27(i) [Deemed owner of house property] specifically excludes married daughter
but sec. 64(1A) does not have this exception, hence income arising to minor married daughter
shall be clubbed in the hands of parent.

7. When neither of the parent is alive

Income of minor child cannot be added with the income of the guardian if the guardian is
not the parent of the minor.
7. Illustration
Mr. Mittal has 4 Minor children consisting of three daughters and one son. The Annual Income of
all the children for the Assessment Year 2023 - 2024 were as follows-
First daughter (including scholarship received Rs.5,000) 10,000
Second Daughter 8,500
Third daughter (suffering from disability specified u/s 80U) 4,500
Son 40,000
Mr. Mittal gifted 2,00,000 to his minor son who invested the same in the business and derived
income of 20,000 which is included above.
Solution
Compute of amount of Income earned by minor children to be clubbed in the hands of Mr. Mittal.
Particular Rs Rs
Annual Income earned by 1st daughter 10,000
Less: Scholarship [Exemption to sec.64(1A)] (assumed that scholarship is 5,000 5,000
received from a trust registered u/s 10(23)/12A)
Annual Income earned by 2nd daughter 8,500
Annual Income earned by 3rd daughter (Exemption u/s(1A) disability u/s 80U NIL
[Note: Income of child suffering from disability u/s 80U shall be taxed only
in that child’s hands, and shall not be clubbed in the parents hands]
Annual Income earned by son (Income derived from gift already included) 40,000
Total of Above 53,500
Less: Exemption u/s 10(32) 1,500 per child (1,500 × 3) [3rd daughter not (4,500)
includible]
Income to be clubbed in the hands of Mr. Mittal 49,000
CONVERSION OF SELF ACQUIRED PROPERTY INTO JOINT HUNDU FAMILY PROPERTY [SEC. 64(2)]
Case 1 Where an individual (being a member of HUF) converts (after 31st

December 1969) his self-acquired property into property belonging to the
family. Is done by impressing such property with the character of joint
family property or throwing such property into common stock of family.
Case 2 When such an Individual transfers his self-acquired property, directly or
indirectly to the family otherwise than for adequate consideration.
Tax treatment
Before Partition The entire income shall be taxable in the hands of transferor

After Partition Income from the assets attributes to the spouse of transferor.
CROSS TRANSFERS
Income from assets transferred in a cross-transfer would be assessed in the hands of the
Transferor, if:
a Transfers are so intimately connected to form part of a single transaction, and
b Each transfer constitutes consideration for the other by being mutual or otherwise.

MEANING OF CLUBBING
1. In certain cases, income of other

person is included in the income of
assessee. It is called:
a Clubbing of Income
b Addition to income
c Increase in income
d Set – off of income
TRANSFER OF INCOME WITHOUT TRANSFERING ASSET SECTION 60
2. Transfer of income without transfer 3. If there is a transfer of income by a

of asset would be taxable in the hands person to another person without the
of: transfer of the asset from which the
income arises, such income shall be
included in the income of:
a Transferor only a Transferor
b Transferee only b Transferee
c Either transferor or transferee c Transferor if transfer is revocable
d Both transferor and transferee d Transferee if transfer is irrevocable
REVOCABLE TRANSFER SECTION 61
4. If there is a transfer of asset which 5. All income arising to any person by virtue of a
is not revocable during the life time revocable transfer of assets is chargeable as
the income of the transferor and shall be
of the transferee, income arising
included in his total income under the Income
from such asset shall be included in
Tax Act, 1961:
the income of:
a Transferor a As per section 60
b Transferee b As per section 61
c Transferee till his death and c As per section 62

thereafter in the hands of the d As per section 60 and 62
transferor
6. Mr. Bhukkad has sold 2000 14%

debentures of Rs. 100 each to his
wife for Rs. 90,000. The market
value of debentures on the date of

transfer was Rs. 1,80,000. In this

case, interest income to be included
in the total income of Bhukkad shall
be:
a Rs. 28,000
b Rs. 14,000
c Rs. 25,200
d Rs. 12,600
SECTION 64(1)(II), SECTION 64(1)(IV) AND (VII),
7. A person is deemed to have 8. Dukhi and Mrs. Dilruba holds 20% and
substantial interest in a company if he 30% equity shares in Hir Ranja Ltd.
is respectively. They employed in Hir Ranja
Ltd. (monthly salary being Rs.20,000 and
Rs.30,000 respectively) without any
technical / professional qualification.
Other incomes of Dukhi and Mrs. Dilruba.
Dukhi are Rs. 70,000 and Rs.1,00,000
respectively. The net income of Dukhi and
Mrs. Dilruba. Dukhi for the assessment
year 2023 – 24 shall be:
a The owner of at least 20% of equity a Rs.70,000 and Rs.7,00,000 of Mr. Dukhi and
capital of the company Mrs. Dilruba respectively
b The owner of at least 25% of equity b Rs.7,00,000 and Rs.70,000 of Mr. Dukhi and
capital of the company Mrs. Dilruba respectively
c Entitled to 10% of profits of the c Rs.3,10,000 and Rs.4,60,000 of Mr. Dukhi
concern and Mrs. Dilruba respectively
d An employee director d Rs.4,60,000 and Rs.3,10,000 of Mr. Dukhi
and Mrs. Dilruba respectively
9. Mr. Samosa gifted debenture of 10. Where an individual has substantial

Rs.1,00,000 to his wife. She interest in a concern, there shall be
received Rs.10,000 interest which included in his total income any
she reinvests and earns Rs.1,000. remuneration paid by such concern to:
This Rs.1,000 will be taxable in the
hands of
a Mr. Samosa a The wife of such individual
b Mrs. Samosa b The husband of such individual
c Not taxable c The spouse of such individual

d Mr. Samosa or Mrs. Samosa, at the

choice of the Assessing Officer
11. Substantial interest for the purpose 12. Relative for the purpose of section 64(1)
of clubbing provision u/s 64 (1) (ii) (ii) shall include:
shall be of:
a The individual only a Spouse, brother and sister of the individual
b The individual & his spouse taken b Spouse, brother, sister or any lineal
together ascendant or descendant of that individual
c The individual along with his relatives c Spouse, children and dependent brother and
sisters of the individual
d Spouse, children, dependent parents,
dependent brothers and sisters of the
individual
13. As per section 64 (i) (iv), there shall 14. Where an individual transfer the house
be included in the income of an property to his wife for adequate
individual, any income arising from the consideration, then income from such
gift to the spouse of: house property shall be subject to the
provisions of:
a Any capital asset a Section 64(1) (iv) i.e. from such house
property shall be clubbed in the hands of
the transferor
b Any asset b Section 27 i.e. the transferor shall be the
deemed of such house property and taxable
under section 22.
c Any asset other than house property c None of these
15. Mr. Aalsi (a Chartered Accountant) is 16. Mr. Maldar gifts Rs. 5,00,000 to his wife
working as Accounts Officer in who invested the same in the partnership
Dhakkan (P) Ltd. on a salary of Rs. business: Mrs. Maldar receives Rs.
20,000 p.m. He got married to Ms. 2,05,000 as her share of profits from
Padhaku who holds 25% shares of this such firm. In this case amount to be
company. What will be the impact of clubbed in the income of Maldar shall be:
salary paid to Aalsi by the company in
the hands of Ms. Padhaku - (Dec.
2015)
a 100% salary to be clubbed a Rs. 2,05,000
b 50% salary to be clubbed b Rs. 15,000 after giving maximum exemption
of Rs. 1,90,000 to Mrs. R.

c No amount be clubbed c Nil as share of profit from firm is exempt

d 25% salary be clubbed.
17. Mr. Gabru has gifted Rs. 10,00,000 18. As per section 64(1A) income accruing to
to his wife on 1.4.2019. The wife a minor shall be clubbed in the income of:
invested the above sum as capital
contribution to the firm where she is
a partner and earned interest every
year. The total capital of Mrs. Gabru
as on 1.4.2022 including 3 years
interest was Rs. 15,00,000. During
the year she earned Rs. 2,70,000 as
interest on such capital balance. The
income to be clubbed in the hands of
Gabru shall be:
a Rs. 2,70,000 a Father
b Rs. 1,80,000 b Mother
c Nil c Father or mother at their option
d Rs. 90,000 d A parent whose income before this clubbing
is greater
19. When the income of an individual 20. Where a house property is transferred by
includes Rs. 20,000 as the income of an individual to his or her minor child other
his minor child in terms of section than a married minor daughter without an
64(1A), taxable income in this respect adequate consideration, income from such
will be - (Dec. 2011) house property shall be subject to
provisions of:
a Rs. Nil a Section 64(1A) i.e. minor income to be
clubbed in the income of the parent whose
income other than such income is greater
b Rs. 20,000 b Section 27 i.e. the transferor shall be the
deemed owner of such house property and
taxable under section 22
c 18,500 c None of these
d None of the above.
21. If any income has to be clubbed under 22. Mrs. Kachori has invested Rs. 5,00,000 in
section 64, it will be clubbed under firm. As on 1/4/2022, out of total
the: investment of Rs. 5,00,000, Rs. 3,00,000
is on account of money given by her

husband. During the AY 2023 - 2024 i.e.

PY 2022 - 2023, she earned interest of
Rs. 50,000 and profit of NIL from the
firm. Out of this amount taxable for Mr.
Wadapav should be
a Head income from other sources a Nil, Rs. 30,000
b Relevant head to which it belongs b Rs. 30,000, Nil
c None of these two c Nil, Nil
d Rs. 30,000, Rs. 30,000
23. Mr. Mota Bhai transferred 2,000 24. Mr. Hatela is a Chartered Accountant and
shares of Udhar Soja Ltd to Ms. is working as Accounts Office in Band Ho
Mota Bhai without any consideration. Gaya Pvt. Ltd. on a salary of Rs. 20,000
Later, Mr. Mota Bhai and Ms. Mota p.m. He got married to Ms. Hatela who
Bhai got married to each other. The holds 25% shares of this company. What
dividend income from the shares will be the impact of salary paid to Mr.
transferred would be Hatela Hatela by the company in the
hands of Ms. Hatela
a Taxable in the hands of Mr. Raju both a 100% salary to be clubbed
before and after marriage
b Taxable in the hands of Mr. Raju before b 50% salary to be clubbed
marriage but not after marriage
c Taxable in the hands of Mr. Raju after c No amount be clubbed
marriage but not before marriage
d Never taxable in the hands of Mr. Raju d 25% salary be clubbed
25. Mr. Gadha transferred his let out 26. Mr. Ladka is working as Company
residential property to his wife by Secretary in Kuch to Hai Pvt. Ltd. on a
way of gift on 1/4/2022. During the salary of Rs. 20,000 p.m. He got married
AY 2023 - 2024 i.e. PY 2022 - 2023, to Ms. Ladki who holds 25% shares of his
she earned rental income of Rs. Company. What will be the impact of
30,000 per month. She made fixed salary paid to Mr. Ladka by the company
deposit in a bank out of such rental in the hands of Ms. Ladki? (Dec.2019)
income and earned interest income
during the year of Rs 21,000. The
total amount of income liable for
clubbing in the hands of Mr. Gadha
for the AY 2023 - 2024 i.e. PY 2022
- 2023 is:
a Nil a No amount to be clubbed

b Rs. 21,000 b Club 50% salary

c Rs. 2,52,000 c Club 100% salary
d Rs. 2,73,000 d 25% salary be clubbed
27. Raja gifts Rs. 2 lakhs to his wife on 28. Shyam transferred 2,000 shares of X
1-4-2022 which she invests in a firm Ltd. to Ms. Babita without any
on interest @ 18% p.a. On 1-1- consideration. Later, Shyam and Ms.
2023, Mrs. Raja withdraws the money Babita got married to each other. The
and gifts it to their son's wife. In dividend income from the shares
this case interest of the period 1-4- transferred would be - (June, 2015)
2022 to 31-12-2022 and 1-1-2023
to 31-3-2023 shall be clubbed in the
total income of _______________.
a Mr. and Mrs. Raja respectively. a Taxable in the hands of Shyam both before
and after marriage
b Mr. Raja b axable in the hands of Shyam before
marriage but not after marriage
c Mrs. Raja and their son’s wife c Taxable in the hands of Shyam after
respectively. marriage but not before marriage
d Mrs. Raja d Never taxable in the hands of Shyam.
TRANSFER TO SON'S WIFE SECTION 64(1)(VI)
29. Mr. Circuit gives Rs.2,00,000 to Mrs. 30. Mr. Dosa gifted a let-out building which
Silencer as gift. She invests in a fetches rental income on Rs. 10,500 per
proprietary concern and incurs a loss month to his son’s wife on 1/11/2022. The
of Rs. 40,000 municipal Tax of Rs. 6,000 on the
property was paid on 10/1/2023. The
total income from all other sources
(computed) amounts to Rs. 2,60,000
except income from above said property.
His total income chargeable to tax is:
a This loss shall be clubbed, in the hands a Rs. 3,11,450
of Mr. Circuit
b The loss shall be borne by Mrs. Silencer b Rs. 2,92,550
c The loss shall not be clubbed c Rs. 3,80,000
d The loss shall be ignored while d Rs. 3,44,000
computing income of both Mr. and Mrs.
Silencer

INCOME OF A MINOR CHILD SECTION 64(1A)
31. Mr. Ladla minor daughter earned 32. Mr. Dukhi has three minor children
Rs.50,000 from her special talent. deriving interest from bank deposits to
This income will be clubbed with the tune of Rs. 2,000, Rs.1,300,
Rs.1,600 respectively. Exemption
available under section 10(32) of the
Income Tax.
a The income of Mr. X a Rs. 4,900
b The income of Mrs. X b Rs. 4,300
c Mr. X or Mrs. X, whoever’s income is c Rs. 4,500
higher
d It will not be clubbed d Rs. 5,000
33. When income of a minor is clubbed, 34. In whose total income, the income of a
assessee will get deduction under minor child is included:
section 10(32) of:
a Rs. 1,500 a Father
b Income clubbed subject to maximum of b Mother
Rs. 1,500
c Such deduction is not available under c Father and mother both
section 10(32) but under section 10(33)
d Rs.100 per month d Parent whose total income is greater
35. Income of minor child suffering from 36. Maximum exemption available in clubbing
any disability of the nature specified of income to mother or father is
in section 80U shall be
a Assessed in the hands of minor a Rs. 1,500
b Clubbed with the income of that parent b Rs. 1,500 per child
whose total income is higher
c Exempt from tax c Rs. 1,200 per child
d Taxable in hands of provider of income d Rs.100 per month per child
like reverse charge
37. Income arising to a minor married 38. Income of minor is clubbed however the
daughter shall be: clubbing provision is not applicable if
a Assessed in the hands of minor a Minor is a married daughter
married daughter
b Clubbed with the income of that b Minor is handicapped as specified under
parent whose total income is higher section 80U

c Exempt from tax c Parents are separate

d Clubbed with the income of her d Minor is a married son
spouse
39. Any income of a minor child who is a 40. Income of a minor child from the
person with disability shall be: application of his talent / skill or from his
manual work shall be:
a Clubbed with the income of the a Clubbed with the income of the parent
parent whose income other than such whose income other than such income is
income is greater greater
b Taxable in the hands of the minor b Taxable in the hands of the minor / through
through his guardian/ legal his guardian / legal representative
representative
c Exempt c Exempt
41. Income of a minor married daughter 42. 10,00,000 earned by minor child from
shall: manual activity is invested in FDR. He
earns 10,000 as interest from FDR during
the AY 2023 - 2024 i.e. PY 2022 -2023.
10,00,000 and 10,000 shall be assessed
in the hands of
a Be clubbed in the income of her a Minor child, Minor child
husband
b Be clubbed in the income of the b Minor child, Parent
parent whose income other than such
income is greater
c Not be clubbed and taxable in her c Parent, Parent
hands d Parent, Minor child
43. Mr. Majnu has 4 minor children: 2

daughters and 2 sons. Annual income
of 2 daughters was 7,500 and 5,000
and of sons was 5,500 and Rs. 1,250
respectively. The daughter having
income of 5,000 is suffering from a
disability specified under section
80U. Work out the amount of income
earned by minor children to be
clubbed in the hands of Mr. Majnu
a Rs. 13,250

b 10,000
c 19,250
d 9,750

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 SET OFF AND CARRY FORWARD OF LOSSES
CHAPTER 10 SET OFF AND CARRY FORWARD OF LOSSES
WHEN SET OFF IS AVAILABLE?
When these is a Loss in one or more sources under one or more heads of income, the provisions
of set off and carry forward are applicable as under:
• Inter Source Adjustment (Sec. 70)
• Inter head Adjustment (Sec. 71)
• Carry forward of losses.
Notes: • Assessee does not have option to set off or not to set off.
• No set off against income which is exempt from tax
Casual income is to be ignored for set off chapter.
INTER SOURCE ADJUSTMENT [SEC. 70]
Under this section loss from any source of income can be set off against same head of income
for the same assessment year.
SR NATURE OF LOSS SET OFF AVAILABLE U/S. 70

1 House property loss House property income
2 Speculation business loss Profit from speculation business
2A Non-speculation business loss Profit from speculative, non-speculative &
specified business
2B Loss of Specified Business Sec. 35AD Income of Specified Business Sec. 35AD.
3 Short term capital loss Long term & short term capital gain
4 Long term capital loss Long term capital gain
5A Losses from activity of maintaining race Income from such business.
horses
5B Winning from lotteries. Crossword Cannot be set off against any income.
puzzles, card games, gambling or
betting.
5C Loss from other source except 5A & 5B Income from other source except casual
income.
6 Loss from income which is exempt u/s. Cannot be set off against any income.
10

INTER HEAD ADJUSTMENT (SEC. 71)
Sec. 71 is appliance if loss cannot be set off against Sec. 70.
SR. NATURE OF LOSS SET OFF AVAILABLE U/S. 71.

1 House property loss Any income other than lottery, card games,
crossword puzzles, gambling or betting.
2 Non-speculation loss Any income other than salary, lottery, card games,
crossword puzzles, gambling or betting.
3 Loss from other source except Income from other source except casual income.
casual income and income from
owning and maintaining race horse
4 Loss from income which is exempt Cannot be set off against any income.
u/s. 10
CARRY FORWARD OF LOSSES
If loss cannot be set off as per provision of sec. 70 & sec. 71 then it is to be carry forward
under the act. The following losses can be carried forward.
a Business Loss (Non-Speculative)
b Business Loss (speculative)
c Loss under Capital Gain (Short term and Long term)
d Losses from the activity of owning and maintaining race horses.
e HP loss.
Summary
Nature of Loss Section 70 Section 71 Carry forward
House Property Yes Yes Yes
Speculation Loss Yes No Yes
Non-Speculation Loss Yes Yes Yes
Loss of Specified Business Yes No Yes
Capital Gain Yes No Yes
Casual Income No No No
Income from Owning & Maintaining Race Horse Yes No Yes
Other than casual income Yes Yes No.
Note: While applying Sec 71, first set off loss under the head IFOS except casual Income &
Owing & maintaining horse race as it can not be carried forward.

CARRY FORWARD & SET OFF OF LOSS FROM HOUSE PROPERTY [SEC. 71B]
SR CONDITIONS EXPLAINATION
1 Against which income loss can be set Income from house property. [Maximum Rs
off 2,00,000]
2 Period of forward carried 8 years immediately succeeding the AY for which
the loss was first computed.
3 Return of loss (sec. 80) Not necessary to submit in time. Even if belated
return is filed still it can be carry forward.
4 Should the source be continued No
CARRY FORWARD AND SET OFF OF BUSINESS LOSS OTHER THAN SPECULATION LOSS [SEC. 72]
1 Against which income loss can be set
off:
a) On account of unabsorbed a) Any Income except Salary and Casual
depreciation, capital expenditure Income.
on scientific research and family
planning.
b) Other remaining business loss it is Against business income only.
not necessary that it should be Set b)
off against income from the same
business
2 Period of carried forward
a) On account of unabsorbed No time limit
depreciation, capital expenditure
on scientific research and family
planning.
b) Other remaining business loss 8 years immediately succeeding the AY for
which the loss was first computed.
3 Return of loss (sec. 80) If assessee fails to file his return of loss on or
before the due date filing return u/s. 139 then
following losses of A. Y. for which return is not
submitted in time cannot be carried forward.
(refer point 1b)

5 Who can set off Successor of a business cannot carry forward &
set off the losses of his predecessor except in
the case of succession by inheritance.
CARRY FORWARD AND SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION IN
CASE OF AMALGAMATION OR DEMERGER, ETC. [SEC. 72A]
1. Sec 72A deals with amalgamation of a company owning –

• An industrial undertaking or
• A ship or
• A hotel
• An Aircraft with another company or
• An amalgamation of a banking company with a specified bank
2. Conditions
Losses and unabsorbed depreciation of amalgamating company can be carry forward by
amalgamated company subject to following conditions:
1 The amalgamating company has been engaged in the business in which the accumulated
loss occurred or depreciation remains unabsorbed, for three or more years.
2 The amalgamating company has held continuously as on the date of the amalgamation at
least 3/4th of the book value of fixed assets held by it two years prior to the date of
amalgamation;
3 The amalgamated company holds continuously for A minimum period of 5 years from the
date of amalgamation at least 3/4th of the book value of fixed assets of the
amalgamating company acquired in a scheme of amalgamation;
4 The amalgamated company continues the business of the amalgamating company for a
minimum period of 5 years from the date of amalgamation;
5 The amalgamated company fulfils such other conditions as may be prescribed to ensure
the revival of the business of the amalgamating company or to ensure that the
amalgamation is for genuine business purpose.
3. Additional conditions for industrial undertaking:
1 The amalgamated company achieves the level of production of at least 50% of the
installed capacity of the said undertaking before the end of the 4 years from the date
of amalgamation of continue to maintain the said minimum level of production till the end
of 5 years from the date of amalgamation’
Note: - Installed Capacity means that capacity of production that exists as on the
date of amalgamation.
2 Account must be verified by a chartered accountant.
4. Treatment
The accumulated loss and the unabsorbed depreciation of the amalgamating company shall
be deemed to be the loss or depreciation of the amalgamated company for the previous year
in which the amalgamation was effected, and other provisions of this Act relating to set off
and carry forward of loss and allowance for depreciation shall apply accordingly.

5. Tax point
accumulated loss of the amalgamating company can be carried forward for further 8 years
6. Consequence on violation of conditions
Where any of the above conditions are not complied with, the set off of loss or allowance
of depreciation made in any previous year in the hands of the amalgamated company shall be
deemed to be the income of the amalgamated company chargeable to tax of the year in
which such condition are not complied with.
DEMERGER [SEC.72A (4)]
In the case of a demerger, the accumulated loss and unabsorbed depreciation of the demerged
company shall be allowed to resulting company and Demerged company (after demerger) in the
following manner –
a Where such loss or unabsorbed depreciation as directly relatable to the undertakings
transferred to the resulting company, it shall be allowed to be carried forward and set off
in the hands of the resulting company;
b Where such loss or unabsorbed depreciation is not directly relatable to the undertakings
transferred to the resulting company then such loss or depreciation shall be apportioned
between the demerged company and the resulting company in the proportion in which the
assets of the undertakings have been distributed.
c Amount of loss to be carried forward by the Demerged company:
𝑨𝒔𝒔𝒆𝒕 𝒕𝒂𝒌𝒆𝒏 𝒐𝒗𝒆𝒓 𝒃𝒚 𝒕𝒉𝒆 𝒓𝒆𝒔𝒖𝒍𝒕𝒊𝒏𝒈 𝒄𝒐𝒎𝒑𝒂𝒏𝒚
𝑳𝒐𝒔𝒔 𝒐𝒇 𝒕𝒉𝒆 𝒖𝒏𝒅𝒆𝒓𝒕𝒂𝒌𝒊𝒏𝒈 × 𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒆𝒔𝒕 𝒐𝒇 𝒕𝒉𝒆 𝒖𝒏𝒅𝒆𝒓𝒕𝒂𝒌𝒊𝒏𝒈 𝒂𝒔 𝒐𝒏 𝒕𝒉𝒆 𝒅𝒂𝒕𝒆 𝒐𝒇 𝒅𝒆𝒎𝒆𝒓𝒈𝒆𝒓
Amount of loss to be carried forward by the Demerged company;

Total loss of the undertaking – loss calculated above
CARRY FORWARD AND SET OFF ACCUMULATED BUSINESS LOSS AND UNABSORBED DE
PRECIATION ALLOWANCE IN BUSINESS ORGANIZATION OF CO-OPERATIVE BANKS. [SEC. 72AB]
The assessee, being a successor co-operative bank, shall, in a case where the amalgamation has
taken place during the previous year, be allowed to set off the accumulated loss and the
unabsorbed depreciation, if any, of the predecessor co-operative bank as if the amalgamation
had not taken place, and all the other provisions of this Act relating to set off and carry forward
of loss and allowance for depreciation shall apply according.
Conditions
a The predecessor co-operative bank –
• Has been engaged in the business of banking for 3 or more years;
• Has held continuously as on the date of the amalgamation at least 75% of the book value
of fixed assets held by it 2 years prior to the date of business organization;
b The successor co-operative bank –
• Holds continuously for a minimum period of 5 years from the date of business
reorganization at least 75% of the book value of fixed assets of the predecessor co-
operative bank acquired in a scheme of business reorganization;

• Continues the business of the predecessor co-operative bank for a minimum period of
5years from the date of business reorganization;
• Fulfils such other conditions as may be prescribed to ensure the revival of the business
of the predecessor co-operative bank or to ensure that the business reorganization is
for genuine business purpose.
The accumulated loss and unabsorbed depreciation of the demerged co-operative bank shall:
a Where it is directly relatable to the undertakings transferred to the resulting co-operative
bank, be allowed to be carried forward and set off in the hands of the resulting co-operative
bank;
b Where such loss or unabsorbed depreciation is not directly relatable to the undertakings
transferred to the resulting co-operative bank, be apportioned between the demerged
company and the resulting co-operative bank in the same proportion in which the assets of
the undertakings have been retained by the demerged company and transferred to the
resulting co-operative bank.
The period commencing from the beginning of the previous year and ending on the date
immediately preceding the date of business re-organization, and the period commencing from
the date of such business re-organization and ending with the previous year shall be deemed two
be different previous years for the purpose of set off carry forward of loss and allowance for
depreciation.
Non – In a case where the conditions are not complied with, the set off of
compliance of accumulated loss or unabsorbed depreciation allowed in any previous year to
the conditions the successor co-operative bank shall be deemed to be the income of the
successor co-operative bank chargeable to tax for the year in which the
conditions are not complied with.
CARRY FORWARD AND SET OFF OF SPECULATION LOSS. [SEC. 73]
1. Meaning of speculative transaction.

Speculation transaction is one which is business settled without actual delivery. It is a
transaction in which a contract for the purchase or sale of commodity including stocks and
shares periodically settled otherwise than by an actual delivery or transfer of the
commodity.
Note: Derivative is not speculation transaction.
2. Against which income loss can be set off.
Speculation business.
3. Period of carry forward
4 years immediately succeeding the AY for which the loss was first computed.
4. Should the source be continued
No
5. Return of Income
Timely as per Sec 139(1)

CARRY FORWARD AND SET OFF OF LOSS FROM SPECIFIED BUSINESS COVERED U/S. 35AD [73A]
1 Against which income loss can be set off Against income from other specified business.
2 Period of forward carried No period is prescribed
3 Filling of Return Timely as per Sec 139(1)
CARRY FORWARD AND SET OFF OF CAPITAL LOSS SEC 74
1 Against which income loss can be Long term capital loss against LTCG
set off Short term capital loss against LTCG & STCG
2 Period of forward carried which 8 years immediately succeeding the AY for
the loss was first computed.
3 Return of loss (sec. 80) Timely as per Sec 139(1)
CARRY FORWARD & SET OFF OF LOSS FROM ACTIVITY OF OWNING & MAINTAINING
RACE HORSES [SEC. 74A]
1 Against which income loss can be set Income from the business of owning & maintaining
off race horses.
2 Period of forward carried which the 4 years immediately succeeding the AY for
loss was first computed
3 Return of loss (sec. 80) Timely as per Sec 139(1)
4 Should the source be continued Yes
CARRY FORWARD AND SET OFF OF LOSSES IN CASE OF CHANGE IN CONSTITUTION OF FIRM OR ON
SUCCESSION [SEC. 78]
Where a change occurred in the constitution of a firm, nothing in this chapter shall entitle the
firm to have carried forward and set off so much of the loss proportionate to the share of a
retired or deceased partner are exceeds his share of profits, if any, in the firm in respect of
the previous year.
As per Sec. 78(1), in case of death or retirement of partner (e.g. change in the constitution of
a firm), share of losses of the outgoing partner cannot be carry forward.
Example: A, B and C are partners of ABC & co. sharing profit or loss in the ratio equally. It had
a brought forward business loss in the ratio equally. It had a brought forward business loss ‘.3
lacs for the year 22-23. Later A retired then his proportionate share of loss i.e. 1 lac cannot be
carry-forward.

However, above provision shall not be applicable to unabsorbed depreciation i.e. unabsorbed
depreciation can be carry-forward without any restriction.
CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPANIES [SEC. 79]
In case of a company in which the public are not substantially interested, no loss incurred in any
year prior of the previous year shall be carried forward and set off against the income of the
previous year unless of the last day of the previous year the share of the company carrying not
less than 51% of the voting power were beneficially held by persons who beneficially held share
of the company carrying not less than 51% of the voting power on the last day of the year or
years in which the loss was incurred.
Exceptions
a Nothing contained in this section shall apply to a case where a change in the said voting power
takes place in a previous year consequent upon
• The death of a shareholder or
• On account of transfer of shares by way of gift to any relative of the shareholder
making such gift
b Further nothing contained in this section shall apply to any change in the shareholding of an
Indian company
• Which is a subsidiary of a foreign company as a result of amalgamation of
demerger of a foreign company
• Subject to the condition that 51% shareholders of the amalgamating or demerged
foreign company continue to be the shareholders of the amalgamated the resulting
foreign company.
Amendment FA Act 2018
Above section shall not apply to a company where a change in the shareholding takes place in a
PY pursuant to approved resolution under the Insolvency and Bankruptcy code 2016.
FACILITATING STRATEGIC DISINVESTMENT OF PUBLIC SECTOR COMPANIES [SEC. 79]
Amendment
• In order to facilitate the strategic disinvestment of public sector companies, the aforesaid
provisions of section 79 have been amended (with effect from the assessment year 2022-
23) to provide that the provisions of sub-section (1) shall not apply to an erstwhile public
sector company subject to the condition that the ultimate holding company of such erstwhile
public sector company, immediately after the completion of strategic disinvestment,
continues to hold, directly (or through its subsidiary or subsidiaries) at least 51 per cent of
the voting power of the erstwhile public sector company in aggregate.
If, however, any of the conditions is not complied with in any subsequent year after the
completion of strategic disinvestment, the provisions of sub-section (1) shall apply for such
previous year and subsequent previous years.

• Erstwhile public sector company-It means a company which was a public sector company in
earlier previous years and ceases to be a public sector company by way of strategic
disinvestment by the Government. Strategic disinvestment-Strategic disinvestment shall
mean sale of shareholding by the Central Government or any State Government in a public
sector company which results in reduction of its shareholding to below 51 per cent, along
with transfer of control to the buyer.
NO ADJUSTMENT OF LOSS IN SEARCH CASES [SEC. 79A]
Amendment
• In sections 70 to 80, there are specific provisions relating to set off or carry forward and
set-off of losses while computing the income under various heads and with respect to
different classes of persons. However, currently, there is no provision to disallow claim of
set off of losses/unabsorbed depreciation against undisclosed income (corresponding to
difference in stock, undervaluation of stock, unaccounted cash payment, etc.) which is
detected during the course of search or survey proceedings. Moreover, no. distinction is
made between undisclosed income which was detected owing to search and seizure or survey
or requisition proceedings and income assessed in scrutiny assessment in the regular course
of assessment though for incomes falling in section 68, section 69, section 69B, etc., such
restriction is there.
• To disallow aforesaid adjustment of losses, section 79A has been inserted with effect from
the assessment year 2022-23. It provides for the following
1. Section 79A is applicable notwithstanding anything contained in the Act.
2. There is a search initiated under section 132 [or a requisition made under section 132A
or a survey con ducted under section 133A, other than under sub-section (2A) of section
133A].
3. Total income of the concerned assessee includes any undisclosed income. If the above
conditions are satisfied, the assessee will not be eligible to set off, against such
undisclosed income, of any loss [whether brought forward or otherwise, or unabsorbed
depreciation under section 32(2)
CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF ELGIBLE START UP [SEC. 79B]
Section 79(b) is applicable if the following conditions are satisfied –

1 The assesse is a company if the following conditions are satisfied –
2 It is an eligible start – up as referred to section 80-IAC.
3 Loss incurred by the assesse company during the period of 7 years (beginning from the year
in which the company is incorporated)
Restriction on carry forward of losses
if the above conditions are satisfied, brought forward loss can be set off against current year’s
income only if all the shareholders of the company (who held shares carrying voting power) on
the last day of the previous year in which the loss was incurred, continue to hold shares as on
the last day of the current year.

Exception
Above restriction will not be applicable in the following cases –
1 If change in shareholding takes place due to death of a shareholder or
2 If change in shareholding takes place due to transfer of shares by way of gift to any
relative of the shareholder making the gift.
3 If the assesse is a subsidiary of a foreign company and the foreign holding company is
amalgamated/ merged with another foreign company and person holding 51% or more shares
in the amalgamating/ demerged foreign company become shareholders in the amalgamated/
resulting foreign company.
Unabsorbed depreciation etc are not governed by Sec. 79(b)
The above provisions are applicable only in the case of carry forward of losses. Unabsorbed
depreciation allowance, capital expenditure on scientific research or family planning will not be
governed by section 79(b)
Losses under the head Capital Gains: Sec 79 shall also be applicable in respect of
NOTES
losses under the head Capital Gains.

KEY
Unabsorbed Depreciation: Sec 79 does not apply on Unabsorbed Depreciation; hence, it

can be carried forward.
SUBMISSION OF RETURN FOR LOSSES [SEC 80]
As per section 80,

• Business loss under section 72(1),
• Speculation business loss under section 73(2),
• Loss from specified business under section 73A(2),
• Loss from activity of owning and maintaining race horses under section 74A(3),
Which has not been determined in pursuance of a return filed under section 139(3) can not be
carried forward and set-off. Thus, the assesse must have filed a return of loss under section
139(3) in order to carry forward and set-off of such losses.
Such a return of loss should be filed within the time allowed under section 139(1). However, this
condition does not apply to a loss from house property carried forward under section 71B and
unabsorbed depreciation carried forward under section 32(2).

CARRY FORWARD
Type of loss to be carried Income against which For how Should Is it

forward & set off carried forward loss many years the necessary
can be set off in loss can be source be to submit
next year(s) carried continued return of
forward loss in time.
Sec. 71B House property loss Income under the 8 years No No
w.e.f. A.Y. 1999-2000 head “Income from
house property”
Sec. 72 Non-speculation Any income under the 8 years No Yes
business loss Business losses head ‘Profits & gains
(other than depreciation etc.) of business or
profession’ (whether
from speculation or
otherwise)
Sec. 32(2) On account of Any income other than Indefinite No No
unabsorbed depreciation, Income under the years
capital expenditure on head Salaries and
scientific research and family winning from
planning. lotteries, etc.
Sec. 73 Speculation loss Income from 4 years No. Yes
speculation
transaction.
Sec. 73A Loss of specified Income from any Indefinite No Yes
business covered u/s. 35AD specified business. Years
Sec. 74 Capital loss Short Income under the 8 Years No Yes
Term head “Capital gains”
Long Term Long term capital gain 8 years No Yes
Sec. 74A Loss from activity Income from the 4 years Yes Yes
of owing and maintaining race activity of owing and
horses maintaining race
horses
PRIORITY FOR SET-OFF OF LOSSES
S N Sec. Nature of Losses

1 35(1) Current Scientific research Capital Expenditure
2 32(1) Current Depreciation
3 36(1)(ix) Current year Expenditure on Family planning to the extent allowed

4 72(1) Unabsorbed business losses of previous years

5 32(2) Unabsorbed depreciation of previous years
6 35(4) Unabsorbed Identified research capital expenditure of previous years
7 36(1)(ix) Unabsorbed family planning promotion expenditure of previous year

SEC 70 INTER SOURSE, SEC 71 INTER HEAD ADJUSTMENT
1. Mr. Akela incurred short term capital 2. The maximum period for which business
loss of Rs.10,000 on sale of land. loss can be carried forward is
Such loss can be set off:
a Only against Short term capital gain a 8 years
b Against both short term capital gain b 4 years
and long term capital gain
c Against any head of income c Any number of years
d Such loss cannot be set off against any d Not carried forward
income; however, it shall be carried
forward
3. Accumulated losses of a firm which is 4. Loss which cannot be set off against inter
converted into Limited Liability – head adjustment is:
Partnership can be carried forward
for:
a 8 years a Loss under the head capital gains
b 7 years b Non-speculative business loss
c 4 years c Loss under the head ‘Income from House
Property’
d Cannot be carried forward d Loss under the head ‘Income from other
sources’
5. If a company assessee has not filed 6. Long term capital loss can be adjusted
the prescribed income – tax return against
within the prescribed time limit, carry
forward of losses sustained under the
head ‘profits and gains of business or
profession’ or ‘capital gains’ and its
set off will not be permitted as per
the provisions of:
a Section 139(3) a Any income excluding winning from
lottery etc.
b Section 139(1) b Any capital gain
c Section 139(4) c Any long term capital gain
d Section 139(5) d Any speculative business income

7. Short term capital loss of particular 8. Long term capital loss of a particular
assessment year can be set off in the assessment year can be set off in the
same assessment year from: same assessment year from:
a Short term capital gain only a Short term or long term capital gain
b Long term capital gain only b Long term capital gain only
c Long term or short term capital gain c Short term capital gain only
9. Loss under the head capital gain in a 10. Mr Shahrukh Joshi has received the
particular assessment year can: following incomes:
(i) Salary received as a partner from a
partnership firm Rs. 7,50,000.
(ii) Loss on sale of shares listed in BSE
Rs. 3 lakhs. Shares were held for 15
months and STT paid on sale.
Long-term capital gain on sale of land Rs.
5 lakhs. His gross total income will be –
a Be set off from any other head of a Rs. 12,50,000
income in the same assessment year
b Be carried forward b Rs. 9,50,000
c Neither be set off nor carried c Rs. 7,50,000
forward d Rs. 5,00,000
SECTION 72 CARRY FORWARD AND SET OFF OF BUSINESS LOSS
11. Business loss cannot be adjusted with 12. To be eligible to carry forward and set –
salary income. Choose the correct off of business losses and unabsorbed
option: depreciation of demerged company, the
resulting company should continue the
original business for:
a The statement is true a A minimum period of 5 years
b The statement is false b A minimum period of 2 years
c If business loss does not exceed 10% of c A minimum period of 7 years
salary, he can adjust business loss with
salary, he can adjust business loss with
salary income otherwise he cannot
adjust
d If assessee does not have any other d No specified period
income, he can adjust business loss with
salary income otherwise he cannot
adjust

13. Unabsorbed depreciation can be 14. Loss from Derivative trading is

carried forward for
a Any number of years a Speculative business loss
b 4 years b Non-speculative business loss
c 8 years c Loss under the head ‘Income from Other
Sources’
d 10 years d Loss under the head ‘Investments’
15. For carry forward of following losses, 16. Business loss of an amalgamation company
return must be furnished within due shall be:
date as specified under section 139
a Loss under the head ‘Profits and gains a Carried forward and set off in the hands of
of business or profession’ amalgamated company unconditionally
b Loss under the head ‘Income from b Carried forward and set off in the hands of
Other Sources’ other than loss from amalgamated company subject to certain
owning and maintaining race horse conditions
c Unabsorbed depreciation c Not be carried forward
d Loss under the head ‘Income from d Allowed to be carried forward only by
House Property’ amalgamating company
17. Mr. Ravan have income from cloth 18. Mr. Dilbar for the previous year has (i)
business Rs. 1,00,000; Loss from business loss of Rs. 1,30,000; (ii) income
agriculture Rs. 50,000; Long-term from salary Rs. 2,40,000; and (iii)
capital gain Rs. 60,000 and short speculation gain of Rs. 1,10,000. His
term capital loss Rs. 80,000 find out total income for income tax assessment is:
his gross total income for assessment (June, 2017)
year 2023 - 24.
a Rs. 50,000 a Rs. 3,50,000
b Rs. 1,00,000 b Rs. 2,20,000
c Rs. 80,000 c Rs. 2,40,000
d Rs. 30,000 d Rs. 1,10,000
19. A business loss can be carried 20. RRR & Company, a partnership firm has
forward and set off in the subsequent three partners, Rock, Rotlu and Rocky
assessment year when the business on having equal share in profits of the firm.
account of which this loss has arisen: Rock retired on 31-12-2023, profits of
the firm for year ending 31-3-2024 were
Rs. 1,50,000 and brought forward
business losses for assessment year 2022

- 23 was Rs. 1,20,000 and unabsorbed

depreciation Rs. 40,000. Find the amount
of brought forward loss that cannot be
carried forward?
a Is continued in the assessment year in a Rs. 2,500
which the such loss is set off
b Is continued or not b Rs. 3,333
c Is continued for any part of the c Rs. 15,833
previous year d Nil
21. Loss from derivative trading in shares 22. Loss under the head house property:
can be carried forward for:
a 8 years a Can be carried forward for 8 years
b 10 years b Cannot be carried forward
c 4 years c Can be carried forward for only 4 years.
23. In the case of amalgamation, carry 24. During the AY 2023 - 2024 i.e. PY 2022
forward of business loss and - 2023, Mr. Yeda bhai has following
unabsorbed depreciation in the hands income and brought forward losses:
of amalgamated company shall be Long term capital gain Rs. 1,75,000 , Long
allowed. term capital loss of AY 2023 - 2024 (Rs.
96,000), Short term capital loss of AY
2023 - 2024 (Rs. 3 7,000).
What is the capital gain taxable in the
hands of Mr. Yeda Bhai and how much loss
can be carried forward to the AY 2023 -
2024?
a Of any amalgamating company a Rs. 79,000, Nil
b Of an amalgamating company which is b Rs. 1,38,000, Rs. 96,000
owing an industrial undertaking or a ship
c Of an amalgamating company which is c Nil, Nil
owing an industrial undertaking or a ship
or a hotel or a bank with a specified
bank
d Of an amalgamating company which is an d Rs. 42,000, Nil
Indian company and is owing industrial
undertaking or a ship.
25. If an individual, having a sales 26. For the previous year 2022 - 23, an
turnover of Rs. 60 lakh files his assessee suffered a business loss of Rs.

return of income for the assessment 2,50,000. His income from other sources
year 2023 - 2024 after the due date, is Rs. 1,80,000. His due date of return
showing unabsorbed business loss of was 31st July, 2023 but he submitted the
Rs. 23,000 and unabsorbed return on 9th September, 2023. The
depreciation of Rs. 45,000, he can assessee in this case - (June 2016)
carry forward to the subsequent
assessment years—
a Both unabsorbed business loss of Rs. a Shall be allowed to carry forward the loss
23,000 and unabsorbed depreciation of of Rs. 70,000
Rs. 45,000
b Only unabsorbed business loss of Rs. b Shall not be allowed to carry forward any
23,000 loss
c Only unabsorbed depreciation of Rs. c Shall be allowed to set-off current year
45,000 business loss to the extent of Rs. 1,80,000
but shall not be allowed to carry forward the
balance loss of Rs. 70,000
d Neither unabsorbed business loss of Rs. d Shall not be allowed to set-off the business
23,000 nor unabsorbed depreciation of loss to the extent of Rs. 1,80,000 and would
Rs. 45,000 be liable to tax on Rs. 1,80,000
27. Mr Amir Kulkarni has the following 28. In case of demerger after fulfilling
incomes: Loss from house property- prescribed conditions u/s 72A, the
(Rs. 2,50,000), Profits and gains of accumulated loss can be carried forward
business or profession- Rs. 5,00,000. for the –
His Gross total income will be:
a Rs. 2,50,000 a Remaining period out of 8 years in the hands
of resulting company.
b Rs. 3,00,000 b Further 8 years in the hands of resulting
company.
c Rs. 7,50,000 c Further 8 years in the hands of demerged
undertaking.
d Rs. 5,00,000 d Remaining period out of 8 years in the hands
of demerged undertaking.
29. A partnership firm with 4 equal

partners brought forward
depreciation of Rs. 3 lakh and
business loss of Rs. 3 lakh relating to
assessment year 2023 - 24. On 1st
April, 2022, two partners retired.

The amount that assessee-firm can

set-off against its income for the
assessment year 2023 - 24 would be
- (Dec. 2015)
a Unabsorbed depreciation of Rs. 3 lakh
plus brought forward business loss of
Rs. 3 lakh.
b Unabsorbed depreciation 'nil' plus
brought forward business loss Rs. 3
lakh.
c Unabsorbed depreciation Rs. 3 lakh plus
brought forward business loss 'nil1.
d Unabsorbed depreciation Rs. 3 lakh plus
brought forward business loss of Rs.
1.50 lakh.
SECTION 73, SPECULATION LOSS, 73A SPECIFIED BUSINESS
30. Loss from specified business covered 31. Mr. Pagal has earned Long term capital
under section 35AD can be adjusted gains on sale of equity shares listed in
against recognised stock exchange on which STT
- Rs. 7,20,000 Short term capital loss of
Rs. 2,00,000. General business income of
Rs. 5,00,000 Find out the gross total
income.
a Any other business income a Rs. 5,00,000
b Any income other than salary b Rs. 10,20,000
c Income from other specified business c Rs. 9,20,000
covered under section 35AD
d Cannot be adjusted d Rs. 5,20,000
32. The maximum period for which 33. Loss from a speculation business of a
speculation loss can be carried particular assessment year can be set off
forward is: in the same assessment year from:
a 4 years a Profits and gain from any business
b 8 years b Profits and gains from any business other
than speculation business
c Indefinitely c Income of speculation business
d Cannot be carried forward

34. Loss under the head business and 35. A business loss other than loss from a
profession other than specified specified business referred to in section
business referred to in section 35AD 35AD can be carried forward for a
can be set off in the same assessment maximum of:
year from
a Income under any other head a 8 years but it should be set off in the
subsequent assessment year (s) if there is
any business income
b Income under any other head except b 4 years but it should be set off in the
salary income subsequent assessment year (s) if there is
any business income
c Income under any other head except c Indefinitely but it should be set off in the
house property subsequent assessment year (s) if there is
any business income
36. Loss from specified business referred 37. Loss from specified business referred in
in section 35AD can be carried section 35AD can be carried forward
forward and set off from
a Income of any business and a For 8 years
profession
b Income of a specified business only b For 4 years
c Indefinitely
38. Loss from derivative trading in shares 39. Speculative loss can be carried forward
carried on in a recognized stock for the maximum of:
exchange is:
a A loss from speculative business a 8 years
b A loss from non-speculative business b 10 years
c 4 years
40. During the AY 2023 - 2024 i.e. PY 41. What is the taxable income and losses to
2022 - 2023 , Mr. Vichitra has be carried forward of Mr. Vichitra for
following incomes and brought forward the AY 2023 - 2024 i.e. PY 2022 - 2023?
losses. Income from non-speculation business Rs.
Short term capital gains on sale of 60,000; Loss from non-speculation
shares (STT not paid) Rs. 1,50,000, business (Rs. 40,000); Short term capital
Long term capital loss of AY 2023 - gain Rs. 80,000; Long term capital loss of
2024 (Rs. 96,000), Short term AY 2022 - 2023 (30,000)
capital loss of Short term capital
gains on sale of shares (STT not paid)

Rs. 1,50,000, Long term capital loss

of AY 2023 - 2024 (Rs. 96,000),
Short term capital loss of AY 2023 -
2024 (Rs. 37,000). What is the
capital gain taxable in the hands of
Mr. Vichitra and how much loss can
be carried forward to the AY 2023 -
2024
a Rs. 1,13,000,Nil a Rs. 70,000, Rs. 70,000
b Rs. 17,000, Nil b Rs. 1,10,000,Rs. 40,000
c Rs. 1,13,000,Rs. 96,000 c Rs. 1,00,000, Rs. 30,000
d Rs. 54,000, Rs. 37,000 d Rs. 1,00,000, Rs. 40,000
42. Calculate PGBP income: Speculation 43. Calculate PGBP income: Speculation
business Rs. 2,00,000; Trading business income Rs. 2,00,000 Normal
business (Rs. 1,00,000) business income (Rs. 1.25.000)
a Rs. 1,00,000 a Rs. 3,25,000
b Rs. 1,00,000) b Rs. 1,25,000
c Rs. 2,00,000 c Rs. 2,00,000
d None of the above d Rs. 75,000
44. Loss from house property of Rs.

3,10,000 of AY 2023 - 2024 is
allowed to be set-off against income
from house property of AY 2023 -
2024 of Rs. 5,00,000 to the extent
of
a Rs. 2,00,000
b Rs. 3,10,000
c Rs. 2,50,000
d Rs. 1,00,000
SECTION 74 CAPITAL LOSS, 74A OWING AND MAINTAINING HORSE RACES
45. Loss from activity of owning and 46. Loss on account of owing & maintaining
maintaining horse race can be carried the race horses of particular assessment
forward for: year can be set off in the same
assessment year from:
a 4 years a Any business income

b 8 years b Any income under the head other

sources
c Indefinite years c Income from owning & maintaining races
d 2 years horses
47. Loss on account of owning & 48. Mr. Rocky handsome had incurred loss in
maintaining the racehorse can be activity of owning and maintaining
carried forward: racehorses Rs. 90,000; Winnings from
lottery (net) Rs. 70,000; Loss in card
game of assessment year 2022 - 23 Rs.
4,000 find out his gross total income for
AY 2023 - 24.
a For 8 years a Rs. 1,00,000
b For 4 years b Rs. 70,000
c Indefinitely c Rs. 10,000
d 66,000

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 PERMISSIBLE DEDUCTION FROM TOTAL INCOME
CHAPTER 11 PERMISSIBLE DEDUCTION FROM TOTAL INCOME
SEC 80IA: DEDUCTION TO BE MADE IN COMPUTING TOTAL INCOME
1 In computing the total income of an assessee, there shall be allowed deductions u/s 80C to
80U from his GTI
2 The aggregate amount of the deductions under this Chapter shall not exceed the GTI of
the assessee.
3 The aggregate amount of deduction under sections 80C to 80U cannot exceed gross total
income [after excluding long-term capital gains, short-term capital gains under section 111A,
winnings from lottery, races, etc., and incomes referred to in sections 115A, 115AB, 115AD,
115BBA and 115D]. for instance, if gross total income is nil, the deductions under these
sections cannot be claimed.
4 Where a deduction u/s 80IA to 80RRB is clamed and allowed in respect of profits of any
business specified u/s 35AD for any assessment year, no deduction shall be allowed u/s
35AD in relation to such specified business for the same or any other assessment year.
DEDUCTIONS TO BE MADE WITH REFERENCE TO INCOME OF THE NATURE REFERRED TO IN SEC 80IA
TO 80 RRB, INCLUDED IN THE GROSS TOTAL INCOME [SEC. 80AB]
For the purpose of computing the deduction under sections 80IA to 80RRB, the amount of
income after setting off any losses in accordance with the provisions of this Act, shall alone be
entitled for deduction.
DEDUCTION NOT TO BE ALLOWED UNLESS RETURN FURNISHED. [SEC. 80AC]
Where in computing the total income of an assessee, any deduction is admissible u/s 80-IA or
80-IAB or 80-IB or 80-ICor 80-ID or 80-IE, 80JJA, 80LA, 80P, 80PA, 80QQB & 80RRB, no
such deduction shall be allowed to him unless he furnishes a ROI for such assessment year on or
before the due date specified u/s 139(1).
SECTION 80C
Applicability Individuals / HUF, irrespective of Residential Status

Conditions a Investment or Contribution should be made in approved invested
schemes.
b The payments need not necessarily be made out of income
chargeable to tax.
c Deduction shall be allowed only on payment basis not on accrual basis.
Maximum Deduction Amount deposited or Rs 1,50,000 whichever is less

Eligible Investments See list below

Eligible Investments under section 80C

Nature of Investment / Payment Payments made by
Individual HUF
1. Life insurance premium (including payment made by Self, spouse, child Any
Government employees to the Central Government (child may be member
Employees’ insurance scheme and payment made by a dependent/independent, of HUF
person under children’s deferred endowment Male/Female,
assurance) minor/major or
Insurance premium cannot exceed the maximum ceiling married/unmarried).
given below.
Date of issue Policyholder Any other
of policy suffering from
disability/disease
Before 1st 20% of sum 20% of sum
April 2012 assured (max) assured (max)
During 2012-13 10% of sum 10% of sum
assured (max) assured (max)
On or after 1st 15% of sum 10% of sum
April 2013 assured (max) assured (max)
2. Lock in period 2 years Non-Commutable Deferred Self, Spouse, Child NA
Annuity without a provision for Cash Payment in lieu of
Deferred Annuity
3. Deferred Annuity deducted from Government Self, Spouse, Child NA
Employee’s Salary (not exceeding 1/5th of salary)
4. Contribution to Statutory or Recognized Provident Self NA
Fund
5. Contribution to Public Provident Fund – Minimum Self, Spouse, Child Any
Rs.500, Maximum Rs.1,50,000 per Account as per PPF member
Rules including interest on PPF excluding last year of HUF
6. Contribution to Approved Superannuation Fund Self NA
7. Subscription to National Superannuation Fund Self NA
8. Subscription to Notified Central Government Self, spouse, child Any
Securities or Notified Deposit Scheme Sukanya member
Samriddhi Account has been notified vide Notfn. of HUF
9/2015. For this Clause, Child includes Girls Child for
whom such Person is the Legal Guardian, if the Scheme
so specifies.
9. Subscription to National Savings Certificate (including Self NA
Interest Accrued)
10. Contribution to Unit Linked Insurance Plan of UTI / Self, spouse, child Any

LIC and continuous for minimum period of 5 years. member

of HUF
11. Contribution to Annuity Plans of Insurance Companies Self, spouse, child Any
(Jeevan, Dhara, JeevanAkshay, of LIC, Plans of Tata member
AIG Life Insurance Co. etc.) of HUF
12. Subscription to Units of Mutual Funds / UTI (Lock in 3 Self NA
years) & tax saver
13. Contribution to Pension Fund of Mutual Fund / UTI / Self NA
National Housing Bank
14. Deposits with National Housing Bank, HUDCO Self NA
15. Deposits with a PSU providing long term finance for Self NA
purchase / construction of Residential Houses in India
16. Deposits with notified Housing Boards set up under Self NA
law, for planning, developing and improvement of cities
/ towns / villages.
17. Full-time education includes any educational course Maximum two children NA
offered by any university, collage, school or other
educational institution to a student who is enrolled
full-time for the said course. Full-time education
includes even play-school activities, pre-nursery and
nursery classes. The amount allowable as tuition fees
shall include any payment of fee to any university,
collage, school or other educational institution In India
except the amount representing payment in the nature
of development fees or donation or capitation fees or
payment of similar nature – Circular No. 17/2014,
dated December 10,2014.
18. Housing Loan (Lock in period 5 years) Self NA
For the purpose for construction of a residential house
property the income from which is chargeable to tax
under the head “Income from House Property” where
such payments are made towards or by way of –
1 Any instalment or part payment of the amount due
under any self – financing or other scheme of any
development authority, housing board or other
authority engaged in the construction and sale of
house property on ownership basis; or
2 Any instalment or part payment of the amount due
to any company or co-operative society of which the
assessee is a shareholder or member towards the

cost of the house property allotted to him; or

3 Repayment of principal amount of loan borrowed by
the assessee from –
A The Central Government or any State
Government, or
B Any bank, including a co-operating bank, or
C The Life Insurance Corporation, or
D The National Housing Bank, or
E Any public company u/s 36(1)(viii), or
F Company or co-operative society engaged in the
business of financing the construction of
houses, or
G The Assessees employer being an authority or a
board or a corporation or any other body
established or constituted under a central or
State Act, or
4 Stamp duty, registration fee and other expenses
for the purpose of transfer of such house property
to the assessee,
19. Subscription to approved Equity Shares or Debentures Self NA
of a Public Company or a Public Financial Institution,
and the entire proceeds of the issue is utilized wholly
and exclusively for Power Generation or Infrastructure
Facility Company [Holding Period minimum 3 years.]
20. Term Deposit for at least 5 Years with a Scheduled Self NA
Bank in accordance with a Scheme framed and notified
by Central Government.
21. Subscription to notified NABARD Bonds Self NA
22. Deposit under Senior Citizens Savings Scheme Rules, Self NA
2004 (Lock in period 5 years)
23. 5-Year Time Deposit in an account under Post Office Self NA
Time Deposit Rules,1981
24. Contribution to additional account under NPS
Contribution by a Central Government employee to
additional account under NPS [specified account]
referred to in section 80CCD for a fixed period of not
less than 3 years and which is in accordance with the
scheme notified by the Central Government for this
purpose qualifies for deduction under section 80C. It
may be noted that only the contribution to the

additional account under NPS will qualify for deduction

under section 80C. (tier 2 cities)
If above lock in period is violated, then entire amount of deduction allowed earlier in any previous
year treated as taxable income in the year in which default is made.
[Amendment Finance Act 2020]
If an individual / HUF opts for the alternative tax regime under section 115 BAC, deduction
under section 80C is not available from the assessment year 2021-22
1. Illustration
Compute the eligible deduction under section 80C for A.Y. 2023 - 24 in respect of life insurance
premium paid by Mr. Balma during the P.Y. 2022 - 23, the details of which are given hereunder:
Date of Person Insured Actual capital insurance
issue of premium sum assured paid
policy during 2022 - 23.
(Rs.) (Rs.)
(i) 14/04/2011 Self 2,50,000 52,000
(ii) 10/05/2012 Spouse 1,80,000 18,500
(iii) 01/06/2018 Handicapped minor Son (Section 80U 4,50,000 72,000
disability)
Solution
Computation of deduction admissible under section 80C to Mr. Balma for A.Y. 2023 - 24.
Date of Person Insured Actual Insurance Deduction Remark
Issue of capital sum premium paid u/s. 80C (restricted to
policy assured during 2022 - for A.Y. % of sum
23 2023 - 24 assured)
14/04/2011 Self 2,50,000 52,000 50,000 20%
10/05/2012 Spouse 1,80,000 18,500 18,000 10%
01/06/2018 Handicapped minor
Son (Section 80U 4,50,000 72,000 67,500 15%
disability)
Total 1,35,500
DEDUCTION IN RESPECT OF CONTRIBUTION TO ANNUITY PENSION PLAN [SEC.80 CCC]
1. Applicable to
An individual (irrespective of his status)
2. Conditions to be satisfied
• Assessee has paid or deposited any amount under an Insurance annuity pension plan,
whether of the Life Insurance Corporation of India (LIC) or any other insurer.

• The amount must be paid out of taxable income (whether of current year or of any past
year)
3. Deduction
Minimum of the following –
a Amount so paid or deposited; or
b 1,50,000
Notes:
• Pension or surrender value received from such pension scheme shall be taxable in the hands
of recipient on cash basis.
• Interest or bonus accrued as per the scheme shall not be eligible for deduction but shall be
liable to tax.
• If deduction is claimed under section 80C, in respect of the same investment, deduction is
not available under section 80CCC.
• [Amendment Finance Act 2020]
under section 80CCC is not available from the assessment year 2021 - 22.
SECTION 80CCD CONTRIBUTION TO NATIONAL PENSION SCHEME
Applicable to An Individual (irrespective of his residential status)

Quantum of Deduction:
A In case of salaried individual (CG employee or Employed by any other person)
Lower of the following
• The whole of the amount so paid or deposited
• Maximum of 10% [CG employee] of his salary in the previous year
Add: Employers contribution maximum to the extent of 10% of salary & 14% in case of
contribution made by central government.
Key Note
Salary = Basic + DA (if applicable)

Employer contribution to NPS is treated as salary income.
B In case of other individual

• The whole of the amount so paid or deposited
• maximum of 20% of his GTI
Add: Further in respect of employee contribution /Assessees contribution in addition to 10%

of salary / 20% of GTI an Additional deduction of Rs 50,000 shall be allowed.


under section 80CCD [except employer’s contribution NPS under section 80CCD (2)] is not
available from the assessment year 2021-22.
Tax at the time of Withdrawal-

The amount standing to the credit of an assesse in NPS for which a deduction has already
been claimed by him and accretions to such account shall be tax as follows -
Provisions
Particulars applicable
From the AY
2020-21
1 Partial withdrawal from NPS (to the extent it does not exceed 25% of an Exempt
employee’s contribution)
2 Amount received by an employee [or a non-employee (applicable from the 60% exempt
assessment year 2019-20)] on closure of his account or on his opting out of
the NPS.
3 In (2) amount is received by a nominee on the death of the assesse. Exempt
4 Pension received out of NPS. taxable
5 Amount received in (2), (3), (4) is utilized for purchasing an annuity plan in Exempt
the same previous year
6 Pension received out of annuity plan purchased in (5) taxable
IMPORTANT NOTE 80C + 80CCC + 80CCD
DEDUCTION U/S 80CCE: LIMIT ON DEDUCTION U/S 80C, 80CCC AND 80CCD
The aggregate amount of deductions under section 80C, section 80CCC and section CCD (other
than deduction in respect of employer’s contribution) shall not exceed Rs. 1,50,000.
Particulars Amount
Deduction u/s 80C ****
Deduction u/s 80CCC ****
Deduction u/s 80CCD [other than deduction in respect of Employer’s ****
Contribution]
Total [Restricted to maximum of Rs. 1,50,000 u/s 80CCE] *****
Add: contribution of NPS by any individual allowable u/s 80CCD(1B) [sub. To ****
maximum of Rs. 50,000/-]
Add: Employer’s contribution to New Pension System referred to in Sec. 80CCD ****

[Subject to max. of 10% 0r 14% of salary]

Deduction available u/s 80C, 80CCC & 80CCD *****
2. Illustration
Particulars Case 1 Case 2 Case 3
10% of Salary 90,000 90,000 90,000
Employee Contribution 60,000 1,00,000 1,60,000
Employer Contribution 60,000 1,00,000 1,60,000
Compute deduction u/s 80CCD.
Solution
1) Employer contribution to the extent of 10 % of salary 60000 90000 90000
2) Employee contribution to the extent of 10 % of salary 60000 90000 90000
3) Additional to the maximum extent of Rs 50,000 10000 50000
Total Deduction u/s 80CCD 120000 190000 230000
3. Illustration
Compute Deduction u/s 80C, 80CCC & 80CCD
10% of Salary 35000 60000 35000
Employee Contribution 50000 50000 50000
Employer Contribution 50000 50000 50000
Deduction u/s 80C 45000 75000 15000
Deduction u/s 80CCC 35000 45000 170000
Solution
S N Particulars Case 1 Case 2 Case 3
1 Deduction u/s 80C subject to maximum of Rs 45000 75000 15000
1,50,000
2 Deduction u/s 80CCC subject to maximum of Rs 45000 150000
1,50,000 35000
3 Deduction u/s 80CCCD 35000 50000 35000
Employee contribution to the extent of maximum
10% of salary
Total 1,15,000 1,75,000 2,00,000
Deduction u/s 80CCE to the extent of Rs 1,50,000 115000 150000 150000
or amount invested u/s 80C, 80CCC & 80CCD
4 Deduction u/s 80CCCD 35000 50000 35000
Employer contribution to the maximum extent of

10% of salary
5 Additional contribution by employee to the extent 15000 10000 15000
of Rs 50,000 maximum
TOTAL 165000 210000 200000
SECTION 80D: IN RESPECT OF MEDICAL INSURANCE PREMIUM
1. Applicable to
The taxpayer is an individual (maybe resident/non-resident or Indian citizen/foreign citizen)
or a Hindu undivided family (maybe resident or non-resident).
Payment should be in any mode other than cash however payment shall be made by any mode
including cash in respect of any sum paid on account of preventive health check-up.
[Amendment finance act 2020]
under section 80D is not available from the assessment year 2021-22
3. Payment for health insurance
The assessee has made payment for health insurance of the following person.
Assessee Payment for Nature of Payment

Individual Himself/herself, a Payment of Mediclaim Insurance premium; or
spouse or b Contribution to the Central Government Health Scheme.
dependent c Payment for preventive health check up
children
Parents a Payment of Mediclaim insurance premium.
b Payment for preventive health checks up
Taxpoint: Contribution to the Central Government Health
Scheme for parents of the assessee is not eligible for
deduction under this section.
HUF Any member of Payment of Mediclaim insurance premium:
the family Taxpoint: Contribution to the Central Government Health
Scheme by HUF is not eligible for deduction under this section.
The deduction for payment made for preventive health check-up for entire family cannot
exceed Rs 5,000. (Himself/herself, spouse or dependent children and Parents)
Dependent Children are said to be dependant if their own resources are not sufficient
Children enough to support them.
Quantum of Following shall be allowed as deduction :-
deduction

Premium or Contribution Individual HUF

paid by
Premium or contribution Himself/herself, spouse Parents (whether Any member of
paid for or dependent children dependent or not) the family.
Deduction being lower of a Aggregate of a Premium paid; or a Premium
Premium paid and preventive health paid or
contribution made check up
or preventive
health check up
b Rs. 25000 / 50000 b Rs.25000 b Rs.25000/
p.a. p.a./50000 p.a. 50000 p.a.
Key Notes
• Senior citizen for the aforesaid purpose is a resident individual and whose age at any time
during the relevant PY should be at least 60 years.
• For senior citizen amount limit of Rs 50,000 is applicable.
• To claim deduction of Rs 50,000 the person for whom policy is taken should be senior citizen
and not the person who has paid the premium.
• Whole of the amount paid on account of medical expenditure incurred on health of assessee
or his family himself who are senior citizen/ very senior citizen (age 80 or above 80 during
relevancy PY) the maximum deduction available shall be Rs 50,000.
• Where the premium is paid in lump sum then deduction allowed for this section for each of
the relevant previous year would be distributed over the no of years.
4. Illustration
Compute deduction u/s 80D.
Age below 60
Assessee & his Parents Preventive health Total paid Deduction
family check up allowed.
20,000 40,000 5,000 65,000 50,000
25,000 50,000 5,000 80,000 50,000
30,000 55,000 30,000 1,15,000 50,000
15,000 44,000 7,000 66,000 45,000
15,000 60,000 7,000 82,000 45,000
30,000 Not paid 5,000 35,000 25,000/30,000
30,000 30,000 5,000 65,000 50,000
40,000 7,000 47,000 25,000/30,000
15,000 Not paid 7,000 22,000 20,000
22,000 48,000 5,000 75,000 50,000

SECTION 80DD IN RESPECT OF MAINTENANCE OF DEPENDANT RELATIVE WITH DISABILITY
1. Applicable to
a The taxpayer is resident in India (maybe ordinarily resident or not ordinarily resident).
b The resident taxpayer is an individual (maybe an Indian citizen or foreign citizen) or a
Hindu undivided family.
Assessee has a dependant disable relative
In the case of Relative includes
Individual Spouse, children, parents, brothers and sisters of the individual.
HUF Any member of the Hindu Undivided Family.
KEY NOTES
• Dependant Relative: A relative is said to be dependant if he wholly or mainly depends on
such individual or HUF for his support and maintenance.
• Disability includes blindness, low vision, leprosy-cured, hearing impairment,
locomotors disability, mental retardation, mental illness.
under section 80DD is not available from the assessment year 2021-22.
3. Quantum of deduction:
Relative is suffering from severe, disability (80% or more than 80%) Rs. 125000
Relative is suffering from disability but not severe disability (less than 80%) Rs. 75000
Tax point: Deduction shall be irrespective of actual expenditure incurred i.e. deduction is
statutory in nature.
KEY NOTES
• Above deduction is available for relative of the assessee.
• If Assessee himself is disable, then he can claim deduction for himself under 80U.
• Even if assessee has more than one disable relative still limits remains same.
SECTION 80DDB IN RESPECT OF MEDICAL TREATMENT
1. Applicable to
A resident individual (irrespective of citizenship) or a resident HUF.
Expenditure incurred on the medical treatment of relative. The assessee has, during the
previous year actually paid any amount for the medical treatment of a specified disease or
ailment as prescribed in rule 11DD. Expenditure is incurred for treatment of the assessee
himself or for a dependant relative
In the case of Relative

Individual Spouse, children, parents, brothers and sisters of the individual.

HUF Any member of the HUF
Dependant Relative: A relative is said to be dependant if he wholly or mainly depends on
such individual or HUF for his support and maintenance.
3. Medical Certificate
A certificate is required to be furnished along with the return of income.
4. Quantum of deduction
Actual expenditure on medical treatment or Rs. 40,000 & in case of senior & super senior
citizen Rs. 1,00,000 whichever is less, is deductible.
If an individual / HUF opts for the alternative tax regime under section 115 BAC,
deduction under section 80DDB is not available from the assessment year 2021-22.
Deduction under this section shall be reduced by the amount received, if any under
NOTE
insurance from an insurer or reimbursed by the employer for the medical treatment of the
KEY
person referred to above.
Specified diseases as per rule 11DD are: Neurological disease, Cancer, Chronic Renal failure,
Thalassemia.
SECTION 80E: REPAYMENT OF LOAN TAKEN FOR HIGHER STUDIES
1. Conditions
• Deduction is available for individual only (irrespective of residential status or citizenship
of the Individual)
• Education loan can be taken for pursuing assessees own education or for the education of
his relatives i.e. (spouse, children or any student for whom the Individual is legal
guardian)
• Loan should be taken from any banking company, approved financial institute and an
approved charitable institution.
• Actual amount of interest paid is available for deduction.
• Higher Education: Means any course of study pursue after passing the Senior Secondary
Examination or its equivalent for from any school, board or university recognized by the
Central Government or State Government or local authority or by any other authority by
the central Government or State Government or local authority to do so;
• Such amount is paid out of his income chargeable to tax.
2. Amount of Deduction
Deduction is available from the year from which assessee start paying interest &7
immediately succeeding A.Y. (or until the above interest is paid in full whichever is earlier).

Key Note [Amendment Finance Act 2020]

If an individual / HUF opts for the alternative tax regime under section 115
BAC, deduction under section 80E is not available from the assessment year
2021-22.
INTEREST ON LOAN FOR SPECIFIED HOUSE PROPERTY SEC. 80EE
1. Applicability
Individual (RI/NR)
2. Nature of Expenditure
Payment of Interest on loan taken by Assessee from any Financial Institutional for the
purpose of acquisition of a Residential Property.
3. Conditions:
a Amount of Deduction deduction shall not exceed Rs. 50,000
b Period Beginning from AY 2017-18 and subsequent AY’s
c Loan section period 1/4/2016 to 31/3/2017.
d Maximum Loan Amount The amount of Loan sanctioned for acquisition of the Residential
House Property does not exceed Rs. 35 lakhs.
e HP Value Value of Residential House Property does not exceed Rs. 50
Lakhs.
f No other house The assessee should not own any Residential House Property on
the date of sanction of loan.
4. No Further Deduction
Where a deduction u/s 80EE is allowed for any interest, deduction shall not be allowed in
respect of such interest under any under provision of this Act for the same or any other
assessment year
under section 80EE is not available from the assessment year 2021-22.
5. “Financial Institution”
Means a Banking Company to which the Banking Regulation Act, 1949 applies, or any Bank or
Banking Institution referred to in Sec. 51 of that Act, or a Housing Finance Company.
6. “Housing Finance Company”
Means a Public Company formed or registered in India with the main object of carrying on
the business of providing long-term finance for construction or purchase of houses in India
for residential purposes.
5. Illustration
Mr. Vadewale purchased a residential house property for self-occupation at a cost of 45 lakh on
01/06/2017 in respect of which he took a housing loan of 35 lakh from bank of India @ 11% p.a.
on the same date. Compute the eligible deduction in respect of interest on housing loan under the

provisions of the Income Tax Act, 1961, assuming that the entire loan was outstanding as on last
day of FY and he does not own any other house property
Solution
Particulars Rs
Interest deduction for AY 18 – 19 & onward
1 Deduction allowable while computing income under the head “Income from
House Property”
Deduction under section 24(b) 3,20,833 [35,00,000 × 11% × 10/12]
Restricted to 2,00,000
2 Deduction under chapter VIA from Gross Total Income
Deduction under section 80EE = 1,20,833 (3,20,833 – 2,00,000)
Restricted to 50,000
DEDUCTION IN RESPECT OF INTEREST PAYABLE ON LOAN TAKEN FOR ACQUISITION OF

RESIDENTIAL HOUSE PROPERTY [SECTION 80EEA]
1. Eligible assessee
An individual who has taken a loan for acquisition of residential house property from any
financial institution. Interest payable on such loan would qualify for deduction under this
section.
2. Conditions
The conditions to be satisfied for availing this deduction are as follows:
1. The loan is sanction by a financial institution (i.e. a bank or banking institution or a
housing finance company) during April 1, 2019 and march 31, 2022
deduction under section 80EEA is not available from the assessment year 2021-22.
2. The stamp duty value of the residential house property does not exceed Rs. 45 Lakh. The
expression “Stamp Duty Value” means value adopted (or assessed or assesable) by any
authority of the Central Government or a State Government for the purpose of payment
of stamp duty in respect of an immovable property.
3. The assesse does not own any residential house property on the date of sanction of loan.
3. Period of benefit
The benefit of deduction under this section would be available from A. Y. 2020-21 and
subsequent assessment years till the repayment of loan continues.
The maximum deduction allowable is Rs. 1,50,000. The deduction of upto Rs. 1,50,000 under
section 80EEA is over and above the deduction available under section 24(b) in respect of
interest payable on loan borrowed for acquisition of a residential house property. In respect
of self-occupied house property, interest deduction under section 24(b) is restricted to Rs.

2,00,000. In case of let out or deemed to be let out property, even though there is no limit
under section 24(b), section 71(3A) restricts the amount of loss from house property to be
set-off against any other head of income to Rs. 2,00,000. Accordingly, if interest payable in
respect of acquisition of eligible house property is more than Rs. 2,00,000, the excess can be
claimed as deduction under section 80EEA, subject to fulfilment of conditions.
5. No deduction under any other provisions
The interest allowed as deduction under section 80EEA will not be allowed as deduction
under any other provision of the Act for the same or any other assessment year.
DEDUCTION IN RESPECT OF INTEREST PAYABLE ON LOAN TAKEN FOR PURCHASE OF

ELECTRIC VEHICLE [SECTION 80EEB]
1. Eligible Assessee
An individual who has taken a loan for purchase of an electric vehicle from any financial
institution. Interest payable on such loan would qualify for deduction under this section.
(hybrid car not eligible)
2. Conditions
The conditions to be satisfied for availing this deduction are as follows-
Loan should be taken for

purchase of an electric
vehicle
The assessee should be an Loan should be sanctioned

individual Conditions during the period between
01/04/19 and 31/03/23
Loan should be sanctioned

by a FI (bank or specified
NBFCs)
3. Period of benefit
The benefit of deduction under this section would be available from AY 2020 - 21 and
subsequent assessment years till the repayment of loan continues.
Interest payable, subject to a maximum of Rs. 1,50,000.
5. No deduction under any other provision
The interest allowed as deduction under section 80EEB will not be allowed as deduction under
any other provision of the Act for the same or any other assessment year.
Deduction under section 80EEB is not available if the option is, exercised for the alternative

tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec. 115BAA / 115
BAB] or a resident co-operative society [sec.115 BAD]. However, a domestic company (which
has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim
deduction under section 80G for the assessment year 2020-21.
6. Meaning of certain terms:
a. Financial Institution
• A banking company to which the Banking Regulation Act, 1949 applies; or
• Any bank or banking institution referred to in section 51 of the Banking Regulation
Act, 1949; or
• Any deposit taking NBFC.
• A systemically important non-deposit taking NBFC i.e., a NBFC which is not accepting
or holding public deposits and having total assets of not less than Rs. 500 crore as
per the last audited balance sheet and is registered with the RBI.
b. Electric Vehicle
A vehicle which is powered exclusively by an electric motor whose traction energy is
supplied exclusively by traction battery installed in the vehicle. The vehicle should have
electric regenerative braking system, which during braking provides for the conversion
of vehicle kinetic energy into electrical energy.
SECTION 80G DEDUCTION IN RESPECT OF DONATION TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS
This deduction is available to all assessee, (irrespective of residential status or citizenship

of the individual)
• Donation in kind is not allowed as deduction.
• Donation for a particular community is not allowed as deduction.
• Proof of donation in original should be attached with the return of income.
• Donation in excess of Rs. 2,000 must be paid by Account Payee Cheque.
• [Amendment Finance Act 2020]
Deduction under section 80G is not available if the option is, exercised for the alternative
tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec. 115BAA / 115
BAB] or a resident co-operative society [Sec.115 BAD]. However, a domestic company (which
has opted for the alternative tax regime under section 115 BAA / 115BAB) can claim
deduction under section 80G for the assessment year 2020-21.
Amount of deduction under Sec. 80G into four parts as follows
A. 100% without limit
Following donations come within this category.
• National Defence Fund
• Prime Ministers National Relief Fund
• National Foundation for Communal Harmony

• An Approved University or Educational Institution & National eminence

• Zilla Saksharata Samiti
• Africa (Public Contribution – India) Fund
• National Blood Transfusion Council.
• Fund setup by State Govt. for medical relief to poor.
• Central welfare fund of the Army and Air force and the Indian Naval Benevolent Fund.
• Andhra Pradesh Chief Minister’s Cyclone Relief Fund.
• National illness assistance fund.
• Chief Minister’s Relief Fund and Lieutenant Governor’s Relief Fund
• National sports fund or National cultural fund.
• Technology Development Fund set up by Central Government.
• National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation
and Multiple disabilities.
• Donation to the fund set up by the Gujarat Govt. for providing Relief to victims of
earthquake in Gujarat.
• National children fund
• The swatch Bharat Kosh set up by the central government other than sum spent on CSR
activity
• The clean Ganga fund set up by the Central Government where the assessee is Resident
and amount spent is other than sum spent on CSR activity.
• The National fund for control of Drug abuse constitute u/s 71A of the Narcotic Drugs
and Psychotropic Substance Act 1985.
• Prime Minister’s Armenia Earthquake Relief Fund
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• The National Cultural Fund set up by the Central government
• Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM Cares
Fund)
B. 50% without limit
• Jawaharlal Nehru Memorial Fund
• Prime Ministers Drought Relief Fund.
• Indira Gandhi memorial Trust
• Rajiv Gandhi Foundation.
C. 100% with Maximum Limit
• Government or Local Authority or an approved institution or association to be utilized for
the purpose of promoting family planning.
• Donation by company to Indian Olympic Association or other notified association.

D. 50% with Maximum Limit

• Any notified temple, mosque, gurdwara, church or other place (for renovation or repairs).
• Any approved institution or fund established in India for charitable purpose.
• Government or any Local authority to be utilized for charitable purposes, other than the
purpose of promoting family planning.
• Any authority set up for dealing with and satisfying the need for housing accommodation
or for the purpose of planning/development of towns, villages, etc.
• Any Corporation established by the Central Government or State Government for

promoting the interest of the members of the minority Community.
Qualifying limit
The eligible donations referred to in iii and iv should be aggregated and the sum total should be
limited to 10% of the adjusted gross total income. This would be the maximum permissible
education
The donations qualifying for 100% deduction would be first adjusted from the maximum
permissible deduction and thereafter 50% deduction of the balance would be allowed.
Steps for computation of qualifying limit

Step 1 Compute adjusted total income i.e., the GTI as reduced by the following:
i. Deductions under Chapter VI-A, except under section 80G
ii. Short-term capital gain taxable under section 111A
iii. Long-term capital gains taxable under sections 112 & 112A
iv. Any income on which income-tax is not payable
Step 2 Calculate 10% of adjusted total income
Step 3 Calculate the actual donation, which is subject to qualifying limit (Total of Category
III and IV donations, shown in the table above)
Step 4 Lower of step 2 or Step 3 is the maximum permissible deduction.
Step 5 The said deduction is adjusted first against donations qualifying for 100% deduction
(i.e., Category III donations). Thereafter, 50% of balance qualifies for deduction
under section 80G
6. Illustration
Compute total income of Mr. Batliwala who gives following donations:
Donation Amount Rs.
National Defence Fund 10,000
Prime Minister’s Drought Relief Fund 20,000
Prime Minister’s National Relief Fund 20,000
Prime Minister’s Armenia Earthquake Relief Fund (in kind) 10,000
Local poor people 14,000

GTI of the assessee is 2,00,000 [including Long Term Capital Gain of Rs. 20,000].
Solution
Computation of total income of Mr. Batliwala for A.Y 23 - 24
Particular W N Rs
Long term capital gain 20,000
Other income 1,80,000
GTI 2,00,000
(-) deduction u/s 80G 1 40,000
= Total Taxable income 1,60,000
Working Note 1
Donation Amt % Rs
1) National Defence fund 10,000 100% 10,000
2) P.M drought Relief fund 20,000 50% 10,000
3) P.M National relief fund 20,000 100% 20,000
50,000 40,000
Working Note 2
Donation in kind deduction to local poor people is not eligible for deduction u/s 80 G

SECTION 80GG: IN RESPECT OF HOUSE RENT PAID
1. Applicable to
Individual (irrespective of the residential status and citizenship of the individual)
2. Conditions to be satisfied:
a No House rent allowance Assessee is not receiving House Rent Allowance (HRA).
b No house at the place of He or his spouse or minor child or HUF of which he is a
employment member, should not own any residential house at a place
where the assessee resides, perform the duties of this
office, or employment or carries on his business or
profession.
c No claim for the benefit of An Assessee should not treat any residential house
self-occupied house property situated at other places as self-occupied property u/s.
23(2)(a) or 23(4) (a).
d Proof for payment of rent A declaration in Form 10BA should be filed for
expenditure incurred by him towards payment of rent.
e [Amendment finance act 2020]
deduction under section 80GG is not available from the assessment year 2021-22.
3. Taxpoint
Rent must be paid for a residential house property whether furnished or unfurnished.
Minimum of the following:
1 Rs. 5000 per month
2 25% of adjusted gross total income for the year (referred as Adj. GTI); or
3 The excess of actual rent paid for accommodation over 10% of Adjusted Gross total
income. Arithmetically, [Rent paid – 10% of Adj. GTI].
Calculation of Limit = 10% AGTI

NOTES
KEY
AGTI = GTI – LTCG – STCG u/s. 111A – All deduction u/s. 80C to 80U except 80GG –
Income referred u/s. 115A, 115AB, 115AC etc.
7. Illustration
Compute total income of Sri Bajaj of Delhi from the following data:
Particulars Amount Rs.
Profit & gains of business or profession 80,000
Income from house property (let-out and situated at Kolkata) 40,000
Income from other sources 10,000
Rent paid for office 8,000

Rent paid for residential house. 40,000
Solution
Computation of total income of Bajaj for A.Y 23 - 24
Particular Rs
Business income 80,000
Income from House Property 40,000
Income from other source 10,000
GTI 1,30,000
- Ded u/s 80GG 27,000
Total taxable income 10,300
Working note
AGTI 1,30,000
Least of the following is exempt:
1) 5000 X 12 = 60,000
2) 25% of AGTI = 25 × 1,30,000 = 32,500
3) Rent paid – 10% of AGTI = 40.000 – 13,000 = 27,000
SECTION 80GGA: DONATIONS FOR SCIENTIFIC RESEARCH OR RURAL DEVELOPMENT
1. Assessee
Any not having income under the head PGBP.
2. Qualifying sums paid to
• A Scientific Research Association, or to an Approved University, or College or other
institutions to be used for Scientific Research or Research in Social Science or
Statistical Research.
• An Approved Association, Institution, Public Sector Company which has as its object the
training of persons for implementing program of rural development.
• Sum paid to the National Fund for rural development set up and notified by the Central
Government for the purpose of carrying out rural development programmers.
• Sum paid to National Urban Poverty Eradication fund set up and notified by Central
Government.
100% of Qualifying Sum
4. Key Note
The following amendment have been made to the scheme of section 80GGA with effect from
October 1, 2020
a) No deduction shall be allowed under this section in respect of any sum exceeding Rs.

2,000 unless such sum is paid by any mode other than cash.
b) Claim of an assesse for a deduction in respect of any sum referred to in section

80GGA(2), in the return of income for any assessment year field by him, shall be allowed
on the basis of information relating to such sum furnished by the payee to the
prescribed income tax authority (or the person authorised by such authority), subject to
verification in accordance with the risk management strategy formulated by the board
from time to time.
c) [Amendment finance act 2020]
Deduction under section 80GGA is not available if the option is, exercised for the
alternative tax regime by an individual / HUF [Sec. 115 BAC] or domestic company [sec.
115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD]. However, a
domestic company (which has opted for the alternative tax regime under section 115
BAA / 115BAB) can claim deduction under section 80GGA for the assessment year
2020-21
SECTION 80GGB & 80 GGC: DEDUCTION FOR CONTRIBUTION TO POLITICAL PARTIES OR ELECTORAL TRUST
Particular Sec. 80GGB 80GGC

Applicable An Indian company All assessee except
to • Local authority and
• Every artificial juridical person wholly or partly funded
the Government
Condition Assessee made contribution to any political party or electoral trust during the
previous year Donation must not be in cash
Deduction under section 80GGB & 80GGC is not available if the option is, exercised
for the alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic
company [sec. 115BAA / 115 BAB]or a resident co-operative society [sec.115 BAD].
However, a domestic company (which has opted for the alternative tax regime under
section 115 BAA / 115BAB) can claim deduction under section 80GGB for the
assessment year 2020-21.
Deduction 100% of contribution so made

SECTION 80JJA: PROFITS AND GAINS FROM THE BUSINESS OF COLLECTING AND PROCESSING
OF BIO DEGRADABLE WASTE
1. Condition
• Applicable to all assessee
Deduction under section 80JJA is not available if the option is, exercised for the
alternative tax regime by an individual / HUF [sec. 115 BAC] or domestic company [sec.
115BAA / 115 BAB] or a resident co-operative society [sec.115 BAD].
• Gross total income of an assessee includes any profits and gains derived from the
business of collecting, processing and treating bio – degradable waste for-
A. Generating Power
B. Bio-Fertilizers,
C. bio-pesticides, or other biological agents
D. Producing bio – gas and
E. Making pellets, briquettes for fuel and organic manure.
An amount equal to whole of such income for a period of five consecutive assessment years
beginning with the assessment year relevant to the previous year in which such business
commences.
SECTION 80JJAA: DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN
1. Applicable to
All assessee who has income from business and is subject to tax audit u/s 44AB.
2. Conditions
1 Business is not acquired by the assessee by way of transfer from any other person or as a
result of any business reorganisation
2 The business of the assessee is not formed by splitting up, or the reconstruction, of an
existing business, Except Sec. 33B
3 Deduction under section 80JJAA is not available unless audit report is submitted with
effect from the assessment year 20-21 audit report in form no. 10DA is required to be
uploaded one month prior to the due date of submission of return of income. If the due
date of submission of return of income is October 31 of the assessment year, audit
report should be uploaded on or before Sep. 30 of the assessment year. Conversely if the
due date of submission of return of income in Nov. 30 of the assessment year, audit
report should be uploaded on or before Oct. 31 of the assessment year.
3. Deduction
An amount equivalent to 30% of Additional Employee Cost (incurred in the course of such
business in the PY) is deduction u/s 80JJAA for 3 assessment years including the AY
relevant to the PY in which such employment is provided.

4. “Additional Employee”
“Additional Employee” means an employee who has been employed during the PY and whose
employment has the effect of increasing the total number of employees employed by the
employer as on the last date of the preceding year, but does not include –
a An employee whose total emoluments are more than Rs. 25,000 per month
b An employee for whom the entire contribution is paid by the government under the
Employee Pension Scheme notified in accordance with the provisions of the “Employees
Provident Funds and Miscellaneous Provisions Act, 1952;
c An employee employed for a period of less than 240 days during the PY&150 days in
case of footwear or leather products [FA ACT 2018] or
d An employee who does not participate in the recognised provident fund.
5. Additional employee cost
“Additional employee cost” means total emoluments paid or payable to additional employees
employed during the PY
1 In the case of existing business, the additional employee cost shall be nil, if –
a There is no increase in the number of employees from the total number of employees
employed as on the last date of the preceding year.
b Emoluments are paid otherwise than by an account payee cheque or account payee
bank draft or by use of electronic clearing system through a bank account.
2 In the first year of a new business, emoluments paid or payable to employees employed
during the PY shall be deemed to be the additional employee cost.
6. Emoluments
“Emoluments” means any sum paid or payable to an employee in lieu of his employment by
whatever name called, but does not include employer’s contribution to pension fund/ provident
fund/ any other fund for the benefit of employer under any law. Further, it does not include
lump sum payment at the time of termination of service, or superannuation or voluntary
retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment
benefits, commutation of pension, and the like.
DEDUCTION IN RESPECT OF INTER CORPORATE INVESTMENT [SEC. 80M]
With effect from the assessment year 21-22, dividend received by a shareholder from a
domestic company is taxable in the hands of the shareholder. To avoid cascading affect section
80M has been inserted with affect from the assessment year 2021-22.
1. Conditions
The following conditions should be satisfied
1 Assesse is a domestic company (i.e. investor company)
2 Income of the assesse includes dividend from domestic companies, foreign companies
or business trusts.

3 Dividend is distributed by the investor company to its own shareholders before the
due date the date one month prior to the date for furnishing return of income under
section 139(1)]
2. Deduction
Deduction under section 80M is-
a aggregate dividend income (as per section 8) of the investor company during the previous
year from domestic or foreign company/companies or business trust(s) [it includes final
dividend interim dividend and even deemed dividend under section
2(22)(a)/(b)/(c)/(d)/(e)];
b dividend distributed by the investor company to its own shareholders before the due
date the date one month prior to the date for furnishing return of income under section
139(1) for the previous year for which dividend income is taxable in the hands of investor
company], whichever is less.
Mere declaration of dividend is not sufficient - For the purpose of (b) (supra), dividend
distributed on or before the "due date" is taken into consideration. Mere declaration of
dividend is not sufficient
Double deduction not possible - Where any deduction, in respect of the amount of dividend
distributed by the domestic company, has been allowed under section 80M in any previous
year, no deduction shall be allowed in respect of such amount in any other previous year.
DEDUCTION IN RESPECT OF CERTAIN INCOME OF PRODUCER COMPANIES [SEC. 80PA]
Section 80PA has been inserted with effect from the Assessment Year 2019 – 20.
1 Conditions – In order to avail of deduction u/s 80PA, the following conditions should be
satisfied
a) The assesse is a producer company u/s 581A(i) of the Companies Act, 1956
b) The total turnover of the producer company is less than Rs. 100 crore in any previous
year.
c) The gross total income of the producer company includes any profits &gains and derived
from “eligible business”.
2 Amount of deduction: if the above conditions are satisfied, 100 per cent of the profit and
gain attributable to “eligible business” is deductible for the AY 2019 – 20 to 2024 – 25. If
the assesse is also entitled to deduction under any other provision or provisions of Chapter
VI – A (i.e., section 80C to 80U), the deduction u/s 80PA shall be allowed from the gross
total income as reduced by the deductions under such other provisions.
If a domestic company opts for the alternative tax regime under section 115 BA / 115BAA/
115BAB, deduction under section 80PA is not available.

3 “Eligible Business” – Only income from eligible business (not from all activities given u/s 581B
of the companies Act) is qualified for deduction under section 80PA. “Eligible Business” for
the purpose of section 80PA means –
a) The marketing of agricultural produce grown by the members; or
b) The purchase of agricultural implements, seeds, livestock or other articles intended for
agriculture for the purpose of supplying them to the members; or
c) The processing of the agricultural produce of the members.
SECTION 80QQB: DEDUCTION IN RESPECT OF ROYALTY INCOME OF AUTHORS
1. Applicability
Resident individual being an Author [Joint Author is also included]
2. Source of Income
Any lump sum consideration for the assignment or grant of any of his interests in the
copyright of any BOOK, being a work of literary, artistic or scientist nature, or for Royalty
or Copyrights Fees (in lump sum or otherwise).
Note: Books does not included Brochures, Commentaries, Diaries, Guides, Journals,
Magazines, Newspapers, Pamphlets, Textbooks for Schools, Track and other publication of
similar nature.
3. Amount of deduction
(a) Whole of such income, or
(b) Rs.3,00,000, whichever is less.
If an individual opts for the alternative tax regime under section 115 BAC, deduction under
section 80QQB is not available from the assessment year 2021-22.
4. Other Conditions
Royalty not received in Lump sum: If Royalty or Copyright Fees is not received in lump sum,
amount in exceed of 15% of value of such book sold during the previous year shall be ignored.
A Certificate in Form 10CCD, from the payer (person responsible for making such payment).
Should be submitted along with the Returned of Income.
If income is earned outside India:
• It should be remitted within six months from the end of the relevant previous year, or
within such times as extended by RBI.
• A certificate in Form 10TH from RBI or other Authorised Authority should be
submitted along with the return of income.
No deduction shall be allowed under any other provision of this Act in respect of such
Income.

SECTION 80RRB: DEDUCTION IN RESPECT OF ROYALTY ON PATENTS
1. Authority
Resident Individuals, being a patentee in receipt of any income by way of royalty in respect
of a patent registered on or after 1.4.2014 under the patents Act, 1970.
2. Source of Income
(a) Gross Total Income of the patentee includes “Royalty” in respect of the patent, i.e.
consideration for-
Whole of such income, or (b) Rs.3,00,000, whichever is less.
section 80RRB is not available from the assessment year 2021-22.
4. Other Conditions
a. A Certificate in Form 10CCE from the Controller referred u/s 2(1)(b) of the patents
Act, should be submitted along with the Return of Income.
b. No deduction shall be allowed under any other provision of this Act in respect of such
Income.
If income is earned outside India:
It should be remitted within six months from the end of the relevant previous year, or
within such time as extended by RBI.
A Certificate in Form 10H form RBI or other Authorised Authority, should be
submitted along with the Return if Income.
5. Patent revoked subsequently [sec.155(17)]
a. When the patent is revoked or the name of the Assessee was excluded from the patents
registered as patentee, the deduction already allowed shall be deemed to be wrongly
allowed, and the assessment shall be rectified u/s 155.
b. The period of 4 years for rectification shall be reckoned from the end of the P.Y in
which the order of the revocation of the patent is passed.
SECTION 80TTA: INTEREST ON DEPOSITS IN SAVING ACCOUNT
1. Applicable to
An individual or a Hindu Undivided Family.
2. Conditions to be Satisfied
Gross total income of an assessee includes any income by way of interest on deposits (not
being time deposit) in a savings account with:
• A banking company;

• A co – operative society engaged in carrying on the business of banking (including a co –

operative land mortgage bank or a co – operative land development bank); or
• A Post Office
3. Quantum of Deduction
Minimum of the following
a. Interest on such deposits in saving account.
b. Rs. 10,000
section 80TTA is not available from the assessment year 2021-22.
As per Sec. 10(15)(i) PO Saving Bank Interest is exempt upto 3,500 in case of
NOTES
a
KEY
individual and 7,000 in case of Joint Account

b No deduction for senior citizen claiming deduction under section 80TTB
SECTION 80 TTB: DEDUCTION IN RESPECT OF INTEREST ON DEPOSITS IN CASE OF SENIOR CITIZENS
1 Eligible Assessee: A resident senior citizen (an individual who is of the age of 60 years or
more at any time during the relevant previous year), whose gross total income includes
income by way of interest on deposits with –
a A banking company to which Banking regulation Act, 1949 applies
b A co-operative society engaged in carrying on the business of banking (including a co-
operative land mortgage bank or a co-operative land development bank)
c A post office.
2 Quantum of deduction: Actual amount of interest on deposits of Rs. 50,000, whichever is
lower.
section 80TTB is not available from the assessment year 2021-22.
3 Non-availability of deduction to partner/ member, where deposit held by, or on behalf of, a
firm, an AOP or a BOI, the partner of the firm or member of AOP/ BOI would not be allowed
deduction in respect of such income while computing their total income.
8. Illustration
Mr. Aalsi resident individual aged about 61 years, has earned business income (computed) of Rs.
1,35,000, lottery income of Rs. 1,20,000 (gross) during the PY 2022 – 23. He also has interest on
Fixed Deposit of Rs. 30,000 which banks. He invested an amount of Rs. 1,50,000 in Public
provident Fund Account. What is the total income of Mr. Aalsi for the AY 2023 – 24

Solution
Computation of total income of Mr. A for AY 2023 – 24
Particulars Rs. Rs.
Profits and gains of business or profession 1,35,000
Income from other sources
- Interest on Fixed Deposit with banks 30,000
- Lottery income 1,20,000
Gross total income 2,85,000
Less: Deduction under chapter VIA [see note below]
Under section 80C
- Deposit in Public Provident Fund 1,50,000
Under section 80TTB
- Interest on fixed deposit with banks 30,000
1,80,000
Restricted to 1,65,000
Total income 1,20,000
Note: Though the value of eligible deductions is Rs. 1,80,000, however, deduction under chapter
VI-A cannot exceed the gross total income exclusive of long term capital gains taxable u/s 112
and section 112A, short-term capital gains covered u/s 111A and winnings of lotteries of the
assesse.
Therefore, the maximum permissible deduction under chapter VI-A = Rs. 2,85,000 – Rs. 1,20,000
= Rs. 1,65,000
In case of resident individuals of the age of 60 years or more, interest on bank fixed deposits
qualifies for deduction upto Rs. 50,000 u/s 80TTB.

SECTION 80U: IN RESPECT OF INCOME OF A PERSON WITH DISABILITY
1. Assessee
Resident Individual (irrespective of citizenship)
2. Conditions
• He is certified by the medical authority to be a person with disability at any time
during the previous year.
• He furnishes certificate issued by the medical authority in the prescribed form.
• Deduction is allowed irrespective of expenditure incurred by the assessee.
• If an individual opts for the alternative tax regime under section 115 BAC,
deduction under section 80U is not available from the assessment year 2022-23
3. Who is Person with disability
Person suffering from not less than 80% of any of following disability as certified by
medical authority.
Person with 80% or more: Deduction of Rs. 1,25,000
Otherwise – Rs. 75,000.
5. Disabilities under Sec. 80U
Blindness, Low vision Leprosy cured, Hearing impairment, Locomotive disability Mental
retardation, Mental illness, Autism (Serious mental condition developed during childhood).
Cerebral Palsy (Brain damage), multiple disability.
9. Illustration
Mr. Zebra is suffering from low – vision (certified as severe disability). He has following incomes
details:
Net salary Rs. 45,000
Short term capital gain Rs. 45,000
Long term capital gain Rs. 1,50,000
Mrs. Zebra, suffering from leprosy (certified as 50% disable), is fully dependant on Mr. Zebra.
find his total income.
Solution
Since Mr. Lion is suffering from severe disability, he can claim deduction under section 80U of
Rs.1,25,000. Further, Mrs. Lion is also a person with disability and dependant on Mr. Lion,
therefore, Mr. Lion can also claim deduction under section 80DD of Rs.75,000.
Computation of total income of Mr. Lion for the A.Y. 23 – 24.
Particulars Details Amount
Salaries 45,000
Capital gains
Short term capital gains 45,000

Long term capital gains 1,50,000 1,95,000

Gross total income 2,40,000
Less: Deduction under section
80DD (Relative with disability) 75,000
80U (Assessee is a person with severe disability) 1,25,000 90,000
Total Income 1,50,000
Total deduction under section 80U cannot exceed GTI excluding LTCG, STCG covered under
section 111A, and casual income like winning from lotteries, etc.
SECTION 80-IA: DEDUCTION IN RESPECT OF PROFIT & GAINS FROM INDUSTRIAL UNDERTAKING
OR ENTERPRISE ENGAGED IN INFRASTRUCTURAL DEVELOPMENT
Available only to the following types of undertaking –

1 Enterprises engaged in providing infrastructural facility
2 Telecommunication services
3 Industrial parks or Special Economic Zones (SEZ)
4 Power Generation and distribution undertakings.
5 Revival of Power Generation Plant
Key Deduction should be claimed in the return of income and return of income should be
Notes submitted on or before the due date of submission of return of income.
Deduction under section 80-IA is not available if the option is exercised for the alternative tax
regime by an individual / HUF [sec. 115 BAC] , a domestic company [sec. 115 BA / 115BAA/
115BAB] or a resident co-operative society [sec. 115BAD].
Deduction under section 80IA is not available unless audit report is submitted with effect from
the assessment year 20-21 audit report in form no. 10CCB is required to be uploaded one month
prior to the due date of submission of return of income. If the due date of submission of return
of income is October 31 of the assessment year, audit report should be uploaded on or before
Sep. 30 of the assessment year. Conversely if the due date of submission of return of income in
Nov. 30 of the assessment year, audit report should be uploaded on or before Oct. 31 of the
assessment year.
INFRASTRUCTURAL FACILITY
Conditions:
• Enterprise provides infrastructural facility.
• The enterprise is owned by an Indian company or consortium of such companies or by an
authority, board or corporation established under any Central or State Act.
• The enterprise has entered into an agreement with Central Government or State Government
or local authority or any other statutory body for developing, maintaining or operating new
infrastructure facility

• The enterprise starts operating and maintaining the infrastructure facility after April 1,
1995. but before 1/4/2017
1. What is Infrastructural facility

The enterprise must carry out business of
1 Developing or
2 Maintaining and operating or
3 Developing, maintaining and operating any infrastructure facility.
2. Infrastructural facility means
1. Road including toll road, bridge or rail system
2. Highway project including housing or other activities
3. Water supply project, water treatment plant, irrigation, sanitation, solid waste
management.
4. Airport inland waterway or inland port or navigational channel in the sea.
1. 100% of the profits for 10 consecutive A.Y. falling within a period of 15 A.Y. from the
year in which enterprise commences or begins operating and maintaining
infrastructural facility.
2. The above deduction will be allowed from the A.Y. specified by the assessee at his
option to be the initial year.
3. For first 3, type Infrastructure Facilities period of 15 A.Y. is replaced by 20 A.Y.
INDUSTRIAL PARKS / SEPECIAL ECONOMIC ZONE
1. It an undertaking which
a Develops or
b Develops and operate or
c Maintains and operate a notified Industrial parks
2. Conditions
a The undertaking begins to operate an industrial park, in accordance with the scheme
framed and notified by the central government.
b It starts operating Industrial park at any time on or after 1.4.1997 but before 31.3.2011.
3. This section shall not apply to
Any SEZ notified on or after 1-4-2005.
100% of profit is deductible for 10 years commencing from Initial A.Y. (out of 15 AY)

TELECOMMUNICATION SERVICES
1. Conditions
• Applicable to all assessee.
• It should be the new undertaking.
• It should not be formed by transfer of old plant and machinery. Upto 20%of total value
of P&M can be previously used
• The activity should commence after 31.3.1995 but before 31.3.2005.
• It is not formed by splitting up or reconstruction of an existing business
2. Telecommunication undertaking means
An undertaking engaged in basic or cellular, radio paging, domestic satellite service or
network of trucking & broadband network and internet services.
Assessee % of profit Deductible Period
Any 100% First 5 years
30% Next 5 years
The above deduction will be allowed out of 15yrs from the A.Y. specified by the assessee at
his option to be the initial year.
POWER UNDERTAKINGS
1. Conditions
• It should be the new undertaking.
• It should not be formed by transfer of old plant and machinery.
• The activity should commence within specified period.
Type of Business Date of Amount of Period
Commencement Deduction
Generation or Generation & 1/4/93 to 100% First 10 yrs from Initial
distribution 31/3/2017 A.Y.(out of 15 AY)
Transmission or Distribution by 1/4/99 to 100% First 10 yrs from Initial
laying Network 31/3/2017 A.Y.(out of 15 AY)
Undertakes substantial 1/4/2004 to 100% First 10 yrs from Initial
renovation and modernization of 31/03/2017 A.Y.(out of 15 AY)
existing network
Note: Substantial renovation and modernization means an increase in the plant and machinery
in the network of transmission or distribution lines by at least 50% of the book value such
plant and machinery as on 1.4.2004.

RECONSTRUCTION OR REVIVAL OF A POWER GENERATING PLANT
Nature of Activity: Reconstruction or revival of a power generating plant, if such undertaking

begins to generate or transmit or distribute power before 31/3/2011.
Amount of Deduction 100% of profits and gains derived for such business.
Period of Deduction Any 10 consecutive assessment years out of 15 years
SECTION 80-IAB: DEDUCTION IN RESPECT OF PROFITS AND GAINS BY AN UNDERTAKING OR

ENTERPRISE ENGAGED IN DEVELOPMENT OF SPECIAL ECONOMIC ZONE
1. Conditions
• Applicable to all assessee
• The taxpayer is a Developer of Special Economic Zone
• The Gross Total income includes Profit from business of developing SEZ
• SEZ is notified after 1-4-2005
• Any enterprise which starts the development all operation and maintenance of
infrastructure facility on or before 31/3/2017
Deduction under section 80-IAB is not available if the option is exercised for the
alternative tax regime by an individual / HUF [sec. 115 BAC], a domestic company
[sec.115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD].
• Books are audited & Return is filed in time.
100% deduction for 10 out of 15 years beginning with the year when the SEZ was notified by
the Govt.
3. Transfer to another undertaking for operation and maintenance
Where a developer who develops a Special Economic Zone on or after the 1st day of April,
2005, transfers the operation and maintenance of such Special Economic Zone or another
Developer (hereafter in this section referred to in the this section referred to as the
transferee developer for the remaining period in the 10 consecutive assessment years.
80IAC: SPECIAL PROVISION IN RESPECT OF SPECIFIED BUSINESS (W.e.f. AY 17-18)
1. Applicability
Assessee being an eligible start-up. (Company or LLP)
2. Meaning of Terms
a. “Eligible Business”
means a business which involves innovation, development, deployment or
commercialisation of new products, processes or services driven by technology or

intellectual property.
From the Assessment Year 2018 – 19 – A business carried out by an eligible start up
engaged in innovation, development or improvement of products or processes or services
or a scalable business model with a high potential of employment generation or wealth
creation.
b. “Eligible Start-Up”
means a company or Limited Liability Partnership engaged in eligible business, which
fulfils the following conditions, namely:
• It is incorporated on or after 1/4/2016 but before 1/4/2023,
• The Total Turnover of its business does not exceed Rs. 100 crores [Fin. Act 20] in
any of the previous years beginning 1/4/2016 and ending on 31/3/2022, and
• It holds a Certificate of Eligible Business for the Inter-Ministerial Board of
Certification as notified by the Central Government.
c. “Limited Liability Partnership”
(LLP) means a partnership referred to in Sec. (2)(1)(c) of the Limited Liability
Partnership Act, 2008.
100% of the profit and gains derived from such eligible Start up business.
Deduction under section 80-IAC is not available if the option is exercised for the alternative
tax regime by a domestic company US 115 BA/ 115BAA/ 115BAB.
4. Period of Deduction
Deduction can be claimed at the option of the Assessee, for any 3 consecutive assessment
years out of 10 [Fin. Act 20] years beginning from the year in which the eligible start-up
incorporated.
5. Conditions to be satisfied for claiming deduction
a. Bar on Formation Style:
It should not be formed by splitting up or re-construction of an exciting business,
[Rehabilitation u/s 35B is permissible.]
b. Bar and Old Machinery
it should not be formed by transfer of Plant and Machinery previously used for any
purpose, except as under –
Imported Machine: The bar on use of Old Machinery does not apply if –
• Such plant or machinery is imported,
• Such plant or machinery is previously not use in India,
• No Depreciation on such Plant or Machinery is allowed to any person for any
Assessment year
c. Provisions of Sec. 80-IA (5) and (7) to (11) shall be applicable for claiming deduction u/s
80-IAC

SECTION 80IB: DEDUCTION IN RESPECT OF PROFITS AND GAINS BY FROM CERTAIN INDUSTRIAL
UNDERTAKING OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKING
INDUSTRIAL UNDERTAKING
Conditions – To claim deduction under section 80-IB, an industrial undertaking must satisfy the
following conditions –
Condition 1 It should be a new undertaking.
Condition 2 It should not be formed by transfer of old plant and machinery.
Condition 3 It should manufacture or produce articles other than non-priority sector items
given in the Eleventh Schedule.
Condition 4 Manufacture or production should be started within a stipulated time limit.
Condition 5 It should employ 10/20 workers.
Condition 6 Deduction should be claimed in the return of income and return of income should
be submitted on or before the due date of submission of return of income
Amount of deduction – An industrial undertaking can claim deduction at given in the table below
Small scale Industrial Industria Industrial Cold Any
industrial undertaking l undertaki chain other
undertaking (including undertaki ng facility
cold ng (including for
storage) set (including cold agricultur
up in an cold storage) al
industrial storage) set up in produce
backward set up in Category [see note
state [Eight Category B notified 1]
Schedule] A backward
notified district
backward
district
1 Nature of Any Any [see Other Other Cold chain Other
articles to be Note 2] than than facility than
produced those those for those
given in given in agricultur given in
Eleventh Eleventh al Elevent
Schedule Schedule produce h
Schedu
le
2 Time limit for Between Between Between Between Between Betwee
commencemen April 1, 1991 April 1, 1993 October October April 1, n April

t of and March and March 1, 1994 1, 1994 1999 and 1, 1991

production or 31, 2001 31, 2004 and and March 31, and
operation (march 31, March 31, March 31, 2004 March
2012 for an 2004 2004 31,
industrial 1995
undertaking
in the State
of Jammu
And Kashmir)
3 Amount of
deduction
(period of
deduction
commences
from initial
Assessment
Year)
owned by 30% for 100% for 100% for 100% for 100% for 30%
3.1 company first 10 first 5 years first 5 first 3 first 5 for
years and 30% for years and years and years and first 10
next 5 years 30% for 30% for 30% for years
next 5 next 5 next 5
years years years
3.2 owned by co- 25% for 100% for 100% for 100% for 100% for 25%
operative first 12 first 5 years first 5 first 3 first 5 for
society years and 25% for years and years and years and first 12
years years years
owned by any 25% for 100% for 100% for 100% for 100% for 25%
3.3 other person first 10 first 5 years first 5 first 3 first 5 for
years and 25% for years and years and years and first 10
years years years
What is initial “Initial assessment year” means the assessment year relevant to the
assessment year – previous year in which the industrial undertaking begins to manufacture or
produce articles or thigs, or to operate its cold storage plant or plants.

COMPANIES ENGAGED IN INDUSTRIAL RESEARCH [SEC. 80-IB (8)/(8A)] – SECTION 80-IB IS

APPLICABLE IF THE FOLLOWING CONDITIONS ARE SATISFIED –
Condition 1 The taxpayer is a company registered in India.

Condition 2 Such company has scientific and industrial research and development as its main
object.
Condition 3 It is for the time being approved by the prescribed authority (i.e., Secretary,
Department to Scientific and Industrial Research).
Condition 4 Deduction should be claimed in the return of income and return of income should be
submitted on or before the due date of submission of return of income.
Amount of Deduction – If all the aforesaid conditions are satisfied, the following is deductible
If the company is approved by the If the company is approved by the
prescribed authority at any time prescribed authority after March
before April 1, 1999 31< 2000 but before April 1, 2007
Amount of deduction 100 per cent of profit from such 100 per cent of profit from such
business business
Period of deduction 5 years beginning with the initial 10 years beginning with the initial
(Note 1) assessment year (Note 1) assessment year
Note 1 Initial assessment year means the assessment year relevant to the previous year in
which the company is approved by the prescribed authority.
MINERAL OILS AND REFINING OF MINERAL OIL [Sec 80-IB(9)]
Conditions: Applicable to all assessee.

Deduction Type of Business Date of commencement Amount of Period
Deduction
Production of Mineral Oil After 31/3/1997 100% First 7
A.Y.
Refining of Mineral Oil After 30/9/1998 100% First 7
anywhere in India but A.Y.
before 31/03/2012
Commercial production of On or after 01/09/2009 100% First 7
Natural Gas but before 1/4/2017 A.Y.

INTEGRATED HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS [Sec 80-IB(11A)]
Conditions:
Applicable to all assessee.
It must operate integrated business of handling, storage and transportation of food grains.
W.e.f. A.Y.2006-07. The benefit has been extended to the business of processing, preservation
and packaging of fruits and vegetables. From AY 2011-12 the following products are also included
namely, meat and meat products or poultry or marine or dairy products.
Amount of Deduction
ENTERPRISE AMOUNT OF DEDUCTION PERIOD
Company 100% 1ST 5 A.Y
30% Next 5 A.Y
Any other person 100% 1ST 5 A.Y
25% Next 5 A.Y

Deduction under section 80-IB is not available if the option is exercised for the alternative tax
regime by an individual / HUF [sec. 115 BAC], a domestic company [sec. 115 BA / 115BAA/
115BAB] or a resident co-operative society [sec. 115BAD].
SECTION 80IBA: DEDUCTIONS FOR PROFITS & GAINS FROM HOUSING PROJECTS
1. Applicability
All Assessee
2. Nature of Business
Business of developing and building Housing Projects.
Note: Assessee who executes the Housing Project as a Works – Contract awarded by any
person (including Central/ State Govt) is not eligible for Deduction.
3. Quantum of Deduction
100% of the Profits & Gains derived from such Business.
Deduction under section 80-IBA is not available if the option is exercised for the alternative
tax regime by an individual / HUF [sec. 115 BAC], a domestic company [Sec. 115 BA /
115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD].
4. Conditions
Project Approval
The project shall be approved by the Authority after 1/6/2016 but on or before 31/3/2022.
[Fin. Act 21]
The project shall be completed within a period a period of 5 years from the date of approval

by the competent Authority.

Project Completion
• First Approval: if the approval in respect of a Housing Project is obtained more than
once the project shall be deemed to have been approved on the date on which the
Building Plan of such Housing Project was first approved by the Competent Authority.
• Deemed Completion: The project is deemed to have been completed when a Certificate
of Completion of Project as a whole is obtained in writing from the Competent Authority.
Shops and Commercial Establishment
• The built-up area of the shops and other commercial establishment included in the
housing project does not exceed 3%. Of the aggregate built-up area.
If project is Location of project area of plot built-up area of Utilisation or
approved prior to of land on residential units permissible
September 1, which project comprised in the FAR
2019 is situated housing project
project is located Not less than Not to exceed 30 Not less than
within the cities of 1,000 square square metres 90%
Chennai, Delhi, metres
Kolkata or Mumbai
Project is located in Not less than Not to exceed 60 Not less than
any other place 2,000 square square metres 80%
metres
If the project is Location of project Area of plot of Carpet area of Utilisation or
approved on or land on which residential units permissible
ater September 1, project is comprised in the FAR
2019 situated housing project
project is located Not less than Not to exceed 60 Not less than
within the 1,000 square square metres 90%
metropolitan cities metres
given in Note (infra)
Project is located in Not less than Not to exceed 90 Not less than
any other place 2,000 square square metres 80%
metres
5. Allotment Restriction
If a Resident unit is allotted to an individual, no other Residential Unit in the Housing Project
shall be allotted to the Individual or the Spouse or the Minor Children of such Individual.
6. Maintenance of Books
The Assessee maintains separate books of account in respect of the Housing Project.
7. Non completion in 5 years
if the Housing Project is not completed within 5 years from the date of approval, and in

respect of which a deduction has been claimed and allowed u/s 80-IBA, the total amount of
deduction so claimed and allowed in one or more previous years, shall be deemed to be the
income of the Assessee chargeable as “Profits and Gains of Business or Profession” of the
previous year in which the period for completion so expires.
8. No Double Deduction
Where any amount of Profits and Gains derived from the business of developing and building
Housing Projects is claimed and allowed u/s 80-IBA for any AY, deduction to the extent of
such profit and gain shall not be allowed under any other previous of this Act
9. Meaning of Terms
a “built-Up Area” means the inner measurements of the Residential Unit at the floor level,
including projections and balconies, as increased by the thickness of the walls, but does
not include the common areas shares with other residential Units, including any open
terrace so shares.
b “Competent Authority” means the authority empowered to approved the Building plan by
or under any law for the time being in force,
c “Floor Area Ratio” means the quotient obtained by dividing the total covered area of
plinth area on all the floors by the area of the plot of land.
d “Floor Area Ratio” means a project consisting pre-dominantly of Resident units which such
other facilities and amenities as the Competent Authority may approve subject to the
provisions of this section.
e “Residential Unit” means an independent housing unit with separate facilities for living,
cooking and sanitary requirements, distinctly separated from other Residential Units
within the building, which is directly accessible from an outer door or through and
interior door in a shared hallway and not by walking through the living space of another
household.
DEDUCTION IN RESPECT OF PROFITS AN GAINS OF CERTAIN UNDERTAKINGS IN CERTAIN SPECIAL

CATEGORY OF STATE – HOW TO FIND OUT [SEC. 80-IC]
Condition 1 Not formed by splitting up or reconstruction of existing business

Condition 2 Not formed by transfer of old plant and machines
Condition 3 industrial undertaking should be set up in certain special category of state
Condition 4 Manufacture/Production of specified Goods
Condition 5 Audit

State in which Time limit for Nature of articles nature of Amount

the industrial commencement of to be produced if article to be deductible
undertaking is production or industrial produced if
set up substantial undertaking is set industrial
expansion up (or completes undertaking is
substantial set up (or
expansion) in the completes
industrial zone of substantial
the relevant expansion) in
State given in any area of the
section 80- relevant State
IC(2)(a)
(1) (2) (3) (4) (5)
Sikkim December 23, Any arcticle but Any article given 100% of profit
2002 to March 31, other than those in Fourteenth and gains of the
2007 given in the Schedule industrial
Thirteenth undertaking for
Schedule 10 years
commencing form
the initial
assessment year
Himachal January 7, 2003 Any article but Any article given 100% of the
Pradesh or to March 31, 2012 other than those in Fourteenth profit and gains
Uttaranchal given in the Schedule of the industrial
Thirteenth undertaking for
Schedule the first 5 years
commencing with
the initial
assessment year
and 25% (30% in
the case of a
company) for the
next 5 years
North-Eastern December 24, Any article Any article given 100% of profit
State [i.e., 1997 to March 31, in Fourteenth and gains of
Arunachal 2007 Schedule industrial
Pradesh, Assam, undertaking for
Manipur, 10 years
Meghalaya, commencing form
Mizoram, the initial
Nagaland and assessment year

Tripura]
PROFITS AND GAINS FROM BUSINESS OF HOTELS AND CONVENTION CENTRES IN SPECIFIED
AREA SEC 80ID
1. Assessee
Any undertaking, engaged in the business of hotel (2,3, or 4 star) located in the specified
district having a world heritage site, if such hotel is constructed and has started or starts
functioning at any time during the period 1-4-2008 to 31-3-2013.
2. Deduction
100% of the profit and gains derived from such business for 5 consecutive AYs beginning
from initial assessment year.
3. Conditions
i The eligible business is not formed by the splitting up, or the reconstruction, of a
business already in existence;
ii The eligible business is not formed by the transfer to a new business of a building
previously used as a hotel or a convention centre, as the case may be;
iii The eligible is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.
Exceptions: Same as 80IA.
iv The assessee furnished along with the return of income, the audit report in the
prescribed form, certifying that the deduction has been correctly claimed.
v “Specified district having a World Heritage Site” means districts, specified in column (2)
of the table below, of the states, specified in the corresponding entry in column (3) of
the said table:
• No double deduction: Notwithstanding anything contained in any other provision of this Act,
in computing the total income of the assessee, no deduction shall be allowed under any other
section contained in Chapter VIA or section 10AA, in relation to the profits and gains of the
undertaking.
• Manner of computer profits eligible for deduction: Same as 80-IA
• Right of the Assessing Officer to adjust the profits eligible for deduction: Same as 80-IA
• Consequence of Amalgamation or Demerger of Company: Same as 80-IA
CERTAIN UNDERTAKINGS IN NORTH – EASTERN STATES SEC. 80IE
1. Assessee
Any undertaking which has, during the period 1/4/2007 to 31/3/2017, begun or beings, in any
of the North-Eastern States,-
i To manufacture or produce any eligible article or thing;
ii To undertake substantial expansion to manufacturer or produce any eligible article or
thing;

iii To carry on any eligible business.

2. Deduction
100% of the profits and gains derived from such business for 10 consecutive AYs
commencing with the initial assessment year.
Deduction under section 80-IE is not available if the option is exercised for the alternative
tax regime by an individual / HUF [sec. 115 BAC] , a domestic company [sec. 115 BA /
115BAA/ 115BAB] or a resident co-operative society [sec. 115BAD]
3. Conditions
i It is not formed by splitting up, or the reconstruction, of a business already in existence:
Exception: Reconstruction or revival of the business as referred to in section 33B;
ii It is not formed by the transfer to a new business of machinery or plant previously used
for any purpose.
Exception: same as 80-IA
4. Double deduction not allowed
Notwithstanding anything contained in any other provision of this Act, in computing the total
income of the assessee, no deduction shall be allowed under any other section contained in
chapter VIA or in section 10A or 10B or 10BA, in relation to the profits and gains of the
undertaking.
For the purpose of this section, -
i “North-Eastern States” means the states of Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;
ii “Substantial expansion” means increase in the investment in the plant and machinery by at
least 25% of the book value of plant and machinery (before taking depreciation in any year),
as on the first day of the previous year in which the substantial expansion is undertaken;
iii “Eligible article or thing” means the article or thing other than the following: -
a Goods falling under chapter 24 of the first schedule to the CETA 1985 which pertains to
Tobacco and manufactured tobacco substitutes;
b Pan masala as covered under chapter 21 of the first schedule to the CETA 1985;
c Plastic carry bags of less than 20 microns; and
d Goods falling under chapter 27 of the first scheduled to the CETA 1985, produced by
petroleum oil or gas refineries;
iv “Eligible business” means the business of,-
a Hotel (not below two star category);
b Adventure and leisure sports including ropeways
c Providing medical and health services in the nature of nursing home with a minimum
capacity of twenty-five beds;
d Running an old-age home
e Operating vocational training institute for hotel management, catering and food craft,
entrepreneurship development, nursing and para-medicine, civil aviation related training,
fashion designing and industrial training;
f Running information technology related training centre

g Manufacturing of information technology hardware; and

h Bio – technology.

SEC 80C TO 80CCE
1. Deduction under section 80C is 2. Deduction under section 80C to 80U

available upto a maximum of cannot exceed:
a Rs.50,000 a Gross Total Income
b Rs.1,50,000 b Total income
c Rs.20,000 c Income from business or profession
d Rs.25,000 d Income from house property
3. Government’s contribution to the new 4. Deduction u/s 80C in respect of LIP,

pension scheme referred to in section contribution to PF, etc. is allowed to:
80CCD is:
a An exempt income a Any assessee
b An income chargeable to tax as b Individual assessee only
‘Salaries’ in full [Max to the extent 14%
of salary]
c An income chargeable to tax as ‘Income c Individual or HUF
from other sources’ in full
d 50%, thereof is income chargeable to d Individual or HUF who is resident in India
tax as ‘Salaries’
5. Deduction under section 80C is 6. Mr. Lala, carrying a business, contributed

allowed from; ₹ 40,000 in the National Pension Trust
account. He also made a tax saving depos
₹ 1,20,000 in his PPF account and ₹
40,000 in LIC Premium. The total amount
eligible for deduction under various
sections enumerated in Chapter VI-A shall
be:
a Gross total income a Rs. 1,90,000
b Gross total income exclusive of long b Rs. 1,50,000
term capital gain
c Gross total income exclusive of short c Rs. 1,20,000
term capital gain from transfer of d Rs. 2,00,000
listed securities / units of equity
oriented fund through stock exchange
and long term capital gain on any asset

7. For claiming deduction u/s 80C, for 8. In case of HUF, deduction u/s 80C in
life insurance premium, if the respect of life insurance premium shall be
payment is made by the assessee for allowed for:
his child, then the child:
a Should be dependent on assessee a Any coparcener of HUF
b May or may not be dependent b Karta of HUF
c May be married or unmarried and c Any member of the HUF
dependent or not dependent
9. For claiming deduction u/s 80C by an 10. For claiming deduction u/s 80C in respect
individual in respect of PPF of ULIP by a an individual, the
contribution for any child, the child contribution can be paid by the individual
should be: for:
a Minor child a Himself only
b Any child dependent on such b Himself and spouse
individual
c Any child dependent or not dependent c Himself, spouse or any child
on such individual
11. For claiming deduction u/s 80C 12. For claiming deduction u/s 80C, the
respect of National Saving Certificate payment or deposit should be made:
of VIII / IX issue, the NSC should
be acquired by the individual in:
a His name only a Out of any income
b His name or any spouse name b Out of income chargeable to income tax
c In his name or spouse name or the name c During the current year out of any source
of any child
d In his name or spouse or in the name of
minor child
13. Deduction under section 80C shall be 14. Deduction under section 80C for tuition
allowed for: fee shall be allowed if such fee is paid
to:
a Any tuition fee a Any university, college, school or other
educational institution situated within India
or outside
b Tuition fee exclusive of any payment b Any university, college, school or other
towards any development fee or educational institution situated within India
donation or payment of similar nature
c Tuition fee and annual charges

15. Deduction under section 80C for 16. Deduction under section 80C in respect of
tuition fee shall be allowed for the tuition fee is allowed to:
purposes of:
a Any full time education a An individual only
b Any full or part time education b An individual or HUF
c Full time education in a college c Any assessee
d Full time education in a school
17. Deduction u/s 80C in respect of 18. Deduction u/s 80C in respect of tuition
tuition fee is allowed to an individual fee is allowed to the maximum extent of:
for:
a Any of his children a Rs. 12,000 per child for maximum of 2
children
b Any two children of such individual b Rs. 12,000 p.m. per child for maximum of 2
children
c Any two minor children of such c Rs. 1,00,000 per child
individual
d Any two dependent children of such d Rs. 1,50,000 for two children
individual
19. NPS (Tier-II) contribution shall be 20. An individual has made investments in the
eligible for deduction u/ s 80C, if in schemes approved under section 80C, and
case of an employee of the Central 80CCD of ₹ 2,50,000 and ₹ 1,00,000
Government, contribution to a respectively during the year ended 31st
specified account of the pension March, 2023. Amount that can be claimed
scheme referred to in section 80CCD: by him as deduction out of income in
assessment year 2023-24 is
a for a fixed period of not less than a 50% of₹3,50,000
three years
b In accordance with the scheme as b ₹ 1,50,000 under section 80C and ₹
may be notified by the Central 1,00,000 under section 80CCD
Government in the Official Gazette
c Both (A) and (B) c ₹ 2,00,000
d Either (A) or (B) d None of the above
21. Deduction in respect of contribution 22. Deduction u/s 80CCD in respect of

for annuity plan to certain pension contribution to pension scheme is allowed
fund under section 80CCC is allowed to:
to:

a Any assessee a Central Government employees only

b Individual assessee only b Central and State Government employees
c Individual HUF c Any employee
d Individual who is resident in India d Any employee or self-employed individual
23. Deduction under section 80CCD is 24. As per section 80CCE deduction u/s 80C,
allowed individual 80CCC and 80CCD cannot exceed:
a Employee’s contribution upto 10% of a Rs. 1,50,000 including employers
salary contribution to notified pension scheme
referred to in section 80CCD
b Employee’s contribution upto 15% of b Rs. 1,50,000 exclusive of employers
salary contribution to notified pension scheme
referred to in section 80CCD
c Employee’s and employer’s contribution c Rs. 1,00,000
each upto 14% of salary and in case of
self-employed person upto 20% of his
total income
d Employee’s and employer’s contribution d Rs.1,50,000 exclusive of employers
u/s 80C, 80CCC and 80CCD cannot contribution to notified pension scheme
exceed: referred in Section 80CCD without any limit
25. Deduction under Chapter VIA are not 26. Mr. Tuntun has taken a life insurance
available from policy on life on his minor son suffering
from severe disability on 01-04-2022.
The capital sum assured is ₹ 1,00,000.
He has paid insurance premium of ₹
30,000 during the previous year. He is
eligible for deduction under Section 80C
amounting -
a Long term capital gain a Rs. 30,000
b Salary b Rs. 15,000
c Short term capital gain on sale of c Rs. 10,000
land
27. Stamp-duty, registration fee and 28. Mr. Motabhai has taken a life insurance
other expenses for purchase of house policy on his own life on 01-04-2022. The
are allowed as deduction u/s – capital sum assured is Rs. 1,00,000. He
has paid insurance premium of Rs. 30,000
during the previous year. He is eligible

for deduction under Section 80C

amounting –
a 80C a Rs. 30,000
b 80CC b Rs. 15,000
c 80CCD c Rs. 10,000
d 80D d Rs. 20,000
29. An assessee has paid life insurance 30. If an assessee discontinues the life policy
premium of Rs. 25,000 during the before the premium of 2 years have been
previous year for a policy of Rs. paid then:
2,00,000 taken on 1-4-2020 he
shall:
a Not be allowed any deduction under a No deduction shall be allowed in respect of
section 80C the payment made in the year of termination
b Be allowed deduction under section 80C b Besides what is mentioned in (a) the
to the extent of 10% of the capital sum aggregate amount of the deduction from
assured i.e. Rs. 20,000 income so allowed in respect of the previous
c Be allowed deduction for the entire year to years preceding such previous year,
premium as per the provisions must be shall be deemed to be the income of the
paid 80C assessee of such previous year and shall be
liable to tax in the assessment year relevant
to such previous year.
31. If a member, participating in the 32. The annual interest accrued on NSCs VIII
ULIP plan, terminates his or NSC IX issue shall be:
participation or ceases to participates
by reason of non-payment of his
contribution, before making deduction
for 5 years, then:
a No deduction shall be allowed in respect a Exempt
of the amount paid in the previous year
of termination
b Besides what is mentioned in (a), the b Taxable
aggregate deduction allowed in the past
years shall be deemed to be the income
in the previous year in which
membership is terminated
c Besides what is mentioned in (a), the c Besides what is mentioned in (b), the
cases of the part years in which interest so accrued shall be also be eligible
deduction was allowed shall be reopened for deduction u/s 80C

and tax shall be recomputed and the

balance tax payable shall be so payable
for these relevant years
33. Amount received from the surrender 34. Mr. Kaka has earned income from salary
of annuity plan or amount received as Rs. 5,00,000, Income from House
pension from the annuity plan by the Property Rs. 1,20,000 and interest on
assessee or his nominee shall be: saving bank deposits: Rs. 15,000. He has
made investment of Rs. 50,000 in public
provident fund. His Total Income is –
a Exempt a Rs. 5,85,000
b Taxable b Rs. 6,85,000
c Exempt upto certain limit, balance c Rs. 5,75,000
taxable d Rs. 6,20,000
SEC 80D TO SEC 80EEB
35. For the purpose of deduction under 36. Out of his agricultural income, Mr. Raju
section 80DD, which of the following chacha has paid interest of Rs.10,000 on
statements is / are true educational loan taken from Nationalized
bank last year. Deduction available under
section 80E of the Income Tax Act, 1961
is
a Assessee is either an individual or a a Rs.10,000
HUF
b Assessee is resident in India b Rs.5,000
c Assessee has a dependent disable c Rs.20,000
relative
d All of the above d Nil
37. Mr. Adhura (30 years) pays medical 38. The deduction available under section 80E
premium of Rs.17,000 for himself; to a HUF resident in India is
for his wife (28 years) Rs.5,000; for
his child Rs.5,000; Rs.10,000 for his
father (62 years). Maximum amount
of deduction he can claim under
section 80D is
a Rs.15,000 a Rs.1,000
b Rs.37,000 b Rs.2,000
c Rs.35,000 c Rs.3,000

d Rs.30,000 d Nil
39. Deduction under the section 80E is 40. Albela pays (through account payee
allowed in respect of cheque) during the previous year medical
insurance premia as under:
(i) Rs. 28,000 to keep in force an
insurance policy on his health and on
the health of his wife and dependent
children;
(ii) Rs. 58,000 to keep in force an
insurance policy on the health of his
father 62 years of age who is non
resident. Calculate deduction under
section 80D.
a Donations to charitable institutions a Rs. 25,000
b Medical treatment of handicapped b Rs. 50,000
person
c Interest on loan taken for higher c Rs. 56,000
education
d Profits earned from exports d Rs. 33,000
41. Wari incurred medical expenditure of 42. Raju bhai paid Rs. 25,000 to LIC of India
Rs. 32,000 towards cataract surgery for the maintenance of his disabled son
of his mother (aged 70 years). She and incurred Rs. 15,000 for the
also underwent a minor surgery for treatment of his handicapped wife who is
which he incurred an expenditure of working in State Bank of India. The
Rs. 26,000. Deduction u/s 80D will deduction allowable to him u/s 80DD is -
be - (Dec. 2016) (June 2016)
a Rs. 50,000 a Rs. 15,000
b Rs. 12,000 b Rs. 25,000
c Rs. 25,000 c Rs. 50,000
d Rs. 38,000 d Rs. 75,000
43. Deduction under section 80D is 44. Deduction under section 80D on account
allowed on account of payment of of preventive health check-up is allowed
preventive health check-up of - only when payment is made by –
a Assessee only a Cheque
b Assessee or his family only b Any mode other than cash
c Assesses or his family or parent or c Any mode including cash
parents

45. Deduction under section 80D on 46. Mr. Aam incurred medical expenditure of
account of preventive health check-up ₹ 32,000 towards cataract surgery of his
is allowed maximum to the extent of: mother (aged 70 years). She also
underwent a minor surgery for which he
incurred an expenditure of ₹ 26,000.
Deduction u/s 80D will be - (Dec. 2016)
a Rs. 25,000 a Rs. 50,000
b Rs. 5,000 b Rs. 12,000
c Rs. 5,000 which is in addition to Rs. c Rs. 25,000
25,000
d Rs. 5,000 which is part of Rs. 25,000 d Rs. 38,000
47. Deduction u/s 80D is allowed if the 48. Deduction under section 80D is allowed to
premium is paid to: an individual for premium paid to insure
the health of
a Life Insurance Corporation a Individual himself
b General Insurance Corporation or any b Individual himself or his family
other insurer
c Life Insurance or General or General c Individual himself or his family and
Insurance Corporation dependent parent or parents of individual
d Individual himself or his family and parent
or parents to an individual
49. Deduction under section 80D is 50. Which of the following conditions need to
allowed to HUF for premium to insure be satisfied for the purpose of claiming
the health of – deduction under section 80EEA :-
a Karta of the HUF only a the loan has been sanctioned by the financial
institution during the period beginning on
the 1-04-2020 to 31-03-2023.
b Any coparcener of HUF b the stamp duty value of residential house
property does not exceed Rs. 45 lakh.
c Any member of HUF c the assessee does not own any residential
house property on the date of sanction of
loan.
d Any male member of HUF d All of the above
51. The quantum of deduction allowed 52. Which of the following conditions needs to
under section 80D in case of an be satisfied for the purpose of claiming
individual shall be limited to: deduction under section 80EEB

a Rs. 15,000 for individual himself, his a the loan has been sanctioned by the financial
family and parents institution during the period beginning on
the 1-04-2019 and ending on the 31-03-
2024.
b Rs. 25,000 for individual himself or his b the value of electric vehicle does not exceed
family and Rs. 50,000 for parent or Rs. 10 lakh.
parents
c Rs. 25,000 for individual himself or his c the assessee does not own any other
family and Rs. 50,000 for parents or electric vehicle on the date of sanction of
parents loan.
d All of the above
53. Deduction under section 80DD in 54. Deduction under section 80DD shall be
respect of maintenance including allowed
medical treatment of dependent being
a person with deniability shall be
allowed to:
a Any assessee a To the extent of actual expenditure /
deposit or Rs. 40,000 whichever is less
b An individual or HUF b For a sum of Rs. 75,000 irrespective of
actual expenditure or deposit
c An individual or HUF who is resident c For a sum of Rs. 40,000 irrespective of any
in India. expenditure incurred or actual amount
deposited
55. Deduction u/s 80DDB in respect of 56. Deduction under section 80DDB for senior
medical treatment for specified citizen shall be allowed for a sum of:
ailment or disease is allowed to:
a Any assessee a Rs. 40,000 irrespective of any
expenditure
b Individual or HUF b Rs. 1,00,000 or actual expenditure
whichever is less
c Individual or HUF who is resident in c Rs. 50,000
India
57. In case the assessee or dependent 58. Deduction under section 80E in respect of
relative is a senior citizen then the interest on loan taken for higher
deduction under section 80DDB shall education shall be allowed to:
be allowed for sum of:
a Rs. 40,000 or actual expenditure a Repayment of loan taken from certain

whichever is less specified institutions

b Rs. 1,00,000 or actual expenditure b Repayment of loan and interest on loan taken
whichever is less from certain specified institutions
c Rs. 80,000 irrespective of actual c Interest on loan taken from certain
expenditure specified institutions
59. Deduction under section 80E shall be 60. Deduction under section 80E shall be
allowed in respect of amount paid by allowed in respect of amount paid by way
way of interest on loan taken by: of interest on loan taken from:
a An individual assessee only a Any person
b An individual who is resident in India b Financial institutions
c An individual or HUF c Financial institutions or approved charitable
d An individual or HUF who is resident institutions
in India
61. For claiming deduction of interest u/s 62. The deduction u/s 80E is allowed for
80E loan should be taken for doing: payment by way of interest on loan to the
extent of:
a Any post graduate course a Rs. 25,000
b Any graduate or post graduate course in b Rs. 40,000
engineering, medicine, management and
post graduate course in applied science
or pure sciences secondary mathematics
and pure sciences
c For any courses of study after passing c Any amount
the recognized senior secondary
examination or its equivalent
63. Deduction u/s 80E for payment by 64. Deduction under section 80E shall be
way of interest on loan is allowed for: allowed for the higher education of:
a 5 years a The assessee himself
b 8 years or till the interest is paid b The assessee himself and his / her spouse
c 10 years c The assessee himself, his / her spouse and
his / her children or the student for whom
the individual is a legal guardian
d 8 years d The assessee himself, his / her spouse and
his / her children

65. Raghunath repaid during P.Y. 2022 - 66. Mr. Monty an employee of A Ltd. incurred
23 education loan of Rs. 60,000 and the following expenditure on medical
interest on education loan of Rs. treatment of his dependent brother
18,000 taken from Punjab National suffering with physical disability (40%)
Bank for his son to pursue MS in (i) Doctors’ fees Rs.80,000
Germany. The loan was taken in the (ii) Medicines Rs.20,000
F.Y. 2015 - 16 and the payment (iii) Travelling expenses Rs.10,000
commenced from F.Y. 2015 - 16. Which of the following is the amount of
The amount eligible for deduction u/s deduction available to Mr. Manoj under
80E for the A.Y. 2023 - 24 is: section 80DD of the income tax act?
(June, 2017)
a Rs. 60,000 a Rs.75,000
b Rs. 78,000 b Rs.1,25,000
c Rs. 18,000 c Rs.1,75,000
d Nil d None of these
67. Sum incurred by HUF on 68. Deduction available to an individual in

rehabilitation of a member of the respect of maintenance including medical
joint family suffering from permanent treatment of a dependent being a person
physical disability being severe with 80% disability, when amount incurred
disability for the assessment year in this respect is Rs.40,000 will be:
2021 – 22
a Not allowed as deduction a Rs.40,000
b Allowed as deduction of sum of b Rs.75,000
Rs.40,000 or actual expenditure
whichever is lower
c Allowed as deduction of sum of c Rs.1,25,000
Rs.75,000
d Allowed as deduction of sum of d None of these
Rs.1,25,000
69. Mr. Monty pays Rs. 55,000 as 70. For the purpose of section 80D, the
medical insurance premium by cheque family in relation to an individual shall
under a scheme framed by GIC, for mean -
his mother (aged 65 years and who is
dependent upon Monty). If her
mother is a resident individual what
amount of deduction will be allowed to
Manish from his Gross Total Income –
a Rs. 55,000 a The spouse and the dependent children

b Rs. 50,000 b The dependent spouse and the dependent

children
c Rs. 25,000 c The spouse and the children
d Rs. 75,000
71. Where the individual or his family or 72. Deduction under section 88DDB shall be
his parents or a member of HUF in allowed for medical treatment of specified
case of HUF is a senior citizen and ailment or disease of:
the medical and the medical insurance
premium is paid to effect or keep in
force an insurance in relation to such
senior citizen, the limit is:
a Rs. 40,000 a Any dependent relative
b Rs. 25,000 b Any dependent handicapped relative
c Rs. 50,000 c The assessee himself or any dependent
relative
73. Deduction in respect of interest on

loan taken for higher education is
available to assessee for -
a His higher education
b The higher education of his relative
c Both (a) or (b)
d None of the above
SEC 80G TO SEC 80JJAA
74. Under section 80JJAA of the 75. Contribution to which of the following
Income Tax Act, 1961 deduction is funds is allowed as 100% deduction
available to under section 80G of the Income Tax
_____________________ in Act
respect of employment of new
workmen.
a An Indian company a Prime Minister’s Drought Relief Fund
b Any assessee b National Children’s Fund
c A resident corporate assessee c None of these two funds
d A non-resident assesse d Both of these two funds
76. Deduction in respect of contribution 77. 80GGA available for donations made to
to political party will:

a Be allowed in respect of sum paid by a Charitable Institutions

way of cash
b Not be allowed if payment made in b Educational Institutions
cash
c This type of deduction is not allowed c Research Associations
whether payment is in cash or not
d Be allowed if payment made in cash, d Religion organizations
subject to certain conditions
78. Deduction under section 80JJA is 79. Which section of the Income Tax Act
available if the assessee provides for deduction on donations to
scientific research for rural
development?
a Is engaged in scientific research a 80G
b Sets up an industrial unit in a b 80GGA
backward area
c Is engaged in agriculture business c 80GGB
d Is engaged in the business of d 80GGC
collecting and processing
biodegradable waste
80. As per section 80JJA, an assessee 81. On donation to whom of the following a
engaged in the business of processing 50% deduction is allowable under section
of bio – degradable waste is allowed 80G of the Income Tax Act?
as deduction of:
a 100% of profit for 2 years a National Defence Fund
b 100% of profit for 5 years b Prime Ministers National Relief Fund
c 100% of profit for 10 years c Rajiv Gandhi Foundation
d No deduction available d National Foundation for Communal
Harmony
82. Deduction under section 80G on 83. The overall limit in case of deduction
account of donation is allowed to: under section 80G is:
a A business assessee only a 10% of gross total income
b Any assessee b 10% of total income
c Individual or HUF only c 10% of gross total income as reduced any
portion thereof on which income tax is not
payable under any provisions of the act and
by any amount in respect of which the

assessee is entitled to a deduction under

chapter VIA except deduction under
section 80G
84. In case the donation is made in cash 85. Deduction in respect of rent paid u/s
the deduction under section 80G 80GG shall be allowed to:
shall be allowed to the maximum
extent of -
a Rs. 15,000 a An individual
b Rs. 1,00,000 b An individual or HUF
c Rs. 2,000 c Any assessee
d Rs. 50,000
86. Deduction in respect of rent paid u/s 87. Shaktimaan engaged in business paid
80GG is allowed to: monthly rent of Rs. 5,000 by cheque for
his residence during the previous year
2022 - 23. His adjusted total income is
Rs. 3,40,000. The amount eligible for
deduction under section 80GG is: (June,
2017)
a Any individual a Rs. 34,000
b Any individual who is self employed b Rs. 26,000
c Any individual who is self-employed or c Rs. 24,000
who is an employee but not entitled to
HRA or rent free accommodation
d Same as (C) and who pays rent for his d Rs. 85,000
residential accommodation
88. Deduction u/s 80GGA in respect of 89. Deduction u/s 80GGA shall be allowed to
certain donation for scientific the extent:
research or rural development is
allowed to:
a Any assessee a 100% of the donation so made
b Non-corporate business assessee b 1 ¼ times of the donation so made
c An assessee whose gross total income c 1 ½ times of the donation so made
does not include income chargeable
under the head business and
profession
90. In case the donation is made in cash 91. Deduction u/s 80JJA in respect of

the deduction under section 80GGA profits and gains from business of
shall be allowed to the maximum collecting and processing of bio
extent of – degradable work is allowed to the extent
of:
a Rs. 5,000 a 100% of the profits derived from such
business or Rs. 5,00,000 whichever is less
b Rs. 10,000 b 100% of the profits for a period of 10 year
c Rs. 20,000 c 100% of the profits for a period of 5
d Rs. 2,000 consecutive assessment years
92. Deduction u/s 80JJA in respect of 93. For the purpose of deduction under
employment of new worker shall be Section 80JJAA, "Additional employee"
allowed to: does not include an employee whose total
emoluments are more than Rs.
____________________ per month.
a Any assessee whose books of accounts a Rs. 15,000
are required to be audited
b An Indian company which is deriving b Rs. 20,000
profits from manufacture of goods in a
factory
c An Indian company or a person other c Rs. 25,000
than company resident in India d Rs. 30,000
94. For the purpose of deduction under 95. In Section 80G we use 10% of adjusted
Section 80JJAA, "Additional gross total income. This adjusted gross
employee" does not include an total income means:
employee employed for a period of
less than _____________________
days during the previous year:
a 240 a Total income less LTCG income, less all
deductions except deduction of 80G
b 300 b Total income less LTCG income u/s 112, less
LTCG income u/s 112A, less STCG income
u/s 111 A, less all deductions except
deduction of 80G
c 200 c Total income less LTCG income u/s 112, less
LTCG income u/s 112A, less STCG income
u/s 111 A, less casual incomes, less all
deductions except deduction of 80G
d 180 d Total income less LTCG income, less STCG

income of section 111 A, less all deductions

including deduction of 80G
96. Deduction u/s 80GGA shall be 97. Mr. Rotlu pays a rent of Rs. 5,000 per
allowed to the extent: month. His total income is Rs. 2,80,000
(i.e. Gross Total Income as reduced by
deductions under Chapter VI- A except
section 80GG). He is also in receipt of
HRA. He would be eligible for a
deduction under section 80GG of an
amount of
a 100% of the donation so made a Rs. 60,000
b 200% of the donation so made b Rs. 32,000
c 125% of the donation so made c Rs. 70,000
d 150% of the donation so made d Nil
98. Under section 80GGB, deduction is 99. Maximum deduction allowed under section
allowable in respect of contribution 80GG is:
to political parties by
a Any person other than local authority a Rs.5,000
and every artificial juridical person
wholly or partly funded by the
Government
b Local authority and every artificial b Rs.10,000
juridical person wholly or partly funded
by the Government
c An Indian company c Rs.60,000
d Any assessee d Rs.30,000
100. Mr. Kameena whose adjusted gross 101. Mr. Adimanav whose adjusted gross total
total income is Rs. 1,90,000 pays by income is Rs. 1,90,000 pays by account
account payee cheque Rs. 21,000 as payee cheque Rs. 21,000 as donation to
donation to family planning fund. The notified charitable institution. The
amount of deduction available to him amount of deduction available to him is –
is –
a Rs. 21,000 a Rs. 21,000
b Rs. 19,000 b Rs. 19,000
c Rs. 10,500 c Rs. 10,500
d Rs.'9,500 d Rs. 9,500

102. Mr. Manohar made the following

contributions during the previous
year:
(i) PM Drought Relief Fund –
Rs.1,00,000
(ii) Africa (Public Contributions –
India) Fund – Rs.2,00,000
(iii) National Children’s Fund –
Rs.25,000
(iv) Indira Gandhi Memorial Trust –
Rs.75,000
Which of the following is the amount
of deduction available under section
80G?
a Rs.3,12,500
b Rs.4,00,000
c Rs.3,62,500
d Rs.3,50,000
SEC 80M TO SEC 80U
103. Section 80QQB of the Income Tax 104. Section 80RRB provides deduction in
Act, 1961, deals with respect of:
a Interest on debentures of a govt. a Income of a co – operative society
company
b Royalty income of authors b Royalty income of authors
c Royalties from patent c Income of a political party
d Profits from export of computer d None of the above
software
105. Mr. Shahrukh Joshi, (62 years) has 106. Deduction under section 80QQB is
received Rs.60,000 as interest on allowed in respect of royalty income to:
saving account in Post Office.
Maximum deduction under section
80TTA he can claim is:
a Rs.25,000 a An individual who is an author of book
b Rs.50,000 b An individual who is resident in India and
who is an author of a book
c Rs.10,000 c An individual who is resident in India who is

d Not eligible for deduction either an author of a book or a joint author

of the book
107. Deduction u/s 80QQB is allowed to 108. Deduction under section 80QQB is
an author of a book provided such allowed to an author of a book of
book is of: literary or artistic or scientific nature
who is resident in India to the extent
of:
a Literary nature a 100% of royalty income or Rs. 5,00,000
whichever is less
b Scientific nature b 100% of royalty income or Rs. 3,00,000
whichever is less
c Artistic nature c 50% of royalty income or Rs. 5,00,000
whichever is less
d Literary, artistic or scientific d 50% of royalty income or Rs. 3,00,000
nature whichever is less
109. Deduction u/s 80RRB in respect of 110. Deduction u/s 80RRB is allowed to the
royalty on patents shall be allowed extent of:
to:
a An individual a 50% of royalty or Rs. 3,00,000 whichever
is less
b An individual who is resident in b 100% of royalty or Rs. 3,00,000 whichever
India is less
c An individual who is resident in India c 100% of royalty or Rs. 2,00,000 whichever
and is patentee or co – patentee is less
d 100% of royalty or Rs. 5,00,000 whichever
is less
111. Deduction under section 80TTA in 112. Deduction under section 80TTA in
respect of interest on deposit in a respect of interest on deposit in a saving
saving account is allowed to: account is allowed to the maximum
extent of:
a An individual a Rs. 5,000
b Any assessee b Rs. 10,000
c HUF c Rs. 20,000
d Individual or HUF only d Any amount

113. Deduction under section 80TTA is 114. Deduction u/s 80TTA is allowed on
allowed on account of interest from: account of interest on deposit in a saving
account with:
a Fixed deposit a A banking company
b Fixed deposit or saving account b A banking company or a co – operative
deposit bank
c Any deposit c A banking company or co – operative bank
or post office
d Deposit in saving account
115. Mr. Dakoo has authored a book 116. Babu Lal authored a book which is
eligible for deduction u/s 80QQB. covered as per provision of section
The price of book is ₹ 150 and 80QQB and received an amount of
10,000 copies of books are sold. He royalty of ₹ 2,00,000 @ 20% during the
has received royalty @ 25% of the year ended 31-03-2023. He had
price of book. The amount of incurred an expenditure of ₹ 30,000 for
deduction admissible u/ s 80QQB earning the amount of royalty of ₹
will be - 2,00,000. The entire royalty was
received by him from abroad and amount
of ₹ 1,10,000 out of the royalty amount
shall be remitted to India till 30-09-
2023. He can claim deduction out of
such royalty income in assessment year
2023-24 for an amount of- (Dec. 2020)
a Rs. 1,00,000 a Rs. 1,70,000
b Rs. 3,75,000 b Rs. 80,000
c Rs. 2,25,000 c Rs. 1,20,000
d Rs. 3,00,000 d Rs. 2,00,000
117. Amount of deduction in case of a 118. Mr. Arnold Joshi is suffering from low
person with severe disability under vision (certified as severe disability). He
section 80U will be: has an income of Rs. 2,40,000. Mrs.
Arnold Joshi, suffering from leprosy
(certified as 50% disable) is fully
dependent on Mr. Arnlod Joshi. Mr.
Arnold Joshi is eligible for deduction
a Rs.50,000 a Under section 80U
b Rs.75,000 b Under section 80DD
c Rs.1,25,000 c Under section 80U and 80DD
d Rs.1,50,000 d Not eligible for deduction

119. Under which section, a person will 120. Deduction u/s 80U in case of person with
not be eligible for deduction if, he disability is allowed to:
files belated return:
a Under section 80E a An individual who is citizen of India
b Under section 80IA b An individual who is resident in India
c Under section 80GG c Any individual assesse
d None of the above
121. The quantum of deduction allowed 122. Deductions u/s 80TTB is available for
u/s 80U is:
a Rs. 40,000 a Interest on saving accounts
b Rs. 75,000 in case of individual who b Interest on deposits
is resident in India and who is a
person with disability and Rs.
1,25,000 in case such individual is a
person with severe disability
c Rs. 50,000 in case of individual c Interest on deposits up to Rs 50,000
resident in India who is a person
with disability
d Rs. 60,000 d Interest on deposits up to Rs 50,000 for
senior citizen
SEC 80 IA TO 80 IE
123. An Indian company has started its 124. An assessee, being an eligible start-up,
business of processing, preservation whose gross total income includes any
and packing of meat and meat profits and gains derived from business
product. Such company is eligible for which involves innovation, development,
deduction under section deployment or commercialisation of new
products, processes or services driven by
technology or intellectual property shall
be allowed a deduction of an amount
equal to ___________________ of the
profits and gains derived from such
business.
a 80 – ID a @ 10%
b 80 – IB b @ 20%
c 80JJA c @100%

d Not eligible for any profit based d @50%

deduction
125. An assessee, being an eligible start- 126. Deduction u/s 80-IA for any undertaking
up, whose gross total income or enterprises engaged in development of
includes any profits and gains infrastructure facility shall be allowed to
derived from business which involves the extent of:
innovation, development, deployment
or commercialisation of new
products, processes or services
driven by technology or intellectual
property shall be allowed a
deduction of an amount equal to
100% of the profits and gains
derived from such business for
_____________________
consecutive assessment years out of
___________________ years
beginning from the year in which the
eligible start-up is incorporated.
a 3,5 a 100% of the profits for fist 5 years and
30% for subsequent 5 years
b 3,10 b 50% of the profits for 10 years
c 10,15 c 100% of the profits of such industrial
d 10,20 undertaking or enterprises for 10 years
127. Deduction u/s 80– IA in respect of 128. Deduction under section 80 – IA for any
profits and gains from undertaking or enterprises engaged in
infrastructure facility is allowed to development of infrastructure facility
an enterprises which is owned by: shall be allowed @ 100% for 10
consecutive assessment years out of:
a An Indian company a 15 years beginning with the year in which
undertaking or the enterprise develops or
being to operate any infrastructure
facility.
b An Indian company or other person b 20 years beginning with the year in which
who is resident in India undertaking or the enterprises develops or
begins to operate any infrastructure
facility
c An Indian company or a consortium c 20 years beginning with the year in which

of such companies undertaking or the enterprise develops or

begins to operate any infrastructure
facility other than port, airport, inland
port or inland water ways and out of 15
years for such port, airport, inland port or
inland waterways.
d An Indian company or a consortium
of such companies or by an
authority or a board or a
corporation or any other body
established or constituted under
any central or state Act
129. Deduction u/s 80 – IB in case of a

undertaking engaged in commercial
production or refining of mineral oil
in any part of India is allowed to
the extent of:
a 100% of profits for 5 years
b 100% of the profits for 7 years
c 100% of profits for 10 years

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 TDS & TCS
CHAPTER 12 TAX DEDUCTED AT SOURCE AND TAX COLLECTED AT SOURCE
TAX DEDUCTED AT SOURCE
Important Notes:
a TDS means pay tax as you earn.
b The main objective of introducing TDS/TCS is quicker realization of tax and effective
realization tax.
c In few cases an individual or HUF cannot deduct TDS if their books of accounts are not
required to be audited.
d Surcharge on TDS for FY 22-23 shall be added in following cases:
Applicability of surcharge and education cess while computing TDS
1 On salary resident or non-resident Surcharge, H&EC shall be considered.
2 Any other payment to resident No. S.C., H&EC
3 Any other payment to non-resident
• Where amount of such payment be Surcharge (5%) H&EC shall considered.
exceeds Rs. 10 crore
• Where amount of such payment exceeds Surcharge (2%) H&EC shall be
Rs. 1 crore considered
• Where amount of such payment does not H&EC shall be considered.
exceed Rs. 1 crore
No TDS on GST (mentioned separately on Invoice)
Key Note
a Time limit for deposit of TDS Refer Table A

b Time limit for Quarterly Statement Refer Table B
c Time limit for TDS Certificate Refer Table C
TAX DEDUCTION AND COLLECTION AT SOURCE
SEC.192: SALARY
1. Person responsible to deduct tax

All assessee who are employers (resident as well as non-resident)
2. Rate of Deduction of tax
Average of income-tax computed on the basis of the rates in force for the financial year
(Part III of schedule I of the Finance Act) in which the payment is made, on the estimated
income of the assessee under the head salary.
The employers shall, for the purpose of estimating income of the employee or computing tax
deductible, obtain from the assessee the evidence or proof or particulars of prescribed

claims (including claim for set-off loss) under the provision of the Act in such from and
manner as may be prescribed
3. Exemption limit
Basic exemption available to the assessee.
4. Time for deduction of tax
At the time of payment i.e. as and when salary is paid
5. Certificate of TDS and time limit
From 16, along with form 12BA showing details of perquisites. For due date refer Table C
6. Deduction of tax at lower rate or non-deduction of tax
Application in form No.13 shall be made to the AO. Certificate in the prescribed form shall
be issued by the AO to the assessee.
7. Salary received from another employer
Where an assessee is employed simultaneously under more than one employer, or where he
has held successively employment under more than one employer, he may furnish to one of
the said employers as he may, choose, details of the salaries due or received by him from
the other employers, the TDS already deducted there from and such other particulars, in
form 12B and thereupon such employer shall take into account the details so furnished for
the purpose of making the deduction.
8. Inclusion of income / loss from other heads
The employer shall include the income from any other head on a declaration filed by the
employee, but shall not considered loss under any other head except “ House Property”
However, such inclusion of other income shall not in any case have the effect of reducing
the tax deductible on salary income.
9. Relief u/s 89(1)
Employer, being Government on a company, co-operative society, local authority, university,
institution, association or body, shall allowed Relief u/s.89(1) on arrears of salary of gratuity
or VRS payments on filling a declaration by the employee in Form 10E.
10. Payment of tax by employer or non – monetary perquisites Sec.192(1A)
The employer may, at his option, pay income tax on the whole or part of perquisite provided
by way of non-monetary payments. Such tax may be determined at the average of income
tax computed on the income chargeable under the head ‘Salaries’, including the non-monetary
payments. The tax so payable shall be constructed as if it were a tax deductible at source.
11. Tax deduction at source under section 192
[Amendments Finance Act 20]
Sub section 1C has been inserted in section 192. It provides that if the employer is a
start- up (qualified for deduction under section 80-IAC) and it allots any specified
security/ sweat equity shares/ ESOP to its employees, TDS on the perquisite (with
effect from April 1, 2020) may be deducted under section 192 within 14 days-
a After the expiry of 48 month from the end of the relevant assessment year; or

From the date of the sale of such specified security or sweat equity share by the
b
assesse; or
From the date of the assesse ceasing to be the employee of the start up Whichever
c
is earlier
Tax shall be calculated based of rates in force for the previous year in which said
security or share is allotted or transferred to the employee.
To put in differently tax burden on the employee getting ESOP has been reduced by
deferring the tax payment by way of TDS by 5 years. Or till they leave the company
and when they sell their shares, whichever is earliest.
FURNISHING OF EVIDENCE OF CLAIMS BY EMPLOYEE FOR DEDUCTION OF TAX UNDER SECTION

192 [NOTIFICATION NO. 30/2016 DATED 29/04/2016]
New rule 26C has been inserted in the Income tax rules, 1962, with effect from 1st June, 2016,
to require furnishing of evidence of the following claims by an employee to the person
responsible for making payment under section 192(1) in Form No. 12BB for the purpose of
estimating his income or computing the tax deduction of tax at source:
S N Nature of Claim Evidence of particulars
1 House Rent Allowance Name, address and PAN of the landlord(s)
where the aggregate rent paid during the
previous year exceed 1 lakh.
2 Leave Travel Concessional or Assistance Evidence of expenditure
3 Deduction of interest under the head Name, address and PAN of the lender
“Income from House Property”
4 Deduction under Chapter VI-A Evidence of investment of expenditure.
SECTION 192A: PAYMENT OF ACCUMULATED BALANCE FROM PROVIDENT FUND
1. Person responsible to deducted tax

The trustee of the payment of employees provident fund scheme, 1952
2. Category of payee
Employee
3. Circumstance
Tax is deductible from “taxable premature withdrawal”. In other words, tax is deductible
from accumulated lump-sum payment (at the time retirement or at the time of leaving job)
in case the employee has not rendered continues service of 5 years. Out of the lump-sum
payment, only amount includible in the total income of the employee is subject to tax
deduction at source
4. Rate of deduction of tax
10%. If PAN is not provided then MMR (42.744%) [30% + SC @ 37% + Cess @ 4%]
5. No TDS

The payment is < Rs.50,000/-

At the time of payment.
7. Declaration in form no. 15G / 15H
Tax is not to be deducted if recipient furnishes declaration in form no. 15G (in the case of
senior citizen: form no. 15H), to the payer of dividend to the effect that the tax on his total
income will be nil
SEC 193: INTEREST ON SECURITIES
1. Person responsible for tax deduction

Central or state government, Local Authority, Company or Corporation established under the
central or State Act.
2. Category of payee and rate of deduction of tax
Resident Non-corporate Assessee and Domestic company: @ 10%
At the time of credit or payment whichever is earlier. It includes credit to “Interest payable
account” or “suspense account”.
4. Time for deposit of TDS
Refer to Table A
5. Quarterly statements
Form No. 26Q. For time refer to Table B.
6. Certificate of TDS and time of issue
Form 16A- For time refer to table C.
7. Interest on which no tax is deducted at source
a Any interest payable on National development Bonds; or
Any interest payable on notified debentures, issued by any institution or authority,
b or any public sector company, or any co-operative society (including a co-operative
land mortgage bank or a co-operative land development bank).
Any interest payable on any security of the Central Government [excluding interest
c > Rs. 10000/- payable on 8% savings (taxable) bonds, 2003]; or 7.75% saving
(taxable) bonds 2018
Any interest payable to an individual or HUF, who is resident in India, on listed
debentures issued by a company in which the public are substantial interested, if-
d • The interest is paid by the company by an account payee cheque; and
• The aggregate amount of interest paid or likely to be paid during the FY does
not exceed Rs.5,000/-
Any interest payable to the LIC, on any securities owned by it or in which it has
e
full beneficial interest; or

Any interest payable to the GIC, or to any of its 4 subsidiary companies, on any
f securities owned by the corporation or such company or in which the corporation or
such company has full beneficial interest; or
Any interest payable to any other insure on any securities owned by it or in which
g
it has full beneficial interest.
Any interest payable on any security issued by a company. Where such security is
in dematerialized from and is listed on a recognized stock exchange in India in
h
accordance with the Securities Contracts (Regulation) Act, 1956 and the rules made
there under.
8. Quarterly Statements
Form No.26Q. For time refer to table B
Form 16A – For time refer to Table C.
DEDUCTION OF TAX AT SOURCE FROM DIVIDENDS SEC.194
With effect from the assessment year 2021-22, dividend income is taxable in the hands of
shareholders. This modification has been made by amending sections 10(34) and 115-O.
consequential amendments have been made to be the provisions of section 194. The modified
version 194 (as applicable for April 1, 2020) is given below.
1 Person Responsible for TDS under section 194:
the principal officer of an Indian company which has made the prescribed arrangement for
the Declaration and payment of dividend (including dividends on preference shares) within
India to a shareholder who resident India, is required before making any payment by any
mode to deduct back at source from the amount of dividend at the prescribed rate 10%
2 Cases in which tax is not deductible or deductible at lower rates
In the case of dividend payable to and individual tax is not liable to be the deducted if the
following conditions are satisfied
a. The dividends are paid such company by any mode; and
b. The amount of such dividend are as the case may be, the aggregate amount of such
dividends distributed or paid, during are there are likely to be distributed or paid,
during the financials year by such company to the shareholders does not exceed Rs.
5000.
3 No TDS if dividend is paid or credited to an insurance company
TDS provisions of section 194 are not applicable if recipient of dividend is LIC, General
Insurance Corporation or any other insurer in respect of any shares owned by it or in which
it has full beneficial interest

4 Declaration in form no. 15G / 15H

Tax is not to be deducted if recipient furnishes declaration in form no. 15G (in the case of
senior citizen: form no. 15H), to the payer of dividend to the effect that the tax on his total
income will be nil
SEC 194A: INTEREST OTHER THAN “INTEREST ON SECURITIES
1. Person responsible for tax deduction

a All person other individual and HUF, and
Individual and HUF who are require to get their accounts audited u/s 44AB (a) or
b
(b), in the preceding FY.
Any resident in India
Non-corporate Assessee or domestic companies @10%
4. No TDS
a. Where the aggregate of interest credited or paid or likely to be credited or paid
during the FY does not exceed a specified amount given below
Who is payer Interest is payable on From April 1, 2019 Rs.
Banking company Time deposit 40,000 50,000
A co-operative society Time deposit 40,000 50,000
engaged in caring on the
banking business
Notified scheme (i.e. Senior 40,000 50,000
Post office
citizen Saving Scheme 2004)
Any other person - 5,000
Note: 50,000 in case senior citizen.
b. Interest credited or paid to-
• Any banking company, or any co-operative bank (including a co-operative land
mortgage bank), or
• Any financial corporation established by or under a Central, State or provincial Act,
or
• The life insurance corporation of India, or
• The Unit trust of India, or
• Any company or co-operative society carrying on the business of insurance, or
• Notified institution association or body or class of institutions, association or bodies;
c. Interest credited or paid by a firm to a partner of the firm;

d. to such income credited or paid by a co-operative society (other than a co-operative

bank) to a member thereof or to such income credited or paid by a co-operative society
to any other co-operative society.
Explanation. - for the purpose of this clause, “co-operative bank” shall have the same
meaning as assigned to it in part V of the banking Regulation Act, 1949 (10 to 1949)
In the case of co-operative society referred to in (d) or (g) (supra) tax is liable to
be deducted (with effect from April 1, 2020) if;
Total sales, turnover or gross receipts of the co-operative society exceed Rs 50
crore during the financial year in which the interest is to be credited or paid.
e. where interest is credited or paid in respect of deposits under the schemes of Post
Office (Time Deposits), post office (Recurring deposits), Post Office Monthly Income
Account, Kisan Vikas Patra, National Saving Certificate VIII Issue and Indira Vikas
Patra.
f. where interest is credited or paid in respect of deposits (other than time deposits made
on or after July 1, 1995) with a banking company or interest to non-members on deposits
with a Co-operative bank.
g. where interest is credited or paid in respect of deposits (by non-members) with a
primary agricultural credit society or primary credit society or co-operative land
mortgage bank or co-operative land development bank.
h. interest credited or paid by the central government to such income paid by way of
interest on the compensation amount awarded by the Motor Accident Claims Tribunal
where the amount of such income or, as the case may be, the aggregate of the amounts
of such income paid during the financial year < = Rs.50,000.
i. Interest paid or payable by an infrastructure capital company or infrastructure capital
fund or a public sector company or scheduled bank in relation to a Zero coupon bond
issued on or after 1st June, 2005.
j. Interest received by business trust from SPV which is exempt u/s 10(23FC).
At the time of credit or payment whichever is earlier, it includes credit to a suspense
account.
SEC 194B: WINNING FROM LOTTERY OR CROSSWORD PUZZLE

Any person paying the sum
Any Assessee


If recipient is a resident, tax is deductible during the financial year 2020-21of the rate of
30 per cent (no surcharge, health and education cess) If, However recipients is non-resident,
tax is deductible at the rate of 30 per cent {+SC [if amount subject to TDS exceeds Rs. 50
lakh (if recipients is non-resident individual HUF/ AOP/ BOI/ artificial juridical person) or
Rs 1 crore (if recipients is non-resident firm/ co-operative society)] +HEC}
4. Winning in kind
Person responsible for paying shall, before releasing the winnings, ensure that tax has been
paid in respect of the winnings.
5. No TDS
The payment =< Rs. 10,000/-
At the time of payment Where prize money is in kind, before releasing the prize, the payer
should ensure that tax has been paid in respect of the winnings.
SEC194BB: WINNING FROM HORSE RACE

Any person being licensed bookmarker
All Assessee
If recipient is a resident, tax is deductible during the financial year 2020-21of the rate of
30 per cent (no surcharge, health and education cess) If, However recipients is non-resident,
tax is deductible at the rate of 30 per cent {+SC [if amount subject to TDS exceeds Rs. 50
lakh (if recipients is non-resident individual HUF/ AOP/ BOI/ artificial juridical person) or
Rs 1 crore (if recipients is non-resident firm/ co-operative society)] +HEC}
4. No TDS
The payment =< Rs. 10,000/-
At the time of payment.
SEC 194C: PAYMENT TO CONTRACTORS AND SUB-CONTRACTORS

a Central government or any state government; or
b Any local authority; or

c Any corporation established by or under a central, state or provincial Act; or

d Any company; or
e Any co-operative society; or
f Any authority, constituted in India by or under any law, engaged either for the purpose
of dealing with and satisfying the need for housing accommodation or for the purpose of
planning, development and improvement of cities, towns and villages, or for India, or
g Any society registered under the societies registration Act, 1860, or under any law
corresponding to that Act in force in any part of India; or
h Any trust; or
i Any university established or incorporated by or under a central, state or provincial Act,
and an institution declared to be a university under section 3 of the university grants
commission Act, 1956 (3 of 1956); or
j Any government of a foreign state or a foreign enterprises or any association or body
established outside India; or
k Any firm; or
l Any person, being an individual or a Hindu undivided family or an association of persons or
a body of individuals, if
Total sales, turnover or gross receipts from the business or profession carried by him
exceed Rs 1 crore in the case of business or 50 lakh in the case of profession during the
financial year immediately preceding the financial year in which the income is to credited
or paid (applicable for April 1, 2020)
2. Nature of payment
Payment of any sum to any resident contractor for carrying out any work including supply
of labour for carrying out any work in pursuance of any contract, including-
a Advertising;
b Broadcasting and telecasting including production of programs for such broadcasting or
telecasting;
c Carriage of goods and passengers by any mode of transport other than by railways;
d Catering;
e Manufacturing of supplying a product according to the requirement or specification of a
customer by using material purchased for such customer, but does not include
manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer. Or its
associates.
Any person
The following TDS rates are applicable under section 194:

Rate
If the recipient is an individual/ HUF 1%
If the recipient is any other person 2%
Where any sum is paid or credited for carrying out any work mentioned is sub-clause
(e) above, tax shall be deducted at source
On the invoice value excluding the value of material, if such value is mentioned
i
separately in the invoice; or
On the whole of the invoice value, if the value of material is not mentioned separately
ii
in the invoice.
5. No TDS
a Contracts, the consideration for which does not exceed Rs. 30,000/-,or
b Aggregate of the sums credited or paid or likely to be credited or paid during the
FY does not exceed Rs.1,00,000/-, or
c Payment to a contractor during the course of business of plying hiring or leasing
goods carriages, not owning more than 10 goods carriages anytime during the PY and
who furnishes his PAN to the payer.
d Contract of personal nature
At the time of credit or payment whichever is earlier (including Cr to suspense a/c)
SEC 194D: INSURANCE COMMISSION
1 Person responsible to deduct tax Insurance Companies

2 Category of payee Resident Assessee
3 Rate of deduction of tax Rate
When recipient is a resident other than a 5%
domestic company
When recipient is a domestic company 10%
4 Exemption limit Payment in aggregate =< Rs. 15,000/- during FY
5 Time for deduction of tax At the time of the credit or payment whichever is
earlier.
SEC 194DA: PAYMENT FROM LIFE INSURANCE POLICY
1 Person responsible to deducted tax Insurance company Not applicable (when exemption
U/S 10(10D))
2 Category of payee Resident Assessee
3 Rate of deduction of tax 5 per cent of the amount of income comprised in
payment

4 Exemption Amount which is exempt u/s 10(10D), or Aggregate

amounts of payments in a FY < 1,00,000
SEC. 194E: PAYMENTS TO NON - RESIDENT SPORTSMEN OR SPORT ASSOCIATIONS
1. Applicability
This section provides for deduction of tax at source in respect of any income referred to in
section 115BBA payable to a non-resident sportsman (including an athlete] or an entertainer
who is not a citizen of India or a non-resident sports association or institution.
2. Rate of TDS
Deduction of tax at source @ 20.8% should be made by the person responsible for making
the payment. Health and education cess @4% on TDS rate of 20% would be leviable, since
payment is made to a non-resident.
3. Time of deduction of tax
Such tax deduction should be at the time of credit of such income to the account of the
payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier.
4. Income referred to in section 115BBA
i Income received or receivable by a non-resident sportsman [including an athlete] by
way of –
a Participation in any game or sports in India [However, games like crossword
puzzles, horse races etc. taxable under section115BB are not included herein];
or
b Advertisement, or
c Contribution of articles relating to any game or sports in India in newspapers,
magazines or journals.
ii Guarantee amount paid or payable to a non-resident sports association or institution
in relation to any game or sport played in India. However, games like crossword
puzzles, horse races etc. taxable under section 115BB are not included herein.
iii Income received or receivable by a non-resident entertainer [who is not a citizen
of India], from his performance in India.
1. Illustration
Calculate the amount of tax to be deducted at source [TDS] on payment made to Ricky Ponting, on
Australian cricketer non-resident in India, by a newspaper for contribution of articles Rs. 25,000.
Solution
Under section 194B, the person responsible for payment of any amount to a non-resident sportsman
for contribution of articles relating to any game or sport in India in a newspaper shall deduct to

@ 20%. Further, since Ricky Ponting is a non-resident, health and education cess @4% on TDS
would also be added.
Therefore, tax to be deducted = Rs. 25,000 x 20.8% = Rs. 5,200.
SECTION 194EE: PAYMENTS IN RESPECT OF DEPOSITS UNDER NATIONAL SAVINGS SCHEME
1 Rate of TDS
The person responsible paying to any person any amount from National Savings Scheme
Account shall deduct income-tax thereon at the rate of 10%
2 No TDS
No such deduction shall be made where the amount of payment or the aggregate amount of
payments in a financial year is less than Rs. 2,500
3 Non-applicability of TDS under section 194EE
The provisions of this section shall not apply to the payments made to the heirs
SEC 194F: REPURCHASE OF UNITS BY MUTUAL FUND OR UNIT TRUST OF INDIA
A person responsible for paying to any person any amount on account of repurchase of units
covered section 80CCB(2) shall deduct tax at source at the rate of 20% at the time of payment
of such amount.
SEC 194G: COMMISSION, ETC., ON SALE OF LOTTERY TICKETS
1. Applicability and Rate of TDS

Under section 194G, the person responsible for paying to any person any income by way of
commission, remuneration or prize [by whatever name called] on lottery tickets in an amount
exceeding Rs. 15,000 shall deduct income-tax thereon at the rate of 5%.
2. Time of deduction of tax
Such deduction should be made at the time of credit of such income to the account of the
payee or at the time of payment of such income by cash, cheque, draft or any other mode,
whichever is earlier.
Where any such income is credited to any account, whether called “Suspense Account” or
by any other name, in the books of account of the person liable to pay such income, such
crediting shall be deemed to be credit of such income to the account of the payee and the
provisions of this section shall apply accordingly.

SEC 194H: COMMISSION OR BROKERAGE

a All person other than individual and HUF, and
b Individual and HUF who are required to get their accounts audited u/s 44AB (a) or
(b), in the preceding FY.
Any person
Commission or brokerage includes any payment received or receivable, directly or indirectly,
by a person acting on behalf of another person for services rendered (not being professional
services) or for any services in the course of buying or selling of goods or in relation to any
transaction relating to any asset, valuable article or thing, not being securities.
Exemption: Commission or Brokerage payable by BSNL or MTNL to their public call
office franchisees.
5%
5. No TDS
Aggregate payment =<Rs. 15,000/- during the FY
At the time of payment or credit whichever is earlier, including credit to a suspense account.
SEC 194 - I: RENT

a All persons other than individual and HUF, and
b Individual and HUF who are required to get their accounts audited u/s 44AB in the
preceding FY.
Any person being resident in India
Rent means any payment, by whatever name called, under any lease, sublease, tenancy or any
other agreement or arrangement for the use of (either separately or together) any, -
a Land; or
b Building (including factory building); or
c Land appurtenant to a building (including factory building); or
d Machinery; or

e Plant; or
f Equipment; or
g Furniture; or
h Fittings,
Whatever or not any or all of the above are owned by the payee;
Rate
For the use of any machinery or plant or equipment 2%
For the use of any land or building or furniture or fittings for all persons 10%
5. No TDS
a Aggregate amount of rent paid or credited = < Rs. 2,40,000/- during the FY, or
the payee is the government or local authority.
b Rent is credited or paid to a real estate investment trust, in respect of any real
estate asset, referred to u/s 10(23FCA), owned directly by such trust
At the time of payment or credit whichever is earlier, including credit to suspense account.
SEC 194IA: PAYMENT ON TRANSFER OF CERTAIN IMMOVABLE PROPERTY OTHER THAN AGRICULTURE LAND

Any person, being a transferee and responsible to pay the consideration
Any person (transferor) being resident in India
Consideration of transfer of immovable property being land (other than rural agriculture
land in India) or building or part of a building
Meaning of consideration for transfer of immovable property:
Consideration for transfer of immovable property include all charges in the nature of
club membership fee, car parking fee, electricity or water facility fee, maintenance
fee, advance fee or any other charges of similar nature, which are incidental to transfer
of the immovable property.
1 Tax rate Tax will be deducted under the modified version o section 194-IA at
the rate of 1 per cent of consideration or stamp duty value, whichever
is higher.
2 Threshold Tax will not be deducted where consideration is less than Rs. 50 lakh
limit as well as stamp duty value is less than Rs. 50 lakh.
5. No TDS
Consideration < Rs. 50 Lakhs


At the time of credit of such sum to the account of the transferor or at the time of payment
of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is
earlier

Compulsory electronic of payment within 7 days of the following month
8. Challan cum statement
Form No. 26QB along with deposit of TDS
Form 16B within 15 days from the due date for the furnishing the challan- cum statement in
the above mentioned Form No. 26QB.
10. TAN and PAN Numbers
Deductor is not required to have TAN number. However, he must obtain PAN of the
deductee. Tax will have to be deducted @20% instead of 1% section 206AA will apply to in
such case.
SEC 194IB: PAYMENT OF RENT BY CERTAIN INDIVIDUALS OR HUF

Individual or HUF other than those covered by 194-I.
[Even Salaried person paying rent > Rs. 50,000 P. M and claiming HRA exemption are required
to deduct and pay TDS of Landlord]
2. Category of Payee
Any person being resident in India
Rent > 50,000 pm or part thereof
“Rent” means any payment, by whatever name called, under any lease, sub – lease, tenancy or
any other agreement or arrangement for the use of any land or building or both.
5% of rent
5. No TDS
Rent < = Rs. 50,000 pm or part
a At the time of credit of rent, for the last month of the previous year or the last
month of tenancy, if the property is vacated during the year, as the case may be,
to the account of the payee or
b At the time of payment thereof in cash or by issue of a cheque or draft or by any
other mode,

Whichever is earlier.
Compulsory electronic payment within 30 days from the end of the month in which the
deduction is made
8. Challan cum statement
Form No. 26QC along with deposit of TDS
Form 16C within 15 days from the due date for furnishing the challan – cum statement in the
above mentioned Form No. 26QC.
10. TAN and PAN Numbers?
Deductor is not required to have TAN number. However, he must obtain PAN of the
Deductee. Otherwise tax will have to be deducted @ 20% instead of 5%. Section 206AA will
apply in such case. However, such deduction shall not exceed the amount of rent payable for
the last month of the previous year or the last month of the tenancy, as the case may be
SECTION 194 – IC: PAYMENT UNDER SPECIFIED AGREEMENT
1. Applicability and Rate

This section casts responsibility on any person responsible for paying to a resident any sum
by way of consideration, not being consideration in kind, under a specified agreement under
section 45(5A), to deduct income-tax at the rate of 10%.
2. Time of deduction
This deduction is to be made at the time of credit of such sum to the account of the payee
or at the time of payment thereof in cash or by issue of cheque or draft or by any other
mode, whichever is earlier.
3. Non-applicability of section 194-IA
Since tax deduction at source for specified agreement u/s 45(5A) is covered u/s 194-IC,
the provisions of section 194-IA do not het attracted in the hands of the transferee in such
cases.
4. Meaning of specified agreement
Specified agreement u/s 45(5A)
• It means a registered agreement in which a person owning land or building or both,
agrees to allow another person to develop a real estate project on such land or
building or both.
• The consideration, in this case, is a share, being land or building or both in such
project; part of the consideration may also be in cash.
5. Threshold Limit
Nil

SEC 194J: FEES FOR PROFESSIONAL OR TECHNICAL SERVICES

a All person than individual and HUF, and
b Individual and HUF who are required to get their accounts audited u/s 44AB (a)
or (b), in the preceding FY.
Any person
3. Meaning of professional services
“Professional Services” means services rendered by a person in the course of carrying on
legal, medical, engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or advertising or such other profession as is
notified by the CBDT for the purposes of section 44AA or of this section.
Other professions notified for the purposes of section 44AA are as follows:
a Profession of “Authorised Representives”.
b Profession of “Film Artist”.
c Profession of “Company Secretary”.
The CBDT has notified the services rendered by following persons in relation to the
sports activities as professional Services for the purposes of the section 194J:
a Sports person,
b Umpires and Trainers,
c Coaches and Trainers
d Team Physicians and Physiotherapists,
e Event managers,
f Commentators,
g Anchors
h Sports Columnists.
a “Professional services” means services rendered by a person in the course of
carrying on legal, medical, engineering or architectural profession of accountancy
or technical consultancy or interior decoration on advertising or such other
profession as is notified by the board for the purpose of section 44AA or of his
section;
Fees for technical services” shall have the same meaning as in explanation 2 to
b
clause (vii) of sub-section (1) of section 9;
any remuneration or fees or commission by whatever name called, other than those
ba
on which tax is deductible u/s 192, to a director of a company, or
c Royalty, or

d Any sum referred to in clause (va) of section 28.

5. Rate of deduction
Rate
If payee is engaged only in the business of operation of call centre (applicable 2%
with effect from June 1, 2017)
In case of fees for technical services (not being professional services) and 2%
royalty where such royalty is in the nature of consideration for sale distribution
or exhibition of cinematographic films (applicable with effect from April 1, 2020)
Any other payment/ credit covered by section 194J 10%
6. No TDS
Where the amount of such sum or, as the case may be, the aggregate of the amount of such
sum credited or paid or likely to be credited or paid during the financial year by the
aforesaid person to the account of, or to, the payee, does not exceed Rs. 30,000 in case of
fees for professional services or Rs. 30,000 in case of fees for technical service, or Rs.
30,000 in the case of royalty or Rs. 30,000 case of any sum referred to in section 28(va).
No threshold limit is provided in the case of directors fees. Consequently, with effect from
July 1, 2012 tax will be deducted from director’s fees, even if the aggregate payment during
the year is less than Rs. 30,000
At the time of payment or credit whichever is earlier, including credit to suspense account.
SECTION 194K: TAX DEDUCTION SOURCE IN RESPECT OF INCOME FROM UNITS
1. Who is responsible for deduct tax at source

Any person responsible for making payment to a resident of any income in respect of units
of mutual fund (specified under section 10 (23D) or of UTI is liable to deduct tax at source.
2. Time of tax deduction
Tax shall be deducted at the time of credit of such income to the account of the payee or
at the time of payment thereof in cash or by issue of a check or draft or by any other
mode whichever is earlier. Where any such income is credited to any account, whether
called “suspense account” or by any other name, in the books of account of the person liable
to pay such income, such crediting shall be deemed to be credit of such income to the
account of the payee.
3. Rate of tax deduction
Tax shall be deducted at the rate of 10%.
4. Threshold limit
No tax is deductible where the amount of such income or, as the case may be, the aggregate
of the amount of such income credited / paid or likely to be credited / paid during the

financial year by the person responsible for making the payment to the account of, or to,
the payee does not exceed Rs. 5000
5. Capital gain
Tax is not deductible if payment/ credit pertains to income of the nature of capital gains.
6. When tax not is deductible
If such income is credited or paid before April 1, 2020, tax is not deductible under section
194K
SEC 194LA: PAYMENT OF COMPENSATION ON ACQUISITION OF CERTAIN IMMOVABLE PROPERTY

Any person responsible for payment of compensation.
Any resident person
Compensation or the enhanced compensation or the consideration or the enhanced
consideration on account of compulsory acquisition, under any law for the time being in force,
of any immovable property (other than agriculture land).
4. Rate of deduction
10%
5. No TDS
Where the aggregate amount of such payments during the FY =< Rs. 2,50,000/-
6. Time for deduction
At the time of payment in cash or by cheque or draft or by any other mode.
SECTION 194M]: PAYMENT MADE BY AN INDIVIDUAL OR A HUF FOR CONTRACT WORK OR BY WAY
OF FEES FOR PROFESSIONAL SERVICES OR COMMISSION OR BROKERAGE
1. Applicability and rate of TDS

Section 194M, Inserted with effect from 1.9.2019, provides for deduction of tax at source
@5%by an individual or a HUF responsible for paying any sum during the financial year to
any resident –
i For carrying out any work [including supply of labour for carrying out any work] in
pursuance of a contract, or
By way of commission [not being insurance commission referred to in section 194D]
ii
or brokerage; or
iii By way of fees for professional services.

It may be noted that only individuals and HUFs [other than those who are required to deduct
income-tax as per the provisions of section 194C or 194H or 194J] are required to deduct
tax in respect of the above sums payable during the financial year to a resident.
The tax should be deducted at the time of credit of such sum or at the time of payment of
such sum, whichever is earlier.
3. Threshold limit
No tax is required to be deducted where such sum or, as the case may be, aggregate amount
of such sums credited or paid to a resident during the financial year does not exceed Rs.
50,00,000.
4. Non-applicability of TDS under section 194M
An individual or a Hindu undivided family is not liable to deduct tax at source under section
194M if –
a They are required to deduct tax at source under section 194C for carrying out any
work [including supply of labour for carrying out any work] in pursuance of a contract
i.e., on individual or a HUF who is subject to tax audit under section 44AB[a]/[b]
in the immediately preceding financial year and such amount is not exclusively
credited or paid for personal purposes of such individual or HUF.
b They are required to deduct tax at source under section 194H on commission [not
being insurance commission referred to in section 194D] or brokerage i.e., an
individual or a HUF whose total sales, gross receipts or turnover from the business
or profession carried on by him exceed the monetary limits of Rs. 1 crore and Rs.
50 lakhs, respectively, specified under section 44AB during the immediately
preceding financial year.
5. No requirement to obtain TAN
The provisions of section 203A containing the requirement of obtaining Tax deduction
account number [TAN] shall not apply to the person required to deduct tax in accordance
with the provisions of section 194M.

SECTION 194N: TDS ON CASH WITHDRAWAL
1. Applicability and rate of TDS

Section 194N, inserted with effect from 1.9.2019, provides that every person, being:
• A banking company to which the Banking Regulation Act, 1949 applies [including
any bank or banking institution referred under section 51 of that Act]
• A co-operative society engaged in carrying on the business of banking or
• A post office.
Who is responsible for paying, in cash, any sum or aggregate of sums exceeding Rs. 1 crore
during the previous year to any person from one or more accounts maintained by such
recipient- person with it, shall deduct tax at source.
This deduction is to be made at the time of payment of such sum.
3. Non-applicability of TDS under section 194N
Liability to deduct tax at source under section 194N shall not be applicable to any payment
made to –
• The Government
Any banking company or co-operative society engaged in carrying on the business
•
of banking or a post-office.
Any business correspondent of a banking company or co-operative society engaged
•
in carrying on the business of banking, in accordance with the RBI guidelines.
Any white label ATM operator of a banking company or co-operative society
• engaged in carrying on the business of banking, in accordance with the authorisation
issued by the RBI under the Payment and Settlement Systems Act,2007.
Such other person or class of persons notified by the Central Government in
•
consultation with the RBI.
Time of payment Threshold limit for payment in cash (to the calculated for TDS rate
a financial year)
During September Exceeding Rs. 1 crore 2%
1, 2019 and June
30, 2020
on or after 1st July Case 1: it covers a defaulter who has not submitted return in
2020 past [see note] in this case threshold limit is as follows.
a. Exceeding Rs. 20 lakh but not exceeding 1 Crore. 2%
b. Exceeding 1 crore. 5%
Case 2: it covers any case other than case 1. Threshold limit 2%
is exceeding 1 crore.

SECTION 194 – O: TDS ON PAYMENT BY E COMMERCE OPERATOR TO E-COMMERCE

PARTICIPANTS
1. Who is responsible for tax deduction at source

Where sale of goods / services of an E-Commerce participant is facilitated by an E-
Commerce operator through its digital or electronic facility or platform (by whatever name
called), such e - commerce operator is required to deduct tax at source under section 194 –
O. For this purpose, “e - commerce operator” means a person who owns, operates for
managers digital or electronic facility or platform for Electronic Commerce. “E-Commerce
participants” means a person resident in India selling goods / services (including digital
products) through digital electronic facility or platform for Electronic Commerce.
“Services”, for this purpose, include fees for Technical Services / professional services. for
the purpose of this section, e - commerce operator shall be deemed to be the person
responsible for paying to e commerce participants
2. Time of deduction at source
Tax is deductible by E - commerce operator at the time of credit of amount of sale of goods
/ services to the account of an E-Commerce participants or at the time of payment thereof
to such e-Commerce participants buy any mode, whichever is earlier
3. Rate of TDS
Tax in deductible at the rate of 1% of the gross amount of such sale of goods / services.
for this purpose, any payment made by a purchaser of goods / services directly to an E-
Commerce participant for the sale of goods / services, facilitated by an E-Commerce
operator, shall be deemed to be the amount credited / paid by the E-Commerce operator to
The E-Commerce participant and shall be included in the gross amount of such sale or
services for the purpose of tax deduction.
If the recipient does not have PAN, tax is deductible (by virtue of section 206AA) at the
rate of 5%
4. When tax is not deductible
Tax is not deductible under section 194 - O if the following conditions are satisfied:
a E-Commerce participant is an individual or HUF
b The gross amount of such sale of goods / services through e - commerce operator
during the previous year does not exceed Rs. 5 lakh
c Such e-Commerce participant has furnished his PAN or Aadhaar number to the E-
Commerce operator
5. TDS under any other section
Not possible - If tax is deductible under section 194 – O (or not deductible because of
threshold limit of Rs. 5 lakh given above), tax cannot be deducted under any other provisions
of the act. However, this rule is not applicable in the case of amount received / receivable
by an E-Commerce operator for hosting advertisements or providing any other services
which are not in connection with the sale of goods services given above

6. Lower TDS Certificate

Lower / Nil TDS Certificate can be obtained by E-Commerce participants by submitting form
no. 13 within the parameters of section 197
7. Removing difficulty
If any difficulty arises in giving effect to the provisions of this section, the board may, with
the approval of the Central Government, issue guidelines for the purpose of removing the
difficulty. These guidelines shall be laid before each House of Parliament and shall be binding
on the income tax authorities and on the E-Commerce operator
[SEC. 194P] DEDUCTION OF TAX IN CASE OF SPECIFIED SENIOR CITIZEN
1. Specified senior citizen -

Under section 194P, tax is deductible only in the case of "specified senior citizen”. For this
purpose, specified senior citizen is an individual who satisfies the following conditions
1 He is a resident individual.
2 He is 75 years or more at any time during the previous year (for the previous year
2022-23, a resident individual shall be treated as "specified senior citizen" only if
he was born before April 2, 1947).
3 He has income from pension which is credited in his pension account with "specified
bank".
4 He has no other income except interest received/receivable from any account
maintained by such individual in the same "specified bank” in which he gets pension
income.
5 He shall be required to furnish a declaration to the “specified bank". The
declaration shall contain such particulars, in such form and verified in such manner,
as may be prescribed.
2. Specified bank
"Specified bank" means a banking company as notified by the Central Government.
3. Tax deduction by specified bank
Once the declaration is furnished by the specified senior citizen, the specified bank would
be required to compute the income of such senior citizen. For computing total income,
deduction under sections 80C to 80U should be given along with rebate under section 87A.
The specified bank shall deduct income-tax on such total income on the basis of rates in
force.
4. At what time tax is deductible by specified bank
It is not given in section 194P.

5. Return under section 139(1) not required

The provisions pertaining to submission of return of income under section 139, shall not
apply to the specified senior citizen for the assessment year relevant to the previous year
in which tax is deducted under section 194P.
[SEC. 194Q] DEDUCTION OF TAX AT SOURCE ON PAYMENT FOR PURCHASE OF GOODS
The provisions of section 194Q (inserted with effect from July 1, 2021) are given below
1. Who is buyer
Under section 194Q, tax is deductible by buyer of goods. "Buyer” for this purpose, means
a person whose total sales, gross receipts or turnover from the business carried on by him
exceed Rs. 10 crore during the financial year immediately preceding the financial year in
which the purchase of goods is carried out. However, "buyer" does not include a person
notified by the Central Government (subject to such conditions as may be specified
therein).
2. Who is responsible for tax deduction
Any person (being a buyer) who is responsible for paying any sum to any resident seller for
purchase of any goods of the value (or aggregate of such value) exceeding Rs. 50 lakh in any
previous year, is required to deduct tax at source under section 194Q with effect from
July 1, 2021.
3. At what time tax is deductible
Tax should be deducted by buyer, at the time of credit of such sum to the account of the
seller or at the time of payment thereof by any mode, whichever is earlier. Where, however,
the above sum is credited to any account (whether called "suspense account” or by any other
name) in the books of account of the person liable to pay such income, such credit of income
shall be deemed to be the credit of such income to the account of the payee and the
provisions of this section shall apply accordingly.
4. Rate of TDS
Tax is deductible by buyer at the rate of 0.1 per cent of the amount paid or payable
exceeding Rs. 50 lakh (in no PAN cases, tax is deductible at the rate of 5 per cent)
5. Threshold limit
Threshold limit is Rs. 50 lakh.
6. When tax is not available
Tax is not deductible in the following cases –
Cases when TDS under section 194Q Comments
not applicable
Case 1-If tax is deductible under any If tax is deductible under any other section,
other section then tax shall be deducted under that section
and not under section 194Q. Even when tax is
deductible under any other section (but not

actually deducted by the payer), TDS

provisions of that section will apply and not
TDS under section 194Q.
Case 2-If tax is collectible under the If a particular transaction is covered by TCS
provisions of section 206C [but other provisions of section 206C [other than sub-
than sub-section (1H)] section (1H)], then tax will be collected by the
seller (and tax is not deductible by the buyer
under section 194Q).
If a particular transaction is covered by
section 194Q as well as section 206C (1H),
then TDS under section 194Q will apply and
not TCS under section 206C (1H).
If any difficulty arises in giving effect to the provisions of section 194Q, The Board may,
with the approval of the Central Government, issue guidelines for the purpose of removing
the difficulty. These guidelines shall be laid before each House of Parliament and Shall be
binding on the income-tax authorities and on the person liable to deduct tax.
DE DUCTION OF TAX ON BENEFIT/ PERQUISITE PERTAINING TO BUSINESS/ PROFESSION SEC 194R
Section 194R has been inserted with effect from July, 1, 2022. The provisions of this
section are briefly given below -
1. Who is responsible for tax deduction under section 194 (who is deductor)
Any person responsible for providing any benefit or perquisite pertaining to
business/profession carried on by deductee, is responsible for deducting tax at source under
section 194R. When, however, such benefit/perquisite is provided by an individual/HUF (if
his total sale/gross receipts/turnover does not exceed Rs. 1 crore (in the case of busi ness)
or Rs. 50 lakh (in the case of profession) during the financial year immediately preceding
the financial year in which such benefit/perquisite is provided] the provisions of section
1948 are not applicable. The expression "person responsible for providing means the person
providing such benefit or perquisite, or in case of a company, the company itself including
the principal officer thereof.
2. Who is deductee
Any resident (who gets the aforesaid benefit or perquisite pertaining to his business/
profession) is deductee under section 194R.
3. Threshold limit
Provisions of section 194R are not applicable in case of a resident where the value or
aggregate of value of the benefit/perquisite provided (or likely to be provided) to such
resident during the financial year does not exceed Rs. 20,000,
4. TDS rate

Tax is deductible at the rate of 10 per cent of the value (or aggregate of value) of such
benefit or perquisite. If, however, the benefit/perquisite is wholly in kind (or partly in cash
and partly in kind but such part in cash is not sufficient to meet the liability of TDS in
respect of whole of such benefit/perquisite), the person responsible for providing such
benefit/perquisite shall, before releasing the benefit/perquisite, ensure that tax required
to be deducted has been paid in respect of the benefit/perquisite.
Before releasing the benefit or perquisite to the resident person.
If any difficulty arises in giving effect to the provisions of section 194R, the Board may,
the difficulty. These guidelines shall be laid before each House of Parliament and shall be
binding on the income-tax authorities and on the person responsible for providing any benefit
or perquisite pertaining to business/profession carried on by the deductee.
7. Other points
The following points may be noted -
1 The aforesaid rule of TDS is applicable, irrespective of whether the benefits or
perquisites are contractual or gratuitous.
2 Where the partner is allowed by the firm to use of residential premises, car and
telephone, etc., value of such perquisites is subject to TDS- VP Warrier v. CIT[1990]
181 ITR 303 (MP)
3 Cash payment cannot be termed as benefit or perquisite - CIT v. Mahindra & Mahindra
Ltd [2018] 93 taxmann.com 32 (SC)
4 Waiver of loan cannot be termed as benefit or perquisite - Essar Shipping Ltd. v.
CIT[2020] 273 Taxman 49 (Bom).
5 Where purchase shares as an investment with a lock in period of holding, for a
consideration which is less than the market value, cannot be brought to tax as a benefit
or perquisite under section 28(iv) – Rupee Finance & Management (P.) Ltd. V. CIT[2008]
22SOT 174(Mum.).
6 For determination of perquisite value of vehicle provided to a director of company for
his free use, rule 3 can be applied even though he is not an employee of the said
company.

DEDUCTION OF TAX FROM PAYMENT ON TRANSFER OF VIRTUAL DIGITAL ASSET [SEC. 194S)
Section 194S has been inserted with effect from July 1, 2022. The provisions of this
section are briefly narrated below -
1. Who is responsible for tax deduction under section 194S (who is deductor)
Any person responsible for payment to any resident any sum by way of consideration for
transfer of virtual digital asset, is responsible for deducting tax at source under section
194S.
2. Who is deductee
Any resident person who is recipient of consideration for transfer of a virtual digital asset
is deductee under section 194S.
Tax is deductible at the time of credit of consideration to the account of the resident payee
or at the time of payment of such sum by any mode, whichever is earlier. Moreover, if
consideration pertaining to transfer of virtual digital asset is credited to any account
(whether called "Suspense account or by any other name), in the books of account of the
payer, such credit of the sum shall be deemed to be the credit of such sum to the account
of the payee and the provisions of section 194S shall apply accordingly.
4. Threshold limit
Tax deduction under section 194S is not required where –
- the consideration is payable by a specified person and the value (or aggregate value of
such consideration) does not exceed Rs. 50,000 during the financial year, or
- the consideration is payable by any person other than a specified person and the value
(or aggregate value of such consideration) does not exceed Rs. 10,000 during the
financial year.
5. Specified person
"Specified person" means a person -
a being an individual/HUF if his total sale/gross receipts/turnover does not exceed Rs.
1 crore (in the case of business) or Rs. 50 lakh (in the case of profession) during the
financial year immediately preceding the financial year in which virtual digital asset is
transferred;
b being an individual/HUF not having any income under the head "Profits and gains of
business or profession
6. Rate of TDS
Tax is deductible at the rate of per cent of consideration for transfer of virtual digital
asset If consideration for such transfer is -
a wholly in kind or in exchange of another virtual digital asset, where there is no part in
cash; or

b partly in cash and partly in kind (but the part in cash is not sufficient to meet the
liability of deduction of tax in respect of whole of such transfer),
The person responsible for paying such consideration shall (before releasing the consideration)
ensure that tax required to be deducted has been paid in respect of such consideration.
7. Non-applicability of section 203A/206AB
Provisions pertaining to TAN under section 203A and higher tax deduction in the case of
non-filers under section 206AB, shall not apply to a specified person.
8. Overlapping between sections 194-0 and 194S
In case of a transaction where tax is deductible under section 194-0 along with section 194S,
then the tax shall be deducted under section 1948 (and not section 194-0)
If any difficulty arises in giving effect to the provisions of section 194S, the Board may,
the difficulty. These guidelines shall be laid before each House of Parliament and shall be
binding on the income-tax authorities and on the person responsible for paying the
consideration on transfer of virtual digital asset.
INCOME PAYABLE “NET OF TAX” SEC. 195A
Where, under an agreement or other arrangement, the chargeable on any income referred
in the in the foregoing provision of this chapter is to be borne by the person by whom the
income payable, then,
(𝐀𝐦𝐨𝐮𝐧𝐭 𝐩𝐚𝐢𝐝 ∗ 𝐑𝐚𝐭𝐞 𝐨𝐟 𝐓𝐃𝐒)
𝐓𝐃𝐒 =
(𝟏𝟎𝟎 − 𝐑𝐚𝐭𝐞 𝐨𝐟 𝐓𝐃𝐒)
NO DEDUCTION TO BE MADE IN CERTAIN CASES. SEC 197A
Taxable Interest [Sec Dividend Payment in National

premature 193 and [Sec. respect of life Saving
withdrawal 194A] or rent 194] insurance police Scheme
from [Sec. 194-a] [Sec. 194DA or [Sec. 194
provident or insurance interest/dividend EE]
fund [Sec. commission on mutual fund
192] [Sec. 194D] units [Sec.
194K]
Condition 1 – who Individual Other than a Resident Other than a Resident
is recipient company or individual company or firm individual
firm
Condition 2 – Nil Nil Nil Nil Nil
what is tax on

total income of
previous year
Condition 3 – Not
How much is total exceeding
of income the
covered by maximum
sections 192A, amount not
193, 194, 194A. chargeable
194D, 194DA, to tax
194EE. 194-I and
194K
If the above conditions are satisfied and the recipient gives a declaration to the payer of
income along with his PAN, the payer will not deduct tax at source. Such declaration
should be given in duplicate in Form No. 15G (Form No. 15H for senior citizen of 60 years
or more)
Obtaining a certificate of lower rate from the Assessing Officer [Sec. 197]-The provisions
of section 197 are given below –
1 Tax is deductible under section 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J,
194K, 194LA, 194LBB, 194LBC, 194M, 194-O or 195.
2 The recipient can apply in Form No. 13 to the Assessing Officer to get a certificate
authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate.
3 If the recipient does not have PAN, he cannot apply for the aforesaid certificate under
section 197.
4 The certificate of lower rate shall be issued on plain paper directly to the person
responsible for paying income, under an advice to the applicant.
5 The recipient may furnish copies of such certificate to the person responsible for paying
the income for the purpose of no deduction of tax at source.
TAX DEDUCTED IS INCOME RECEIVED SEC. 198
All sums deducted in the accordance with the provisions of the foregoing provisions of this
chapter shall, for the purpose of computing the income of an assessee, be deemed to be income
received. Provided that the sum being the tax paid, u/s 192(1A) or 194N shall not be deemed to
the income received.

CREDIT FOR TAX DEDUCTED SEC. 199
1 Any deduction made in accordance with the foregoing provisions of this chapter and paid to
the central government shall be treated as a payment of tax on behalf of the person from
whose income the deduction was made, or of the owner of the security, or of the depositor
of the owner of property or of the unit-holder, or of the shareholder, as the case may be.
2 Any sum referred to in sub-section (1A) of section 192 and paid to the central Government
shall be treated as the tax paid on behalf of the person in respect of whose income such
payment of tax has been made.
TABLE A: DUE DATE FOR PAYMENT OF TDS [SEC. 200 READ WITH RULE 30]
S N Deductor Cases Due Date

1 Government Tax paid without production of an income-tax Same day
challan
2 Tax paid accompanied by an income- tax challan 7 days from end of
month
3 Any other Deduction made in the months of April to Feb 7 days from end of
person month
4 If income is credited or paid in the month of 30th April
March
TABLE B: DUE DATE OF FILING QUARTERLY STATEMENT [RULE 31A (2)]
S N Date of ending of the quarter of Due date

the financial year
1 30th June 31th July of the financial year.
2 30th September 31th October of the financial year
3 31st December 31th January of the financial year
4 31st March 31th May of the financial year immediately following
the financial year in which deduction is made.
TABLE C: TIME LIMITS FOR ISSUE OF CERTIFICATE [RULE 31(3)]
S N Form No. Periodicity Due date

1 16 & Annual By 15th of June of the financial year immediately following the
12BA financial year in which the income was paid and tax deducted.
[Form 24Q]

2 16A Quarterly Within 15 days from the due date for furnishing the statement
of tax deducted as source under rule 31A. Form 27D
3 16 B Within 15 days from the due date for furnishing the challan –
(Sec 194 cum statement in Form No. 26QB
– IA)
4 16 C Within 15 days from the due date for furnishing the challan –
(Sec 194 cum statement in Form No. 26QC
– IB)
5 16D (Sec Within 15 days from the due date for furnishing the challan –
194M) cum statement in Form No. 26QD
ELECTRONIC PAYMENT OF TAX (RULE 125)
The following persons shall pay tax electronically:

i A company; and
ii A person (other than a company), to whom provisions of section 44AB (tax audit) are
applicable.
INTEREST FOR FAILURE TO DEDUCT AND PAY TAX AT SOURCE [SEC. 201(1A)]
Condition: Where a person, responsible for deducting tax at source, fails to:
a Deduct tax at source; or
b Deposit such tax after deducting the same.
Amount on which interest is to be charged: On the amount of such tax.
RATE OF INTEREST
Period Rate of Interest

From the date on which such tax was Simple interest @ 1% per month or part
deductible to the date on which such tax is thereof.
deducted.
From the date on which such tax was deducted Simple interest @ 1.50% per month or part
to the date on which such tax is actually paid thereof.
Period: From the date on which such tax was deductible to the date on which such tax is
actually paid to the Government.
2. Illustration
An amount of Rs. 40,000 was paid to Mr. arnold on 1.7.2022 towards fees for professional services
without deduction of tax at source. Subsequently, another payment of Rs. 50,000 was due to Mr.
arnold on 28.2.2023, from which tax @ 10% [amounting to Rs.9,000] on the entire amount of

Rs.90,000 was deducted. However, this tax of Rs.9,000 was deposited only on 22.6.2023. Compute
the interest chargeable under section 201(1A).
Solution
Interest under section 201 (1A) would be computed as follows
Particulars Rs.
1% on tax deductible but not deducted i.e. 1% on Rs. 4,000 for 8 months 320
1 ½% on tax deducted but not deposited i.e. 1 ½% on Rs. 9,000 for 4 months 540
860
i Such interest should be paid before furnishing the statements in accordance with section
200(3).
ii Where the payer fails to deduct the whole or any part of the tax on the amount
credited or payment made to a payee and is not deemed to be an assessee-in-default
under section 201(1) on account of payment of taxes by such payee, interest under
section 201(1A)(i) i.e. @ 1% p.m. or part of month, shall be payable by the payer from
the date on which such tax was deductible to the date of furnishing of return of income
by such payee. The date of deduction and payment of taxes by the payer shall be
deemed to be the date on which return of income has been furnished by the payee.
iii Where the tax has not been paid after it is deducted, the amount of the tax together
with the amount of simple interest thereon shall be a charge upon all the assets of the
person or the company, as the case may be.
FEE FOR DEFAULTS IN FURNISHING STATEMENTS (SECTION 234E)
• Condition Where a person fails to deliver a quarterly TDS / TCS return within the
prescribed time.
• Amount of fee Rs.200 for every day during which the failure continues subject to
maximum of amount of TDS / TCS.
• The fee shall be paid before delivering a statement.

NOTE
KEY
• The fee is in addition to other consequences of non – delivering such return.

S
TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER (SECTION 203A)
Every person, deducting tax or collecting tax, who has not been allotted a tax – deduction
account number or tax collection account number, shall within specified time, apply to the
Assessing Officer for the allotment of a “tax deduction and collection – account number” in Form
49B.

BAR AGAINST DIRECT DEMAND AN ASSESSEE SEC. 205
Where tax is deductible at source under the provisions of this Chapter, the assessee shall not
be called upon to pay the tax himself to the extent to which tax has been deducted from that
income.
REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER SEC. 206AA
1 Any person entitled to receive any sum or income or amount, on which tax is deductible shall
furnish his PAN to the person responsible for deducting such tax, failing which tax shall be
deducted at the higher of the following rates, namely:
a At the rate specified in the relevant provision of this Act; or
b AT the rate of 20%.
2 Form 115G shall not be availed unless the person furnished his PAN in such declaration.
3 In case any declaration becomes availed under sub-section (2), the deductor shall deduct
the tax at source in accordance with sub-section (1).
4 No certificate shall be granted on the basis of form 13 unless the application contains the
PAN of the applicant.
5 The deductee shall furnish his PAN to the deductor and both shall indicate the same in all
the correspondence, bills, vouchers and other documents which are sent to each other.
6 Where the PAN provided to the deductor is availed or does not belong to the deductee, it
shall be deemed that the deductee has not furnished his PAN to the deductor and the
provisions of sub-section (1) shall apply accordingly.
7 The provisions of this section shall not apply in respect of payment of interest on long-term
bonds as referred to in section 194LC, to a foreign company or any other non-resident
person.
TAX COLLECTION AT SOURCE
APPLICABILITY OF SECTION 206C
Every seller1, shall collect tax from the buyer2 of any specified goods3, at specified rates.
Meaning of important terms
1 “Seller” means –
a The Central Government; or
b State Government; or
c Local authority; or
d Statutory corporation; or

e Authority established by or under a Central, State or Provincial Act; or

f Company; or
g Firm; or
h Co – operative society; or
i Individual & HUF
1) If his books of account are required to be audited under section 44AB during
the financial year immediately preceding the financial year in which such goods
are sold. (Applicable up to September 30, 2020).
2) his total sale, turnover or gross recipients from the business or profession
carried on by him exceed Rs. 1 crore in the case of business (or Rs. 50 Lakh
in the case of profession) during the financial year immediately preceding the
financial year in which goods are sold applicable from October 1, 2020)
2 “Buyer” means a person who obtains in any sale (by way of auction, tender or any other
mode) specified goods or the right to receive any such goods but does not include,:
a A public sector company, the Central Government, a State Government and an
embassy, a High Commission, legation, Commission, consulate and the trade
representation, of a foreign state and a club; or
b A buyer in the retail sale of such goods purchased by him for personal
consumption.
3 “Specified goods” includes:

Particulars Rate as a % of the amount
payable by the buyer or
licensee or lessee*
1 Alcoholic liquor for human consumption 1%
2 Tendu leaves 5%
3 Timber obtained under a forest lease 2.5%
4 Timber obtained by any mode other than under a forest 2.5%
lease
5 Any other forest produce (not being timber or tend leaves) 2.5%
6 Scrap 1%
7 Specified minerals 1%
8 Parking lot, toll plaza, mining and quarrying 2%
9 Motor car of value exceeding 10 Lakhs 1%
10 foreign remittance through LRS and overseas tour
package) (applicable from October 1, 2020)-
E1 Foreign remittance through liberalised remittance 5%
scheme (LRS) of Rs. 7 lakh or more in a financial
year.

E2 selling of overseas tour package 5%

11 Sale of any other goods) (applicable from October 1, 2020 0.1%
F1- sale of any other goods of the value (or aggregate of
such value) exceeding Rs. 50 lakh in a previous year by a
person whose total sale / gross receipts/ turnover from
business exceeds Rs. 10 crores during the immediately
preceding financial year (tax to be collected on sale
consideration of exceeding Rs. 50 lakh)
However, where the purchase or licensee or lessee is a non – resident non-corporate
assessee or a non – domestic company, then surcharge (if any applicable), education cess
and SHEC is also required to be deducted along with aforesaid rates.
MODIFICATIONS IN THE SCHEME OF TAX COLLECTED AT SOURCE [SEC. 206C]
TCS on Purchase of Any person being a seller who receives any amount as consideration of
Motor Vehicle (w.e.f. sale of motor vehicle of Value exceeding Rs. 10,00,000 shall collected
1/6/2016) Section the tax at the rate of 1% of sale consideration.
206(1F)
Note: This will be applicable whether payment is made by the purchase in cash or by cheque
of draft or by any other mode.
The CBDT has, vide Circular No. 22/2016 dated 08/06/2016 and Circular No. 23/2016 dated
24/06/2016, clarified the following issues in “Questions & Answer (Q & A)” format.
Q 1. Whether TCS@1% is on sale of motor vehicle at retail sale or also on sale of motor vehicles
by manufacturing to dealers/ distributors?
Answer: To bring high value transactions within the tax net, section 206C has been amended to
provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor vehicle of
the value exceeding 10 lakhs. This is brought to cover all transaction of retail sales and accordingly,
it will not apply on sale of motor vehicles by manufactures to dealers/ distributors.
Q 2. Whether TCS@1% on sale of motor vehicle is applicable only to luxury cars?
Answer: No, as per section 206C (1F), the seller shall collect tax@1% from the purchaser on sale
of any motor vehicle of the value exceeding ’10 lakhs.
Q 3. Whether TCS@1% is applicable in the case of sale to Government Departments, Embassies,

Consulates and United Nation Institutions, of motor vehicle?

Answer: Government, institutions notified under United Nations (Privileges and Immunities) Act
1947, and Embassies, Consulates, High Commission, legation, Commission and trade representation
of a foreign state shall not be liable to levy of TCS@1% under sub-section (IF) of section 206C.
Q 4. Whether TCS is applicable on each sale of motor vehicle or on aggregate value of sale during
the year?
Answer: Tax is to be collected at source@1% on sale consideration of a motor vehicle exceeding

10 lakhs. It is applicable to each sale and not to aggregate value of sale made during the year.
Q 5. Whether TCS@1% on sale of motor vehicle is applicable in case of an individual?
Answer: The definition of “Seller” as given in clause (c) of the Explanation below sub-section (11)
of section 206C shall be applicable in the case of sale of motor vehicles also. Accordingly, an
individual who is liable to audit as per the provisions of section 44AB during the financial year
immediately preceding the financial year in which the motor vehicle is sold shall be liable for
collection of tax at source on sale of motor vehicle by him.
Q 6. How would the provisions of TCS on sale of motor vehicle be applicable in a case where part
of the payment is made in cash and part is made by cheque?
Answer: The provisions of TCS on sale of motor vehicle exceeding 10 lakhs is not dependent on
mode of payment. Any sale of motor vehicle exceeding 10 lakhs would attract TCS @ 1%.
DEPOSIT OF TAX (SECTION 206C(3))
Payment of TCS – Save as TDS

Assessee in default – Same as TDS.
Exception: Provided that any person, other than referred to in sub-section (1D), shall not be
deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee –
a Has furnished his ROI u/s 139;
b Has taken into account such amount for computing his income; and
c Has paid the tax due on such income,
And the person furnishes a certificate to this effect from CA in prescribed form:
Interest on delay in deposit of TCS: Simple interest @1% per month or part thereof on
the amount of such tax from the date on which such tax was collectible to the date on
which the tax was actually paid, and such interest shall be paid before furnishing the
quarterly statement.
Provided that in case any person who is not deemed to be an assessee in default, the
interest shall be payable from the date on which such tax was collectible to the date of
furnishing of return of income by such buyer or licensee or lessee.

DUE DATE OF FILING QUARTERLY STATEMENT
S N Date of ending of the

quarter of the Due date
financial year
1 30th June 15th July of the financial year.
2 30th September 15th October of the financial year
3 31st December 15th January of the financial year
4 31st March 15th May of the financial year immediately following the
financial year in which deduction is made.
COLLECTION OF TAX AT SOURCE AT LOWER RATE (SECTION 206C(9))
Where buyer or licensee or lessee applies to the Assessing Officer in Form 27F, and receives a
certificate authorizing the seller to collect tax at lower rate, seller or lesser may collect tax at
the rate specified in the certificated till the cancellation of such certificate.
CONSEQUENCES WHEN SELLER FAILS TO COLLECT TAX AT SOURCE (SECTION 206C(6))
Any person who is responsible for collecting tax, but fails to do so, shall be liable to pay tax to
the credit of the Central Government.
REQUIRED TO FURNISH PAN BY COLLECTEE. SEC 206CC
1 Notwithstanding anything contained in any other provisions of this Act, any collectee shall
furnish his PAN to the collector, failing which tax shall be collected at the higher of the
following rates, namely: -
i At twice the rate specified in the relevant provision of this Act; or
ii At the rate of 5%
2 No declaration under sub-section (1A) of section 206C shall be valid unless the person
furnishes his permanent Account Number in such declaration.
3 In case any declaration becomes invalid under sub-section (2), the collector shall collect the
tax at source in accordance with the provisions of sub-section (1).
4 No certificate under sub-section (9) of section 206C shall be granted unless the application
made under that section contains the permanent Account Number of the applicant.
5 The collectee shall furnish his Permanent Account Number to the collector and both shall
indicate the same in all the correspondence, bills, vouchers and other documents which are
sent to each other.

6 Where the Permanent Account Number provided to the collector is invalid or does not belong
to the collectee, it shall be deemed that the collectee has not furnished his Permanent
Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.
7 The provisions of this section shall not apply to a non-resident who does not have permanent
establishment in India.
Explanation – For the purpose of this sub-section, the expression “permanent establishment”
includes a fixed place of business through which the business of the enterprise is wholly or
partly carried on.
SPECIAL PROVISION FOR COLLECTION OF TAX AT SOURCE FOR NON-FILERS OF INCOME TAX
RETURN (SEC. 206CCA, APPLICABLE FROM JULY 1, 2021)-
When tax is required to be collected under any provision of section 206C from a specified
person, tax shall be collected (with effect from July 1, 2021) at twice the normal rate or at
the rate of 5 per cent, whichever is higher. If, however, the provisions of section 206CC are
applicable to a specified person (in addition to the provisions of section 206CCA), tax shall be
collected at higher of two rates provided in section 206CC and in section 206CCA).
Specified person
For the purposes of section 206CCA, "specified person" means a person –
a. who has not filed the returns of income for both of the two assessment years relevant
to the two previous years immediately prior to the previous year in which tax is required
to be collected [for which the time-limit of filing return of income under section 139(1)
has expired], and
b. the aggregate amount of TDS/TCS in his case is Rs. 50,000 (or more) in each of these
two previous years. However, the specified person shall not include a non-resident who
does not have a PE in India.
AMENDMENTS TO SECTIONS 206AB AND 206CCA
By virtue of section 206AB, if recipient is a specified person, then tax is deductible at twice
the applicable TDS rate or at the rate of 5 per cent, whichever is higher. Similarly, by virtue of
section 206CCA, if collectee is a specified person, tax is collectible at twice the applicable rate
or at the rate of 5 per cent, whichever is more Specified person for these purposes is a non-
filer of income-tax return of last two years and aggregate TDS/TCS is Rs. 50,000 or more for
each of these years. However, provisions of section 206AB are not applicable if tax is deductible
under sections 192, 192A 1948 194BB 194LBC and 194N.
Amendments - The following amendments have been made in the scheme of sections 206AB and
206CCA
1. Sections 194-1A, 194-18 and 194M
With effect from April 1, 2022, section 206AB provisions will not be applicable if tax is
deductible under sections 194-1A, 194-1B and 194M. This has been done in order to reduce

the additional burden on tax deductors under section 194-1A, 194-18 and 194M for whom
simplified tax deduction system has been provided without requirement of TAN
2. Now-filers-
In order to ensure that all the persons in whose case significant amount of tax has been
deducted/collected do furnish their return of income, the requirement of default for 2
years has been reduced to one year. Consequently, specified person under sections 206AB
and 206CCA (with effect from April 2022) will be a person who has not filed its return of
income for the assessment year relevant to the previous year immediately preceding the
financial year in which tax is to be deducted or collected, as the case may be, and the
amount of TDS/TCS is Rs. 50,000 or more in the said previous year.

SEC 192 SALARY, SEC 193 INTEREST ON SECURITIES
1. Deduction of tax from salary as per 2. Raste Ka Mal Sasteme Ltd. pays salary
section 192 shall be: of Rs. 5,00,000 as salary to Mr.
Shyam. Mr Shyam has reported a
business loss of Rs. 1,50,000 to his
employer. The amount on which tax to
be deducted at source will be -
a @10% of salary a Rs. 5,00,000
b At the average rate of income tax b Rs. 1,50,000
computed on the basis of rates in force
for the financial year in which the
payment is made
c At the maximum marginal rate of 30% c Rs. 3,50,000
d Nil
3. Mr. Fabrick after serving Lion Ltd. for 4. No deduction of tax at source on
4 years resigned his job to commence a interest on listed debentures is to be
business of his own. His provident fund done by the widely held company:
account consisted of his own
contribution Rs. 50,000; employer's
contribution Rs. 50,000 and interest of
Rs. 20,000 being attributable equally to
the said contribution. How much would
be the amount deductible at source u/s
192A1 (June, 2017)
a Rs. 12,000 being 10% of total withdrawal a If the interest is paid by cheque
b Rs. 10,000 being 10% of total b If the interest is paid by account payee
contributions cheque and the amount of interest paid or
payable during the financial year does not
exceed Rs. 5,000
c Rs. 6,000 being 10% of employer's c Same as (B), but interest is paid or
contribution and interest theoreon payable to an individual who is resident in
India.
d Rs. 2,000 being 10% of interest on the
contributions

5. Ranti, an individual, whose turnover of 6. A company has given an advertising

the business for the preceding year contract to an advertising agency which
exceeded Rs. 1 crore, has engaged a is also a company. On 5.11.2023, it has
contractor for building his residential paid a sum of Rs. 2,40,000 to the
house. On 5.11.2023, Ranti has made advertising agency a firm. The company
a payment of Rs.1,10,000 to the should deduct tax amounting to
contractor an individual. Ranti
residential should deduct the tax at
source amounting to:
a Rs. 2060 a Rs. 4800
b Rs. 825 b Rs. 4944
c Rs. 10,000 c Rs. 2720
d Nil d Rs. 2640
7. Vikram Ltd. A firm of contractors have 8. No tax is to be deducted at source if

given some works contract to Vetal Ltd. the amount credited / paid to the
a sub – contractor. On 6.10.202, it has contractor during the relevant previous
made a payment of Rs. 4,00,000 to year does not exceeds:
Vetal ltd. Vikram Ltd. should deduct
tax amounting to
a Rs. 8000 a Rs. 30,000
b Rs. 4120 b Rs. 1,00,000
c Rs. 4000 c Rs. 30,000 at one time or Rs. 1,00,000 in
aggregate in the financial year
d Rs. 8240
9. In a contest, Amit wins Rs. 50,000 cash 10. Mr. jaroori, a resident Indian, wins Rs.
and a motor-cycle worth Rs. 50,000. 180,000 in a Game Show. Which of the
The amount of tax deducted at source statement is true?
will be - (Dec. 20U)
a Rs. 30,000 a Tax is deductible u/s 194B @ 30%
b Rs. 15,000 b Tax is deductible u/s 194B @ 31.2%
c Rs. 27,000 c Tax is deductible u/s 194B @ to be
decided by the winner
d Rs. 27,810 d Tax is deductible u/s 194B @ to be
decided by the organizer of the game
show
11. On 1-07-2023, Mr. Rangila started a 12. Mr. Ijjat has won Lottery of Rs.
9 months recurring deposit of Rs. 1,00,000. The state Government should

1,80,000 per month @ 6.25% p.a. with deduct tax on such winning amounting
TP Bank. The recurring deposit matures to:
on 31-03-2024. Interest on such
deposit amount is Rs. 42,590. Examine
the TDS implications under section
194A.
a Tax has to be deducted by TP Bank on the a Rs. 30,000
interest of Rs. 42,590 as it exceeds the
threshold limit of Rs. 40,000
b Tax has not to be deducted by TP Bank on b Rs. 33,000
the interest of Rs. 42,590 as it does not
exceeds the threshold limit of Rs. 50,000
c Tax has to be deducted by TP Bank on the c Rs. 33,990
d Tax has to be deducted by TP Bank on the d Rs. 30,900
13. Mr. Hathoda an individual, whose 14. A company has given an advertising
turnover of the business for the contract to an advertising agency which
preceding year exceeded Rs. 100 lakhs, is also a company. On 30/11/2022, it
has engaged a contractor Mr. Nutbolt has paid a sum of Rs. 2,40,000 to the
for building his residential house. On advertising agency a firm. The company
30/11/2023, he has made a payment of should deduct tax amounting to:
Rs. 10,00,000 to the contractor. Mr.
Hathoda should deduct the tax at
source amounting to:
a Rs. 20,800 a Rs. 4800
b Rs. 10,400 b Rs. 4,992
c Rs. 20,000 c Rs. 2,400
d Nil d Rs. 2,496
15. No tax is to be deducted at source if 16. Who shall not be liable to deduct TDS
the amount credited / paid to the under section 194C?
contractor during the relevant previous
year does not exceed:
a Rs. 30,000 a Any Individual
b Rs. 1,00,000 b Any HUF

c Rs. 30,000 at one time or Rs. 100,000 in c Any Individual and Any HUF whose
aggregate in the financial year accounts were not liable to audit in
preceding financial year
d 1,30,000 d Any Individual and Any HUF whose
accounts were liable to audit in preceding
financial year
17. What is the limit for the amount 18. What shall be the rate at which TDS
payable during the entire previous year on payment to contract/sub-contractor
mentioned under section 194C upto be deducted under section 194C when
which TDS shall not be deducted? the payment is made to Individual or
HUF?
a Rs. 90,000 a 1%
b Rs. 75,000 b 2%
c Rs. 30,000 c 10%
d Rs. 1,00,000 d 5%
19. A company is engaged in real estate 20. When prize is given partly in cash &
business conducted a lucky draw and party in kind, Income tax is to be
gave Maruti Car to a prize winner. TDS deducted only from cash?
shall be deducted under section at
__________________ the rate of.
___________________.
a 194B, 10% a True
b 194A, 30% b False
c 194B, 30% c Partly true
d 194G, 20% d Partly false
21. If the employee receives the 22. The amount of TDS payable on the sum
accumulated amount out of the of Rs. 25,000 payable to Tubelight Ltd.
recognized provident fund, which is by Government of India by way of
taxable due to non-fulfillment of interest on securities owned by it would
conditions given under section 10(12), be -
then TDS shall be deducted.
a under section 192 a Rs. 2,575
b under section 192A b Rs. 5,150
c under section 194A c Nil
d under section 197A d Rs. 7,725

23. The amount of TDS payable on the sum 24. Mr. Mangalam has invested Rs.
of Rs. 25,000 payable to Mr. Aam by 10,00,000 in 12% debentures of Nippo
way of securities owned by him of a battery Ltd. The gross amount of
company listed in recognised stock interest payable by the company is Rs.
exchange and issued in dematerialized 1,20,000 on 15-07-2022. The amount
form would be - of tax deducted at source will be:
a Rs. 2,575 a Rs. 9,000
b Rs. 5,150 b Rs. 24,000
c Nil c Rs. 12,360
d Rs. 7,725 d Rs. 24,720
Amount of TDS = Rs. 1,20,000 × 10%
= Rs. 12,000
25. HP Ltd. paid Rs. 55,00,000 in part 26. What is the due date of payment of
payment to contractor Dell contractors TDS in the above case, if Clutch Ltd.
Ltd. on 15-10-2022. What is the due credited such amount to the account of
date for payment of TDS? Gear contractor Ltd. on 31-3-2022?
a 15-10-2022 a 30-04-2022
b 07-11-2022 b 07-04-2022
c 31-12-2022 c 31-03-2022
d 15-12-2022 d 15-04-2022
SEC 194 DEDUCTION OF TAX AT SOURCE FROM DIVIDENDS
27. Mr. Munna Bhaiyya has won a state 28. Mr. Guddu has won a horse race on
Government Lottery of Rs. 1,00,000 on 11.10.2022 and is entitled to a prize
11.10.2022 The state Government of Rs. 2,00,000. The race club should
should deduct tax on such winning deduct the tax at source amounting to:
amounting to:
a Rs. 30,000 a Rs. 66,000
b Rs. 33,000 b Rs. 60,000
c Rs. 33,990 c Rs. 67,980
d Rs. 31,200 d Rs. 62,400
29. Tappu. Ltd has taken a showroom on 30. No tax is to deducted at source if the
rent @ Rs. 40,000 p.m. from Pappu amount credited/paid during the
Ltd. Tappu Ltd. should deduct tax at previous year as fee for profession or
source amounting to: technical services does not exceed:
a 10% a Rs. 10,000
b 2% b Rs. 20,000

c 10% c Rs. 30,000

d Nil d Rs. 40,000
31. A company has taken a house on rent @ 32. What shall be the rate at which TDS
Rs. 40,000 pm. On 1.10.22 The on insurance commission shall be
company should deduct tax on account deducted under section 194D when the
of such rent paid/credited on monthly payee is a domestic company?
basis amounting to:
a Rs. 20,000 a 20%
b Rs. Nil b 10%
c Rs. 24,000 c 5%
d Rs. 24,960 d 3.75%
33. What shall be the rate at which TDS 34. Any person responsible for paying to a
on commission on sale of lottery tickets non-resident sportsman, who is not a
shall be deducted under section 194G? citizen of India referred under section
115BBA shall be liable to deduct tax at
source:
a 5% a 20.80%
b 3.75% b 42.744%
c 20% c 31.20%
d 30% d 10.40%
35. What is maximum amount upto which 36. What is the total amount during the
TDS on commission or brokerage shall previous year upto which TDS on rent
not be deducted? under section 194-1 shall not be
deducted?
a Rs. 15,000 a Rs. 30,000
b Rs. 20,000 b Rs. 75,000
c Rs. 10,000 c Rs. 2,00,000
d Rs. 5,000 d Rs. 2,40,000
37. What shall be the rate of TDS under 38. What shall be rate of TDS on fees for
section 194-I on payment of rent of professional or technical service section
plant and machinery where rent is paid 194-J?
to any person other than individual or
HUF?
a 1% a 20%
b 2% b 10%
c 10% c 30%

d 15%&1.5% d 15%
39. Sachin Tichkule entered into a Joint 40. Mr. Ajnabi, resident, is due to receive
Development Agreement with Reality Rs. 4.50 lakhs on 31/3/2023, towards
Builders Pvt. Ltd. for developing a maturity proceeds of LIC policy taken
project on the land owned by him during on 1/4/1992, for which sum assured
the previous year 2022-23 and the was Rs. 4 lakhs and annual premium was
builder who agreed to make the payment Rs. 5,000. What will be the
of Rs. 50 lakh to Sachin Tichkule paid applicability of provisions for tax
the same to him on execution of the deduction at source u/s 194DA.
Joint Development Agreement. The
amount of TDS u/s 194-IC required to
be deducted on the amount of Rs. 50
lakh shall be __________. (Dec.2019)
a Rs. 50,000 a Tax is deductible on Rs. 4,50,000.
b Rs. 2,50,000 b Tax is not deductible on Rs. 4,50,000
c Rs. 5,00,000 c Tax is not deductible at all on maturity of
LIC policy
d Rs. 10,00,000 d None of the above
41. Mr. Bichukale, a resident of age of 70 42. No deduction of tax at source will be
years, is due to receive Rs. 2,20 lakhs made by a banking company under
on 31/3/2023 on LIC policy taken on section 194A with respect to aggregate
1/4/2014, for which the sum assured is amount of interest paid or payable on
Rs. 2 lakhs and the annual premium is time deposits to a senior citizen if it
Rs. 45,000. What will be the does not exceed
applicability of provisions for tax _________________?
deduction at source u/s 194DA.
a Tax is deductible on Rs. 2,20,000 since a Rs. 10,000
annual premium exceeds 10% of sum
assured
b Tax is deductible on Rs. 2,20,000 since b Rs. 50,000
annual premium exceed 20% of sum
assured
c Tax is deductible on Rs. 2,20,000 since c Rs. 20,000
annual premium exceeds 15% of sum
assured

43. If the employee receives the 44. What shall be the rate at which TDS
accumulated amount out of the on insurance commission shall be
recognized provident fund then deducted under section 194D when the
exemption limit to apply provisions of payee is a person other than a domestic
TDS shall be company?
a 10,000 a 20%
b 50,000 b 10%
c 20,000 c 30%
d 30,000 d 5%
45. Any person responsible for paying to a 46. The rate of TDS on rental payments of
resident any sum exceeding Rs. 2.5 lakh plant, machinery or equipment is -
towards compensation for compulsory
acquisition of his urban industrial land
under any law has to deduct income-tax
at the rate of
a 10% a 2%
b 15% b 5%
c 20% c 10%
d 2% d 1%
47. Mr. Patti, an individual, who is not 48. Mr. Sunami has deposited a sum of Rs.
carrying on a business, has borrowed a 20,00,000 on 1.10.2022 with a
sum of Rs. 1, 00,000 on 1.4.2021 @ schedule bank for one year at the
18% p.a. from a finance company. Mr. interest rate of 10% p.a. the bank
Patti in this case should deduct tax on should deduct tax at source amounting
such interest paid amounting to: to:
a Rs. 1,800 a Rs. 10,400
b Rs. 1,872 b Rs. 10,000
c Rs. 2,080 c Rs. 20,000
d Nil d Rs. 20,800
49. Mr. Nadan & sons, a HUF is carrying on 50. Mr. DK Continental Ltd. has credited a
business and whose turnover of the last sum of Rs. 80,000 to the account of its
year was Rs. 2,10,00,000 got tax audit Charted Accountants, a sole
done from a firm of charted proprietary firm during the previous
Accountants for the current previous

year 2022 – 23. An audit fee of Rs. year 2022 - 23. The company should
40,000 was paid by Mr. Nadan & sons deduct tax amounting to:
during the previous year 2022 - 23 on
31.1.2023. Mr. Nadan & sons should
deduct tax amounting to:
a Rs. 2060 a Rs. 8320
b Rs. 2200 b Rs. 4160
c Rs. 4000 c Rs. 8000
d Nil d Rs. 9064
51. No tax is to deducted at source if the 52. Golu Ltd. has taken a house on rent on
amount credited / paid during the 1.10.2022 @ Rs. 50,000 pm. From
previous year as fee for profession or Molu Ltd Golu Ltd. should deduct tax at
technical services does not exceed: source amounting to:
a Rs. 20,000 a Rs. 15,000
b Rs. 30,000 b Rs. 15,600
c Rs. 50,000 c Rs. 10,000
d Rs. 30,000
53. Mr. Hampi, a salaried individual, pays 54. Mr. Bunty paid fees for professional
rent of Rs. 51,000 per month to Mr. services of Rs. 40,000 to Mr. Monty.
Dampi from June, 2022. Which of the Mr. Monty is engaged only in the
statement is true? business of operation of call center.
Tax is to be deducted by Mr. Bunty at
the rate of
a No tax is deductible at source since Mr. a 1%
Hampi is not liable to tax audit u/s 44AB.
b Tax is deductible at source every month b 2%
@ 10% on rent paid to Mr. Dampi.
c Tax is deductible at source every month c 10%
@ 5% on rent paid to Mr. Dampi.
d Tax is deductible at source @ 5% on d 20%
annual rent from the rent paid for March
2022.
55. A HUF is carrying on business and whose 56. Rotlu, director of Potlu Ltd. is eligible
turnover of the preceding previous year for board sitting fees of Rs. 10,000
was Rs. 1,65,00,000 and got tax audit for every meeting attended by him.
done from a firm of Chartered During the year 2022-23, he had
Accountants for the current previous attended six meetings. The amount of

year. An audit fee of Rs. 40,000 was tax required to be deducted from such
paid by HUF. It should deduct tax sitting fees to be paid to Rotlu by the
amounting to: company shall be: (June 2019)
a Rs. 2,060 a Rs. 12,000 @20%
b Rs. 2,000 b Rs. 1,200 @2%
c Rs. 4,000 c Rs. 3,000 @5%
d Rs. 4,160 d Rs. 6,000 @10%
57. Payment has been made by Pushpa Ltd. 58. What will be the amount of TDS
to Mr. Allu by way of royalty Rs. payable by a company if it pays Rs.
20,000 and fees for technical services 10,00,000 non competing fees to Y Ltd.
Rs. 20,000. What will be the amount of on 10-4-2022?
TDS payable -
a Rs. 4,160 a Nil
b Nil b Rs. 1,04,000
c Rs. 8,320 c Rs. 1,00,000
d Rs. 12,480 d Rs. 2,08,000
59. Form 16A issued once in

a Month
b Year
c Quarter
d Half Year
60. A person makes payment of Rs. 35,000 61. In rate of TDS, surcharge or health &
to a contractor who is a transport education cess will not be included in
operator is not subject to TDS if case of:
a The recipient owns 10 or less than 10 a Resident Company
goods carriages at any time during the
previous year.
b The recipient is engaged in the business b Non-resident company
of plying, hiring or leasing of goods
carriage

c The recipient has furnished declaration c (c)

to this effect along with his PAN to the
payer.
d All of the above d None of the above
62. Compute the amount of tax to be 63. If PAN is not submitted by assessee
deducted. Rs. 2,40,000 paid to Mr. than TDS will deducted at
Shantilal on 25-03-2022 by Rajasthan
State Government on compulsory
acquisition of his urban land.
a Rs. 18,000 a the higher of, Rate specified in Act or
20%
b Rs. 1,800 b 20%
c Rs. 36,000 c 30%
d Nil d Maximum Marginal Rate of Tax
64. When the ________________ is the 65. When the payer is other than
government TDS must be deposit on Government, TDS of March month shall
_____________ be deposit upto:
a Payee, same day a 30th April
b Payer, 7th of the next month in which b 7th April
TDS deducted
c Payer, same day c Same day
66. Which of the following are correct due 67. Due date of furnishing of TDS
dates for deductor other than certificate in case of salary:
government for filling TDS returns:
a 31st July, 31st October, 31st January, a 30th May of the following relevant
31st May financial year
b 15th July, 15th October, 15th January, b 15th May of the following relevant
15th May financial year
c 15th July, 31st October, 31st January, c 15th June of the following relevant
15th May financial year
d None of the above d 30th June of the following relevant
financial year
68. Assessee shall be deemed to assessee 69. If the employee receives the
in default in which of following cases: accumulated amount out of the

recognized provident fund then TDS

shall be deducted at the rate of
a If deductor has not deduct the whole or a 10%
any part of the tax
b If after deduction, the deductor fails to b 5%
pay whole or any part of tax
c If after deduction, the deductor makes c 20%
late payment
d In all of the cases mentioned above d 30%
70. If the employee receives the 71. No order shall be made under section
accumulated amount out of the 201(1) deeming a person to be an
recognized provident fund then and does assessee in default for failure to
not submit the PAN then TDS shall be deduct the whole or any part of the tax
deducted at the rate of from a person resident in India, at any
time after the expiry of:
a 10% a seven years from the end of the financial
year in which payment is made or credit
is given
b 20% b two years from the end of the financial
year in which the correction statement is
delivered under the proviso to Section
200(3),
c 30% c earlier of (a) or (b)
d Maximum marginal rate d later of (a) or (b)
72. In case of payment to be made by or

on behalf of Government, TDS/TCS
shall be paid -
a On the same day when such deduction/
collection is made
b Within two months from lost day of the
month in which deduction/ collection is
made.
c Within one week from last day of the
month in which deduction/collection is
made.
d None of the above.

73. In case of Salary, TDS certificate is 74. Form 16 is issued by the employer:
issued in:
a Form 16 a Annually
b Form 16A b Quarterly
c Form 15 c Half yearly
d Form 15H d Monthly
75. TDS certificate issued in cases other 76. Every seller shall collect tax at source
than salary income is in form from the buyer at the time of debiting
of the amount payable by the buyer to
the account of the buyer; or receipt of
such amount from the buyer in cash or
by cheque or draft or any other mode,
whichever is earlier, collect tax at
source at the rate of ______________
in case of tendu leaves.
a Form 16A a 1%
b Form 16A b 2.50%
c Form 15 c 2%
d Form 15H d 5%
77. Every seller shall collect tax at source 78. Every seller shall collect tax at source
from the buyer at the time of debiting from the buyer at the time of debiting
of the amount payable by the buyer to of the amount payable by the buyer to
the account of the buyer; or receipt of the account of the buyer; or receipt of
such amount from the buyer in cash or such amount from the buyer in cash or
by cheque or draft or any other mode, by cheque or draft or any other mode,
whichever is earlier, collect tax at whichever is earlier, collect tax at
source at the rate of __________ in source at the rate of ______________
case of Timber obtained under a forest in case of alcoholic liquor.
lease.
a 1% a 1%
b 2.50% b 2.50%
c 2% c 2%
d 5% d 5%
79. Every seller shall collect tax at source 80. Every person, who grants a lease or a
from the buyer at the time of debiting licence or enters into a contract or

of the amount payable by the buyer to otherwise transfers any right or

the account of the buyer; or receipt of interest either in whole or in part in any
such amount from the buyer in cash or parking lot or toll plaza or mine or
by cheque or draft or any other mode, quarry, to licensee or lessee, (other
whichever is earlier, collect tax at than a public sector company) for the
source at the rate of use of such parking lot or toll plaza or
_________________ in case of mine or quarry for the purpose of
Minerals, being coal or lignite or iron business, shall be liable to collect tax
ore. at source @ ________________.
a 1% a 1%
b 2.50% b 2%
c 2% c 3%
d 5% d 10%
81. Every person, being a seller, who 82. In case of tax collection at source,
receives any amount as consideration buyer doesn't includes -
for sale of a motor vehicle of the value
exceeding __________ shall, at the
time of receipt of such amount, collect
from the buyer, a sum equal to
__________ of the sale consideration
as income-tax.
a Rs. 10,00,000,1% a A public sector company
b Rs. 2,00,000,1% b State or central Government
c Rs. 2,00,000,5% c An embassy
d Rs. 10,00,000,5% d All of these
83. Penalty for failure to collect tax at source, as a percentage of tax to be collected is
- (Dec. 2016)
a 25%
b 100%
c 75%
d 50%
84. The deduction of tax at source from the 85. The rate of TDS in case of listed
salary shall be made at the time of: debentures for the financial year 2022
- 23 is:

a accrual of salary a 20%

b payment of salary b 21%
c credit or payment of the salary, c 10% plus H&EC
d 10%

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 ADVANCE TAX
CHAPTER 13 ADVANCE TAX
SCHEME OF ADVANCE TAX [SEC. 208]
Where the advance tax liability of the assessee is Rs. 10,000 or more, the assessee should pay
such tax in the previous year itself within the due date.
ADVANCE TAX LIABILITY [SEC. 209]
Particulars Amount Rs.

Estimated Gross Total Income
Less: Deduction under chapter VIA Xxxx
Estimated Total Income Xxxx
Gross tax liability on Estimated Total Income Xxxx
Add: Surcharge (if applicable) Xxxx
Total and surcharge payable Xxxx
Add: 4% Social Welfare Surcharge Xxxx
Total liability after education case Xxxx
Less: Tax deducted or collected at source. Xxxx
Xxxx
Advance Tax Liability xxxx
If Advance tax is payable by Resident Individual, Then Relief u/s. 87 A should be considered.
PAYMENT OF ADVANCE TAX BY THE ASSESSEE OF HIS OWN ACCOUNT (SEC. 210]
An assessee who is liable to pay advance tax is required to estimate his current income
and pay advance tax thereon without having to submit any estimate or statement of income
to the assessing authorities.
Revision of After making payment of first/second instalment of advance tax, an assessee
second and can revise the remaining instalment(s) of advance tax in accordance with his
subsequent revised estimate of current income and pay tax accordingly, without any
instalment requirement of filing the revised estimate of advance tax.
Payment of advance tax in pursuance of order of Assessing Officer [Sec. 210] - The
provisions are given below -
1 The taxpayer is one who had earlier been assessed to income-tax.
2 Inspite of the legal obligation, he has not paid advance tax.
3 The Assessing Officer may pass an order under section 210(3) requiring him to pay advance
tax on his current year's income.
4 The order must specify the different instalments in which the advance tax should be paid.
5 Such order may be passed during the previous year but not later than last day of February.

INSTALLMENTS OF ADVANCE TAX AND DUE DATES [SECTION 211]
Due date of Instalment in Other than 44AD or Eligible assessees carrying on

the relevant previous year 44ADA eligible business u/s 44AD or
44ADA
On or before June 15 15 % of such advance tax
On or before September 15 45% of Advance Tax Payable
On or before December 15 75% of Advance Tax Payable
On or before March 15 100% of Advance Tax Payable 100% of Advance Tax Payable
Key Note
a Any amount paid under section 211 on or before 31st March of the previous year, shall be
treated as advance tax paid during the financial year.
b Provisions of advance tax is not applicable in the following cases:
Where an assessee is a senior citizen and does not have any income chargeable under the
head “Profits and gains of business or profession”. In other words, senior citizen not having
business income is not liable to pay advance tax.
Every income including capital gain, winning from lotteries, Dividend, etc. is subject to
advance tax. However, it is not possible to estimate capital gain or casual gain or
dividend, therefore, where the assesse has paid the whole of the amount of tax payable in
respect of such income:
• As part of the remaining instalments of advance tax which were due; or
• Where no instalments were due, by March 15 of the financial year immediately preceding
the assessment year,
Then it is deemed that all the provisions are complied.
c If the last day for payment of any instalment of advance tax is a day on which the receiving
bank is closed the assessee can make the payment on the next working day. In such case,
the mandatory interest leviable under section 234B and 234C would not be charged (Circular
no. 676 dt. 14.1.1994)
d While calculating advance tax, net agricultural income shall also be taken into
consideration for computing tax liability.
e If any assessee does not pay any instalment within due date he shall be deemed to be an
assessee in default in respect of such instalment (Section 218).
f Any sum, other than a penalty or interest, paid by an assessee as advance tax shall be treated
as a payment of tax and credit for such shall be given to the assessee in the regular
assessment (Section 219).

Advance tax instalments in case of Casual income/ Dividend and Capital Gain
Date of earning income
Instalments 12/6/22 15/8/22 1/12/22 1/2/23
15th June
15th Sept
15th Dec
15th Mar
Total

1. In case of a non-corporate assessee, 2. What maximum amount of penalty can be

advance tax is payable on or before imposed for failure to pay advance tax
th
15 September of the relevant
previous year
a Upto 15% of advance tax payable a Rs.1,000
b Upto 45% of advance tax payable b Rs.10,000
c Upto 30% of advance tax payable c Rs.20,000
d Upto 36% of advance tax payable d No penalty
3. An individual needs to pay 4. A company is required to pay 75% of its

th
Rs.1,00,000 as advance tax. By 15 advance tax liability by:
of December, how much amount must
be paid by the individual:
a Rs.30,000 a 15th March of the relevant previous year
b Rs.60,000 b 15th December of the relevant previous year
c Rs.75,000 c 15th September of the relevant previous
year
d Rs.1,00,000 d 15th June of the relevant previous year
5. The advance tax is payable by the 6. The first installment of advance tax in
assessee if the advance tax payable case of a company assessee should be
during the financial year: made:
a Exceeds Rs. 5,000 a On or before 15th June of the relevant
financial year
b Exceeds Rs. 10,000 b On or before 15th July of the relevant
financial year
c Is Rs. 10,000 or more c On or before 15th September of the
d Exceeds Rs. 10,000 relevant financial year
7. The first installment of advance tax 8. The amount of advance tax payable by the
in case of a non – company assessee company assessee on or before 15th June
should be made: shall be:
a On or before 15th June of the a 30% of the advance tax payable
relevant financial year
b On or before 15th September of the b 15% of the advance tax payable

c On or before 15th October of the c 12% of the advance tax payable

9. A company assessee has to make the 10. A non–company assessee has to make
payment of advance tax: payment of advance tax:
a In 3 installments a In 4 installments
b In 4 installments b In 3 installments
c Every month c Every months
11. Advance tax is payable by: 12. The advance tax can
a A company a Be paid after 15th March of the relevant
financial year
b An assessee other than individual or b Not be paid after 15th March
HUF
c Any assessee other than an individual c Be paid after 15th March but by 31st March
who is a senior citizen and does not have of the relevant financial year
income under the head PGBP
d Any assessee
13. The advance tax is payable by the 14. A senior citizen is not liable for advance
assessee tax, if he does not get any income from -
(Dec. 2016)
a On his own account a Interest or securities
b Only when the order for payment is b Capital gains
passed by the assessing officer
c On his own account or when the order c Profit and gains from business or profession
for payment is passed by the assessing
office
15. Calculate advance tax payable by Mr. 16. Hatela, aged 62 years, has pension income
Vadapav on or before 15th of Rs. 2,40,000 (computed) and rental
September, 2022 from the following: income (computed) of Rs. 3,60,000 for
Rent from house property Rs. 46,000 the financial year 2022 - 23. How much
per month; municipal taxes paid by amount he must have paid as advance tax
him Rs. 32,000 - (Dec. 2014) in September, 2022 - (June 2016)
a Rs. 4,920 a Rs. 12,000
b Rs. 4,320 b Rs. 10,000
c Rs. 5,928 c Rs. 31,200
d Nil d Nil

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 REGULATORY FRAMEWORK
CHAPTER 14 REGULATORY FRAMEWORK
INTRODUCTION
The provisions of the Income-tax Act contained in Sections 116 to 136 specify income tax
authorities, the procedure relating to the appointment of the various income-tax authorities,
their powers, functions, jurisdiction and control. The procedure under the Income-tax Act for
making an assessment of income begins with the filing of a return of income. Section 139 of
the Act contains the relevant provisions relating to the furnishing of a return of income. On
the basis of return of income the income tax authority makes the assessment.
The Income-tax Act provides for various remedies to an assessee on completion of the
assessment. The main remedies available to an assessee on completion of the assessment are
Appeals, Revision, and Rectification. All these remedies work in different areas. However,
strictly speaking the remedies are not alternative to each other but at times more than one
remedial proceeding may be used as complimentary to each other so as to achieve the best
results.
The right to appeal arises where the taxpayer is aggrieved by the order passed by the income-
tax authority. Where the Assessing Officer accepts the return filed by the tax payer and
passes an order making no modification, an appeal does not lie against that order as the
taxpayer cannot be said to be aggrieved of that order.
INCOME-TAX AUTHORITIES (APPOINTMENT AND CONTROL) [SECTION 116 TO 119A]
The following are the income-tax authorities who are statutorily empowered to administer
the law of Income Tax:
i. The Central Board of Direct Taxes, constituted under the Central Boards of Revenue
Act, 1963
ii. Principal Director General of Income-tax or Principal Chief Commissioners of Income-
tax
iii. Directors-General of Income-tax or Chief Commissioners of Income-tax
iv. Principal Director of Income- tax or Principal Commissioners of Income-tax
v. Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-
tax (Appeals)
vi. Additional Directors of Income-tax or Additional Commissioners of Income-tax
vii. Joint Directors of Income Tax or Joint Commissioners of Income-tax
viii. Deputy Directors of Income-tax or Deputy Commissioners of Income-tax
ix. Assistant Directors of Income-tax or Assistant Commissioners of Income-tax
x. Income-tax Officers
xi. Tax Recovery Officers
xii. Income-tax Inspectors

The provisions of the Income-tax Act contained in Sections 116 to 136 specify income tax
authorities, the procedure relating to the appointment of the various income-tax authorities,
their powers, functions, jurisdiction and control. In addition to the various provisions contained
in these sections, the Income-tax Department follows the system of functional allocation and
distribution of work with a view to specializing and concentrating in the various areas of income-
tax assessment, procedure, collection, recovery, refund, appeals, etc.
For all purposes of the Income-tax Act, the Income Tax authorities are vested with the various
powers which are vested in a Court of Law under the Code of Civil Procedure while trying a suit in
respect of any case. More particularly, the provisions of the Code of Civil Procedure and the
powers granted to the tax authorities under the code would in respect of:
Discovery and
inspection
Issuing commissions Enforcing the attendance,

including any officer of a
and summons
bank and examining
Collecting certain Compelling the production

information [Section of books of accounts and
133B] the documents
Every income-tax authority shall be deemed to be a Civil Court for the purposes of Section 195
and Chapter XXVI of the Code of Criminal Procedure, 1973. The powers granted are generally
quasi-judicial. In particular, the powers of Income-tax authorities relate to discovery, production
of evidence etc., searches and seizures, application of retained assets, power to call for
information from various parties, authorities and bodies, powers of survey, powers relating to the
inspection of the registers of companies etc. Further, all proceedings under the Income-tax Act
before any income-tax authority must be deemed to be judicial proceedings within the meaning
of Sections 193 and 228 and for the purposes of Section 196 of the Indian Penal Code. For a
detailed Study of the various powers, functions, jurisdiction, etc., of the different classes of
income-tax authorities and the general scheme of administration of the Income-tax Act,
students may refer to the relevant provisions of the Income-tax Act.

APPOINTMENT AND CONTROL OF INCOME-TAX AUTHORITIES [SECTION 117 & 118]
i. Section 117 empowers the Central Government to appoint such persons as it thinks fit to be
income-tax authorities.
ii. It may also authorise the Board or a Principal Director General or Director General, a
Principal Chief Commissioner or Chief Commissioner or a Principal Director or Director or a
Principal Commissioner or Commissioner to appoint income-tax authorities below the rank of
an Assistant Commissioner or Deputy Commissioner.
iii. An income-tax authority authorised by the CBDT may appoint such executive or ministerial
staff as may be necessary to assist it in the execution of its functions.
iv. Section 118 authorises the CBDT to also direct, by way of notification, that any Income-tax
authority or authorities shall be subordinate to such other income-tax authority or
authorities, as may be specified.
INSTRUCTIONS TO SUBORDINATE AUTHORITIES [SECTION 119]
The Board is empowered to issue orders, instructions and directions to its subordinate
authorities from time to time. The Board may also issue guideline, principles or procedures to be
followed by its Income tax authorities and if it is in the interest of public, then the same may be
published and circulated. The Board also empowered to authorize any income tax authority to
admit an application for any claim of exemption, deduction, refund or any other relief under this
act and deal with the same if it was genuinely out of the taxpayer control.
TAX PAYER’S CHARTER [SECTION 119A]
The CBDT shall adopt and declare a tax payer’s charter and issue orders, directions,
instructions and guidelines to other Income tax authorities for the administration of such
Charter.
JURISDICTION OF INCOME-TAX AUTHORITIES [SECTION 120]
1. Income-tax authorities to exercise powers in accordance with CBDT directions [Section

120(1)]:
The income-tax authorities shall exercise all or any of the powers and perform all or any of the
functions conferred on, or assigned to, such authorities in accordance with the directions
issued by the CBDT for the exercise of such powers and performance of the functions by all
or any of those authorities.
2. Deemed directions under section 120(1) by CBDT [Explanation to section 120(1)]:
Any income-tax authority, being an authority higher in rank, may exercise the powers and
perform the functions of the income-tax authority lower in rank, if so directed by the CBDT.

Such direction issued by the CBDT shall be deemed to be a direction issued under the said
section 120(1).
3. CBDT may authorize income-tax authorities to exercise powers/perform functions:
The directions of the Board may authorise any other income-tax authority to issue orders in
writing for the exercise of the powers and performance of the functions by all or any of the
other income-tax authorities who are subordinate to it.
4. Criteria for issue of directions [Section 120(3)]:
In issuing such directions, the Board may have regard to the following criteria:
a. Territorial area.
b. Persons or classes of persons.
c. Incomes or classes of incomes.
d. Cases or classes of cases.
5. CBDT authorisation assigning functions [Section 120(4)]:
The CBDT may authorise any Principal Director General or Director General or Principal
Director or Director of Income-tax to perform such functions of any other income-tax
authority as may be assigned to him. Such authorisation may be through a general or special
order.
CENTRAL BOARD OF DIRECT TAXES [CBDT]

APPOINTMENT AND WORKING OF THE BOARD
The Central Board of Direct Taxes was a statutory body created under the Central Boards of
Revenue Act, 1963 [Section 2(12)]. The Board in its working is closely associated with the
Ministry of Finance. The Board consists of a chairman and six members, all of whom are ex-
officio Special Secretary to the Government of India.
JURISDICTION
It is the top most executive authority in the sphere of Direct Taxes. Its powers of
administration supervision and control extend over the whole department.
POWER
1. POWER TO MAKE RULES

It has the power to make rules (Section 295), subject to the approval of Central
Government, for carrying out the purposes of this Act. The Rules may be made for whole or
any part of India.
2. TO ISSUE INSTRUCTIONS [SECTION 119(1)]
It may issue orders, instructions and directions to income tax authorities for the proper
administration of this Act and such authorities and all other persons employed in the
execution of the Act shall observe and follow the same. However, no such orders, instructions

or directions shall be issued so as to:

• require any income tax authority to make a particular assessment or to dispose of a
particular case in a particular manner; or
• Interfere with the discretion of the Commissioner (Appeal) in the exercise of his
appellate functions.
3. POWER TO ISSUE ORDERS, GUIDELINES, PROCEDURES [SECTION 119(2)(A)]
It may, if it considers it necessary or expedient so to do, for the purpose of proper and
efficient management of the work of assessment and collection of revenue, issue, from time
to time, general or special orders in respect of any class of income or
fringe benefit or class of cases, setting forth directions or instructions (not being prejudicial
to assessees) as to the guidelines, principles or procedures to be followed by its subordinates
in execution of their duties. Any such orders may, If the Board is of the opinion that it is
necessary in the public interest so to do, be published and circulated for general information.
4. POWER TO RELAX CERTAIN PROVISIONS [SECTION 119(2)(A)]
The Board is empowered to relax the provisions relating to the charge of interest for
defaults in deduction of tax at source, or payment of such tax [under Section 201(1A)] or
payment of advance tax (Section 211) or interest for defaults in furnishing return (Section
234A) or interest for defaults in payment of advance tax (under Section 234B or Section
234C) or assessment and recovery of tax etc. Other provisions, in appropriate cases, Board
may relax the provisions of sections are 115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH,
115WJ, 115WK, 139, 143, 144, 147, 148, 154, 155, 158BFA, 211, 234E, 270A, 271, 271C, 271CA
and 273.
The Board is also empowered to relax the provisions relating to the computation of total
income and deductions to be made in computing total income in cases of genuine hardship. It
can be done by a general or special order and for reasons to be specified therein.
5. POWER TO ADMIT BELATED REFUND APPLICATION
To avoid genuine hardship in any case or class of cases, the Board may authorise any income-
tax authority, not being Commissioner (Appeals) to admit belated application or claim for any
exemption, deduction, refund or any other relief [Section 119(2)(b)].
6. POWER TO DECIDE JURISDICTION
The Board is empowered to decide jurisdictional matters of any income- tax authority and
assign to them such functions as are to be performed by them (Section 120).
7. POWER TO DISCLOSE INFORMATION
The Board may disclose information relating to any assessee, to any officer, authority, or body
performing any functions under any tax law relating to the imposition of any tax, duty or cess
or dealing in foreign exchange under Foreign Exchange Management Act, 1999, if it considers
such disclosure in public interest. The Board may also authorise any other income-tax
authority to disclose such information (Section 138). The provision is intended to facilitate
exchange of information about tax evaders. Principal Director-General or Director-General or
Director of Income-Tax

The Principal Director – General has the following powers:

To appoint an income-tax authority below the rank of an Assistant Commissioner Section 117
To delegate the powers of Assessing Officer to Joint Commissioner Section 120
To transfer cases Section 127
Enquiry into concealment Section
131(1A)
Search and Seizure Section 132(1)
To requisition books of account/assets etc Section 132A
To make any enquiry Section 135
a. To appoint an income-tax authority below the rank of an Assistant Commissioner

[Section 117]
If so authorised by the Central Government a Director-General or Director may appoint an
income- tax authority below the rank of Assistant Commissioner.
b. To delegate the powers of Assessing Officer to Joint Commissioner [Section 120]
Where Director- General or Director is so authorised by the Board, he may delegate the
powers and functions of the Assessing Officer to Joint Commissioner.
c. To transfer cases [Section 127]
The Director-General may transfer any case from one or more Assessing Officers
subordinate to him to any other Assessing Officer also subordinate to him.
d. Enquiry into concealment [Section 131(1A)]
If the Director-General or Director or Deputy Director or Assistant Director (w.e.f.
1.6.1988) has reason to suspect that any income has been concealed, or is likely to be
concealed, by any person or class of persons, within his jurisdiction, he is empowered to make
any enquiry or investigation relating thereto notwithstanding that no proceedings with respect
to such person or class of persons are pending before him [Section 131 (1A)].
e. Search and Seizure [Section 132(1)]
Where the Director- General or Director or Chief Commissioner or Commissioner in
consequence of information in his possession has reason to believe that (a) any person to
whom notice has been issued in respect of discovery and inspection etc. [under Section
131(1)] or (b) any person to whom notice has been issued to produce accounts or documents
[under Section 142(1)], has failed to do so far he is not likely to produce such accounts or
documents, or any person is in possession of undisclosed income or property, he is empowered
[under Section 132(1)] to authorise any Deputy Director, Deputy Commissioner, Assistant
Director (Assistant Commissioner w.e.f.1.4.1989) or Assessing Officer to enter and search
any building, place, vessel, vehicle or aircraft, where he has reason to suspect about their
availability and seize any such books of accounts, other documents, money, bullion, jewellery
or other valuable article or thing found as a result of such search.
The “reason to believe or reason to suspect” to for issuing warrant of authorization of
search/ seizure shall not be disclosed to any person or authority or Appellate Tribunal.

Amendment to section 132(1) will take effect from April 1, 1962 and amendment to section
132(1A) and 132A(1) from October 1, 1975.
f. To requisition books of account/Assets etc. [Section 132A]
Where any books of account or documents have been taken into custody by any officer or
authority under any other law (e.g., by Commissioner or Customs, Sales Tax Commissioner
etc.) and the Director General or Director or the Chief Commissioner or Commissioner, in
consequence of information in his possession, has reason to believe that (i) any person,
required to produce such accounts/documents prior to their acquisition under any other law,
has failed to do so, or (ii) such accounts or documents will be useful for any proceeding under
income-tax law but such person would not produce them on their return by the officer or
authority under any other law, or (iii) any assets represent income or property which has not
been, or would not have been disclosed by any person from whose possession or control such
assets have been taken into custody by any officer or authority under any other law, he may
authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant
Commissioner or Income-tax Officer to require such officer or authority under any other law
to deliver such books of account or documents or such assets to the requisitioning officer
under income-tax law. On a requisition being made, such officer or authority under any other
law is required to deliver such books of accounts or documents or assets to the requisitioning
officer either forthwith or after such time when it is no longer necessary to retain them in
his custody.
The “reason to believe or reason to suspect” to for issuing warrant of authorization of
search/seizure shall not be disclosed to any person or authority or Appellate Tribunal.
Amendment to section 132(1) will take effect from April 1, 1962 and amendment to section
132(1A) and 132A(1) from October 1, 1975.
g. To make any enquiry [Section 135]
The Director-General or Director is competent to make any enquiry under this Act.
POWER OF CHIEF COMMISSIONER OR COMMISSIONER OF INCOME-TAX
Powers Of Chief Commissioner Or Commissioner Of Income-Tax

To appoint an income-tax authority below the rank of Assistant Commissioner [Section 117]
To delegate the powers of Assessing Officer to Deputy Commissioner [Section 120]
To transfer case [Section 127]
Power regarding discovery, production of evidence etc. [Section 131]
Search and seizure [Section 132]
To requisition books of accounts etc. [Section 132A]
Power of survey [Section 133A]
To make any enquiry [Section 135]
Disclosure of information respecting assessees [Section 138]

To sanction reopening of the assessment after the expiry of four years [Section 151(2)]
To approve withholding of refund in certain cases [Section 241]
Set-off of refund against arrears of tax [Section 245]
To direct the Assessing Officer to prefer appeal to the Tribunal against A.A.C.’s [Section 253(2)]
order
To revise any order passed by the Assessing Officer which is prejudicial to [Section 263]
revenue
Revision of any order passed by a subordinate authority on application by [Section 264]

the assessee or suo motu
The Chief Commissioner or Commissioner of Income tax has the following powers:
1. To appoint an income-tax authority below the rank of Assistant Commissioner
[Section 117]
If so authorised by the Central Government, a Chief Commissioner or Commissioner may
appoint an income-tax authority below the rank of Assistant Commissioner.
2. To delegate the powers of Assessing Officer to Deputy Commissioner [Section 120]
Where Chief Commissioner or Commissioner is so authorised by the Board, he may delegate
the powers and functions of the Assessing Officer to Joint Director or Joint Commissioner.
3. To transfer case [Section 127]
The Chief Commissioner or Commissioner is empowered to transfer any case from any
Assessing Officers to any other Assessing Officer or Assessing Officers.
4. Power regarding discovery, production of evidence etc. [Section 131]
The Chief Commissioner or Commissioner has the same powers as are vested in a Court
under the Code of Civil Procedure in respect of discovery and inspection, compelling
production of books of accounts and other documents (relating to any period), issuing
commissions enforcing the attendance of any person, including any officer of a banking
company and examining him on oath.
The Commissioner may impound or retain any books of accounts or other documents
produced before him for such time as he thinks fit [Section 131(3)]. Where such power is
exercised by the Assessing Officer, he has to record reasons before impounding the books
of accounts or documents. The Assessing Officer or Assistant Commissioner cannot retain
the books of accounts/documents for a period exceeding 15 days without prior approval of
the Chief Commissioner or Director-General or Commissioner [Section 131(3)].
Like Director-General or Director, the Chief Commissioner or Commissioner of Income-tax
has also got the powers of search and seizure.
5. Search and seizure [Section 132]
Like Director-General or Director, the Chief Commissioner or Commissioner of Income-tax
has also got the powers of search and seizure.

6. To requisition books of accounts etc. [Section 132A]

Like Director-General or Director of Income- tax, the Chief Commissioner or Commissioner
is also vested with the power to requisition books of accounts.
7. Power of survey [Section 133A]

An Income-tax authority may enter, after sunrise and before sunset, any office, or any
other place (where business or profession is carried on or where any books of accounts/
documents, cash, stocks or other valuable articles relating to business are kept), for the
purpose of verifying whether tax has been deducted or collected at source in accordance
with the relevant provisions. Provided that such place is within the limits of the area assigned
to him, or any place in respect of which he is authorised for the purposes of this section by
such income-tax authority who is assigned the area within which such place is situated.
He may also require the deductor or the collector or any other person who may at that time and
place be attending in any manner to such work to afford him the necessary facility to inspect such
books of account or other documents available at such place, and to furnish such information as
he may require in relation to such matter.
The income-tax authority acting under this section may also place marks of identification,
impound or retain in his custody books of account or other documents inspected by him,
make inventory of articles verified or record the statement of any person. Provided that
such impounding shall be done only after recording the reasons for doing so and the period
of retention (without obtaining the approval of the Principal Chief Commissioner or the
Chief Commissioner or the Principal Director General or the Director General or the
Principal Commissioner or the Commissioner or the Principal Director or the Director
thereof, as the case may be) shall not exceed a period of fifteen days (exclusive of
holidays).
Where an assessee incurs an ostentatious expenditure on any function, ceremony, the
income-tax authority is empowered to collect information about such expenditure from the
assessee or any other person who is likely to possess information in this connection and may
record their statement which may be used thereafter as an evidence. This may be done at
time such function or ceremony is over.
‘Any Place’ to include any place at which an activity for charitable purpose is carried on.
8. To make any enquiry [Section 135]
The Chief Commissioner or Commissioner is competent to make any enquiry under this Act.
9. Disclosure of information respecting assessees [Section 138]
Where a person makes an application to the Chief Commissioner or Commissioner in the
prescribed form for any information relating to any assessee in respect of any assessment,
he may furnish the information asked for in respect of that assessment if he satisfied that
such disclosure is in public interest.
10. To sanction reopening of the assessment after the expiry of four years [Section
151(2)]

The assessment of an income which has escaped assessment can be reopened after the
expiry of four years from the end of the relevant assessment year only if the Chief
Commissioner or Commissioner has sanctioned such reopening.
11. To approve withholding of refund in certain cases [Section 241]
Where any proceeding is pending against the assessees and the Assessing Officer is of the
opinion that the grant of the refund may adversely affect the revenue, the Chief
Commissioner or Commissioner may authorise the Assessing Officer to withhold the refund
till such time as the Chief Commissioner or Commissioner may determine.
12. Set-off of refund against arrears of tax [Section 245]
The Chief Commissioner or Commissioner is empowered to set off the amount of refund or
any part thereof due to any person against the arrears of the tax due from such person.
Any intimation in writing to this effect should be given to such person.
13. To direct the Assessing Officer to prefer appeal to the Tribunal against A.A.C.’s
order [Section 253(2)]
The Commissioner may, if he objects to any order passed by a Commissioner (Appeals), direct
the Assessing Officer to appeal to the Appellate Tribunal against the order.
14. To revise any order passed by the Assessing Officer which is prejudicial to revenue
[Section 263]
The Commissioner may revise any order passed by the Assessing Officer which is prejudicial
to the interest or revenue.
15. Revision of any order passed by a subordinate authority on application by the assessee
or suo motu [Section 264]
The Commissioner may revise either on his own motion or on an application made by the
assessee within the prescribed time for such revision, any order passed by an authority
subordinate to him. He may pass such order thereon, not being an order prejudicial to the
assessee as he may think fit.

POWER OF COMMISSIONER OF INCOME-TAX (APPEALS)
Power to inspect Set off of refund

register of against arrears of
companies tax
(Section 134) (Section 245)
Power to call for Disposal of

information appeal
(Section 133) (Section 251)
Power regarding
discovery, Judicial Powers of Imposition of
production of Commissioner of penalty
evidence Income Tax as an
appellate authority (Section 271)
(Section 131)
The Commissioner of Income-tax (Appeals) is an appellate authority. It is vested with the

judicial powers
1. Power regarding discovery, production of evidence [Section 131]
Like Chief Commissioner or Commissioner, the power regarding discovery, production of
evidence etc., can also be exercised by the Commissioner (Appeals).
2. Power to call for information [Section 133]
The Commissioner of Income-tax (Appeals) may, for the purposes of this Act:
a. require any firm to furnish him with a return of the names and addresses of the
partners of the firm and their respective shares;
b. require any Hindu Undivided Family to furnish him with a return of the names and
addresses of the manager and the members of the family;
c. require any person whom he has reason to believe to be a trustee, guardian or agent, to
furnish him with a return of the names of the persons for or of whom he is trustee,
guardian or agent, and of their addresses;
d. require any assessee to furnish a statement of the names and addresses of all persons
to whom he has paid in any previous year rent, interest, commission, royalty or
brokerage, or any annuity together with particulars of such payments made;
e. require any dealer, broker or agent or any person concerned in the management of a stock
or Commodity Exchange to furnish a statement of the names and addresses of all
persons to whom he or the Exchange has paid any sum in connection with the transfer,
whether by way of sale, exchange or otherwise, of assets, or on whose behalf or from
whom he or the Exchange has received any such sum, together with particulars of all
such payments and receipts;
f. require any person, including a banking company or any officer thereof, to furnish

information in relation to such point or mater or to furnish statements of accounts and

affairs verified in the specified manner, giving such information as may be required by
him.
3. Amendment to First Proviso to Section 133
w.e.f. April 1, 2017 power in respect of inquiry or proceeding under the Act, may also be
exercised by the Joint Director, Deputy Director and Assistant Director.
4. Amendment to Second Proviso to Section 133
w.e.f. April 1, 2017 Joint Director, Deputy Director may exercise the powers in respect of
such inquiry, without seeking prior approval of higher authorities.
5. Amendment to Section 133C
Section 133C has been amended to empowers CBDT to make a scheme for centralised
issuance of notice calling for information and documents for the purpose of verification of
information in its possession, processing of such documents and making outcome of thereof
available to assessing officer for necessary action, if any.
6. Power to inspect register of companies [Section 134]
The Commissioner (Appeals) may inspect and, if necessary, take copies or cause copies to
be taken, of any register of members, debenture holders or mortgagees of any company or
of any entry in such register. The Commissioner (Appeals) may also authorize (in writing) any
person subordinate to him to inspect and, if necessary, take copies or registers as
aforesaid.
7. Set-off of refund against arrears of tax [Section 245]
The Commissioner (Appeals) is empowered to set off the amount of refund or any part
thereof due to any person against the arrears of tax due from such person. Intimation in
writing to this effect should be given to such person.
8. Disposal of appeal [Section 251]
In disposing of an appeal, the Commissioner (Appeals) has the following powers
a. in an appeal against an order of assessment he may confirm, reduce, enhance or annul
the assessment, or he may set aside the assessment and refer back to the Assessing
Officer for making a fresh assessment in accordance with such directions as given by
him.
b. in an appeal against an order imposing a penalty, he may confirm or cancel such order or
vary it so as either to enhance or reduce the penalty.
c. in any other case, he may pass such order in appeals as he thinks fit.
It may be noted that an assessment or a penalty cannot be enhanced or the amount of refund
cannot be reduced unless the appellant had a reasonable opportunity of showing cause against
such enhancement or reduction.
9. Imposition of penalty [Section 271]
The Commissioner (Appeals) may impose penalty for not producing the books of accounts or
other documents [Section 142(1)] or for concealment of income [Section 271].

1. The following is not an income tax 2. The Central Board of Direct Taxes (CBDT)
authority: is headed by Chairman and also comprises
of six members. The Chairman and all the
Members of the CBDT are being selected:
(Dec.2019)
a Central Board of Direct taxes a By Finance Minister
b Chief Commissioner of Income Tax b From IRS
c Income tax Appellate Tribunal c By Prime Minister
d Tax Recovery officer d By Chief Justice of India
3. The Central Board of Direct Taxes 4. In issuing the directions or orders of

(CBDT) provides essential inputs for Jurisdiction of Income Tax authorities,
policy and planning of direct taxes in the CBDT may have regard to which of
India and is a __________ the undermentioned criteria:
functioning under the Central Board
of Revenue Act, 1963. (Dec. 2019)
a Constituted Authority a territorial area
b Revenue Administration Authority b incomes or classes of income;
c Statutory Authority c persons or classes of persons
d Central Authority d All of the above
5. Under section 131, the income tax 6. In case where books of accounts are
authorities shall, for the purposes of seized by the Assessing officer not having
this Act, have the same powers as jurisdiction over such person, the same will
are vested in a court under the Code be handed over to the Assessing officer
of Civil Procedure, 1908, when trying having jurisdiction over such person within
a suit in respect of the which of the a period of ________________ from the
following matters: date on which the last of the
authorizations for search was executed.
a discovery and inspection a 30
b compelling the production of books of b 60
account
c issuing commissions. c 120
d All of the above d 180
7. The following property shall not be 8. The restraint order under Section 132(3)
subject to deemed seizure under shall not remain in force for a period
Section 132 of the Income-tax Ad, exceeding ____________________ days

1961: from the date of seizure.

a Money a 30
b Bullion b 60
c Jewellery c 120
d stock in trade d 180
9. In case if refund arises. Interest is 10. The premises of an assessee within the
payable after expiry of __________ jurisdiction of an Assessing Officer can be
days from conclusion of search till surveyed during business hours by such
the date of completion of assessment. Income-tax Authority __________.
(Dec.2019)
a 30 a After sunset and before sunrise
b 60 b After sunrise but before sunset
c 120 c Any time during 24 hours
d 180 d After 11A.M.
11. Which of the following is false: 12. In case of survey the books of accounts
Income tax authorities in exercise of cannot be impounded for a period
power during survey can: exceeding days. without obtaining prior
approval of Chief Commissioner of Income
Tax.
a place marks of identification on the a 10
books of account
b make an inventory of any cash, stock or b 15
other valuable article or thing
c record the statement of any person c 30
which may be useful/relevant to any
proceeding under the Act
d seize cash, stock or other valuable d 60
article or thing

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 ASSESSMENT PROCEDURE
CHAPTER 15 ASSESSMENT PROCEDURE AND INTEREST
FILING OF RETURN
As per provisions of Sec. 139(1), following persons need to file a return of income in the
prescribed form and within the prescribed time.
Section Assessee Size of Income
139(1)(a) A company or a firm Irrespective of size of Income (even where
there is a loss)
139(1)(b) A person (other than an Is required to submit his/its return of income,
individual/HUF/AOP/BOI/artificial if income exceeds exemption limit
juridical person/company/firm)
139(1)(b) Read with sixth proviso Individual/HUF/AOP/BOI/artificial juridical
person is required to submit his/its return of
income, if income [without claiming deduction
under sections 10A, 10B, 10BA, 80C to 80U,
(for the assessment years 2017-18 and 2018-
19) under section 10(38 and (from the
assessment year 2020-21) under section
54/54B/54D/54EC/54F/54G/54GA/54GB]
exceeds the amount of exemption limit.
139(1)(b) Read with seventh proviso Any person (other than a company or a firm)
(applicable with effect from the who is not required to furnish the return of
assessment year 2020-21) income under any other provision of section
139(1) and who during the previous year-
a Has deposited an amount (or aggregate of
the amounts) exceeding Rs. 1 crore in one
(or more) current account(s) in a bank/co-
operative bank; or
b Has incurred expenditure of an (or
aggregate of the amounts) exceeding Rs. 2
lakh for himself (or any other person) for
travel to a foreign country; or
c Has incurred expenditure of an amount (or
aggregate of the amounts) exceeding Rs. 1
lakh towards consumption of electricity; or
d Fulfils such other conditions as may be

prescribed.
139(4A) Trust Must file return if income before exemption

u/s. sec. 11 or 12 exceeds maximum amount not

chargeable to tax.
139(4B) Political party Must file return if GTI before exemption u/s
13A exceeds maximum amount not chargeable
to tax.
139(4C) Scientific research association; Must file return if income before giving effect
News agency; etc. u/s. 10 exceeds maximum amount not
chargeable to tax.
139(4D) Any University/College / other Irrespective of size of Income (even where
institution referred to on Sec. there is a loss)
35(1) (ii) or (iii)
1. Illustration
Whether following assessee is compulsorily required file return of income;
Assessee Taxable Income before deduction Required to file return or not
Mr. Arnold 500000
Mr. Rock 30000
Fight Club Ltd. 10000
Friends Club Ltd. (-) 20000
• Assessee can file a return of income voluntarily irrespective of its size of income.
FORMS – RETURN OF INCOME
Rule 12 provides following Form for filing return of income for different assessee:
1 [Sahaj] For individuals having income from Salary / Pension / Income from One House
Property (excluding loss brought forward from previous years) / income from
Other Sources (Excluding Winning from Lottery and income from Race Horses).
2 For Individuals & HUFs not having income from Business or Profession.
3 For Individuals/HUFs being partners in firms and not carrying out business or
profession under any proprietorship.
4 For Individuals & HUFs having income from a proprietary business or profession.
ITR–4(i.e., For an individual or a resident and ordinarily resident HUF or a resident firm (not
Sugam) being LLP) deriving business income and such income is computed in accordance with
special provisions referred to in section 44AD, 44ADA, or 44AE.
5 For firms, AOPs and BOIs
6 For Companies other than companies claiming exemption under Sec. 11
7 For persons including companies required to furnish return under section 139(4A)
or section 139(4B) or section 139(4C) or section 139(4D).
ITR – V Indian Income tax Return Verification Form [Where the data of the Return of
Income in Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-4S & ITR-5 transmitted

electronically without digital signature].

Mode of submission: Mode of submission of income tax return.
Person Conditions Mode of furnishing return

Individual/ Case 1: accounts are required to Electronically with digital signature
HUF be audited under section 44AB.
Case 2: return submitted by an Electronic mode given in case 3; or
individual (who was born before Paper format
April 2, 1939) in ITR- 1 or ITR-4
Case 3: any other case Return can be submitted by using any one of
the following electronic modes-
a) Electronically under digital signature or-
b) Transmitting the data in the return
electronically under electronic verification
code or-
c) Transmitting the data in the return
electronically and thereafter submitting
the verification of the return in form ITR-
Vț
Company Case 4: any company Electronically with digital signature
Person Case 5: Political party Electronically with digital signature
required to Case 6: any other case Electronic mode given in case 3
furnish
return in
ITR-7
Firm LLP or Case 7: accounts are required to Electronically with digital signature
any person be audited under section 44AB
(not Case 8: any other case Electronic mode given in case
mentioned
above)
required to
furnish
return in
ITR-5
Note for the aforesaid table electronic verification code means a code generated for the
purpose of electronic verification of the person furnishing the return income as per
the data structure and slandered specified by principle director general (systems) or
Director general (systems)

TIME LIMIT FOR FILING RETURN OF INCOME [EXPLANATION 2 TO SEC. 139(1)]
Return should be filed on or before the following due date (of respective assessment year)
Assessee Due date
1. Company
• Where the company is required to furnish a report in Form 3CEB 30th November.
u/s. 92E pertaining to international transaction(s)
• In case of any other company. 31th October
2. Any other assesse
• Where accounts of the assessee are required to be audited under 31th October
any law.
• Where the assesse is a partner in a firm whose accounts are 31th October
required to be audited under any law [or (with effect from the
assessment year 2021-22) the spouse of such partner if the
provisions of section 5A applies to such spouse]
• In any other case. 31st July.
WHEN A RETURN OF LOSS SHOULD BE FILED [SEC. 139(3)]
1. Following assessee need to file return of income irrespective of income or loss.

• A Company.
• A firm, and
• A University College / other institution referred to on Sec. 35(1)(ii) or (iii).

2. An assessee other than above is not compulsorily required to furnish return of loss.
However, the following losses cannot be carried forward if the return of loss is not
submitted within the time allowed u/s. 139(1).
a) Business loss (speculative or otherwise).
b) Capital loss.
c) Loss from the activity of owning and maintaining race horses.
3. KEY NOTES
a) Loss declared in belated return cannot be carried forward. However, set-off of losses
of current year is not prohibited while computing the total income, even if the return of
loss is filed after the due date.
b) Delay in filing the return of loss may be condoned in certain cases.
c) Unabsorbed depreciation u/s. 32 and loss under the head “Income from House
Property”
can be carried forward even if the loss return is filed after the due date u/s. 139(1).
d) Although the loss of the current year cannot be carried forward unless the return of

loss is submitted before the due date but the loss of earlier years can be carried
forward if the return of loss of that year was submitted within the due date.
BELATED RETURN [SEC. 139(4)]
Situation If an assessee fails to file return within the time limit allowed u/s. 139(1) or
within the time allowed under a notice issued u/s. 142(1), he can file a belated
return.
Time limit Assessee may file such return before
December 31 of relevant assessment year or the completion of assessment,
whichever is earlier (applicable from the assessment year 2021-22).
Note However, if an assessee files a belated return, he would be liable to penal
interest u/s. 234A.
Consequences 1 The assessee will be liable for penal interest under section 234A.
of late 2 The assessee shall be liable for late filing fee under section 234F from the
submission assessment year 2018-19 onwards.
REVISED RETURN [SEC. 139(5)]
1. Situation
If an assessee discovers any omission or wrong statement (Bonafide in nature) in return
originally filed, he can revise his return u/s. 139(5).
2. Conditions to file a revised return
1 Only return filed u/s. 139(1) or in pursuance of a notice u/s. 142(1) can be
revised. Even belated return U/S 139(4) can be revised.
2 Revised return can be filed only if the assessee discovers any omission or wrong
statement in return originally file in other words, an assessee cannot revise a return
if the omission or error in the original return was pre-known to him.
3. Time limit
Assessee may file such return before
December 31 of relevant assessment year or the completion of assessment, whichever is
earlier (applicable from the assessment year 2021-22).
4. Replacement of original return
Once a revised return is filed, it replaces the original return. This signifies that the revised
return should be complete in itself and not merely an accessory to the original return.
5. Permission
There is no need to seek permission to file a revised return.
6. Revision of revised return
A revised return can again be revised i.e. a second revised return can be filed u/s. 139(5) for

correcting any omission or wrong statement made in the first revised return within such time
(i.e. one year from the whichever is earlier).
7. Revision of loss return
A loss return can be revised.
8. Time limit for assessment in case of revised return
the period of limitation for completion of assessment prescribed u/s. 143(1) will run from the
date of filing of latest revised return.
DEFECTIVE RETURN [SEC. 139(9)]
1. Meaning of defective return

A return of Income shall be regarded as defective, in the following cases –
a The Annexures, Statements and Columns in the return of Income have not been duty
filed in.
b The return is not accompanied by the general Details and Specific Details)
2. Time limit for rectification
The assessee must rectify the error within a period of 15 days from the date of
intimation (served on the assessee) or within such extended time as allowed by the
Assessing Officer.
3. Consequence when defect is not rectified
If defect is not rectified within the time limit, the Assessing Officer will treat the return
as an invalid return and provisions of the Act will apply as if the taxpayer had failed to
furnish the return at all.
4. Amendments
A proviso has been inserted in the said explanation empowering the Board to specify (vide
notification) that any of the above conditions shall not apply for a class of assesse or shall
apply with such modifications, as may be specified in such notifications.
RETURN OF INCOME OF CHARITABLE TRUST [SEC. 139(4A)]
Every person who is in receipt of:

Income from property held under the trust or other legal obligation wholly or partly for
charitable or religious purpose; or Income by way of voluntary contribution on behalf of such
trust or institution.
And if such income before allowing exemption u/s. 11 or 12 exceeds the maximum amount which is
not chargeable to tax, must file a return before the due date as per sec. 139(1).
Penalty Where an assessee fails to file return of income under this section, within the time
limit. It shall be liable to pay a penalty of Rs. 100 per day during which such failure
continues [Sec. 272A(2)].

RETURN OF INCOME OF POLITICAL PARTY [SEC. 139(4B)]
The chief executive officer, (whether such chief executive officer is known as Secretary or by
any other designation) of any political party is required to furnish a return in respect of Income
of such political party, if the amount of gross total income before allowing exemption u/s. 13A
exceeds the maximum amount not chargeable to tax must file a return, if the total income
without giving effect to the provisions of sec. 10 exceeds the maximum amount which is not
chargeable to Income-tax.
limit, it shall be liable to pay a penalty of Rs. 100 per day during which such failure
continues [Sec.272A(2)].
RETURN OF INCOME OF RESEARCH ASSOCIATION, ETC. [SEC. 139(4C)]
An assessee being –
Section Organization
Sec. 10(21) Research association (including a research association having as
its object undertaking research in social science or statistical
science)
Sec. 10(22B) News agency
Sec. 10(23A) or Sec. Specified association or institution
10(23B)
Sec. 10(23C)(iv) Specified Fund or institution
Sec. 10(23C)(v) Specified trust on institution
Sec. 10(23C)(vi),(iia) / (iia) Any university of other educational institution
Sec. 10(23C)(via) Any hospital or other medical institution
Sec. 10(24) Trade union or an association of such union
Sec. 10(46) Anybody or authority or board or trust
Sec. 10(47) Infrastructure debt fund
Sec. 10(23D) A Mutual fund
Sec. 10(23DA) Securitization trust
Sec. 10(23FB) Venture Capital company or venture capital fund
Of which income before claiming exemption u/s 10, exceeds the maximum amount which is not
chargeable to income-tax must file a return of income.
limit, it shall be liable to pay a penalty of Rs. 100 per day during which such failure
continues [Sec. 272A(2)].

RETURN OF INCOME BY A UNIVERSITY / COLLEGE ETC. (SEC. 139(4D)]
Every University, college or other institutions referred to in sec. 35(1)(ii) or (iii) is required to
furnish a return in respect of income or loss irrespective of size of income or loss.
RETURN BY AN INVESTMENT FUND [SEC. 139(4F) [W.E.F. A.Y. 2016-17]
Every Investment Fund as referred u/s 115UB must file return of income irrespective of size of
income.
DETAILS TO BE FURNISHED IN THE RETURN OF INCOME [SEC. 139(6)/(6A)]
1. For All Assessee

Following details are to be furnished by all Assessee in the Return of Income
a Income exempt from tax
b Assets belonging to the Assessee, of the prescribed nature and value,
c W.e.f. 01/04/2016, Assets of the prescribed nature and value, held by him as a
beneficial owner or Otherwise in which he is a Beneficiary.
d Bank Accounts of the Assessee,
e Credit Cards held by the Assessee,
f Expenditure incurred by the Assessee under prescribed heads exceeding
the prescribed limits, and
g Such other outgoings as may be prescribed.
2. Personal engaged in Business or Profession
Assessee engaged in Business or profession shall furnish the following additional
particulars –
a Audit Report u/s 44AB, if applicable.
b Where report has been furnished prior to the furnishing of the Return, a copy of such
report and the proof of furnishing the Report.
c Particulars of the location and style of the principal place of business and the branches.
d Names and Addresses of the Partners / Members in case of Firm / AOP / BOI, and
e Extent of share of all such Partners / Members in the profit & Gains of the Business or
profession.

INTER-CHANGEABILITY OF PAN AND ADHAAR AND MANDATORY QUOTING IN PRESCRIBED

TRANSACTIONS [SEC. 139A]
Section 139(A), inter alia, provides that every person specified therein, who has not been
allotted a PAN, shall apply to the assessing officer for allotment of PAN.
1 In many cases, person entering into high value transactions (such as purchase as foreign
currency or huge withdraw from the banks) do not possess a PAN.
In order to keep an audit trail of such transactions, for widening and deepening of the tax
base, new clause (vii) has been inserted (with effect from September 1, 2019) in section
139A(1) so as to provide that every person, who intends to enter into certain prescribed
transactions and has not been allotted a pan, shall also apply for allotment of pan.
2 To ensure ease of compliance, modifications have been made to provide for inter
changeability of pan with the adhaar number.
For this purpose, provisions of section 139A have been amended (with effect from
September 1, 2019) as follows -
a Every person who is required to furnish or intimate or quote his pan under the act, and
he has not been allotted a pan but possesses adhaar number, may furnish or intimate or
quote his adhaar number, in lieu of pan and such person shall be allotted a pan in the
prescribed manner
b Every person who has been allotted a pan and who has been linked his adhaar number
under section 139AA. May furnish or intimate or quote his adhaar number in lieu of a pan
3 Section 139A, inter alia, provides that every person, receiving a document relating to
transaction for which pan is required to be quoted, shall ensure that the pan has been duly
quoted therein. This provision has been amended (with effect from the September 1, 2019)
to provide that every person receiving such documents shall also ensure that the pan or the
adhaar number as the case may be, has been duly quoted moreover sub section 6A has been
inserted in section 139A (with effect from September 1, 2019) to ensure quoting of pan or
adhaar number entering into prescribed transaction and authentication thereof in the
prescribed manner. moreover, sub section 6B has been inserted to provide that the person
receiving any document relating to such transactions shall ensure that pan/adhaar number is
duly quoted and authenticated.
QUOTING OF AADHAAR NUMBER SEC. 139AA
1 Every person who is eligible to obtain number shall, on or after the 1st day of July,
2017, quote Adhaar number –
i. In the application form for allotment of PAN
ii. In the RIO:
Provided that where the person does not possess the Aadhar Number, the Enrolment ID of
Aadhar application form issued to him at the time of enrolment shall be quoted in the

application for PAN or, as the case may be, in the RIO furnished by him.
2 Every person who has been allotted PAN as on the 1st day of July, 2017 and who is
eligible to obtain Aadhar number, shall intimate his Aadhar number to such authority in
such form and manner as may be prescribed, on or before a date of to be notified by
the Central Government in the Official Gazette:
Provided that in case of failure to intimate the Aadhar number, the PAN allotted to the
person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the
person had not applied for allotment of PAN.
3 The provisions of this section shall not apply to such person or class or classes of
persons or any State or part of any State, as may be notified by the Central
Government in this behalf, in the Official Gazette.
AMENDMENT TO SECTION 139 AA
Section 139AA(2) provides that the pan allotted to a persons shall be deemed to be invalid,
in case the person fails to intimate the adhaar number, on or before the notified date.
In order to protect validity of transactions previously carried out through a such pan, the
scheme of section 139 AA has been modified (with effect from September 1, 2019) to provide
that if a person fails to intimate the adhaar number, the pan allotted to such person shall be
made inoperative in the prescribed manner.
SCHEME TO FACILITATED SUBMISSION OF RETURNS THROUGH TAX RETURN PREPARERS [SEC – 139B]
• For the purpose of enabling any specified classes of persons to prepare and furnished
returns of income, the board has framed a scheme providing that such persons may furnish
their returns of income through a Tax Return Preparer authorised to act as such under the
scheme.
• The scheme specifies the manner in which the Tax Return preparer shall assist the persons
furnishing the return of income, and shall also affix his signature on such return.
UPDATED RETURN [SECS. 139(8A), 140B3, 144, 153, 234A, 234B AND 276CC]
Any person may furnish an updated return of his income (or the income of any other person
in respect of which he is assessable under the Act) for the previous year relevant to such
assessment year. The provisions given below pertaining to updated return are applicable
from April 1, 2023 -
1 Time limit -
Updated return under section 139(8A) can be submitted at any time within 24 months from
the end of the relevant assessment year. For instance, updated return for the assessment

year 2023-24 can be submitted on or before March 31, 2025.

2 Who can submit updated return -
Updated return can be submitted by any person whether (or not) he has furnished a return
under section 139(1)/(4)/(5) for an assessment year (herein referred to as the relevant
assessment year).
Other points -
The following points should be noted
a If a person has sustained a loss for any previous year and he has already submitted
return of loss for that year within due date [as given in section 139(1)], he can furnish
an updated return for that year under section 139(8A) where such return is a return
of income.
b If as a result of submitting updated return under section 139(8A), the quantum of
carried forward loss (or unabsorbed depreciation or MAT/AMT credit) is to be
reduced for any subsequent year, then an updated return shall be furnished for each
such subsequent year.
3 When updated return cannot be submitted
In the following cases updated return cannot be submitted
a If updated return is a return of a loss.
b If updated return has the effect of decreasing the total tax liability determined on
the basis of return furnished under section 139(1)/(4)/(5) or results in refund or
increases the refund due on the basis of return furnished under section 139(1)/(4)/(5),
of such person for the relevant assessment year.
c A person shall not be eligible to furnish an updated return, if
- Search has been initiated under section 132 or books of account, other documents
or any assets are requisitioned under section 132A in the case of such person, or
- a survey has been conducted under section 133A [other than sub-section (2A)) of
that section in the case of such person, or
- a notice has been issued to the effect that any money, bullion, jewellery or
valuable article or thing, seized or requisitioned under section 132 or section
132A in the case of any other person belongs to such person, or
- a notice has been issued to the effect that any books of account or documents,
seized or requisitioned under section 132 or section 132A in the case of any other
person, pertain or pertains to, or any other information contained therein, relate
to, such person.
This provision is for the assessment year relevant to the previous year in which such
search is initiated, or survey is conducted or requisition is made and any assessment year
preceding such assessment year. For instance, if search is initiated on May 25, 2026, then
belated return cannot be submitted for the assessment year 2026-27 or any preceding
assessment year.

4 Updated return to be accompanied by proof of payment of tax and additional Income

tax -
By virtue of Explanation (ca) to section 1399), updated return cannot be submitted unless
it is accompanied by proof of payment of tax as required by section 140B (ie, tax and
additional income-tax).
SIGNING OF RETURN U/S. 140
Assessee Case Signed and verified by

Individual In general Individual himself.
Where the individual concerned is Individual himself or by the duly
absent from India. authorized person of such individual.
Where the individual is mentally Guardian of such individual or any
incapacitated. other person competent to act on his
behalf.
Where by any other reason it is not Any person duly authorized by him.
possible for the individual to sign the
return.
Note: When return is signed by any authorized person in that case the return
should be accompanied with power of attorney.
HUF In General Karta
Where the ‘Karta’ is absent from Any adult member of the family
India or is mentally incapacitated.
Firm In general Meaning partner
If due to any reason it is not possible Any adult partner.
for meaning partner to sign or where
there is no managing partner.
Limited In general Designated partner.
liability
partnership
If due to an unavoidable reason such Any partner.
designated partner is not able to sign
and verify the return, or where there
is no designated partner as such.
Local Principal officer
authority
Political Party Chief Executive Officer In general
Company In general MD
If due to any reason it is not possible Any Director
for MD to sign or where there is no

MD
Any other Any other person Principal Officer.
association
PERMANENT ACCOUNT NUMBER
1. Meaning
Permanent Account Number (PAN) is a 10 characters alpha-numeric code which is used for
identification of the assessee.
2. Who need to apply of PAN
• A person whose total income exceeds exempted limit.
• A person whose turnover / gross receipts is expected to exceed Rs. 5 lac during the
previous year.
• Every person, being a resident, other than an individual, which enters into a financial
transaction of an amount aggregate to Rs. 2,50,000 or more in a financial year.
• Every person who is the managing director, director, partner, trustee, author, founder,
Karta, chief executive officer, principal officer or office bearer of the person
mentioned in (iii) above or any person competent to act on behalf of such person.
• A charitable trust which is required to furnish return u/s 139(4A)
• A person who requires registration under any GST law must apply for PAN before making
application for registration
• A person who requires registration under the Central Excise Act must apply for PAN
before making application for registration.
• A person who requires export-import code apply for PAN before making application for
registration.
3. Time limit for making application
Person whose total income exceeds maximum exempted limit Till 31st May of A.Y.
Person whose turnover is expected to exceed Rs. 500000 Till the end of accounting year
4. Voluntary application
Any person can voluntarily apply for a PAN. Such person need not to file return unless he
falls under criteria of Sec. 139
5. Whom to apply
Application must be made to the person who has been assigned the function of allotment of
PAN. In case no such person then to jurisdictional Assessing Officer
6. Form
Application must be made in Form 49A
7. Fee
Nil, there is no fee for applying for PAN
8. Utility

Since PAN is the identification of the assessee therefore PAN must be quoted on-
• Return of income
• Challans of payment of any sum to the Department.
• Any correspondence with income-tax authority
9. Penalty
If a person fails to apply for PAN or quotes wrong PAN then they shall be liable for a penalty
of Rs. 10000.
10. Suo-Moto Allotment of PAN
• As per Sec. 139A(1B), the Central Government may by notification, specify any class of
person to apply to the assessing Officer, within the prescribed time, for the allotment
of the PAN.
• The Assessing Officer is empowered u/s 139A(2) to allot a PAN to any person other than
the person falling under the category mentioned above.
11. Where to quote PAN
Every person shall quote its PAN on the following documents (illustrative only)
• Transactions of an immovable property of not less than Rs. 5 lakhs
• Transactions of a Motor vehicle, which requires registration.
• Transactions of securities exceeding Rs. 100000.
• Term deposits in a bank exceeding Rs. 50000.
• Deposit exceeding Rs. 50000 with Post Office Savings Bank A/c
• Payment of an amount of Rs. 50000 or more to any mutual fund for purchase of its units.
• Payment of an amount of Rs. 50000 or more to a company or institution for acquiring
debentures or bond issued by it.
• Payment of an amount of Rs. 50000 or more to RBI for acquiring bonds issued by it.
• Transactions of hotels or restaurants bills exceeding Rs. 25000 at a time
• On purchase of a Bank Draft Rs. 50000 or more in cash in a day.
• On cash-deposit of Rs.50000 or more in a Bank Account in a day.
• Application for opening a bank account.
• Application for a telephone connection (including mobile phone).
• Application to Banking Company or any other institution for issue of a credit card.
12. Person Exempted from quoting PAN
• In case a person is having agricultural income but does not receive any taxable income.
However, such person will have to furnish a declaration in Form 61 in respect of each
prescribed transaction.
• Non-Residents;
• The Central or State Government or Consular Officers is transactions in which they are
payer.

13. Minor to quote PAN of parent or guardian

Where a person, entering into any transaction referred to in this rule, is a minor and who
does not have any income chargeable to income-tax, he shall quote the PAN of his father or
mother or guardian, as the case may be in the document pertaining to the said transaction.
14. Declaration by a person not having PAN
Further, any person who does not have a PAN and who enters into any transaction specified
in this rule, shall make a declaration in Form No. 60 giving therein the particulars of such
transaction either in paper form or electronically under the electronic verification code in
accordance with the procedures, data structures, and standards specified by the Principal
Director General of Income-tax (Systems) or Director General of Income-tax (Systems).
15. PAN on TDS
PAN is required to be intimated to the person who has deducted the tax at source.
16. Exceptions
In case of an assessee who furnishes to the payer a declaration in writing in the prescribed
form (Form 15G or 15H) and manner to the effect that the tax on his estimated total income
is nil, he is not required to intimate his PAN.
17. [Sec. 139A (5D)]
The person deducting tax at source is required to quote PAN of the payee, PAN of himself
and Tax Deduction Account Number (TAN) of himself in all statements, certificates
furnished u/s 200(3) or 203 or 206
18. PAN on TCS [Sec. 139A(5D)]
Every person who is responsible for collecting tax in accordance with the provisions of Sec.
206C shall quote PAN of every buyer or licensee or lessee in all certificates furnished in
accordance with the provisions of Sec. 206C(3) or 206C(5) and in all returns prepared u/s
206(5A)/(5B) to the Income tax authority.
Case Form No.
For Indian Citizen / Indian Company / Entitles incorporated in India / 49A
Unincorporated entitled formed in India
For Individuals not being Indian Citizen / Entitles incorporated outside India / 49AA
Unincorporated entitles formed outside India.
SEC. 140B: HOW TO CALCULATE TAX ON UPDATED RETURN
1 Mode of computation of tax (including additional tax) is given by section 140B as

follows:
a Where assessee has not furnished return earlier Where no return of income under
section 139(1)/(4) has been furnished by an assessee, he shall before furnishing
updated return under section 139(8A) is liable to pay the tax due together with
interest and fee payable under any provision of the Act for any delay in furnishing the
return or any default or delay in payment of advance tax, along with the payment of

additional tax. The tax payable shall be computed after considering the following:
- the amount of advance tax (already paid);
- any TDS/TCS:
- any relief of tax claimed under section 89/90/90A/91;
- any AMT credit/MAT credit under section 115JAA/115JD.
2 Such updated return shall also be accompanied by proof of payment of such tax,
additional tax, interest and fee under section 234F –
b Where assessee has furnished return earlier-If an assessee has furnished return
under section 139(1)/(4)/ (5) (referred to as earlier return), he (before submitting
updated return) is liable to pay the tax due together with interest payable under any
provision of the Act for any default or delay in payment of advance tax, along with the
payment of additional tax, as reduced by the amount of interest paid in the earlier
return. The tax payable shall be computed after considering the following
- the amount of relief or tax, referred to in section 140A(1), credit for which has
been taken in the earlier return;
- TDS/TCS on any income which is subject to such deduction or collection, and which
is taken into account in computing total income and which has not been claimed in
the earlier return;
- any relief of tax or deduction of tax claimed under section 90/90A/91 which has
not been claimed in the earlier return:
- any MAT/AMT credit claimed, to be set off which has not been claimed in the
earlier return. The aforesaid tax shall be increased by the amount of refund, if
any, issued in respect of earlier return. The updated return shall be accompanied
by proof of payment of such tax, additional tax, interest and fee.
c Computation of additional tax-The additional tax payable at the time of furnishing
updated return shall be calculated as follows -
If updated return is furnished after expiry of time 25 per cent aggregate of tax (+
available under section 139(4)/(5) but before SC + HEC) and interest as
completion of 12 months from the end of the computed above
relevant assessment year
If updated return is furnished after the expiry of 50 per cent of aggregate of tax
12 months but before completion of 24 months from (+SC+ HEC) and interest as
the end of the relevant assessment year computed above
d How to calculate interest under section 234B where an earlier return is furnished
Where an earlier return has been furnished, interest payable under section 234B shall
be computed on an amount equal to the assessed tax (or on the amount by which the
advance tax paid falls short of the assessed tax). For this purpose, "assessed tax"
means the tax on the total income as declared in updated return after considering the
following
- the amount of relief or tax, referred to in section 140A(1), the credit for which

has been taken in the earlier return:

- TDS/TCS on any income declared in updated return and which has not been claimed
in the earlier return;
- any relief/deduction under section 90/90A/91 which has not been claimed in the
earlier return;
- any AMT/MAT credit under section 115JAA/115JD, which has not been claimed in
the earlier return.
The aforesaid tax shall be increased by the amount of refund, if any, issued in respect of
such earlier return.
Other points - The following points should be noted
- If no earlier return is furnished, interest payable under section 234A shall be
calculated on the basis of tax on total income as declared in the updated return.
- If earlier return is furnished, interest payable under section 234C shall be
computed after considering the total income furnished in the updated return as
the returned income.
- For the purpose of additional tax, interest payable shall be interest chargeable
under any provision of the Act on the income as per updated return, as reduced by
interest paid in earlier return. However, the interest paid in the earlier return
shall be considered to be nil if no earlier return has been furnished.

1. As per section 139 (1), a company 2. For which of the following, the filing of
shall have to file return of income: return of income is mandatory? (June
2021)
a When its total income exceeds Rs. a Acquired jewellery for ₹ 2,10,000
2,50,000
b When its total income exceeds the b Made foreign travel and incurred
maximum amount, which is not expenditure of ₹ 2,05,000
chargeable to income tax
c In all cases irrespective of any c Made aggregate cash deposit in a savings
income or loss earned by it. bank account of ₹ 10,01,000 in the previous
year
d Paid electricity bill of ₹ 56,000 in the
previous year
3. As per section 139(1), an individual 4. The return of income for the previous
other than an individual of age of 60 year 2022-23 required to be filed by an
years or more shall have to file individual who is not a senior citizen as
return of income if: per section 139(1) of the Act by 30th
September, 2023. However, the assessee
finds that he cannot file the return as
per 139(1) within the due date. Can he
file his return of income after the due
date and if yes, by which date/time? (Dec
2020)
a His total income exceeds Rs. 2,50,000 a On or before 31st December, 2022
b His total income exceeds Rs. 3,00,000 b On or before 31st March, 2023
c His total income exceeds Rs. 2,00,000 c On or before 31st March, 2024
d His Gross Total Income before claiming d On or before 30th June, 2023
exemption u/s 10(38) & Chapter VI-A
exceeds the exempted celling.
5. An individual who is of the age of 60 6. A woman who is resident in India and less
years or more but non – resident in than 60 years of age shall have to file
India shall have to file return of the return of income if her total income
income if: exceeds:
a His total income exceeds Rs. a Rs. 2,00,000
3,00,000
b His total income before allowing b Rs. 2,50,000 before allowing exemption

under section 80C to 80U exceeds Rs. u/s 10(38)

3,00,000
c His Gross Total Income before c Rs.2,00,000 before allowing deduction
claiming exemption u/s 10(38) under section 80C to 80U
exceeds Rs. 2,50,000
7. A woman who is non – resident in 8. As per section 139 (1), a person other
India and who is 60 years of age shall than a company or a firm shall have to
have to file the return of income if file return of income if:
her total income exceeds
a Rs. 2,50,000 before allowing exemption a His total income exceeds Rs. 2,50,000
u/s 10(38)
b Rs. 2,50,000 after allowing exemption b His total income exceeds the maximum
u/s 10(38) amount which is not chargeable to tax
c Rs. 3,00,000 before allowing deduction c His total income exclusive of exemption
under section 80C to 80U u/s 10(38) exceeds the maximum amount
which is not chargeable income tax
d In all cases irrespective of any income or
loss
9. The total income of a trust before 10. A dies on 15.11.2022 and his total income
claiming exemption u/s 11 is Rs. till 15.11.2022 was Rs. 2,60,000.
3,40,000. It is eligible for exemption Thereafter the business of A was
u/s 11 to the extent of Rs. inherited by his son R & his total income
1,00,000. Such trust shall: from such business was Rs. 1,95,000.
The son does not have any other income.
In this case the son:
a Have to file a return of income a Has to file a consolidated return of
income amounting to Rs. 4,55,000
b Has to file two returns of income, one on
half of his father for Rs. 2, 60,000&
other in his own capacity for Rs. 1,
95,000.
b Not be required to file return of c Has to file one return of income on behalf
income as its taxable income is Rs. of his father for Rs. 4,55,000
2,40,000 d Has to file only one return of income on
behalf of his father for Rs. 2,60,000
11. The last date of filing the return of 12. The last date of filing the return of
income u/s 139 (1) for AY 23 - 24 in income u/s 139 (1) for AY 23 - 24 is

case of a company assessee is: case of non-corporate assessee who does

not have any income under the head
profits and gains from business or
profession is:
a 31th October a 31st July of the assessment year
b 31th October of the assessment year b 30th March of the assessment year
c 31st March of the assessment year c 31st March of the assessment year.
d 30th November of the assessment
year in case it is required to furnish
report referred to in section 92E and
31st October of the assessment year
in any other case
13. The last of filing the return of 14. The due date of filing the return of
income u/s 139(1) for AY 23 - 24 in income for AY 23 - 24 in case of a
case of non – corporate business working partner of a firm whose accounts
assessee whose accounts are not are liable to be audited shall be:
liable to be audited shall be:
a 31st July of the assessment year a 31st July of the assessment year
b 30th June of the assessment year b 31th October of the assessment year
c 30th October of the assessment year c 30th June of the assessment year
15. All companies other than those 16. Individuals having Income from Salaries,
covered u/s 25 are required to file one house property and Income from
return of income in: other sources and having total income upto
₹ 50 lakh is required to file return of
income in:
a Form ITR6 a ITR-1
b Form ITR5 b ITR-3
c Form ITR4 c ITR-2
d Form ITR7 d ITR-4
17. A return of income filed by the 18. Chand Ltd. filed its return of income on
assessee was found defective by the 7th December, 2023 declaring loss of ₹
CPC, Bengaluru. The assessee was 3,50,000 for AY 2023 - 24. Later, it
intimated of the defect on 02-04- noticed a claim of expenditure omitted in
2022. What is the time limit within the return filed. The revised return -
which the defect has to be rectified (June 2016)
by the assessee? (June 2021)
a 30-04-2022 a must be filed before 31st December, 2023

b 17-04-2022 b cannot be filed

c 30-09-2022 c must be filed before 31st March, 2024
d 31-03-2023 d Can be filed after completion of the
assessment
19. If the assessee has to carry forward 20. If there is a loss U/H house property, it
the loss, the return of loss must be will be allowed to be carried forward (if it
submitted: could not be set off from other heads of
income). In this case, however the
assessee:
a On or before the due date mentioned a Has to submit the return of loss before
in section 139(1) the due date mentioned under section
139(1)
b At any time before the end of the b Need not submit the return of income
relevant assessment year
c At any time before the expiry of one c Must submit the return of income but it
year from the end of the relevant can be belated return submitted as per
assessment year section 139(4)
21. Belated return u/s 139(4) can be filed 22. An assessee was issued a notice u/s 142
at any time: (1) (i) to file return of income within 30
days of the receipt of notice. He
submitted his return within 30 days. Such
return shall be treated as:
a Before the expiry of the relevant a Belated return as per section 139 (4)
assessment year though filed within time
b Before the expiry of one year from the b Return filed within time
end of the relevant assessment year
c December 31 of relevant assessment c Return filed within due date mentioned
year or the completion of assessment, u/s 139 (1)
whichever is earlier (applicable from the d Return filed within time if he is neither
assessment year 2021-22). covered section 139 (1) and belated return
as per section 139 (4) though filed within
time if he is covered either under section
139(1).
23. The assessee could not file his return 24. The assessee could not file his return of
of income for AY 23 - 24 within the income for AY 23 - 24 within the time
time allowed u/s 139 (1). No allowed as per section 139(1). His
assessment has so far been made. assessment u/s 144 was completed on

The assessee in this case can file his 15.1.2024 & it was communicated to him
return of income till: on 19.1.2024. the assessee in this case
could file the belated return till:
a 31.12.2023 a 31.12.2023
b 31.3.2024 b 15.1.2024
c 31.3.2025 c 18.1.2024
d 19.1.2024
25. For the PY 22 - 23 assessee has 26. For the PY 22 - 23, the assessee
suffered a business loss of Rs. incurred loss under the head, income from
2,50,000. His income from the house property amounting to Rs.
sources is Rs. 1,80,000. His due date 1,20,000. His other income for the same
of return was 31.7.2023 but he previous year is Rs. 50,000. The due date
submitted the return on 9.9.2023, of filing the return of income is
the assessee in this case: 31.7.2023 but the submitted the return
of income on 9.9.2023. in case the
assessee:
a Shall be allowed to carry forward any a Shall be allowed to carry forward the loss of
loss of Rs. 70,000 Rs. 70,000
b Shall not allowed to carry forward any
loss
c Shall be allowed to set off current year c Shall not be allowed to carry forward the
business loss to the extent of Rs. loss of Rs. 70,000
1,80,000 but shall be not allowed to
carry forward the balance loss of Rs.
70,000
d Shall not allowed to set off the business
loss to the extent of RS. 1,80,000 &
would be liable to tax on Rs. 1,80,000
27. For the PY 22 - 23, the business 28. For the PY 22 - 23, the business loss of
income for the assessee, before the assessee was Rs. 1,00,000 and the
providing current year depreciation current year depreciation was
was Rs. 3,00,000, was Rs.2,40,000. Rs.1,40,000. The assessee furnished the
The assessee furnished the return of return of income on 15.12.2023 although
income on 15.12.2023 although the the due date was 31.10.2023. in this
due date was 31.10.2023. in this case the assessee shall:
case the assessee shall:
a Be allowed to carry forward unabsorbed a Be allowed to carry forward business loss of
depreciation of Rs. 60,000 Rs. 1,00,000 and unabsorbed depreciation of

Rs. 1,40,000
b Not be allowed to carry forward b Neither be allowed to carry forward
unabsorbed depreciation of Rs. 60,000 business loss nor the unabsorbed
depreciation
c Not be allowed to carry forward business
loss but shall be allowed to carry forward
unabsorbed depreciation
29. The assessee in response to a notice 30. The due date of furnishing the return of
u/s 142 (1) submitted a return of loss income for assessment year 2023 – 24 in
of Rs. 1,10,000 within the time case of charitable trust is:
allowed in the said notice. In this
case the assessee:
a Shall be allowed to carry forward such a 30th June of the assessment year
loss as the return is filed within the
time allowed
b Shall not be allowed to carry forward b 31st July of the assessment year
such loss c 31th October of the assessment year
31. Mr. Chalu finds some mistake in the 32. Band Ho Gaya Ltd. who submitted the
return of income submitted by him on return of income for AY 23 - 24 on
5.6.2023 for AY 23 - 24. He wishes 5.12.2023 finds some mistake in the
to revise such return. No assessment return submitted by it. In this case Band
has been done in this case. Mr. Chalu Ho Gaya Ltd.
can revise such return till:
a 31.12.2023 a Can revise the return of income till
31.12.2023
b 31.3.2025 b Can revise the return of income till
31.3.2024
c 31.3.2026 c Cannot revise such of income
33. Mr. Kala Jamun did not file any 34. Gampu, who submitted the return of
return of income for AY 23 - 24 income for AY 23 - 24 declaring an
although he was required to do so by income of Rs. 2,90,000 on 29.7.2023,
31.7.2023. He was issued notice u/s find some mistake and revised the return
142 (1) to file return of income which on 14.1.2024 declaring a loss of Rs.
he furnished within the time allowed 1,80,000. In this case Gampu:
in the notice. He, later on finds some
mistake in the return. In this case
Mr. Kala Jamun:

a Can revise such return a Shall be allowed to carry forward such

b Cannot revise such return loss
c Can revise such return but the loss, if c Shall not be allowed to carry forward
any cannot be carried forward such loss
35. Champu wishes to revise the return 36. The assessee filed his return of income in
submitted by him within the due date requisite form without attaching any
but in the meantime, he received a documents or proof of payment of tax.
notice u/s for security assessment. In The return so filed is
this case Champu:
a Can revise the return a Valid
b Cannot revise the return b Not valid
c Valid but be should file the documents
and proof of tax within 15 days of
submitting such return
37. A return filed u/s 139(4) is called 38. A return of income when notified as
defective, has to be rectified within -
(Dec. 2015)
a Belated return a 30 days
b Original return b The financial year
c Revised return c 15 days
d Loss return d 60 days
39. Wadapav Ltd. engaged in 40. Chacha Chachi & Co. is a partnership firm
manufacturing of cement also had whose turnover for the previous year
wind mills to generate power. Entire 2022-23 was Rs. 220 lakhs. The 'due
power generated by it was used by its date' for filing the return of income of
wholly owned subsidiary Potato Ltd. the firm is: (June, 2017)
The amount received for the said
power supply was Rs. 7 crore.
Wadapav Ltd. disclosed total income
of Rs. 10 crore for the assessment
year 2023-24. The due date for
filing return of income by Wadapav
Ltd. is - (June 2016)
a 31st July, 2023 a 31st July, 2023
b 30th September, 2023 b 31st October, 2023
c 31st October, 2023 c 30th November, 2023
d 30th November, 2023 d 31st March, 2024

41. Hindu Undivided Family (HUF) of 42. The business income of the assesse
Vinay consisted of himself, his major before adjusting unabsorbed depreciation
son, minor son and his wife. At the of Rs.3,50,000 is Rs.1,50,000. He
time of filing of return of income of submitted his return of income on 16-12-
the HUF for AY 2023-24, Vinay was 2023, the assesse in this case:
out of country. The return of income
of the HUF can be signed in this case
by: (June, 2019)
a Karta a Be allowed to adjust unabsorbed
depreciation to the extent of income and
balance shall be carried forward.
b Authorized Tax Consultant b Not be allowed to adjust unabsorbed
depreciation and entire Rs 3,50,000 shall be
lapsed
c Major Son c Be allowed to adjust unabsorbed
depreciation to the extent of income
however balance shall be lapsed
d Minor Son d Not be allowed to adjust unabsorbed
depreciation in the current year but entire
Rs. 3,50,000 shall be carried forward
43. A partnership firm whose sales 44. For which of the following transactions,
turnover is Rs. 250 lakh has derived quoting of PAN is mandatory. (June 2021)
income from an industrial undertaking
entitled to deduction u/ s 80-IB. The
due date for filing the return of
income for the AY 2023 - 24 will be
— (June, 2015)
a 31st July, 2023 a Deposit of ₹ 26,000 in one day in post
office saving bank account
b 30th September, 2023 b Life insurance premium paid during the year
₹ 48,000
c 31st October, 2023 c Payment to hotel bills of ₹ 49,000
d None of the above d Fixed deposit in SBI of ₹ 55,000 on 10-02-
2023
45. Consequences in the case of not 46. A return filed by Ms. Mala was found to
rectifying defect with in specified/ be defective. The Assessing Officer gave
extended time limit is - notice of the defect to the assessee.

Time-limit for rectification of the defect

is - (June 2016)
a Defective return shall be treated as a 30 Days
a return filed u/s 139(1).
b Defective return shall be treated as b 15 Days
an invalid return
c Defective return shall be treated as c 45 Days
return filed u/s 142(1)
d All of the above d 60 Days
47. Individuals having Income from 48. A partnership firm having 9 trucks
Salaries, one house property and engaged in the business of plying these
Income from other sources and having trucks on hire is to file its return of
total income upto Rs. 50 lakh is income for the assessment year 2023-24
required to file return of income in: on the basis of provisions of section
44AE. The partnership firm is required to
file its return of income in - (Dec. 2015)
a ITR-1 a Form ITR-4S
b ITR-3 b Form ITR-3
c ITR-2 c Form ITR-2
d ITR-4 d Form ITR-5
49. Individuals and HUFs not carrying out 50. A company assessee carrying on business
business or profession under any whose turnover is Rs. 5 crores is required
proprietorship are required to to furnish return of Income in;
required to file return on Income in:
a ITR -2 a ITR-2
b ITR -3 b ITR-6
c ITR-4 c ITR-4
d ITR-1 d ITR-5
51. Which of the following persons is 52. Penalty for quoting or intimating wrong
liable to apply for PAN PAN or possessing more than one PAN is -
a Turnover/gross receipts of whose a Rs. 50,000
business or profession exceeds Rs.
5,00,000.
b If the total income of such person b Rs. 10,000
exceeds maximum amount not
chargeable to tax.

c A person liable to file a return u/s c Rs. 1,000

139(4A).
d All of the above d Rs. 100
53. Choose the transaction in respect of 54. Quoting of PAN is mandatory when a
which quoting of PAN is mandatory. person is entering into following
transactions:
(1) Sale of immovable property of Rs. 10
lakh or more
(2) Deposit of cash exceeding Rs. 50,000
in Post Office Savings Bank
(3) Deposit of cash aggregating Rs.
40,000 in one day in a bank
(4) Contract of sale and purchase of
securities exceeding Rs. 1 lakh
Select the correct answer from the
options given below - (Dec. 2015)
a Payment of Rs. 50,000 or more to RBI a (1), (2) and (3)
for acquiring bonds issued by it.
b Sale or purchase of any immovable b (1), (2) and (4)
property valued at Rs. 5,00,000 or more.
c Payment to hotels/restaurants against c (1), (3) and (4)
their bills for amount exceeding Rs.
25,000 at any one time.
d All of the above. d (1), (2), (3) and (4)
55. Mr. Bhukkad made following 56. Quoting of PAN is not necessary in the
transaction for the year ended 31st case of - (Dec. 2016)
March, 2022: (a) acquired immovable
property for Rs. 6 lakh; (b) made a
term deposit (TDR) of Rs. 60,000 in
a bank (c) paid Rs. 75,000 to a hotel
for his birthday party and (d)
deposited Rs. 45,000 cash in his
Savings Bank (SB) account. Quoting of
PAN is mandatory in which of these
transactions: (June 2019)
a Purchase of immovable property a Purchase of immovable property valued at
Rs. 50 lakhs
b TDR with bank and deposit of cash in b Payment of hotel bills Rs. 20,000

bank
c Payment to hotel for birthday party c Deposit of Rs. 75,000 into bank in a day
d All the three above in (a), (b) & (c) d Payment of Rs. 5,00,000 for purchase of
shares of a company

ASSESSMENT PROCEDURE
Assessment means to assess the income of the assessee i.e. to decide the income and tax
liability of the assessee on the basis of return filed, information gathered or to the best of
judgement of income tax department.
It begins with self-assessment i.e. assessment by the assessee himself.
SELF-ASSESSMENT [SEC. 140A]
In self-assessment, assessee itself is responsible to determine its taxable income, tax

liability and to pay tax accordingly. Provision of Sec. 140A is as follows:
a Where any tax is payable (after deducting relief, advance payment of tax or tax deducted or
collected at source or MAT credit, if any) on the basis of return furnished the assessee is
required to pay such tax before filing the return.
b If any interest is payable for delayed filing of return (u/s. 234A) or default in payment of
advance tax (u/s. 234B) or for deferment of advance tax (u/s. 234C) then such interest
should be paid along with self-assessment tax.
While calculating above interest for the purpose of self-assessment, tax on the total
income declared in the return shall be considered.
a. Where the amount paid by the assessee fails short of the aggregate of tax and
interest, the amount so paid shall first be adjusted towards interest payable and the
KEY NOTE
balance, if any, shall be adjusted towards tax payable.

b. After assessment, any amount paid under this section shall be deemed to have been
paid towards such assessment.
c. If an assessee fails to pay whole or any part of such tax or interest or both in
accordance with the provisions of Sec. 140A, he shall be deemed to be an assessee in
default.
Inquiry before assessment: Notice should be sent to assessee before assessment by
department as under.
In case in delay in furnishing of return of income self-assessment tax shall also include interest
for delay and fee for delay under Section 234.
ISSUE OF NOTICE TO THE ASSESSEE [SEC. 142(1)]
For the purpose of making assessment, the Assessing Officer may serve a notice on any
person:
• Who has submitted a return u/s. 139; or
• In whose case the time allowed u/s. 139(1) for furnishing the return has expired. Such

notice may relate to any of the following matter:

Notice to If the assessee has not submitted a return of income within the time
submit a return allowed u/s. 139(1) or before the end of the relevant Assessment Year,
[Sec. 142(1)(ii): the Assessing Officer may require him to submit a return in the
prescribed form on or before the date specified in the notice.
• Time limit
If a person has not submitted his return of income within the due date given under section
139(1), the Assessing Officer may serve a notice under section 142(1)(i) on such person
requiring him to furnish the return of his income in the prescribed form and manner. Such
notice can be issued at any time after the expiry of tme-limit given under section 139(1)
• In case assessee has not furnished the return of income, it is not mandatory for the
Assessing Officer to issue notice U/s. 142(1)(i) if he wishes to make best judgement
assessment.
Notice to The Assessing Officer may ask the assessee to produce such documents
produce or accounts for last 3 years prior to relevant previous year.
accounts,
documents etc.
[Sec. 142(1)(ii)]
2. Illustration
Assessing Officer issued a notice u/s. 142(1) seeking accounts for the year 2017 - 18 to 2021 -
22 for assessment of income for the PY 2022 - 23. State the validity of the notice.
Solution
AO can demand records for last 3 yrs prior to relevant PY 22 - 23.
Therefore notice demanding records for PY 21 - 22, 20 - 21 and 19 - 20 is valid whereas for
earlier period is invalid.
3. Illustration
In response to the notice from the Assessing Officer, an assessee company has filed a return of
loss for the A. Y. 23 - 24 on 14.10.2023 claiming the following items to be carried forward to the
next A. Y.:
Loss under the head capital gains Rs. 45,000
Business loss Rs. 2,74,000
Depreciation unabsorbed Rs. 3,92,000
Discuss the validity of the claims made by the assessee.
Solution
If return of loss not filed on time then following losses shall not be carried forward
a) Loss under the head capital gain
b) Business loss

Note: Unabsorbed depreciation can be carried forward even in case of belated return.
MAKING INQUIRY [SEC. 142(2)]
For the purpose of obtaining full information in respect of the income (or loss) of any person, the
Assessing Officer has the power to collect information from any source.
GIVING DIRECTION TO GET BOOKS OF ACCOUNT AUDITED [SEC. 142(2A) ]
The Assessing Officer (after giving reasonable opportunity to the assessee) may direct the
assessee to get his accounts audited if he is of the opinion that it is necessary to do so
having regard to the:
• Nature and complexity of the accounts of the assessee; and
• Interest of revenue.
Such direction can be issued even if the accounts of the assessee have already been
audited u/s. 44AB or any other law for the time being in force.
Notes:
a Such direction can be issued only with the prior approval of the Chief Commissioner /
Commissioner.
b The Chief Commissioner/Commissioner nominates such auditor.
c Such order can be issued at any stage of the proceedings before the Assessing Officer.
However, no such order shall be issued after the completion of assessment / reassessment.
d It is not necessary to issue show-cause notice or give an opportunity of being heard to the
assessee before issuing directions for audit u/s. 142(2A).
• Time Limit for audit Report
The audit report shall be furnished by the assessee within the period specified by the
Assessing Officer. The Assessing Officer has power to extend such period on an application
made by the assessee or suomotu. However, the aggregate period (fixed originally and
extended) shall not exceed 180 days from the date on which such direction is received
by the assessee.
• Form of audit Report
The chartered accountant shall submit the report in Form 6B to the assessee. Thereafter
such report is to be submitted by the assessee to the Assessing Officer within such period
as allowed by the Assessing Officer.
• Audit fees
The audit fees and audit expenditure shall be determined by the Chief Commissioner /
Commissioner (which shall be final) and paid by the Central Government.
• Consequences of failure to get books of account audited: In case assessee fails to get
books of account audited, it
• Will be liable to Best Judgement Assessment u/s. 144; and

• Attracts penalty of Rs 10,000 u/s. 271(1)(b) and prosecution u/s. 276D which may
extend upto 1 year.
Penalty etc. are attracted only if there is a default by the assessee. If

NOTE
KEY
accountant nominated by the Commissioner refuses to audit the accounts, the

assessee cannot be held responsible.
OPPORTUNITY OF BEING HEARD [SEC. 142(3)]
The assessee must be given an opportunity of being heard in respect of any material gathered on
the basis of any inquiry u/s. 142(2) or any audit u/s. 142(2A) and is proposed to be utilized for
the purpose of the assessment.
NOTES
KEY
Sec. 142(3) shall not be applicable in case of assessment u/s. 144.
ESTIMATION OF VALUE OF ASSETS BY VALUATION OFFICER [SECTION 142A]
1. The Assessing Officer may, for the purposes of assessment or reassessment, make a
reference to a Valuation Officer to estimate the value, including fair market value, of any
asset, property or investment and submit a copy of report to him.
2. The Assessing Officer may make a reference to the Valuation Officer under sub-section (1)
whether or not he is satisfied about the correctness or completeness of the accounts of the
assessee.
3. The Valuation Officer, on a reference made under sub-section (1), shall, for the purpose of
estimating the value of the asset, property or investment, have all the powers that he has
under section 38A of the Wealth- tax Act, 1957.
4. The Valuation Officer shall, estimate the value of the asset, property or investment after
taking into account such evidence as the assessee may produce and any other evidence in his
possession gathered, after giving an opportunity of being heard to the assessee.
5. The Valuation Officer may estimate the value of the asset, property or investment to the
best of his judgment, if the assessee does not co-operate or comply with his directions.
6. The Valuation Officer shall send a copy of the report of the estimate made under sub-
section (4) or sub- section (5), as the case may be, to the Assessing Officer and the
assessee, within a period of six months from the end of the month in which a reference is
made under sub-section (1).
7. The Assessing Officer may, on receipt of the report from the Valuation Officer, and after
giving the assessee an opportunity of being heard, take into account such report in making
the assessment or reassessment.

“Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act,
1957.
FACELESS INQUIRY AND VALUATION [SECTION 142B]
Section 142B has been inserted with effect from 1st November, 2020 to empower the Central
Government to notify the scheme for faceless processes for eliminating physical interface.
Faceless Scheme [Section 142B(1)]
The Central Government is empowered to make a scheme (faceless enquiry and valuation scheme)
by notification in the official gazette for the purpose of:
a. Issue notice u/s 142(1) or
b. Making enquiry to obtain full information in respect of income or loss of any person u/s
142(2) or
c. directing the assessee to get his accounts audited by an accountant u/s 142(2A) or
d. making a reference to the valuation officer to estimate the value of any asset, property or
investment u/s 142A.
The objective of the scheme is to impart greater efficiency, transparency and accountability by
a. eliminating the interface between the income-tax authority or Valuation Officer and the
assessee or any person to the extent technologically feasible;
b. optimising utilisation of the resources through economies of scale and functional
specialisation;
c. introducing a team-based issuance of notice or making of enquiries or issuance of
directions or valuation with dynamic jurisdiction.
ASSESSMENT BY ASSESSING OFFICER
SUMMARY ASSESSMENT [SEC. 143(1)]
1 Where a return has been made under section 139, or in response to a notice u/s
142(1), such return shall be processed in the following manner, namely:
a The total income or loss shall be computed after making the following adjustments,
namely:
i Any arithmetical error in the return;
ii An incorrect claim, if such incorrect claim is apparent from any information in the
return;
iii Disallowance of loss claimed, if return of the previous year for which set off of
loss is claimed was furnished beyond the due date specified u/s 139(1).
iv Disallowance of expenditure indicated in the audit report but not taken into
account in computing the total income in the return;

v Disallowance of deduction claimed u/s, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID

or section 80-IE, if the return is furnished beyond the due date specified u/s
139 (1) or
vi Addition of income appearing in Form 26AS or Form 16A or Form 16 which has
not been included in computing the total income in the return
2 Provided that no such adjustments shall be made unless an intimation is given to the assessee
of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered
before making any adjustment, and in a case where no response is received within 30 days of
the issue of such intimation, such adjustments shall be made;
3 “an incorrect claim apparent from any information in the return” shall mean a claim, on the
basis of an entry, in the return,-
i Of an item, which is inconsistent with another entry of the same or some other item in
such return;
ii In respect of which the information required to be furnished under this Act to
substantiate such entry has not been so furnished; or
iii In respect of a deduction, where such deduction exceeds specified statutory limit which
may have been expressed as monetary amount or percentage or ratio or fraction;
4 Time for sending the intimation
Intimation shall be sent before the expiry of 1 year from the end of the financial year in
which the return is made.
5 Processing of return not necessary
The processing of a return shall not be necessary before the expiry of such period, where a
notice has been issued to the assessee U/S 143(2)
SCRUTINY ASSESSMENT U/S. 143(3)
1 Where the Assessing Officer considers it necessary to ensure that the assessee has
not:
• Understand his income; or
• Declared excessive loss; or
• Under paid the tax.
He can make a scrutiny in this regard and gather such information and evidence as he deems fit.
And on the basis of such information and evidence so collected, he shall pass an assessment
order. Such order shall be treated as regular assessment order.
2 conditions for scrutiny assessment
• A return has been furnished u/s. 139 or in response to a notice u/s. 142(1), and
• Assessing Officer considers it necessary or expedient to ensure that the assessee has
not understated his income, declared excessive loss or under-paid the tax.

3 Notice For Scrutiny [Sec. 143(2(ii)]

• Assessing Officer shall serve on the assessee a notice requiring the assessee, on a date
specified in the notice, to produce, or cause to be produced, any evidence on which assessee
may rely in support of the return.
• Time Limit of Notice
a. Within 6 months from the end of the financial year in which return is furnished
(applicable up to March 31, 2021); or
b. Within 3 months from the end of the financial year in which return is furnished
(applicable from April 1, 2021).
4 Order
After collecting such information and hearing such evidence as the assessee produces in
response to the notice u/s. 143(2) and after taking into account all relevant materials, which
the Assessing Officer has gathered;
The Assessing Officer shall, by an order in writing, make an assessment of the total
income or loss of the assessee and determine the sum payable by him or refund of any
amount due to him on the basis of such assessment.
TIME LIMIT FOR COMPLETION OF SCRUTINY ASSESSMENT
Assessment u/s. 143(3) should be completed within 9 months from the end of the relevant
assessment year.
BEST JUDGEMENT ASSESSMENT [SEC. 144]
1. Situation
Under this section, assessment shall be made by the Assessing Officer to the best of his
judgement after considering all relevant materials which he has gathered.
Assessing Officer cannot reduce the tax liability of the assessee by assessment under this
section.
2. Tax point
A refund cannot be granted u/s. 144.
Situation in which it is applicable: In the following situations assessment shall be made
under this section:
Case 1 If any person fails to make a return required under section 139(1) and has not
made a return or a revised return under sub-section (4) or (5) of that section.
Case 2 If any person fails to comply with all the terms of a notice under section 142(1) or
fails to comply with the direction requiring him to get his accounts audited it
terms of section 142(2A)
Case 3 If any person, after having filed a return, fails to comply with the terms of a
notice under section 143(2), requiring his presence or production of evidence and
documents.

Case 4 If the Assessing Officer is not satisfied about the correctness or the
completeness of the accounts of the assessee or if no method of accounting has
been regularly employed by the assessee.
3. Note
In any of the given situation, the Assessing Officer is under is under an obligation to make
an assessment under this section. In other words. Best judgement assessment is not the
discretionary power of the Assessing Officer but mandatory in nature.
4. Opportunity of being heard
The assessment u/s. 144 can only be made after giving the assessee a reasonable opportunity
of being heard. Such opportunity shall be given by serving a “Show cause notice” calling upon
the assessee to show cause(s), on a date and time specified in the notice, why the
assessment should not be completed to the best of judgement of the Assessing Officer.
Exception Such opportunity need not be given, where notice u/s. 142(1) has already been
issued.
5. Time limit for completion of Assessment
9 months from the end of relevant assessment year
6. Appeal
Assessee has a right either to file an appeal u/s. 246A to the Commissioner (Appeal) or to
make an application for revision u/s. 264 to the Commissioner.
E - ASSESSMENTS
The Finance Act, 2018 has inserted a new sub-section (3A) in Section 143 that the Central Govt.
may make a scheme for the purpose of making assessment so as to impart greater efficiency,
transparency and accountability by:
a. Eliminating the interface between the Assessing Officer and the assessee in the course of
proceeding to the extent technologically feasible.
b. Optimising utilization of the resources through economies of scale and functional
specialization.
c. Introducing a team-based assessment with dynamic jurisdiction.
As part of e-governance initiative to facilitate conduct of assessment proceedings electronically,
Income-tax department has launched ‘E-Proceeding’ facility. Under this initiative, CBDT has made
it mandatory for the tax officers to take recourse of electronic communications for all limited
and complete scrutiny. The CBDT had issued the instructions and notice formats for conducting
scrutiny assessments electronically. As per the instruction, except search related assessments,
all scrutiny assessments shall be conducted only through the ‘E-Proceeding’ functionality
available at e-filing website of Income-tax Department.
An amendment has been made in sub-section (3A) of section 143 of the Act to,-
i. expand the scope so as to include the reference of section 144 of the Act relating to best
judgement assessment in the said sub-section;

ii. provide that Central Government may issue any direction under sub-section (3B) of the
said section upto 31st March, 2022.
This amendment will take effect from 1st April, 2020.
FACELESS ASSESSMENT [SECTION 144B]
Procedure for Faceless Assessment [Section 144B(1)] -

Section 144B(1) provides that assessment under section 143(3), i.e., regular assessment / scrutiny
assessment or best judgment assessment under section 144 in respect of such territorial area or
persons or classes of persons or incomes or class of incomes or cases or class of cases, as
specified by the CBDT under section 144B(2), has to be made in faceless manner in accordance
with the following procedure:
NFAC/RFACs/AUs/VUs/Rus to be set up for the purpose of faceless assessment [Section

144B(3)]
For the purpose of faceless assessment, the CBDT, may set up the following Centers and Units
and specify their respective jurisdiction:
1. National Faceless Assessment Center (NFAC)

To facilitate the conduct of faceless assessment proceedings in a centralised manner, NFAC
to be set up, which shall be vested with the jurisdiction to make faceless assessment.
2. Regional Faceless Assessment Center (RFAC)
To facilitate the conduct of faceless assessment proceedings in the cadre controlling region
of a Principal Chief Commissioner, RFACs to be set up, which shall be vested with the
jurisdiction to make faceless assessment.
3. Assessment Units (AUs)
To facilitate the conduct of faceless assessment, Assessment Units, as deemed necessary,
may be set up to perform the function of making assessment, which includes
• identification of points or issues material for the determination of any liability (including
refund) under the Act,
• seeking information or clarification on points or issues so identified,
• analysis of the material furnished by the assessee or any other person, and
• such other functions as may be required for the purposes of making faceless assessment.
4. Verification Units (VUs)
To facilitate the conduct of faceless assessment, Verification Units (VUs) as deemed
necessary, may be set up to perform the function of verification, which includes.
• enquiry, cross verification, examination of books of account, examination of witnesses and
recording of statements, and
• such other functions as may be required for the purposes of verification
5. Technical Units (TUs)

To facilitate the conduct of faceless assessment, Technical Units (TUs) as deemed

necessary, may be set up to perform the function of providing technical assistance which
includes any assistance or advice on legal, accounting, forensic, information technology,
valuation, transfer pricing, data analytics, management or any other technical matter which
may be required in a particular case or a class of cases, under this section.
6. Review Units (RUs)
To facilitate the conduct of faceless assessment, Review Units (RUs) as deemed necessary,
may be set up to perform the function of review of the draft assessment order, which
includes checking -
• whether the relevant and material evidence has been brought on record,
• whether the relevant points of fact and law have been duly incorporated in the draft
order,
• whether the issues on which addition or disallowance should be made have been discussed
in the draft order,
• whether the applicable judicial decisions have been considered and dealt with in the
draft order,
• for arithmetical correctness of variations proposed, if any, and
• such other functions as may be required for the purposes of review.
1. Serving of Notice
The National Faceless Assessment Centre (NFAC) has to serve a notice on the assessee
under section 143(2)
2. Filing of response to the notice by the Assessee
The assessee is required to file his response to the notice within 15 days from the date of
receipt of the notice to the NFAC.
3. Intimation by NFAC to the Assessee
The NFAC has to intimate the assessee that assessment in his case would be completed in
accordance with the procedure laid down under this section in the following cases –
• Where the assessee has furnished his return of income under section 139; or in
response to a notice issued under section 142(1); or in response to notice issued under
section 148(1) and a notice under section 143(2) has been issued by the Assessing
Officer or the prescribed income-tax authority, as the case may be; or
• Where assessee has not furnished his return of income in response to a notice issued
under section 142(1) by the Assessing Officer or under section 148(1) and a notice under
section 142(1) has been issued by the Assessing Officer
4. Assigning the selected case to a specific assessment unit
The NFAC has to assign the case selected for the purposes of faceless assessment under
this section to a specific assessment unit in any one Regional Faceless Assessment Centre
(RFAC) through an automated allocation system (AAS).

5. Request by Assessment Unit to NFAC for obtaining information/conducting enquiry

Where a case is assigned to the assessment unit, it may make a request to the NFAC for:
• obtaining such further information, documents or evidence from the assessee or any
other person, as it may specify;
• conducting of certain enquiry or verification by verification unit; and
• seeking technical assistance from the technical unit.
6. Notice or requisition to the assessee or any other person for obtaining the information
The NFAC has to issue appropriate notice or requisition to the assessee or any other person
for obtaining the information, documents or evidence requisitioned by the assessment unit.
7. Assessee to file response to the notice within specified time
The assessee would be required to file response to the notice within the time specified
therein or such time as may be extended on the basis of an application in this regard, to the
NFAC.
8. Request for conducting inquiry or verification to be assigned to Verification Unit by
NFAC
Where a request for conducting of certain enquiry or verification by the verification unit has
been made by the assessment unit, the request would be assigned by the NFAC to a
verification unit in any one Regional Faceless Assessment Centre through an automated
allocation system.
9. Request for seeking technical assistance to be assigned to Technical Unit by NFAC
Where a request for seeking technical assistance from the technical unit has been made by
the assessment unit, the request would be assigned by the NFAC to a technical unit in any
one Regional Faceless Assessment Centre through an automated allocation system.
10. Report received from the Verification Unit/Technical Unit to be sent to Assessment
Unit
The NFAC has to send the report received from the verification unit or the technical unit
to the concerned assessment unit.
11. Serving notice u/s 144 for failure on the part of the assessee to comply with notice
seeking information / direction
Where the assessee fails to comply with the notice seeking information or evidence or
notice issued under section 142(1) or with a direction issued under section 142(2A) for
special audit, the NFAC has to serve upon such assessee a notice under section 144 giving
him an opportunity to show-cause, on a date and time to be specified in the notice, why the
assessment in his case should not be completed to the best of its judgment.
12. Assessee to file response to a notice under section 144
The assessee has to, within the time specified in the notice or such time as may be
extended on the basis of an application in this regard, file his response to the NFAC.
13. Intimation to Assessment Unit, of failure on the part of the assessee to file response
to notice issued u/s 144

Where the assessee fails to file response to the notice within the time specified therein or
within the extended time, if any, the NFAC has to intimate such failure to the assessment
unit.
14. Making of draft assessment order by the Assessment Unit
The assessment unit has to, after taking into account all the relevant material available on
the record or, in a case where intimation for failure to respond to notice is received from
the NFAC, make in writing, a draft assessment order to the best of its judgment, either
accepting the income or sum payable by, or sum refundable to, the assessee as per his
return or making variation to the said income or sum, and send a copy of such order to the
NFAC.
15. Details of penalty proceedings to be mentioned in draft assessment order
While making draft assessment order, the assessment unit has to also provide details of
the penalty proceedings to be initiated therein, if any.
16. Examination of draft assessment order by the NFAC
NFAC has to examine the draft assessment order in accordance with the risk management
strategy specified by the CBDT, including by way of an automated examination tool,
whereupon it may decide to:
• finalise the assessment, in case no variation prejudicial to the interest of assessee is
proposed, as per the draft assessment order and serve a copy of such order and
notice for initiating penalty proceedings, if any, to the assessee, along with the
demand notice, specifying the sum payable by, or refund of any amount due to, the
assessee on the basis of such assessment; or
• provide an opportunity to the assessee, in case any variation prejudicial to the interest
of assessee is proposed, by serving a notice calling upon him to show-cause as to why
the proposed variation should not be made; or
• assign the draft assessment order to a review unit in any one Regional Faceless
Assessment Centre, through an automated allocation system, for conducting review of
such order.
17. Review of the draft assessment order by Review Unit
The review unit would conduct review of the draft assessment order referred to it by the
NFAC whereupon it may decide to
• concur with the draft assessment order and intimate the NFAC about such
concurrence; or
• suggest such variation, as it may deem fit, in the draft assessment order and send its
suggestions to the NFAC.
18. Procedure to be followed by NFAC on receiving concurrence from Review Unit
The NFAC, upon receiving the concurrence of the review unit, has to follow the procedure
laid down in sub- clause (a) or (b) of clause (xvi).
19. Procedure to be followed by NFAC on receiving suggestion for variations from Review
Unit

Upon receiving suggestions for variation from the review unit, the NFAC has to assign the
case to an assessment unit, other than the assessment unit which has made the draft
assessment order, through an automated allocation system.
20. Assessment Unit to send Final draft assessment order to NFAC
After considering the variations suggested by the review unit, the assessment unit has to
send the final draft assessment order to the NFAC.
21. Procedure to be followed by NFAC on receiving final draft assessment order
Upon receiving the final draft assessment order, the NFAC has to follow the procedure laid
down in sub-clause (a) or (b) of clause (xvi).
22. Furnishing of response by the assessee to show cause notice
The assessee may, in a case where show-cause notice has been served upon him, furnish his
response to the NFAC on or before the date and time specified in the notice or within the
extended time, if any.
23. Procedure on receipt / non-receipt of response from the assessee
Where no response to the show-cause notice is received – In such a case, the NFAC has to
• in a case where the draft assessment order or the final draft assessment order is in
respect of an eligible assessee and proposes to make any variation which is prejudicial
to the interest of said assessee, forward the draft assessment order or final draft
assessment order to such assessee; or
• in any other case, finalise the assessment as per the draft assessment order or the
final draft assessment order and serve a copy of such order and notice for initiating
penalty proceedings, if any, to the assessee, along with the demand notice, specifying
the sum payable by, or refund of any amount due to, the assessee on the basis of such
assessment;
• In any other case, the NFAC has to send the response received from the assessee to
the assessment unit.
24. Assessment Unit to make revised draft assessment order
After taking into account the response furnished by the assessee, the assessment unit has
to make a revised draft assessment order and send it to the NFAC.
25. Procedure on receipt of revised draft assessment order by NFAC
Upon receiving the revised draft assessment order, the NFAC has to –
• in case the variations proposed in the revised draft assessment order are not
prejudicial to the interest of the assessee in comparison to the draft assessment
order or the final draft assessment order, and—
a. In case the revised draft assessment order is in respect of an eligible assessee
and there is any variation prejudicial to the interest of the assessee proposed in
draft assessment order or the final draft assessment order, forward the said
revised draft assessment order to such assessee;
b. In any other case, finalise the assessment as per the revised draft assessment
order and serve a copy of such order and notice for initiating penalty proceedings,

if any, to the assessee, along with the demand notice, specifying the sum payable
by, or refund of any amount due to, the assessee on the basis of such assessment;
• in case the variations proposed in the revised draft assessment order are prejudicial
to the interest of the assessee in comparison to the draft assessment order or the
final draft assessment order, provide an opportunity to the assessee, by serving a
notice calling upon him to show-cause as to why the proposed variation should not be
made.
• In such case, the procedure laid down in Clauses (xxiii), (xxiv) and (xxv) would
apply mutatis mutandis to such notice referred to above. [Clause (xxvi)].
26. Eligible assessee file his acceptance of the variations to the NFAC
The assessee has to file his acceptance to the NFAC with respect to any variation proposed
in draft assessment order or the final assessment order within the period of 30 days of the
receipt of the draft order as specified under section 144C(2).
27. Finalisation of assessment by NFAC upon receipt of acceptance from eligible assessee
or where no objections are received from eligible assessee:
Upon receipt of the acceptance from the eligible assessee or if no objections are received
from the eligible assessee within the 30 days period as specified under section 144C(2), the
NFAC has to proceed to finalise the assessment within the time allowed under section
144C(4), i.e., 1 month from the end of month in which the acceptance is received or period
of 30 days for filing objection expires. The NFAC has to serve a copy of such order and
notice for initiating penalty proceedings, if any, to the assessee, along with the demand
notice, specifying the sum payable by, or refund of any amount due to, the assessee on the
basis of such assessment.
28. NFAC to forward directions of DRP to Assessment Unit
Where the eligible assessee files his objections with the Dispute Resolution Panel, the
NFAC has to, upon receipt of the directions issued by the Dispute Resolution Panel under
section 144C(5), forward such directions to the concerned Assessment Unit.
29. Assessment Unit to prepare a draft assessment order
In conformity of the directions issued by the DRP under section 144C(5), the Assessment
Unit has to prepare a draft assessment order in accordance with section 144C(13) and send
a copy of such order to the NFAC.
30. Finalisation of assessment by the NFAC
Upon receipt of the draft assessment order, the NFAC would finalise the assessment within
the time allowed under section 144C(13), i.e., within 1 month from the end of month in which
direction is received and serve a copy of such order and notice for initiating penalty
proceedings, if any, to the assessee, along with the demand notice, specifying the sum
payable by, or refund of any amount due to, the assessee on the basis of such assessment.
31. Transfer of electronic records of the case to the jurisdictional AO after completion of
assessment
After completion of assessment, the NFAC should transfer all the electronic records of

the case to the Assessing Officer having jurisdiction over the said case for such action as
may be required under the Income-tax Act, 1961.
INCOME ESCAPING ASSESSMENT [SEC. 147]
If any income chargeable to tax, in the case of an assessee, has escaped assessment for any
assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153,
assess or reassess such income or recompute the loss or the depreciation allowance or any other
allowance or deduction for such assessment year (hereafter in this section and in sections 148 to
153 referred to as the relevant assessment year).
Explanation - For the purpose of assessment or reassessment or re-computation under this
section, the Assessing Officer may assess or reassess the income in respect of any issue, which
has escaped assessment, and such issue comes to his notice subsequently in the course of the
proceedings under this section, irrespective of the fact that the provisions of section 148A have
not been complied with.
ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT [SECTION 148]
Before making the assessment, reassessment or re-computation under section 147, and subject to
the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice,
along with a copy of the order passed, if required, under clause (d) of section 148A,
requiring him to furnish within such period, as may be specified in such notice, a return of his
income or the income of any other person in respect of which he is assessable under this Act
during the previous year corresponding to the relevant assessment year, in the prescribed form
and verified in the prescribed manner and setting forth such other particulars as may be
prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such
return were a return required to be furnished under section 139
Provided that no notice under this section shall be issued unless there is information with the
Assessing Officer which suggests that the income chargeable to tax has escaped assessment in
the case of the assessee for the relevant assessment year and the Assessing Officer has obtained
prior approval of the specified authority to issue such notice.
For the purposes of this section and section 148A, the information with the Assessing
Officer which suggests that the income chargeable to tax has escaped assessment means:
i Any information flagged in the case of the assessee for the relevant assessment year in
accordance with the risk management strategy formulated by the Board from time to time;
ii Any final objection raised by the Comptroller and Auditor General of India to the effect that
the assessment in the case of the assessee for the relevant assessment year has not been
made in accordance with the provisions of this Act.
For the purposes of this section, where,—
i A search is initiated under section 132 or books of account, other documents or any assets

are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of
the assessee; or
ii A survey is conducted under section 133A, other than under sub-section (2A) or sub-section
(5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or
iii The Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or
requisitioned under section 132 or section 132A in case of any other person on or after the 1st
day of April, 2021, belongs to the assessee; or
iv The Assessing Officer is satisfied, with the prior approval of Principal Commissioner or
Commissioner, that any books of account or documents, seized or requisitioned under section
132 or section 132A in case of any other person on or after the 1st day of April, 2021,
pertains or pertain to, or any information contained therein, relate to, the assessee,
The Assessing Officer shall be deemed to have information which suggests that the income
chargeable to tax has escaped assessment in the case of the assessee for the three assessment
years immediately preceding the assessment year relevant to the previous year in which the
search is initiated or books of account, other documents or any assets are requisitioned or
survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable
article or thing or books of account or documents are seized or requisitioned in case of any other
person.
TIME LIMIT FOR COMPLETION OF ASSESSMENT U/S 147
No order of assessment, reassessment shall be made u/s 147 after the expiry of 12 months from
the end of the financial year in which notice u/s 148 was serve.
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY BEFORE ISSUE OF NOTICE

UNDER SECTION 148 [SECTION 148A]
The Assessing Officer shall, before issuing any notice under section 148:
a. Conduct any enquiry, if required, with the prior approval of specified authority, with respect
to the information which suggests that the income chargeable to tax has escaped assessment;
b. Provide an opportunity of being heard to the assessee, with the prior approval of specified
authority, by serving upon him a notice to show cause within such time, as may be specified in
the notice, being not less than seven days and but not exceeding thirty days from the
date on which such notice is issued, or such time, as may be extended by him on the basis of
an application in this behalf, as to why a notice under section 148 should not be issued on the
basis of information which suggests that income chargeable to tax has escaped assessment in
his case for the relevant assessment year and results of enquiry conducted, if any, as per clause
(a);
c. Consider the reply of assessee furnished, if any, in response to the show-cause notice
referred to in clause (b);
d. Decide, on the basis of material available on record including reply of the assessee, whether

or not it is a fit case to issue a notice under section 148, by passing an order, with the prior
approval of specified authority, within one month from the end of the month in which
the reply referred to in clause (c) is received by him, or where no such reply is furnished,
within one month from the end of the month in which time or extended time allowed to
furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
a. A search is initiated under section 132 or books of account, other documents or any assets
are requisitioned under section 132A in the case of the assessee on or after the 1st day of
April, 2021; or
b. The Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a
search under section 132 or requisitioned under section 132A, in the case of any other
person on or after the 1st day of April, 2021, belongs to the assessee; or
c. The Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner that any books of account or documents, seized in a search under section 132
or requisitioned under section 132A, in case of any other person on or after the 1st day of
April, 2021, pertains or pertain to, or any information contained therein, relate to, the
assessee.
Explanation: For the purposes of this section, specified authority means the specified authority
referred to in section 151.
FACELESS ASSESSMENT OF INCOME ESCAPING ASSESSMENT [SECTION 151A]
Section 151A has been inserted with effect from 1st November, 2020 by the Taxation and
Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, to provide for faceless
assessment of income escaping assessment.
Faceless Assessment Scheme for income escaping assessment may be notified by the Central
Government for the purposes of assessment, reassessment or re-computation under section 147
or issuance of notice under section 148 or sanction for issue of such notice under section 151, so
as to impart greater efficiency, transparency and accountability by –
a. Eliminating the interface between the income-tax authority and the assessee or any other
person to the extent technologically feasible;
b. Optimising utilisation of the resources through economies of scale and functional
specialisation;
c. Introducing a team-based assessment, reassessment, re-computation or issuance or sanction
of notice with dynamic jurisdiction.

ASSESSMENT IN CASE OF SEARCH OR REQUISITION [SECTION 153A]
Notwithstanding anything contained in section 139, section 147, section 148, section 149, section
151 and section 153, in the case of a person where a search is initiated under section 132 or
books of account, other documents or any assets are requisitioned under section 132A after the
31st day of May, 2003 but on or before the 31st day of March, 2021, the Assessing Officer
shall assess or reassess the total income of six assessment years immediately preceding the
assessment year relevant to the previous year in which such search is conducted or requisition is
made.
NOTICE FOR FILLING RETURN [SECTION 153A(A)(A)]
The concerned assessing officer can issue notice for 6 preceding assessment years and for “the
relevant assessment year or years”. For this purpose “relevant assessment year” shall mean an
assessment year preceding the assessment year relevant to the previous year in which search is
conducted or requisition is made which falls beyond 6 assessment years but not later than 10
assessment years from the end of the assessment year relevant to the previous year in which
search is conducted. However, for the “relevant assessment year” notice can be issued if-
• The assessing officer has in his possession books of accounts or other documents or evidence
which reveal that the income which has escaped assessment amounts to (or likely to amount)
to Rs. 50 lakhs (or more) in one year or in aggregate in the relevant 4 assessment years falling
beyond 6 assessment years.
• Such income escaping assessment in the form of asset, (for this purpose “asset” shall include
immoveable
• property being land or building or both, shares and securities, loans and advances, deposits in
bank account);
• The income escaping assessment or part thereof relates to such year or years; and
• Search under section 132 is initiated or requisition under section 132A is made on or after
April 1, 2017.
Income tax authorities are not required to disclose reason for conducting search before any
person, authority or Tribunal for such 6 assessment year as per amended section 132. However,
this concession is not available in respect of “relevant assessment year or years” beyond such 6
assessment years.

SEPARATE ASSESSMENT FOR SIX ASSESSMENT YEAR
The Assessing Officer shall assess or reassess the total income of each of such six assessment
years [Proviso 1 to section 153(1)].
TIME LIMIT OF COMPLETION OF ASSESSMENT OF 6 ASSESSMENT YEARS [SECTION 153B(1)(A)]
The Assessing officer shall make an order of assessment or re-assessment in respect of each
assessment year falling within six assessment years under section 153A [Assessment in case of
search or requisition] within a period of 21 months from the end of the financial year in which the
last of the authorization for search under section 132 [search and seizure] or for requisition
under section 132A [Powers to requisition books of accounts] was executed.
Where the search was executed and during the course of proceedings for the assessment or re-
assessment, a reference under section 92CA(1) is made, the period for making an order of
assessment or reassessment shall be extended by 12 months.
TIME LIMIT OF COMPLETION OF ASSESSMENT OF ASSESSMENT YEAR RELEVANT TO THE

PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS
MADE [SECTION 153(1)(B)]
Time limit of completion of assessment in respect of the assessment year relevant to the
previous year in which search is conducted under section 132 or requisition is made under section
132A within a period of 21 months from the end of the financial year in which the last
authorizations for search under section 132 or for requisition under section 132A was executed.
In case assessment has a reference to section 92CA(1), then the above period shall be extended
by 12 months.
RECTIFICATION OF MISTAKE [SEC. 154]
An income-tax authority, is empowered (suo moto or on application by assessee) to:

a Rectify any mistake apparent in an order passed by him; or
b Amend any intimation issued u/s. 143(1) or deemed intimation.
• Tax Point: Such order of rectification must be passed in written:
Within 4 years from the end of the financial year in which the order sought to be
amended was passed.
However, in respect of an application made by the assessee, the authority shall, within a
period of 6 months from the end of the month in which the application is received by it,
pass an order:
a Making the amendment, or

b Refusing to allow the claim.
OPPORTUNITY OF BEING HEARD [SEC. 154(3)]
If such rectification order is prejudicial to the assessee, an opportunity of being heard must be
given to the assessee, before passing such order.

1. An intimation under section 143(1) can 2. The assessee in response to a notice u/s
be issued within: 142(1) submitted a return of loss of
Rs.1,10,000 within the time allowed in
the said notice. In this case the
assessee:
a 6 months from the end of financial a shall be allowed to carry forward such
year in which return is filed. loss as the return is filed within the time
allowed:
b 6 months from the end of relevant b shall not be allowed to carry forward such
assessment year in which return is loss
filed.
c One year from the end of financial c shall not be allowed to carry forward such
year in which return is filed. loss as the return is not filed uls 139
d One year from the end of relevant d none of the above
assessment year in which return is
filed.
3. The notice under section 143(2) must 4. Intimation U/S 143(1) cannot be sent
be served within: after the expiry of:
a 12 months from the date of filing of a 4 years from the end of the month in which
return return of time was furnished
b 12 months from the due date of filing b 2 years from the end of the month in which
the return U/S 139(1) or from the date return of income was furnished
of filing of return of income
c 3 months from the end of the financial c 2 years from the end of the assessment
year in which the return was furnished year in which the income was so assessable
d 6 months from the end of month in d One year from the end of the financial year
which the return was furnished in which the return is made
5. Return of income of assessment year 6. The time limit for completion of

2023-24 was furnished on 16.8.2023. assessment under section 143/144 shall
Intimation in respect of such be after 1/4/2022 onward:
assessment year must be sent by:
a 31.3.2022 a 21 months from the end of the relevant
assessment year in which income was first
assessable
b 31.3.2021 b 9 months from the end of the relevant
assessment year which income was first

assessable
c 31.3.2025 c 18 month from the end of the month in
which the return was so furnished
d 31.12.2023 d 36 months from the end of the relevant
assessment year which income was first
assessable
7. The time limit for completion of 8. The time limit for completion of
assessment/reassessment u/s 147 assessment/reassessment u/s 147 shall be
shall be if date of issue of notice if date of issue of notice after 1/4/2022:
before 1/4/2022:
a 12 months from the end of the financial a 12 months from the end of the financial year
year in which notice U/S 148 was served in which notice U/S 148 was served on the
on the assesse assesse
b 2 years from the end of the financial b 2 years from the end of the financial year in
year in which notice U/S 148 was served which notice U/S 148 was served on the
c 4 years from the end of the financial c 4 years from the end of the financial year in
year in which notice u/s 148 was served which notice u/s 148 was served on the
on the assessee assessee
d 3 years from the end of the financial d 3 years from the end of the financial year in
year in which notice u/s 148 was served which notice u/s 148 was served on the
9. The amendment of an order under 10. Where an income in relation to any asset
section 154 can be made: (including financial interest in any entity)
located outside India has escaped
assessment, notice under section 148
cannot be issued:
a within four years from the date when a after the expiry of 6 years from the end of
the order sought to be amended was the relevant A/Y for which notice for
passed reassessment is issued
b within four years from the date of b after the expiry of 10 years from the end of
receipt of such order by the assessee the relevant assessment year
c within four years from the end of the c after the expiry of 16 years from the end of
financial year in which the order sought the relevant assessment year
to be amended was passed
d within six months from the end of the d after the expiry of20 years from the end of
financial year in which the order sought the relevant assessment year
to be amended was passed

11. In case of an application made by the 12. Any mistake which is apparent from the
assessee u/s 154, the income-tax record in any order passed by the
authority shall rectify the Assessing Officer can be rectified under
order/refuse the rectification within section ________________.
_____________ from the end of the
month in which the application is
received by the authority.
a 4 years a 154
b 2 years b 147
c 1 year c 143
d 6 months d 254
13. No order of rectification can be 14. Notice u/s 143(2) (i.e. notice of scrutiny
passed after the expiry of assessment) should be served within a
_______________ from the end of period of _______from the end of the
the financial year in which order financial year in which the return is filed.
sought to be rectified was passed
a 2 a 3 months
b 3 b 12 months
c 4 c 24 months
d 6 d 18 months
15. The objective of carrying out 16. Assessment under following section is
assessment u/s 147 is to bring under termed as scrutiny assessment
the tax net _________
a Any money, bullion, jewellery, valuable a 143(3)
article, etc. which are undisclosed
b Any income which has escaped b 144
assessment
c Any of the above c Both of the above
d Both of the above
17. Which of the following can be 18. Intimation u/s 143(1) can be sent within a
corrected while processing the return period of __________________ year
of income under section 143(1)? from the end of the financial year in
which the return of income is filed
a any arithmetical error in the return a 1
b any error in the return of income b 2

c any mistake in the return of income c 3

d any claim by the taxpayer which is d 4
against law
19. An apparent error in the assessment 20. If there is an apparent error in the
order passed u/s 143(3) dated 15- intimation dated 11th June, 2022 issued
11-2021 was noticed by the assessee under section 143(1), the time-limit for
in February, 2022. The time limit for filing application for rectification under
seeking rectification of mistake is section 154 is available up to - (Dec.
available up to: (June, 2017) 2016)
a 31-03-2026 a 31st March, 2026
b 31-03-2025 b 31st March, 2027
c 31-03-2023 c 31st March, 2023
d 31-03-2024 d 31st October, 2022
21. Opportunity of being heard u/s 148 22. Faceless assessment has been introduced
with _______________________. for ______________________.
a Not less than 5 & more than 25 a Sec 143
b Not less than 7 & more than 30 b Sec 144
c None of the above c Sec 147
d d Sec 142(2A)
23. Time limit for completing assessment 24. Who can make a reference to a Valuation
u/s ___________________. Officer for the purposes of assessment or
reassessment, to estimate the value,
including fair market value, of any asset,
property or investment u/s 142A?
a 12 months from the date of order a Assessing Officer
b 12 months from the end of the month in b Principal Chief Commissioner
which order is issued
c 12 months from the end of FY in which c Principal Commissioner
notice u/s 148 was served
d None of the above d Director general
25. If the Assessing Officer has reason 26. In which of the following cases the
to believe that any income chargeable Assessing Officer need not conduct
to tax has escaped assessment for enquiry and provide an opportunity of
any assessment year, he may initiate being heard as required under section
proceedings of - (Dec. 2014) 148A before issuing notice under section

148.
a Re-assessment a a search is initiated under section 132 or
books of account, other documents or any
assets are requisitioned under section 132A
in the case of the assessee on or after
01.04.2022; or
b Regular assessment b the Assessing Officer is satisfied, with the
prior approval of the Principal Commissioner
or Commissioner that any money, bullion,
jewellery or other valuable article or thing,
seized in a search u/s 132 or requisitioned
u/s 132A, in the case of any other person on
or after 01-04-2022, belongs to the
assessee; or
c Self-assessment c the Assessing Officer is satisfied, with the
prior approval of the Principal Commissioner
or Commissioner that any books of account
or documents, seized in a search under
section 132 or requisitioned under section
132A, in case of any other person on or
after 01-04-2022, pertains or pertain to, or
any information contained therein, relate to,
the assesse
d Best judgment assessment d Any of above three
27. The specified authority whose prior 28. Section 149(1) provides that no notice
approval is required for the issue of under section 148 shall be issued for the
notice u/s 148, in case where notice relevant if three years, but not more
is issued within 3 years from the end than ten years, have elapsed from the
of the relevant assessment year? end of the relevant assessment year
unless the Assessing Officer has in his
possession books of account or other
documents or evidence which reveal that
the income chargeable to tax,
represented in the form of asset, which
has escaped assessment amounts to or is
likely to amount to for that year.
a Principal Chief Commissioner or Principal a ₹ 50,00,000 or more
Director General or Chief Commission-
er or Director General

b Assistant Commissioner b ₹ 15,00,000 or more

c Deputy Commissioner c ₹ 1,00,00,000 or more
d Principal Commissioner or Principal d ₹ 10,00,000 or more
Director or Commissioner or Director

INTEREST
IMPORTANT NOTES REGARDING CALCULATION OF INTEREST
Following points are to be noted regarding calculation of interest, whether such interest is
receivable from or payable to the Central Government [Rule 119A].
ROUNDING OFF THE AMOUNT ON WHICH INTEREST IS TO BE CALCULATED
Amount on which such interest is calculated will be rounded off to the multiple of 100 by
ignoring any fraction of 100. E.g. amount on which interest is to be calculated is Rs. 240 or Rs.
290, then it is to be rounded off to Rs. 200 by ignoring fraction of Rs. 40 or Rs. 90.
ROUNDED OFF THE PERIOD FOR WHICH INTEREST IS TO BE CALCULATED
When interest is calculated on monthly basis, any fraction of the month shall be taken as full
month. E.g. interest is to be calculated from 1st August to 5th December, then interest shall be
calculated for 5 months.
When interest is calculated on annual basis, any fraction of the month shall be ignored.
INTEREST FOR DEFAULT IN FURNISHING RETURN OF INCOME [SEC. 234A]
Condition Where a person, who is required to furnish return of Income:

a Fails to furnish a return; or
b Furnishes it after the due date specified u/s. 139(1).
Amount on Particulars Amount Amount
which Rs. Rs.
interest is Tax determined u/s. 143(1) or on Regular assessment XXX
to be Less: Advance Tax paid XXX
charged: Relief u/s. 90 or 90A or 91 XXX
Credit allowed u/s. 115JAA (MAT Credit) XXX
Tax deducted/collected at source XXX XXX
Amount for interest calculation XXX
Rate of Simple interest @ 1% per month or part thereof.
Interest
Period For every month or part of a month commencing from the day immediately
following the due date for furnishing return for the relevant assessment year
and ending on :
Where the return is furnished after due date Date of furnishing return

Where the return is not furnished at all Date of completion of

Assessment u/s. 144.
The following amendments have been made to the scheme of section 234A with effect
1 An assessee shall be liable to pay simple interest from furnishing after due date or not
furnishing an updated return u/s 139(8A) in addition to return under sub-section (1) or
sub-section (4) of section 139.
2 Under explanation 2 to section 234A(1), “tax on total income as determined under sub-
section (1) of section 143” shall not include the additional income-tax, if any, payable u/s
140B or section 143.
3 Under the aforesaid explanation, “tax on total income determine under such regular
assessment” shall not include the additional income-tax payable u/s 140B.
4. Illustration
Case Last date of Actual date Date of payment Date of Period of
filing return of filing of self- assessment default
return assessment tax
A 31-7-22 31-7-22 31-7-22 15-12-22 NIL
B 31-7-22 15-12-22 15-12-22 1-5-23 5 months
C 31-7-22 15-12-22 31-7-22 1-5-23 Nil
D 31-7-22 Not Filed Not Paid 1-5-23 10 months
5. Illustration
Compute interest payable u/s 234A.
Name of the assesse A A Ltd. C
Due date of furnishing return 31st July 32st October 31st July
Date of filing return 4th December 10th Feb Not filed
Date of completion of assessment 1st March 14th April 14th February
Income as per return Rs. 570000 Rs. 500000 --
Assessed Income Rs. 610000 Rs. 550000 Rs. 1200000
Advance tax paid Rs. 20000 Rs. 25000 Rs. 25000
Tax deducted at source Rs. 12590 Rs. 14000 Rs. 85000
Tax paid along with return Rs. 70000 Rs. 140000 --
Also state interest payable u/s 234A for the purpose of Sec. 140A ignores interest under any
other section.

Solution
Name of the assesse A A Ltd. C
Period of default 5 months 4 months 7 months
Assessed income 6,10,000 5,50,000 12,00,000
Tax on Assessed Income 35,880 1,71,600 1,79,400
(-) Advance tax 20,000 25,000 25,000
(-) TDS 12,590 14,000 85,000
Short fall 3,290 1,32,600 69,400
Rounded off 3,200 1,32,600 69,400
Int @ 1% per month 160 5,304 4,858
Working Note: Calculation of interest

384 × 12
1) A = 3200 × 1% × 12 = 12
× 160
2) A Ltd = 1,32,600 × 1% × 4 m = 5304
3) C = 69,400 × 1% × 7 = 4858
INTEREST FOR DEFAULT IN PAYING ADVANCE TAX [SEC. 234B]
Condition Where a person, who is required to pay advance tax, fails to pay:
a Advance tax at all; or
b 90% of assessed tax as advance tax.
Meaning of Tax determined u/s. 143(1) or Regular assessment
Assessed
Tax
Less Tax deducted or collected at source;
Less Relief allowed u/s. 90 or 90A or 91;
Less Credit allowed u/s. 115JAA (MAT Credit)
Amount on Particulars Interest
which Where no tax is paid u/s. 140A Assessed tax – Advance tax paid
interest is Where tax is paid u/s. 140A
calculated Period upto the date on which tax as Assessed Tax – Advance tax paid –
per self-assessment is paid Tax paid on Self-Assessment*
Key Note Where amount paid under self-assessment fails short of tax and interest
calculated as per self-assessment, then amount paid shall be first adjusted
towards interest and balance, if any, shall be adjusted towards tax payable.
Rate of Simple interest @ 1% per month or part thereof.
Interest
Period For every month or part of a month commencing from 1st day of April of the

relevant assessment year and ending on the date of determination of tax u/s.
143(1) or on regular assessment.
The following amendments have been made to the scheme of section 234B with effect
1 Under explanation 1 and sub-section (3), “tax on total income as determined under sub-
section (1) of section 143” shall not include the additional income-tax, if any, payable u/s
140B or section 143.
2 For the aforesaid purpose, “tax on total income determined under such regular
assessment” shall not include the additional income tax payable u/s 140B.
6. Illustration
A firm furnished its return of income on 26th June, 2022 showing income of Rs. 1,00,000. The
return shows other particulars as follows:
Advance Tax Rs. 20,000
TDS Rs. 1,000
The AO passed the assessment order enhancing income by Rs. 5,000 on 26/3/2023. Compute
interest u/s. 234B.
Solution
Period of default [1st April 2021 to 29th March 2023]
Particular Rs
Assessed income 1,05,000
Tax @ 31.2 [30% + 4%] 32,760
(-) TDS 1,000
Assessed tax 31,760
Advance tax paid 20,000
Short fall 11,760
Rounded off 11,760
Interest for 12 months @ 1% per month on 11,700 1,404
FOR DEFERMENT OF ADVANCE TAX [SEC. 234C]
Condition Payment of advance tax is to be made as per the schedule (mentioned in the
chapter “advance Tax”). In case assessee fails to pay the amount or pays lesser
amount as required by the schedule, then assessee will have to pay interest u/s.
234C for such deferment.
Amount on which interest is payable:
Specified % of tax* on the total income declared in the return filed by the XXX
assesse

Less: Tax deducted/collected at source XXX

Less: Amount of advance tax paid on or before the due date of payment as per XXX
the advance tax payment schedule
Less: Relief allowed u/s. 90 or 90A or 91 XXX
Less: Credit allowed u/s. 115JAA (MAT Credit) XXX
Amount on which interest shall be calculated XXX
*Specified % of tax for calculation of interest under this section.

All assessee On or before June 15 Not less than 15% of tax (Note 1).
other than 44AD On or before Sept. 15 Not less than 45% of tax as reduced by the
amount paid in the earlier instalment (Note
2).
On or before December 15 Not less than 75% of tax as reduced by the
amount paid in the earlier instalments.
On or before March 15 The whole amount of tax as reduced by the
amount paid in the earlier instalments.
7. Illustration
Eligible Assessee u/s 44AD and 44ADA
Due Date Advance tax payable Interest payable
th
15 March 100% of tax due on Simple interest @1% per month for a period of 1
the income month on the amount of the shortfall from 100%
Eg – Mr. mehra’s (not eligible u/s 44AD or 44ADA) tax as per ROI is Rs. 2,00,000/- and he has
paid advance tax Rs. 12,000/- on 13th June, Rs. 65,000 on 10th Sept and Rs. 40,000/- on 13th Dec
and 25,000/- on 15th March. Calculate the interest payable u/s 234C.
Solution
Quarter Advance tax payable Advance tax paid Shortfall Interest
15th June 15% 30,000 12,000 (6%) 18,000 @ 3% 540
15th Sep 45% 90,000 77,000 (38.5%) NIL NIL
15th Dec 75% 1,50,000 1,17,000 33,000 @ 3% 990
15th March 100% 2,00,000 1,42,000 58,000 @ 1% 580
Tax as per ROI 2,00,000 Total interest 2,110
SHORTFALL DUE TO CAPITAL GAINS AND CASUAL INCOMES
No interest shall be chargeable on shortfall in the payment of the tax due on the returned
income where such shortfall is on account of under-estimate or failure to estimate -
a The amount of capital gains; or

b Casual income; or
c Income under the head “PGBP” in cases where the income accrues or arises under the said
head for the first time; or
d Dividend received from domestic company
And the assessee has paid the whole of the amount of tax payable on such income, had such
income been a part of the total income, as part of the remaining instalments of advance tax
which are due or where no such instalments are due, by the 31st day of March of the financial
year
1 Where an assessee has paid 12% or more of tax as advance tax on or before June
KEY NOTES
15, then no interest u/s 234C is payable.
2 Where an assessee has paid 36% or more of tax as advance tax on or before
September 15, then no interest u/s. 234C is payable.
Rate of Interest: Simple interest @ 1% per month or part thereof.

Period: 3 months (1 month for last instalment).
INTEREST FOR EXCESS REFUND GRANTED TO THE ASSESSEE (SECTION 234D)
Condition: Where any refund is granted to the assessee under section 143(1) and:
a No refund is due on regular assessment; or
b The amount refunded exceeds the amount refundable on regular
assessment;
Rate of Simple interest @ ½ % for every month or part of the month.
interest:
Amount on which On the whole or excess amount refunded.
interest is to be
charged:
Period: From the date of grant of refund to the date of such regular assessment.
FEE FOR DIFFICULT IN FURNISHING RETURN OF INCOME 234F
1 Without prejudice to the provisions of this Act, where a person required to furnish a
return of income u/s 139, fails to do so within the time prescribed in section 139(1), he
shall pay, by way of fee, a sum of, -
a Rs. 5,000/-, if the return is furnished after due date

FEE FOR DEFAULT RELATING TO STATEMENT/ CERTIFICATE OF DONATION

[SEC.234G, APPLICABLE FROM OCTOBER 1, 2020]
With effect from October 1, 2020 sections 35 and 80G have been amended to provide that
deduction under these sections will be available to the entity covered by these sections only if
these entities deliver the statement of donations, as prescribed by the board, and also
furnishes a certificate of donation to the donors.
In order to insure compliance of these provisions, section 234G has been inserted with effect
from October 1, 2020. It provides for leavy of Fee of Rs. 200 per day if these entities fail to
submit such statement of donation and / or certificate of donation within the prescribed time.
However the fee, shall not exceed the amount in respect of which the failure has occurred.
Such fees shall be paid before submitting such statement of donation or before furnishing of
certificate of donation.

1. The interest liability u/s 234C would 2. In case of assessee being company, if
be _______________, for a period advance tax payable in second instalment
of _________________, for every is __________________, no interest
deferment under section 234C shall be payable
a 2%, 6 months a 36% or less
b 1%, 1 month b 36% or more
c 1%, 3 months c 12% or more
d 2%, 3 months d 12% or less
3. In what case, interest under section 4. The interest liability under section 234B
234B is attracted? would be _________________________
from 1st April following the financial year
up to the date of assessment of income.
a Non-payment of advance tax a 1% per month
b Payment of advance tax of an amount b 1% per month or part of the month
less than 90% of assessed tax
c Either of the case c 2% per month or part of the month
5. If any person has paid income tax 6. Interest u/s 234B is calculate on the
after expiry of the last date of filing amount of difference between the
of return of income, interest under ______________ and ______________
section 234A shall be payable
_____________________ for the
period subsequent to last date of
filing of return of income
a 12% per annum a Advance tax paid and assessed tax
b 1% per month or part of the month b Advance tax paid and 90% of the assessed
tax
c 1% per month c Assessed tax and advance tax paid
d 10% per month d None of the above
7. When advance tax is deposited on 8. The interest u/s 234C is to be calculated

16th September instead of 15th on difference between
September, what would be the ___________________ up to that date
consequences of same under section and ___________________
234C
a Interest for one day shall be charged a Actual tax paid and advance tax payable

b Interest for one month shall be b Advance tax payable and actual tax paid
charged
c No levy of interest shall be charged c Either of above
d Interest for three month shall be d None of the above
charged
9. Mr. Majnu submitted his return of 10. Interest shall be payable u/s 234B if the
income for the PY 2022 - 2023 i.e. advances tax paid by the assessee during
AY 2023 - 2024 on 15/12/2023. The the financial year is:
due date for filling the return of
income in his case was 30/10/2023.
Mr. Majnu in this case shall have to
pay interest under section 234A for
a 3 months a less than the assessed tax
b 2 months b less than 90% of the assessed tax
c 2.5 months c less than 90% of tax payable on the
returned income
d none of the above d none of the above
11. Interest u/s 234B for default in 12. The total income of Ram is ₹ 4,90,000
payment of advance tax is payable and due date of filing the return of
income for A.Y. 2023 - 24 is 31” July,
2023. The return by Ram shall be filed on
20th September, 2023. The late fee
payable for late filing of return of income
shall be: (June. 2019)
a for the period starting from due date a ₹ 1,000
of return to the date of assessment
b for the period starting from 1st April of b ₹ 5,000
the relevant assessment year to the
date of assessment
c for the period starting from 1st April of c ₹ 10,000
relevant assessment to the date of
submission of return
d none of the above d No late fee up to income of ₹ 5 lakh

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 COMPUTATION OF TOTAL INCOME
CHAPTER 16 COMPUTATION OF TOTAL INCOME OF VARIOUS PERSON
ASSESSMENT OF INDIVIDUAL
ALTERNATE MINIMUM TAX SEC 115JC
1. Applicability
The provisions shall be applicable to a person, other than a company, whose regular income –
tax payable for a previous year is less than the alternate minimum tax payable.
2. Adjusted total income to be deemed income
If regular income tax payable for a previous year is less than the alternate minimum tax
payable then the adjusted total income shall be deemed to be the total income of that person
for such previous year and he shall be liable to pay tax on such income @ 18.5% of adjusted
total income. From AY 23 – 24 15% in case of co-operative society.
Under section 115JC, alternate minimum tax in the case of a non-corporate assesse is 18.5
per cent of adjusted total income. In order to promote the development of world class
financial infrastructure in India, section 115JC has been amended (W.e.f. the Assessment
Year 2019 – 20) so as to provide that in case of a unit located in an International Financial
Service Centre, the alternate minimum tax shall be calculated at the rate of 9 per cent.
3. Meaning of Adjusted Total Income
Adjusted Total Income shall be the total income as increased by:
a Deductions claimed under sections 80IA to 80RRB (other than section 80P);
b Deduction under section 10AA; and
c Deduction claimed, if any, under section 35AD as reduced by the amount of depreciation
allowable in accordance with the provisions of section 32 as if no deduction under section
35AD was allowed in respect of the assets on which the deduction under that section is
claimed. (Bold portion amended by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 i.e. AY 2015 –
16).
4. Provisions applicable when adjusted total income exceeds Rs.20 lakhs
The above provisions shall not apply to an individual or HUF or an AOP / BOI, whether
incorporated or not, or an artificial juridical person, if the adjusted total income of such
person does not exceed Rs.20 lakhs.
5. Report to be obtained from a Chartered Accountant
Every such person shall obtain a report, in prescribed form, from a chartered Accountant,
certifying that the adjusted total income and the alternate minimum tax have been computed
in accordance with the provisions of this Chapter and furnish such report on or before the
due date of filing of return under section 139(1).
6. Tax credit for alternate minimum tax (Section 115JD)
The credit for tax paid by a person under section 115JC shall be allowed in accordance with

the provisions of this section as under:

a Tax credit to be allowed = Alternate minimum tax paid – regular income tax payable.
b No interest shall be payable on tax credit so allowed.
c The tax credit so allowed shall be credited forward and set – off during 15 subsequent
assessment years.
d If the regular income tax exceeds the alternate minimum tax, the tax credit shall be
allowed to be set off to the extent of the excess of regular income tax over the
alternate minimum tax and the balance of the tax credit, if any, shall be carried forward.
7. Note
An amendment has been made under Section 115JEE to provide that even if the assessee has
not claimed any deduction under section 10AA or section 35AD or Chapter VI – A in any
previous year and the adjusted total income of that year does not exceed Rs.20 lakh, it would
still be entitled to set – off his brought forward AMT credit in that year. (Bold portion
amended by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 i.e. AY 2015 – 2016).
ASSESSMENT OF HUF
• Meaning The term Hindu Undivided Family (or Joint Hindu Family) is not defined in the
income-tax Act. The term HUF has the same meaning as in Hindu Law. A
Hindu Undivided Family (HUF) consists of all persons lineally descended from a
common ancestor including their wives and unmarried daughters.
• Taxpoint Only those undivided families are covered here, to which Hindu law applies.
1. An HUF is not the creation of a contract. Its membership arises from status.
KEY NOTES
2. Jain and Sikh families are also treated as Hindu undivided family for the purpose of
income-tax Act. However, Muslim undivided family cannot be treated as HUF.
3. Once a family is assessed as Hindu Undivided family, it will continue to be assessed as
such till its partition.
COMPUTATION OF TOTAL INCOME AND TAX LIABILITY OF HUF
There is no specific provision in income-tax Act for computation of total income of HUF.
Total income and tax liability of HUF shall be computed in same manner as in case of an
individual.
Taxpoint:
H & EC As in case of an individual
Residential Status Refer chapter “Residential Status”
Computation of income under various As usual, however, HUF cannot have any income under
heads the head ‘Salaries’

Clubbing of income As usual:

Sec. 64(1) & (1A) are not applicable in case of HUF as it
is specifically applicable to individual Specially refer
Sec. 64
Setoff & Carry forward of losses As usual
Deductions Refer chapter “Deductions & Relief”
Return and Assessment As usual
Advance tax As in case of an individual.
Following Points shall be considered:

1 Remuneration Any genuine (not excessive) remuneration paid to the Karta for conducting
to Karta: business of the HUF is allowed expenditure in the hands of the HUF
provided such remuneration is paid under a Bonafide agreement and is in
the interest of the family business.
2 Personal income Income of the member of HUF acquired in his personal capacity shall not
of the be taxable in the hands of HUF.
members: Taxpoint: ‘Stridhan’ is an absolute property of a women, income there
from is not taxable in the hand of HUF.
3 Income from Though the impartible estate belongs to the family, income arising there
impartible from is taxable in the hands of the holder of the ‘estate’ and not in the
estate hands of the HUF.
ASSESSMENT OF CO-OPERATIVE SOCIETY
• Meaning Co-operative society means a co-operative society registered under the

Co-operative Societies Act, 1912 or under any other law for the time
being in force in any State for the registration of co-operative societies
[Section 2(19)]
• Computation of Gross total income of a co-operative society is computed under different
Total Income head as per the various provisions of the Act. Further, deduction u/s.
80G, 80GGA, 80GGC, 80IA, 80IB, 80IC, 80JJA and 80P are available to
a co-operative society.
• Deduction u/s. Applicable to A co-operative society.
80P in respect
of co-operative
societies
Quantum of Deduction
Income derived from Deduction
Specified Activities 100% of income from such activities

Activity other than specified activities Assessee is a consumers’ co-operative

Society Rs. 100000
In any other case Rs. 50000
Following income of any co-operative society is also exempt:
• Interest or dividends from its investments with any other co-operative society.
• Letting of godowns or warehouses for storage, processing of facilitating the marketing of
commodities, and
• Interest on securities or any income from house property, provided certain conditions are
satisfied.
• Taxpoint: The deduction u/s. 80P shall be allowed only if such deduction is claimed in the
return of income.
SPECIFIED ACTIVITIES
a Banking business or providing credit facilities to its members, or However, w.e.f. 2007-08,
deduction shall not be available to any co-operative bank other than a primary agricultural
credit society or a primary co-operative and rural development bank.
b Cottage Industry; or
c Marketing of the agricultural produce grown by its members; or
d Purchase of agricultural implements, seeds, livestock or other articles intended for
agriculture for the purpose of supplying them to its members; or
e Processing, without the aid of power, of the agricultural produce of its members, or
Collective disposal of the labor of its members; or
f Supplying milk, oilseeds, fruits or vegetables raised or grown by its members to (only in the
case of a primary society).
g A federal co-operative society, being a society engaged in the business of supplying milk,
oilseeds, fruits or vegetables, or
h The Government or a local authority; or
i A Government company or corporation established by or under a Central, State or Provincial
Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables,
as the case may be, to the public)
CONDITIONS TO BE SATISFIED
a Co-operative society must not be:

1 A housing society; or
2 An urban consumers’ society’ or
3 A society carrying on transport business, or
4 A society engaged in any manufacturing operations with the aid of power.

b Gross total income of such society does not exceed Rs. 20,000.
a Consumers’ co-operative society means a society for the benefit of the consumers.
b Urban consumers’ co-operative society means a society for the benefit of the
KEY NOTES
consumers within the limits of a municipal corporation, municipality, municipal

committee, notified area, committee, town area or cantonment.
c In case, where the assessee is also entitled to deduction u/s. 80-IA, the deduction
u/s. 80P shall be allowed after allowing deduction under aforesaid section.
Rates of Tax: A co-operative society is liable to pay tax at the following rate:
Income Rate of Tax
Rs. 10,000 10%
Next Rs. 10,000 20%
Balance Income 30%
Tax is further enhanced by H & EC @ 4%.
ASSESSMENT OF AOP/BOI
In case of AOP/BOI income will be determined as under:

1 If any, salary, bonus, commission or remuneration is paid by AOP/BOI to its members, it will
not be deductible [Sec. 40(ba)]
2 Similarly any interest paid by AOP/BOI to its members on loan, capital or borrowings by
whatever name called is not deductible. [Sec. 40(ba)]
3 Total income of the AOP/BOI is taxable either.
• At the rate applicable to an Individual or
• At the maximum marginal rate or (30% + SC + H & EC)
• At the rate higher than maximum marginal rate. (40% + SC + H & EC)
a Rent paid by AOP/BOI to its members for use of members premises for its business
is allowed subject to 40A(2).
b Commission paid by an AOP to the proprietor business of one of its member is not
allowed as deduction.
KEY NOTES
c City compensatory allowance paid to member is not allowed as deduction.

d Interest paid by AOP/BOI to members or vice versa.
• When interest is paid by the AOP/BOI to any of its member who has paid interest to
the
• AOP/BOI, the amount of interest to be disallowed shall be limited to the amount by
which the payment of interest by AOP/BOI to the member exceeds the payment of
interest by the member to the AOP/BOI.

• Where an individual is a member in an AOP/BOI on behalf or for the benefit of any

other person interest paid by the AOP/BOI to such member or by such individual to
AOP/BOI, otherwise than as member in a representative capacity is not taken into
account, for the purpose of section 40(ba).
1. Illustration
AOP/BOI pays interest of Rs. 6000 to its member Zebra on his loan/capital account and Zebra
pays interest of Rs. 9000 to AOP/BOI on his drawings. Find the amount disallowed & income of
AOP/BOI.
Solution
AOP / BOI pay interest of Rs.6000 to its member Zebra and Zebra pays interest of Rs.9000 to
AOP / BPI on his drawing. Income of AOP / BOI = Rs.3000/-
2. Illustration
AOP/BOI pays interest of Rs. 6000 to its member Zebra on his loan/capital account and Y pays
interest of Rs. 9000 to AOP/BOI on his drawings. Find the amount disallowed & income of
AOP/BOI.
Solution
RS.6000/- PAYS TO MEMBER ZEBRA AS AN INTEREST ON LOAN / CAPITAL IS
DISALLOWED.
RS.9000/- INCOME FOR AOP / BOI BECAUSE IT IS THE INTEREST ON DRAWING PAID BY
YAK.
COMPUTATION OF TAX OF AOP/BOI:
AOP/BOI When none of the members is When one or more partners is a

a foreign company foreign company
Tax incidence Tax incidence Tax incidence Tax incidence
On AOP/BOI On members On AOP/BOI On members
A) When shares of
members are
determinates
A1) When none of Income is Share of Share of Share of member is
the members has taxable as if members shall foreign not taxable.
income exceeding the AOP/BOI is be Included in company Shall
maximum amount An Individual taxable income be taxable at
chargeable to tax of members the rate
and if applicable to
AOP/BOI has the company

paid tax then (40%) & the

the members remaining
can claim income is
rebate under taxable at the
section 86. maximum
marginal rate
A2) When one or Income will be Share of As given As given above.
more members has taxed at the member is not above.
income exceeding the maximum taxable.
maximum amount marginal rate.
chargeable to tax
B) When shares of As given above As given above At the rate As given above.
members are applicable to
indeterminate the foreign
company
Rebate u/s 86 is calculated by applying the following steps-

Step 1 Calculate total income of member including share from AOP
Step 2 Calculate tax liability after surcharge and education cess
Step 3 Calculate average rate of tax
Average of tax = Tax liability after surcharge and cess * 100
Total income
Step 4 Rebate u/s 86 = Share from AOP * Average of tax
ASSESSMENT OF NON RESIDENT
TYPES OF NON-RESIDENT IN INDIA
Under Income Tax Act, non-resident in India can be of two types:

a Non-resident Indian
The definition of this term is given under section 115C (Chapter XII-A) which deals with
special provisions relating to certain income of non-resident Indians.
According to section 115C, non-resident Indian means an individual, being a citizen of
India or a person of Indian origin who is not a resident.
• A person shall be deemed to be of Indian origin if he, or either of his parents or any of
his grand-parents, was born in undivided India;
• Non-resident Indians can only be individuals.
b Any other non-resident person i.e. Foreign Nationals (other than individuals of Indian
origin) or foreign companies or Overseas financial organisations (Offshore funds) or foreign
institutional investors, etc.

Therefore, in the following discussion wherever the term non-resident in India is used, it
includes persons covered in category (a) and (b) above. On the other hand where the term
non-resident Indian is used, it refers to individuals only of category (a) mentioned above.
TAXATION OF NON-RESIDENT
Particulars All Non-Residents Overseas All Non- Resident Foreign

including foreign Co. financial Residents Individual Institutional
organs/ including employee Investors
i.e. foreign Co. of Indian
offshore Co.
funds
Section 115A 115AB 115AC 115ACA 115AD
Investment Mandatory Mandatory Mandatory Mandatory Mandatory
made in
Foreign
Currency
Source of 1. Dividends other than Income 1. Interest Dividends 1. Income
Income dividends u/s 115-0) received, on – (a) (other (other than
2. Interest from Govt, and LTCG bonds of dividends Dividends
of Indian Concern or from Indian u/s 115-0) & u/s 115-0)
on Foreign Currency transfer Company LTCG on from
Loan (Exempt Point 3, of, Units issued transfer of Securities
4 below). of UTI / abroad, GDRs (other than
3. Interest from Mutual or (b) (allotted units
infrastructure Debt Funds Bonds of under Govt mentioned
Fund u/s 10(17). PSU sold approved u/s 115AB)
4. Interest referred by Govt. ESOP 2. STCG/LTCG
u/s or (c) Scheme) from above
194LC/194LD/194LB GDRs Securities
A(2) 2. Dividends (See Notes
5. Income from units of (other 8 & 9)
Mutual Funds u/s than
10(23D) or UTI dividends
u/s 115-
0)
3. LTCG on
transfer
of above
Tax Rate 1. Point 1, 2 and 5 above On On Income On On Income at

at 20% Income at at 10% dividends at 20% (5% for

(Surcharge 2. Point 3 and 4 above at 10% 10% 194LD Income)
as 5%
applicable, STCG N.A STCG N.A STCG N.A STCG N.A STCG 30%
EC and (15% for STT)
SHEC) LTCG N.A. LTCG at LTCG at LTCG at LTCG at 10%
10% 10% 10%
Filling of Exempt of total income Exempt if
Return consists of above income Total
Income only provided TDS is Income
made and no other consists of
income. Otherwise Mandatory Interest & Mandatory Mandatory
mandatory dividend
provided
TDS is
made and no
other
income.
Otherwise
mandatory
TDS 195 196B 196C - 196D
Section
Notes:
1 No deduction / expenditure shall be allowed u/s 28 to 44C or Sec. 57 in computing the above
Incomes.
2 Indexation Benefit for LTCG (Second proviso to Sec. 48) is not available.
3 Benefit of Conversion to Foreign Currency (First Proviso to Sec. 48) is not available.
4 Benefit of Set Off and Carry Forward of Loss is available (Subject to Chapter VI).
5 Benefit of DTAA can be availed by the above Persons.
6 Deduction under chapter VI-A are not allowed against the above the above Incomes. If there
is any other income, deductions are available against such other income.
7 Basic Exemption Limit is not available for the above Income. But, it can be claimed / availed
against Other Income, if any.
8 As per Explanation to Sec. 115ACA, Global Depository receipts means –
a Any instrument in the form of Depository Receipt or certificate,
b Created by Overseas Depository Bank outside India,
c Issued to Non-Resident Investors,
d against the issue of ordinary shares (w.e.f. 01/04/2016 being a company listed on a
Recognised Stock Exchange in India), or

e Convertible Foreign Currency Convertible Bonds of Issuing Company.

9 Sec. 115ACA applies to GDR’s issued by the following ‘Specified Knowledge Based Industries
/ Services’ –
a Biotechnology Industry,
b Entertainment Services,
c Information Technology Service / Software,
d Pharmaceutical Industry,
e Any other notified industry.
TAXATION OF INVESTMENT INCOME AND CAPITAL GAINS OF A NON RESIDENT

INDIAN (SECTION 115C TO 115 – I)
Nature of Income Tax rate

Investment income i.e. any income derived from a foreign exchange asset 20%
Long term capital gains (without indexation benefit) from a foreign exchange asset 10%
EXEMPTION IN RESPECT OF LTCG (SECTION 115F)
Any long term capital gains arising to an NRI – assessee from transfer of a foreign exchange
asset will be eligible for exemption as follows:
𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑮𝒂𝒊𝒏𝒔 × 𝑨𝒎𝒐𝒖𝒏𝒕 𝒊𝒏𝒗𝒆𝒔𝒕𝒆𝒅 𝒊𝒏 𝒏𝒆𝒘 𝒂𝒔𝒔𝒆𝒕
𝑨𝒎𝒐𝒖𝒏𝒕 𝒐𝒇 𝑬𝒙𝒆𝒎𝒑𝒕𝒊𝒐𝒏 =
𝑵𝒆𝒕 𝒄𝒐𝒏𝒔𝒊𝒅𝒆𝒓𝒂𝒕𝒊𝒐𝒏
AGENT OF NON-RESIDENT (SECTION 163)
a Who is employed by or on behalf of the non – resident; or

b Who has any business connection with the non – resident within the meaning of section
9(1)(i); or
c From or through whom the non-resident is in receipt of any income, whether directly or
indirectly; or
d Who is the trustee of the non – resident
and includes also any other person who, whether a resident or non – resident, has acquired by
means of transfer, a capital asset in India.
Submission of statement by a non – resident having liaison office within 60 days from the end
of such financial year in prescribed form and containing prescribed particulars.

ASSESSMENT OF COMPANY
COMPANY UNDER THE INCOME TAX ACT, [SECTION 2(17)]
Company means –
• AN INDIAN COMPANY, OR
• BODY CORPORATE INCORPORATED OUTSIDE INDIA UNDER THE LAWS OF A
FOREIGN COUNTRY, OR
• ANY INSTITUTION, ASSOCIATION OR BODY WHETHER INCORPORATED OR NOT
AND WHETHER INDIAN OR NON-INDIAN, WHICH IS DECLARED BY GENERAL OR
SPECIAL ORDER OF THE BOARD TO BE A COMPANY.
BACKGROUNDS & TYPES OF COMPANIES
Before we begin to examine and understand the taxability and tax incidence on companies, we
must understand the types of Companies that are in existence today post the Companies Act,
2013.
Categories of
Companies
Indian Domastic Foreign Widely Held Closely Held

Company Company Company Company Company
INDIAN COMPANY
Section 2(26) of the Income Tax Act, 1961 defines the expression ‘Indian Company’ as a
company formed and registered under the Companies Act, 2013 and includes:
a) A company formed and registered under any law relating to companies formerly in force in
any part of
b) India (other than the State of Jammu and Kashmir, and the Union Territories specified in
(e) below);
c) Any corporation established by or under a Central, State or Provincial Act;
d) Any institution, association or body which is declared by the Board to be a company under
Section 2(17) of the Income Tax Act, 1961;
e) In the case of any of the Union Territories of Dadra and Nagar Haveli, Goa, Daman and Diu

and Pondicherry, a company formed and registered under any law for the time being in force
in that Union Territory;
Provided that the registered or, as the case may be, principal office of the company,
corporation, institution, association or body in all cases is in India.
DOMESTIC COMPANY
Section 2(22A) of the Income Tax Act, 1961, defines domestic company as an Indian company or
any other company which, in respect of its income liable to tax under the Income Tax Act, has
made the prescribed arrangements for the declaration and payment within India, of the
dividends (including dividends on preference shares) payable out of such income.
From this definition, it is clear that all Indian companies are domestic companies while all
domestic companies need not necessarily be Indian companies. In other words, a non-Indian
company would be considered as a domestic company if it makes the prescribed arrangements for
the declaration and payment of dividends in India on which tax is deductible under Section 194.
FOREIGN COMPANY
Section 2(23A) of the Income Tax Act defines foreign company as a company, which, is not a
domestic company. However, all non-Indian companies are not necessarily foreign companies. If a
non-Indian company has made the prescribed arrangements for declaration and payments of
dividends within India, such a non-
Indian company must be treated as a “domestic company” and not as a “foreign company”.
Company in which public are substantially interested (A widely-held company)
LOGIC BEHIND MAT
SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES

It was observe by the law markets that many companies were showing huge profits in the profit
and loss amount as laid in the Annual General Meeting of the shareholders and distributing huge
dividends. At the same time these companies were not declaring any income under the income-tax
Act since their taxable profit as per income-tax Act were NIL. This variance in the profits as
computed as per Companies Act and the profits as computed under the income tax Act was
mainly because of rates of depreciation under the two Acts. The companies provided lesser
depreciation under the Companies Act (by following lower rates of depreciation as per Companies
Act and by following Strength Line Method of Depreciation). At the same time, while computing
the total income under the income-tax Act, the depreciation was claimed as per the Income Tax
Act and the taxable income was compute as NIL.
The law makers felt that such companies which show book profits under the Companies Act and
no income under the income-tax Act must be made to pay a Minimum Tax. Hence, Minimum

Alternate Tax.
MINIMUM ALTERNATE TAX SEC [115JB (1)]
Rate Where in the case of a company the income tax payable on the total income as computed
under income tax act is less than 15% of its book profit, such book profit shall be deemed
to be the total income of the assessee.
Effective Rate of MAT:
Book Profits Domestic Company Foreign Company

Do not exceed Rs. 1 crore 15.6% 15.6%
Exceeds Rs. 1 crore but do not exceed Rs. 10 crores 16.692% 15.912%
Exceeds Rs. 10 crores 17.472% 16.38%
NOTE
• [9% of book profits, in case of the assessee is a unit located in an International
Financial Services Centre and derives its income solely in convertible foreign exchange]
• ADVANCE TAX PROVISIONS ARE APPLICABLE TO TAX PAYABLE U/S 115JB HENCE
ASSESSEE IS LIABLE TO PAY INTEREST UNDER SECTION 234B AND 234C.
PROFIT AND LOSS ACCOUNT TO BE PREPARED AS PER PROVISIONS OF THE

COMPANIES ACT 1956 [SEC 115JB (2)]
• Every Assessee shall prepare its profit and loss account for the relevant PY in accordance
with the provisions of Companies Act 2013.
• Electricity Company, Banking Company or Insurance Company to prepare profit and loss
account as per governing Act.
• However such companies have been given an option to prepare its profit and loss account for
the previous year relevant to AY commencing on or before 1.4.2012 either in accordance with
the provisions of part II and Part III of schedule VI of the companies Act 1956.
MAT CREDIT: SECTION 115-JB
1. Relevant year in which tax credit becomes available

Tax credit becomes available in the assessment year in which the assessee pays minimum
alternate tax in accordance with provisions of section 115JB.
2. Amount of MAT credit to be allowed
The tax credit to be allowed shall be the difference of the tax paid for any assessment year
under section 115JB (1) and the amount of tax payable by the assessee on his total income
computed in accordance with the other provisions of this Act.

3. No interest to be payable
No interest shall be payable on the tax credit allowed under this section.
4. Period for which tax credit is allowed
The amount of tax credit shall be carried forward upto 15 years immediately succeeding the
assessment year in which tax credit becomes available.
5. Year in which tax credit shall be set-off
The tax credit shall be allowed set-off in a year when tax payable on the total income
computed in accordance with the provisions of this Act exceed minimum alternate tax u/s
115JB.
6. Amount of tax credit eligible shall be set-off
Set off in respect of brought forward tax credit shall be allowed for any assessment year to
the extent of the difference between the tax on his total income and the tax which would
have been payable under the provisions of section 115JB, as the case maybe for that
assessment year.
7. Credit not to be allowed to successor LLP
In case of conversion of a private company or unlisted public company into a limited liability
partnership under the Limited Liability Partnership Act, the provisions of this section shall
not apply to the successor limited liability partnership.
SPECIAL TAX RATE FOR DOMESTIC COMPANIES SEC. 115BA
1. Eligible Assessee
Domestic Companies
2. Special Rate of Tax
25% of Total Income, at option of the company.
3. Nature
Above Tax Rate is notwithstanding anything contained in the Act, but subject to the
provisions of Sec. 111A & Sec. 112
4. From
AY 2017-18 onwards.
5. Exercise of Option
a The benefit of this section shall be applicable only if the option is exercised in the
prescribed manner on or before the due date specified u/s 139 (1) for furnishing the
First of Return of Income for the relevant previous year.
b The option once exercised for any PY cannot be subsequently withdrawn for the same or
any other PY.
6. Conditions
a The Company has been set up and registered on or after 1/3/2016,
b The Company is engaged only in the business of manufacturing or production of any article

or thing, and research in relation to, or distribution of such article or thing manufactured
or produced by it, and
c The Total Income of the Company has been computed –
i Without any deduction u/s 10AA/ 32(1)(iia)/ 32AC/ 32AD/ 33AB/ 33ABA/ 35(1)(ii)/
(iia)/ (iii)/ (2AA)/ (2AB)/ 35AC/ 35AD/ 35CCC/ 35CCD/ and 80HH to 80RRB
(excluding 80JJAA).
ii Without set off of loss carried forward from any earlier AY, if such loss is
attributable to any of the deduction referred to in (i) above
iii Depreciation u/s 32 other than Sec. 32(1)(iia), is determined in the prescribed
manner.
Note: The loss referred above shall be deemed to have been already given full effect to and no
further deduction for such loss shall be allowed for any subsequent year.
SPECIAL PROVISIONS OF TAX ON CERTAIN INCOME OF DOMESTIC MANUFACTURING

COMPANY AND OTHER DOMESTIC COMPANY AS PER PROVISIONS OF SECTION
155BAB AND SECTION 115BBA OF THE INCOME-TAX ACT, 1961.
(1) (2) (3) (4)

Particulars Section 115BAB Section 115BAA
1 Applicability Domestic manufacturing Any domestic company
company
2 Rate of tax 15% 22%
3 Rate of surcharge 10% 10%
4 Effective rate of 17.16% 25.168%
tax [including
surcharge & cess]
5 Applicability of The rate of tax [i.e., 17.16%] The rate of tax [i.e. 25.168%] is
concessional rate is notwithstanding anything notwithstanding anything contained in
of tax on total contained in the Income-tax the Income-tax Act, 1961 but subject
income of Act, 1961 but subject to the to the provisions of Chapter XII,
company. provisions of Chapter XII, other than section 115BAand 115BAB.
other than section 115BA
and 115BAA.
Note: The implies that this rate [i.e., 17.16% / 25.168%] would
prevail in respect of all income, other than income subject to special
rates of tax under Chapter XII, for which the special rates would
continue to apply. For example, in case of such companies opting for
section 115BAA or 115BAB, long-term capital against chargeable to
tax under section 112 and 112A and short-term capital gains
chargeable to tax under section 111A would be subject to tax at the
rates mentioned in the said sections. However, other income, like

short term capital gains [other than those covered under section
111A], income from house property and income from other sources
would be taxable at the rate of 17.16% / 25.168%, as the case may
be.
6 Conditions to be (i) The company should be No time limit specified. Both
fulfilled for set-up and registered existing companies and new
availing the on or after 1-10- companies can avail benefit.
concessional rate 2019.
of tax and (ii) It should commence Need not be a manufacturing
exemption from manufacturing on or company.
MAT. before 31-3-2023.
(iii) It should not be No similar condition has been
formed by splitting up prescribed.
or the reconstruction
of a business already
in existence [except in
case of an undertaking
formed by
reconstruction or
revival of a person of
the business of any
undertaking referred
to in section 33B in
the circumstances and
within the period
specified therein]
(iv) It does not use any No similar condition has been
machinery or plant prescribed.
previously used for any
purpose [Refer Note at
the end]
(v) It does not use any No similar condition has been
building previously used prescribed.
as a hotel or a
convention Centre
[meanings assigned in
section 80-ID(6)]
(vi) It should not be No similar condition has been
engaged in any business prescribed.
other than the
business of

manufacture or
production of any
article or thing and
research in relation to,
or distribution of, such
article or thing
manufactured or
produced by it.
7 Common condition The total income should be computed –
for both sections (i) Without providing for deduction under any of the following
for availing the provisions:
concessional rate Section Provision
of tax and 10AA Exemption of profits and gains derived from
exemption from export of articles or things or from services by an
MAT. assessee, being an entrepreneur from his Unit in
SEZ.
32(1)(iia) Additional depreciation @ 20% or 35%, as the case
may be, of actual cost of new plant and machinery
acquired and installed by manufacturing and power
sector undertakings.
32AD Deduction @ 15% of actual cost of new plant and
machinery acquired and installed by an assessee in
a manufacturing undertaking located in the notified
backward areas of Andhra Pradesh, Telengana,
Bihar and West Bengal.
33AB Deduction @ 40% of profits and gains of business
of growing and manufacturing tea, coffee or rubber
in India, to the extent deposited with NABARD in
accordance with scheme approved by the
Tea/Coffee/Rubber Board.
33ABA Deduction @ 20% of the profits of a business of
prospecting for, or extraction or production of,
petroleum or natural gas or both in India, to the
extent deposited with SBI in an approved scheme
or deposited in Site Restoration Account.
35(1)(ii)/ Deduction / weighted deduction for payment to any
(iia)/(iii) research association, company, university etc. for
undertaking scientific research or social science or
statistical research.
35(2AA) Weighted deduction @ 150% of payment to a

National Laboratory or University or IIT or

approved specified person for scientific research.
35(2AB) Weighted deduction @ 150% of in-house scientific
research expenditure incurred by a company
engaged in the business of bio-technology or in the
business of manufacture or production of an article
or thing.
35AD Investment-linked tax deduction for specified
businesses.
35CCC Weighted deduction @ 150% of expenditure
incurred on notified agricultural extension project.
35CCD Weighted deduction @ 150% of expenditure
incurred by a company on notified skill development
project.
80-IA to Deductions from gross total income under Chapter
80RRB VI-A under the heading “C – Deductions in respect
of certain incomes” other than the provisions of
section 80JJAA.
(ii) Without set-off of any loss carried forward from any earlier
assessment year, if such loss is attributable to any of the
deductions listed in (i) above [Such loss would be deemed to
have been already given effect to and no further deduction for
such loss shall be allowed for any subsequent year].
(iii) By claiming depreciation u/s. 32 determined in the prescribed
manner. However, additional depreciation u/s. 32(1)(iia) cannot
be claimed.
Note: A domestic company exercising option for availing benefit of
lower tax rate under section 115BAA shall not be allowed to claim set
off of any brought forward loss on account of additional depreciation
for an Assessment Year for which the option has been exercised and
for any subsequent Assessment Year.
Since there is no time line without which option under section 115BAA
can be exercised, a domestic company having brought forward losses
on account of additional depreciation may, if it so desires, exercise
the option after set of the losses so accumulated.
8 Applicability of Not applicable Not applicable
MAT
9 Availability of set- Since it is a new company, Brought forward MAT credit cannot
off of MAT credit there would be not brought be set-off against income u/s. 115BAA.
brought forward forward MAT credit

from earlier years.
EQUALISATION LEVY
• The rapid growth of the information and communication technology has resulted in
substantial expansion of the supply and procurement of digital goods and services globally,
including India, and the digital economy is growing at approximately 10% per annum, faster
than the economy as a whole.
• These new business models have brought along with themselves, challenges. The typical
issues / concerns around taxation vis-à-vis e-commerce are:
• Difficulty in characterizing the nature of payment and establishing a link / nexus between
taxable transaction, activity and taxing jurisdiction the difficulty in locating the
transaction, activity and identifying the tax payer
• The Organization for Economic Cooperation and Development (OECD), has recommended
several options to tackle these challenges.
• In order to address these challenges, Chapter VIII of the Finance Act, 2016 titled
“Equalization Levy” provides for an equalization levy of 6% on the amount of consideration
for specified services, received / receivable by a non-resident, not having permanent
establishment in India, from a resident in India, who carries out business / profession, or
from a non-resident who has a permanent establishment in India.
Refer to the table below to understand the various parameters and aspects involved.
Section Subject Provisions
166 Person Every person being a resident in India, who carries out business /
responsible for profession, or a non-resident who has a permanent establishment
deduction of in India shall deduct equalization levy from the amount paid /
equalization levy payable to a non-resident in respect of the specified service
Rate 6% of the amount of consideration for a specified service,
received/ receivable by a non-resident, not having permanent
establishment in India, from a resident in India, who carries out
business/ profession, or from a non-resident who has a permanent
establishment in India, rounded off to the nearest ten rupees
Threshold Equalization Levy is deductible if the aggregate amount of
consideration for a specified service in a previous year exceeds
INR 100,000
The Equalization Levy so deducted during any calendar month shall
Time-period be paid by every assessee to the credit of the Central Government
by the 7th of following month
Consequence of Any assessee who fails to deduct, would anyway continue to be
failure liable to pay to the credit of the Central Government, the

Equalization Levy by 7th of the following month

167 Furnishing the Every assessee shall, within the time prescribed after the end of
statement the FY, submit a statement in the prescribed Form # 1, on or by
30th June immediately following the FY, setting forth all details for
specified services pertaining to that FY
Revised If the assessee notices omissions / errors / wrong details, he can
Statement furnish a revised statement before the expiry of 2 years from the
end of the FY in which the specified service was provided
Notice by the Where any assessee has failed to file the statement within the
Assessing prescribed time, the A.O. is empowered to issue a notice calling
Officer (A.O.) for the statement and in which case the statement has to be
furnished within 30 days of date of serving of such notice
168 The statement shall be processed, and the amount payable along
with interest if any, shall be computed towards the Equalization
Processing of the Levy. The net amount payable by or refundable to the assessee has
statement to be worked out and an intimation must be served upon the
assessee. However, no intimation is to be sent after the expiry of
one year, from the end of the FY in which the statement is
furnished
169 Rectification of With a view to rectifying a mistake apparent on the record, the
mistake A.O. may amend the intimation and such intimation must be
amended within one year from the end of the FY in which the
intimation sought to be amended was issued
170 Interest on Every assessee who fails to deposit to the credit of the Central
delayed Government, the applicable Equalization Levy, within 7th of the
payments month following the month in which it was deducted, the assessee
shall be liable to pay Interest @ 1% of such levy for every month /
part of the month of delay
171 Penalty If the assessee fails to deduct the Equalization Levy, in addition
to the Equalization Levy and Interest, penalty equal to the amount
of Equalization Levy that he failed to deduct would be applicable
If the assessee fails to remit the Equalization Levy so deducted to
the credit of the Government by 7th of the following month, a
penalty of INR 1000 per day would be leviable, subject to a
maximum of the equalization levy that he was to deduct.
172 Penalty for If the assessee fails to furnish the statement within 30th June of
delay in the following FY, or within 30 days of the notice served by the
furnishing the A.O., a penalty of INR 100 per day is leviable on the assesse.
statement
An assessee aggrieved by an order of the A.O., may appeal to the Commissioner of Income Tax

(Appeals) within 30 days of receipt of date of order.

An assessee aggrieved by an order of the Commissioner, may appeal to the Appellate Tribunal
within 60 days of receipt of date of order.

1. AMT is applicable to 2. AMT stands for ________________

_______________
a All person a Alternate minimum tax
b An individual b Automated minimum tax
c All person except company c Alternate maximum tax
d None of the above
3. AMT rate is _________________ 4. AMT is calculated on

_________________
a As per assessee a Book profit
b 18.5% b Gross profit
c 30% c Adjusted total income
d 18.5% or actual tax whichever is d Total income
higher
5. AMT provision is applicable to an 6. AMT credit can be carried forward for

Individual if ATI exceeds ___________________ yrs
a Maximum exemption limit a 12
b Gross income b 15
c Total income c 10
d ATI exceeds 20 lakhs d 8
7. AMT rate of 15% is 8. For calculation of ATI which of the

following is added back
a Including SC and H&EC a Deduction u/s 80
b Deduction u/s 10AA
b Excluding SC and H&EC c Deduction u/s 35AD
d Both c & d
9. Maximum exemption limit for HUF is 10. Remuneration paid is Karta is

________________ __________________ in the hands of
HUF.
a 2.5 lakhs a Allowed
b 3 lakhs b Disallowed
c 5 lakhs c Allowed if it is paid under bonafied
agreement

d No limit d Not allowed
11. Share of income received by member 12. Lala and sons, a Hindu undivided family,
in HUF is _________________ carrying on business of food grain agents
has total income of Rs. 10,25,000. It has
paid health insurance premium of Rs.
25,000 of karta. The tax liability of
Hindu undivided family is –
a Taxable a Rs. 1,17,000
b Rs. 1,12,500
c Exempt c Rs. 1,13,300
d Rs. 3,09,000
13. Subject to the provisions of Section 14. Mr. Satta gifted a let-out building which
64(2), any sum received by an fetches rental income of ₹ 10,500 per
individual as a member of a HUF from month to his son's wife on 1-11-2022. T
HUF shall be - nicipal tax of ₹ 6,000 on the property
was paid on 10-1-2023. The total income
from all other sources (computed) amounts
to ₹ 2,60,000 except income from above
said property. His total income chargeable
to tax is: (June, 2017)
a Taxable a Rs. 3,11,450
b Exempt b Rs. 3,44,000
c Regarded as personal income c Rs. 3,80,000
d Non of these Ans.(b) d Rs. 3,33,500
15. Mr. Bantai has earned salary income 16. Mr. Samba has earned salary income of ₹
of ₹ 5,00,000 (computed) and he has 5,00,000 (computed) and he has suffered
suffered loss from house property loss under the head capital gains ₹
amounting ₹ 2,00,000. General 1,50,000. He has made payment of ₹
business loss - ₹ 1,00,000. He has 75,000 in public provident fund.
made payment of ₹ 25,000 in public Determine his total income.
provident fund. Determine his total
income if he has not opted for
Section 115BAC.
a Rs. 5,00,000 a Rs. 5,00,000
b Rs. 2,75,000 b Rs. 2,25,000
c Rs. 1,75,000 c Rs. 3,50,000
d Rs. 3,50,000 d Rs. 4,25,000

17. Under the Income-tax Act, 1961, 18. Hir Ranja & Co. is an AOP consisting of 4
LLP is chargeable to tax @ - (June, members with equal share. None of the
2015) member has income exceeding the taxable
limit. The total income of the AOP is Rs.
5 lakhs. The income tax liability of the
AOP would be: (June, 2017)
a 30% plus surcharge plus HEC or AMT @ a Rs. 1,56,000
18.5% plus surcharge plus HEC
b 30% plus surcharge plus HEC or AMT @ b Rs. 13,000
18.5%
c 30% plus cess and SHEC or MAT @ c Rs. 10,400
18.5% plus surcharge plus HEC
d 30% plus surcharge plus HEC or MAT @ d Rs. 20,800
18.5%
19. A co-operative society is although a 20. An association of persons (AOP) has paid
body of individual but taxable at: tax at the maximum marginal rate. Yash,
a member of AOP received 11 lakh to his
share income. Such income is chargeable
to tax in his assessment @ - (Dec, 2016)
a The same rate as are applicable to a 10%
individual/HUF
b Average rate of tax b Nil
c The maximum marginal rate c 30%
d The rates given in Schedule I of the d 20%
Income-tax Act
21. In case of AOP/BOI, any interest 22. In case of AOP whose member include a
paid to the member shall: foreign company whose income is taxable
@ 50%, and their shares are
indeterminate, the tax shall be charged:
a be allowed as deduction to the a at the rate applicable to individual
AOP/BOI while computing its income
b be allowed as deduction to the b at the maximum marginal rate i.e. 30% +
AOP/BOI while Computing its income surcharge @ 37%, if applicable + HEC @ 4%-
subject to maximum of 12% p.a. 42.744%
c not be allowed as deduction c at the rate applicable to the foreign
company i.e. 50% + surcharge @ 2%/5% if
applicable + HEC @ 4%

d be allowed as deduction to the d At the rates given in Schedule I of the

AOP/BOI while computing its income Income-tax Act
subject to maximum of 6% p.a.
23. In case of AOP whose members are 24. In case of AOP whose members include a
other than foreign company, and foreign company, whose income is taxable
whose shares are known, but the total @ 50%, and their shares are
income of any of its member exceeds determinate, the tax shall be charged:
the maximum exemption limit, tax to
the AOP shall be charged:
a at the rate applicable to individuals a at the rate applicable to individuals
b at the maximum marginal rate i.e. 30% + b at the maximum marginal rate i.e. 30% +
surcharge @ 37%, if applicable + HEC @ surcharge @ 15%, if applicable + HEC @4%
4%- 42.744%
c at the rate applicable to the foreign c at the rate applicable to the foreign
company i.e. 40% + surcharge @ 2% if company i.e. 40% + surcharge @ 2% if
applicable + HEC 1% applicable + HEC @4%
d at the rates given in Schedule I of the d on that portion or portions of income of AOP
Income-tax Act which is relatable to the share of the
member which is a foreign company and on
the balance income at the maximum marginal
rate
25. Deemed profits in case of non- 26. Deemed profits in case of non-residents
residents engaged in shipping business engaged in aircraft business is
is __________ % of amount of __________ % of amount of carriage.
carriage.
a 5 a 7.5
b 7.5 b 10
c 10 c 5
d 15 d 12.5
27. Golu Marine Lines Inc., a Singapore 28. Every person being resident Indian who
company engaged in shipping business carries-out the business/profession or a
collected Rs. 150 lakh towards non-resident who has a permanent
carrying goods from Chennai Port. Its establishment in India shall deduct
presumptive income chargeable to tax equalization levy from the amount paid/
in India would be - (Dec. 2015) payable to a non-resident in respect of
specified services @ _______________
whereas the aggregate amount of

consideration for specified services in the

previous year exceeds Rs. __________.
(Dec.2019)
a Rs. 15 lakh a 8%, Rs. 10,00,000
b Rs. 11.25 lakh b 8%, Rs. 1,00,000
c Rs. 12 lakh c 6%, Rs. 1,00,000
d Nil d 10%, Rs. 1,00,000
29. A Foreign Institutional Investor (FII) 30. Chacha Chchi Ltd., a domestic company
has total income which includes short- having a turnover of Rs. 450 crore has
term capital gains on sale of listed computed its total income for the year
shares of Rs. 30 lakh. The rate of 2022 - 23 of Rs. 102 lakh. The tax
tax for charging such income to tax is payable by the company on such income in
- (June 2016) A.Y. 2023 - 24 shall be: (Dec.2019)
a 10% a Rs. 34,05,168
b 30% b Rs. 29,70,240
c 15% c Rs. 33,28,000
d 40% d Rs. 33,30,968
31. Provisions of Minimum Alternate Tax 32. A company has earned book profits of Rs.
(MAT) are applicable to the companies 50 lakhs during the financial year 2022 -
which are : (i) Indian companies (ii) 23. The total income of the company is
Foreign Companies (iii) LLP : Rs. 10 lakhs. The company is liable to pay
(Dec.2019) income tax of -
a & (iii) a Rs. 3,12,000
b & (ii) b Rs. 7,72,750
c All the three c Rs. 9,62,000
d None of the above d Rs. 7,80,000
33. Provisions of section 115JB are 34. Income earned by cooperative society
applicable in case of - (Dec. 2016) from __________________ activity is
fully exempt.
a Domestic companies only a Specified
b Foreign companies b Other than specified
c All companies c Both
d Closely held companies d
35. Deduction to cooperative society is 36. Mr. Hathoda, 82 years of age resident in
available u/s ___________________ India has earned Long term capital gains

on sale of building of ₹ 10,00,000 and

has no other income. He has made
payment of ₹ 1,00,000 in public provident
fund. Determine his tax liability if he has
not opted for Section 115BAC.
a 80C a Rs. 2,06,000
b 80 TTA b Rs. 1,04,000
c 80P c Rs. 82,400
d All of the above d Rs. 1,85,400
37. If income of cooperative society is 4 38. Mr. Kathiya, 82 years of age non-
lakhs, then tax payable is resident in India has earned Long term
capital gains on sale of building of ₹
6,00,000 and has no other income. He
has made payment of ₹ 1,00,000 in public
provident fund. Determine his tax liability
if he has not opted for Section 115BAC.
a Rs. 1,21,680 a Nil
b Nil b Rs. 1,24,800
c Rs. 13,000 c Rs. 20,800
39. Remuneration paid by AOP/BOI to 40. Tax rates applicable to AOP/BOI are
members is _________________ as
deduction.
a Allowed a Normal
b Not allowed b 30%
c Allowed subject to conditions c 40%
d All the the above
41. During the year 2023-24, Mr. Tapori 42. When member is foreign company and PSR
won ₹ 4,00,000 from a motor car is not known then entire income is taxable
rally out of which he deposited ₹ at the rate __________________
1,50,000 in his PPF account. He does
not have any other income. Net tax
payable by Mr. Tapori for AY 2024-
25 will be if he has not opted for
Section 115BAC-
a Rs. 1,24,800 a 30%

b Rs. 15,450 b 40%

c Nil c 10%
d None of the above d Normal rates
43. When member is foreign company and 44. Company for income tax purpose includes-
PSR is known then entire income is
taxable at the rate
___________________
a Share in foreign company at 40% a Indian Company
b Other as per member b Foreign Company
c Other at 30% c Institution assessed as company for any
Assessment Year under Income Tax Act,
1922
d Both a and c d All of the above
45. Hillary Clinton Ltd is a Company 46. Rate of income tax for domestic Company
formed under laws of America when turnover in FY 18-19 is 250 crore
situated in India and it made
arrangements for declaration of
dividend within India. It is treated
as-
a Foreign company a 25%
b Indian company b 30%
c Domestic company c 35%
d All of the above d 40%
47. Rate of income tax for domestic 48. Surcharge of foreign Company if total
Company when turnover in FY 20 - 21 income is 9.5 crore in FY 22 - 23
is 465 crore
a 25% a 2%
b 30% b 5%
c 35% c 7%
d 40% d 10%
49. Surcharge of domestic Company if 50. Dividend received by Indian companies

total income is 12 crore in FY 22 - from specified foreign Company as per
23 Sec 115BBD is Mr. Pakoda taxed @15%.
What is specified foreign Company?
Specified foreign Company means Company

in Mr. Pakoda which Indian Company holds

or more of equity share capital of
Company -
a 2% a 26%
b 5% b 50%
c 7% c 51%
d 12% d 100%
51. MAT is applicable to 52. MAT can be carried forward for

___________________ _________ yrs
a Indian Company a 10
b Domestic Company b 15
c Foreign Company c 8
d All of the above d None of the above
53. MAT is applicable to

a all assessee
b all assessee except company
c all assessee except individual
d Only to company

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 APPEALS, REVISION
CHAPTER 17 APPEALS, REVISION, PENALTIES OFFENCES AND PROSECUTIONS
APPEALS
Meaning: An appeal means “a complaint to a superior authority (not lower or parallel) against an
order of lower authority for injustice.
General Ideas on Appeal
1 Parties of appeal
Person Complaint Appellant
Other Party Respondent or Defendant
2 The rights to appeal is not implied in Income tax Act. It is not an inherent right. No appeal
will lie unless specifically provided by the statute. Appeal can be made only in respect of
those matters which are expressly allowed by the Act. All matters are not applicable
Following 7 matters cannot be appealed against:
a An order levying interest u/s 234A, 234B, 234C.
b A revisionary order passed u/s 264 by CIT
c An order u/s 264 by CIT rejecting the application for revision u/s 263.
d An order of Settlement Commission.
e An order of Advance Ruling Authority
f An order passed by ITAT involving matter of Fact.
g An order of CIT u/s 273A(1) or 273A(4) (Power to waive penalty)
3 Appealed cannot be field free of cost, prescribed fee need to be paid
4 Appellate hierarchy must be followed. Direct appeal to top most authority is not permitted.
Alternative One – Appeal
Appeal Appellant Appellate Authorities Against the order of
Final Appeal Assessee Supreme Court High Court
3rd Appeal Or, High Court ITAT (the case must involve
The substantial question of law)
2nd Appeal commissioner Income Tax Appellate Commissioner (Appeals)
of Income Tax Tribunal (ITAT)
1st Appeal Assessee only. Commissioner of Income Tax Assessing officer
(Appeals)
Alternative Two – Revision under section 263
Nature of action Against which order it can be taken Who can prefer
Revision under section order of the Assessing Officer if it Action can be taken by the
263 is prejudicial to the interest of Commissioner of Income-tax
revenue himself
First appeal Appeal to ITAT against the revision Taxpayer
order under section 263

Appeal to High Court See under Alternative One

Appeal to Supreme See under Alternative One
Court
Alternative Three – Revision under section 264
nature of action Against which order it can be taken Who can prefer
Revision under section Order of the Assessing Officer The taxpayer may apply the
264 Commissioner for revision
under section 264 or the
Commissioner can suo motu
take action
PROCEDURE FOR FILING APPEAL [SECTION 249 AND RULES 45 AND 46]
1. Form of appeal
This is to be filed in Form No. 35 verified in the prescribed manner.
2. Documents to accompany Form No.35
Documents Number of copies
Order against which appeal is made One copy
Statement of facts In duplicate
Grounds of appeal In duplicate
Notice of demand In original (if any)
Note: Above together is known as Memorandum of appeal
3. Fee for filing appeal
The memorandum of appeal shall be accompanied by a fee as under
N Particulars Amt. Rs.
1 Where assessed income in a case to which appeal relates is Rs. 1,00,000 250
or less
2 Where assessed income in a case to which appeal relates exceed is Rs. 500
1,00,000 but does not exceed Rs. 2,00,000
3 Where assessed income in a case to which appeal relates more than 1000
2,00,000
4 Any other matter 250
4. Signing of appeal
Form No. 35 grounds of appeal and the form of verification appended thereto shall be signed
and verified by the person who is authorized to sign the Return of Income under section 140.
If the appeal is unsigned or unverified or signed or verified by a wrong person that would be
a curable defect and in appropriate cases an opportunity should be given to the assessee to
rectify it.

5. Time limit for filing appeal [section 249 (2)]

The appeal should be filed within a period of 30 days of;
a) Where the appeal relates to any tax deducted under section 195(1), the date of
payment of the tax or where appeal is under section 248, the payment of tax; or
b) Where the appeal relates to any assessment or penalty, the date of service of the
notice of demand relating to the assessment or penalty; or
c) In any other case, the date on which intimation of the order sought to be appealed
against is served.
6. Exclusion of time for calculating time limit for filing appeal [section 268]
For this purpose, the date on which the order complained of is served is to be excluded.
Further if the assessee was not furnished with a copy of the order when the notice of the
order (say notice of demand) was served upon him then time required for obtain a copy of
the order should be excluded i.e. period taken for obtaining the order shall be added to the
time limit of 30 days.
7. Amount of tax payable before filing appeal [section 249(4)]
No appeal shall be admitted unless at the time of filing of the appeal.
a. Where a return has been filed by the assessee, the assessee has paid the tax due
on the income returned by him or
b. Where no return has been filed by the assessee, the assessee has paid an amount
of advance tax which was payable by him i.e. tax which is payable on income
assessed under section 144 or 147
c. However, where no return has been filed by the assessee the Commissioner
(Appeals) on an application made by the assessee, may for any good and sufficient
reason to the recorded in writing exempt him from the payment of such tax.
PROCEDURE IN HEARING APPEAL [SECTION 250]
a The Commissioner (Appeal) shall fix a day and place for the hearing of the appeal and
shall give notice of the same to the appellant and to the Assessing Officer against whose
order the appeal is preferred.
b The following persons shall have a right of being heard at the hearing of the appeal
1 The appellant either in person or through authorized representative
2 The Assessing Officer either in person or through a representative
c The appellate authority shall have the power to adjourn the hearing of the appeal from
time to time
d The appellate authority may before disposing off any appeal make such further inquiry as he
thinks fit and may direct the Assessing Officer to do so and report the same
e The appellate authority may at the hearing of the appeal allow the appellant to go into any
ground of appeal not specified in the grounds of appeal , if he is satisfied that omission of
such ground of appeal was not will or unreasonable.

f The order of the appellate authority disposing off the appeal shall be in writing and shall
state the points for determination the decisions thereon and the reason for the
decision.
g The order passed by the Commissioner (Appeals) shall be communicated to the assessee and
to the Commissioner of income tax
h Appeal should be disposed of within one year from the end of FY in which appeal is
filed. (if possible)
POWERS THE COMMISSIONER (APPEALS) [SECTION 251]
In disposing off an appeal the Commissioner (Appeal) shall have the following powers
a In an appeal against an order of assessment he may confirm reduce enhance or annual the
assessment or
b In an appeal against an order imposing a penalty he may confirm or cancel such order or very
it so as either to enhance or to reduce the penalty
c In any other case – he may pass such orders in the appeal as he thinks fit
The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the
amount of refund unless the appellant has had a reasonable opportunity of showing cause
against such enhancement or reduction.
APPELLATE TRIBUNAL [SECTION 252]
• The Central Government shall constitute an Appellate Tribunal consisting of as many judicial
and accountant members as it thinks fit to exercise the powers and discharge the functions
conferred on the Appellate Tribunal by this Act
Who can be member of Appellate Tribunal
• A judicial member shall be a person who has for at least ten years held a judicial office in
the territory of India or who has been a member of the Indian Legal Service and has held a
post in Grade. II of the Service or any equivalent or higher post for at least there year or
two has been an advocate for at least ten years.
• An accountant member shall be a person who had for at least ten years been in the practice
of accountancy as a chartered accountant under the Chartered Accountants Act 1949 or as
a registered accountant under any law formerly in force or partly as a registered accountant
and partly as a chartered accountant or who has been a member of the Indian Income-tax
Service. Group A and has held the post of Additional Commissioner of Income-tax or any
equivalent or higher post for at least three years

PROCEDURE FOR APPEAL TO APPELLATE TRIBUNAL [SECTION 253(3) (4) AND
• Time limit for filing appeal

The appeal to the Appellate Tribunal shall be filed within 60 days of the date on which the
order sought to be appealed against. It communicated to the assessee or to the CIT, as
the case may be [section 253 (3).
• Filing of cross objections and time limit
The Assessing Officer or the assessee as the case may be on receipt of notice that an
appeal against the order of Commissioner (Appeals) has been filed by the other party may
file memorandum of cross objections has to be file within 30 days of the receipt of above
said notice. No fees is payable in case of memorandum of cross objections. [section 253(4)]
• Condonation of delay of time limit
The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross
objections after the expiry of 60/30 days if it is satisfied that there was sufficient cause
for not presenting it within the specified period.
• Prescribed forms and documents to accompany
The appeal to the Appellate Tribunal shall be in Form No. 36 and memorandum of cross
objections in Form No. 36 A
• Signing of appeal
Form No. 36 grounds of appeal the verification should be signed by the person authorized to
sign the return of income under section 140.
• Fee for filing appeal
An appeal to the Appellate Tribunal shall be accompanied by a fee of:
a. Where the total income of the assessee as Rs. 500
computed by the Assessing Officer in the
case to which the appeal relates is Rs.
1,00,000 or less
b. Where the total income of the assessee as Rs. 1, 500
computed aforesaid is more than Rs.
1,00,000 but does not exceed Rs.
2,00,000 or less
c. Where it exceeds Rs. 2,00,000 1 % of the assessed income (subject
to a maximum of Rs. 10,000)
d. Where the subject matter of the appeal Rs. 500
relates to any matter other than specified
in clauses (a) (b) and (c) above
e. Application for stay of demand Rs. 500

However, no such fee shall be payable in case:

1 The appeal is filed by the Commissioner or
2 Where the memorandum of cross objections is filed either by the assessee or the
department [section 253(6)]
Note: In case appeal is to be filed by Revenue in minimum amount involved should be 50
lakhs.
ORDERS OF APPELLATE TRIBUNAL [SECTION 254]
1. Appellate order
The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of
being heard, pass such orders thereon as it thinks fit.
2. Time limit for disposal of appeal
In every appeal, the Appellate Tribunal, where it is possible, may hear and decide every such
appeal within a period of 4 years from the end of the financial year in which such appeal is
filed.
3. Rectification of mistake
The Appellate Tribunal may, at any time within 4 years from the date of the order, with a
view of rectifying any mistake apparent from the record, amend any order passed by it and
shall make such amendment if the mistake is brought to its notice by the assessee or the
Assessing Officer.
a However, an amendment which has the effect of enhancing an assessment or
reducing a refund or otherwise increasing the liability of the assessee, shall not be
made unless the Appellate Tribunal has given notice to the assessee of its intention
to do so and has allowed the assessee a reasonable opportunity of being heard.
b Further, any application filed by the assessee for rectification shall be accompanied
by a fee of Rs.50.
4. Costs of Appeal
The cost of any appeal to the Appellate Tribunal shall be at the discretion of the Tribunal.
5. Copy of order
The appellate tribunal shall send a copy of any orders passed to the assessee and the
Principal Commissioner or Commissioner.
APPEAL TO HIGH COURT [SECTION 260A]
The provisions relating thereto are as follows –

1. Matters appealable before High Court
An appeal shall lie to the High Court from every order passed in appeal by the Appellate
Tribunal if the High Court is satisfied that the case involves a substantial question of law.
2. Appeal by Assessee/ Department –Time limit thereof

The CCIT/ CIT/ assessee aggrieved by any order passed by the Appellate Tribunal may file
an appeal to the High Court and such appeal shall be –
Filed within 120 days from the date on which the order appealed against is
received by the person filing the appeal;
In the form of a memorandum of appeal precisely stating therein the substantial
question of law involved.
3. Formulation of substantial question of law
Where the High Court is satisfied that a substantial question of law is involved in any case, it
shall formulate that question.
4. Hearing of appeal
The appeal shall be heard only on the question so formulated and the respondents shall, at
the hearing of the appeal, be allowed to argue that the case does not involve such
question(s).
However the High Court has the power to hear, for reasons to be recorded, appeal on any
other substantial question of law not formulated by it if it is satisfied that the case involves
such question.
5. Judgment
The High Court shall determine the question of law so formulated and deliver such judgment
thereon containing the grounds on which such decision is founded and may award such cost as
it deems fit.
6. Determination of issue
The High Court may determine any issue which –
Has not been determined by the Appellate Tribunal; or
Has been wrongly determined by the Appellate Tribunal, by reason of a decision on
such question of law.
Hence, it is implied that it is necessary that the question was raised before Tribunal
before it is raised before the High Court
7. Case before High Court to be heard by not less than two judges (Section 260B)
When an appeal has been filed before the High Court under section 260A, it shall be heard
by a bench of not less than 2 Judges of the High Court, and shall be decided in accordance
with the opinion of such Judges or of the majority of such Judges.
However, where there is no such majority, the Judges shall state the point of law upon which
they differ and the case shall then be heard upon that point only by one or more of the
other Judges of the High Court and such point shall be decided according to the opinion of
the majority of the Judges who have heard the case including those who first heard it.
Note: In case appeal is to be filed by Revenue in minimum amount involved should be 1
Crore

APPEAL TO SUPREME COURT [SECTION 261
1. Appeal to Supreme Court (Section 261)

An appeal shall lie to the Supreme Court against any order of the High Court made in respect
of an appeal filed under section 260A provided the case is certified by the High Court to be
a fit one for appeal to the Supreme Court.
2. Hearing before Supreme Court (Section 262)
The Supreme Court, on hearing the case, shall decide the question of law and give its decision
thereon along with the reasons for such decision.
3. Costs of appeal
The costs of the appeal shall be at the discretion of the Supreme Court. Where the
judgment of the High Court is varied or reversed in the appeal, effect shall be given to the
order of the Supreme Court in the manner provided in Section 260A in case of a judgment of
the High Court.
4. Certificate for appeal to the Supreme Court otherwise SLP to be filed
a Article 134A of the Constitution of India deals with certificate for appeal to the
Supreme Court and provides that the High Court should decide, whether the certificate
of fitness for appeal to the Supreme Court is to be granted or not, immediately on the
delivery of the concerned judgment, decree, final order or sentence. The High Court
can do so either on the basis of an oral application by a party or on its own motion.
b Further, there is no requirement in such Article that the party aggrieved by the
judgment has to make a written application. An oral application should be made
immediately after the judgment is delivered. The Kerala High Court in Joseph Binoy
(K.M) (No. 2) Union of India (1992) 194 ITR 0453 (Ker) has held that, the
application filed at any later point of time is not maintainable.
c However, if the High Court, in respect of any case, does not grant the certificate
of fitness for appeal to the Supreme Court, then an application for special leave to
appeal (i.e. Special Leave Petition) can be made before the Supreme Court under
Article 136 of the Constitution of India.
Note: In case appeal is to be filed by Revenue in minimum amount involved should be 2 Crore
SUMMARY OF APPEAL PROVISONS
Authority to Persons who Time limit for filing Form in Time limit for
whom appeal can file appeal which appeal disposal of appeal
to be filed appeal to be filed
CIT (Appeals) Assessee Within 30 days of Form No. 35 If possible, within 1
[Sec 246A- payment of to be filed in year from the end of
251) TDS/service of notice duplicate the financial year in

of demand or order. which such appeal

However, condenation was filed.
of delay can be granted
on sufficient cause
being shown by the
appellant
ITAT Assessee or Within 60 days of Form No. 36 If possible, within 4
[SEC.252- Department communication of the to be filed in years from the end
255] order to the assessee triplicate of financial year in
or CIT. However, which such+ appeal
condonation of delay was filed
can be granted
sufficient cause being
shown by the appellant
High Court Assessee or Within 120 days of As per Code As per Code Civil
[section Department receipt of order of IT of Civil Procedure 1908
260A-260B AT However of Civil Procedure
Procedure condonation 1908
on sufficient cause
being shown by the
appellant 1908
Supreme Assessee or Within 90 days from As per Code As per Code Civil
Court [Sec. Department date of receipt of of Civil Procedure 1908
261-262] order of High Court. Procedure
(As per Code of Civil 1908
Procedure 1980.
However, condonation
as per Code of Civil
Procedure, 1908

APPEALS
1. An appeal to the High Court under 2. Appeal once filed before Commissioner of
section 260A of the Income Tax Act, Income Tax _______________ be
1961 shall lie only if withdrawn
________________
a A substantial question of law is a Can not
involved
b A substantial question of fact is b Can
involved
c A substantial question if involved c May be but with the permission of the
appellate authority
d The assessee is not satisfied with d May be but after obtaining no objection
the order passed by Hon’ble ITAT from the Assessing Officer
3. When Income Tax Department files 4. Generally, first appeal by Income Tax
an appeal before ITAT against the Department lies with
order of Commissioner (Appeals),
Department is required to pay fees of
____________
a Nil a ITAT
b Rs.500 b Commissioner (Appeals)
c 1% of assessed income subject to c High Court
maximum of Rs.10,000
d None of the above d Central Government
5. Appeal to ITAT is to be made in 6. Fee for filing an appeal under section

Form ___________ 249(1) to the Commissioner of Income
Tax (Appeals) when the assessed income is
more than Rs.2 lakh is:
a 36 a Rs. 1,000
b 35 b Rs.500
c 36A c Rs.250
d None of the above d No fee is payable
7. The Commissioner (Appeals) may 8. An assessee aggrieved with the order of

admit belated application the ITAT can file appeal before High

____________ Court within ____________________.

a On sufficient cause being shown by a 120 days
applicant to him
b On sufficient cause being shown by b 30 days
applicant to the ITAT and thereafter
ITAT requests for the same
c After obtaining no objection letter c 60 days
from the Assessing Officer
d After obtaining no objection letter d 180 days
from the Commissioner
9. A tax payer wants to prefer an 10. The first appeal against the order of the
appeal against the order of the assessing officer lies with:
Assessing Officer. He received the
order dated 30th April, 2022 on 5th
May, 2022. He must prefer an appeal
before the CIT (Appeals) under
section 246A of the Income Tax Act,
1961, within: (June, 2019)
a 30 days from the date of order a Deputy commissioner (appeals)
b 30 days from the date of receipt of b Commissioner (appeal)
order
c 60 days from the date of order c Appellate tribunal
d 60 days from the date of receipt of
order
11. The first can be filed by: 12. If the assessee is not satisfied with any
order passed by the assessing officer, he
can:
a The assessee only a File appeal to commissioner (appeal)
b Assessing officer only b Apply for revision to the CIT u/s 264
c Either the assessee or the Assessing c Either file appeal or apply for revision u/s
officer 264
d File appeal or apply for revision
13. The appeal against the order of 14. If the assessee or the assessing officer
commissioner (appeal) can be filed by: is not satisfied with the order of
commissioner (appeals), the second appeal
lies to:
a As assessee only a High court directly

b An assessing officer only subject to b Appellate Tribunal

approval of CIT
c Either by the assessee or by the c High court on a reference by the
assessing officer subject to approval appellate Tribunal
of CIT
15. If the assessee or the CIT is not 16. The appeal against the order of appellate
satisfied with the order of appellate tribunal can be filed to high court:
Tribunal, then either of them can:
a Request the Appellate Tribunal to a For any matter in the order
refer the matter to the high court
b File the appeal direct to high court b Only if any question of fact is involved
c File the appeal either to high court c Only if any question of law is involved
or supreme court if there are
conflicting decisions by the various
high courts
17. The first appeal to commissioner 18. The first appeal against the order of the
(appeals) must be filed in: assessing officer can be filed within a
period of:
a Form No. 35 a 30 days from the date of the order
b Form no 36 b 30 days from the date of services of the
order to the assessee
c Form No. 36A c One months from the date of services of
the order to the assessee
19. If the appeal against the order of 20. The order passed by the commissioner
the assessing officer was not filed (appeals) should be communicated to:
within 30 days as required, then the
Assessee:
a Has no option left with him a Assessee
b Can apply for condonation of delay or b C.I.T. who has jurisdiction over the case
apply for revision u/s 264
c Can only apply for revision u/s 264 c Both to the assessee and CIT
d The assessee though CIT
21. The commissioner (appeals) should 22. An assessee who submitted a return
decide the appeal: declaring an income of Rs. 90,000 was
assessed by the assessing officer at Rs.
1,60,000. He wishes to file an appeal.

the fee for filing appeal should be:

a Within one year from the date of a Rs. 250
filing of be appeal
b One year from the end of the b Rs. 500
financial year in which appeal is filed
before him
c As far as possible within one year c Non – judicial stamp of 50 paise
from the end of the financial year in
which appeal is filed before him
d Rs. 1000
23. The assessee wishes to file an appeal 24. The time limit for filing an appeal to the
against the order of ITO for levying appellate tribunal is:
a penalty for TDS default the fee
for filing such appeal shall be:
a Rs. 250 a 30 days from the receipt of the order to
be appealed against
b Rs. 500 b 30 days from the passing of the order to
be appealed against
c Rs. 1000 c 60 days from the receipt of the order to
be appealed against
d 60 days from the passing of the order to be
appealed against
25. The appeal to the appellate tribunal 26. The time limit for filing memorandum of
should be made in: cross objection to appellate tribunal shall
be:
a Form 35 a 60 days from the receipt of notice that
appeal has been filed by the other party
b Form 36 b 30 days from the receipt of notice that
appeal has been filed by the other party
c Form 36A c 90 days from the receipt of such notice
27. The memorandum of cross objection 28. The total income assessed by the
must be filed in: assessing officer was Rs. 4,50,000. The
assessee wishes to file an appeal to
appellate tribunal as he was not satisfied
with the order of commissioner (appeals).
The fee for filing such appeal shall be:
a Form No. 36 a Rs. 1500

b Form No. 36A b Rs. 2500

c Form No. 37 c Rs. 4500
d d Rs. 10,000
29. The maximum fee for filing an appeal

to appellate tribunal is:
a Rs. 5,000
b 1% of the assessed income
c 1% of the assessed income subject to
maximum of Rs. 10,000

REVISION OF ORDERS PREJUDICIAL TO REVENUE (SECTION 263):
The provisions relating thereto are as follows:

Prejudicial to the interests of the revenue w.e.f. 1.6.15
An order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is
prejudicial to the interest of the revenue, if, in the opinion of the Principal Commissioner or
Commissioner,-
a The order the passed without making inquiries or verification which should have been
made;
b The order is passed allowing any relief without inquiring into the claim;
c The order has not been passed in accordance with any order, direction or instruction
issued by the board u/s 119; or
d The order has not been passed in accordance with any decision which is prejudicial to
the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of
the assessee an any other person.
1. Power of Principal Commissioner or Commissioner to enhance, modify, cancel assessment

or direct a fresh assessment
The Principal Commissioner or Commissioner (who is assigned the jurisdiction of transfer
prising):
a May call for and examine the record of any proceeding; and
b If he considers that any order passed therein by the Assessing Officer is erroneous
so far that is prejudicial to the interests of the revenue,
He may, after giving the assessee an opportunity of being heard and after making
the necessary inquiry, pass such order thereon as the circumstances of the case
justify, including an order enhancing or modifying the assessment, or cancelling the
assessment and directing a fresh assessment.
2. Scope of order passed by AO
An order passed by the Assessing Officer shall include:
a An order of assessment made by the Assistant Commissioner or Deputy
Commissioner or the Income – tax Officer on the basis of the directions issued by
the Joint Commissioner under section 144A;
b An order made by the Joint Commissioner in exercise of the powers or in the
performance of the functions of an Assessing Officer conferred on, or assigned to,
him under the orders or directions issued by the Board or by the Principal Chief
Commissioner or Chief Commissioner or Principal Director General or Director
General or Principal Commissioner or Commissioner authorized by the Board in this
behalf under section 120.

3. In case order passed by AO is subject matter of any appeal

Where any such order passed by the Assessing Officer had been the subject matter of any
appeal filed, the powers of the Principal Commissioner or Commissioner for revision shall be
restricted only to such matters as had not been considered and decided in such appeal.
4. Time – limit for passing of order:
The order for revision should be passed within 2 years from the end of the financial year
in which the order sought to be revised was passed. However, an order in revision may be
passed at any time in the case of an order which has been passed in consequence of, or to
give effect to, any finding or direction contained in an order of the Appellate Tribunal, High
Court or Supreme Court.
a Exclusion of In computing the period of limitation, the time taken in giving an

time opportunity to the assessee to be reheard under proviso to section
129 and any period during which any proceeding is stayed by an order
or injunction of any court shall be excluded.
KEY NOTES
b “Record” Record Shall include and shall be deemed always to have included all
records relating to any proceeding under this Act available at the time
of examination by the Principal Commissioner or Commissioner.
c Appeal can be An appeal against the revision order so passed by the Principal
filed to Commissioner or Commissioner can be filed before the Appellate
tribunal Tribunal.
REVISION OF OTHER ORDERS (SECTION 264):
1. Revision order to be passed either on own motion or on application of assessee

In the case of any order, other than an order to which section 263 applies, passed by an
authority subordinate to him, the Principal Commissioner or Commissioner:
a Either of his own motion or on an application by the assessee for revision,
b Call for the record of any proceeding in which any such order has been passed, and
c May make necessary inquiry and may pass such order thereon, not being an order
prejudicial to the assessee.
2. Time limit for filing of application
The application must be made by the assessee within 1 year from the date on which the
order in question was communicated to him or the date on which he came to know of it,
whichever is earlier.
However, the Principal Commissioner or Commissioner may, if he is satisfied that the
assessee was prevented by sufficient cause from making the application within that period,
admit an application made after the expiry of that period.
Such application must be accompanied by a fees of Rs. 500.

3. Time limit for passing of revision order

The time limit within which the order is to be passed by the Principal Commissioner or
Commissioner is:
a In case of application by the assessee: Within 1 year from the end of the
financial year in which such application is made by the assessee (However, an
order in revision may be passed at any time in consequence of or to give effect to
any finding or direction contained in an order of the Appellate Tribunal, High Court
or Supreme Court); or
b In case of suo moto revision by Principal Commissioner or Commissioner” Within 1
year from the date the order sought to be revised is passed.
4. Cases where revision cannot be made
The principal commissioner or commissioner shall not revise any order under this section in
the following cases:
a Where an appeal against the order lies to the Commissioner (Appeals) or Appellate
Tribunal but has not been made and the time within which such appeal may be
made has not expired and the assessee has not waived his right of appeal; or
b Where the order has been made the subject of an appeal to the Commissioner
(Appeals) or Appellate Tribunal.
No appeal but writ petition can be filed: No appeal can be filed against such
NOTES
order. However, such order can be challenged before the High court by a writ
KEY
petition and before the Supreme Court by a special Court by a special leave
petition.
EXCLUSION OF TIME TAKEN FOR COPY [SECTION 268]
In computing the period of limitation prescribed for an appeal or an application under this Act
the day on which the order complained of was served and if the assessee was not furnished with
a copy of the order when the notice of the order was served up to him the time requisite for
obtaining a copy for such order shall be excluded.

REVISION
1. The order of revision passed by 2. Any order passed by the Commissioner of

Commissioner under section 264 is - Income Tax under section 263 can be
(Dec. 2016) appealed before:
a Appealable before Commissioner a ITAT
(Appeals)
b Appealable before Appellate Tribunal b High court
c Appealable before High Court c No appeal is possible
d Not appealable d Commissioner of Income Tax (Appeals)
3. Time limit for passing revision order 4. Any order passed by the Assessing
by Commissioner under section 263 is: Officer can be revised by the
Commissioner of Income Tax under section
263 provided such order is:
a 2 years from the end of the financial a Erroneous
year in which the order sought to be
revised was passed
b 2 years from the date of on which b Prejudicial to the interest of the revenue
the order sought to be revised was
passed
c 1 year from the end of the financial c Passed by an authority subordinate to the
year in which the order sought to be Commissioner
revised was passed
d 1 year from the date of on which the d All of the above
order sought to be revised was
passed
5. Where revision under section 264 has 6. Revision under section 264 of the Income
been initiated by the assessee, the Tax Act, 1961 is not possible in the
application must be made within following case(s):
______________ from the date on
which the order in question was
communicated to the assessee or the
date on which he otherwise came to
know of it, whichever is earlier.
a 1 year a Where an order is appealable but no appeal
has been made to CIT (Appeals) or to the
Tribunal and time within which such appeal
can be made has not expired

b 4 year b Where the order has been made the subject

of an appeal to the CIT (Appeals) or to the
Appellate Tribunal
c 2 year c Both of the above
d 30 days d None of the above
7. On whose motion revision by 8. Where application for revision under

Commissioner under section 264 of section 264 is made by the assessee, fee
the Income Tax Act, 1961 is of ___________ is also required to be
possible: paid by him
a Commissioner’s own motion a Rs.500
b Application by assessee b Nil
c Any of the above two options c 1% of assessed income, subject to
maximum of Rs. 10,000
d Assessing Officer d Rs. 1,000
9. Time limit for passing an revision 10. Revisions u/s 263 is to be done by the
order by Commissioner under section commissioner:
264, when initiated on his own
motion, is:
a Within 1 year from the date of original a On his own motion
order
b Within 1 year from the end of the b On the request of the assessee
financial year in which original order
was passed
c Within 2 years from the date of c On the request of the assessee officer
original order
d Within 2 year from the end of the d On his own motion or on the request of the
financial year in which original order assessee or the assessing officer
was passed
11. The commissioner cannot revise the 12. Revision of order not covered by section
order of the assessing order sought 263 can be done by the commissioner:
to be revised u/s 263 after the
expiry of:
a One year from the end of the a On his own motion
financial year in which order sought
to be revised was passed
b 2 years from the end of the financial b On the request of the assessee
year in which order sought to be

revised was passed

c 2 years from the date of such order c On the request of the assessing officer
d d On his own motion or on the request of the
assessee
13. The commissioner shall not revise the

order under section 264:
a Where an order has been made more
than one year previously
b Where an order has been made more
than 2 years previously
c Where an order has been made more
than 4 years previously

PENALTIES
1. MODE OF TAKING OR ACCEPTING CERTAIN LOANS, DEPOSITS AND SPECIFIED

SUM [SECTION 269SS]:
a. Restrictions relating to acceptance of loans or deposits or specified sum in cash:
No person shall take or accept from any depositor, any loan or deposit or any specified
sum, otherwise than, by an account payee cheque or account payee bank draft or use of
electronic clearing system through a bank account or through such other electronic
mode as may be prescribed, if, -
i. the amount of such loan or deposit or specified sum or the aggregate amount of
such loan, deposit and specified sum; or
ii. on the date of taking or accepting such loan or deposit or specified sum, any
loan or deposit or specified sum taken or accepted earlier by such person from
the depositor is remaining unpaid, the amount or the aggregate amount
remaining unpaid; or
iii. the amount or the aggregate amount referred to in (i) together with the amount
or the aggregate amount referred to in (ii), is Rs. 20,000 or more.
"Loan or deposit" means loan or deposit of money.
"Specified sum" means any sum of money receivable, whether as advance or otherwise, in
relation to transfer of an immovable property, whether or not the transfer takes place.
b. Non Applicability
The aforesaid provisions shall not apply to any loan or deposit or specified sum taken or
accepted from, or any loan or deposit or specified sum taken or accepted by -
i. Government;
ii. Banking company, post office savings bank, or" co-operative bank;
iii. Corporation established under a Central, State or Provincial Act;
iv. Government company as defined under Section 2(45) of the Companies Act,
2013;
v. Any other institution, association or body or class of institutions, associations
or bodies, which the Central Government may notify in the Official Gazette. If
both lender and borrower have only agricultural income.
2. MODE OF REPAYMENT OF CERTAIN LOANS OR DEPOSITS [SECTION 269T]:
a. No branch of a banking company/co-operative bank/ any other person shall repay any
loan/deposit made with it or any specified advance received by it otherwise than by an
account payee cheque/account payee bank draft drawn in the name of person who has
made the loan or deposit or paid the specified advance or by use of electronic clearing
system through a bank account or through such other electronic mode as may be
prescribed, if-

i. amount of loan/deposit/or specified advance together with the interest; or

ii. aggregate amount of loans/ deposits held by the person making the loan/deposit
with the persons mentioned above either in his own name or jointly with any
other person on the date of such repayment together with the interest; or
iii. the aggregate amount of the specified advances received by such person either
in his own name or jointly with any other person on the date of such repayment
together with the interest; if any, payable on such specified advances, is Rs.
20,000 or more.
"Specified advance" means any sum of money in the nature of advance, by whatever
name called, in relation to transfer of an immovable property, whether or not the
transfer takes place.
i. Government;
ii. Government company;
iii. Banking company, post office savings bank or co-operative bank
iv. Corporation established under a Central, State or Provincial Act;
v. Any other institution, association or body notified by the Central Government.
3. MODE OF UNDERTAKING TRANSACTIONS [SECTION 269ST]
a. Restriction on acceptance of cash amounting Rs. 2,00,000 or more
No person shall receive an amount of Rs. 2,00,000 or more —
i. in aggregate from a person in a day; or
ii. in respect of a single transaction; or
iii. in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or an account payee bank draft or use of
electronic clearing system through a bank account or through such other electronic
mode as may be prescribed.
The provisions of this section shall not apply to any receipt by
i. Government;
ii. any banking company, post office savings bank or co-operative bank;
iii. transactions of the nature referred to in section 269SS;
iv. such other persons or class of persons or receipts, which the Central
Government may, by notification in the Official Gazette, specify.
Section Nature of default Quantum of Penalty

221(1) When assessee is in default or is deemed to be Such amount as the Assessing
in default in making a payment of tax. Officer may direct but not
exceeding amount of tax in
arrears.

271(1)(b) Failure to comply with notice issued under Rs.10,000 for each failure (See
section 142(1) / 143(2) or with a direction issued note).
under section 142(2A).
271(1)(c) Concealment of particulars of income or 100% to 300% of tax sought to
furnishing inaccurate particulars of income. be evaded.
271A Failure to keep, maintain or retain books of Rs.25,000
accounts or documents, etc. as required by
section 44AA or the rules made there under.
271AA In respect of an international transaction or 2% of value of each international
specified domestic transaction: transaction or specified domestic
a) Failure to keep and maintain any transaction entered into by such
information and document as required by person.
section 92D(1) or 92D(2), or
b) Failure to report such transaction as he is
required to do so, or
c) Maintains or furnishes an incorrect
information and document.
271AAA Penalty on undisclosed income in case where 10% of undisclosed income
search has been initiated on or before 30.6.2012
271AAB Penalty on undisclosed income in case where a) 10% or
search has been initiated on or before 1.7.2012. b) 20% or
c) 30% to 90% of undisclosed
income of specified previous
year, as the case may be.
271B Failure to get accounts audited in respect of any a) 0.5% of the total sales,
previous year(s) relevant to an assessment year turnover or gross receipts of
or furnish a report of such audit as required the business or profession;
under section 44AB. or
b) Rs.1,50,000,
Whichever is less. (see note)
271BA Failure to furnish report under section 92E. Rs.1,00,000 (see note)
271C Failure to: Amount of tax which such person
a) Deduct the whole or any part of TDS failed to deduct or pay (see note).
under Chapter XVII – B, or
b) Pay the whole or any part of the tax as
required under section 115 – O(2) or
second proviso to section 194B.
271CA Failure to collect tax at source. Amount of tax which such person
failed to collect
271D Loan or deposit taken or accepted in Amount of the loan or deposit so

contravention of the provisions of section taken or accepted

269SS.
271DA Receiving an amount of Rs 2 lakh or more 100 % of Receipt of such amount
otherwise than account payee cheque/draft/use
of electronic clearing system through a bank
account in contravention of provision of Sec
269ST
271E Loan or deposit referred to in section 269T Amount of the loan or deposit so
repaid otherwise than in accordance with the repaid
provisions of that section.
271F Failure to furnish a return of income as required Rs. 5,000
under section 139(1) or by the proviso to that
section before the end of the relevant
assessment year.
271FA Failure to furnish statement of financial Rs.100 for every day during which
transaction or reportable account within the the failure continues.
prescribed time under section 285BA. (Bold Rs.500 for every day for which
portion as amended by Finance (no. 2) Act, 2014 default continues, starting from
w.e.f. 1.4.2015) the day immediately following the
day on which the time specified in
notice under section 285BA(5)
for furnishing the statement
expires till the date of furnishing
of statement. (bold portion as
amended by Finance (no. 2) Act,
2014 w.e.f. 1.4.2015) (see note)
The above provision have been
amended so as to increase penalty
from 100 to 500 and 500 to 1000
in case of continuing default.)
271FAB Penalty for failure to furnish statement or Rs 5,00,000
information or document by an eligible
investment fund
271G Failure to furnish any information or document The Assessing Officer or the
under section 92D(3). Transfer Pricing Officer as
referred to in section 92 CA or
the Commissioner (Appeals) may
direct a penalty equal to 2% of
the value of international
transaction or specified domestic
transaction for each failure.

271GA Penalty for failure to furnish information or a. A sum equal to 2%of the
document under section 285A (Indian concern value of transaction in
fails to furnish any information or document respect of which such failure
which is required to be furnished under section has taken place in a case
285A) where such transaction had
the effect of directly or
indirectly transferring the
right of management or
control in relation to the
Indian concern
b. A sum of Rs 5,00,000 in any
other case
271H Failure to furnish submit quarterly TDS/TCS Rs 1,00,000
returns
271-I Penalty for failure to furnish information AO may direct that such person
inaccurate information under section 195 shall pay by way of penalty a sum
If a person who is required to furnish of Rs 1,00,000
information under section 195(6) fails to furnish
information
272A(1) a. Refusal to answer any question put to a Rs. 10,000 for each such failure
person legally bound to state the truth of or default.
any matter touching the subject of his
assessment, by an Income Tax Authority in
exercise of its powers under this Act, or
b. Refusal to sign any statement made by a
person in the course of any proceedings
under this Act, which an Income Tax
authority may legally require him to sign;
or
c. Omission to attend to give evidence or
produce books of account or other
documents at a certain place or time as
required by the summons issued under
section 131(1) (see note)
272B Failure to comply with the provisions of section Rs.10,000
139A.
272BB Failure to comply with the provisions of section Rs.10,000
203A.

KEY NOTE Penalty not to be imposed in certain cases (section 273B): No penalty shall be
impossible on the person or the assessee, as the case may be, for any failure
referred to in the said provisions, if he proves that there was reasonable cause for
the said failure.

PROSECUTION
REMOVEL, CONCEALMENT, TRANSFER OR DELIVERY OF PROPERTY TO THWART TAX

RECOVERY (SECTION 276)
a Type of offence Fraudulent removal, concealment, transfer or delivery to any person, any
property or any interest therein, intending thereby to prevent that
property or interest therein from being taken in execution of a
certificate under the provisions of the Second Schedule.
b Imprisonment Rigorous imprisonment for a term which may extend to 2 years and with
and Fine: fine.
WILLFUL ATTEMPT TO EVADE TAX, ETC. (Section 276C(1))
a Type of offence Wilful attempt to evade any tax, penalty or interest chargeable or
imposable under this Act.
b Imprisonment • Where the amount sought to be evaded exceeds Rs.25,00,000:
and Fine Rigorous imprisonment for a term which shall not be less than 6
months but which may extend to 7 years and with fine.
• In any other case: Rigorous imprisonment for a term which shall
not be less than 3 months but which may extend to 2 years and
with fine.
WILFUL ATTEMPT TO EVADE PAYMENT OF TAX (SECTION 276C(2))
a Type of offence Wilful attempt to evade the payment of any tax, penalty or interest
under this Act.
b Imprisonment Rigorous imprisonment for a term which shall not be less than 3 months
and Fine but which may extend to 2 years and shall, in the discretion of the court,
also be liable to fine.
Explanation: Same as discussed above in section 276C(1).
FALSE STATEMENT IN VERIFICATION, ETC. (SECTION 277)
a Type of offence If a person makes a statement in any verification under this Act or
under any rule made thereunder, or delivers an account or statement
which is false, and which he either knows or believes to be false, or does
not believe to be true.
b Imprisonment • Where the amount of tax, which would have been evaded if the

and Fine statement or account had been accepted as true, Rs. 25,00,000 –
Rigorous imprisonment for a term which shall not be less than 6
months but which may extend to 7 years and with fine;
• In any other case: Rigorous imprisonment for a term which shall
with fine.
FALSIFICATION OF BOOKS OF ACCOUNT OR DOCUMENT, ETC. (SECTION 277A)
a Type of offence If any person wilfully and with intent to enable any other person to
evade any tax or interest or penalty chargeable and imposable under this
Act, makes or causes to be made any entry or statement which is false
and which the first person either knows to be false or does not believe
to be true, in any books of account or other document relevant to or
useful in any proceedings against the first person or the second person,
under this Act.
b Imprisonment The first person shall be punishable with rigorous imprisonment for a
and Fine term which shall not be less than 3 months but which may extend to 2
years and with fine.
Explanation: For the purposes of establishing the charge under this section, it shall not be
necessary to prove that the second person has actually evaded any tax, penalty or interest
chargeable or imposable under this Act.
ABATMENT OF FALSE RETURN, ETC. (SECTION 278)
a Type of offence If a person abets or induces in any manner another person to make and
deliver an account or a statement or declaration relating to any income
chargeable to tax which is false and which he either knows to be false or
does not believe to be true or to commit an offence under section
276C(1).
b Imprisonment • Where the amount of tax, penalty or interest which would have
and fine been evaded, if the declaration, account or statement had been
accepted as true, or which is wilfully attempted to be evaded,
exceeds Rs.25,00,000
✓ Rigorous imprisonment for a term which shall not be less than
6 months but which may extend to 7 years and with fine;
• In any other case – Rigorous imprisonment for a term which shall
with fine.

PUNISHMENT FOR SECOND AND SUBSEQUENT OFFENCES (SECTION 278A)
a Type of offence If any person convicted of an offence under section 276B or 276C(1) or
276CC or 276E or 277 or 278 is again convicted of an offence under any
of the aforesaid provisions, he shall be punishable for the second and
for every subsequent offence.
b Imprisonment Rigorous imprisonment for a term which shall not be less than 6 months
and fine but which may extend to 7 years and with fine.
Directorate of Income tax (Criminal Investigation) – DCI (w.e.f. 30.5.2011): The

KEY NOTES
President of India has granted its approval to create DCI as a subordinate office to
CBDT, which will perform functions in respect of criminal matters having any financial
implication punishable as an offence under Income Tax or Wealth – tax.

PENALTY
1. In case if an assessee fails to 2. Maximum amount of penalty for failure to

maintain accounts under section get accounts audited required as per
44AA, he shall be liable to penalty of section 44AB of the Act from an
_______________. accountant is: (June, 2019)
a Rs. 10,000 a Rs. 1,50,000
b Rs. 25,000 b Rs. 1,00,000
c Rs. 50,000 c Rs. 50,000
d Rs. 1,00,000 d ½% of turnover or gross receipts of the
business or profession or Rs. 1,50,000
3. Penalty for failure to get the 4. As per section 271A, failure to keep,
accounts audited under Section 44AB: maintain or retain books of account would
attract penalty of - (Dec. 2016)
a 0.5% of Turnover a Rs. 10,000
b Rs. 1,50,000 b Rs. 1,00,000
c 0.5% of turnover or Rs. 1,50,000 c Rs. 2,000
whichever is less
d 0.5% of turnover or Rs. 1,50,000, d Rs. 25,000
whichever is more
5. Tiger Soja sold a vacant land for Rs. 6. Mr. Hatela did not appear before the
15 lakhs on 20th March, 2023. The Assessing Officer in response to a notice
indexed cost of acquisition of the land issued under section 143(2). He
is Rs. 12,00,000. He received Rs. 3 repeatedly absented from appearing
lakhs being part of the sales before the Assessing Officer. How much
consideration in cash and the balance could be the quantum of penalty the
through Electronic Clearance System Assessing Officer could levy on Mr.
(ECS). The AO can levy penalty in Hatela for the failure? (June, 2017)
such case on Tiger Soja of an amount
of: (June, 2019)
a Rs. 12,00,000 a Rs. 2,000
b NIL b Rs. 5,000
c Rs. 15,00,000 c Rs. 10,000
d Rs. 3,00,000 d Rs. 20,00

CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 23 COLLECTION & RECOVERY
CHAPTER 18 COLLECTION AND RECOVERY OF TAX & REFUND OF TAX
COLLECTION AND RECOVERY OF TAX
NOTICE OF DEMAND [SECTIONS 156]
Section 156 lays down that the Assessing Officer shall serve upon the assessee a notice of
demand when any tax interest or penalty fine or other sum is payable in consequence of any
order passed under the Act.
WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED TO BE IN DEAULTY [SECITON 220]
Section 220 prescribes (A) the time limit of payment tax in a notice of demand (B) the levy
of interest for late payment of tax and (C) when an assessee shall be deemed to be
assessee in default. These have been discussed below
a Time limit for payment of tax in a notice of demand [Section 220 (1)]: Any amount
otherwise than by way of advance tax. Specified as payable in a notice of demand under
section 156 shall be paid within thirty days of the services of the notice at the place and
to the person mentioned in the notice.
b Interest for late payment of tax [Section 220 (2)]: If the amount specified in a notice
of demand under section 156 is not paid within the period limited under sub-section (1) above
the assessee shall be liable to pay simple interest at 1 % for every month or part of a month
comprised in the period commencing from the day immediately following the end of the
period mentioned in sub-section (1) (i. e. 30 days or less than 30 days as the case may be) and
ending with the day on which the amount is paid
c Assessee shall be deemed to be in default if a payment not made within time [section
220(4)]: If the amount is not paid within the time limit under section 220(1) or extended
under section 220(3) as the case may be at the place and to the person mentioned in these
notice the assessee shall be deemed to be in default.
PENALTY PAYABLE WHEN TAX IN DEFAULT [SECTON 221]
a When an assessee is in default or is deemed to be in default in making a payment of

tax he shall in addition to the amount of the arrears and the amount of interest
payable under sub-section (2) of section 220 be liable by way of penalty to pay such
amount as the Assessing Officer may direct and in the case of continuing default, such
further amount or amounts as the Assessing Officer may from time to time decide so
however, that the total amount of penalty does not exceed the amount of tax in
arrears
b However, before levying any such penalty, the assessee shall be given a reasonable

opportunity of being heard

c Further, where the assessee proves to the satisfaction of the Assessing Officer that
the default was for good and sufficient reasons no penalty shall be levied under this
section
CERTIFICATE TO BE DRAWN BY TAX FRECOVERY OFFICER AND PROCEDURE OF RECOVERY

OF TAX [SECTION 222 & RULE 117B]
When an assessee is in default or is deemed to be in default in making a payment of tax the Tax
Recovery Officer may draw up under his signature a statement in Form No. 57 specifying the
amount of arrears due from the assessee (such statement being hereafter referred to as
“certificate”) and shall proceed to recover from such assesses the amount specified in the
certificate by one or more of the modes mentioned below, in accordance with the rules laid down
the Second Schedule
a Attachment and sale of the assessees movable property
b Attachment and sale of the assessees immovable property
c Arrest of the assessee and his detention in prison
d Appointing a receiver for the management of the assessees movable and immovable
properties
The Tax Recover Officer may take action as per above sub-section (1) notwithstanding
that proceedings for recovery of the arrears by any other mode have been taken
OTHER MODES OF RECVOERY OF TAX [SECTION 226]
Where no certificate has been drawn up the Assessing Officer or where the certificate has
been drawn up the Tax Recovery Officer without prejudice to the modes of recovery specified in
section 222 as the case may be may recover the tax by any one or more of the following modes
a Deduction from salaries [Section 226 (2)]
b Attachment of deposit [section 226 (3)]
c Money in court custody [section 226(4)
d Distrait and Sale of movable property [section 226 (5)]
e Recovery against the assessees property in foreign country [section 228A]

1. Notice of demand is issued under 2. Amount mention in demand notice is

section _______________ payable within ______________
a 154 a 30 days from the date of notice
b 156 b 30 days from the date of service
c 220 c As per time given in notice
d 221 d None of the above
3. Interest payable on delay in payment 4. Penalty payable under section 221 is

of amount u/s 156 is __________________.
_________________
a 2% a 10,000
b 0.5% b 12,000
c 12% c As prescribed by AO
d 1% p.m or part thereof d None of the above

REFUND OF TAX
Meaning
Sec. 237 An assessee shall be entitled to receive back the excess amount paid as tax
liability, in the name called refund.
As per sec. 237, If the assessing officer is satisfied that the assessee or any
person on his behalf has paid the amount of tax for any assessment year, which is in
excess of the amount chargeable under this Act, then he shall be entitled to a
refund of such excess amount.
Here, tax paid by the assessee includes:
a Advance Tax
b Tax Deducted at Source (TDS)
c Tax Collected at Source (TCS)
d Tax paid on demand; and
e Self - assessment tax
Person eligible to claim refund:

Sec. A person who has paid tax in excess of the amount for which he is chargeable under
237 this Act.
Sec. In case income of a person is clubbed in the hands of the other person, then the later
238(1) can claim refund for tax paid on such clubbed income.
Sec. In case an assessee is unable to claim or receive any refund due to him on account of
238(2) death, incapacity, insolvency, liquidation or any other cause, then his legal
representive, trustee, guardian or receiver, as the case may be, can claim and receive
such refund for the benefit of such person or his estate.
Key a A claim for refund may be presented either by the claimant himself or
Notes: through his duly authorised agent.
b It may also be sent by post
Form and Time Limit for claiming refund

A claim for refund should be made in Form 30 & from 1-9-19 along with return of income
under section 139
[sec. 239] refund shall be claimed within 1 year from the end of relevant assessment year
Claim of refund after the expiry of the statutory time limit

The claim of refund after the expiry of statutory time limit may be admitted by the
Assessing Officer, if the following conditions are satisfied
a Refund being claimed is due to TDS, TCS and Advance Tax
b Refund amount is upto Rs. 5,00,000 for any assessment year. However, the board can

condone this condition

c Income of the assessee is not liable for assessment in the hands of any other person
d The claim for refund arises from the return of income filed for the first time;
however, the refund shall be issued only after making a regular assessment u/s 143(3)
e Refund must be related to a period of 6 assessment years, preceeding the current
assessment year
Key notes a Any refund claimed in respect of any A.Y., other than 6 preceding A.Y.,
will not be entertained
b Interest shall not be admissible on the belated refund claim
Permission Before entertaining a belated refund claim, Assessing Officer needs to take prior
permissible of following authorities (together with satisfying all the above
conditions)
Situations Authorised person

Refund amount is less than Rs. 1,00,000 The Commissioner
Refund amount is greater than Rs. 1,00,000 but upto Rs. 5,00,000 The Chief Commissioner
Refund amount is greater than Rs. 5,00,000 The board
For any assessment year
The Chief Commissioner, in addition to examining that the conditions are satisfied, should
also look into facts of the case and examine other aspects such as
a The source of income
b Whether the income return is reasonable
c Considering the extent of profits disclosed
d Whether books of account had been maintained and there was any manipulation of
accounts in the course of the delayed filing of the claim of refund, etc
e For deciding the genuineness of the claims [Instruction No. 1867, dated
30/11/1990]
Key In case income of a person is clubbed in the hands of the other person under any
Notes provision of this Act, then the later alone can claim refund for tax paid on such clubbed
income
SEC. 240 REFUND ON APPEAL, ETC.
In case any refund has become due as a result of any order passed in an appeal or other
proceedings, the assessee shall be entitled to get refund of the amount suomotu (without being
claimed by the assessee.)
However, such refund shall become due on

Where The refund shall become due on

An assessment is set aside or cancelled and an On completion of such fresh assessment and
order of fresh assessment is direct to be amount of refund shall be decided as per the
made. fresh assessment.
The assessment is annulled. When such assessment is annulled.
The refund shall be only of the amount of the
tax paid in excess of tax as per return.
Key Notes The assessee is not entitled to claim refund of advance tax and tax paid on
self-assessment in case the Assessing Officer fails to make fresh assessment
after the earlier assessment is set aside or nullified, because to that extent
the assessee has admitted his liability (as well as it amounts to deemed
acceptance of the return by Assessing Officer) to pay tax in accordance with
the law
SEC. 244A: INTEREST PAYABLE TO THE ASSESSEE ON REFUND
Provision An assessee, entitled to get refund, shall be entitled to interest on such

refund.
Amount for On the amount of refund
calculation of
interest
Rate of 0.5% S.I. p.m. (or a part thereof)
Interest
1 Interest if return is timely filed

Section 244A inter alia provides that an assessee as entitled to interest on refund arising
out of excess payment of advance tax, tax deducted or collected at source from the 1 st
April of the assessment year and till the date on which refund is granted
2 Interest if return is timely not filed
In case where the return is filed after the due date, the period for grant of interest on
refund shall being from the date of filing of return
3 Interest on refund of self-assessment tax
In the interest of fairness and equity, it is further purposed to provide that an assessee
shall be eligible to interest on refund of self-assessment tax for the period beginning
from the date of payment of tax or filing of return, whichever is later, to the date on
which the refund is granted
For the purpose of determining the order of adjustment of payments received against
the taxes due, the prepaid taxes i.e. the TDS, TCS and advance tax shall be adjusted
first
4 Refund arises out of appeal
It is also provided that where a refund arises out of appeal effect being delayed beyond

the time prescribed u/s 153(5), the assessee shall be entitled to receive, in addition to
the interest payable u/s 224A(1), an additional interest on such refund amount calculated
at the rate of 3% per annum, for the period beginning from the date following the date
of expiry of the time allowed u/s 153(5) to the date on which the refund is granted
Note In case where extension is granted by the Principal Commissioner or Commissioner by
invoking proviso to section 153(5), the period of additional interest, if any, shall
being from the expiry of such extended period.
Key a Interest on refund due to TDS or TCS shall be allowed, provided the amount of
note refund is not less than 10% of the tax liability as determined u/s 143(1) or
regular assessment
b Tax liability of refund
Refund of tax : Not Taxable
Interest on delayed refund : Taxable as IFOS
c Adjustment in Interest: In case the tax payable is reduced or increased due to
an order u/s 154, 245D(4), 250, 254, 260, 262, 263 & 264 the amount of
interest shall be adjusted accordingly
d In case, the refund is delayed due to any reason attributable to the assessee,
the period for which interest is payable shall get reduced by the period of delay
attributable to him. CIT v. Larsen & Toubro Ltd. [2010]
e An assessee cannot claim interest on interest in case of refund

1. Application for refund is to be made 2. When an assessee has paid advance tax
within - more than the tax due on the returned
income and the return is filed before the
'due date' specified is section 139(1), the
refund amount is eligible for interest @ -
a One year from the end of relevant a 12% per annum
assessment year
b Two years from the end of relevant b 6% per annum
assessment year
c 6 months from the end of relevant c 9% per annum
assessment year
d months from the end of relevant d 8% per annum
assessment year
3. Interest is payable to assessee on 4. Interest on income tax refund is

refund under the Income-tax, 1961 granted @ _________________.
at the rate of -
a 5% per annum a 1% p.m. or part thereof
b 6% per annum b 0.5% p.m. or part thereof
c 9% per annum c 12% p.a.
d 12% per annum d 6% p.a.

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CS Vikas Vohra CA CS Harish A.

CS Vikas Vohra CA CS Harish A. Mathariya

CHAPTER 7 CAPITAL GAIN

MEANING & BASIS OF CHARGE [SEC. 45]

CONDITION 1: THERE SHOULD BE CAPITAL ASSET [SEC. 2(14)]

YES ACADEMY FOR CS 8888 235 235 7.1

Examples of Capital Asset:

YES ACADEMY FOR CS 8888 235 235 7.2

Agricultural land in rural area, used for NO Specifically excluded

TYPES OF CAPITAL ASSET & POH

2. Period of holding applicable to different assets

YES ACADEMY FOR CS 8888 235 235 7.3

Zero coupon Bonds 12 months

Day following the date

CONDITION B: THE CAPITAL ASSETS IS TRANSFERRED BY THE ASSESSEE

Transfer u/s. 2(47) means

YES ACADEMY FOR CS 8888 235 235 7.4

YES ACADEMY FOR CS 8888 235 235 7.5

7. Conversion of capital asset into stock in trade

COMPUTATION OF CAPITAL GAIN [SECTION 48]

1. Computation of Short term Capital Gain

YES ACADEMY FOR CS 8888 235 235 7.6

= Net sale consideration XXX

WHAT IS A FULL VALUE OF CONSIDERATION

a It is a full value of consideration received or receivable by the transferor.

COST OF ACQUISITION [SEC. 55(2)]

Purchase Price of Asset +

Inflation adjusted cost of

YES ACADEMY FOR CS 8888 235 235 7.7

INDEXED COST OF ACQUISITION (EXPLANATION (III) TO SECTION 48)

Cost Inflation Index for different financial years is as follows:

YES ACADEMY FOR CS 8888 235 235 7.8

2004 – 05 113 2015 – 16 254

COST OF ACQUISITION OF ASSETS ACQUIRED BEFORE 1-4-2001 [SECTION 55(2) (B)]

Acquired by Cost of acquisition

COST OF ACQUISITION OF ASSETS ACQUIRED BEFORE 1-4-2001 [SECTION 55(2) (B)]

The cost of acquisition in relation to the long-term capital assets being

YES ACADEMY FOR CS 8888 235 235 7.9

• Benefit of Indexation not available

• Deduction u/s 80C to 80U is not available

Meaning of fair market value

YES ACADEMY FOR CS 8888 235 235 7.10

Cost of acquisition on Sep. a 410 710 900 800 30

COST OF IMPROVEMENT [SEC. 55(1)]

YES ACADEMY FOR CS 8888 235 235 7.11

INDEXED COST OF IMPROVEMENT

Cost to Previous owner Inflation Adjusted Cost

YES ACADEMY FOR CS 8888 235 235 7.12

Index cost of acquisition

HOW TO CLACULATE INDEXED COST OF ACQUISITION & IMPROVEMENT

Indexed cost of acquisition [Explanation (iii) to Section 48)

INDEXATION OF COST NOT ALLOWED IN CERTAIN CASES

YES ACADEMY FOR CS 8888 235 235 7.13

In case of depreciable assets, there is no question of any indexation as capital

Working Note 1: Index cost of acquisition

YES ACADEMY FOR CS 8888 235 235 7.14

3) Cost of improvement – House property

YES ACADEMY FOR CS 8888 235 235 7.15

COA to previous owner or FMV on 1 − 4 − 01 whichever is higher

YES ACADEMY FOR CS 8888 235 235 7.16

Sales consideration 1900000

WN 2: Improvement expenditure incurred before 1-4-2002 ignored