Section A : Income tax Act Basics:

Study Note(S N) 1 : Basic Concepts

1. Meaning and Purpose of Tax:
 Taxes are seen as a major source of revenue for public expenditure, viz. building schools and
hospitals, paying the police and the soldiers, making provisions for critical infrastructure, etc.
 The recent Budget estimates for the financial year 2016-17, where 82.5% of the total expenditure
is expected to be financed by tax revenues.
2. Constitutional Provisions:
 Constitution of India is the supreme law of the land and all other laws are subservient to it.
 The authority to legislate is divided between the Central Government and the State Governments
as under (Seventh Schedule of Article 246 of the Constitution):
i) List I : Central or Union List- Comprises of Entries over which the Union or the Central
Government has exclusive power to legislate
ii) List II : State List - Comprises of entries over which the State Government has exclusive
power to legislate
iii) List III Concurrent List- Concurrent power of legislation to the Central and State Governments
3. Tax Structures in India:
 The authority to levy taxes divided between the Central Government and the State Governments
 The various types of taxes levied by these Governments are divided into 2 broad categories: i) Direct and ii)
Indirect taxes.
 Direct taxes are those, which are collected directly from the tax-payers through levies such as Income Tax
Indirect taxes comprise excise duty, sales tax, customs duty, value added tax, octroi, entry tax, service tax,
expenditure tax, etc.
 The table below gives a list of the major direct and indirect taxes in India and the authorities responsible for
administering these laws:
Nature of Tax Governing Act Act Authority
Direct Tax
Income Tax Income-tax Act, 1961 Central Board of Direct Taxes (CBDT)
Indirect Tax
Central Excise Central Excise Act, 1944 CBEC
Customs Customs Act, 1962 CBEC
Central Sales Tax Central Sales Tax Act, 1956 CG Sales Tax Act, 1956
State Sales Tax Respective State Sales Tax Acts/ Value Added Tax Respective stage Governments
Acts
4. Sources of Income – Tax Law in India:
a) The Income-tax Act, 1961 : CBDT is responsible for administration of the Act
b) The Income-tax Rules, 1962 : CBDT will make rules
c) The Finance Act : Every year … Prescribes rates of tax, new changes etc
d) Circulars issued by the CBDT : The purpose of CBDT circulars is to provide
guidance to the Income tax officers and the general public. These circulars
are binding on the Income-tax officers.
e) Case laws and precedents: Case laws are the decisions of the Tax Tribunals
or Courts on disputes relating to any aspect of the Income-tax Law. These
case laws serve as precedents. In cases of similar disputes in the future, the
decisions of the courts may be used to decide any later disputes.
5. Tax Planning, Tax Avoidance and Tax Evasion:
i) Tax Planning - when a person arranges his financial affairs within the scope
of the law in a manner that would give him the maximum benefit of the
various exemptions, deductions, rebates and reliefs to reduce his tax
liability.
ii) Tax Avoidance - Any device that twists the law or purports to defeat the
spirit of the law, may be called tax avoidance. Tax avoidance is illegal.
iii) Tax evasion - taking resort to various means such as suppression of facts
and figures, furnishing false details, etc., with a clear intention to deceive. It
is a crime against society and is punishable under the law.

Intention of the tax-payer will decide whether it is Tax avoidance or Tax

evasion.
 S N 2 : Background, Concepts, Definitions

1. Some Important Definitions: Key Points

i) Assessee [ Section 2(7) ]: person by whom any tax or any sum payable under IT Act.
Assessee also includes:
a) Proceedings for assessment or refund
b) Deemed assessee
ii) Person [ Section 2(31)]: Person Includes
(a) an individual, (b) a Hindu undivided family (HUF), (c) a Company, (d) a Firm, (e) an association of
persons or body of individuals, whether incorporated or not. (f) a local authority, and (g) every
artificial juridical person, not falling within any of the above categories.
iii) Assessment year [Section 2(9)]: period of twelve months commencing on the 1st day of April
every year and ending on the 31st March of the following year.
iv) Previous year [Section 3]: the financial year (1st day of April to 31st of March of following
year) immediately preceding the assessment year. However, Newly started…
General Rule: Income earned in PT is chargeable to tax in AY.
Exceptions to general rule: 1) shipping business of non-residents [Section 172]. 2) persons leaving
India [Section 174]. 3) an AOP or a BOI or an artificial juridical person, which is likely to be dissolved
on completion of a particular event or purpose [Section174A]. 4) persons likely to transfer property
with a view to avoiding tax [Section 175]. 5) discontinued business [Section 176].
 v) Income 2(24): Income includes-
a) PGBP
b) dividend
c) voluntary contributions
d) Perquisite
e) Perquisites by directors and relatives
f) Perquisites by representative assessee
g) any sum chargeable to income-tax under sub-clauses (ii), (iii), (iiia), (iiib), (iiic), (iv), (v), (va) of
Section 28, Section 41 or Section59
h) any CG’s chargeable u/s 45
i) Insurance
j) Banking
k) Lottery, crossword puzzles etc.
l) Contributions received from ee’s by er
m) KIP
n) clause (viia) or clause (viib) of Section 56(2)
o) clause (ix) of sub-section (2) of section 56.
p) subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement
vi) Assessing Officer [Section 2(7A)]:
AO means the Asst C or Dep C or Asst D or Dep D or the IT Officer who is vested
with the relevant jurisdiction by virtue of directions or orders issued under
Section 120(1) or 120(2) or any other provision of this Act, and the Addl C or
Addl J D or J C or J D who is directed under Section 120(4)(b) of that section to
exercise or perform all or any of the powers and functions conferred on, or
assigned to, an AO under this Act.
vii) Gross total income [Section 80B(5)] :
The total income of an assessee before making any deduction under Sections
80C to 80U is called Gross Total Income. In other words, it is the aggregate of
income under the five heads of income mentioned under Section 14 of the Act.
viii) Total income [Section 2(45)]:
It is this income on which an assessee pays tax at the rates prescribed by the
Finance Act. Under the Act, it is the gross total income as reduced by
permissible deductions under Sections 80C to 80U.
2) Heads of income [Section 14]:
According to Section 14 of the Income-tax Act, 1961, for the purpose of computation of total income,
all income of an assessee shall be classified under the following five heads:
(a) Income under the head “Salaries”.
(b) Income from house property.
(c) Profits and gains of business or profession.
(d) Capital gains.
(e) Income from other sources
3) Concept of Agricultural Income and Tax issues in respect of Agricultural Income:
Definition of agricultural income [Section 2(1A)]:
(A) Agricultural rent or revenue [Section 2(1A) (a)]: Any rent or revenue derived from land which is
situated in India and is used for agricultural purposes.
Under Section 2(1A)(a), in order to be called agricultural income, the following conditions should be
satisfied:
(a) The rent or revenue should be derived from land
(b) The land should be situated in India
(c) The land should be used for any agricultural purpose:
(B) Income from agricultural produce and from marketing process [Section 2(1A) (b)]
(C) Income from farm buildings [Section 2(1A)(c)]
Instances of agricultural income: The following are some examples of incomes which
have been held to be agricultural income-
• Income from use of land for grazing of cattle required for agricultural pursuit.[CIT
vs. Rai Shamsherjung Bahadur (1953) 24 1TR (All)].
• Profit on sale of crops after harvest, made by cultivator or receiver of rent-in-kind.
• Compensation received from insurance company for damage caused to the crops
by hailstorm or flood. [CIT vs. B. Gupta (Tea) P. Ltd. (1969) 74 1TR 337].
• Salary, interest on capital, share of profits, etc., received by a partner of a firm
having agricultural income. [CIT vs. R.M. Chidambaram Pillai (1977) 106 1TR 292
(SC)].
• Income from running a dairy which is purely incidental to agriculture.[CIT vs. Kokine
Dairy Rangoon (1938) 6 ITR 502],
• Income from growing flowers and creepers.
• Income from saplings and seedlings grown in nursery [Explanation 3 to Section 2(1
A) ]
Instances of non-agricultural income: The following are some examples of incomes
which have been held to be non-agricultural income-
• Income from sale of trees, flowers and fruits growing spontaneously in forests. [Rani
Tara Kumari Devi vs. CIT (1946) 14 ITR 787].
• Profits arising from purchase and sale of standing crops. [CIT vs. Maddi 20 ITR 151].
• Remuneration received by a manager as a percentage of profit from a firm having
agricultural income. [E.C. Danby vs. CIT [1944] 12 ITR 351 (Pat.)].
• Dividends paid by a company from its agricultural incomes. [Bacha F. Guzdar vs. CIT
(1955) 27 ITR 1 (S.C.)].
• Income from fisheries. [Raja DurgaNarain vs. CIT (1947) 15 ITR 235].
• Royalty income from mines. [Shiblal vs. CIT 2 ITC 425].
• Poultry farming. [State of Orissa vs. Ram Chandra Choudhury [1962] 46 ITR 246
(Ori)].
• Annuity received for transfer of agricultural land.[Gopal vs. CIT 3 ITR 237 (PC)].
• Interest on arrears of rent payable in respect of agricultural land. [CIT vs. Raja
Bahadur Kamakhya Narayan Singh [1948] 16 ITR 325 (PC)].
• Interest received by a money lender in the form of crops. [Cassim vs. CIT 6 ITC 41]
Computation of tax :
Step I: The total income and the net agricultural income shall be aggregated and
the amount of income tax shall be determined in respect of the aggregate
income at the rates specified
Step II: The net agricultural income shall be increased by basic exemption limit
and the amount of income-tax shall be determined
Step III: The amount of income-tax = Step I (-) Step II
Step IV: Step III is to be increased by surcharge or decreased by tax rebate as
applicable under Section 87A
Step V: Step IV is to be increased by Education cess@2% and Secondary and
higher Education Cess @ 1% to arrive at the amount of tax payable.
 S N 3 : Capital And revenue : Receipts and Expenditures
1. Distinction between Capital and Revenue Receipts:
 except for those which are specifically exempt under the Income-tax Act, all revenue receipts are taxable. A
capital receipt is taxable, subject to the other provisions of the Act, if it falls within the purview of Section
45.
 the following general principles may be relied upon while making a distinction between capital and
revenue receipts:
(a) Disintegration of single sum into capital and income
(b) Lump sum and periodic sum
(c) Magnitude of receipt
(d) Accounting treatments
(e) Income from wasting assets
(f) Receipt from fixed capital
(g) Capital sale and business sale
(h) Transactions in the ordinary course of business
(i) Shares and securities
 Instances of transactions which are capital in nature but specifically taxable:
1. Capital gains arising from sale of capital assets defined in section 2(14). [Section 45]
2. Compensation for termination of service or modification in the terms of service [Section 17(3)]
3. Compensation or other payments due to or received by the persons specified u/s 28(ii)/ u/s 28(va).
2. Distinction between Capital expenditures and Revenue Expenditures:
Few distinguishing tests for capital and revenue expenditures are discussed
below:
(a) Acquiring asset or advantage of enduring nature
(b) Capital assets belonging to third parties
(c) Expenditure which facilitates assessee‘s business
(d) Expenditure related to fixed capital and circulating capital
(e) Initial expenditure
(f) Expenditure for goodwill, route permits, etc.
(g) Payment for know-how, patents and trademarks
(h) Buying off competition
(i) Legal expenses for maintenance of asset
 S N 4 : Basis of Charge and scope of total Income
1. Computation of Total Income:
 Sections 15 to 59 of the Act lay down the procedure of computation of income under all
the five heads mentioned in section 14.
 The sum total of income under all the five heads is known as Gross Total Income.
 Total income is obtained after subtracting from the GTI the permissible deductions under
Chapter VI-A of the Act (Sections 80C -80U).
Computation of total income
1. Income under the head "Salaries":
Various components of salary defined u/s 17(1)
• Pay, wages, pension, annuity, etc.
• Taxable allowances
• Perquisites
• Profits in lieu of salary Gross salary
Less : Deductions u/s 16 :
• Deduction for entertainment allowance
• Deduction for professional tax Taxable salary
2. Income from house property:
Gross annual value:
Less: Municipal tax Net annual value
• Standard deduction u/s 24 (a), Interest on borrowed capital u/s 24 (b)
Income from house property
3. Profits and gains from business or profession:
Net profit as per Profit and Loss Account
Add: Inadmissible expenses
Less: Income credited to the Profit and Loss Account but not taxable under the head or exempt from tax
Income from business or profession
4. Capital gains:
• Short-term capital gains:
Consideration received on transfer of short-term capital asset
Less: Expenses incidental to transfer
Less : Cost of acquisition/improvement of capital asset
Less: Exemptions u/s 54B, 54D, 54G, 54GA (A)
• Long-term capital gains:

Consideration received on transfer of long-term capital asset

Less: Expenses incidental to transfer
Less: Indexed cost of acquisition/improvement of capital asset
Less: Exemption u/s 54,54B, 54D, 54EC, 54F, 54C, 54CA and 54GB (B)
Taxable capital gains [A + B]
5. Income from other sources:
Gross income
Less: Deductions for incidental expenses u/s 57
Income from other sources
Gross total income
Less : Deduction u/s 80C - 80U
Total income or taxable income
Computation of tax liability:

Tax on total income [Total income x Rate of tax]

Less: Rebate u/s 87A

Total tax after rebate

Add: Surcharge

Tax and surcharge payable

Add: Education Cess on income-tax @ 2% of tax and surcharge

Add: Secondary and higher education Cess @ 1 % of tax and surcharge

Less: Tax relief

Tax payable
2. Rates of Tax:
 The rates of tax are mentioned in the First Schedule of the Finance Act.
For example, Finance Act 2016 contains the normal rates of tax in three parts.
Part I of the First Schedule contains the normal rates of tax as applicable to the assessment
year 2016-17.
Part II of the First Schedule contains the normal rates of tax to be deducted at source on
certain incomes for the financial year 2016-2017.
Part III contains the rates of tax for deducting income tax from income under the head salaries
and computing advance tax.
The rates mentioned in part III will be same as the rate to be mentioned in Part I of the First
Schedule of the Finance Act 2017 and will be applicable for the assessment year 2017-18.
Part IV contains the rules for computation of net agricultural income.
3. Special Rates:
 Special rates are the rates which are mentioned in the Income-tax Act itself. Chapter XII
(Sections 110- 115BBE) of the Income-tax Act contains the special rates of tax to be
applicable in certain cases.
For example, u/s 111A, short-term capital gains from securities is to be charged to tax @15%;
long-term capital gains are to be charged u/s 112 @20% and lottery income is to be charged
u/s 115BB @ 30%.
 S N 5 : Residential status and Incidence of tax [section 6]
1. Introduction:
Different types of residential status: Based on their presence in India, Section 6 contemplates different types
of assessees as under:
A) Resident
i) Resident and ordinarily
ii) Resident but not ordinarily
B) Non-resident
2. Residential Status of an Individual [Section 6(1) and 6(6)(a)]:
Basic conditions [Section 6(1)]:
(a) is in India in that year for a period or periods amounting in all to 182 days or more [Section 6(1)(a)], or
(b) is in India for a period of 365 days or more during the four years preceding the previous year and is also
present in India for a period of 60 days or more during the relevant previous year.[Section 6(1)(c)].
Additional Conditions [Section 6(6)(a)]:
(a) the assessee has been a resident in India in at least 2 out of 10 previous years preceding the relevant
previous year;
(b) (b) he or she has been in India for a period or periods amounting in all to 730 days or more during the 7
years preceding the relevant previous year.
 If any 1 basic condition is satisfied, he is resident
 If none of the basic conditions are satisfied, he is non-resident
 If at least 1 basic condition and both the conditions are satisfied, he is resident and
ordinarily resident.
 If at least 1 basic condition and 1 or none of the conditions are satisfied, he is resident but
not ordinarily resident.
Exceptions: For the following, Only 182 days condition is applicable.
i) an Indian citizen who leaves India in any previous year as a member of the crew of an
Indian ship or for the purposes of employment outside India
ii) an Indian citizen or a person of Indian origin, who being outside India, comes on a visit
to India in any previous year
3. Residential Status of a HUF [Sections 6(2) and Sec 6(6)(b)]:
 control and management of its affairs is wholly or partly situated in India- Resident
 Karta needs to satisfy addl conditions for to classify as ordinary or not
4. Residential Status of Firm and AOP [Section 6(2)]:
 control and management of affairs of the firm or association of persons is wholly or partly
situated in India- Resident
 Other wise – Non Resident
5. Residential Status of a Company [Section 6(3)]:
(i) it is an Indian company; or, (ii) its place of effective management, in that
previous year, is in India (100%) - Resident
(ii) Other wise – Non Resident
6. Residential Status of Every other Person [Section 6(4)]:
 control and management of his affairs is wholly or partly situated in India –
Resident
 Otherwise – Non Resident
7. The Scope of Total Income or Incidence of Tax of Different Types of
Assessees [Section 5]:
Income Resident and Resident but not Non-Resident
ordinarily resident ordinarily resident

Income received in India or deemed to be received in Taxable Taxable Taxable

India — whether accrued in India or accrued outside
India.
Income accruing or arising in India or deemed to arise or Taxable Taxable Taxable
accrue in India — whether received in India or received
outside India.
Income accruing or arising outside India from a business Taxable Taxable Not Taxable
or profession set up in or controlled from India.

Income accruing or arising outside India from a business Taxable Not Taxable Not Taxable
controlled from outside India or a profession set up
outside India.
Income received outside India and subsequently Not Taxable Not Taxable Not Taxable
remitted to India — whether taxable at the time of
remittance.
 S N 6 : Income which do not form part of total Income [section 10, 11 to
13A]
1. Incomes Exempt from Tax:
Section Nature of Income Exemption limit

10(1) Agricultural income Fully exempt.

10(2) Share from income of HUF Fully exempt

10(2A) Share of profit from firm Fully exempt.

10(7) Allowances and perquisites received Fully exempt

outside India by a government employee
who is also an Indian citizen
10(34) Dividends from Indian companies Fully exempt.

10(35) Income from Units of Mutual Funds Fully exempt

10(48) Income received by the notified foreign Fully exempt, if the receipt of money is the only activity carried out by
companies for selling crude oil in India such companies in India.
etc
2. Income of Trusts or Institutions from contributions [Sections 11-13]:
 Subject to the provisions of sections 60 to 63, the following incomes of the trusts and charitable institutions shall be
exempt:
(a) Income from property held under trust wholly for charitable or religious purposes [Section 11(1)(a)]
(b) Income from property held under trust in part which is applied only for religious or charitable purposes [Section
11(1)(b)]
(c) Income from property held under trust which is applied for charitable purposes outside India [Section 11(1)(c)]
(d) Voluntary contribution forming part of the corpus [Section 11(1)(d)]
 Conditions for exemption:
i) Property held under a trust
ii) property should be so held for charitable or religious purposes
iii) The funds of the trust should be invested or deposited in one or more of the forms and modes specified in Section
11(5).
3. Incomes of Political Parties [Section 13A]:
 Under section 13A, the following incomes of a political party are exempt from tax:
a) Income from house property;
b) Income from other sources;
c) Capital gains;
d) Any income by way of voluntary contributions received by a political party from any person.
 Conditions for exemption:
a) Maintains accounts, b) Vol contr 20000—name and address c) a/c’s audited by CA.
 Section B: Heads of Income and Computation of total Income
and tax Liability
S N 7 : Income under the Head “salaries” [section 15 to 17]
1. Meaning of Salary:
i) Employer-employee relationship
ii) Salary from more than one source
iii) Foregoing or surrender of salary
iv) Voluntary payments and personal gifts
v) Place of accrual of salary
2. Elements of Salary [Section 17(1)]:
i) Pay and incentives
(a) Basic salary or basic pay
(b) Advance salary
(c) Arrears of salary
(d) Pensions
(e) Annuity
(f) Bonus, commission, fees, etc
ii) Retirement or terminal benefits: The benefits in this category usually include the following:
• Employer‘s contribution to provident funds
• Interest credited to the Provident Fund
• Receipt from provident fund
• Commutation of pensions
• Death-cum-retirement gratuity
• Profits in lieu of salary
• Leave salary
• Compensation for voluntary retirement.
iii) Allowances
iv) Perquisites
3. Computation of Pension [Section 10(10A)]
4. Death-Cum-Retirement Gratuity
5. Profits in Lieu of Salary
6. Leave Salary
7. Retrenchment Compensation
8. Allowances
9. Perquisites
10. Tax Treatment of Various Perquisites
11. Valuation of Perquisites which are taxable in the hands of specified
employees
12. Deductions from Gross salary
A standard pro forma for computation of income under the head ― “Salaries”

Basic salary
Advance salary
Arrears of salary
Bonus, commission or fees
Pension
Employer's contribution to RPF in excess of 12% of salary
Employer's contribution to pension fund specified u/s 80CCD
Interest credited to RPF in excess of 9-5% Commuted value of pension
Commuted value of pension
Less: Exemption u/s 10(10A)
Gratuity
Less: Exemption u/s 10(10A)
Leave salary
Less: Exemption u/s 10(10AA)
Any other receipts taxable as profits-in-lieu of salary u/s 17(3)
Add: Taxable allowances:
Add: Perquisites u/s 17(2):
A. Taxable in all cases
B. Taxable at the hands of specified employees

Gross Salary
Less: (i) Deduction for entertainment allowance
(ii) Deduction for professional tax

Income under the head "Salaries"

 S N 8 : Income from House property [section 22 to 27]
1. Basis of Charge [Section 22]
2. Essential Conditions:
The charge under section 22 is subject to the following essential conditions and propositions:
(a) The property should consist of buildings and lands appurtenant thereto. Income from vacant land
(where there is no building upon it) shall be charged as Income from other sources or as Profits
and gains of business or profession.
(b) The assessee should be the owner of such property. Ownership here means ownership of the
superstructure, and not necessarily ownership of the land.
(c) The property is not used by the owner for the purpose of any business or profession carried on by
him, the income of which is chargeable to tax.
3. Deemed Owner
4. House Property let out for purposes which is incidental to Business: PGBP
5. Property held in as stock-in-trade: Income from House Property
6. House Property Situated abroad
7. Composite Rent
8. Annual Value of House Property: i) RR or R , ii) MV, iii) FR, iv) SR
9. Annual Value How determined [Section 23]
10. Deductions from Annual Value [Section 24]:
i) Standard rent
ii) Interest
11. Recovery of Arrears of Rent and Unrealized Rent [Section 25A]
12. Treatment of Loss
Pro forma:
GAV
Less: Municipal tax
NAV
Less: Deductions u/s 24
1-Standard deduction
2-Interest
Income from House Property
 S N 9 : Profits and Gains From Business or Profession [Sections 28-44]
1. Introduction
2. Basis of Charge
3. Business income excluded from the purview of Sec.28
4. General principles of computation of business Income
5. Method of Accounting[Section 145]
6. Specific deductions (Sec 30 to 37)
7. Incentives for Investment in New plant and Machinery [Section 32AC]
8. Investment Allowance for Notified Backward Areas[Section 32AD]
9. Tea development account, Coffee development a/c or Rubber development a/c [Section
33AB]
10. Site Restoration Fund [Section 33ABA]
11. Expenditure on Scientific Research [Section 35]
12. Expenditure for obtaining right to use spectrum for telecommunication services
[Section 35ABA]
13. Expenditure for obtaining licence to operate telecommunication services [Section
35ABB]
14. Expenditure on eligible projects or schemes [Section 35AC]
15. Capital expenditure in respect of specified business [Section 35AD]
16. Expenditure on agricultural extension project [Section 35CCC]
17. Expenditure on skill development projects [Section 35CCD]
18. Amortisation of preliminary expenses (Sec. 35D)
19. Amortisation of expenditure in case of amalgamation or demerger [Section 35DD]
20. Amortisation of expenditure incurred under voluntary retirement scheme [Section
35DDA]
21. Other deductions u/s 36
22. General deduction (Sec. 37)
23. Specific disallowance
24. Deemed profits chargeable to tax [Section 41]
25. Deemed income in respect of undisclosed income/ investment, etc.
26. Compulsory maintenance of books by certain persons carrying on profession or business
[Section 44AA; Rule 6F]
27. Compulsory tax audit of accounts of certain persons [Section 44AB]
28. Presumptive incomes and special provisions for computation of income of the resident
assessees in certain cases [Sections 44AD, 44ADA, 44AE, 44B12423434].
Pro forma of PGBP:
PBT

Add: Disallowable expenses

Less: Expenditure allowed as deduction but not debited to P&L a/c

Add: Capital expenditure and personal expenses

Less: Incomes considered under other heads

Income From PGBP

 S N 10 : Capital Gains [sections 45 - 55A]
1. Basis of Charge [Section 45(1)]:
 The charge under this head, thus, depends on the fulfillment of the following conditions:
• There must be a capital asset.
• The capital asset must be transferred during the previous year or must have suffered any of the
damages mentioned u/s 54(1A).
• There must be profits or gains on transfer of the capital asset. For this purpose, the term ―profits
and gains‖ also includes any loss on transfer of any capital asset.
• Such capital gain is not exempt under Sections 54, 54B, 54D, 54E, 54F, 54G, and 54H.
2. Meaning of Capital Asset [Section 2(14)]:
 “Capital asset” means property of any kind held by an assessee, whether or not connected with his
business or profession. The expression ―property‖ is wider enough and it includes any rights in or in
relation to an Indian company, including rights of management or control or any other rights
whatsoever.
 Assets which are excluded from the definition of capital assets:
a) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or
profession;
b) any personal effects, that is to say, movable property (including wearing apparel and furniture)
held for personal use by the assessee or any member of his family dependent on him.
c. agricultural land in rural area in India
d. 61/2% Gold Bonds, 1977 or 7% Gold Bonds, 1980, National Defence Gold Bonds, 1980;
e. Special Bearer Bonds, 1991;
f. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999.
g) Deposit Certificates issued under the Gold Monetisation Scheme 2015.
3. Classification of Capital Assets
4. Meaning of Transfer of Capital Asset [Section 2(47)]:
 ‘Transfer’ in relation to a capital asset includes:
a) the sale, exchange or relinquishment of the asset; or
b) the extinguishment of any rights therein; or
c) the compulsory acquisition thereof under any law; or
d) asset is converted into stock-in trade
e) transaction involving Section 53A of the Transfer of Property Act, 1882
f) the maturity or redemption of a zero coupon bond; or
g) any transaction … becoming a member of, or acquiring shares in a co-operative society
 Transactions not regarded as transfer [Sections 46 and 47]: Read
5. Mode of Computation of Capital Gains [Section 48]
(i) Shares and debentures acquired by a non-resident through foreign currency
(ii) Indexation for certain long-term capital assets
iii) No indexation for bonds and debentures
iv) No deduction for securities transaction tax
 Computation of short-term capital gains:
Step I: Find out the full value of consideration received or accruing on transfer of short-term capital
asset
Step II: Deduct the following: (a) Expenditure incurred wholly and exclusively in connection with such
transfer (b) Cost of acquisition of capital asset (c) Cost of improvement to capital asset Balance
Step III: Deduct exemptions under Sections 54B, 54D, 54G and 54GA.
The balance is taxable short-term capital gain/loss.
 Computation of long-term capital gain:
Step I: Find out the full value of consideration received or accruing on transfer of long-term capital
asset
Step II: Deduct the following:
(a) Expenditure incurred wholly and exclusively in connection with such transfer
(b) Indexed cost of acquisition of long-term capital asset (where applicable)
(c) Indexed cost of improvement to capital asset (where applicable) Balance
Step III: Deduct exemptions under Sections 54, 54B, 54D 54EC, 54F, 54G, 54GA and 54GB.
The balance is the taxable long-term capital gain
6. Computation of Capital Gains under certain Special Circumstances:
A. Capital gains in case of receipt of insurance claim for damage or destruction of
capital Asset [Section 45(1A)]
B. Capital gains on conversion of capital asset into stock-in-trade [Section 45(2)]
C. Transfer of capital asset as capital-in-kind by a person to a firm /AOP/BOI [Section
45(3)]
D. Capital gains on transfer by way of compulsory acquisition [Section 45(5)]:
E. Capital gains on repurchase of units of Mutual Funds or Unit Trust of India [Section
45(6)]
F. Capital gains on conversion of debentures into shares [Section 49(2A)]
G. Capital gains on purchase by a company of its own shares or other specified
securities [Section 46A]:
H. H. Capital gains on transfer of shares, debentures or warrants issued under
Employees‘ Stock Option Plan [Section 49(2AA)]
I. Capital gains on transfer of goodwill, trademark or brand name, tenancy rights,
route permits, loom hours or right to manufacture:
J. Computation of capital gains in case of slump sale [Section 50B]
7. Capital Gains Exempt from Tax:
i) Capital gains on transfer of residential house [Section 54]
ii) Capital gains on transfer of agricultural land used for agricultural purposes
[Section 54B]
iii) Capital gains on compulsory acquisition of lands and buildings [Section 54D]
iv) Exemption of capital gains on investment in certain special bonds [Section 54EC]
v) Exemption of capital gains on investment in units of specified fund [ Section 54EE]
vi) Exemption of capital gains on transfer of certain capital asset, when reinvestment
is made in residential house property [Section 54F]
vii) Exemption of Capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area [Section 54G]
viii) Exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area to any Special Economic Zone [Section 54GA]
ix) Exemption from capital gains on investment in small or medium enterprise
[Section 54GB]
x) Treatment of short-term capital loss and long-term capital loss
 S N 11 : Income From other sources [section 56-59]
1. Chargeability:
 to attract chargeability under this head, the following conditions should be satisfied:
(a) There must be an income.
(b) The income is not exempt from tax; and
(c) Such income is not chargeable to tax under any of the first four heads of income.
2. Method of accounting:
• either cash or mercantile basis
• Where no method of accounting has been regularly employed, an assessee should not be assessed
in respect of the money that has not been received
• With effect from the AY 2016-17, computation of income under the head “PGBP” and “IOS” shall be
subjected to Income Computation and Disclosure Standards.
3. Incomes that are taxable under this Head [Section 56]:
In accordance with the provisions of Section 56(2), the following specific incomes shall be chargeable
under this head:
(i) dividends (other than dividends received from domestic company);
(ii) any winnings from lotteries, cross word puzzles, races, including horse races, card games and
other games of any sort or from gambling or betting of any form or nature whatsoever;
(iii) any sum received by the assessee from his employees as contributions to any
provident fund or superannuation fund or any fund setup under the provisions of the
Employees‘ State Insurance Act, 1948 or any other fund for the welfare of such
employees, provided that it is not taxable under the head “PGBP”;
(iv) Income by way of interest on securities, if it is not chargeable under the head
“PGBP”;
(v) Income from machinery, plant or furniture belonging to the assessee and let on
hire, if it is not chargeable under the head “PGBP”
(vi) Income resulting to an assessee who lets on hire machinery, plant or furniture
belonging to him and also building, and the letting of the buildings is inseparable from
the letting of the said machinery, plant or furniture, provided that it is not chargeable
under the head “PGBP”;
(vii) any sum received under a Keyman Insurance Policy including the sum allocated by
way of bonus on such policy, if it is not chargeable under the head “PGBP”.
(viii) any income by way of interest received by an assessee on compensation or
enhanced compensation referredtoinSection145A(b).
(ix) any sum of money received as an advance or otherwise in the course of
negotiations for transfer of a capital asset, if such sum is forfeited and the
negotiations do not result in transfer of such capital asset [Section 2(56(ix) w.e.f. the
assessment year 2015-2016].
4. Taxability of Cash, Immovable Property or other Movable Property Received without any
consideration [Section 56(2)(vii)]:
A. Cash receipt without any consideration [Section 56(2)(vi)(a)]
B. Immovable property [Section 56(2) (vi)(b)]
5. Taxability of Share Premium in excess of the FMV [Section 56(2)(viiB)]
6. Other Incomes which are chargeable Under this head:
The list of incomes provided under Section 56, which are chargeable under this head, is not exhaustive.
The following are the instances of other incomes which are chargeable under this head:
(i) income from subletting ;
(ii) casual income ;
(iii) interest on bank deposits or deposits with companies, or loans ;
(iv) insurance commission ;
(v) directors‘ fees ;
(vi) family pensions ;
(vii) ground rent ;
(viii) agricultural income from land situated outside India ;
(ix) income from vacant land ;
(x) income from undisclosed sources ;
xi) remunerations of the Member of Parliament ;
(xii) examiner‘s fees received by a teacher from institutions other than his employer ;
(xiii) interest on securities of foreign Governments ;
(xiv) income from royalty, if not charged under the head “PGBP”;
(xv) income from fisheries ;
(xvi) interest on employee‘s contribution to the unrecognised provident fund ;
(xvii) gratuity received by a director, who is not an employee of the company ;
(xviii) income from racing establishments ;
(xix) income from granting of grazing rights ;
(xx) director‘s commission for standing guarantor to bankers or for underwriting shares of a new
company ;
(xxi) income received after discontinuation of business ;
(xxii) annuity payable under will or contract or trust deed (not being annuity from the present or
former employer) ;
(xxiii) annuity payable to the lender of trademark ;
(xxiv) interest on tax refunds u/s 214;
(xxv) interest earned prior to commencement of business ;
(xxvi) income from hoardings on business premises.
7. Tax Treatment of Dividend [Section 56(2)]
8. Tax Treatment of Winnings from Lotteries, Crossword Puzzles, Horseracing,
etc.
9. Interest on securities
10. Family Pensions
11. Deductions from Income under the Head “IOS”[Section 57]
12. Expenditure Expressly Disallowed [Section 58]
 S N 12 : Income of other persons included in Assessee’s total Income
[section 60 to 65]
1. Introduction:
 Under the Income-tax Act 1961, an assessee is generally liable to pay tax in respect of his own
income. However, there are certain circumstances where the incomes of others persons are also
included in his income. This is known as clubbing of income.
2. Transfer of Income without transfer of Assets [Section 60]:
 All income arising to any person by virtue of a transfer shall be chargeable to income-tax as the
income of the transferor and shall be included in his total income, provided that the following
conditions exist:
(a) There is a transfer of income by the assessee.
(b) The income so transferred may be revocable or irrevocable.
(c) Such income is transferred either before or after the commencement of the Income-tax Act, 1961.
(d) The assessee does not transfer the assets from which such income arises.
3. Income of Individual to Include income of Spouse, Minor child, etc. [Section 64]:
a) Remuneration received by spouse [Section 64(1)(ii)]
b) Exceptions
c) Meaning of substantial interest [Explanation 2]
4. Income from Assets transferred to Spouse [Section 64(1)(IV)]:
 Included in transferor’s income
5. Income from assets transferred to son’s wife [Section 64(1)(vi)]:
 Included in transferor’s income
6. Clubbing of Income when transferred Asset is invested in Business [Explanation 3 to Section 64]:
 Share of profit included in transferor’s income
7. Income from Assets transferred to other person or AOP for the Benefit of Spouse [Section
64(1)(VII)]
 Included in Transferor’s income
8. Income from Assets transferred to other person or AOP for the Benefit of Son’s wife
 Included in Transferor’s income
9. Income from accretion to property transferred or accumulated income of such property:
 When any asset is transferred by the individual under clauses (iv), (vi), (vii) and (viii) of Section 64(1),
any income arising from accumulated income or from accretions to such assets shall not be included
in the total income of the individual. [C.I.T. vs. Saraswathi 133 ITR 315].
10. Clubbing of income of minor Child:
 Whose income is higher
 Exceptions: i) disabilities, ii) manual work, iii) Skill; Rs.1500
11. Income from self-Acquired property converted into Joint family property:
 Income included in individual hands
 In case of partition, Spouse share also included in individual’s income
12. Liability of a person in respect of Income included in the income of
another person [Section 65]:
 AO may serve notice to Transferee.
 S N 13 : set off and Carry Forward of Losses [sections 70 - 80]
1. Introduction:
 Sections 70-80 of the Income-tax Act provide the procedure for adjustments of losses in the
process of computing the total income.
 Sections 70 to 80, which contain the provisions relating to set off and carry forward,
involves the following three stages:
(a) Inter-source adjustments,
(b) Inter-head adjustments, and
(c) Carry forward of losses.
2. Inter-Source Adjustments [Section 70]:
 STCL can be set off against any STCG or LTCG in the same year [Section 70(2)]
Exceptions:
(i) LTCL: LTCL can be set off against LTCG only.
(ii) Speculation loss: Any loss in respect of a speculation business can be set off only against
profits and gains of another speculation business [Section 73(1)].
(iii) Loss from owning and maintaining race horses: A loss incurred from the activity of owning
and maintaining race horses can be set off only against income from owning and
maintaining race horses, and not against income from any other sources [Section 74A(3)].
(iv) Loss from gambling, lotteries, crossword puzzles, etc.: Under section 58(4), income by way of
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 cannot be applied to set off any loss
[Section 58(4)].
(v) Loss from a source which is exempt: If income from a particular source is altogether exempt from
tax, loss from such sources cannot be set off against income of a source which is taxable.
3. Inter-Head Adjustments [Section 71]:
 Loss under the head “PGBP” can be set off against income under the head “CG’s” or “IOS” or “CG’s”.
 Loss under the head “IHP” can be set off against income under the head “Salaries” or under the head
“IOS”.
Important exceptions:
(i) Loss under the head “PGBP”: Any loss under the head “PGBP” cannot be set off against income
under the head “Salaries”. [Section 71(2A)].
(ii) Loss under the head “CG’s”: Where in respect of any AY the net result of computation under the
head “CG’s” is a loss, such loss cannot be set off against income under any other head [Section
71(3)].
(iii) Speculation loss: Any loss computed in respect of a speculation business cannot be set off against
income under any other head. Such loss can be set off against profits and gains of another
speculation business only [Section 73(1)].
(iv) Loss from owning and maintaining race horses: Any loss computed in respect of the activity of
owning and maintaining race horses cannot be set off against income under any other heads. Such
loss can be set off against the income of similar activities only [Section 74A(3)].
(v) Loss from gambling, lotteries, crossword puzzles, card games, betting, or games of any other sport:
Loss from such gambling, lottery, etc., cannot be set off against income under any other head
[Section 58(4)].
(vi) Loss by specified business: Any loss computed in respect of any specified business referred to in
Section 35AD shall not be set off except against profits and gains, if any, of any other specified
business [Section 73A (1].
4. Carry Forward of Loss:
 Under the Income-tax Act, only the following losses can be carried forward:
(A) Loss under the head “IHP” : Set off against IHP only … 8 AY’s.
(B) Loss under the head “PGBP” including loss of speculative business and the business specified in
Section 35AD : Non Speculation Business: i) Set off against Business income…. 8 AY’s, ii)
Depreciation, unabsorbed scientific research capital expenditure, unabsorbed capital expenditure
on family planning---- Unlimited period. Speculation: Against speculation only--- 4 AYS’s.
(C) Loss under the head “CG’s”: STCL—Against LTCG or LTCL ; LTGL--- Against LTCG only – Next 4 AY’s.
(D) Loss under the head “IOS” to the extent it relates to the activity of owning and maintaining of
race horses: Set off against similar activities. 4 AY’s
5. Carry forward and set off of loss and depreciation in the case of amalgamation or Demerger
[Section 72A (1)]:
 accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed
to be loss of amalgamated company
6. Carry forward and set off of loss and depreciation in the case of Demerger:
 loss or unabsorbed depreciation shall be allowed in the hands of resulting company.
9. Losses of Firms [Section 75]: If partner continues
10. Carry forward and set off of losses in case of change in Constitution of Firm or on Succession
[Section 78]:
(i) Where the change in the constitution of a firm is owing to the death or retirement of a partner,
the firm shall not be allowed to carry forward and set off the loss proportionate to the share of
the retired or deceased partner.
(ii) Where any person carrying on any business or profession has been succeeded in such capacity by
another person, otherwise than by inheritance, such person (i.e., the successor) shall not be
entitled to have the loss of the predecessor carried forward and set off against his income.
11. Carry forward and set off of losses in the case of certain companies [Section 79]:
 company, not being a company in which the public are substantially interested, where a change in
shareholding has taken place in a previous year, the loss incurred in any year prior to the previous
year shall be carried forward and set off against the income of the previous year, if on the last day of
the previous year the shares of the company carrying not less than 51% of the voting rights were
beneficially held by persons who beneficially held shares 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.
12. Submission of Return for losses [Section 80]:
 In the following cases, if return of income is not submitted within the due date
specified u/s 139(3), the right to carry forward losses shall be lost:
(i) Loss under the head “ PGBP” , excluding loss from speculative business
[Section 72(1)].
(ii) Loss from a speculative business [Section 73(2)].
(iii) Loss under the head “Capital gains” [Section 74(1)].
(iv) Loss from the activity of owning and maintaining race horses [Section 74A
(3)]
 S N 14 : Deductions From Gross total Income [sections 80C – 80U]
1. Nature of deduction:
A. Overall deductions [Sections 80A; 80AB]
B. Deduction in certain cases are subject to furnishing of returns [ Section 80AC]
2. Deductions available to a Non-Corporate Assessee :
 The deductions under Sections 80C to 80U available to a non- corporate assessee may be
classified into two groups:
A. Deductions in respect of certain payments and expenses.
B. Deductions in respect of certain incomes.
Deductions available u/s 80C to 80U for non-corporate assessee
Section Nature of deduction Maximum amount of deduction
A. Deductions in respect of certain payments
80C Deduction in respect of life insurance premium and certain other Rs. 1,50,000
savings.
80CCC Deduction in respect of certain pension funds. Rs.1,50,000
[Aggregate amount of deductions u/ss 80C, 80CCC and 80CCD(1) shall not
exceed Rs.1,50,000 [Section 80CCE]
80CCD (1) Deduction for contributions to the notified pension scheme for the Contributions made by the
80CCD(1B) employees of the Central Government or any other employer who have employer and employee are
joined service on or after 1st January, 2004 or contributions by any self deductible to the extent of 10% of
employed person. salary. [80CCD (1)] Additional
amount up to Rs.50,000
[80CCD(1B)].
80CCG Deductions in respect of investments made under an equity savings Subject to the ceiling on
scheme investment of Rs.50,000, actual
deduction is 50%. of the sum
actually invested, provided that
the GTI of the assessee does not
exceed Rs.12 lakh.
80D Deduction in respect of medical insurance premium. (a)For senior citizens Rs.30,000
and (b)Rs.25,000 for others.
Maximum possible deduction
Rs.60,000 [a+ b]
80DD Deduction in respect of maintenance, including medical treatment of Rs.75,000 ; Rs.1,25,000 in case of
handicapped dependent. severe disability
80DDB Deduction in respect of medical treatment of some specified diseases Actual amount spent or, Rs.80,000 for very senior
citizens, Rs.60,000 for senior citizens and Rs.40,000
for others, whichever is lower.

80E Deduction in respect of payment of interest on loan taken for higher Actual amount paid.
education.
8OEE Interest on loan taken from financial institutions for acquisition of residential Fixed at Rs.50,000 during the assessment years
house property for assessees who do not own any residential house property 2017-18 and subsequent assessment years. Amount
on the date of sanction of the loan of loan should not exceed Rs.35 lakhs and value of
the property should not exceed Rs.50 lakhs

80G Deduction in respect of donation to certain funds and charitable institutions. 100%. of donations to specified funds and 50% in
other cases.
80GG Deduction in respect of rent paid. 25% of total income subject to a maximum of
Rs.5,000 p.m.
80GGA Deduction in respect of certain donations for scientific research or rural Actual amount paid.
development.
80GGB Deduction in respect of contributions given by an Indian company to political Actual amount contributed (other than cash) during
parties. the previous year.
80GGC Deduction tor contributions to political parties by any person, except local Actual amount contributed (other than cash) during
authority and an artificial juridical authority wholly and partly funded by the the previous year.
Government.
 B. Deductions in respect of certain incomes
80IA Deduction in respect of profits and gains from industrial undertakings or 100% of profits.
enterprise engaged in infrastructure development.
80-IAB Profits and gains of an undertaking engaged in the development of Special 100% of profit for 10
Economic Zone. assessment years.
80IB Deduction in respect of profits and gains from certain industrial undertakings 100% of profits for industries in
other than infrastructure development under-takings. backward states; in other cases
25% of profit (30% for
corporate assessee).
80IC Deduction for undertakings in special category states. 100% of profits.
80JJA Deduction in respect of profits from the business of collecting and processing of 100% of profits.
biodegradable waste.
80JJAA Deduction in respect of Employment of new workman in the case of a company 30% of the wages paid to new
assesse having business income from manufacture of goods in factory workmen for three years
including the year in which
employment is provided.
80LA Deduction in respect of income of offshore banking units. 100% of income for the first fire
consecutive years and 50% of
the income for the next five
years.
80QQB Deduction in respect of royalty income of authors of certain books other than In case of lump sum payment
text books. amount actually received or
Rs.3,00,000, whichever is lower;
in other cases 15% of the value of
books sold or Rs.3,00,000,
whichever is lower.
80RRB Deduction in respect of royalty on patent. 100% of royalty or Rs.3,00,000,
whichever is lower.
80U Deduction in the case of a person with disability. Rs.75,000; Rs.1,25,000 in case of
severe disability.
 S N 15 : Rates of tax and tax Liability, Rebates and Reliefs
1. Normal rates of Income Tax
A
In the case of every Individual (Upto age of 60 Years) or HUF or AOP/BOI (other than a co-operative society or any other
(I)
AOP or BOI which is taxable at maximum marginal rate) whether incorporated or not, or every artificial judicial person

Upto Rs.2,50,000 - Nil ; Rs. 2,50,010 to Rs. 5,00,000 - 10% ; Rs. 5,00,010 to Rs. 10,00,000 - 20% ; Above Rs.
10,00,000 - 30%
In the case of every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at
(II)
any time during the previous year.
Upto Rs.3,00,000 - Nil ; Rs. 3,00,010 to Rs. 5,00,000 - 10% ; Rs. 5,00,010 to Rs. 10,00,000 - 20% ; Above Rs.
10,00,000 - 30%
In the case of every individual, being a resident in India, who is of the age of 80 years or more at any time during the
(III)
previous year.
Upto Rs.5,00,000 - Nil ; Rs. 5,00,010 to Rs. 10,00,000 - 20% ; Above Rs. 10,00,000 - 30%
Note:-
1. Special rates of income tax: Besides the normal rates, special rates of tax are applicable in case of certain incomes in
the hands of various persons. These rates are given in Chapter XII of the Income Tax Act which are covered under
sections 111A to 115BBE.
 2. Rebate of income tax under section 87A: This rebate is allowed to an individual who is resident in India
and whose total income (including the income taxable at special rates) does not exceed Rs. 5,00,000. The
rebate available shall be 100% of income tax payable (before cess) or Rs.2,000, whichever is less.
Surcharge: The amount of income-tax computed in accordance with the above normal and special rates
shall be increased by a surcharge at the rate of 12% of such income-tax in case of a person referred to in
clause (A) above having a total income exceeding Rs. 1 crore.
Marginal relief: The total amount payable as income-tax and surcharge on total income exceeding Rs. 1
crore shall not exceed the total amount payable as income-tax on a total income of Rs. 1 crore by more than
the amount of income that exceeds Rs. 1 crore.
Cess: ‘Education Cess’ @ 2%, and ‘Secondary and Higher Education Cess (SHEC)’ @ 1% on income tax
(inclusive of surcharge if applicable) shall be chargeable.

B) In the case of every co-operative society

(1) where the total income does not exceed Rs. 10,000 - 10% of the total
income;
(2) where the total income exceeds Rs. 10,000 but does not exceed Rs. 20,000 - Rs. 1,000 plus 20% of the
amount by which the total income exceeds Rs. 10,000;
(3) where the total income exceeds Rs. 20,000 - Rs. 3,000 plus 30% of
the amount by which the total income exceeds Rs. 20,000.
 >> Surcharge: The amount of income-tax computed as per the normal and special rates shall be increased by a surcharge at the rate
of 12% of such income-tax in case of a co-operative society having a total income exceeding Rs. 1 crore.

>> Marginal relief: The total amount payable as income-tax and surcharge on total income exceeding Rs. 1 crore shall not exceed the
total amount payable as income-tax on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

>> Cess: ‘Education Cess’ @ 2% and SHEC @ 1% on income tax (inclusive of surcharge if applicable) shall be chargeable.
C) In case of any firm (including limited liability partnership) — 30%.
>> Surcharge: The amount of income-tax computed as per the normal and special rates shall be increased by a surcharge at the rate
of 12% of such income-tax in case of a firm having a total income exceeding Rs. 1 crore.

>> Marginal relief: The total amount payable as income-tax and surcharge on total income exceeding Rs. 1 crore shall not exceed the
total amount payable as income-tax on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

>> Cess: ‘Education Cess’ @ 2% and SHEC @ 1% on income tax (inclusive of surcharge if applicable) shall be chargeable.
D) In the case of a company
i) For domestic companies: 30%.

>> Surcharge: The surcharge @ 7% of income tax computed as per the normal and special rates shall be levied if the total income of
the domestic company exceeds Rs. 1 crore but does not exceed Rs. 10 crore.

>> The surcharge at the rate of 12% of income tax computed as per the normal and special rates shall be levied if the total income of
the domestic company exceeds Rs. 10 crore.
 >> Marginal relief: However, the total amount payable as income-tax and surcharge on total income exceeding Rs. 1
crore but not exceeding Rs. 10 crore, shall not exceed the total amount payable as income- tax on a total income of `Rs
1 crore, by more than the amount of income that exceeds Rs. 1 crore. The total amount payable as income-tax and
surcharge on total income exceeding Rs. 10 crore, shall not exceed the total amount payable as income-tax and
surcharge on a total income of Rs. 10 crore, by more than the amount of income that exceeds Rs. 10 crore.
>> Cess: ‘Education Cess’ @ 2% and SHEC @ 1% on income tax (inclusive of surcharge if applicable) shall be
chargeable.
ii) For foreign company: 40%.
>> Surcharge: In case of companies other than domestic companies, the surcharge of 2% of income tax computed as
per the normal and special rates shall be levied if the total income of such company exceeds Rs.1 crore but does not
exceed Rs. 10 crore.
>> The surcharge at the rate of 5% of income tax computed as per the normal and special rates shall be levied if the
total income of the company other than domestic company exceeds Rs.10 crore.

>> Marginal relief: However, the total amount payable as income-tax and surcharge on total income exceeding Rs. 1
crore but not exceeding Rs. 10 crore, shall not exceed the total amount payable as income- tax on a total income of `Rs
1 crore, by more than the amount of income that exceeds Rs. 1 crore. The total amount payable as income-tax and
surcharge on total income exceeding Rs. 10 crore, shall not exceed the total amount payable as income-tax and
surcharge on a total income of Rs. 10 crore, by more than the amount of income that exceeds Rs. 10 crore.
>> Cess: ‘Education Cess’ @ 2% and SHEC @ 1% on income tax (inclusive of surcharge if applicable) shall be
chargeable.
S N 16 : Assessment of Individuals (Including non-residents) and Computation of
tax Liability