PROJECT REPORT ON

Direct Tax Study & Overview

Submitted in partial fulfillment of the requirements
For
Master of Commerce
(2015-2016)
By
Prashant M. Rawal
Roll No.: 12
Under the Guidance of
Ms. Anuradha Parmar
University of Mumbai
Sheth T.J. Education Societys
SHETH N.K.T.T. COLLEGE OF COMMERCE &
SHETH J.T.T. COLLEGE OF ARTS,
THANE (W)

University of Mumbai
Sheth T.J. Education Societys
SHETH N.K.T.T. COLLEGE OF COMMERCE &
SHETH J.T.T. COLLEGE OF ARTS,
THANE (W)
CERTIFICATE
OF
PROJECT WORK
This is Certify that PRASHANT M. RAWAL of M.Com-2 (Semester-3) Roll
No.12 has undertaken & completed the project work title Direct Tax

Study & Overview. During the academic year 2015-2016 under the Ms.
Anuradha Parmar Submitted on ___________ to this college in fulfillment of
the curriculum of Master of Commerce, University of Mumbai. This is
confiding project work and the information presented is True and Original to
the best of or knowledge and belief.

Project Guide

External Examiner

Course Coordinators

PRINCIPAL

DECLARATION
I, PRASHANT M. RAWAL hereby declare that the project report entitled Under
Guidance of Ms. Anuradha Parmar, submitted in partial fulfillment of the
requirement for the award of the Degree of Master of Commerce to Mumbai
University is my Original work.

Signature:
Date:
Place: Thane

ACKNOWLEDGEMENT

I take this opportunity to express and record my thanks and gratitude to Sheth
N.K.T.T. College of Commerce and sheth J.T.T. College of Arts, Thane (w) and
also the entire Faculty of Semester III of M.com-2 Course in the College. Further, I
also knowledge my sincere and special thanks and gratitude to my project Guide
Ms. Anuradha Kayasth, without whose continuous guidance and encouragement
it would not have been possible for me to completed this project work.

I express my thanks to all my colleagues, with whom I have had debates and
discussions on the on the subject, which also helped me to acquire better
understanding and clarity on the subject.

Indian Tax Guide:

An initiation to get general public aware about Income Tax In India and also help people to
satisfy their queries:

Archive for the Heads of Income Category

Defination of Income:
August 12, 2008
In order to tax the income of a person the term itself is designed under the Income Tax Act. As
per the Act the term Income includes:

A. Profits and gains of Business or Profession: This includes income from carrying on a
business or income earned by doing any profession.
B. Dividend:
C. Profit in lieu of Salary, perqusite: This includes any amount received by an employee
from his employer other then the salary amount.
D. Allowances granted to the assesse to meet his expenses incurred for performance of his
duties: This includes allowances such as HRA, Medical allowance, etc given by an
employer to his employee.
E. Any capital gains: This means any profit dericed on sale of any capital asset.
F. Winning from lotteries, crossword puzzles, races, card game, T.V. Show , etc
G. Any sum received for fund created for welfare of employees.
One interesting thing in the definition of income is that it can be received in cash or in
kind. More over the Income Tax Act does not make distinction between legal source of
income or illegal source of income. This means that gambling, smugling income is also
chargeable to tax under the Income Tax act. More over gifts of personal nature for eg.
birthday/ marriage gifts are not treated as income (but there are some exceptions in this ).
In all ties one more thing is that the term income does not only means profits but there is
a concept of negative income also.

Heads of Income:
August 8, 2008
In the Income Tax any income earned by a person is broadly categorised into five heads of
income. Any income earned to be taxed must come under any of the five heads of income. The
five heads of income are:

1. Income under Head Salaries: This head taxes the income earned by an individual
as salary from any firm or organisation.
2. Income from House Property: This head taxes rental income received by any
person from way of renting of any immoveable property.
3. Profits and Gains of Business or Profession: This head of income broadly
covers income earned by a person as a result of some business or professional setup by
him.
4. Capital Gains: This head of income taxes the income earned on sale of any investment
in form of gold, precious ornaments, shares, etc or immoveable property.
5. Income from other Sources: This head of income covers any income which is not
chargeable to tax under any of the above heads of income. Any income including
gambling or profit/loss on running of race horses, camels, interest income , etc are
chargeable to tax under this head of income.

We will take each Head of Income one by one but first in the next post we will
understand meaning of the term Income itself:

OBJECTIVES:
After reading this lesson, you should be able to understand:
Classification of income into various heads.
Concept of salary income
Incomes forming part of salary
The computation of basic salary in grade system
Types of commission an employee can get
The concept of allowances
Various income tax provisions for computing taxable value of allowances
Computation of taxable value of allowances

Income tax in India

The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of
the Constitution of India to levy tax on all income other than agricultural income (subject to
Section 10(1)). The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules
1962, Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual
Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The government
of on taxable income of all persons including individuals, Hindu Undivided Families (HUFs),
companies, firms, association of persons, body of individuals, local authority and any other
artificial judicial person. Levy of tax is separate on each of the persons. The levy is governed by
the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and
is part of the Department of Revenue under the Ministry of Finance, Govt. of India. Income tax
is a key source of funds that the government uses to fund its activities and serve the public. The
Income Tax Department is the biggest revenue mobilize for the Government. The total tax
revenues of the Central Government increased from 1392.26 billion (US$21 billion) in 1997-98
to 5889.09 billion (US$89 billion) in 2007-08.

Residential status, Scope of taxable income & Charge

Charge to income-tax
Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an
assesses, and shall be chargeable to the income tax at the rate or rates prescribed under the
finance act for the relevant assessment year, shall be determined on basis of his residential status.
Income tax is a tax payable, at enacted by the Union Budget (Finance Act) for every Assessment
Year, on the Total Income earned in the Previous Year by every Person. The chargeability is
based on nature of income, i.e., whether it is revenue or capital. The rates of taxation of income
are-:
Income Tax Rates/Slabs Rate (%) (Applicable for assessment year 2015-16.)

Net income range

(Individual resident
(Age below
60 Yrs.) or any NRI

Net
income
range (For
resident

/ HUF / AOP / BOI

senior

/ AJP)

citizen1)

Up to 250,000

Up to

Net income range

(For
super senior

Net income range

(For any other
person
excluding
companies and cooperative
societies)

Income
Tax
rates3

Up to 500,000

Up to 200,000

NIL

200,001500,000

10%

500,001

500,001

500,0011,000,000

20%

1,000,000

1,000,000

Above

Above 1,000,000

Above 1,000,000

30%

citizen2)

300,000
250,001500,000

300,001
500,000

500,0011,000,000
Above 1,000,000

1,000,000

A. Senior citizen is one who is 60 years or more at any time during the previous year but
not more than 80 years on the last day of the previous year.
B. Super senior citizen is one who is 80 years or more at any time during the previous year.
C. These slab-rates aren't applicable for the incomes which are to be taxed at special rates
under section 111A, 112, 115, 161, 164 and 167. For instance, long-term capital gains

(except the one mentioned in section 10(38))for all assesses is taxable at 20%. For
individual assesses whose total income does not exceed 500,000 after providing for any
deduction under Chapter VI A are eligible for a rebate of up to 2,000 under section 87A
(applicable from assessment year 2014-15 onwards). A surcharge of 10% on income tax
payable is applicable for every non-corporate assesses, whose total income exceeds 10
million (applicable for assessment year 2014-15).

About 1% of the national population, called the upper class, fall under the 30% slab. It grew 22%
annually on average during 2000-10 to 0.58 million income taxpayers. The middle class, who
fall under the 10% and 20% slabs, grew 7% annually on average to 2.78 million income
taxpayers.

Residential status
Residential status of a person other than an individual:

Control &
management of affairs
of
the taxpayer is wholly

Control &
management of affairs
of the
taxpayer is wholly

Control &
management of affairs
of the taxpayer
is partly in India

in India

outside India

partly outside India

HUF

Resident

Non-resident

Resident

Firm

Resident

Non-resident

Resident

Association of
Persons

Resident

Non-resident

Resident

Indian company

Resident

Resident

Resident

Foreign company

Resident

Non-resident

Non-resident

Any other person

except an individual

Resident

Non-resident

Resident

Type of person

1. HUF is resident or non-resident, the additional conditions (as laid down for an individual)
should be checked for the karta to determine whether the HUF is ordinary or not-ordinary
resident.
2. An Indian company is the one which satisfies the conditions as laid down under section
2(26) of the Act.
3.

Foreign company is the one which satisfies the conditions as laid down under section
2(23A) of the Act.

Scope of total income:

Indian income is always taxable in India not withstanding residential status of the taxpayer.

Foreign income is not taxable in the hands of a non-resident in India. For resident (in case of
firm, association of persons, company and every other person) or resident & ordinarily resident
(in case of an individual or an HUF), foreign income is always taxable. For resident but not
ordinarily resident foreign income is taxable only if it is business income and business is
controlled wholly or partly in India or it is a professional income and profession is set up in
India.
A. Foreign income is the one which satisfies both the following conditions: Income is not received (or not deemed to be received under section 7) in India, and
Income doesn't accrue (or doesn't deemed to be accrued under section 9) in India.
If such an income satisfies one or none the above conditions then it is an Indian income.

Heads of income:
The total income of a person is segregated into five heads: Income from salaries
Income from house property
Profits and gains of business or profession
Capital gains and
Income from other sources

Income from salaries:

All income received as salary under employer-employee relationship is taxed under this head, on
due or receipt basis, whichever arises earlier. Employers must withhold tax compulsorily
(subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at
Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and
net paid income. The Act contains exemptions including (the list isn't exhaustive):Particulars
Leave travel concession
Death-cum-Retirement Gratuity
Commuted value of Pension (not taxable for
specified Government employees)
Leave encashment
Retrenchment Compensation
Compensation received at time of Voluntary
Retirement
Tax on perquisite paid by employer
Amount received from Superannuation
Fund to legal heirs of employee
House Rent Allowance
Some Special Allowances

Relevant section for computing exemption

10(5)
10(10)
10(10A)
10(10AA)
10(10B)
10(10C)
10(10CC)
10(13)
10(13A)
10(14)

The Act contains list of perquisites which are always taxable in all cases and a list of perquisites
which are exempt in all cases (List I). All other perquisites are to be calculated according to
specified provision and rules for each. Only two deductions are allowed under Section 16, viz.
Professional Tax and Entertainment Allowance (the latter only available for specified
government employees).
Computation of exemption for gratuity [Section 10(10)]
In case of Government employee it is fully exempt from tax.
In case of non-government employee covered by Payment of Gratuity Act, 1972 it is exempt
from tax up to the least of the following: 15 days' salary for each year of service or part thereof exceeding six months(i.e.,
15/26*last drawn salary*completed year of service or part thereof exceeding 6
months), or
1 million, or
Gratuity actually received

In case of non-government employee not covered by Payment of Gratuity Act, 1972 it is

exempt from tax up to the least of the following: 1 million, and
Half month's salary for each completed year of service(i.e.,15/30*Average
salary*completed year of service), or
Gratuity actually received
Average salary for above purpose is average salary drawn during 10 months immediately
preceding the month in which the employee retired or ceased to exist.

Computation of exemption of House Rent Allowance(HRA) [Section 10(13A)]

The least of the following is exempt: Allowance actually received
40 per cent of salary (50 per cent in case of Bombay/Calcutta/Delhi/Madras)
Rent paid in excess of 10% of salary
Salary for this purpose means basic plus dearness allowance (if terms of employment so
provide) plus fixed percent commission on turnover.

Computation of exemption for pension [Section 10(10A)]

Uncommuted pension is taxable in all cases. Commuted pension is exempt for specified
Government employees. In any other case, commuted pension is exempt to the extent given
below:1/3 of normal pension is exempt if the employee is in receipt of gratuity
1/2 of normal pension is exempt if the employee is not in receipt of gratuity

Computation of exemption for Leave encashment [Section 10(10AA)]

It is fully exempt in case of specified Government employees
In other case, it is exempt from tax to the extent of least of the following: Amount actually received at the time of retirement
300,000
10 months average salary
Cash equivalent of leave salary in respect of the period of earned leave at the credit
of the employee at the time of retirement, but it cannot exceed 30 days of average
salary for
every completed year of service
Average salary for the above purpose means average salary drawn during 10 months
immediately preceding retirement

Computation of exemption for Retrenchment compensation [Section 10(10B)]

It is exempt to the extent of least of the following: 500,000, or
Amount calculated under section 25F(b) of the Industrial Disputes Act

Computation of exemption for Voluntary Retirement Scheme [Section 10(10C)]

Least of the following three amounts is exempt in case of approved/recognized scheme: Actual received
Rs500,000,
Last drawn salary*3*Completed years of service, or, last drawn salary*remaining
months of service; whichever is lower

Computation of deduction for Entertainment Allowance [Section 16 (ii)] and Professional Tax
[Section 16 (iii)]
Section 16(ii) a deduction in respect of any allowance in the nature of an entertainment
allowance specifically granted by an employer to the assessee is in receipt of a salary from
the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit
or other perquisite) or five thousand rupees, whichever is less.
Section 16 (iii) a deduction of any sum paid by the assessee on account of a tax on
employment within the meaning of clause (2) of article 276 of the Constitution, leviable by
or under any law.
Professional tax is allowed as a deduction to all the employees.
It is allowed as a deduction when actually paid.

Income from house property:

Income under this head is taxable if the assessee is the owner of a property consisting of building
or land appurtenant thereto and is not used by him for his business or professional purpose. An
individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Selfoccupied if it is used for own or family's residential purpose. In that case, the Net Annual Value
(as explained below) will be nil. Such a benefit can only be claimed for one house property.
However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as
deduction under section 24, subject to some conditions. In the case of a self occupied house
deduction on account of interest on borrowed capital is subject to a maximum limit of 150,000
(if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and
30,000 (if the loan is taken before 1 April 1999). For let-out property, all interest is deductible,
with no upper limits. The balance is added to taxable income.

The computation of income from let-out property is as under:Gross annual value (GAV)

xxxx

Less: Municipal Taxes paid

(xxxx)

Net Annual value (NAV)

xxxx

Less: Deductions under section 24

(xxxx)

Income from House property

xxxx

1) The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable
during the year. The ALV is higher of fair rent and municipal value, but restricted to
standard rent fixed by Rent Control Act.
2) Only two deductions are allowed under this head by virtue of section 24, viz.,
30% of Net annual value as Standard deduction
Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals
or reconstruction of property (subject to certain provisions).

Profits and Gains of business or profession:

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or
Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D.
However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except
sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section
44C is a disallowance provision in the case non-residents. Section44AA deals with maintenance
of books and section 44AB deals with audit of accounts.

In summary, the sections relating to computation of business income can be grouped as under: Specific

Sections 30 to 37 cover expenses which are expressly allowed as

deductions

deduction while computing business income.

Specific

Sections 40, 40A and 43B cover inadmissible expenses.

disallowance
Deemed Incomes

Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.

Special provisions

Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA,
44DB.

Presumptive

Sections 44AD, 44AE 55.

Income

The computation of income under the head "Profits and Gains of Business or Profession"
depends on the particulars and information available.
If regular books of accounts are not maintained, then the computation would be as under: Income (including deemed income) chargeable as income xxx
under this head
Less: Expenses deductible (net of disallowances) under this (xx)
head

However, if regular books of accounts have been maintained and profit and loss account has
been prepared, then the computation would be as under: -

Net Profit as per profit and loss account

xxx

Add : Inadmissible expenses debited to profit and loss account

xx

Add: Deemed incomes not credited to profit and loss account

xx

Less: Deductible expenses not debited to profit and loss account

(xx)

Less: Incomes chargeable under other heads credited to Profit & Loss A/c

(xx)

Income from capital gains:

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of
the I.T. Act, 1961 as property of any kind held by an assesses such as real estate, equity shares,
bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for
businesses and personal effects. Transfer has been defined under section 2(47) to include sale,
exchange, relinquishment of asset extinguishment of rights in an asset, etc. Certain transactions
are not regarded as 'Transfer' under section 47. Computation of Capital Gains:-

Full value of consideration

xxx

Less: Cost of acquisition

(xx)

Less: Cost of improvement

(xx)

Less: Expenditure pertaining to transfer incurred by the transferor

(xx)

1) In case of transfer of land or building, if sale consideration is less than the stamp duty
valuation, then such stamp duty value shall be taken as full value of consideration by
virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation
before the Assessing Officer.
2) Cost of acquisition & cost of improvement shall be indexed in case the capital asset is
long term.

For tax purposes, there are two types of capital assets: Long term and short term. Transfer of
long term assets gives rise to long term capital gains. The benefit of indexation is available only
for long term capital assets. If the period of holding is more than 36 months, the capital asset is
long term, otherwise it is short term. However, in the below mentioned cases, the capital asset
held for more than 12 months will be treated as long term: Any share in any company
Government securities
Listed debentures
Units of UTI or mutual fund, and
Zero-coupon bond

Also, in certain cases, indexation benefit is not be available even though the capital asset is long
term. Such cases include depreciable asset (Section 50), Slump Sale (Section 50B),
Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the
Act. There are different scheme of taxation of long term capital gains. These are:

1. As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities
or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no tax
is payable. STT has been applied on all stock market transactions since October 2004 but does
not apply to off-market transactions and company buybacks; therefore, the higher capital gains
taxes will apply to such transactions where STT is not paid.
2. In case of other shares and securities, person has an option to either index costs to inflation
and pay 20% of indexed gains, or pay 10% of non indexed gains. The cost inflation index rates
are released by the I-T department each year.
3. In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.

All capital gains that are not long term are short term capital gains, which are taxed as such:
Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from
Assessment Year (AY) 2005-06 as per Finance Act 2004. With effect from AY 2009-10
the tax rate is 15%.
In all other cases, it is part of gross total income and normal tax rate is applicable.

For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not
paid). Besides exemptions under section 10(33), 10(37) & 10(38) certain specific exemptions are
available under section 54, 54B, 54D, 54EC (http://topcafirms.com/index.php/whitepaper/ 4376capital-gains-exemption-us-54ec-of-income-tax-act-1961), 54F, 54G & 54GA.
Secti
on
54B

Secti
on
54D

Sectio Section
n
54F
54EC

Section 54G

Individual

Indiv

Any

Any

Individual

Any person

/HUF

idual

perso

perso

/HUF

Section
54
Wh
o is
eligi
ble
to
clai

Section
54GA
Any person

Sectio
n
54GB
Indivi
dual/H
UF

m
exe
mpti
on
Whi
ch
asse
t is
eligi
ble
for
exe

A
residential
house
property
or land
appurtena
nt thereto
(long

mpti term)
on

Agri
cultu
ral
land
(if
used
by
indiv
idual
or his
paren
ts for
agric
ultur
al
purp
ose
durin
g at
least
2
years
imm
ediat
ely
prior
to
trans
fer)

Land/
buildi
ng
formi
ng
part
of an
indust
rial
under
taking
which
is
comp
ulsori
ly
acquir
ed by
the
Gover
nment
&
which
is
used
durin
g2
years
for
indust
rial
purpo
ses
prior
to
acqui

Any
long
term
capita
l
asset

Any long
term
capital
asset
(other
than
house
property)
provided
that on the
date of
transfer
the
assessee
does not
own more
than one
residential
house

Land/buildin
g/plant/machi
nery
in order to
shift an
industrial
undertaking
from urban
area
to rural area

Land/buildin
g/plant/machi
nery
in order to
shift an
industrial
undertaking
from urban
area
to any
Special
Economic
Zone

Longterm
reside
ntial
proper
ty if
transfe
r takes
place
betwee
n
if
transfe
r takes
place
during
1
April
2012
and
31
March
2017

Bonds A
Land/buildin
of
residential g/plant/machi
Natio house
nery

Land/buildin
g/plant/machi
nery

Equity
shares
in

property

sition
Whi
ch
asse

Residentia Agri
l house
cultu
ral

Land/
buildi
ng

t
property
shou
ld
be
acqu
ired
to
clai
m
exe

land
in
rural
or
urba
n
area

for
indust
rial
purpo
se

mpti
on

nal
property
High
ways
Autho
rity of
India
or
Rural
Electr
ificati
on
Corpo
ration
Limit
ed;
Maxi
mum
exem
ption
in
one
financ
ial
year
is
5

in order to
shift
undertaking
to rural area

in order to
shift
undertaking
to any SEZ

eligibl
e
compa

1-year
backward or
3 years
forward

1-year
backward or
3 years
forward

Equity
shares
in
an
eligibl
e
compa
ny to
be
acquir
ed on
or
before
due
date of

ny

millio
n
Wha
t is
the
time
limit
for
acqu
iring
the
new
asse
t

Purchase:
1-year
backward
or 2 years
forward;C
onstructio
n:3
years
forward

2
years
forw

3
years
forwa

ard

rd

6
month
s
forwa
rd

Purchase:
1-year
backward
or 2 years
forward;C
onstructio
n:3
years
forward

filing

Ho
w
muc
h is
exe
mpt

Investmen
t in the
new
asset or
capital
gain,
whichever
is lower
(The new
asset
should
not be
transferre
d
within 3
years of
its
acquisitio
n)

Inves
tmen
t
in the
new
asset
or
capit
al
gain,
whic
hever
is
lowe
r
(The
new
asset
shoul
d not
be
trans
ferre
d
withi
n3
years
of its
acqui
sition
)

Invest
ment
in
the
new
asset
or
capita
l
gain,
which
ever
is
lower
(The
new
asset
shoul
d not
be
transf
erred
withi
n3
years
of its
acqui
sition
)

Invest
ment
in
the
new
asset
or
capita
l
gain,
which
ever
is
lower
(The
new
asset
shoul
d not
be
transf
erred
within
3
years
of its
acquis
ition);
The
new
asset
shoul
d
not be
conve
rted
into
mone
y
or any
loan/a
dvanc
e
shoul
d not
be

Investmen
t in the
new
assetNet
sale
considerat
ionCapit
al
gain; The
assessee
should not
complete
constructi
on of
another
residential
house
property
within 3
years
from the
date of
transfer of
original
asset nor
should he
purchase
within 2
years
from the
date of
transfer of
original
asset
another
house
property

Investment in
the new asset
or capital
gain,
whichever is
lower (The
new asset
should
not be
transferred
within 3
years of its

Investment in
the new asset
or capital
gain,
whichever is
lower (The
new asset
should
not be
transferred
within 3
years of its

acquisition)

acquisition)

Invest
ment
in
the
new
asset
capital
gain
net
sale
consid
eration
.
(The
exemp
tion
is
revoke
d if
equity
shares
are
sold/tr
ansferr
ed
within
5 years
from
acquisi
tion or
the
new
asset is
sold/tr
ansferr
ed
by the
compa
ny
within
5 years
from
acquisi
tion)

taken
on the
securi
ty of
the
new
asset
within
3
years
from
the
date
of its
acquis
ition

Income from other sources:

This is a residual head, under this head income which does not meet criteria to go to other heads
is taxed. There are also some specific incomes which are to be always taxed under this head.
1. Income by way of Dividends.
2. Income from horse races/lotteries.
3. Employees' contribution towards staff welfare scheme/ provident fund/ superannuation fund or
any fund set up under the provisions of ESIC Act, received from the employees by the employer.
4. Interest on securities (debentures, Government securities and bonds).
5. Any amount received from keyman insurance policy including the sum allocated by way of
bonus on such policy.
6.Gifts(subject

to

certain

condition

exemptions)(http://www.indiantaxupdates.com/2012/10/21/tax-on-gift-received-cash-or-noncash/).
7. Interest on compensation/enhanced compensation.
8. Income from renting of other than house property.
9. Family pension received by family members after the death of the pensioner.
10. Income by way of interest on other than securities.

and

Agricultural income:
Agricultural income is exempt from tax by virtue of section 10(1). Section 2(1A) defines
agricultural income as: Any rent or revenue derived from land, which is situated in India and is used for
agricultural purposes.
Any income derived from such land by agricultural operations including processing of
agricultural produce, raised or received as rent-in-kind so as to render it fit for the market
or sale of such produce.
Income attributable to a farm house (subject to some conditions).
Income derived from saplings or seedlings grown in a nursery.

Income partly agricultural and partly business activities:

Income in respect of the below mentioned activities is initially computed as if it is business
income and after considering permissible deductions. Thereafter, 40,35 or 25 percent of the
income as the case may be, is treated as business income, and the rest is treated as agricultural
income.
Income

Business
income
40%
35%

Growing & manufacturing tea in India

Sale of latex or cenex or latex based crepes or brown crepes
manufactured from field latex or coalgum obtained from rubber
plants grown
by a seller in India
25%
Sale of coffee grown & cured by seller in India
Sale of coffee grown, cured, roasted & grounded by seller in 40%
India

Agricultural
Income
60%
65%

75%
60%

For apportionment of a composite business-cum-agricultural income, other than the

above-mentioned, the market value of any agricultural produce, raised by the assesses or
received by him as rent-in-kind and utilized as raw material in his business, should be
deducted. No further deduction is permissible in respect of any expenditure incurred by
the assesses as a cultivator or receiver of rent-in-kind.

Permissible deductions from Gross Total Income:

Deductions allowed under Chapter VI-A i.e., sections 80C to 80U, cannot exceed gross total
income of an assesses excluding short term capital gains under section 111A and any long term
capital gains. Some deductions under sections 80C to 80DDB are listed below.

Section 80C deductions:

Deduction under this section is available only to an individual or an HUF.
Section 80C of the Income Tax Act allows certain investments and expenditure to be deducted
from total income up to the maximum of Rs 1,50,000 from the Financial Year 2014-15.

Section 80CCC (pension):

Contribution made by the assesses and by employer to New Pension Scheme is admissible for
deduction under this section. The assesses should be an individual who is employed on or after 1
January 2004. The deduction shall be equal to the amount contributed by the assesses and/or by
the employer, not exceeding 10% of his salary (basic dearness allowance). Even a self-employed
person can claim this deduction which will be restricted to 10% of gross total income.

The total deduction available to an assesses under sections 80C, 80CCC & 80CCD is restricted
to 150,000 per annum. However, employer's contribution to Notified Pension Scheme under
section 80CCD is not a part of the limit of 150,000.

Sec 80D:
(1) In computing the total income of an assesses, being an individual or a Hindu undivided
family, there shall be deducted such sum, as specified in sub-section (2) or sub-section
(3), payment of which is made by any mode 95[as specified in sub-section (2B),] in the previous
year out of his income chargeable to tax.

(2) Where the assesses is an individual, the sum referred to in sub-section (1) shall be the
aggregate of the following, namely:- (a) the whole of the amount paid to effect or to keep in
force an insurance on the health of the assesses or his family 96[or any contribution made to the
Central Government Health Scheme] 96a[or such other scheme as may be notified by the Central

Government in this behalf] 97[or any payment made on account of preventive health check-up of
the assesses or his family]as does not exceed in the aggregate fifteen thousand rupees; and (b) the
whole of the amount paid to effect or to keep in force an insurance on the health of the parent or
parents of the assesses 97[or any payment made on account of preventive health check-up of the
parent or parents of the assesses]as does not exceed in the aggregate fifteen thousand rupees.

(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1) shall
be the whole of the amount paid to effect or to keep in force an insurance on the health of any
member of that Hindu undivided family as does not exceed in the aggregate fifteen thousand
rupees.

(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) or in sub-section (3) is
paid to effect or keep in force an insurance on the health of any person specified therein, and
who is a senior citizen, the provisions of this section shall have effect as if for the words "fifteen
thousand rupees", the words "twenty thousand rupees" had been substituted. Explanation:-For
the purposes of this sub-section, "senior citizen" means an individual resident in India who is of
the age of 60[sixty years] or more at any time during the relevant previous year.

(5) The insurance referred to in this section shall be in accordance with a scheme99 made in this
behalf by (a) the General Insurance Corporation of India formed under section 9 of the
General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the
Central Government in this behalf; or (b) any other insurer and approved by the Insurance
Regulatory and Development Authority established under sub-section (1) of section 3 of the
Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

Amount of Deduction U/Sec 80D

HUF

Individual

On whose health insurance Any

Individual

policy can be taken

member

Parents

whether Total

himself, spouse, dependent or not

Dependent
children

General deduction
Additional

deduction

15000
if 5000

15000

15000

30000

5000

5000

10000

20000

20000

40000

insured is a senior citizen

Total

20000

Deduction under Section 80D (http://caknowledge.in/deduction-for-medical-insurance-premiumusec-80d/) is also available in respect of contribution to Central Government Health Scheme.
However this deduction is not available to HUF. Deduction is available to an individual and only
in respect of health insurance policy taken for Individual himself, spouse and dependent children.
If an individual takes an insurance policy on health of Parents whether dependent or not,
deduction under this Section will not be available.

Deduction under this section within the existing limit, in respect of any payment or contribution
made by the assesses to such other health scheme as may be notified by the Central Government.

Section 80DDB: Deduction in respect of medical treatment, etc:

Deduction is allowed to resident individual or HUF(Hindu Undivided Family ) in respect of
expenditure actually during the PY incurred for the medical treatment of specified disease or
ailment as specified in the rules 11DD for himself or a dependent relative or a member of a HUF.

Section 80E: Education loan interest:

Interest payment on education loan for education in India gets deduction under this section.
Education loan should be for self, spouse, child or the whose legal guardian the assesses is.

Financial institute must be gazette company by the Central Government of India.

Section 80TTA: Interest on Savings Account:

Up to Rs 10,000 earned as interest from savings account in bank, post office or a co-operative
society can be claimed for deduction under this section. This rebate is applicable for individuals
and HUFs.

Section 80U: Disability:

Disabled persons can get a flat deduction on Income Tax on producing their disability certificate.
If disability is severe Rs 1,00,000 can be claimed else Rs 50,000.server here mean disability 80%
or more as per this section.

Section 24: Interest on housing loans:

80CCF and 80D. However, this is only applicable for a residence constructed within three
financial years after the loan is taken and also the loan if taken after 1 April 1999.

If the house is not occupied due to employment, the house will be considered self occupied.

For let out properties, the entire interest paid is deductible under section 24 of the Income Tax
act. However, the rent is to be shown as income from such properties. 30% of rent received and
municipal taxes paid are available for deduction of tax.

P. Chidambaram while announcing his Budget 2013 speech on 28 Feb 2013 also announced that
for the year 2013-14, an additional deduction of 100,000 would be allowed to be deducted for
the payment of Interest on Home Loan u/s 80EE.[11] This deduction would be allowed provided
that the total value of the loan is not more than 25,00,000 and the total value of the house is not
more than 40,00,000 and the loan should be a fresh loan taken during the financial year 201314. This deduction would be over and above the 150,000 deduction.

The losses from all properties shall be allowed to be adjusted against salary income at the source
itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be
necessary.

Due date of submission of return:

The due date of submission of return shall be ascertained according to section 139(1) of the Act
as under:30 September of the Assessment
Year(AY)

If the assesses is a company (not having any internation transaction), or

If the assesses is any person other than a company
whose books of accounts are required to be audited
under any law, or
If the assesses is a working partner in a firm whose
books of accounts are required to be audited under
any law.

30 November of the AY

If the assesses is a company and it is required to furnish

report under section 92E pertaining to international
transactions.

31 July of the AY

In any other case.

If the Income of a Salaried Individual is less than 500,000 and he has earned income through
salary or Interest or both, such Individuals are exempted from filing their Income Tax return
provided that such payment has been received after the deduction of TDS and this person has not
earned interest more than 10,000 from all source combined. Such a person should not have
changed jobs in the financial year.
CBDT has announced that all individual/HUF taxpayers with income more than 500,000 are
required to file their income tax returns online. However, digital signatures won't be mandatory
for such class of taxpayers.

Advance tax:
Under this scheme, every assessee is required to pay tax in a particular financial year, preceding
the assessment year, on an estimated basis. However, if such estimated tax liability for an
individual who is not above 60 years of age at any point of time during the previous year and
does not conduct any business in the previous year, and the estimated tax liability is below
10,000, advance tax will not be payable. The due dates of payment of advance tax are:-

In case of corporate assesses

Otherwise

On or before 15 June of the Up to 15% of advance tax previous year

payable

On or before 15 September Up to 45% of balance of Up to 30% of advance tax

of the previous year

advance tax payable

payable

On or before 15 December Up to 75% of balance of Up to 60% of advance tax

of the previous year

advance tax payable

payable

On or before 15 March of Up to 100% of balance of Up to 100% of advance tax

the previous year

advance tax payable

payable

Tax deducted at source (TDS):

The general rule is that the total income of an assesses for the previous year is taxable in the
relevant assessment year. However, income-tax is recovered from the assesses in the previous
year itself by way of TDS. The relevant provisions therein are listed below. (To be used for
reference only. The detailed provisions therein are not listed below.)
Section

Nature of payment

Threshold limit (up

to which no tax is
deductible)

TDS to be deducted

192

Salary to any person

Exemption limit

As specified for individual

in Part III of I Schedule

193

Interest on securities to any Subject to detailed

provisions of given
resident
Section

10%

194A

Interest (other than interest on 10000 (for

Bank/cooperative
securities) to any resident
bank) &
5000 otherwise

10%

194B

Winning from lotteries etc. to 10000

30%

any person
194BB

Winning from horse races to any 5000

30%

person
194C

Payment to resident contractors

30000 (for single

contract) & 75000

2% (for companies/firms)

(for
aggregate

& 1% otherwise

consideration in a
financial year)
194D

Insurance

to 20000

commission

10%

resident
194E

Payment

to

non-resident

Not applicable

10%

2500

20%

1000

10%

5000

10%

sportsmen or sports association

194EE

Payment

of

deposit

under

National Savings Scheme to any

person
194G

Commission on sale of lottery

tickets to any person

194H

Commission/brokerage

to

resident
194-I

Rents paid to any resident

194IA

Payment

for

Purchase

180000

of

5000000

2% (for
plant,machinery,equipment)
& 10% (for
land,building,furniture)
1%

Immovable Property
194J

Fees for professional/technical

30000

10%

services; Royalty
At what time tax has to be deducted at source and some other specifications are subject
to the above sections.
In most cases, these payments shall not to deducted by an individual or an HUF if books
of accounts are not required to be audited under the provisions of the Income Tax Act,
1961 in the immediately preceding financial year.

 Income tax slab for FY 2010-11 / A.Y. 2011-12:

New Income tax slab proposed in budget 2010-11 and its impact on Male individual,
Female Individual, HUF and senior citizen
The Finance Minister, in the Budget today, changed the tax slabs for men, women and senior
citizens. The highest tax slab has now been raised from Rs 5 lakh to Rs 8 lakh.
The FM has also increased the limit of deduction available under section 80C. He has allowed an
additional investment of Rs 20,000 for infrastructure bonds taking the total of the limit under
section 80C from the current Rs 1 lakh to Rs 1.2 lakh.
Male individual below the age of 65 years& HUF tax payers :
New tax slabs:
Slabs (Rs)

Rate

0 160000

160001 500000

10

500001 800000

20

800001 and above

30

Old tax slabs:

Slabs (Rs)

Rate

0-160000

160001-300000

10

300001-500000

20

500001 and above

30

Impact:
Taxable income
(Rs)

Tax

-before

budget Tax after budget

Saving (Rs)

(Rs)

(Rs)

200000

4120

4120

500000

55620

35019

20601

1000000

210120

158619

51501

1200000

271919

220419

51500

1500000

364619

313119

51500

2000000

519119

467619

51500

2500000

673619

622119

51500

4000000

1137119

1085619

51500

Female individual taxpayer:

New tax slabs:
Slabs (Rs)

Rate

0-190000

190001-500000

10

500001-800000

20

800001 and above

30

Old tax slabs:

Slabs (Rs)

Rate

0-190000

190001-300000

10

300001-500000

20

500001 and above

30

Impact:
Taxable income
(Rs)

Tax

-before

budget Tax after budget

Saving (Rs)

(Rs)

(Rs)

200000

1029

1029

500000

52529

31929

20600

1000000

207029

155529

51500

1200000

268829

217329

51500

1500000

361529

310029

51500

2000000

516029

464529

51500

2500000

670529

619029

51500

1134029

1082529

51500

4000000

Senior Citizens
New tax slabs:
Slabs (Rs)

Rates

0-240000

240001-500000

10

500001-800000

20

800001 and above

30

Old tax slabs:

Slabs (Rs)

Rates

0-240000

240001-300000

10

300001-500000

20

500001 and above

30

Impact:
Taxable income
(Rs)

Tax
(Rs)

(Rs)

200000

500000

47379

26780

20599

1000000

201879

150379

51500

1200000

263679

212179

51500

1500000

356379

304879

51500

2000000

510879

459379

51500

2500000

665379

613879

51500

1128879

1077379

51500

4000000

-before

budget Tax after budget

Saving (Rs)

 Income Tax Slabs for FY 2011-12 (AY 2012-13):

In Case of General Assesses:

Income Bracket

Rate

0 to Rs. 1,80,000

0%

Rs. 1,80,001 to Rs. 5,00,000

10%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

In Case of Women Assesses:

Income Bracket

Rate

0 to Rs. 1,90,000

0%

Rs. 1,90,001 to Rs. 5,00,000

10%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

In Case of Senior Citizens (> 60 Years but less than 80 Years):

Income Bracket

Rate

0 to Rs. 2,50,000

0%

Rs. 2,50,001 to Rs. 5,00,000

10%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

In Case of Very Senior Citizens (80 Years and above):

Income Bracket

Rate

0 to Rs. 5,00,000

0%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

 Income tax slab 2012-2013:

The latest income tax slab to calculate your tax for Year 2012-2013
based on budget 2012 budget.
Tax exemption limit raised to Rs 2 lakhs and tax rates has changed for other slabs too. Use our
Free income tax calculator for getting an idea of how much tax you will be saving compared to
last year per the latest tax rates.

India Income tax slabs 2012-2013 for General tax payers:

Income tax slab (in Rs.)

Tax

0 to 2,00,000

0%

2,00,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

India Income tax slabs 2012-2013 for Female tax payers:

Income tax slab (in Rs.)

Tax

0 to 2,00,000

0%

2,00,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

India Income tax slabs 2012-2013 for Senior citizens (Aged 60 years but less than 80 years):
Income tax slab (in Rs.)

Tax

0 to 2,50,000

0%

2,50,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

India Income tax slabs 2012-2013 for very senior citizens (Aged 80 and above)
Income tax slab (in Rs.)

Tax

0 to Rs. 5,00,000

0%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

India Income tax slabs for Assessment Year 2013-14 (Financial Year 2012-2013):
General tax payers:
Income tax slab (in Rs.)

Tax

0 to 2,00,000

0%

2,00,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

Education Cess: 3% of the Income-tax.

Female tax payers:

Income tax slab (in Rs.)

Tax

0 to 2,00,000

0%

2,00,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

Education Cess: 3% of the Income-tax.

Senior citizens (Aged 60 years but less than 80 years at any time during the previous year):
Income tax slab (in Rs.)

Tax

0 to 2,50,000

0%

2,50,001 to 5,00,000

10%

5,00,001 to 10,00,000

20%

Above 10,00,000

30%

Education Cess: 3% of the Income-tax.

Senior citizens (Aged 80 and above at any time during the previous year):
Income tax slab (in Rs.)

Tax

0 to Rs. 5,00,000

0%

Rs. 5,00,001 to Rs. 8,00,000

20%

Above Rs. 8,00,000

30%

 Income Tax Slab Rates for 2014-15 & 2015-16:

The Income Tax Slab Rates for 2014-15 & 2015-16 are the same. The Income Tax Slab Rates
are different for different categories of taxpayers.
The Income Tax Slab Rates can be divided in the following categories:A. INDIVIDUALS & HUF:
For Male Individuals below 60 Years of Age and HUF
For Female Individuals below 60 Years of Age
For all Senior Citizen above 60 years of Age
For all Super Senior Citizen above 80 years of Age

B. BUSINESSES:

Co-operative Society

Firms, Local Authority & Domestic Company

Income Tax Slab Rates:

FOR INDIVIDUALS & HUF:
1. For Male Individuals below 60 years of age & HUF:

Income tax slab (in Rs.)

Tax

Where Total Income does not exceed Rs. 2,50,000

NIL

Where the Total Income exceeds Rs. 2,50,000 but

does not exceed Rs. 5,00,000
Where the Total Income exceeds Rs. 5,00,000 but
does not exceed Rs. 10,00,000
Where the Total Income exceeds Rs. 10,00,000

10% of the Amount by which

it exceeds Rs. 2,50,000
20% of the Amount by which
it exceeds Rs. 5,00,000
30% of the Amount by which
it exceeds Rs. 10,00,000

2. For Female Individuals below 60 years of Age:

Income tax slab (in Rs.)

Tax

Where Total Income does not exceed Rs. 2,50,000

NIL

Where the Total Income exceeds Rs. 2,50,000 but

does not exceed Rs. 5,00,000
Where the Total Income exceeds Rs. 5,00,000 but
does not exceed Rs. 10,00,000
Where the Total Income exceeds Rs. 10,00,000

10% of the Amount by which

it exceeds Rs. 2,50,000
20% of the Amount by which
it exceeds Rs. 5,00,000
30% of the Amount by which
it exceeds Rs. 10,00,000

3. For all Senior Citizens above 60 years of Age:

Income tax slab (in Rs.)

Tax

Where Total Income does not exceed Rs. NIL

3,00,000
Where the Total Income exceeds Rs. 3,00,000
but does not exceed Rs. 5,00,000

10% of the Amount by which it exceeds

Rs. 3,00,000

Where the Total Income exceeds Rs. 5,00,000

but does not exceed Rs. 10,00,000

20% of the Amount by which it exceeds

Rs. 10,00,000

Where the Total Income exceeds Rs. 10,00,000

30% of the Amount by which it exceeds

Rs. 10,00,000

4. For all Senior Citizens above 80 Years of Age:

Income tax slab (in Rs.)

Tax

Where Total Income does not exceed Rs. NIL

5,00,000
Where the Total Income exceeds Rs. 5,00,000
but does not exceed Rs. 10,00,000

20% of the Amount by which it exceeds

Rs. 5,00,000

Where the Total Income exceeds Rs. 10,00,000

30% of the Amount by which it exceeds

Rs. 10,00,000

I.

SLABS FOR BUSINESS:

a. For Co-operative Society:

Income tax slab (in Rs.)

Tax

Where the Total Income does not exceed Rs. 10% of the Income
10,000
Where the Total Income exceeds Rs. 10,000 but
does not exceed Rs. 20,000

20% of the Amount by which it exceeds

Rs. 10,000

Where the Total Income exceeds Rs. 20,000

30% of the Amount by which it exceeds

Rs. 20,000

b. For Firms, Local Authority and Domestic Company:

Income Tax Slab Rates wont apply in this case and Tax @ 30% flat shall be computed on the
Total Income. Surcharge shall not be levied on Income of Firms and Local Authorities but shall
be levied on the Total Income Tax of Domestic Companies @ 5% provided that the Total
Income of the Domestic Company exceeds Rs. 1 Crore.

References:
1. Institute of Chartered Accountants of India (2011). Taxation. ISBN 978-81-8441-290-1.

2."Growth

of

Income

Tax

revenue

in

India"

(http://shodhganga.inflibnet.ac.in/bitstream/10603/2876/12/12_chapter%205.pdf)

(PDF).

Retrieved 16 November 2012.

3. http://www.thetaxinfo.com/2013/12/income-tax-rebate-of-2000-calculation-sec-87a/

4.The

Indian

upper

class

grew

rapidly

during

the

Noughts

(http://www.financialexpress.com/news/evasion-of-personal-tax-dips-to-59-of-mopup/1096336)

5. Business Income (http://www.v-krishnan-and-company.com/business_income.html)

6. 80C limit Increased from 1,00,000 to 1,50,000 (http://www.thetaxinfo.com/2014/12/80c-taxdeductions/)

7. The institute of Cost accountants of India (Jan 2012). Applied direct taxation. Directorate of
Studies,The Institute of Cost accountants of India. p. 238.

8. http://www.tax.fintotal.com/Sections/80E-Tax-Rebate/5913/68

9. http://www.tax.fintotal.com/Sections/80TTA-Tax-Rebate/6212/68

10. http://www.tax.fintotal.com/Sections/80U-Tax-Rebate/5916/68

11. http://www.thetaxinfo.com/2014/01/additional-deduction-on-interest-on-housing-loan/

12.http://www.incometaxindia.gov.in/publications/1_Compute_Your_Salary_Income/2_Income_
from_house_property.asp

13.

http://www.caclubindia.com/articles/e-filing-is-mandatory-income-is-more-than-5-lacs-

17646.asp

14. Income Tax rates Companies (http://businesssetup.in/blog/view/Income-Tax-rates-forCompanies)

15. Finance Act 2010