New Regime / 115BAC regime / Default regime Old Regime / Opting out of default regime / Opt

From income to income rates i For Non-residents and residents < 60 years of a
0 300000 0% From income To income
300000 700000 5% 20000 0 250000
700000 1000000 10% 30000 250000 500000
1000000 1200000 15% 30000 500000 1000000
1200000 1500000 20% 60000 1000000 More
1500000 More 30%
ii Residents 60 years to 80 years

Health and education cess 4% 0 300000

300000 500000
Surcharge 500000 1000000
1000000 More
Marginal relief
iii Residents > 80 years

0 500000
500000 1000000
1000000 More

1 Mr A Age 45 years
Total income 51 lakhs
AY 2025-26
Nature of income Salary, IFHP, Interest
Old regime
Calculate tax
Resident

Step 1 0 250,000 0% 0
250,000 500,000 5% 12,500
500,000 1,000,000 20% 100,000
1,000,000 5,100,000 30% 1,230,000
Total tax 1,342,500
Surcharge @ 10% 134,250
Total tax + Surcharg 1,476,750
Health and educati 59,070
Total tax payable 1,535,820

Step 2 Compute income tax @ 50 lakhs

 0 250,000 0% 0
250,000 500,000 5% 12,500
500,000 1,000,000 20% 100,000
1,000,000 5,000,000 30% 1,200,000
Tax @ 50 lakhs 1,312,500

Step 3 Total income less 50 lakhs 100,000

Step 4 Add amount in Step 2 and Step 3 1,412,500

Step 5 Calculation of marginal relief

Marginal relief 64,250

Step 6 Tax payable

Total tax + Surcharge on the total income 1,476,750
Less: Marginal relief 64,250
Tax after marginal relief 1,412,500
Add: Health and education cess@4% 56,500
Total tax payable 1,469,000

Marginal relief
2 Mr C Age 58 Iswaryaa 518,750
Total income 20,100,000 Raam Vishwa 518,750
Old regime Srikrishna 518,750
No dividend income, capital gain income Nithin 518,750
Resident Divya 518,750
Calculate tax Santharani 518,750

Step 1 Calculation of tax @ 2,01,00,000

0 250,000 0% 0
250,000 500,000 5% 12,500
500,000 1,000,000 20% 100,000
1,000,000 20,100,000 30% 5,730,000
Total tax 5,842,500
Surcharge @ 25% 1,460,625
Total tax + Surcharg 7,303,125

Step 2 Calculation of tax @ 2,00,00,000

 0 250,000 0% 0
250,000 500,000 5% 12,500
500,000 1,000,000 20% 100,000
1,000,000 20,000,000 30% 5,700,000
Total tax 5,812,500
Surcharge @ 15% 871,875
Total tax + Surcharg 6,684,375

Step 3 Total income less 2,00,00,000 100,000

Step 4 Step 2 + Step 3 6,784,375

Step 5 Marginal Relief 518,750

Step 6 Tax payable 6,784,375

Add: Cess @ 4% 271,375
Total tax payable 7,055,750

1 Tax rate for LLP and Firm 30% Health and education cess 4%
Surcharge total income > 1 cro 12%
Marginal relief Applicable

2 Domestic Companies

i) If the total turnover or gross receipts in PY 25%

Less than or equal to 400 crores
ii) In any other case 30%

Surcharge
Total income More than 1 crore an 7%
Total income More than 10 crores 12%
Marginal relief Applicable

iii) Concessional tax rate for new manufacturing companies (115BAB)

Applicability New Domestic companies engaged in manufacturing of article or thing

Commence date Company set up and registered on or after 01 October 2019
Manufacturing date Start manufacturing on or before 31 March 2024
Tax Rate 15%
Surcharge 10% 1000 crores
 Health and education c 4% 171.6 crores
Effective tax rate 17.16%
Other conditions Will see during PGBP chapter

iv) Concessional tax rate for existing domestic companies (115BAA)

Applicability Any new company / existing company opting to pay tax at concessional tax rate
Commence date NA
Manufacturing date NA
Tax Rate 22%
Surcharge 10%
Health and education c 4%
Effective tax rate 25.17%
Other conditions Will see during PGBP chapter

Marginal relief for 11 Not applicable - Because no slab for surcharge

3 Foreign companies

Tax Rate 35%

Surcharge
Total income More than 1 crore a 2%
Total income More than 10 crores 5%

Marginal relief Applicable

1 Rates
2 Surcharge
3 Health and education cess
4 Marginal relief
5 Rebate u/s. 87A

New regime
No tax 300000 650000
Rebate u/s. 87A limit 700000 0 300000
Maximum rebate 25000 300000 700000
700000 710000
Old regime
Basic exemption limit 250000
Rebate u/s. 87A 500000
Maximum rebate 12500

Total income 500000

0 250000 0% 0
250000 500000 5% 12500
Tax 12500
Less: Rebate u/. 87 12500
Final tax payable is 0

0 250000 0% 0
250000 450000 5% 10000
Tax 10000
Rebate = Minimum of 12500 or your tax paRebate u/s. 87A 10000
Final tax 0
g out of default regime / Opting out of section 115BAC of the Act
and residents < 60 years of age 750000
Tax rate S.No Income Tax Health & educa Total tax
0% i 200000 0 0 0
5% ii 270000 1000 40 1040
20% iii 750000 62500 2500 65000
30% iv 1250000 187500 7500 195000

to 80 years

0% Aravind 361500
5%
20%
30%

31Mar

0%
20%
30%
Tax payable
7,055,750
7,055,750
7,055,750
7,055,750
7,055,750
7,055,750
oncessional tax rate

0% 0
5% 20000
10% 1000
Tax payable 21000
Rebate
Final tax payabl 0
 0 2.5; 0%
250000 500000
12500
50000
62500

1250000 100000

0-2.5l 0
2.5l-5l 12500
5-10l 100000
75000
187500
Residential status - Section 6 of Income-tax Act, 1961

1 Individuals

Resident and ordinary resident (ROR)

Resident not ordinary resident (RNOR)
Deemed Resident
Non-resident (NR)

2 Resident - Individual

If an Individual satisfies any one of the following condition - He will be treated as a 'Resident' during a

i) He has been in India during the PY for a total of 182 days or more

ii) He has been in India during 4 years immediately preceding the PY for a total period of 365 days or mor
During the PY he is in India for more than 60 days

AY 25-26

Bret lee
IPL match - 100 days every year
Last 10 years

i) Whether in India for 182 days or more

ii) Whether in India during PY 24-25 for more than 60 days

4 years immediately preceding the PY
365 days or more

Bret Lee is Resident in India for AY 2025-26

Important points

1 Stay may or may not be continuous stay

2 How to calculate stay in India
 Date of departure
Date of arrival
Passport

3 Citizenship

Exception to the above rule

182 days or more

60 days or more and 365 days

i) The individual leaves India for employment purspose outside India during relevant PY
ii) Leaves India as a member of crew of an Indian Ship
iii) If a person - Indian Origin or Indian Citizen
Being o/s India - Comes to visit India during relevant PY

However, if the above person - Having total income > 15 lakhs other than foreign sources
Will be treated as resident in India - If
182 days or more
120 days or more and 365 days in the 4 immediately preceding PYs

Indian Origin
If a person's parents or grandparents were born in undivided India

Period is to be excluded
Period commencing from
Date entered into
Continuous discharge certificate
Joining the ship

Eligible voyage
Eligible voyage

1 Mrs. A
 Left India (for the first time)
Joining a job in UK
She came to India for some personal reasons
Determine residential status
For AY 25-26

Days stayed in India in PY 2024-25

April 2024
May 2024
Jun 24
Jul 24
Aug 24
Sep 24
Oct 24
Nov 24
Dec 24
Jan 25
Feb 25
Mar 25

2 Mr. A - Indian Citizen

Member of a Singapore bound Indian ship
Departing from Chennai port
4 Preceding PYs

Date entered into Continuous discharge certificate

Date signed off -
Determine his residential status for AY 2025-26

Facts / Understanding of the facts

Provision
Explain the provision to the given facts
Conclusion

No of days which needs to be excluded

June 2024
July 2024
Aug 2024
Sep 2024
Oct 2024
Nov 2024
 Dec 2024
No of days outside India

No of days in India

Not be treates as a resident ; He is a non-resident for AY 2025-26

Deemed Resident

Indian Citizen
Derives income from India
Income from India > 15 lakhs

Not liable to income-tax in any other country due to

his domicile or residence or similar nature

Deemed resident

3 Resident Ordinary Resident

Resident Not Ordinary Resident

RNOR
If a resident - Satisfies - any one of the following condition - He will be treated as RNOR

i) He is a NR in India in any 9 out of immediately 10 preceding PYs

ii) During 7 years immediately preceding the PY - He was in India for a period of 729 days or less
iii) Deemed Resident
iv) Indian Citizen / Indian Resident - Who is outside India having total income > 15 lakhs other than foreign s
who has been in India for a period of 120 days or more and less than 182 days

If a resident does not satifies all of the above conditions, he will be treated as ROR

1 Bret lee
IPL match - 100 days every year
Last 10 years
AY 2025-26
Residential Status

182 days or more

 60 days or more and 365 days in 4 years immediately preceding the PY
60 days condition
365 days or more in 4 years immediately preceding the PY

Resident

RNOR

b) Would your answer be different - If the above person (Mr B) is a Indian Citizen who has settled in Australi
Non - Resident

c) If Mr. B - instead of 100 days, he was in India for 120 days

182 days
Income < 15 lakhs 60 days or more and 365 days

Income > 15 lakhs 120 days or more and 365 days

Resident

2 Residential status of HUF

Resident
Non-Resident

ROR
Karta - Satisifes both the conditions
i) He is a Resident for at least 2 PY out of 10 immediately preceding PYs'
ii) Karta stays in India for at least 730 days in 7 years immediately preceding PYs

RNOR
Karta - Satisifes any one of the following conditions
i) He is a NR for 9 PY out of 10 immediately preceding PYs'
ii) Karta stays in India for 729 days or less in 7 years immediately preceding PYs

3 Residential status of Firm / AOP / BOI

 Resident
Non-Resident

4 Residential Status of a Company

Resident
a) Indian Company
b) Place of Effective Management (POEM) in that PY is in India

Otherwise - Non - Resident

 Broad category Sub category
Resident
ROR
RNOR
Non resident

He will be treated as a 'Resident' during a PY

or

he PY for a total period of 365 days or more and

PY 2024-25 Should be in India for 60 days or more and

PY 2023-24
PY 2022-23
PY 2021-22 Collectively - Should be in
PY 2020-21 India for 365 days or more

PY 2024-25 100 70
PY 2023-24 100
PY 2022-23 100
PY 2021-22 100
No PY 2020-21 100 365

Yes and
400 days Yes
 Needs to be considered
Needs to be considerd
Important

Not important

dia during relevant PY Using Passport

CBDT Clarification / Notification

other than foreign sources

or

Applicable only for an eligible voyage

Period ending on
Date entered into
Continuous discharge certificate
Signing off the ship

Ship - Carriage of passengers or freight (goods)

International traffic

Voyage - Origination - any port in India ;

Destination - Any port outside India or

Origination - Any port outside India

Destination - Any port in India
 01 April 2024

11 January 2025 and stayed in India for 170 days

1 182 days or more during PY

0 60 days or more and 365 days or more in 4 years immediately prcedeing
0
0 Non- resident
0
0
0
0
0
21
28
31
81

06 June 2024
400 days

06 June 2024
9 December 2024

25
31
31
30
31
30
 9
187 days

178 days

Only Indian Citizen not Indian origin

Income accruing or arising in India
In the relevant PY

Not a resident in any other country

Deemed resident will always be a RNOR

ROR
RNOR

will be treated as RNOR

for a period of 729 days or less

tal income > 15 lakhs other than foreign sources

ss than 182 days

be treated as ROR

Previous Year No of days

PY 2024-25 100 Yes
PY 2023-24 100
PY 2022-23 100
Not satisfied PY 2021-22 100
 PY 2020-21 100 400
PY 2019-20 100
Satisfied 2018-19 100
Satisfied 2017-18 100 700

Satisfied

a Indian Citizen who has settled in Australia and comes to India

Previous Year No of days

PY 2024-25 120
Not satsfied PY 2023-24 120
PY 2022-23 120
PY 2021-22 120
Satisfied PY 2020-21 120 480
PY 2019-20 120
2018-19 120 840
2017-18 120

Control and management wholly or partly in India

Control and management wholly outside in India

and
preceding PYs

or
preceding PYs
Control and management wholly or partly in India
Control and management wholly outside in India

or
Notification
more in 4 years immediately prcedeing the PY
days
Section 5 - Scope of total income

Scope
i) Received / Deemed to be received in India during a relevant PY

ii) Accrued or deemed to be accrued in India during a relevant PY

iii) Income accruing or arising outside India from business controlled in

or profession set up in India

iv) Income accruing or arising outside India

(apart from business controlled in or profession set up in India)

1 Mr. A has the following income for the year ended 31 March 2025
Compute his total income
a) ROR
b) RNOR
c) NR

Income
Short term capital gain on sale of Indian shares - received in Germany
Dividend from Japan Company received in Japan
Dividend from US company received in India
Rent from property in London - which was earned during AY 2023-24 - Brought to India d
Dividend from Indian Company - Received in Australia
Rent from property in London received in London
Total income

A Deemed to be received in India

i Contribution in excess of 12% of salary to Recognized PF or interest more than 9.5 % p.a.
ii Contribution by a Central Government or any other employer under a pension scheme
iii Amount transferred from Unrecognized PF to a recognized PF (being employer's portion of contribution and

B Accruing or deemed to accrue or arise in India - Section 9 of the Income-tax Act, 1961

i) Income accruing or arising outside India, directly or indirectly through:

a) any business connection in India
 b) any property or asset or source of income situated in India
c) transfer of capital asset situtated in India

ii) Salary earned for services rendered in India

iii) Salary payable by the Government to Indian Citizen for services rendered outside India

iv) Dividend paid by an Indian Company outside India

v) Interest, if payable by:

a) a non-resident - If the money borrowed is for the purpose of business or profession carried in India
b) Government
c) a resident - Exception - If the money borrowed is for the purpose of business / profession carried outside

vi) Royalty, if payable by:

a) a non-resident - If the royalty is for the purpose of business or profession carried in India
b) Government
c) a resident - Exception - If the royalty is for the purpose of business / profession carried outside India

vii) Fees for technical services, if payable by:

a) a non-resident - If the Fees for technical services is for the purpose of business or profession carried in In
b) Government
c) a resident - Exception - If the Fees for technical services is for the purpose of business / profession carrie

Fees for technical services ('FTS') means any consideration for rendering technical, consultancy or mana
Either lump sum consideration or piece meal consideration

Royalty - Means any consideration payable for:

i) transfer of all or any rights (including grant of license) for patent, invention, model, design, secret formula or
ii) imparting of any information concerning the working of, or use of patent, invention, model, design, secret for
iii) Use of any patent, invention, model, etc.,
iv) imparting any information concerning technical, industrial, commercial or scientific knowledge, experience or
v) the use or right to use any industrial, commercial or scientific equipment
vi) transfer of all or any rights in respect of copyright, literary, artistic or scientific work including films, video tape
vii) the rendering of any services in connection with activities listed above

viii) Income arising outside India, being any sum of money paid without consideration - If the value of the consid
Such sum is paid by a resident Indian to a NR or RNOR

Gift by a resident to a non-resident - If value of the gift exceeds Rs. 50,000

 1 Mr. A - 40 years - Indian Citizen
Government employee
Serving in MEA - Left India for the first time on 31 March 2024 to Canada
He was not back to India till 31 March 2025
He has earned the following income:

Salary from Government

Interest from FD in India
Agricultural income from Nepal
Income from rent from house property situated in Canada

What is his gross total income for AY 2025-26?

Answer Computation of gross total income of Mr. A for AY 2025-26

Provision Section 6 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') provides for residential status.
As per section 6 of the Act, for a person to be a resident in India during a previous year, he has to satisfy the

i) He is in India during the relevant PY for 182 days or more

ii) He is in India during the relevant PY for 60 days or more and during 4 years immediately preceding the PY

Application of the In the given facts, Mr. A was not in India for a single day during PY 2024-25.

Conclusion Hence, he is a non-resident as per Section 6 of the Act for AY 2025-26

Provision As per provisions of the Act, in the case of a non-resident, only the income which is received or deemed to b
Income which is deemed to accrue or arise in India
is only taxable in the hands of such non-resident

Application of proGiven the above, the gross total income of Mr. A for AY 2025-26 shall be as follows

Particulars
Salary from Government
Interest from FD in India
Agricultural income from Nepal
Income from rent from a house situated in Canada
Gross total income

Notes

1 Salary from a Government to a Indian Citizen which is paid for the services rendered outside India will be de
As per Section 9 of the Act
 Since, section 5 provides that any income which is deemed to accrue or arise in India is taxable in the hands
for AY 25-26

2 Interest from FD in India is deemed to accrue or arise in India since the source of income is in India - and he
or
Interest from FD is received in India - and hence, taxable in the hands of Mr. A for AY 25-26

3 Income earned outside India (which is not deemed to accrue or arise in India) is not taxable in the hands of
Hence, agricultural income from Nepal and rent income from property situated in Canada - is not taxable in t

2 Compute total income of Mr. B - Age 35 years

If
a) He is a resident and ordinary resident
b) He is a resident but not an ordinary resident
c) He is a non-resident

Assume - He is paying tax under old regime

Answer Computation of total income of Mr. B for AY 25-26

Particulars
i) Interest on UK Development bonds, 50% received in India
ii) Income from a business in Chennai ( 50% received outside India)
iii) Short term capital gains from sale of Indian Company's shares - Received in Canada
iv) Dividend from British Company Received in London
v) Income earned from business in Germany - which is controlled in India
Total income earned is INR 70,000. Income received in India is INR 40,000
vi) Profits from business in Coimbatore - But entirely controlled / managed from London
vii) Income from profession setup in Canada - which was received in Canada, But spent in Ind
Gross Total income

3 Mr. A and Mr. B are brothers

Mr A - Settled in Thailand during the year 1996 and has not come to India since then
Mr. B Settled in Hyderabad and he did not go out of India any time during his lifetime
Compute the gross total income of Mr. A and Mr. B for AY 2025-26
Both are opting for old regime

Particulars
i) Interest on Canada Bonds (50% received in India)
ii) Income from business in Chennai
iii) Fees for technical services rendered in Mumbai - Received in Canada
iv) Past foreign untaxed credits bought to tax in India during FY 2024-25
v) Income from agricultural land in Nepal received there and then bought to India
vi) Interest income from FD in SBI
vii) Income from business in Russia, controlled from India

Provision
Mr A. - Non - resident
Mr. B - Resident

note 1 -
 Whether taxed in India?
ROR RNOR NR
Yes Yes Yes

Yes Yes Yes

Yes Yes No

Yes No No

Amount ROR RNOR NR

30,000 30,000 30,000 30,000
25,000 25,000 0 0
45,000 45,000 45,000 45,000
100,000 0 0 0
36,000 36,000 36,000 36,000
100000 100,000 0 0
236,000 111,000 111,000

n 9.5 % p.a.

er's portion of contribution and interest)

Only the income reasonably attributable to the operations carried out in India will be taxed in India
 Exceptions for business connection:
i) Purchase of goods in India solely for the purpose of export
ii) Collection of news and views in India solely for the purpose of transmission o/s. India
iii) Shooting of cine films by a NR - if such NR:
a) an individual who is not a citizen of India
b) a firm - which does not have any partner who is a citizen or resident in India
c) a company - which does not have any shareholders who is a citizen or resident in India
iv) Activities confined to display of rough diamonds in Special Zones

ofession carried in India

s / profession carried outside India

arried in India

sion carried outside India

ness or profession carried in India

of business / profession carried outside India

hnical, consultancy or managerial services

odel, design, secret formula or process or trade mark or similar property

tion, model, design, secret formula or process or trade mark or similar property

ntific knowledge, experience or skill

work including films, video tapes, etc.

ion - If the value of the consideration exceeds Rs. 50,000

 500,000
100,000
50,000
70,000

vides for residential status.

ious year, he has to satisfy the following conditions:

or
s immediately preceding the PY, he is in India for a period of 365 days or more

ich is received or deemed to be received in India and

Amount (in INR) Note

500,000 Refer Note 1
100,000 Refer Note 2
0 Refer Note 3
0 Refer Note 3
600,000

ndered outside India will be deemed to accrue or arise in India

 in India is taxable in the hands of a non-resident, the income of INR 5,00,000 is taxable in the hands of MR. A

e of income is in India - and hence, it is taxable in the hands of a NR (i.e., Mr A) for AY 25-26

A for AY 25-26

is not taxable in the hands of a NR under provisions of the Act (Section 5).
in Canada - is not taxable in the hands of MR. A for AY 25-26

ROR RNOR NR Amount

10,000 5,000 5,000 10,000
20,000 20,000 20,000 20,000
20,000 20,000 20,000 20,000
5,000 0 0 5,000
70,000 70,000 40,000 70,000 Earned 40000 Received

15,000 15,000 15,000 15,000

5,000 0 0 5,000
145,000 130,000 100,000

Taxable income
Mr. A Mr. B Mr. A - NR Mr. B - ROR
35,000 40,000 17,500 40,000
60,000 70,000 60,000 70,000
 75,000 40,000 75,000 40,000 Note 1
16,000 25,000 0 0 Note 2
25,000 30,000 0 30,000
45,000 50,000 45,000 50,000
70,000 70,000 0 70,000

As per Section 6
As per Section 6
5 heads of income

1
2
3
4
5

Salaries

1
2
3
4

1
2
3

Less:
Income from salaries

Basics

Basic

Allowances

Perquisites

Retirement benefits

Less:
Basic concepts

1
2

Section 15

i)
ii)

Section 17
Meaning of salary
i)
ii)
iii)
iv)
v)
vi)
vii)

viii)

i)
ii)
iii)

Allowances - Which are fully taxable under both the regimes

i)

ii)
iii)
iv)

v)

Allowances - Which are fully taxable under new regime but partially exempt under the

vi)
The least of the following will be exempt in the hands of the employee

i)
ii)
iii)

i)
ii)
iii)
iv)

A
i
ii
iii

Less:

i
ii
iii
i)

ii)

iii)
iv)

i)

ii)

i)
D

E
income

Salaries
Income from House property
Profits and gains from business or profession
Capital gains
Income from other sources

Basics
Allowances
Perquisites
Profits in lieu of salary

Not chargeable to tax

Exempt income
Deduction from gross total income

Particulars
Income from salaries

Income from House property

Profits and gains from business or profession

Capital gains

Income from other sources

Gross total income

Chapter VIA deductions
Total income
Calculate tax on 600
om salaries

Particulars
Basic salary
Bonus
Commission

Dearness Allowance
House Rent Allowance
Children Education Allowance
Children Hostel Allowance
Transport allowance
Travelling / Conveyance allowance
Other allowances

Rent free accomodation

Motor vehicle
Other perquisites

Gratuity
Leave encashment
VRS compensation
Pension
Others

Gross Salary
Deduction under the head salary
Standard deduction
Deduction for professional tax
Deduction for entertainment allowance
(Only for government employees)
Income taxable under the head salaries

Employer-employee relationship
Whether salary earned from a partnership firm by a partner will be taxable under the h
No. Because salary is just an appropriation and not charge
Partnership salary is taxable under the head PGBP in the hands of the partner
Full time employment / part time employment is not required to be seen

Basis of charge - Chargeability section

Deduction
Salary meaning

Accrual or receipt basis

Salary is taxable in the year in which the salary is accrued or received (which ever is

March 2025

Receipt is only on 02 April 2025

April 2025

Advance salary in March 2025

Advance salary vs Advance against salary

Arrears of salary

Salary includes the following

 salaries and wages
any annuity or pension
Any gratuity
any fees, commission, perquisites or profits in lieu of salary
advance of salary
leave encashment
PF contribution to the extent taxable
Transfer of RPF to the extent taxable
Contribution to a pension scheme u/s. 80CCD

Basic Salary
Bonus (either statutory or voluntary)
Commission (Fixed or percentage)

- Which are fully taxable under both the regimes

Dearness Allowance (may or may not form part of salary)
[i.e., may or may not form part of retirement benefits]

City compensatory allowance

Entertainment allowance - Non-government employee
Entertainment allowance - Government employee

Transport allowance
One exception
Transport allowance provided to an employee who is blind/
dumb and deaf/ orthopedically handicapped

- Which are fully taxable under new regime but partially exempt under the old regime

House Rent Allowance

Provided to an employee to meet his rental expenses
 HRA received by an employee is INR 1,00,000
Basic pay - INR 3,00,000
He pays rent at 18,000 per month
He is in a metro city

HRA exemption [Section 10(13A)]

f the following will be exempt in the hands of the employee

Actual HRA received

Rent paid - 10% of salary for the relevant period
50% of salary for the relevant period [in case of metros]
40% of salary for the relevant period [in case of other cities]

Salary for the purpose of HRA = Basic + D.A (forming part of salary) + Commission re

Taxable HRA

Mr. A has earned the following income from salaries

Basic
HRA
Dearness Allowance (entirely forming part of salary)
Commission

Actual rent paid by him in Pune is INR 16,000 per month

Calculate the HRA taxable and the taxable salary
He has opted to come out of default regime

HRA Taxable

Particulars'
HRA Received
Less: HRA Exempt under section 10(13A)
Taxable HRA
Note: Exemption shall be least of the following

Actual HRA received

Rent paid - 10% of salary
40% of salary

Rent paid
10% of salary

Salary for the purpose of HRA

Taxable salary
Basic
HRA
DA
Commission

Deduction
Income taxable under the head salaries

Mr. B has provided the following data for FY 24-25

Basic salary
D.A (forming part of salary)
HRA

Rent paid in Pune

On 01 July 2024 - His basic pay got increased by 1000 per month
On 01 October 2024 - He shifted to Chennai and paid rent of INR 4,000 per month
On 01 January 2025 - He purchased a new house in Chennai and started living there
Calculate his HRA taxable for AY 25-26

From 01 April 2024 to 30 June 2024

Salary for HRA

HRA received
Less: Exemption u/s. 10(13A)
Taxable HRA for the period from 01 April 2024 to 30 June 2024

i) HRA received
ii) Rent paid - 10% of salary
iii) 40% of salary

From 01 July 2024 to 30 September 2024

Salary for HRA

HRA received
Less: Exemption u/s. 10(13A)
Taxable HRA for 01 July 2024 to 30 June 2024

i) HRA received
ii) Rent paid - 10% of salary
iii) 40% of salary

From 01 October 2024 to December 2024

Salary for HRA

HRA Received
Less: Exemption u/s. 10(13A)
Taxable HRA for 01 October 2024 to 31 December 2024

i) HRA received
ii) Rent paid - 10% of salary
iii) 50% of salary
From 01 January 2025 to 31 March 2025

Total taxable HRA

Special allowances

Allowance which is specifically granted to meet expenses - incurred in the performanc

Particulars
a) Helper allowance
b) Research allowance
c) Uniform allowance

Particulars
a) Children Education allowance
b) Children Hostel Allowance
c) Tribal area allowance / Scheduled area allowance
d) Underground allowance - working in underground mines
e) Insurgency allowance - provided to armed forces
f) High Altitude allowance - provided to members of armed forces
operating in high altitude areas
For altitude of 9,000 to 15,000 feet
For altitude above 15,000 feet
g) Special compensatory highly active field area allowance
h) Island allowance - Andaman and Nicobar and Lakshadweep
i) Compensatory field area allowance [specified areas in specified state
j) Compensatory modified field area allowance [specified areas in
specified states]

Allowances which are partially exempt under both the regimes

Allowance which is specifically granted to meet expenses - incurred in the performanc

Particulars
a) Travelling allowance
b) Daily allowance
c) Conveyance allowance

Transport allowance
Travelling allowance
Conveyance allowance

Allowances which are fully exempt under new regime - but fully taxable under the old
a) Any Allowance to SC / HC judges
b) Allowances received from UNO

Allowance paid by Government to an Indian Citizen for services rendered outside Ind
Taxable allowances and exempt allowances
Taxable perquisites and non-taxable perquisites

Outside the scope of income-tax Agricultural income

Generally chargeable to tax - But a portion or the entire income is exempt under secti
Chapter VIA deductions

Amount
100 Excluding exempt income

200

300

50

50

700 Always exclude exempt income

100
600
Old Regime New Regime
Fully taxable Fully taxable
Fully taxable Fully taxable
Fully taxable Fully taxable

Fully taxable Fully taxable

Partially taxable Fully taxable Under Old regime - Certail
Partially taxable Fully taxable
Partially taxable Fully taxable
Partially taxable Partially taxable
Partially taxable Fully taxable
- -

Fully taxable Fully taxable

Fully taxable Fully taxable
Fully taxable Fully taxable

Partially taxable Partially taxable Some portion is exempt u/

Partially taxable Partially taxable
Partially taxable Partially taxable
Partially taxable Partially taxable
Partially taxable Partially taxable

XXX XXX

50,000 75,000
Available Not available
Available Not available
 XX XX

be taxable under the head Income from Salaries?

s of the partner
be seen

Section 15 Exemption Section 10

Section 16
Section 17

eceived (which ever is earlier)

100,000 Accured during March 2025

Taxed in PY 24-25 ; AY 25-26

200000 Accrual in April 2025

Taxed in PY 24-25; AY 25-26

 Taxable under both regime
Taxable under both regime
Taxable under both regime

Taxable under both regimes

Taxable under both regimes

Taxable under both regimes
Available as deduction under Old regime
Not available as deduction under New regime
Taxable under both regimes

Exemption - 3,200 per month or actual transport allowance which ever is lower
Under both the regimes

the old regime

 Metro cities Chennai, Mumbai, Delhi, Kolkata
Other cities

100,000
186,000 216000 30000
150,000
120,000

alary) + Commission received as a percentage of turnover

40,000 per month

15,000 per month
6,000 per month
60,000 per annum

Amount
180,000
136,800 Note 1
43,200
 180,000
136,800
220,800

192,000
55,200
136,800

552,000

480,000
43,200
72,000
60,000
655,200
50,000
605,200

5,000 Per month

2,000 per month
4,000 per month

4,000 per month

NR 4,000 per month

and started living there'
21,000
12,000
8,400
3,600

12,000
9,900
8,400

24,000
12,000
9,600
2,400

12,000
9,600
9,600

24,000
12,000
9,600
2,400

12,000
9,600
12,000
 12,000

20,400

urred in the performance of duties of the employee

Amount of exemption
Actual allowance received or expenditure incurred which
ever is lower

Amount of exemption Book - Pg. 3.24

Rs. 100 per month - Maximum of 2 children
Rs. 300 per month - Maximum of 2 children
Rs. 200 per month
Rs. 800 per month
Rs. 3,900 per month Armed forces
Armed forces

Rs. 1,060 per month

Rs. 1,600 per month
Rs. 4,200 per month Armed forces
Rs, 3,250 per month Armed forces
Rs, 2,600 per month Specified areas
Rs, 1,000 per month

urred in the performance of duties of the employee

Amount of exemption
Actual allowance received or expenditure incurred which
ever is lower
 Actual allowance received or expenditure incurred which
ever is lower

From house to office Fully taxable under both the regimes

Allowance for travel - official tour or transfePartially exempt under both the regimes
Travelling for official purposes - normal Partially exempt under both the regimes
course of employment

taxable under the old regime

United Nations Organisation

s rendered outside India - Fully exempt under both the regimes

 is exempt under section 10

mpt income
 er Old regime - Certail portion of HRA is exempt

me portion is exempt u/s. 10

ch ever is lower
elhi, Kolkata

186000
Basic 1,000,000 P.a
HRA 500,000 P.a
1,500,000

600,000

HRA 500,000
Rent paid - 500,000
50% of sal 500,000
both the regimes
er both the regimes
er both the regimes
Salaries - Retirement benefits

A Annuity or Pension
B Gratuity
C Leave encashment

A) Annuity or pension

Uncommuted pension 200 per month

Commuted pension 0 rs

How to calculate exempt pension under income-tax [applicable for both new regime and old regime]

Uncommuted pension Fully taxable

Commuted pension
Government employee Fully exempt

Other employees
a) If he receives gratuity 1/3 x (commuted pension / commutation %)

b) If he does not receive gratuity 1/2 x (commuted pension / commutation %)

Commuted pension = Lump sum pension which is received by an employee

Illustration Mr. A - Retired on 01 October 2024

He received 5,000 per month as pension till 31 January 2025
On 1 February 2025 - He commuted 60% of his pension and received INR 3,00,000 as commuted pension
Calculate his taxable pension - If he is a Government employee, other than Govt - who has recieved Gratuity a

i) Government 01 Oct 24 to 31 Jan 25

Uncommuted pension 20,000
Commuted pension
Received 300000
Exempt 300000
Taxable 0
Taxable pension

ii) Non-Government - Received Gratuity

Uncommuted pension 20000
Commuted pension 300,000
 Exemption 166,667
Taxable commuted pension 133,333
Taxable total pension

iii) Non-government - Not received gratuity

Uncommuted pension
Commuted pension
Received 300,000
Exemption 250,000
Taxable commuted pension 50,000

Total taxable pension

B Gratuity

i) Gratuity received during service Fully taxable

ii) Gratuity received during retirement

A) For Government employees Fully exempt

B) For other employees

Exemption will be lower of the following:

A. Gratuity received
B. 20,00,000

C. i) Employer covered under POGA, 1972 Payment of Gratuity Act

Exemption 15/26 x last drawn salary x no of completed

Salary for this purpose Basic + DA
No of completed year of service If more than 6 months - it will be treated as
E.g - 27 years and 7 months will be treated
27 years and 5 months will be treated as 27

ii) Employer not covered under POGA 1972

Exemption 1/2 x average salary for last 10 months x no

Salary for this purpose Basic + DA (forming part of salary) + commi
No of completed year of service Fraction to be ignored
E.g. 27 years and 11 months - 27 years
 Average salary for last 10 months Last 10 months salary / 10

1 Mr. R - retired after 26 years and 8 months of service.

Gratuity received - INR 15,00,000
At the time of retirement - his salary was as follows:
Basic - 50,000 per month
D.A - 10,000 per month (60% forming part of retirement benefits)
Commission - 1% of turnover. Turnover for the last 12 months - INR 1,20,00,000
Bonus - 25,000 per annum

Compute taxable gratuity if,

a) He is a private sector employee - Covered under Gratuity Act
b) He is a private sector employee - Not Covered under Gratuity Act
c) He is a government employee

a) Private sector employee - Covered under Gratuity Act

Lower of the following will be exempt
i) Actual gratuity received 1,500,000
ii) 20,00,000 2,000,000
iii) 15/26 x last drawn salary x no of completed year of service 934,615

Last drawn salary 60,000

No of completed year of service 27 years

Taxable Gratuity 565,385

b) Private sector employee - Not covered under Gratuity Act

Lower of the following will be exempt
i) Actual gratuity received 1,500,000
ii) 20,00,000 2,000,000
iii) 1/2 x 10 months average salary x no of completed year of servic 858,000

Salary Last 10 months salary / 10

(Basic + DA [forming part of salary] + Commission]

Last 10 months salary 660,000

Average of last 10 months salary 66,000
No of completed year of service 26

Taxable Gratuity 642,000

c) Government employee Nil

C. Leave salary / Leave encashment

A. At the time of service Fully taxable

B. At the time of retirement

i) Government employee Fully exempt

ii) Private employee - Lower of the following is exempt

a) Actual Leave salary received

b) 25,00,000
c) 10 months salary - Based on 10 month's average salary
d) Cash equivalent of unavailed leave balance - Based on last 10 month's average salary'
For leave encashment - 1 month = 30 days'
Leave per year = 30 days or actual which ever is less

Salary for leave encashment = Basic + D.A. [forming part of salary] + commission as fixed % of turnover

E.g. Employee has been in employment for 26 years

His leave per year is 40 days
He has availed 12 days per year leave
Unavailed leave balance

Total leave eligible 780

Leave taken 312
Unavailed leave balance 468
No of months 15.6
468/30 days x 10 month's average salary

1 Mr. G - retired after 20 years of service on 01.12.2024

Received leave salary - INR 5,00,000
At the time of his retirement - His salary was as follows:

a) Basic - INR 5,000 per month [Rs. 1,000 w.e.f. 01 April 2024 it was increased]
b) Dearness Allowance - INR 3,000 per month (60% forming part of retirement benefits)
c) Commission - INR 500 per month
d) Bonus - INR 1,000 per month
e) Leave availed during his service - 480 days
He was entitled for 35 days of leave every year
 Calculate taxable leave salary - He is a non-government employee

Answer In case of non-government employee, the lower of the following will be exempt
i) Actual leave salary received' 500,000
ii) 25,00,000 2,500,000
iii) 10 months salary (based on last 10 months average salary) 66,000

Salary for last 10 months Basic + DA (forming part of salary) + Comm

a) Basic 48,000
b) D.A. (Forming part of salary) 18,000
c) Commission 0
Last 10 months salary 66,000

Average salary 6,600

iv) Cash equivalent of unavailed leave balance 26400

Eligible leave 600

Leave actually taken 480
Leave balance 120
No of months 4
10 month's average salary 6,600
Cash equivalent 26400

1 Compute the taxable salary of Mr. R for AY 2025-26 based on the following facts
a) He retired on 31 December 2024 after 25 years and 9 months of service
b) He was paid a salary of INR 25,000 per month as basic and INR 6,000 per month as HRA
c) He paid a rent of INR 6,500 per month
d) On retirement - he was paid the following:
i) Gratuity - INR 3,50,000 - He was covered under POGA, 1972
ii) He had accumulated leave balance of 15 days per annum during the period of his service
This was encashed by him at the time of retirement. He received INR 3,15,000 after encashing
Employer provided 30 days leave per annum
iii) He is receiving INR 5,000 per month as pension. On 01 February 2025, he commuted 60% of his pension an

Calculate his taxable salary - If he is paying tax under default regime.

Answer Computation of taxable salary of Mr. R for AY 2025-26

Particulars Amount
Basic salary (25000 x 9 months)
House rent allowance (6000 x 9 months)
[HRA is fully taxable under default regime]

Gratuity
Received 350,000
Less: Exempt 350,000
Taxable gratuity

Exemption of gratuity will be lower of:

a) Actual grauity received 350,000
b) 20,00,000 2,000,000
c) 15/26 x last drawn salary x no of completed year of service 375,000
[15/26 x 25,000 x 26]

Leave encashment
Received 315,000
Less: Exemption 250,000
Taxable leave salary

Exemption of leave salary will be lower of the following:

a) Actual leave salary received 315,000
b) 25,00,000 2,500,000
c) 10 months salary based on 10 months average salary 250,000
d) Cash equivalent of unavailed leave balance 312,500
[average salary x no of days of leave balance / 30]
[25000 x 375 / 30]

Pension or annuity
Uncommuted pension (fully taxable)
[5000 x 1 month + 5000 x 40% x 2 months]

Commuted pension
Actually received 300,000
Less: Exempt 166,667
Taxable Commuted pension

Exemption
1/3 x commuted pension / commutation % x 100%

Gross salary
Less: Standard deduction
Taxable salary
 100
30
3000
2500
5500 Corpus 600 50

3500 Lumpsum 2000 rs 63.64%

2000 218.18181818 18.181818182
75 rs month
3500 rs. Lump sum

gime and old regime]

muted pension / commutation %) x 100%

muted pension / commutation %) x 100%

,000 as commuted pension

vt - who has recieved Gratuity and Not received gratuity

1 Feb 25 to 31 March Total

4,000 24,000

500000
200000

24,000

4000 24,000
 166,667 1/3*300000/60%*100% 166,667

157,333

24,000

1/2*300000/60%*100%

74,000

Gratuity Act

drawn salary x no of completed year of service

DA whether or not forming part of salary
n 6 months - it will be treated as one full year
ars and 7 months will be treated as 28 years
d 5 months will be treated as 27 years

ge salary for last 10 months x no of completed year of service

(forming part of salary) + commission expressed as a fixed percentage of turnover

rs and 11 months - 27 years

nths salary / 10

nths salary / 10

12,000,000 10,000,000
100,000
 Basic - 6 months 55,000 330,000
Basic - 4 months 75,000 300,000

on as fixed % of turnover
630,000 63,000
630,000
 Taxable leave salary 473,600

(forming part of salary) + Commission as a fixed percentage of turnover

days
days
days

of his service
after encashing

ommuted 60% of his pension and received INR 3,00,000 as commuted pension

Amount
225,000
 54,000

65,000

9,000

133,333

486,333
75,000
411,333
Provident Fund

Types of Provident fund

i) Recognized Provident Fund (RPF) Recognized byEmployees' Provident Fund Organisation

ii) Unrecognized Provident Fund (URPF) Not recognized by the CBDT
iii) Statutory Provident Fund (SPF) Government employers.
iv) Public Provident Fund (PPF) Can be used other than salaried person

Taxability

Particulars RPF URPF SPF

Employer's contribution Contribution in excess of 12% of the salary Not taxable at Fully exempt
Employee's contribution is taxble as
Available as'salary'
deduction - u/s. 80C of the the time of
No deduction Available as
Interest credited on Act. available
Amount in excess of 9.5% p.a. is taxable Not taxable at deduction -
Fully exempt
employer's contribution
Interest credited on as salaryin excess of 9.5% p.a. is taxable
Amount the
Not time of at Exempt
taxable
employee's contribution
Amount withdrawan on as salary(but subject to certain conditions)
Exempt the time of
- Employer's (subject to
Fully exempt
retirement / termination contribution -

Salary - Basic + DA (forming part of salary) + Commission as a fixed percentage of turnover

Condition for exemption of PF at the time of retirement or termination

i) The employee should have completed at least 5 years of employment;

ii) If not, whether his employment is due to the following: Exception for the 5 years condition
a) Ill-health
b) Contraction or discontinuance of employer's business
c) any other cause beyond the control of the employee
iii) Not covered under the above
i) Entire balance of PF is transferred to the RPF account maintained by his new employer
ii) Entire balance of PF is transferred to his NPS account
iv) Not satisfying any of the above conditions - Taxable

________________________________________________

From 1st April 2021 The contirbution (employer's and employee's) in case of RPF and SPF is capped at 2,50,000 for cla
In case of PPF - It is capped at 5,00,000

If the contribution is in excess of these limits, then the interest earned on the contribution made abov

E.g. PPF During FY 2024-25, Mr. A has earned the following income

i) Interest income on the accumulated balance of PPF as on 31 March 2021 (INR 10,00,000) - Interes
ii) During FY 2021-22 - He contributed INR 6,00,000 as PPF contribution and claimed 80C benefit
 Interest on the contribution made during FY 21-22 is INR 50,000

Compute his total income for the year AY 2025-26

i) Interest income of INR 1L Fully exempt

ii) Interest income of INR 50K

Interest on INR 5,00,000 41,667 Exempt

Interest on INR 1,00,000 8,333 Taxable

1 Mr. A - Retires from service on 31 December 2024 after 25 years of service

Following is his total income for PY 2024-25

a) Basic pay - INR 16,000 per month

b) DA - INR 8000 per month 50% forms part of retirement benefits
c) Lumpsum PF received from URPF - INR 6 lakhs
d) Deposits in PPF account - INR 40,000

Break-up for 6lakhs

i) Employer's contribution 220,000 Salary
ii) Interest on (i) 50,000 Salary
iii) Employees contribution 270,000 Not taxable
iv) Interest on (iii) 60,000 IFOS
Total 600,000

Calculate his total income for AY 25-26 - Assume he is opted out of default regime

Answer Computation of total income of Mr. A for AY 2025-26

Particulars AMount AMount

A Income under the head salaries
i Basic Pay 144,000.0
ii DA 72,000.0
iii PF 270,000.0

Gross salary 486,000.0

Less: Standard deduction 50000

Taxable salary 436,000.0

B Income from other sources

Interest on URPF - Employees' contribution 60,000
 Gross total income 496,000.0
Less: Deduction u/s. 80C 40000
Total taxable income 456,000.0

2 Mr. B - Has the following income for AY 25-26

Calculate his gross salary

a Basic (per month) - INR 10,000

b DA (per month) - INR 8,000 [50% forming part of retirement benefits]
c Commission as a fixed percentage of turnover - 0.1%
d Turnover during the year - INR 50 lakhs
e Bonus - INR 40,000
f Gratuity - INR 25,000
g His own contribution to RPF - 20,000
h Employer's contribution to RPF - 20% of his basic salary
i Interest accrued in RFP @ 13% p.a. - INR 13,000

Answer Computation of Gross salary of Mr. B for AY 25-26

Particulars Amount Amount

Basic salary [10,000 x 12] 120,000
DA [8,000 x 12] 96,000
Commission 5,000 5,000
Bonus 40,000
Gratuity 25,000
Employees' contribution to RPF 0
Employer's contribution 24,000
Less: Exempt 20,760 3,240
[12% of salary]
Salary = Basic + DA. (Forming part of salary] + Comission as a fixed percentage of turnover
Salary 173,000
12% on salary 20,760

Interest accrued @ 13% 13,000

LessL Exempt - Interest @ 9.5% 9,500 3,500
Total gross salary 292,740

Section 89 Relief

1 Computation of tax payable by Mr. Hari for AY 2025-26

 including excluding
Step 1 - Calculate tax Particulars
arrears of arrears of
including arrears and excCurrent year salary 1,020,000 1,020,000
arrears during AY 25-26 Arrears of salary received 345,000 0
Taxable salary 1,365,000 1,020,000
Income-tax 219,500 116,000
Add: Health and education cess @ 4% 8,780 4,640
Total tax payable 228,280 120,640

Additional tax payable with respect to arrears of salary in 107,640

Step 2 - Calculate tax Particulars AY 2011-12

on arrears of salary Incl arrears Excl arrears
for the respective AYs Taxable salary 710,000 710,000
Arrears of salary 103,000 0
Total taxable salary 813,000 710,000
Tax on above 97,900 76,000
Add: Cess @ 3% 2,937 2,280
FY 24-25 - 72 years Total tax 100,837 78,280
FY 10-11 - 58 years
FY 11-12 - 59 years Additional tax payable for arrears of salary 22,557
FY 12-13 - 60 years

Step 3 Relief under section 89

Additional tax payable with respect to arrears for AY 25-26 107,640
Less: Additional tax payabe with respect to arrears in resp 92,185
Relief under section 89 15,455

Step 4 calculation of tax Tax payable before relief 228,280

Less: Relief 15,455
Tax payable (after relief) 212,825
ployees' Provident Fund Organisation (EPFO)

than salaried person

PPF
Not applicable -
Because
Available there
as is Deduction available from Gross total income and not from salaries
deduction - u/s.-
Not applicable
Because there is
Fully exempt
(subject to
Fully exempt

eption for the 5 years condition

ained by his new employer

and SPF is capped at 2,50,000 for claiming exemption. I.e., 2.5 lakhs for employee's contribution and 2.5l for employers contribution

earned on the contribution made above the limits is not exempt

March 2021 (INR 10,00,000) - Interest income on that 10L @ 10%

tribution and claimed 80C benefit
ars of service

retirement benefits

out of default regime

775000
-75000
700000
a fixed percentage of turnover

0 300000 0% 0
300000 500000 5% 10000
 500000 1000000 20% 100000
1000000 1,365,000 30% 109500
219500

0 300000 0% 0
300000 500000 5% 10000
500000 1000000 20% 100000
1000000 1,020,000 30% 6000
116000

AY 2012-13 AY 2013-14
Incl arrears Excl arrears Incl arrears Excl arrears
825,000 825,000 950,000 950,000
117,000 0 125,000 0
942,000 825,000 1,075,000 950,000
134,600 99,500 147,500 115,000
4,038 2,985 4,425 3,450
138,638 102,485 151,925 118,450

36,153 33,475 92,185

ployers contribution
Salaries - Perquisites

Types of pequisites

a) Perquisites taxable in case of all employees

b) Perquisites taxable only in case of specified employees
c) Tax free perquisites in case of all employees

Who is a specified employee?

a) Director employee of a company

b) Employee has substantial interest in a company
Substantial interest - Having more than or equal to 20% of voting rights in a Company
c) Employee drawing in excess of INR 50,000 per annum as salary (after deductions)
This 50,000 limit - is to be considered in aggregate of all the employment'

Whether taxable in hands of

S.No Perquisites Specified
employee'
1 Rent free accomodation Yes
a) Government
a.i) Unfurnished house
a.ii) Furnished house

- If furniture is owned by employer

- If furniture not owned by employer and taken on hire

b) Non-government - If the accomodation is owned by the employer

b.i) Unfurnished house

b.ii) Furnished house

- If furniture is owned by employer

 - If furniture not owned by employer and taken on hire

c) Non-government - If the accomodation is taken on rent by the

employer

c.i) Unfurnished house

c.ii) Furnished house

- If furniture is owned by employer

- If furniture not owned by employer and taken on hire

d) Where the accomodation is provided in a hotel

2 Motor car
- If the car is owned / hired by employer Yes
- If the car is owned by employee Yes

A. Motor car owned / hired by the employer

A.i. If used entirely for employment
A.ii. If used only for personal purpose (running and maintenace cost
is also reimbursed by the employer)

A.iii. used both for employment and personal purpose

- Running and maintenance - met by the employer
 - Running and maintenance - met by the employee

- Driver is provided by the employer

B. Motor car owned by the employee and running and maintanence

cost is provided by the employer

B.i. If used entirely for employment

B.ii. Using it for personal purpose and business purpose

3 Any other motor vehicle - owned by the employee and running and Yes
maintenance charges are met by the employer'

i. If used entirely for employment

ii. If used partly for employment and partly for personal purposes

4 Free domestic servant

- Appointed by the employer Yes
- Appointed by the employee Yes

5 Gas, electricity or water facility

- If the facility is in the name of the employer Yes

- If the facility is in the name of the employee Yes

6 Free education or concessional education

- In case of reimbursement of education fees Yes
- In any other case Yes
(Educational facility maintained by the employer)

7 Interest free loan or loan provided at concessional rates Yes

8 Value of gift voucher Yes

 9 Use of moveable assets Yes

10 Transfer of movable assets Yes

- Computers and electronic items

- Motor car

- Other assets

11 Other fringe benefits

i) Travelling, tour or accomodation on travel

ii) Concessional food or non-alcoholic beverages

iii) Credit card expenses

iv) Club expenditure

Mr. A takes a loan of INR 1 lakhs on 01 April 2024. He repays the loan at INR 10000 per month as on the e
SBI lending rate as on 01 April 2024 is 5%
Calculate the value of perquisite

Month Maximum balance ou

April 24 90000
May 24 80000
Jun 24 70000
July 24 60000
August 24 50000
September 24 40000
Oct 24 30000
November 24 20000
December 24 10000
January 25 0
Feb 25 0
March 25 0
 1 Mr. A - employed in ABC ltd.
He has been provided with RFA in Mumbai
Basic - 8500 per month
DA - 2000 per month (30% forming part of retirement benefits)
Bonus - 1500 per month
The company allotted house to him on 01 April 2024
However, he stayed in the house only from 01 Nov 2024
Calculate the income under the head salaries

Answer Computation of income under the head salaries of Mr A for AY 25-26

Particulars Amount
Basic
DA
Bonus
Perquisites
Rent free accomodation
10% of salary - Since it is in Mumbai
Salary 53,000
Gross salary
Default regime - Standard deduction
Income under the head salaries

2 Mr A - retired from ABC Ltd on 31 January 2025 - After completing 30 years and one month
During retirement - he received the following:
i) Gratuity - INR 600000. He is covered under POGA
ii) Leave encashment - INR 330000 for 330 days leave balance. He was credited 30 days leave for each c
iii) He was offered a car by the employer
This car was purchased by the Company on 30 January 2022 - for INR 5,00,000
Company recovered INR 2,00,000 from him.
Company depreciates the car at 10% on SLM
iv) An amount of INR 3,00,000 as commutation of pension for 2/3 of his pension commutation
v) Gift voucher of INR 6,000 during retirement
vi) Colleagues gifted him TV of INR 50,000 from their own contribution

Basic salary - INR 20000 per month

DA is 50% of basic salary
Pension received - INR 5,000 from 01 Feb 2025 to 31 March 2025

Compute taxable salary for AY 2025-26 - He has opted out of default regime

Answer Computation of taxable salary of Mr. A for AY 2025-26

Particulars Amount
Basic
Allowances Dearness Allowance = 50% of basic
Perquisites Gift voucher
Car (value of perquisite) 256,000
Less: received from employee 200,000
Taxable perquisite
 Computation of perquisite value of car
Car purchased on 30 January 2022 500,000
Less: Depreciation till 29 January 2023 100,000
WDV as on 29 Jan 2023 400,000
Less: Depreciation till 29 January 2024 80,000
WDV as on 29 Jan 2024 320,000
Less: Depreciation till 29 January 2025 64,000
WDV as on 29 Jan 2025 256,000

Retirement benefits Gratuity

Actually received 600,000
Exemption will be lower of the following
i) 20,00,000 2,000,000
ii) Actual grauity received 600,000
iii) 15/26 x last drawn salary x no of completed year of service 519,231
Taxable grauity

Leave encashment
Actually received 330,000
Less: Exemption
i) 25,00,000 2,500,000
ii) Actual leave encashment received 330,000
iii) 10 months salary 300,000
iv) Cash equivalent of his leave credit 330,000
No of days of leave balance / 30 days x average salary based on last 10 months
330/30 x 30000
Taxable leave encashment

Commuted pension
Amount received 300,000
Less: Exemption 150,000
Since he has received gratuity
1/3 x commuted pension/commutation % x 100%
Taxable commuted pension

Uncommuted pension
Gross salary
Less: Standard deduction
Taxable salary

Employee's Stock Option Plan

i) At the time of option given to the employee and exercised by the empl Taxable perquisite
ii) At the time of sale of shares by the employee Capital gain

Valuation of ESOP (perquisite) = FMV of the specified security or sweat equity share less cost recovered f

How to determine this FMV of specified security

1 If the shares are listed on a recognized stock exchange
- If it is listed on only one stock exchange Average of opening and closing pric
 On the date of exercise of the option
When the option is exercised on a holiday FMV - Immediately preceding date w

- If it listed on multiple stock exchanges

Option exercised on working day Average of opening and closing pric

in the stock exchange which has rec

Option exercised on a holiday FMV - Immediately preceding date w

Closing price - of the stock exchang
Price = Selling price and not buying price

2 If the shares are not listed on a recognized stock exchange

FMV of the share as on the date of exercise - cost recovered from the employee

If FMV on the date of exercise is not available - the FMV determined within the last 180 days
her taxable in hands of
Valuation Rules
Non-specified (Taxable perquisite)
employee
Yes

License fee determined by the government less actual rent paid

by employee

i. License fee determined by the government less actual rent

paid by employee; plus

ii. 10% per annum of the cost of furniture less actual rent paid by
employee for the furniture

i. License fee determined by the government less actual rent

paid by employee; plus

ii. Actual rent paid by the employer less rent collected from the
employee

i. 10% of salary in cities having population more than 40 Lakhs

(as per 2011 census)

ii. 7.5% of salary in cities having population between 15 lakhs

More than15 lakhs and
and 40 lakhs
less than or equal to 40
lakhs'
iii. 5% of salary in cities having population less than 15 lakhs
[residuary - i.e., in all other cases]

Less if any rent collected from employee

i. Value of perquisite determied in b.i - Plus

ii. 10% per annum of the cost of furniture less actual rent paid by
employee for the furniture
 i. Value of perquisite determied in b.i - Plus

ii. Actual rent paid by the employer less rent collected from the
employee

i. Actual amount of rent paid by the employer; or

ii. 10% of salary

Which ever is lower

Less if any rent collected from employee

i. Value of perquisite determied in c.i - Plus

ii. 10% per annum of the cost of furniture less actual rent paid by
employee for the furniture
i. Value of perquisite determied in c.i - Plus

ii. Actual rent paid by the employer less rent collected from the
employee

i. 24% of the salary payable for the previous year; or

ii. Actual rent paid by the employer to such Hotel.

which ever is lower (needs to be considered for the relevant

period of accomodation)

Less amount collected from the employee

Exception: When the accomodation provided is less than 15
days, then it will not be treated as taxable perquisite

No CC of the engine is less than 1.6 litres

Yes CC of the engine is more than 1.6 litres

No perquisite
i. Actual amount of expenditure incurred by the employer for
running and maintanence of the car.
ii. 10% per annum of the actual cost of the car.
iii. If driver also provided - cost of salary provided to the driver.

less the actual cost recovered from the employee

i. If the CC is less than 1.6 litres - Perquisite value is INR 1,800

p.m.
ii. If the CC is more than 1.6 litres - Perquisite value is INR 2,400
p.m.
 i. If the CC is less than 1.6 litres - Perquisite value is INR 600
p.m.
ii. If the CC is more than 1.6 litres - Perquisite value is INR 900
p.m.
INR 900 per month (over and above the above perquisite)

No perquisite
Actual amount of expenditure incurred by the employer less For Eg., if the actual amount of expenditure in
amount specified in A.iii above (running and maintenance met by Perquisite value (in case of CC is less than 1.
employer) Perquisite value (in case of CC is more than 1

Yes

No perquisite
Actual amount of expenditure incurred by the employer less INR
900 per month

No Actual salary paid by the employer to the domestic servant Domestic Servant - Sweeper, Gardener, watc
Yes Less amount recovered from the employee

No i. If the payment is made to a agency - Actual payment made to Eg., - Gas - cost of manufacturing Gas in one
these agency

ii. If the supply is made from the resources owned by the

employer - Actual manufacturing cost per unit incurred by the
Yes employer

Less Actual amount recovered from the employee

Yes Amount of expenditure incurred by the employer

No Cost of such education in a similar institution in or nearby The value is to be reduced by the amount rec
location.
Exception - If the cost of such education value is less than INR
1,000 per month (for a maximum of 2 chidren) - there will be no
Yes - Interest calculated at the SBI Lending rate as on 01 April 2024
for the same purpose as of the purpose for which the employer
lends the loan

Less interest recovered from the employee

Interest is to be calculated at maximum outstanding monthly

balance - i.e., outstanding monthly balance as on last day of the
month

Yes Any gift voucher given to employee - value more than INR 5,000
is taxable as perquisite
 Yes i. Movable asset - Laptop or computer - Not a perquisite
ii. Movable asset (which is not already specified) -

- If owned by employer - 10% of the actual cost of the asset

or
- If taken on rent - amount of rent or charge paid by the
employer

Less any amount actually collected from the employee

Yes
Depreciated value of the asset - Rate of depreciation - 50% on
WDV (each completed year of usage)
Depreciated value of the asset - Rate of depreciation - 20% on
WDV (each completed year of usage)
Depreciated value of the asset - Rate of depreciation - 10% on
SLM (each completed year of usage)
Less - Whatever is received from the employee
1. Actual cost incurred by the employer less collected from the
employee; or
2. Actual cost of package to a third party less collected from
employee (if employer itself in the business of providing the said
services)
This also includes travelling, tour or accomodation provided to a
household member of the employee
This does not include any food provided during the work hours.

10000 per month as on the end of each month.

Interest @ 5%
375
333
292
250
208
167
125
83
42
0
0
0
1,875 Value of perquisite
 Amount
102,000
24,000
18,000

5,300
149,300
75,000
74,300

d one month

ed 30 days leave for each completed year of service

n commutation

Basic
Allowances
Perquisites
Amount Retirement benefits
200,000 Standard deduction
100,000
6,000

56,000
 No of completed year of service - It needs to be rounded off
80,769

30,000

450000
300000 0.666666666666667
150,000 1
450000
10000
632,769
50000
582,769

share less cost recovered from the employee

of opening and closing price of the share in the said stock exchange
date of exercise of the option
mmediately preceding date when the market was open - Closing price

of opening and closing price of the share

ock exchange which has recorded highest volume

mmediately preceding date when the market was open

price - of the stock exchange which has recorded highest volume

last 180 days

gine is less than 1.6 litres
gine is more than 1.6 litres
e actual amount of expenditure incurred by employer is INR 5,000 per month.
alue (in case of CC is less than 1.6 l - INR 5,000 p.m - INR 1800 per month = 3200 per month
alue (in case of CC is more than 1.6 l - INR 5000 p.m. - INR 2400 per month

ervant - Sweeper, Gardener, watchman or personal attendant

cost of manufacturing Gas in one cylinder - will be the value of perquisite

to be reduced by the amount recovered from the employee

Salaries - Tax Free perquisites

List of tax free perquisites

i Telephone provided by an employer at employee's residence

ii Transport facility provided by an employer (airline or railways)
iii Perquisites allowed outside India by Government for rendering services outside India by an Indian Citizen
iv Refreshment provided by employer during working hours
v Recreational facilities like club facilities available for all employees
vi Amount spent on training the employees
vii Employer's contribution to group insurance scheme
viii Annual premium paid by employer for accident policy
ix Subsidized lunch - value of the meal is less than INR 50
x Leave travel concession Available only in case of old regime

Applicable - for LTC received by employees for travel to any place in India:
a) either on leave; or
b) after retirement of service; or
c) after termination

LTC - Is available to the employee and family

Family
1. Spouse
2. Children Maximum of 2 chi
3. Parents of the person or spouse Mainly or wholly
4. Brother or sisters of the person or spouse dependent on
the individual
5. Brother or sisters of the parents (in item 3.)

Block of leave
How many times the exemption can be availed 2 times in a 4 calendar years block
Block period starts from 1986
Block year relevant for PY 2024-25 Calendar Year 2022 to 2025

Amount of exemption
i. Air Restricted to the
ii. Raiways air economy
Restricted to fare
AC
iii. No railway is available first class -to the
Restricted
1st class ticket in
If no public transport - 1st class tick

xi Medical facilities The following medical facilities prov

 a) Value of medical treatment in any hospital maintained by the employer
b) Reimbursement of actual medical expenditure incurred on medical treatment in a Government hospital or in r
c) Health insurance premium paid by the employer on health of the employee - Scheme approved by IRDA
d) Reimbursement of health insurance paid by employee
e) Amount paid for medical expenditure incurred outside India on medical treatment
- medical treatment
- travel and stay abroad for such medical treatment
- Travel and stay abroad for one attendant who accompanies the patient

Conditions: - i) Medical treatment and stay abroad will be exempt only to the extent allowed by RBI
ii) For travel - the employees gross total income should be less than INR 2 lakhs

1 The following are the medical facilities received by Mr. A for PY 2024-25. Calculate the value of taxable perquis

Particulars Amount
i) Medical premium paid for insuraning health of Mr. A 7,000
ii) Treatment of Mr. A by his family doctor 5,000
iii) Treatment of Mrs A in Government Hospital 25,000
iv) Treatment of Mr. A's Grandfather in a private hospital 12,000
v) Treatment of Mr. A's mother by a family doctor 8,000
vi) Treatment of Mrs. A's brother in a Government hospital (brother is independ 6,000
vii) Treatment of Mr. A's father abroad - 50000 80,000
Expenses of staying abroad - 30000
RBI limit - 75000
ndia by an Indian Citizen

able only in case of old regime

Twin
First birth Single child
Second birth Twin
All three to be considered for LTC

First birth Twin

es in a 4 calendar years block p Only for the twin LTC to be considered
period starts from 1986
dar Year 2022 to 2025

public transport - 1st class ticket of private transport

ollowing medical facilities provided are to be considered as tax free

 Even in respect of family members - it is tax free
a Government hospital or in respect of a prescribed disease (COVID 19 is also a prescribed disease)
cheme approved by IRDA

nt allowed by RBI

e the value of taxable perquisites

Taxable perquisite
0
5,000
0
12,000
8,000
6,000
5,000
Profits in lieu of salary

i) Any compensation received on termination of employment

ii) Compensation on account of modification of the terms and conditions of employemt
iii) Payment from provident fund or other fund
iv) Keyman insurance policy
v) Lump sum payment received before joining or after cessation of employment

Lump sum consideration after cessation of employment

a Gratuity
b Leave encashment
c Pension
d VRS - Voluntary Retirement Receipts

Taxable VRR
Actual VRS compensation received
Less: Lower of the following
i) 5,00,000
ii) 3 months salary x completed year of service (Fraction to be ignored)
iii) Last drawn salary x no of months of service left

Salary - Basic + DA (Forming part of retirement benefits) + Commission as a fixed percentage of turnover

e Retrenchment compensation

Taxable Retrenchment compensation

Actual compensation received
Less: Lower of the following is exempt
i) 5,00,000
ii) 15 days average pay x completed year of service (rounded off)

Average pay - Wages payable

- In case the workman is paid monthly - average wages based on 3 months - Calendar months
- In case the workman is paid weekly - average wages based on 4 weeks calendar weeks
- In case the workman is paid daily - average wages based 12 working days
s a fixed percentage of turnover

hs - Calendar months
s calendar weeks
 2 Taxablity of perquisites provided to Mr. B by ABC Ltd during AY 2025-26

i) Domestic servant employed by the employee and reimbursed by the employer will be a taxable perquisite in the
Taxable perquisite is INR 18,000 (INR 1500 x 12)

If the domestic servant was directly employed by the employer, then the same will be perquisite in the hands of
In the given case, we have assumed that Mr. B who is a tax manager is a specified employee. Hence, INR 18,0
where the servant is directly employed by ABC Ltd.

ii) In case of educational institution owned or maintained by the employer, the amount of taxable perquisite will be
in a similar institution. However, there will be no perquisite, if the cost of such education is less than INR 1,000

In the given case, the value of perquisite is as follows

a) With respect to Arthy - the value of perquisite is Nil, since the cost is less than INR 1000 per month
b) With respect to Ashok - the value of perquisite is INR 14,400.

iii) Where the employer provides any movable asset (other than a laptop or computer) to the employee, then 10%
or the actual rent by the employer for hire of such asset reduced by the amount recovered from the employee w

In the given case, the movable asset is only AC, fridge, television and not laptop or computer. Hence, the taxab
Taxable perquisite 11,000

iv) The value of any gift or gift voucher provided by an employer to an employee will be a taxable perquisite if the v
In the given case, since the value of voucher is INR 10,000 (which is more than INR 5,000) - the entire amount

v) Telephone provided by employer at the place of residence of the employee (including payment of telephone bill

vi) Computation of perquisite in case of concessional loan

Month Maximum amount outstanding Perquisite value at 4% per month

April 2024 588,000 1,960
May 2024 576,000 1,920
June 2024 564,000 1,880
July 2024 552,000 1,840
August 2024 540,000 1,800
September 2024 528,000 1,760
October 2024 516,000 1,720
November 2024 504,000 1,680
December 2024 492,000 1,640
January 2025 480,000 1,600
 February 2025 468,000 1,560
March 2025 456,000 1,520
20,880

Total perquisite 74,280

4 60000 2000 80000

5000 1000 8000

Y1 5000 per month

Y2 6000 per month
Y3 7000 per month
Y4 8000 per month
Y5 10000 per month
Y6 12000 per month
Y7 14000 per month
Y8 14000 per month

Particulars Amount Amount

i Basic salary =60000x11+62000x1 722,000
ii DA 288,800
iii Telephone allowance 6,000
iv Employer's contribution to RPF 108,300
Less; Exempt 12% of salary 107,434
Taxable RPF contribution 866
v Interest @ 12% 25,800
Less: Exempt - Interest @ 9.5% 20,425
Taxable interest 5,375
vi RFA
Salary 901,280
RFA = 10% of salary 90,128
vii Domestic servant salary 30,000
viii Perquisite value of motor car
Cost incurred by the employer 50000
Less: Exemption 28800
21,200
ix Professional tax 1,500
Gross salary 1,165,869
Less:
Standard deduction 50000
Professional tax 2500 52500
Taxable salary 1,113,369
l be a taxable perquisite in the hands of all the employees

be perquisite in the hands of only specified employees.

d employee. Hence, INR 18,000 will be taxable perquisite in the hands of Mr. B

nt of taxable perquisite will be the reasonable cost of such education

ucation is less than INR 1,000 per month

NR 1000 per month

r) to the employee, then 10% of the actual cost of the asset

ecovered from the employee will be taxable perquisite

or computer. Hence, the taxable perquisite is 10% of INR 1,10,000

be a taxable perquisite if the value of gift is more than INR 5,000

NR 5,000) - the entire amount is taxable perquisite.

ding payment of telephone bill) is a tax free perquisite.

isite value at 4% per month

Maxmum amount outstanding x 4% / 12
 2000 14000

Salary for 12% of RPF 895,280

Salary definitions

S.No Particulars
1 House rent allowance
2 For computing Gratuity
3 exemption - If covered
For computing Gratuityunder
4 exemption - Notleave
For computing covered under
salary
5 exemption
For computing RPF taxability
6 (i.e., excess
For Rent freeofaccomodation
12% of salary)

7 For computing VRS

compensation exemption
Salary definition
Basic + Dearness Allowance (forming part of salary) + Commission as a fixed
percentage of turnover
Basic + Dearness / sales
Allowance
Basic + Dearness Allowance (forming part of salary) + Commission as a fixed
percentage of turnover
Basic + Dearness / sales(forming part of salary) + Commission as a fixed
Allowance
percentage of turnover
Basic + Dearness / sales(forming part of salary) + Commission as a fixed
Allowance
percentage of turnover
Salary for RFA includes/ all
sales
the income which are taxable under the head salaries, but
excludes the following:
Basic + Dearness Allowance (forming part of salary) + Commission as a fixed
percentage of turnover / sales
Income from House property

Conditions

1 There should be a building / property

2 Building includes residential building, factory, office, shops, godowns, comm
3 Exception - When an assessee lets out a commercial property and is eng
It will be treated as income from PGBP
4 Assessee should be the owner of the property
5 It should not be used by the owner for his own business purpose

2 Classifications

i Self occupied property

ii Let out property

Let out property

Particulars
Determination of Gross annual value (GAV)
Less: Municipal taxes paid
Net annual value (NAV)
Less: Standard deduction @ 30% of the NAV
Less: Interest on borrowed capital
Income under the head house property

How to calculate gross annual value

i Municipal value / Municipal rent

ii Fair value / Fair rent
iii Standard rent
iv Actual rent (both received and receivable)

Steps
1 Higher of Municipal rent and fair rent
2 Lower of Standard rent and Step 1 value
3 Higher of Actual rent received / receivable and expe
Actual rent received / receivable

1 In case of vacancy during part of the year

Due to the vacancy - the actual rent received / receivable is less than Expe
Actual rent will be GAV

However, if the reason is other than vacancy - it will be higher of expected

2 Rule 4 of Income-tax rules

Conditions for not including any amount of rent which is not capable of bein

i the tenancy is bona fide

ii the defaulting tenant has vacated or steps have been taken for him to vaca
iii the defaulting tenant should not be in occupation of any other property of th
iv the assessee has taken all the reasonable steps for collecting the defaulted

Municipal taxes paid

1 Actually been paid - if it is kept payable / outstanding - no deduction availab

2 If kept outstanding - deduction available in the year of payment
3 Municipal taxes should be borne by the assessee / owner of the property -

Interest on borrowed capital

i If any interest is paid on any loans borrowed for acquisition or construction

ii Interest on loan borrowed for any repairs, renewal or reconstruction - can a
iii Pre-construction interest and post construction interest

Pre construction interest

Pre construction interest is available as deduction over a period of 5 years

 from the year of acquisition or completion of construction

For eg. Construction completed on 31 August 2024

Interest paid on loan borrowed from 01 April 2021 to 31 March 2024 - INR
Pre construction period is not till 31 July 2024
Pre construction period is only till 31 March 2024 (i.e., PY 2023-24)

Deduction of pre construction interest - From PY 2024-25 INR 80,000 (i.e.,

Interest of INR 80,000 (per year) can be claimed till PY 2028-29

Post construction interest

Self occupied property and unoccupied property

i Self occupied property - Property occupied by a owner for his own residenc
ii Unoccupied property - Property which is not used by owner for his residenc
at a different place and he resides in a building not belonging to him.

iii In case of self occupied or unoccupied property - GAV will be nil.

No deduction for municipal taxes paid
The benefit of 'Nil' GAV in respect of self occupied is available only upto 2

Particulars
Gross annual value
Less: Municipal taxes paid
Net annual value (NAV)
Less: Standard deduction @ 30% of the NAV
Less: Interest on borrowed capital
Income under the head house property

Interest on borrowed capital for Self occupied / unoccupied property

i This deduction is available only for a person opting out of default regime.
 Not available for a person who has opted for 115BAC regime

ii Pre-construction interest / post construction interest concept same as let ou

iii Pre-construction interest - Construction should have been completed

iv Interest on borrowed capital in case of self occupied / unoccupied property

a) In case of newly constructed / acquired property

b) In case of repairs, reconstruction, etc.

This above ceiling will not be applicable in case of let out / deemed let out

The total deduction of interest u/s. 24(b) is restricted to INR 2,00,000 i

Deemed let out property

1 If an assessee owns more than 2 properties for self-occupation, then the in

self occupied property. Rest will be treated as income from let out property

2 In case of deemed let out property - ER will be the GAV (because there is n

3 This option can be changed year on year

4 In case of deemed let out - Municipal taxes paid can be claimed as deducti

Co-owned property

i Property owned by two or more persons - whose shares are definite

ii In case of self-occupied
If the co-owners opted for old regime - for each person the deduction of INR
will be applicable separately.
If the co-owners opted for new regime - no deduction available u/s. 24
iii In case of let our property
Step 1 - Calculate the income from house property as if it is owned by a sin
Step 2 - Bifurcate the income from house property calculated in S1 based o

Other points

1 If any house property is held as a stock-in-trade, the annual value of such h

2 However, if the house property is not let out / sold within 2 years from the e
then, it will be treated as 'deemed let out' and the Expected rent will be the
y, office, shops, godowns, commercial properties, etc.
ommercial property and is engaged in the business of letting out commercial property

wn business purpose

Amount

Step 1 value
Expected Rent always for a full year
GAV
 d / receivable is less than Expected Rent

y - it will be higher of expected rent and actual rent

ent which is not capable of being realised

have been taken for him to vacate the property

ation of any other property of the assessee
steps for collecting the defaulted rent - including legal proceedings, etc.

tstanding - no deduction available.

he year of payment
essee / owner of the property - not tenant

d for acquisition or construction of house property - the interest paid is allowable as deduction
enewal or reconstruction - can also be claimed as deduction
ion interest

Interest paid during the pre construction period

In case of acquired property - Pre construction period - till the previous year possessi
In case of constructed property - Pre construction period - the prior to the PY in which

uction over a period of 5 years in equal instalments commencing

f construction

l 2021 to 31 March 2024 - INR 4,00,000

rch 2024 (i.e., PY 2023-24)

m PY 2024-25 INR 80,000 (i.e., INR 4 lakhs / 5) can be claimed

imed till PY 2028-29

Can be claimed as deduction in the year to which the interest is relating to

property

by a owner for his own residence

t used by owner for his residence due to his employment, business or profession
ing not belonging to him.

erty - GAV will be nil.

cupied is available only upto 2 self-occupied properties

Amount
Nil
NA
Nil
Not applicable since NAV is 'Nil'
Please refer below

upied / unoccupied property

n opting out of default regime.

r 115BAC regime

interest concept same as let out property

should have been completed within 5 years from the FY in which the capital is borrowe

occupied / unoccupied property cannot exceed:

INR 2,00,000 per annum Certificate from the banker is requiredc to be obtained.
INR 30,000 per annum

ase of let out / deemed let out property

is restricted to INR 2,00,000 irrespective of the no of self occupied property

s for self-occupation, then the income from any 2 properties will be treated as
as income from let out property (i.e., deemed let out)

be the GAV (because there is not actual rent received / receivable)

paid can be claimed as deduction

hose shares are definite

ach person the deduction of INR 30,000 and INR 2,00,000

deduction available u/s. 24

roperty as if it is owned by a single owner
operty calculated in S1 based on % of shares of the co-owner

rade, the annual value of such house property will be Nil

/ sold within 2 years from the end of the FY in which the construction is complete
nd the Expected rent will be the GAV.
ercial property
owable as deduction

evious year possession of the house property is granted

or to the PY in which property is constructed
elating to

ofession
e capital is borrowed

iredc to be obtained.

property
complete
Question - 1
Particulars House 1 House 2
Municipal Value 80,000 55,000
Fair Rent 90,000 60,000
Standard Rent NA 75,000
Actual rent received/ receivable 72,000 72,000

Expected rent 90,000 60,000

GAV 90,000 72,000

Question - 2

Computation of income from house property of Mr. B for AY 2025-26

Since Mr. B is a resident ordinary resident in India for AY 2025-26, the income earned in Canada is also ta
The rent received from Canada from the let-out property will be taxable under the head 'Income from Hous
The municipal taxes paid there, will be allowed as deduction

Particulars Amount Amount

Actual rent received (GAV) 10000 x 12 x 50 6,000,000
Less: Municipal taxes 8000 x 50 400,000
Net annual value (NAV) 5,600,000
Less: Standard deduction @ 30% 1,680,000
Income from house property 3,920,000

Question - 4
Computation of income from house property of Mr. Anirudh for AY 2025-26

Particulars Amount Amount

A. Computation of Gross annual value
i. Municipal Rent 130,000
ii. Fair rent 110,000
Higher of i and ii 130,000
iii. Standard rent 120,000

Expected rent is (higher of i and ii restricted to iii) 120,000

Actual rent 132,000
Less: Unrealised rent (since all conditions in Rule 4 are s 11,000
Revised actual rent 121,000

Gross annnual value (Higher of Expected rent and revised actual rent) 121,000
Less: Municipal taxes paid 13,000
Net annual value 108,000
Less: Deduction u/s. 24
a) 30% of NAV 32,400
b) Interest on borrowed capital (assumed it is post
construction interest) 40,000 72,400

Income from house property 35,600

Question - 3
Computation of interest available as deduction u/s. 24(b) for Mr. M for AY 2025-26

Particulars Amount
I. Interest on self occupied property situated at Bombay 200,000
Interest amount = 30 lakhs x 10% = 3,00,000
Restricted to INR 2,00,000

II. Interest on unoccupied property at Delhi 30,000

Interest amount = 5 lakhs x 11% = 55,000
Restricted to INR 30,000 - since loan is taken for repairs

Total interest 230,000

Total deduction u/s..24(b) in case of self occupied proper 200,000

Question 5
Computation of income from house property of Ganesh for AY 2025-26

Particulars Amount Amount

1. Computation of Gross annual value
Expected rent = Higher of Municipal value and Fair rent
Higher of INR 2,50,000 and INR 2,00,000
Expected rent 250,000
Actual rent received / receivable
20000 x 10 months 200,000
Less: Unrealised rent 20,000
Revised actual rent received 180,000

Gross Annual value 180,000

Less: Municipal taxes (8% of municipal value) 20,000
Net Annual value 160,000
Less: Deduction u/s. 24
a) 30% of NAV 48,000
b) Interest on borrowed capital 65,000 113,000
IFHP 47,000

Question 6
Computation of income from house property of Ms. Poorna for AY 2025-26

Particulars Amount Amount

Net annual value 0

Less: Deduction u/s. 24

b) Interest on borrowed capital
i. Preconstruction interest - 360000/5 72,000
ii. Post construction interest 180,000
Total 252,000
Restricted to INR 2,00,000 200,000
Loss from house property -200,000

Question 7
Computation of income from house property of Ms. Rajalakshmi for AY 2025-26

Particulars Amount Amount

1. Gross annual value

Expected rent
Municipal value 500,000
Fair rent 420,000
Higher of municipal value and fair rent 500,000
Standar rent 480,000

Expected rent (Higher of municipal value and fair rent 480,000

but restricted to standard rent)

Actual rent received or receivable 450,000

Less: Unrealised rent 100,000
Revised actual rent 350,000

Gross annual value 480,000

Less: Municipal taxes paid [12% x municipal value] 60,000
Net Annual value 420,000

Less: Deduction u/s. 24

a) Standard deduction at 30% of NAV 126,000
b) Interest on borrowed capital 25,000 151,000
IFHP 269,000
Question 8

Computation of income from house property of Mr. G for AY 2025-26

Step 1 - Calculation of IFHP if the houses are deemed to be let out

Particulars House 1 House 2
Computation of GAV
i. Municipal rent 300,000 360,000
ii. Fair rent 375,000 275,000
Higher of (i) and (ii) 375,000 360,000
iii. Standard rent 350,000 370,000

Expected rent (Higher of municipal rent and fair rent rest 350,000 360,000
GAV (will be expected rent since there is no actual rent 350,000 360,000

Less: Municipal taxes 36,000 28,800

Net annual value 314,000 331,200

Less: Deduction u/s. 24

a) 30% of NAV 94,200 99,360

b) Interest on borrowed capital 0 55,000

Income from house property 219,800 176,840

Step 2 - IFHP if one property is let out and other properties are self occupied
If he has opted for default regime
Option 1 - House 1 is let out and House 2 and 3 are self occupied
Option 2 - House 2 is let out and House 1 and 3 are self occupied
Option 3 - House 3 is let out and House 1 and 2 are self occupied

Particulars Option 1 Option 2

House 1 219,800 0
House 2 0 176,840
House 3 0 0
Total IFHP 219,800 176,840

Mr G - If he has opted for default regime - he can choose house 1 and House 2 as self occupied and

If he has opted out of default regime

Particulars Option 1 Option 2

House 1 219,800 0
House 2 176,840
-200,000
House 3 -175,000
Total IFHP 19,800 1,840

In case Mr. G opted out of default regime, he can choose House 1 and House 3 as self occupied and

Workings
Option 1
House 2 - Interest on borrowed capital 30,000
House 3 - Interest on borrowed capital 175,000
Total deduction 205,000
Restricted to 2,00,000 200,000

In case of self occupied and opted out of default regime

Particulars House 1 House 2
NAV 0 0
Less: Deduction u/s. 24
b) Interest on borrowed capital 0 30,000
Loss from house property 0 -30,000

(actual interest is
55000 but
restricted to
30000 since it is
for repairs)

Question No. 10

i) If both Arun and Bimal opted to pay tax under the default tax regime under section 115BAC of th

Computation of total income of Arun and Bimal for AY 2025-26

Particulars Arun Bimal

I. Self occupied property
Net Annual Value 0.00 0.00
Less: Deduction u/s. 24(b) 0.00 0.00
Income / loss from self occupied property 0.00 0.00

II. Let out property (75%) 125,850.00 125,850.00

Total income from house property 125,850.00 125,850.00
Other income 290,000.00 180,000.00
Total income 415,850.00 305,850.00
Workings

Particulars Amount Amount

Gross Annual value

Expected rent
Municipal value 675,000.00
Fair Rent Not given
Higher of the above 675,000.00

Expected rent 675,000.00

Actual rent received / receivable 816,000.00
(12000x12x6) - (12000x1x4)

Gross annual value (higher of ER and AR) 816,000.00

Less: Municipal taxes 135,000.00
NAV 681,000.00
Less: Deduction u/s. 24
a) 30% of NAV 204,300.00
b) Interest on loan taken (300000x75%) 225,000.00
429,300.00
Income from let out portion 251,700.00
Each person's share @ 50% 125,850.00

ii) If both Arun and Bimal opted out of the default tax regime under section 115BAC of the Act

Computation of total income of Arun and Bimal for AY 2025-26

Particulars Arun Bimal

I. Self occupied property
Net Annual Value 0.00 0.00
Less: Deduction u/s. 24(b) 37,500.00 37,500.00
Loss from self occupied property -37,500.00 -37,500.00

II. Let out property (75%) 125,850.00 125,850.00

Total income from house property 88,350.00 88,350.00
Other income 290,000.00 180,000.00
Total income 378,350.00 268,350.00

Question 9
Computation of income from house property of Mr. Prem for AY 2025-26 - If he has opted out of def

Particulars Amount Amount

Self occupied property (2/3rd value)
Annual value 0.00
Deduction u/s. 24(b) of the Act 80,000.00
Loss from self occupied property -80,000.00

Income from let out portion (1/3rd value)

Gross annual value

Expected Rent
i) Municipal value 100,000.00
ii) Fair rent 90,000.00
iii) Higher of (i) and (ii) 100,000.00
iv) Standard rent 110,000.00

Expected rent (lower of standard rent and (iii)) 100,000.00

Actual rent 96,000.00

Gross annual value (Higher of expected rent and AR) 100,000.00

Less: Municipal taxes 10,000.00
NAV 90,000.00
Less: Deduction u/s. 24
a) 30% of NAV 27,000.00
b) Interest on loan 40,000.00 67,000.00

Income from let out portion 23,000.00

Loss from house property -57,000.00

Computation of income from house property of Mr. Prem for AY 2025-26 - If he has opted for defaul

Total income from house property will be INR 23,000 (Because INR 80,000 deduction is not available in ca
under the default regime

Question No. 11

Computation of total income of Mr. Raj under default regime for AY 2025-26

Particulars Amount Amount

I. Income from salaries
Gross salary received 1,800,000.00
Less: Standard deduction 75,000.00
Income from salaries 1,725,000.00

II. Income from house property

A. Self occupied property in Kanpur

Annual value 0.00
Deduction u/s. 24(b) 0.00
Income / loss from self occupied property 0.00

B. Let out property in Delhi

Calculation of expected rent

i. Municipal value 205,000.00
ii. Fair rent 195,000.00
iii. Higher of (i) and (ii) 205,000.00
iv. Standard rent 172,000.00

Expected rent = Lower of SR and (iii) 172,000.00

Actual rent 180,000.00

Gross annual value (Higher of ER and AR) 180,000.00

Less: Municipal taxes paid 10,250.00
Net Annual value 169,750.00

Less: Deduction u/s. 24

a) 30% of NAV 50,925.00
b) Interest on borrowed capital 420,000.00 470,925.00

Loss from let out property -301,175.00

Total loss from house property -301,175.00

Available for set - off against income from salaries 200,000.00
Total income of Mr. Raj 1,525,000.00
Balance loss of INR 1,01,175 will be available for carry foward and set off against future years IFHP

Computation of total income of Mr. Raj under old regime for AY 2025-26

Particulars Amount Amount

I. Income from salaries
Gross salary received 1,800,000.00
Less: Standard deduction 50,000.00

Income from salaries 1,750,000.00

II. Income from house property

A. Self occupied property in Kanpur

Annual value 0.00
Deduction u/s. 24(b) [refer workings] 200,000.00
Loss from self occupied property -200,000.00

B. Let out property in Delhi

Loss from let out property -301,175.00

Total loss from house property -501,175.00

Total loss available for set off 200,000.00
Loss carry forward for set off against future year's inco -301,175.00

Total income for AY 2025-26 1,550,000.00

Deduction u/s. 24(b) in case of old regime

i. Pre-construction interest

Pre-construction period is till 31 March 2023 since Mr. Raj has completed the construction of the house in
Any interest paid till 31 March 2023 will be treated as pre-construction interest
The pre-construction interest is available as deduction for 5 PYs starting from PY 2023-24 in 5 equal instal

Pre-construction interest from July 22 to March 23 187,500

1/5th available as deduction during PY 24-25 37,500

ii. Post construction interest 250,000

Total interest for self-occupied property 287,500

Deduction u/s. 24(b) is restricted to INR 2,00,000

 House 3 House 4 House 5
65,000 24,000 80,000
65,000 25,000 75,000
58,000 NA 78,000
60,000 30,000 72,000

58,000 25,000 78,000

60,000 30,000 78,000

arned in Canada is also taxable in India.

head 'Income from House Property'
The expected rent is less than the standard rent of INR 2,70,000
 House 3

330,000
380,000
380,000
375,000

375,000
375,000

19,800
355,200

106,560
175,000

73,640

Option 3
0
0
73,640
73,640

e 2 as self occupied and house 3 as deemed let out

Option 3
 0
-30,000
73,640
43,640

e 3 as self occupied and house 2 as deemed let out

House 3
0

175,000
-175,000

er section 115BAC of the Act

Self occupied 25%

Let out 75%
 Standard rent also not given

ER = Expected rent
AR = Actual rent

115BAC of the Act

75000 37500
he has opted out of default regime

he has opted for default regime

ction is not available in case of a self occupied property

t future years IFHP
nstruction of the house in PY 2023-24

2023-24 in 5 equal instalments

Profits and Gains from Business or Profession

What is a business?

Any trade, commerce or manufacture or any adventure or concern in the nature of trade, manufact

Compulsory maintenance of accounts - Section 44AA

Notified professionals (Notified under s.44AA and separately notified by CBDT)

Every person carrying on the following professions:

i. Legal
ii. Medical
iii. Engineering
iv. Architectural profession
v. Accountancy
vi. Technical consultancy
vii. Interior decoration
viii. Film artist (actor, director, camera man, music director, editor, singer, screen play
ix. Company secretary
x. Information technology related professionals
xi. Profession of authorised representative

2 Monetary limits for maintenance of specified books of accounts (in case of specified

i. Gross receipts exceed INR 1,50,000 in all the 3 years immediately preceding the
ii. If newly setup during the PY - gross receipts likely to exceed INR 1,50,000

3 Specified / Prescribed books of accounts (if above conditions are satisfied - in case of

a. Cash book
b. Journal (if accounts are maintained on mercantile basis)
c. Ledger
d. CC of bills and receipts (in relation to sums more than INR 25)
e. Original bills and receipts

In case of medical profession (apart from the above list):

a. Daily case register in Form 3C - (Patient name, Nature of service provided, Fees re
b. An inventory of stock of drugs, medicines, other consumables.

4 Period for which the above prescribed books of accounts are required to be maintaine
 6 years from the end of the relevant AY
7 years from the end of the relevant PY

5 Where these books of accounts to be kept? - Where the profession is carried.

Where the profession is carried at multiple places - Principal place of profession.

Persons other than notified professionals (who are doing business / profession

i. In case of individual or HUF

a. Existing business
Income earned from the business is more than INR 2,50,000; or
Total sales, gross receipts, turnover - more than INR 25,00,000
In any one of the three preceding PYs

b. In case of new business

Income earned from the business is expected to be more than INR 2,50,000; or
Total sales, gross receipts, turnover is expected to be more than INR 25,00,000

ii. Person (other than individual or HUF)

a. Existing business
Income earned from the business is more than INR 1,20,000; or
Total sales, gross receipts, turnover - more than INR 10,00,000
In any one of the three preceding PYs

b. In case of new business

Income earned from the business is expected to be more than INR 1,20,000; or
Total sales, gross receipts, turnover is expected to be more than INR 10,00,000

iii. What books of accounts to be maintained - Any books of accounts which enable the ta

How to compute income under the head PGBP

Particulars
Net profit as per P&L a/c.

A Add: Inadmissble expenses (Expenses debited to P&L a/c. but not allowable)
i. Depreciation as per P&L a/c.
ii. Other disallowances

B Less: Expenditure allowable as deduction but not debited to P&L a/c.

 i. Depreciation as per Income-tax Act, 1961
ii. Other allowances

C Less: Income credited to P&L account but not taxable / taxable under other heads of i

D Add: Income chargeable under the head PBGP - but not credited to my P&L

PGBP income

Points to be kept in mind while computing PGBP income

i Income / expense may be in cash or kind

ii Only revenue items is taxable as PBGP. Capital items are not taxable as PGBP. Exce
iii Accounts can be maintained as per cash or mercantile basis - whichever is regularly fo
iv Income from distinct business should be calculated separately.

Sections for PGBP

Particulars
Admissible expenses
Inadmissble expenses
Expenses and payments not deductible in certa
Profits chargeable to tax
Other provisions

1 DEPRECIATION - SECTION 32

i. Charge of depreciation is mandatory - Even if the assessee has not claimed depreciat
ii. Method for calculating depreciation
a. Block of asset - Where multiple assets of similar nature are there, all these assets w
All the depreciation calculation, including additions, deletions, etc. - will be based on th

b. 180 days criteria

If the asset is put to use for more than or equal to 180 days during the PY
If the asset is put to use for less than 180 days during the PY

For e.g., Asset 1 - Purchased on 1 April 2024 -

Asset 2 - Purchased on December 2024 - INR
Asset 3 - Purchased on Aug 2024 - INR 30 lak
 Type of asset (for companies act)
HP Laptop
Dell computer
Chairs
Tables
Interior decoration for building
False ceiling for building

As per income-tax
Block of asset
Block 1 P&M - 40%
Block 2 Furniture - 10%
Block 3 Building - 10%

04 October 2024

iii. Additional depreciation

a Additional depreciation is provided to an assessee - on the new plant and machinery p

b This additional depreciation is over and above normal depreciation
c Additional depreciation is at the rate of 20% - in case asset is put to use more than 18
d Where additional depreciation is allowed at 10% in Y1 on account of the asset put to u
e This additional depreciation is not allowable to a person who is paying tax at concessio
i.e., Person who has opted to pay tax u/s. 115BAC, 115BAA, 115BAB
f Important conditions for claiming additional depreciation
- It is only available to an assessee who is engaged in the business of manufacture / pro
- It is also available to an assessee who is engaged in the business of generation, trans
- It is available only in respect of new P&M. If the P&M is used either within India or outs
- Any P&M installed in office premises, residential accomodation or in any guest house
- Additional dep not allowed on office applicances, road transport vehicles
- Additional dep not allowed on a P&M - where whole or part of the actual cost of P&M i

Building, Furniture and Fixtures, Plant and machinery, Ships, Intangible assets
Important block of assets
Block
1 Building used for residential purpose
2 Building not used for residential purpose
3 Temporary erections such as wooden structure
4 Furnitures and fixtures including electrical fittin
5 Aeroplanes and Aeroengines (P&M)
6 Computer including computer software
7 Books
8 Plant and machinery (General rate)
9 Ships
10 Intangible assets
[Know-how, patents, copyrights, trademarks, licences, Franchise, etc]

1 Compute depreciation and WDV of the P&M block of asset in the following case

Particulars
Opening WDV of P&M as on 01 April 2024
New P&M purchased and put to use on 08 Jun
New P&M acquired and put to use on 15 Janua
Computer acquired and installed in office prem

Compute dep, additional dep and closing WDV in the case of Mr. A -
i. If he is paying tax under default regime
ii. If he has opted out of default regime

Answer Computation of depreciation, addtional depreciation and closing WDV in case of Mr. A

1 Default regime
Particulars
i. Opening WDV as on 01 April 2024
ii. Add: Additions - Put to use more than 180 days
Add: Additions - Put to use less than 180 days

iii. Less: Depreciation

a. Depreciation on opening WDV (15% x 30l)
b. Depreciation on assets put to use more tha
c. Depreciation on assets put to use less than 180 days
On P&M 15% - 7.5% x 800000
On Computer 40% - 20% x 300000
 Total depreciation

iv. Additional depreciation

v. Closing WDV

2 Opted out of 115BAC

Lionel
Nithin
Raam Vishwa
Iswaryaa
Srikrishna
Divya
Santharani
Anusha

i. Opening WDV
ii. Add: Additions - Put to use more than 180 days
Add: Additions - Put to use less than 180 days

iii Depreciation

iv. Additional depreciation

Asset put to use more than 180 days
Asset put to use less than 180 days

Total additional depreciation

v Closing WDV

Actual cost of asset (Section 43(1))

i. Cost of asset
Less: Amount paid by way of cash / other than
Actual cost of asset for section 43(1)
Depreciation

ii. Limit for cash transaction for section 43(1) - INR 10,000
 Scenarios
i Asset used for scientific research purpose

ii Inventory converted into a capital asset and

used for business / profession

iii Asset acquired by way of gift / inheritance

iv Second hand asset

v Re-acquisition of an asset

vi Building previously owned by the assessee

and brought into use for the purpose of
business

1 Interest paid / payable in connection with acquisition of asset - will not form part of ac
2 Subsidy / government grant - It has to be reduced from the cost of asset
3 Customs duty credit claimed - Should be reduced from the cost of asset

1 Calculate depreciation in case of Mr. A in the following scenarios

Assume that the assets are purchased by way of a/c payee cheque

Particulars
 1 Computer including comp software
2 Computer UPS
3 Computer printer
4 Books
5 Office furniture
6 Laptop

Answer Computation of depreciation in the hands of Mr. A for AY 2025-26

Particulars
Block 1 - P&M - Computers @ 40%
Asset put to use more than 180 days
Asset put to use less than 180 days

Block 2 - P&M - Books @ 40%

Asset put to use more than 180 days

Block 3 - Furnitures and fixtures @ 10%

Asset put to use more than 180 days

Total depreciation

Section 35 - Expenditure incurred on scientific research

- Where an assessee incurs any expenditure on scientific research in relation to the bus
- Any contribution made by an assessee for scientific research
a. Notified approved University / College / Research association / other institution for s
b. Notified bapproved University / College / Research association / other institution for
c. Approved Indian Company for scientific research
d. Approved National Lab / University / IIT / Specified person for specified research un

- For an assessee who has opted to pay tax at concessional rates u/s. 115BAC, 115BA
The contribution made for scientific research is not allowable as a deduction
However, expenditure (both revenue and capital) incurred by the assessee on scientifi

- Expenditure incurrred by the assessee - Both revenue and capital expenditure is allow
Amount of allowance = 100% of the expenditure (both revenue and capital) incurred b
This deduction is subject to the amount certified by the prescribed authority (Prescribe
- No depreciation u/s. 32 is allowable in case deduction u/s. 35 is claimed for capital exp
Capital expenditure - Excludes expenditure on purchase of land

- Any expenditure incurred by an assessee prior to the commencement of business, the

immediately preceding the PY in which the business is commenced - Is allowable as d

Capital expenditure - All expenditure allowable

Revenue expenditure - Only salary expenditure for research personnel is allowable

Sl. No Nature

i Incurred by the assessee

ii Contribution to outsiders

Problem Compute the deduction u/s. 35 in the following case if the assessee is paying tax unde

Particulars

Amount paid to notified approved Indian

i. Institute of Science, Bangalore for scientific
research
Amount paid to IIT Delhi for approved
ii.
scientific research programme

Amount paid to A Ltd, an Indian company

iii. which has its main objective as scientific
reseach and approved by prescribed authority

Revenue expenditure incurred by assessee

iv
on scientific research for his business
Capital expenditure (including purchase of
v land amounting to INR 4,50,000) incurred by
assessee for scientific research
 Srikrishna
Anusha
Divya
Nithin
Raam Vishwa
Santharani
Lionel
Iswaryaa

Section 35D - Amortisation of preliminary expenses

- Applicability
i. Only to Indian companies and resident non-corporate assessees
ii. in case of new companies - to the expenses incurred before commencement of bus
iii. In case of expansion (i.e., setting up of new unit) - Expenses incurred till new unit c

- Preliminary expenses - Available as deduction over 5 years (i.e., amortisation over 5 y

Beginning with the PY in which business commences; or
Beginning with the PY in which new unit commences production / operation

- Eligible expenses
i. Expenditure incurred in connection with
- Preparation of feasibility report
- Preparation of project report
- Conducting market survey / other survey necessary for the business
- engineering services

ii. Legal charges for drafting agreement between assessee and other person
iii. In case of company
- Legal charges for drafting MOA / AOA
- Printing of MOA / AOA
- Registration fees paid to Ministry of Corporate affairs
- In case of public issue - any expenses in connection with the same like underwriting

iv. Such other items as may be prescribed

- Limit prescribed
- In case of non-corporate assessee
- In case of a company
- Cost of project (in case of new set up entity)

- Cost of project (in case of extension)

- Capital employed

- Capital employed (in case of new unit)

- Audit of accounts

Section 35DDA - Amortisation of expenses incurred on VRS

- Applicability

- Amount of deduction

- No deduction is available under other provisions of the Act

Other deductions

Section
Deduction nature
No.
 Rents, rates, taxes, repairs and maintance
30
and insurance for buildings

Repairs and maintanence and insurance for

31
plant and machinery

36 Other deductions
Insurance premium paid for the purpose of
i business / profession - eg., against stock /
stores, etc
Insurance premium paid by employer for the
ii
health of the employee

iii Bonus / commission paid to employees

iv Discount on Zero Coupon Bonds

v Contribution to PF / other funds

 i. Employers' contribution

ii. Employees' contribution

vi Bad debts

37 Residuary deduction section

Conditions for section 37
i. The expenditure is not in the nature
described u/s. 30 to 36
ii. Actually incurred by the assessee during
PY
iii. It should be incurred for the purpose of the
business / profession
iv. Should not be any personal expense
v. Should not be a capital expenditure
vi. Should have been incurred after the
business was set up
vii. Should not have been incurred for any
purpose which is an offence or prohibited
under any law

CSR expenditure as per section 135 of

37
Companies Act, 2013
Donations
Keyman insurance policy
Advertisement in souvenirs of political parties
nture or concern in the nature of trade, manufacture or commerce

der s.44AA and separately notified by CBDT)

g professions:

man, music director, editor, singer, screen play writer, dress designer, etc.)

essionals

ecified books of accounts (in case of specified professions)

00 in all the 3 years immediately preceding the PY

s receipts likely to exceed INR 1,50,000

nts (if above conditions are satisfied - in case of specified professions)

on mercantile basis)

to sums more than INR 25)

om the above list):

atient name, Nature of service provided, Fees received, date of receipt)
dicines, other consumables.

d books of accounts are required to be maintained

 kept? - Where the profession is carried.
ltiple places - Principal place of profession.

sionals (who are doing business / profession other than the notified profession)

more than INR 2,50,000; or

more than INR 25,00,000

xpected to be more than INR 2,50,000; or

s expected to be more than INR 25,00,000

more than INR 1,20,000; or

more than INR 10,00,000

xpected to be more than INR 1,20,000; or

s expected to be more than INR 10,00,000

ned - Any books of accounts which enable the tax authorities to verify the income earned

head PGBP

Amount Amount
xxx

s debited to P&L a/c. but not allowable)

xxx
xxx xxx

ction but not debited to P&L a/c.

 xxx
xxx xxx

t but not taxable / taxable under other heads of income

ad PBGP - but not credited to my P&L

xxx

mputing PGBP income

GP. Capital items are not taxable as PGBP. Exception is - when the Act specifically provides for taxation of C
ash or mercantile basis - whichever is regularly followed by the assessee
be calculated separately.

Relevant sections
30 to 37
40
40A
41
-

Even if the assessee has not claimed depreciation - it needs to be allowed mandatorily by tax authorities

ets of similar nature are there, all these assets will be combined together and form a single block of asset
ing additions, deletions, etc. - will be based on the block of asset - and not based on individual assets

n or equal to 180 days during the PY Entire depreciation is allowed

180 days during the PY 1/2 of the depreciation is allowed

Year 1 deprecation as per accs

Computer 4
Computer 1.67
Building 3
 8.6666666667

Block of asset Amount Date of purchase

P&M - 40% 60,000 01 April 2024
P&M - 40% 70,000 01 December 2024
Furniture - 10% 15,000 01 August 2024
Furniture - 10% 30,000 31 October 2024
Building - 10% 70,000 01 February 2025
Building - 10% 190,000 31 March 2025

Total Additions Addition - put Addition - less than 180 days

130,000 60,000 70,000
45,000 15,000 30,000
260,000 0 260,000

an assessee - on the new plant and machinery purchased during a PY.

nd above normal depreciation
f 20% - in case asset is put to use more than 180 days. It is 10% if the asset is put to use less than 180 day
wed at 10% in Y1 on account of the asset put to use < 180 days, then the balance 10% is allowed as deducti
wable to a person who is paying tax at concessional rates
u/s. 115BAC, 115BAA, 115BAB
tional depreciation
o is engaged in the business of manufacture / production of an article or thing.
o is engaged in the business of generation, transmission or distribution of power
&M. If the P&M is used either within India or outside India - Additional dep not allowed
residential accomodation or in any guest house - Additional Dep not allowed
pplicances, road transport vehicles
- where whole or part of the actual cost of P&M is already allowed as deduction

nery, Ships, Intangible assets

 Rate of dep
5%
10%
40%
10%
40%
40%
40%
15%
20%
25%
marks, licences, Franchise, etc]

e P&M block of asset in the following case

Amount Block of asset

3,000,000 P&M 15%
2,000,000 P&M 15%
800,000 P&M 15%
300,000 P&M - Computers - 40%

sing WDV in the case of Mr. A -

04 Oct 2024

al depreciation and closing WDV in case of Mr. A for AY 2025-26

P&M 15% P&M - Computer - 40%

3,000,000 0
2,000,000 0
800,000 300,000

450,000 0
300,000 0
ess than 180 days
60,000
60,000
 810,000 60,000

0 0

4,990,000 240,000

4,510,000 240,000
4,510,000 240,000
3,910,000 240,000
4,510,000 240,000
4,510,000 240,000
4,510,000 240,000
4,600,000 240,000
4,510,000 240,000

3,000,000 0
2,000,000 0
800,000 300,000

810,000 60,000

0
400,000 0
80,000 0

480,000 0

4,510,000 240,000

500000
-500000
0
0

43(1) - INR 10,000

 Adjustment in actual cost
Actual cost = Actual cost of the asset -
Any deduction claimed u/s. 35 of the Act

Actual cost = Fair value of the inventory

as on the date of its conversion into a
capital asset (Determined in manner
prescribed)
Actual cost = Actual cost to the prev
owner less depreciation allowable to the
assessee as if the asset is the only
asset in the block
Actual cost = Amount given to purchase
the second hand asset
Actual cost shall be lower of the
following:

i. Actual cost when the assessee first

purchased the asset less depreciation
allowable as if it was the only asset in
the relevant block till the year of re-
acquisition

ii. Actual price at which the asset is re-

acquired

Actual cost = Actual cost to the

assessee less depreciation till the date
of bringing the asset into use in
business

with acquisition of asset - will not form part of actual cost for IT purpose
be reduced from the cost of asset
be reduced from the cost of asset

WDV
A in the following scenarios P&M - 15% 17
d by way of a/c payee cheque P&M - 15% 15
P&M - 15% 12

Date of acquisition Date of put to Amount

 27 Sep 24 01 Oct 2024 35,000.00
2 Oct 24 08 Oct 2024 8,500.00
01 Oct 24 01 Oct 24 12,500.00
01 Apr 24 01 Apr 24 13,000.00
01 Apr 24 01 Apr 24 300,000.00
26 Sep 24 08 Oct 24 43,000.00

Mr. A for AY 2025-26

Amount Amount of depreciation

47,500.00 19,000
51,500.00 10,300

13,000.00 5,200

300,000.00 30,000

64,500

research

diture on scientific research in relation to the business of the assessee

e for scientific research
ge / Research association / other institution for social science or statistical research
ege / Research association / other institution for scientific research
ntific research
/ IIT / Specified person for specified research undertaken under an approved programme

y tax at concessional rates u/s. 115BAC, 115BAA or 115BAB of the Act

search is not allowable as a deduction
and capital) incurred by the assessee on scientific research is allowable

e - Both revenue and capital expenditure is allowed.

xpenditure (both revenue and capital) incurred by the assessee
nt certified by the prescribed authority (Prescribed authority - Department of Scientific and Industrial Resear
n case deduction u/s. 35 is claimed for capital expenditure incurred for scientific research
diture on purchase of land

see prior to the commencement of business, the aggregate of expenditure incurred within 3 years
h the business is commenced - Is allowable as deduction u/s. 35 in the year of commencement

penditure for research personnel is allowable

Under default regime (115BAC, 115BAA, 115BAB)

If debited to
Allowability If given as additional info
P&L

No
Allowable adjustment We can claim as deduction
required
Diasllow - We
need to add
Not allowable No adjustment required
back to the
Profit

following case if the assessee is paying tax under default regime and if the assessee is opting out of default

Under default
Amount Under old regime
regime

100,000 0 100,000

250,000 0 250,000

400,000 0 400,000

300,000 300,000 300,000

850,000 400,000 400,000

700000 1,450,000
 Default regime Old regime
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000
700,000 1,450,000

Date of incorporation
ent non-corporate assessees Date of commencement of busin
xpenses incurred before commencement of business
p of new unit) - Expenses incurred till new unit commences operation

eduction over 5 years (i.e., amortisation over 5 year period)

ess commences; or
nit commences production / operation

rvey necessary for the business

nt between assessee and other person

Corporate affairs
es in connection with the same like underwriting charges, etc

5% of the cost of project

5% of capital employed
 Actual cost of fixed assets (including land, building, P&M,etc)
as per books of accounts on the last day of the PY in which
business commences

Actual cost of fixed assets (including land, building, P&M,etc) - In so far as it relates to the expansi
as per books of accounts on the last day of the PY in which
new unit commences manufacturing

Share capital, debentures, long term borrowings as on the last day of the PY
in which business commences

Share capital, debentures, long term borrowings relating to expansion as on the last day of the PY
in which new unit starts mfg

Irrespective of the thresholds prescribed u/s. 44AB - In case an assessee claims deduction
u/s. 35D of the Act, the person is required to get his books of accounts audited under the Income-t

urred on VRS

For all the assessees

Where any expenditure is incurred on VRS during the PY

1/5th of the VRS expenditure in the PY in which it is incurred

Balance in equal installments over the period of next 4 PYs

provisions of the Act

Specific pointers
It should be revenue expenditure and
not capital expenditure

The building / assets should be used for

the purpose of business

If used both for personal and business

purpose, deduction will be allowable
proportionately to the extent of the asset
used for business

It should be revenue expenditure and

not capital expenditure

The mahincery should be used for the

purpose of business

If used both for personal and business

purpose, deduction will be allowable
proportionately to the extent of the asset
used for business

- The bonus / commission which is

otherwise payable as dividend / profits
[apportionment of profit] is not allowable
as deduction

- Section 43B - Provides for timing of

allowance of bonus [among other
expenses]. As per section 43B - a bonus
which is allowable u/s. 36 is allowable
as deduction only on actual payment

It is allowable as deduction on pro rata

basis over the period of life of the bond
- Allowable as deduction subject to
conditions u/s. 43B
- Allowable as deduction only if the
payment is made on or before the due
dates prescribed under the respective
Act.

- Important point to note - Section 43B

provision is not applicable for a
employees' contribution

- The amount in respect of bad debts is

taken into account while computing total
income

- Actual write off in the books of

accounts is necessary i.e., Provision for
bad debts is not allowbale as deduction.
Only actual bad debts is allowable as a
deduction

Disallowed - Not allowable as a

deduction - Not incurred for business /
profession
Disallowed
Allowable as a deduction
Disallowed
des for taxation of Capital items, it is taxable

by tax authorities

gle block of asset

vidual assets

s allowed
 Rate of dep for compaDep as per WDV Sale price
20% 12,000 48,000 50000
20% 4,667
15% 1,500
15% 1,875
30% 3,500
30% 0
23,542

Y1
Rate of depreciation Depreciation Opening WDV
40% 38,000 Add: Additions during the year
10% 3,000 Less: Depreciation @ 40%
10% 13,000 Less; Sale consderation
54,000 Closing WDV

Y2
Opening WDV
Less: Sale consideration
Closing WDV (for business)

e less than 180 days Short term capital gain

allowed as deduction in Y2
Y3
Opening WDV
Less: Sale consideration
Closing WDV

Short term capital gain

 28
30
31
31
28
31
179
 Books 10
Sale 15
Profit 5

Sale consideration Closing WDV

15 2
15 0 4
15 0 Short term capital gain of 3 crores

Block of asset
 P&M - Computer - 40%
P&M - Computer - 40%
P&M - Computer - 40%
P&M - Books - 40%
F&F - 10%
P&M - Computer - 40%

d Industrial Research)
n 3 years

Under old regime

If given as
If debited
Allowability additional
to P&L
info
No We can
Allowable adjustment claim as
required deduction

No We can
Allowable adjustment claim as
required deduction

opting out of default regime

Period prior to incorporation
Incorporation till commencement of business
Post commencement of business
ates to the expansion

e last day of the PY

s deduction
under the Income-tax Act
100000
130000
72000
50000
108000

108000
120000
0

12000

0
200000
0

200000
PGBP - Disallowances

Sl. No Section Particulars

- Applicable in case of payment made to

a Non-resident where tax is required to
be deducted but not deducted by the
assessee.
i. Section 40(a)(i)
- In such cases - 100% of the
payment / expenditure will be
disallowed

- Applicable in case of payment made to

a resident where tax is required to be
deducted but not deducted by the
ii. Section 40(a)(ia) assessee.

- In such cases - 30% of the payment /

expenditure will be disallowed

Any tax levied on profits and gains of

iii. Section 40(a)(ii) any business or profession - which is
included in P&L - will be disallowed
Non-deduction of tax at source on
'Salaries' paid by a person outside India
iv. Section 40(a)(iii)
or to a non-resident - Entire amount
disallowed

Any contribution to PF or any fund

established for the benefit of employees
- unless the employer has made
v. Section 40(a)(iv)
effective arrangements to make sure tax
is deducted at source on the payment
made from the fund to the employees

Tax paid on perquisites on behalf of the

vi. Section 40(a)(v)
employee
 Disallowance of expenses / payments
vii. Section 40A(3) made in excess of INR 10,000 other
than through presribed modes

viii. Section 40A(7) Provision for gratuity

 Certain deductions allowable only on
ix. Section 43B actual payment
[other than MSME payments]

x. Section 43B (MSME) Payment made to MSME

Partnership disallowance - Disallowance in case of partnership

xi.
Section 40(b) firms / LLPs, etc.

Example - Partnership
Firm has paid - INR 850000 as remuneration to its partners. Its book profit is INR 10,00,000. Compute the

Particulars Amount
On first 6 lakhs 540000
On the balance 4 lakhs 240000
780000
Actual remuneration 850000
Remuneration disallowed 70000

Example - Book profit

Book profit

i. 100,000 90,000
ii. 500,000 450,000
iii. 600,000 540,000
iv. 750,000 630,000
v. 1,200,000 900,000
vi. -600,000 300,000
Actual salary paid is 4,20,000 820000
What is the amount of disallowance

Max deduction Disallowance

i. 300,000 520,000
ii. 450,000 370,000
iii. 540,000 280,000
iv 630,000 190,000
v 900,000 0
vi 300,000 520,000

Problem - Calculation of book profit and remuneration

A partnership firm - Has a Net profit of INR 17,00,000 before deduction of following items:

a. Salary of INR 40,000 each per month payable to two working partners (Authorised by deed)
b. Depreciation calculated as per section 32 - INR 1,50,000
c. Interest on capital - 15% per annum (as per partnership deed) - Amount of eligible capital is INR 5

Compute book profit and allowable partner's salary

Answer Computation of book profit for AY 2025-26

Particulars Amount
Net profit as per P&L
Less: Depreciation 150,000
Allowable interest @ 12% 60,000
Book profit as per section 40(b)

Computation of allowable partner's salary

Particulars Amount (in INR)

On first 6 lakhs 540,000
On the balance amount 534,000
Maximum salary 1,074,000

Salary actually paid to partners 960,000

 Important pointers

i. These sections are also applicable in a case where the assessee has
deducted tax at source but not remitted to the Government within the due
date of filing the return of income (Non-resident - 100% disallowance;
Resident - 30% disallowance).

ii. In case an assessee fails to deduct tax at source - no disallowance u/s.

40(a)(i) or 40(a)(ia) will be made if:
a) The payee has furnished his return of income for the respect AY;
b) He has included such amount as his income in the return of income filed:
c) He has paid taxes on the same and furnishes a certificate to this effect
from an accountant

[Disallowance will be made in Y1 - However, it can be claimed as allowance

in Y2]

iii. The amount of disallowance made on account of non-deduction / non-

remittance of TDS, will be allowed as a deduction in the year in which the tax
is deducted at source / year in which the TDS payment is made

-
i. Applicable in case a person makes payment of more than INR 10,000 to a
single person in a single day other than through prescribed modes.

ii. Prescribed modes - A/c payee cheque, A/c payee bank draft, ECS, credit
card, debit card, net banking, IMPS, UPI, RTGS, NEFT, BHIM Aadhar pay

iii. Where the payment is in excess of INR 10,000 - entire expenditure is

disallowed

iv. Y1 - any amount of expenditure is outstanding as payable. In Y2 - The

person is making the payment. In Y2 - if the payment in a single day is more
than 10000 - the expenditure will be disallowed in Y2.

v. In case payment is made to a transport operator for plying, hiring, leasing

of goods carriages - the limit is increased to INR 35,000

vi. Exceptions to this section:

a. Where payment is made to a bank (RBI, SBI, any banking company, etc.)
b. Payment made to LIC
c. Payment is made to Government - if such payment is compulsorily
required to be made in cash, etc.
d. Payment made to purchase of agri / forest produce, fish / fish products,
produce of animal husbandry or dairy or poultry farming, products of
horticulture or apiculture to the cultivator, producer, grower of such products.
Exception in the above case not applicable to a middlemen
e. Payment made for purchase of products which are manufactured /
processed without the aid of power in a cottage industry.
f. Payment made in a vliiage or town - which on the date of making such
payment is not served by any bank
g. Payment made by a person to his agent who is required to make payment
in cash for goods / services on behalf of such person
h. payment is made to authorised dearler of money changer against
-purchase
Provisionoffor
foreign currency
gratuity in the normal
is disallowed course 40A(7)
under section of his business
of the Act
- However, provision for gratuity made towards contribution for an approved
gratuity trust is allowed in the year of creation of provision.
- Since this provision towards approved gratuity trust / fund is allowed in the
year of creation of provision, the same shall not be claimed as a deduction in
the year of payment of gratuity / contribution to the trust or fund.
- Any tax, duty, cess or fee by whatever name called under any law for the
time being in force
- Any sum payable towards employer's contribution to any PF, Super
annuation fund, Gratuity fund, or any other fund for the welfare of the
employees.
- Bonus or commission for services rendered payable to employees;
- Any interest on loan taken from bank, financial institution, notified NBFC,
co-operative bank, State financial corporation, etc.,
- Leave salary payable to employees

If actually paid on or before the due date of filing return of income for a
particular AY - Then allowable as deduction in that AY

If paid after due date for filing return of income, allowable in the year of
payment

- Where an expenditure is incurred towards MSME, such expenditure is

allowable only if it is actually paid on or before the due dates as per MSME
Act.

- If not paid, it will be allowable as a deduction for the year in which it is

actually paid.

- Due date as per MSME Act

a) Where there is an agreement between MSME vendor and the entity - due
date is as per the agreement (maximum no. of days is 45 days)

b) Where there is no agreement - 15 days

1. Any remuneration paid to a non-working partner will be disallowed.
2. Any remuneration paid to a working partner - but not authorised by
partnership deed is disallowed
3. Any remuneration / interest paid to a working partner and authorised by
partnership deed - but relating to an earliier period is disallowed [Earlier
period - Period prior to authorisation of partnership deed]
4. Any interest paid to a partner - which is authorised by the deed - more
than 12% p.a. is disallowed [This interest can also be authorised to be paid
to a non-working partner]. Only the excessive interest is disllowed and not
the entire interest.
5. Prescribed limit for a remuneration to a working partner:
a. On first 6 lakhs of the book profit on in case of loss - INR 3,00,000 or 90%
of book profit, whichever is higher
b. On profit
Book the balance amount
= Net profit of book
as per P&L profit - 60 % of book
+ All disllowances profit
- All allowances +
Partner's salary if already debited to P&L
t is INR 10,00,000. Compute the amount of remuneration available as deduction

Higher of 90% of 1L and 3L = 3L. So max deduction is 3L

Higher of 4.5L and 3L is 4.5L
Higher of 5.4L and 3L is 5.4L
6L x 90% + 1.5L x 60%
6L x 90% + 6L x 60%

following items:

rtners (Authorised by deed)

Amount of eligible capital is INR 5,00,000

Amount
1,700,000

210,000
1,490,000

Srikrishna
Iswaryaa
Nithin
Divya
Lionel
Santharani
Anusha
Raam Vishwa
 March 2025 10 crores R - Not deducted tax
AY 2025-26 - Return of in 3 crores disallowed u/s. 40(a)(ia)
June 2025 - I am deducting tax

3 crores disallowed in PY 2024-25 - Will be allowed as deduction in PY 25-26

Allowable salary
1,074,000
1,074,000
1,074,000
1,074,000
960,000
1,074,000
1,074,000
1,074,000
 Disallowance u/s. 43A
i.
(Similar to AS 11)
ii. Speculation business
iii. Deduction u/s. 35AD
iv. Tax audit u/s. 44AB
v. Presumptive taxation - 44AD, 44AE, 44ADA
vi. Section 40A(2)

Presumptive taxation

Particulars Section 44AD

Eligibility Resident Individual, HUF and Firm (excluding LLP)
Nature of activities Engaged in business
ii. A person earning income in the nature of
Exclusions
commission
Turnover or brokerage
/ gross receipts in the relevant PY is less
Threshold - General
than or equal to INR 2 crores
Special threshold
Presumptive income which Provided
the that the gross receipts which have been
assessee.
Requirement of
needs to be offered to tax
maintenance of books of Not required to maintain as per section 44AA
Requirement
accounts of audit of the
Not required to get the books audited u/s. 44AB
books of accounts u/s. 44AB out of 44AD in AY 2026-27 - then such person is
Other condition
disentitled from claiming presumptive basis u.s
AY 2025-26 - Opting for 44AD
The person has to declare his income u/s. 44AD for
AY 2026-27 to AY 2030-31
But - if the person comes out of 44AD - lets say in
AY 2027-28
He will not be able to declare his income u/s. 44AD
till AY 2032-33

In the above case, you have to maintain your books

of accounts u/s. 44AA and get your books of
aaccounts audited - if his total income is more than
basic exemption limit

17000000
2000000
15000000

Section 44AB Tax audit

Applicability - General
I. In case of persons carrying on business
threshold

Applicability - Special
I. In case of persons carrying on business
threshold

Applicability - General
II. In case of persons carrying on profession
threshold

Special applicability Please refer to other condition in 44AD and 44ADA

Summary

Person carrying on
profession

Gross receipts Applicability

Not applicable
i. Less than 50 lakhs However, if his total income is less than 50% of the
gross receipts - then applicable
ii. More than 50lakhs and Not applicable - if he has opted to declare his
less than 75 lakhs income under presumptive taxation u/s. 44ADA
iii. More than 75 lakhs Applicable

Audit report is required to be furnished - Form 3CA,

Other conditions
3CB, 3CD

3CA - Applicable if the person is requried to get his

books of accounts audited under any other law
 3CB - Applicable in case of person where he is not
required to get his books of accounts audited under
any other statue
3CD - It is the annexure to Form 3CA, 3CB as
applicable - and contains 44 clauses

Tax audit report to be Before 1 month from the end of the month in which
furnished when? the person is required to file his return of income

i. Where the return due date is 31 Oct - on or

before 30 Sep
ii. Where the return due date is 30 Nov - on or
before 31 Oct

Penalty for failure to get the

Penalty - Lower of the following
books of accounts audited

a) 0.5% of the total sales, turnover, gross receipts of

the business / profession in the relevant PY
b) 1,50,000

Presumptive taxation -
44AE

An assessee who is engaged in the business of

plying, hiring or leasing goods carriage
Eligibility / Nature of
Business
Eligibility - If the person owns not more than 10
goods carriage at any time during the PY

i. For heavy vehicle - INR 1,000 per ton of gross

vehicle weight for every month or part of the month
Presumptive income
ii. For other vehicle - INR 7,500 per month or part of
month - per vehicle

Requirement of
maintenance of books of Not required to maintain as per section 44AA
accounts

Requirement of audit of the

Not required to get the books audited u/s. 44AB
books of accounts u/s. 44AB
 If the eligble assessee claims that his income is
lower than the profits computed by applying the
Other conditions presumptive rate, he has to maintain books of
accounts and other documents u/s. 44AA and get
his accounts audited.
Deduction u/s. 40(b) - Salary and interest paid to
partners is tax deductible - Subject to conditions
prescribed u/s. 40(b)

Any goods carriage, where the gross vehicle weight

Heavy goods vehicle
is more tha 12,000 kg

Speculative business

Speculative business includes a transaction of

purchase or sale of any commodity (including stock
a. For normal assessee
and shares) which is periodically or ultimately
(other than a company)
settled otherwise than actual delivery or transfer of
the commodity

If a part of the business of the Company includes

sale and purchase of shares of other companies,
b. Company such Company shall be deemed to be carrying on
speculative business to the extent to which the
business consists of purchase and sale of shares

Exceptions for a company

i. A company whose income mainly consist s of
(Business of trading in
income chargeble under the heads of income - other
shares shall not be deemed
than business income
as speculative business)

ii. A company, whose principal business is

- business of trading in shares

- banking company
- granting of loans and advances

Why speculative business

differentiation?

Transactions not deemed

to be speculative
transactions

i. Hedging contract in respect of raw materials and merchandise

ii. Hedging contract in respect of shares and stock
iii. Forward contract
iv. Trading in derivatives
v. Trading in commodity derivatives

Section 35AD - Investment linked tax incentives

Eligibility An assessee engaged in specified business

100% of the capital expenditure incurred is available
Deduction available as deduction in the year of commencement of
business
Does not include - Land, Goodwill or any financial
Capital expenditure
instrument
1. Not available to a person opting to pay tax u/s.
Other conditions
115BAC, 115BAA or 115BAB
2. Cash expenditure more than INR 10,000 is not
available as deduction
3. Any expenditure prior to the commencement of
operations, will be allowed as deduction in the year
of commencement

4. The new unit should not be set up by splitting up

or reconstruction of a business already in existence

5. It should not be set up by transfer to the specified

business of the P&M which is previously used for
any purpose
However, 20% of the total value of P&M can be
second hand P&M

Specified business

Date of commencement of
Specified business
operations

Laying and operating cross country natural gas

On or after 01 April 2007 pipeline network for distribution, including storage
facilities (being an integral part of such network)

Building and operating anywhere in India, a hotel of

On or after 01 April 2010 2 star or above category as specified by Central
Government
Building and operating a hospital with at least 100
On or after 01 April 2010
beds for patients
Notified scheme for slum redevelopment or rehab
On or after 01 April 2010
housing projects
On or after 01 April 2011 Notified scheme for affordable housing projects
 Production of fertilizer in a new plan or in a newly
On or after 01 April 2011
installed capacity in an existing plant
Setting up and operating a warehousing facility for
On or after 01 April 2012
storage of sugar
On or after 01 April 2012 Bee-keeping and production of honey and beeswax

Setting up and operating an inland container depot

On or after 01 April 2012 or a container freight station notified or approved
under Customs Act, 1962
Laying and operating a slurry pipeline for
On or after 01 April 2014
transportation of iron ore
Setting up and operating semi-conductor wafer
On or after 01 April 2014
fabrication manufacturing unit
Developing or oprating and maintaining or
On or after 01 April 2017 developing, operating and maintaining any
infrastructure facility
Setting and operating cold chain facilities for
On or after 01 April 2009
specified products
Setting and operating warehousing facilities for
On or after 01 April 2009
storing agricultural produce

Forest produce, meat and meat products, poultry,

Specified products for cold
marine and dairy products, products of horticulture,
chain facilities
floriculture, apiculture and processed food items

Chain of facilities for storage and transportation of

Cold chain facility the above products
Including refrigeration and other facilities necessary
for preservation of such produce

If any deduction is claimed u/s. 35AD - then the

books of accounts is required to be audited and
Additional provisions report to be given in the prescribed form

i. The asset for which section 35AD deduction is claimed shall be used for a minimum period of 8 years
ii. If not used for 8 years and transferred or discarded or destroyed - then the sum received on
transfer - shall be chargeable to tax under the head PGBP
iii. If the asset is used for other business within this 8 year period - then the cost of asset less deprecaition
shall be deemed to be the income of the year in which it is used for other business

Depreciation is available for the other business under section 32 of the Act from the year in which the asse
The cost of acquisition will be the amount of income offered to tax in the year of using the asset for the oth
ii. On actual payment / on actual settlement - if
Done

Done
Done
Done

Section 44ADA
Resident Individual, HUF and Firm (excluding
LLP)
Engaged in profession which is specified under
section 44AA
-
Gross receipts is less than or equal to INR 50
lakhs
50% of the
Provided gross
that the receipts or suchwhich
gross receipts higher sumbeen
have
claimed to have been earned by the assessee.
Not required to maintain as per section 44AA
Not required to get the books audited u/s. 44AB
presumptive rate, he has to maintain books of
accounts and other documents u/s. 44AA and get

Total turnover
Total turnover received in cash 160000
Received otherthan by cash - Prescribed modes
900000
1060000
If his total sales / gross receipts / turnover in
business is more than 1 crore in the relevant PY

However, if the person has opted to declare his

total income as per provisions of section 44AD -
then tax audit is not applicable
If his total sales / gross receipts / turnover in
business is more than 10 crore in the relevant
PY
Condition to be satisfied:
i. Aggregate cash receipts in the relevant PY is
less than or equal to 5% of the total sales, gross
receipts or turnover; and
ii. Aggregate of cash payments in the relevant PY
is less than or equal to 5% of the total
expenditure incurred
If his gross receipts is more than 50 Lakhs during
the relevant PY
However, if the person has opted to declare his
total income as per provisions of section 44ADA -
then tax audit is not applicable
International taxation is not in inter level
or a minimum period of 8 years
n the sum received on

he cost of asset less deprecaition calculated u/s. 32 till the year of use for other business
business

ct from the year in which the asset is used for the other business
year of using the asset for the other business
Question No. 4

Allowability of expenses under the Income-tax Act, 1961 ('the Act')

a. As per section 40A(3) of the Act, any payment other than by way
If it is made to a single person on a single day for an amount exce

However, Rule 6DD provides for certain exceptions to the above.

made for purchase of agricultural produce directly from the growe
u/s. 40A(3) is attracted even in a case where the payment is more

Therefore, in the given case, payment made to the farmer for purc
is an allowable expenditure

b. As per section 40(a)(v) of the Act, any income-tax paid by the em

to its employee is not allowable as deduction while computing the

Therefore, in the given case, the amount of INR 20,000 represent

c. Expenses incurred for fire insurance is allowable as per section 3

payment for the purpose of section 40A(3) of the Act for payments

Thus, the amount of INR 50,000 towards fire insurance paid throu

d. In case of salary paid by a person outside India without deduction

is disallowed as per section 40(a)(iii) of the Act. Thus, the payme
is not allowable.

e. The limit prescribed under section 40A(3) of the Act in case of pa

or a/c payee bank draft or use of ECS or through such other pres
goods carriage is INR 35,000

In the present case, since the payment made to a transporter for g

it is an allowable expenditure as per section 40A(3).

Question 6.

Computation of total income of MR. R for AY 2025-26

Particulars Amount Amount

Income under
III.
the head PGBP
 Net profit as per
profit and loss 500,000
account

Expenses
Add: debited to P&L
Not allowable

SGST Penalty
i. paid disallowed 5,000
[Refer Note 2]

Depreciation
ii. 200,000
debited to books

Interest to bank
not paid within
due date
iii. prescribed. 40,000
Disallowance
made under
section 43B

Disallowance
under section
40A(2) -
iv. Commission paid 10,000 255,000
to brother more
than the market
rates

Expenses
allowable as
Less:
deduction but not
debited to P&L

Depreciation
allowable as per
i. 223,500
section 32 [Refer
Note 1]
Salary paid to
staff but failed to
ii. 48,000 -271,500
be recorded in
the books
 Income
chargeble under
Less: other heads /
Income not
chargeable to tax

Dividend income
i. - chargeable 15000
under other head

Agricultural
ii. income not 180,000 -195,000
chargeable to tax

PGBP 288,500
IFOS 15000
Total income 303,500
Notes:
1 Calculation of depreciation under section 32
Particulars Amount
Opening WDV as o 1,190,000
Add: Additions mo 200,000
1,390,000
Depreciation on A 208,500

Additions less tha 200,000

Depreciation on ad 15,000

Total depreciation 223,500

2 We have assumed that SGST penalty is for contravention of the p

However, if the penalty is compensatory in nature, the same can

3 Disallowance under section 40A(3) is not applicable where the pa

other than through a a/c payee cheque, a/c payee BD, through pr
and the payment amout is less than INR 35,000 in a single day
In the present case, since INR 33,000 is less than the prescribed

Question No. 7
Mr X is eligible for opting for the presumptive income under section 44AE of the Act, since he does not own
vehicle at any time during the PY 2024-25.
In case of presumptive taxation under section 44AE of the Act, the following shall be the income of Mr. X
a) For heavy goods vehicle - INR 1,000 per ton of each vechile for a month or part of the month
b) For other goods - INR 7,500 per vehicle per month or part of the month

For the purpose of section 44AE, heavy goods vehicle means any goods carriage where the weight of suc

Computation of income of Mr. X u/s. 44AE of the Act

A) For heavy goods

No of months No of months
Date of for which the x no of
No of vehicles
purchase vehicle is vehicles x
used ton

2 29 Aug 24 8 240
1 23 Feb 25 2 30
270

Presumptive income for heavy goods vehicle 270,000

B) Other goods vehicle

No of months
No of months
Date of for which the
No of vehicles x no of
purchase vehicle is
vehicles
used

2 10 Apr 24 12 24
1 15 Mar 25 1 1
3 16 Jul 24 9 27
1 02 Jan 25 3 3
55

Presumptive income for other goods vehicle 412,500

Total presumptive income of Mr. X 682,500

Question No. 8
Mr S is eligible for opting for the presumptive income under section 44AE of the Act, since he is engaged in
does not own more than 10 goods carriage vehicle at any time during the PY 2024-25.
In case of presumptive taxation under section 44AE of the Act, the following shall be the income of Mr. S
a) For heavy goods vehicle - INR 1,000 per ton of each vechile for a month or part of the month
b) For other goods - INR 7,500 per vehicle per month or part of the month

For the purpose of section 44AE, heavy goods vehicle means any goods carriage where the weight of suc

A. Computation of total income of Mr. S under presumptive taxation u/s. 44AE

a) For heavy goods

No of
vehicles x no
No of vehicles No of months Ton
of months x
ton

5 12 15 900
1 2 15 30
930

Presumptive income for heavy goods vehicle 930000

b) For other goods

No of vehicles
No of vehicles No of months x no of
months

4 12 48
1 11 11
59

Presumptive income for other vehicle 442500

Total presumptive income 1,372,500

Other income 70,000
Total income in case of opting 44AE 1,442,500

B. Computation of total income of Mr. S under normal provisions

Particulars Amount Amount

Net profit 445,000
Other income 70,000
Total income under normal provisions 515,000

Conclusion

The total income of Mr. S, if he has opted for presumptive taxation u/s. 44AE is INR 14,42,500
However, as per section 44AE, where an assessee claims profits lower than the presumptive income, then
and get them audited under section 44AB of the Act

In the present case, the total income of Mr. S (if he has maintained books of accounts) is INR 5,15,000
If Mr. S wants to declare an income of INR 5,15,000 (which is less than the total income calculated as per
He has to maintain books of accounts and get them audited under section 44AB of the Act.

Question No. 5

Computation of PBGP income of Mr. S for AY 2025-26

Particulars Amount Amount

Net profit as per P&L 50,000
Add: Inadmissble expenses / losses
i. Depreciation 105,000
ii. Loss on sale of shares 8,100
(To be taxed underofthe
iii. Undervaluation head stock
closing 'Capital gain') 18,000
iv. Disallowance u/s. 40A(2) - salary 2,000
paid to brother
v. Disallowance under section 40A(3) - 23,200
Payment in cash more than INR 10,000

vi. Donation to public charitable trust - 2,000 158,300

Disallowance under section 37
208,300

Less: Admissible deductions / Income chargeable under other heads

i. Depreciation u/s. 32 80,000
ii. Undervaluation of opening stock 9,000
iii. Interest income from UTI (Chargeble 2,400 91,400
under income from other sources)

Total business income 116,900

Computation of depreciation u/s 32

Particulars Amount Amount

Opening WDV 420000
Add: Purchases - Put to use more than 180 days 70000
Less: Sales 50000
440000
Normal depreciation @ 15% 66000
Additional depreciation @ 20% 14000
Total depreciation 80000

In case 44AD is opted - Business income = 1,12,11,500*6%

672,690
ayment other than by way of prescribed modes shall be disallowed
gle day for an amount exceeding INR 10,000

n exceptions to the above. As per Rule 6DD, in case the payment is

ce directly from the grower, producer or cultivator, then no disallowance
where the payment is more than INR 10,000

made to the farmer for purchase of oil seeds amounting to INR 50,000

ncome-tax paid by the employer on non-monetary perquisites provided

uction while computing the income under the head PGBP.

nt of INR 20,000 representing tax on non-monetary perquisites shall be disallowed.

allowable as per section 36 of the Act. Further, credit card is a prescribed mode of
(3) of the Act for payments made more than INR 10,000.

s fire insurance paid through credit card is an allowable expenditure

de India without deduction of tax at source, then the entire amount of payment
the Act. Thus, the payment of INR 10,00,000 representing salary paid outside India

3) of the Act in case of payment made otherwise than through a a/c payee cheque
or through such other prescribed mode to a person for plying, hiring or leasing of

made to a transporter for goods carriage in a single day is INR 30,000 (which is less than INR 35,000)
ction 40A(3).
s for contravention of the provisions of the GST law and hence have disallowed
y in nature, the same can be claimed as a deduction

ot applicable where the payment is made to a trasport of carriage goods

a/c payee BD, through prescribed modes
R 35,000 in a single day
s less than the prescribed limit, disallowance u/s. 40A(3) is not applicable.
Act, since he does not own more than 10 goods carriage

l be the income of Mr. X

art of the month

e where the weight of such vechicle is more than 12,000 kgs

Ton

15
15
Act, since he is engaged in the business of plying goods carriage and

l be the income of Mr. S

art of the month

e where the weight of such vechicle is more than 12,000 kgs

NR 14,42,500
presumptive income, then he is required to maintain books of accounts

ounts) is INR 5,15,000

income calculated as per presumptive taxation u/s. 44AE) -
of the Act.
R 35,000)
Capital asset Population as per
Aerial distance from Municipal board latest census
i 1 km 9,000
ii 1.5 km 12,000
iii 2km 1,100,000
iv 3kms 80,000
v 4kms 300,000
vi 5 kms 1,200,000
vii 6kms 8,000
viii 7kms 400,000
ix 8kms 1,050,000
x 9kms 1,500,000

FY - 2 50000
FY 20 1000000

CW problems

1 Computation of income under the head capital gains in the hands of Mr. D for AY 2025-26
Amount
Particulars (in INR)
Full value of consideration 80000
Less: Cost incurred on transfer 5000
Net sale consideration
Less: Cost of acquisition 20000
Less: Cost of improvement 25000
Short term capital gain

Notes:
Since the ring is held for a period of less than 36 months (transferred before 23 July 2024) - the gain
short term capital gain

2 Computation of income under the head capital gains in the hands of Mr. Rajat for AY 2025-26
Amount
i) Particulars (in INR)
Full value of consideration 1400000
Less: Cost incurred on transfer 0
Net sale consideration
Less: Cost of acquisition
Less: Cost of improvement
Long term capital gain
 Amount
ii) Particulars (in INR)
Full value of consideration 1400000
Less: Cost incurred on transfer 0
Net sale consideration
Less: Indexed Cost of acquisition
Less: Indexed Cost of improvement
Long term capital loss

Indexed cost of acquisition

Since the asset is purchased before 01 April 2001, the cost of acqusition for the purpose computing
Either the actual cost of acquisition or the FMV of the asset on 01 April 2001 - at the option of the As

Cost of acquisiton 400000

Indexed cost of acquisition
[4,00,000 x 363/100] 1,452,000.0

3 Computation of capital gain of Mr. Anand for AY 2025-26

i He has exercised the option for indexation benefit
Particulars Amount
Full value of consideration 1,800,000
Less: Brokerage 36,000
Net sale consideration
Less: Indexed cost of acquisition 1,728,571
[5,00,000 x 363/105]
Less: Indexed cost of improvement 803,097
[2,50,000 x 363/113]

Loss from long term capital asset / Long term capital loss

ii He has not exercised the option for indexation benefit

Particulars Amount
Full value of consideration 1,800,000
Less: Brokerage 36,000
Net sale consideration
Less: Cost of acquisition 500,000
Less: Cost of improvement 250,000

Long term capital gain

Tax on long term capital gain @ 12.5%
Add: Cess @ 4%
Total long term capital gain tax
4 A is the owner of a car. He purchased the car on 01 April 2023 for INR 5,00,000.
On 1-4-2024, he starts a business of purchase and sale of motor cars.
He treats the above car as part of the stock-in-trade of his new business - On 01 April 2024 - the FM
He sells the same on 31-3-2025 for INR 6,00,000 and gets a profit of INR 1 lakh. Discuss the tax imp

PGBP
Aravind 50,000
Anusha 50,000
Lionel 50,000
Iswarya 50,000
Holika 50,000
Raam 50,000
Divya 50,000
Santharani 50,000
Srikrishna 50,000
Nithin 100,000
Kamal 50,000

Answer: - Car is not a capital asset. Hence, the income of INR 1 lakhs will be considered as income

5 Computation of capital gain and business income of X

Since the capital asset was converted into a stock-in-trade during FY 2023-24, it will be considered a
AY 2024-25. However, the profit / gain from the above conversion will be taxable only in the year in w
For the purpose of computing capital gain income, the FMV as on the date of conversion will be trea

Actual sale value minus the FMV as on the date of conversion will be treated as business income

Particulars Amount
i. Capital gains
Full value of consideration (FMV as on 10 March 2024)
Less: Cost incurred on transfer
Net sale consideration
Less: Indexed cost of acquisition (since date of transfer is 10 March 2024)
Cost of acquisition x CII in the year of transfer / CII in the year of purchase

[60,000 x 348/122]
Long term capital gain taxable in AY 2025-26

ii. Business income

Sale consideration
Less: FMV on the date of conversion
PGBP income taxable in AY 2025-26

7 Computation of Capital gain and business income in the hands of Mr. A

A For 6,000 shares converted into stock-in-trade - capital gain provision is not applicable since the con

B For 2,000 shares - Capital gain is applicable and the date of transfer will be 01 May 2007. FMV as o
Taxable in AY 2025-26 (i.e., the year in which it is ultimately sold)
Diff between actual sale consideration and FMV on the date of conversion will be treated as busines

C For the balance 2,000 shares - it will be treated as a capital gain income.

Particulars Amount
PGBP income
Cat A Sale consideration 1,350,000
6000 Less: Brokerage @ 2% 27,000
Gross profit
Less: Cost of purchase of shares - INR 15 per share
PGBP income on Cat A shares

Cat B Sale consideration 450,000

2000 Less; Brokerage @ 2% 9,000
Gross profit
Less: Cost of purchase [FMV as on 01 May 2007]
PBGP income on Cat B shares

Total PBGP income

Capital gain income

Cat B Full value of consideration [FMV as on 01 May 2007] 60,000

Less: Expenses on transfer 0
Net sale consideration
Less: Indexed cost of acquisition
[2000*16x129/100]
Year of transfer is FY 2007-08
CII in the year of transfer is 129

Long term capital gain on transfer of Cat B shares

Cat C Full value of consideration 450,000

Less: Expenses on transfer 9,000
Net sale consideration
Less: Indexed cost of acquisition
[2000*16*363/100]
Long term capital gain of Cat C shares

Summary
 PGBP income for AY 2025-26
Total capital gain income for AY 2025-26

Type of asset (for companies act) Block of asset

HP Laptop P&M - 40%
Dell computer P&M - 40%
Chairs Furniture - 10%
Tables Furniture - 10%
Interior decoration for building Building - 10%
False ceiling for building Building - 10%

As per income-tax
Block of asset Total Additions
Block P&M - 40% 130,000
Block Furniture - 10% 45,000
Block Building - 10% 260,000

1. When the sale proceeds of an asset - which is inside a block of asset - exceeds the WDV of the b
2. When the block ceases to exist

Under these 2 conditions - Section 50 will be triggered

Question No. 8
i) Computation of depreciation for AY 2025-26 for M/s. S and Co.
Amount
Particualrs
(in INR)
Opening WDV of the block of asset (P&M -40%) as
on 01 April 2024 850,000.00
Add: Assets put to use less than 180 days 850,000.00
Less: Sale consideration 1,100,000.00
Closing WDV as on 31 March 2025 (before
depreciation) 600,000.00
Depreciation @ 7.5% [half of 15% - since the closing
WDV represents the cost of asset put to use less than
180days] 45,000.00
Closing WDV (after depreciation) 555,000.00

ii) Computation of capital gains for AY 2025-26

Section 50 provides for computation of capital gains

in the case of depreciable assets.
 As per section 50, capital gains / loss on transfer of
depreciable assets will occur only in the following
cases
i. When the full value of consideration received is
greater than the amount of WDV of the block of
assets
ii. When all assets in the block are sold

In the given case, since the sale consderation is less

than the WDV of the block and since the block
continues to exist,
Capital gain as per section 50 of the Act will not apply

iii) Computation of WDV / Capital gain in case the sale consideration is INR 21,00,000
Amount
Particualrs
(in INR)
Opening WDV of the block of asset (P&M -40%) as
on 01 April 2024 850,000.00
Add: Assets put to use less than 180 days 850,000.00
Total WDV 1,700,000.00
Less: Sale consideration 2,100,000.00
Short term capital gain 400,000.00

In a scenario where the sale consideration is INR 21,00,000 - then as per section 50, there will be a
capital gain of INR 4,00,000 since the amount of sale consideration
is greater than the WDV of the asset

Further, as per section 50, where any capital gain is earned on transfer of depreciable asset
It will always be a short term capital gain

Question No. 9

i. Since a part of the consideration is paid before the date of agreement, the SDV on the date of
agreement needs to be considered for section 50C

Actual consideration 100

SDV on the date of agreement 109

110% of actual consideration 110

Since the SDV is less than 110% of the actual consideration, the actual consideration of INR 100 lak
will be treated as full value of consideration
ii. Where no part of consideration is paid before the agreement date, the SDV on the date of transfer
needs to be considered for section 50C

Actual consideration 100

SDV on the date of transfer 112
110% of actual consideration 110

Since the SDV is more than 110% of the actual consideration, the SDV on the date of transfer
i.e., INR 112 lakhs will be consdered as full value of consideration

Section 54 exemption

Residential house property - Net sale consideration 15,000,000

Cost of acquistion / Indexed cost of acquisition 4,500,000
Long term capital gain 10,500,000

Purchasing a new asset for 1.10 crores

Less: Exemption u/s. 54 10,500,000

Long term capital gain chargeable to tax 0

Section 54F exemption

Sale of shares - Net sale consideration 15,000,000

Cost of acquistion / Indexed cost of acquisition 4,500,000
Long term capital gain 10,500,000

Sce 1 Purchasing a new asset for INR 1.10 crores

Less: Exemption u/s. 54F 7,700,000

Long term capital gain chargeable to tax 2,800,000

Sce 2 Purchase of new capital asset is INR 1.6 crores

Exemtion u/s. 54F 10,500,000

Problem No. 12
Computation of total income and tax liability of Mr. Mithun for AY 2025-26

Particulars Amount
1. Capital gain on sale of original 100 shares
Gross sale consideration (100 x INR 4,000)
 Less: Brokerage @ 1%
Net sale consideration
Less: Cost of acquisition (2,000 - as per note 1)
Long term capital gain on sale of original 100 shares

2. Capital gain on sale of bonus shares

No of bonus shares = 100 shares
Gross sale consideration (100 x INR 4,000)
Less: Brokerage @ 1%
Net sale consideration
Less: Cost of acquisition
Short term capital gain on sale of bonus shares (100 qty)

Income from other sources

Dividend (200*10)
Other income
Total income

Tax on LTCG u/s 112A - [196000-125000]*12.5% 8,875

Tax on STCG u/s. 111A - 396000 x 20% 79,200
Tax on other income
300000-700000@5% 20,000
700000-802000@10% 10,200

Total tax liability 118,275

Add: health and education cess @ 4% 4,731
Total tax liability 123,006
Rounded off to nearest 10s 123,010

Note on cost of acquisition

In a case where equity shares are purchased before 01 February 2018, the cost of acquisition will be
Higher of
i) Actual cost of acquisition; and 1,000
ii) Lower of
a) FMV of such asset as on 31 January 2018; or 2,000
b) Full value of consideration 4,000

Question No. 11

Computation of tax liability for AY 2025-26

i If Mr. A, Mrs. B, Mr. C and Mr. D pay tax under default regime

Particulars Mr. A
Residential status NR
 Applicable basic exemption limit 300000
Long term capital gain 85000
(Vacant Land)
Long term capital gain tax 17,000
Other income 240,000
Tax on other income 0
Rebate u/s. 87A 0
Total tax 17,000
Health and education cess@ 4% 680
Total tax liability 17,680

ii If the persons are not opting for 115BAC regime

Particulars Mr. A
Residential status NR
Applicable basic exemption limit 250000
Long term capital gain 85000
(Vacant Land)
Long term capital gain tax 17,000
Other income 240,000
Tax on other income 0
Rebate u/s. 87A 0
Total tax 17,000
Health and education cess@ 4% 680
Total tax liability 17,680

Question No. 13

As per section 2(47), a conversion of a capital asset into stock in trade shall be treated as transfer an
However, the capital gains will be charged to tax only in the PY in which the asset / stock-in-trade is

Further, since the transfer is on 31 March 2024 (i.e., before 23 July 2024), indexation benefit shall be
The fair market value as on the date of transfer shall be considered as full value of consideration
The difference between the price at which the stock-in-trade is ultimately sold and the FMV on the da

Computation of business income and capital gain income for Aarav for AY 2025-26

Amount
Particualrs
(in INR)
PGBP income
Sale price of Stock-in-trade 325,000
Less: FMV on the date of transfer 300,000

PGBP income
 Capital gains

Full value of consideration 300,000

Less: Indexed cost of acquisition 246,372
[80000/113*348]

Capital gain income

Total taxable income

Question No. 14

Computation of income under the head capital gain and PGBP of Mrs. Harshitha for AY 25-26

Particulars Amount

Business income

Sales [10 flats x 30 lakhs] 30,000,000

Less: Cost of construction 10,000,000

[10 flats x 10 lakhs]

Less: FMV of land on the date of transfer 14,000,000

[210 lakhs x 10 / 15]

Business income chargeable to tax for AY 25-26

Capital gains

Full value of consideration (FMV on the date of transfe 21,000,000

Less: Indexed cost of acquisition 10,778,761
[35 lakhs x 348 / 113]
10,221,239
Proportionate capital gain arising in AY 25-26
Less: Exemption u/s. 54EC

Capital gain chargeable to tax in AY 25-26

Notes

1 As per section 2(47), conversion of a capital asset into stock in trade is a transfer which is chargeabl
It would be regarded as transfer in the year in which the capital asset is converted into stock in trade
 2 However, the capital gain arising from such conversion will be chargeable to tax only in the year in w

3 Indexation benefit is available with respect to such transfer since the capital asset which is transferre

4 For the purpose of computing capital gains, the FMV on the date of transfer shall be considered as fu
The FMV on the date of transfer shall be treated as cost of acquisition of the stock in trade for the pu

5 As per section 54EC, where a long term capital asset which is land or building or both is sold / transf
the amount invested in such bonds shall be available as exemption if the assessee purchases it with
However, in case of a conversion of capital asset into stock in trade, the date of transfer to be consid

The maximum limit of exemption which can be claimed u/s. 54EC is INR 50 lakhs

Question No. 16
Computation of capital gain income in the hands of Mr. Sarthak for AY 25-26

Particulars Option1
Paying tax @ 20%
availing indexation

Capital gain on sale of residential house

Actual consideration 15,000,000
Stamp duty value for the purpose of section 50C 17,000,000

Full value of consideration 17,000,000

Less: Cost of acquisition
Less: Indexed Cost of acquisition 10,890,000
[30l x 363/100]

Long term capital gain 6,110,000

Less: Exemption u/s. 54

House property 1 2,000,000
House property 2 3,500,000

Long term capital gain chargeable to tax 610,000

Long term capital gain tax 122,000

Notes
1. As per section 50C of the Act, where the actual sale consideration is lower than the value adopted
and such stamp duty value exceeds 110% of the actual sale consideration, then the stamp duty valu
 2. In case where the date of agreement is different from the date of registration, the stamp duty value
the whole or part of consideration is received on or before the date of agreement in prescribed mode

3. In case of transfer of a long term capital asset being land or building or both on or after 23 July 20
the assessee has an option to pay tax on such long term capital gain at the rate of 12.5% [without av
20% after availing the benefit of indexation

4. As per section 54 of the Act, where a residential house property being a long term capital asset is
within a period of 2 years from the date of transfer, the cost of acqusition of the new residential hous

Further, where the LTCG is less than 2 crores, the assessee has an option to claim section 54 exem

Question No. 17
Computation of capital gain income in the hands of Mrs. Yuvika for AY 25-26

Amount
Particulars
(in lakhs)
Actual sale consideration 810

Stamp duty value 890

[Stamp duty value on the date of agreement needs to
be considered for Sec. 50C applicability - Please
refer notes below]

Full value of consideration

Less: Brokerage @ 1% of actual sale consideration
Net sale consideration

Cost of acquisition
Indexed cost of acquisition
- For land - 80Lakhs + 10% of cost 273.03
[88 x 363/117]
- For building - 100 lakhs 281.40
[100 x 363/129]

Long term capital gain on sale of residential house

Less: Exemption u/s. 54
Can be claimed only with respect to one residential house property - since the amount of
long term capital gain is exceeding INR 2 crores

Less: Exemption u/s. 54EC

Maximum exemption available u/s. 54EC is only 50 lakhs on investment in NHAI bonds

Long term capital gain after exemption

 Notes
1 Any advance received on transfer of a capital asset and foreited subsequently shall be chargeable to
under the head IFOS if such advance is received and forfeited on or after 01 April 2014
In the given case, since advance of INR 20 lakhs is received during April 2015 - the same is not requ
reduced from cost and the same wouldve been charged to tax under the head IFOS

2 As per section 50C - where an assessee has received advance through prescribed modes, then the
on the date of agreement needs to be considered for the purpose of determining the full value of con
in accordance with section 50C

3 Since the stamp duty value on the date of agreement is less than 110% of the actual sale considerat
the actual sale consideration shall be treated as full value of consideration
 Capital asset or
not
No
Yes
Yes
No
Yes
Yes
No
No
Yes
No

Indexed cost of acquistion 155,128

Capital gain 844,872

ands of Mr. D for AY 2025-26

Amount
(in INR)

75000

45000
30000

red before 23 July 2024) - the gain on transfer of the ring will be treated as

ands of Mr. Rajat for AY 2025-26

Amount
(in INR)

1400000
400000
0
1000000
 Amount
(in INR)

1400000
1,452,000.0
0
-52,000.0

usition for the purpose computing capital gains will be

April 2001 - at the option of the Assessee

Since FMV on 01 April 2001 is less than the actual cost

Amount

1,764,000

2,531,669

-767,669

Amount

1,764,000

750,000

1,014,000
126,750.0
5070
131,820.0
 INR 5,00,000.

siness - On 01 April 2024 - the FMV of the car is INR 5,50,000.

t of INR 1 lakh. Discuss the tax implication in his hands under the head "Capital gains" and PGBP.

Capital gains
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000

akhs will be considered as income under the head PGBP

FY 2023-24, it will be considered as a 'transfer' during the year

will be taxable only in the year in which the asset is ultimately sold
the date of conversion will be treated as full value of consideration

be treated as business income

Amount

550,000
0
550,000
171,148

378,852

600,000.00
550,000.00
50,000.00

ds of Mr. A
sion is not applicable since the conversion took place before AY 1985-86

fer will be 01 May 2007. FMV as on 01 May 2007 will be considered as sale consideration

nversion will be treated as business income

Amount

1,323,000
90,000
1,233,000

441,000
60,000
381,000

1,614,000

60,000

41,280

18,720

441,000
116,160

324,840
 1,614,000
343,560

Amount Date of purchRate of de Dep as per accouWDV Sale procee

60,000 01 April 2024 20% 12,000 48,000 30000
70,000 ### 20% 4,667 65,333 50000
15,000 ### 15% 1,500 13,500 10000
30,000 ### 15% 1,875 28,125
70,000 ### 30% 3,500 66,500 80000
190,000 ### 30% 0 190,000
23,542

Addition - put to Addition - less Rate of depDepreciation WDV Sale proceed

60,000 70,000 40% 38,000 92,000 -80000
15,000 30,000 10% 3,000 42,000 -10000
0 260,000 10% 13,000 247,000
54,000 381,000

asset - exceeds the WDV of the block Short term capital gain
Short term capital loss

Example

850,000.00
850,000.00
700000

1,000,000.00 850000 Half depreciation rate

150,000.00 Full depreciation rate

 tion is INR 21,00,000

n as per section 50, there will be a

nsfer of depreciable asset

ment, the SDV on the date of

lakhs
Lakhs

lakhs

actual consideration of INR 100 lakhs

the SDV on the date of transfer

lakhs
lakhs
Lakhs

SDV on the date of transfer

Full value of consideration less cost incurred on transfer

150,000,000
45,000,000
105,000,000

Purchased a new asset for 16 crores

For the purpose of section 54F - the cost of new asset will be restricted to INR 10 crores
70,000,000
35,000,000

AY 2025-26

Amount

400,000 4000
 4,000 1000
396,000 3000
200,000 300000
196,000 4,000
296,000
100,000

400,000
4,000
396,000
0
396,000

2,000
800,000
1,394,000

From Income To Income Tax Rate

0 300000 0%
802,000 300000 700000 5%
700000 1000000 10%
1000000 1200000 15%
1200000 1500000 20%
1500000 More 30%

2018, the cost of acquisition will be as follows

Sold shares on 31 Jan 2018

1,000 100,000

115BAC / Default regime

Mrs. B Mr. C Mr. D 0 300000
NR R NR 300000 700000
 300000 300000 300000 700000 1000000
10000 60000 0 1000000 1200000
(Listed shares) (Rural Agri Land) 1200000 1500000
0 0 0 1500000 More
310,000 590,000 480,000
500 14,500 9,000
0 14,500 0
500 0 9,000
20 0 360
520 0 9,360

Old regime - Resident individual (less than 6

Mrs. B Mr. C Mr. D 0 250000
NR R NR 250000 500000
250000 500000 250000 500000 1000000
10000 60000 0 1000000 More
(Listed shares) (Rural Agri Land)
0 0 0 Resident individual > 60 years < 80 years
310,000 590,000 480,000 0 300000
3,000 18,000 11,500 300000 500000
0 0 0 500000 1000000
3,000 18,000 11,500 1000000 More
120 720 460
3,120 18,720 11,960 Resident individual > 80 years
0 500000
500000 1000000
1000000 More

rade shall be treated as transfer and accordingly chargeable to tax as capital gains
which the asset / stock-in-trade is ultimately sold

y 2024), indexation benefit shall be available to the assessee.

d as full value of consideration
mately sold and the FMV on the date of transfer shall be considered as PGBP income

Aarav for AY 2025-26

Amount
(in INR)

25,000
 53,628
78,628

P of Mrs. Harshitha for AY 25-26

Salary
Amount IFHP
PGBP
Capital gains
IFOS

6,000,000

6,814,159
-5,000,000

1,814,159

de is a transfer which is chargeable under the head "capital gains"

set is converted into stock in trade
argeable to tax only in the year in which the stock in trade is sold

he capital asset which is transferred is a long term capital asset.

of transfer shall be considered as full value of consideration.

ition of the stock in trade for the purpose of computing business income

d or building or both is sold / transferred, and the assessee purchases RECL or NHAI bonds
n if the assessee purchases it within a period of 6 months from the date of transfer
de, the date of transfer to be considered for 54EC is the date of sale of stock in trade.

is INR 50 lakhs

ak for AY 25-26

Option 2
Paying tax @
12.5% without
availing
indexation

15,000,000
17,000,000 16500000

17,000,000
3,000,000

14,000,000

2,000,000
3,500,000

8,500,000

1,062,500

on is lower than the value adopted by stamp duty authorities

deration, then the stamp duty value shall be deemed to be the full value of consideration
of registration, the stamp duty value on the date of agreement can be considered, provided
e of agreement in prescribed modes of payment

lding or both on or after 23 July 2024 (which was acquired before 23 July 2024)
ain at the rate of 12.5% [without availing the benefit of indexation] or

y being a long term capital asset is sold and the assessee has acquired residential house property
usition of the new residential house property shall be availed as exemption u/s. 54 of the Act

an option to claim section 54 exemption with respect to investment in 2 residential house properties

ka for AY 25-26

Amount
(in lakhs)

810
8.1
801.9

554.42

247.48
130
y - since the amount of

50
stment in NHAI bonds

67.48
ubsequently shall be chargeable to tax
or after 01 April 2014
g April 2015 - the same is not required to be
der the head IFOS

rough prescribed modes, then the SDV

of determining the full value of consideration

110% of the actual sale consideration,

nd PGBP.
Profit / (loss) y3 profit / loss
-18,000
-15,333
-3,500
35000 6,875
13,500

Y2 - DepreciaWDV Y2 Sale proceeds

-12,000 Short term capital loss
3200 28,800 35000 6,200 Short term capital gain
e restricted to INR 10 crores
0%
5%
 10%
15%
20%
30%

sident individual (less than 60 years) and NR

0%
5%
20%
30%

ual > 60 years < 80 years

0%
5%
20%
30%

ual > 80 years

0%
20%
30%
e property

e properties
Income from other sources

Section 2(22)(f) - Deemed dividend on buy back of shares

domestic
company
Till 01 October 2024 The buy back
consideration
On or after 01 Oct 24 Not taxable

Question
Mr. B bought 100 shares of A Ltd on 01 August 2020 at INR 40 per share
A Ltd bought back 20 shares from Mr. B at a consideration of INR 60 per share on 01 November 2024
In January 2025, Mr. B sold the balance shares at INR 70 per share
Compute the income under the head capital gains and income from other sources

Particulars Amount

Capital gain

No of shares sold = 80 5,600

Full value of consideration
[80x70]
Less: Cost of acquisition 3,200
[80x40]

Long term capital gain income 2,400

Income from other sources

Deemed dividend u/s. 2(22)(f) 1,200

[20 shares x 60 per share]

Income from other sources 1,200

Long term capital loss (available for set off or carry forwa 800
[Cost of acquisition of the shares bought back]

Long term capital gain (after set off) 1,600

Income from other sources 1,200
Total income 2,800
Undisclosed sources of income

Sectiion 68 - Cash credits - Unexplained borrowings, loan; Unexplained sha

Section 69 - Unexplained investments
Section 69A - Unexplained money
Section 69B - Investment, etc., not fully disclosed
Section 69C - Unexplained expenditure
Section 69D - Amount borrowed or repaid on hundi

The tax rate applicable on the above income is 60% on gross

Surcharge of 25%
Cess @ 4% is applicable
Effective tax rate is 78%
 In the hands of shareholder
Exempt u/s. 10(34A)

Taxable as deemed dividend

No
Thededuction can be claimed
cost of acquisition of the shares will be treated as capital loss (Long term or short term)
as the case may be

R 60 per share on 01 November 2024

om other sources

800
lained borrowings, loan; Unexplained share premium received by a closely held company.
erm or short term)
Chapter VIA deduction

Step 1 Determination of residential status

Step 2 Classify the income under five heads
Step 3 Compute the income under five heads
Salaries 100
IFHP 40
PGBP 100
Capital Gains 200
IFOS 50
Step 4 Clubbing provisions 10 Minor child's interest income
Step 5 Set-off and carry forward of los -25
Step 6 Computation of GTI 475 Does not include exempt income
Step 7 Deductions from Gross total in -20 Deduction of certain investments,
Step 8 Total income 455
Step 9 Application of rates of taxes - Slab rates, capital gain rates, spec
Step 10 Computation of tax payable -

Collection and recovery of taxes

Return of income

Deductions from Gross total income

Important points

1 Most of these deductions from GTI are available to an assessee (individual / HUF) only if he has e
Shifting out of default regime

2 Deduction under Chapter VIA cannot exceed GTI - u cannot have loss due to Chapter VIA deduct

3 Furnishing of return of income before the due date is required - if following deductions are claimed
 1 80C - Deduction in respect of investment in certain specified assets

Particulars Individual HUF

Contribution to unit-linked Him or his spouse or any Any member of
i
insurance plan children HUF
Contribution to unit-linked
Him or his spouse or any Any member of
ii insurance plan of LIC Mutual
children HUF
fund
Him or his spouse or any Any member of
iii LIC premium paid
children HUF

Subject to certain conditions

Deduction u/s. 80C
Premium paid will be allowable
In respect of policies issued
to the extent of 20% of actual
before 31 March 2012
sum assured
In respect of policies issued on Premium paid will be allowable
or after 01 April 2012 but to the extent of 10% of actual
before 01 April 2013 sum assured
a) Where the insurance is on
the life of a person with
In respect of policies issued on disability or severe disability or 15% of actual
or after 01 April 2013 a person suffering from a sum assured
disease or ailment prescribed
u/s. 80DDB
 10% of actual
b) In all other cases
sum assured

Proble
Compute eligible deduction u/s. 80C in the following case
m
Assume that the assessee has opted out of default regime

Date of Insurance
issue of Person insured Actual capital sum assured premium paid
policy during FY 24-25

### Self 900,000 48,000

### Spouse 150,000 20,000
Handicapped son (disability
### 400,000 80,000
u/s.80U)

Deduction u/s.
Max deduction
80C
30 March 2012 - 20% of sum
i 180,000 48,000
assured
01 May 2018 - 10% of sum
ii 15,000 15,000
assured
01 June 2021 - Disability -
iii 60,000 60,000
15% of sum assured

Total eligible deduction u/s. 80C of the Act 123,000

Particulars Individual HUF

Contribution to any provident PPF - Him or his spouse or Any member of
iv
fund - PPF, SPF, RPF children the Huf
Subscription to National
v
Savings Certificates VIII
Subscription towards any
notified units of a mutual fund
vi
(ELSS) - lock in period of 3
years
Tution fees by an individual to
any university, college, school,
other educational institution
vii
within India for full-time
education for maximum 2
children of the individual
Five year fixed deposit in a
viii
scheduled bank
 Five year fixed deposit in a
ix
Post office

Repayment of housing loan for

x purchase/ contruction of house
property (Principal portion)

80CCD - National pension

2
scheme

Any investment made to a

national pension scheme - Employees contribution -
Allowable as deduction u/s. Available only in case of
80CCD(1) - Employee's shifting out of default regime
contribution

Eligible assessee and limit

Limit of deduction
An individual employed by
i
Central Government
10% of salary
An individual employed by any
ii
other person
iii Any other individual 20% of GTI

Employeer's contribution -
80CCD(2) - Employer's
Available for both old regime
contribution
and new regime

Central Government or State

i 14% of salary
Government employer
10% of salary in case of old
ii Any other employer
regime
14% of salary in case of new
regime

80CCC - Deduction in
respect of any other pension
3 fund

80CCE - Provides for

maximum amount of
deduction available with
respect to deduction u/s.
4 80C, 80CCC and 80CCD
 Section Particulars Ceiling
80C Investment in specified assets 150,000
Investment in specified
80CCC 150,000
pension funds

10% of salary or
Employees contribution to
80CCD (1) 20% of GTI as
NPS
the case may be

Aggregate of deduction 80C,

80CCE 150,000
80CCC, 80CCD(1)
Employees contribution to
80CCD(1B) NPS outside the limit of the 50,000
above INR 1,50,000

80CCD(2) Employer's contribution to NPS As specified above

80C
80D
80E
80EE

80EEA
80G
80GG

80GGB
80GGC
80JJAA
80TTA
80TTB

80D - Medical insurance premium paid

This deduction is available only person who have opted out of default regime

S.no Nature of expenditure On behalf of Max deduction

Any premium paid on medical
Self, spouse and dependent
1 insurance - By modes other 25,000
children
than cash
 Central Government Health
Scheme - Contribution
In case any of these persons
Preventive health checkup
are of age more than 60 years 50,000
expenditure
+ resident in India

Any health insurance premium

2 - Paid by modes other than Parents 25,000
cash
Either of the parents are senior
Preventive health checkup 50,000
citizens

Amount paid on medical For self/ spouse/ parents - who

3 50,000
expenditure is a senior citizen
And who does not have any
medical insurance in force

80E - Deduction in respect of interest on loan taken for higher education

Is available only for persons who have opted out of default regime

Any loan taken for the purpose of higher education - for the person or his spouse or children
Loan is taken from any financial institution or approved charitable institution
Interest paid on such loan is available as a deduction

No maximum cap

Higher education - Any degree

Period of deduction - Initial year - the year in which the person has started paying interest + 7 AYs immedia

80G - Deduction in respect of donation to certain funds and charitable institutions

This is not available with respect to persons who is exercising the option to pay tax in default regime

Quantum of deduction
I 100% deduction of the donation - without any qualifying limit
II 50% deduction of the donation - without any qualifying limit PM's Drought relief fund
III 100% deduction of the donation - Subject to qualifying limit
IV 50% deduction of the donation - Subject to qualifying limit Approved charitable institution / fu

How to compute qualifying limit?

Step 1 Compute Gross Total Income - reduced by Adjusted total income

i. Chapter VI A deduction - other than 80G deduction
ii. STCG - taxable u/s. 111A
iii. LTCG taxable u/s. 112 and 112A
 iv. Any income on which tax is not payable
Step 2 Calculate 10% of adjusted total income Qualifying limit
Step 3 Calculate actual donation - which is subject to qualifying limit
Step 4 Lower of Step 2 and Step 3 is maximum permissible limit
Step 5 The said deduction will be adjusted first against Cat III donation and then the balance be adjusted

Other conditions for 80G

1 Donation should be only in the form of money - not in kind

2 Donation should be paid only in modes other than cash
[Exception - till INR 2000]

80GG - Deduction in respect of rent paid

This is applicable only with respect to persons opting out of default regime

Conditions
1 The assessee should not be in receipt of HRA which is qualifying for deduction u/s. 10(13A) of the

2 The accomodation should be occupied by the assessee for his own residence

3 The assessee or his spouse or his minor child - shall not own any accomodation at any place whe
he ordinarily resides

4 The Assessee should file a declaration in the prescribed form confirming the details of rent paid
and fulfilment of other conditions - Along with the return of income

Quantum of deduction
Least of the following:
1 Actual rent paid minus 10% of total income of the assessee before allowing 80GG deduction

2 25% of total income (before making this deduction)

3 5,000 per month

Answer
Computation of total income of Mr. Shiva for AY 2025-26

Particulars Amount Amount

Gross total income 775,000
Less: Chapter VI A Deduction

i Deduction u/s. 80C

Deposit in PPF 100,000
Life Insurance Premium paid 18,000
[Maximum of 10% of assured value - since the policy is taken after 31 March 2012]

118,000
80CCC - LIC Pension Fund 60,000

Total 178,000
But as per section 80CCE, deduction u/s. 80C 150,000
and 80CCC is restricted to INR 1,50,000

ii. Deduction u/s. 80D

Medical insurance premium for 26,000
Restricted to 25,000

iii. Deduction u/s. 80G 87,500

Total income 512,500

Deduction u/s. 80G

Particulars Amount Deduction
Cat I National Children's fund 25,000 25,000
Cat II PM's Drought Fund 25,000 12,500
Cat III Approved institution for promoti 40,000 40,000
Cat IV Public charitable institution 50,000 25,000

Adjusted total income 600,000

10% of adjusted total income 60,000

Cat III 40,000

Cat IV 20,000

80JJAA - Deduction in respect of employment of new employees

This can be claimed as deduction even in case of a default regime / domestic companies opting s. 115BAA

Any person having PGBP income - can claim 80JJAA deduction

Quantum of the deduction

Sum equal to 30% of additional employee cost incurred in the PY

Period of deduction
Can be claimed for a period of 3 years

Y1 Additional employee cost 15000

Y1 30% of 15000 4500
Y2 4500
Y3 4500

Conditions
1 The business with respect to which this 80JJAA deduction is claimed
Should not be formed by splitting up. or reconstruction of existing business

2 The business is not acquired by the assessee by way of transfer from any other person

3 A report of an accountant in the prescribed form - shall be furnished on or before the due date of f

Terms definition
1 Additional employee cost
Total emoluments (salary/wages) paid or payable to additional employees employed
during the PY

In case an existing business Additional employee cost will be Nil if

a) there is no increase in the no. of employees from the total no. o
employed on the last day of the preceding year
 b) emoluments are paid otherwise than by prescribed modes

In case of a new business The emoluments paid during the PY (i.e. year in which the busines
shall be treated as additional employee cost

2 Additional employees
An employee who has been employed during the PY and whose employment has the effect of inc
total no. of employees employed by the employer as on the last date of the preceding year

Employees as on 31 March 24 100

Resignations in 2024-25 5
95
New joinees in 2024-25 15
Employees as on 31 March 2025 110

Net increase 10 employees

Employee definition - shall not include the following employees

a) employee - whose total emoluments is more than 25000 per month
b) an employee for whom the entire contribution is paid by the Government under the Employees'
c) An employee who does not participate in RPF
d) An employee who has been employed for a period of less than 240 days during the PY

If an employee is employed for a period of less than 240 days in the PY - he will be treated as
employed during the immediately succeeding PY

Exception - If the employer is in the business of manufacturing of apparel, footwear, leather produ
Then 240 days will be replaced by 150 days

80TTA Deduction in respect of interest earned on deposit in savings account

Max deduction INR 10,000

Interest income earned in SB
Not available with respect to senior citizens claiming deduction u/s. 80TTB
Available only for old regime

80TTB Deduction in respect of interest earned on deposit in case of senior citizens who is a reside

Max deduction INR 50,000

Interest income earned any deposit and savings bank
Available only for old regime

10AA Deduction u/s. 10AA - With respect to SEZ units

Eligible assessee All categories of assessees who derive any Profit or gain
from a undertaking / unit situated in SEZ

Quantum of deduction 100% of eligible profits for 1st 5 years

50% of eligible profits for 2nd 5 years
Upto 50% of eligible profits for year 11 to 15 (Please refer below)

Sun set Any business in SEZ unit started after AY 2020-21 then cannot cla
Extended sunset clause Approval from SEZ authorities received on or before 31 March 202
Business to be commenced before 31 March 2021

Other condition Auditors certificate in prescribed form (Form 56F) needs to be fur

Eligible profit Taxable income (PGBP income) x Export turnover of the SEZ unit

Years 11 to 15 (addl conditions)1. The deduction claimed u/s. 10AA of the Act needs to be credite
SEZ Re-investment reserve account
2. This reserve shall be utilised for the purpose of acquiring P&M
before the expiry of 3 years following the py in which the reserve is
3. Reserve account can be utilised for the purpose of normal busin
4. It should not be used for the following purpose:
a) Distribution of dividends
b) remittance outside india as profits
c) creation of any assets outside India

5. In the year of purchase of P&M - We need to file a Form (Form

assets purchased

6. Where SEZ reserve is not utilised for the said purpose - it will be
following the said period of 3 years and be charged to tax accordin
hild's interest income

t include exempt income

on of certain investments, expenditure, insurance, etc.

es, capital gain rates, special rates, company rates

ual / HUF) only if he has exercised the option of

due to Chapter VIA deductions

ng deductions are claimed

 75000 75000

60000 60000

60000 15000 45000

150000

45000

fied above
e or children

g interest + 7 AYs immediately succeeding the initial AY

ax in default regime

ought relief fund

d charitable institution / fund

d total income
 100000
10000
14500 Cat III 7000 7000 7000
10000 Cat IV 15000 7500 3000
n the balance be adjusted against Cat IV donation 10000

duction u/s. 10(13A) of the Act

modation at any place where

g the details of rent paid

wing 80GG deduction

March 2012]

Subject to qualifying limit

25,000
12,500
 40,000
10,000
87,500

mpanies opting s. 115BAA/ 115BAB

ny other person

or before the due date of filing the return of income

es employed

loyees from the total no. of employees

by prescribed modes

. year in which the business is started)

yment has the effect of increasing the

the preceding year

ent under the Employees' pension scheme

ays during the PY

- he will be treated as

el, footwear, leather products

r citizens who is a resident

any Profit or gain

o 15 (Please refer below)

Y 2020-21 then cannot claim this deduction

on or before 31 March 2020
March 2021

orm 56F) needs to be furnished on or before 1 month prior to the due date of filing return of income

rt turnover of the SEZ unit / total turnover of the SEZ unit

he Act needs to be credited in a

urpose of acquiring P&M

e py in which the reserve is created
he purpose of normal business of the undertaking
purpose:

need to file a Form (Form 56FF) listing the details of

the said purpose - it will be taxed in the year immediately

be charged to tax accordingly.
Advance tax
Conditions

1 Tax payable of 10,000 or more

2 Senior citizen - Advance tax is applicable only if there is any income under the head PGBP
3 Instalment and due dates - 4 instalments

Due date Amount

On or before 15 June 15% of the advance
Cumulative
On or before 15 Septembe45% of the advance
Cumulative
On or before 15 December75% of the advance
Cumulative
On or before 15 March 100% of the advanc
Cumulative

4 For a assessee - who is computing profits on presumptive basis u/s. 44AD and 44ADA
15 March is the only advance tax instalment

5 Interest u/s. 234C

Is applicable where advance tax is not paid on or before the due dates of instalment prescribed ab

Interest will be calculated at the rate of 1% per month on the shortfall of the advance tax

Specified date Specified % Short fall in advance tax

15 June 15% 15% - Adv tax paid till 15 Jun
15 Sep 45% 45% - Adv tax paid till 15 Sep
15 Dec 75% 75% - Adv tax paid till 15 Dec
15 Mar 100% 100% - Adv tax paid till 15 Mar

For June quarter - If we have paid 12% of advance tax liability - No 234C interest
For Sep quarter - If we have paid 36% of advance tax liability - No 234C interest

Advance tax liability = Total tax - TDS - TCS

However, 234C interest is not applicable in the following cases:

a Capital gains
b Winnings from lotteries, crossword puzzles, etc
c PGBP income - if that particular income is arising for the first time
d Deemed dividend income u/s 2(22)(e)
instalments are due, by 31st March of the financial year.

234B Interest

1 Attracted for non-payment of advance tax or if payment of advance tax is less than 90%
 of the assessed tax

2 To be calculated from 1st April following the FY till the date of determination of total income
u/s 143(1) or where regular assessment is made - till the date of regular assessment

3 Interest is calculated at 1% p.m or part of the month

4 Assessed tax = Total tax - TDS - TCS - 89 relief - 90 relief

5 If any self assessment tax is paid u/s. 140A - interest to be calculated till the date of such payment

6 Self assessment tax - First to be set off against 234B and 234C interest

Total tax as per RoI 150

Advance tax paid 0
Pai self assessment tax 30 Sep 25
Amount 150

234B interest
143(1) date 31 March 2026 Tax liability determined - 150 Rs
Scenario 1 - Assessed tax = Self assessed tax

234B 9

Scenario 2 Assesed tax = 200

234B interest 24 Wrong

i. On 150 Rs 9
ii. On balance 50 Rs 6
Total interest 15
ome under the head PGBP

u/s. 44AD and 44ADA

dates of instalment prescribed above

rtfall of the advance tax

Period of inte Interest %

3 months 3%
3 months 3%
3 months 3%
1 month 1%

No 234C interest
o 234C interest

ce tax is less than 90%

termination of total income
regular assessment

lated till the date of such payment

ed - 150 Rs
TDS and TCS

Nature of
Section Threshold limit Payer Payee
payment Basic exemption responsible for
Additional192 Salary
applicable in case oflimit
a new regime payment of Employee
points in 3. Employee can provide the following information to the employer - based on which the empl
192 Interest on savings bond making the
193 shall deduct tax at source:
an individual Any resident
securities payment
Domesticof Resident
194 Dividends
Interest (other shareholder only when the
is INR 40,000 Company shareholder
194A than interest on total turnover,
responsible for Any resident
Winnings from -winnings
In case payee
is less is
194BA securities) gross receipts
making paymentis Any resident
online games
contractors and than 100 Rs. in a only when the
194C of winnings
total from contractor /
turnover,
What is a sub-contractors
telecasting; for INR 1,00,000 in
grosswhen
receipts is subcontractor
Work? c) Carriage oforgoodsINR
Commission
15,000
or passengers byonly
any modethe of transport other than railways;
194H during a financial total turnover, Any resident
brokerage INR 2,40,000
194-I Rent year gross receipts
Same as aboveis Any resident
individuals / HUF INR during the year
50,000 for a for whom section
194-IB Fees for not fall month only when the Any resident
who does INR 30,000 in a 194-I is not
194J professional or total turnover, Any resident
Technical technical services year gross receipts is
Technical service means - Any payment made for managerial, technical or for consultancy se
services
Professiona
Any payment made to any profession
l services for contract of INR 50,00,000 in receipts is less
194M Any bank, co- Any resident
work, commission INR a year1 crores in a than INR 1 crore
194N Cash withdrawal operative bank, Any resident
financial year
post office, etc.,

TDS process

1 TDS deducted in a month - shall be deposited to the Government within 7 days from the end o

For e.g, Tax deducted during April 2025 - Needs to be deposited on or before 07 May 2025
Tax deposited in May 2025 - Needs to be deposited on or before 07 June 2025

However - in case TDS is deducted in the month of march - 30 April 2025 will be the due date

2 Form 26Q - TDS form For other than salaries

Form 24Q - TDS deducted u/s. 192

This Form has the details of the payee such as amount of payment, TDS deducted, PAN of th

Due date for filing this Form 26Q, 24Q

Quarter Due date
Q1 - Apr - June 31 July
Q2 - Jul to Sept 31 October
Q3 - Oct to Dec 31 January
Q4 - Jan to Mar 31 May
 Form 16 - For Salary tax deduction u/s. 192 (annual for On or before 15th June

Form 16A - Other than salary (quarterly form) on or before 15 days from the due da
TDS return

3 If return in Form 26Q or Form 24Q is not filed within the due dates - Additional fee of INR 200
for the period of default is required to be paid by the deductor (Section 234E)

4 TDS not deducted within the timelinesInterest @ 1% p.m. or part of month on the amount of T
From the date on which tax was deductible till the date o
tax is deducted

TDS is deducted but not remitted to thInterest @ 1.5% p.m. or part of month on the amount of
Government from the date on which tax was deducted till the date on
tax is remitted

Risk of prosecution is there in this case

Lower withholding certificate - Section 197

206AA - Where PAN is not furnished by the payee

The payer is required to withhold taxes at a higher of the following rates

a) Rate prescribed under the Act
b) At rate in force i.e, rate mentioend in the finance act
c) At the rate of 20% (5% in case of TDS is required u/s. 194Q- purchase of goods)
 Rate of Time of
TDS At deduction
the time of
income tax
paying the
applicable to
ployer - based on which salary
the employer
payment or
10% Before
credit making
10% whichever oris of
any payment
payment
dividend
10% credit
make the is
HUF - 2% 30% whichever
payment
payment orof
credit
Contractor / whichever
payment oris
other than2024
railways;
- 5%
credit
payment or
whichever is
credit
10% -- 5% rent for the last
2024
2% whichever
payment is
month of or
the
credit
Fees for whichever
l, technical or for consultancy is
services
payment or
2024 - 5%
credit
2% of such At the timeisof
whichever
sum withdrawal

ment within 7 days from the end of the month

ited on or before 07 May 2025

fore 07 June 2025

30 April 2025 will be the due date

yment, TDS deducted, PAN of the payee, date of payment, etc.,

r before 15th June

before 15 days from the due date of furnishing

dates - Additional fee of INR 200 per day

r (Section 234E)

part of month on the amount of TDS

h tax was deductible till the date on which

r part of month on the amount of TDS

tax was deducted till the date on which

here in this case

purchase of goods)
Basics and Residential Status

Rates of taxes

1. Individual and HUF / AOP / BOI under the default regime / 115BAC regime

From Income To Income Rate

0 300,000 0%
300,000 700,000 5%
700,000 1,000,000 10%
1,000,000 1,200,000 15%
1,200,000 1,500,000 20%
1,500,000 More 30%

2. Individual as per old regime

A. Not a senior citizen and non-resident

From Income To Income Rate

0 250,000 0%
250,000 500,000 5%
500,000 1,000,000 20%
1,000,000 Above 30%

B. Who has attained 60 years of age any time during the PY

From Income To Income Rate

0 300,000 0%
300,000 500,000 5%
500,000 1,000,000 20%
1,000,000 Above 30%

Important points - applicable for super senior citizen also

1 Even if he turns 60 years on 31 March 2025 - The person will be treated as S
2 The above slab rates is applicable only for a senior citizen who is a resident
3 As per CBDT Circular No. 28/2016 dated 27 July 2016 - Even if he is turning
He will be treated as senior citizen for AY 2025-26

C. Who has attained 80 years of age any time during the PY

From Income To Income Rate

0 500,000 0%
500,000 1,000,000 20%
1,000,000 Above 30%
3. HUF / AOP / BOI / Artificial Juridical person - Under old regime

From Income To Income Rate

0 250,000 0%
250,000 500,000 5%
500,000 1,000,000 20%
1,000,000 Above 30%

4. Firm / Local authority / LLP

Tax rate 30%

5. Co-operative society [Who is not opting for the provisions of sec. 115BAD or 115BAE of the Act]

From Income To Income Rate

0 10,000 10%
10,000 20,000 20%
20,000 Above 30%

6. Companies

A. Domestic Company not opting for 115BAA or 115BAB [Concessional tax rates]

i) If total turnover or gross receipts in PY 2022-23 < or equal to INR 400 crores - 25%
ii) In other cases - 30%

B. Foreign Company - 35%

C. Domestic Company opting for 115BAA - 22%

[Effective tax rate after surcharge of 10% and cess of 4% is 25.168%]

D. New Domestic Manufacturing Company opting for 115BAB - 15% [Sunset on 31 March 2024]
[Effective tax rate after surcharge of 10% and cess of 4% is 17.16%]

Surcharge

1. Individual / HUF/ AOP / BOI / Artificial Juridical Person - Under the default regime
 Including dividend
Surcharge
Particular income, capital gain u/s.
rate
111A, 112 and 112A

Where the total income is

more than 50 lakhs but less Yes 10%
than or equal to 1 crore

Where the total income is

more than 1 crore but less Yes 15%
than or equal to 2 crores

Where the total income is

more than 2 crores

If there is any dividend

No 25%
income, capital gain income
in this scenario - the
surcharge rate applicable for
such income will be 15%

Where the total income is

more than 2 crores and not Yes 15%
covered above

Scenario 1
Dividend, Capital gain
1,000,000
income
Other sources (Salaries, etc) 4,500,000
Total income 5,500,000
Surcharge applicable 10%

Scenario 2
Dividend, Capital gain
5,500,000
income
Other sources (Salaries, etc) 5,000,000
Total income 10,500,000
Surcharge applicable 15%

Scenario 3
Dividend, Capital gain
5,500,000
income
Other sources (Salaries, etc) 25,000,000
Total income 30,500,000
Surcharge applicable (on
25%
other sources)
Surcharge applicable (on
dividend, capital gain 15%
income)

Scenario 4
Dividend, Capital gain
5,500,000
income
Other sources (Salaries, etc) 15,000,000
Total income 20,500,000
Surcharge applicable (on
15%
total income)

2. Individual / HUF/ AOP / BOI / Artificial Juridical Person - Under the old regime

Including dividend
Surcharge
Particular income, capital gain u/s.
rate
111A, 112 and 112A

Where the total income is

more than 50 lakhs but less Yes 10%
than or equal to 1 crore

Where the total income is

more than 1 crore but less Yes 15%
than or equal to 2 crores

Where the total income is

more than 2 crores but less
than or equal to 5 crores

If there is any dividend No 25%

income, capital gain income
in this scenario - the
surcharge rate applicable for
such income will be 15%
Where the total income is
more than 5 crores

If there is any dividend

No 37%
income, capital gain income
in this scenario - the
surcharge rate applicable for
such income will be 15%

Where the total income is Scenario 4

more than 2 crores and not Yes 15% example
covered above above

3. Firm / LLP / Local authority

Where the total income is

12%
more than 1 crores

4. Co-operative society (other than those opting to CTR) Concessional Tax Regime

Where than income is more

than 1 crores but less than 7%
or equal to 10 crores

Total income is more than

12%
10 crores

5. Domestic Company (not opting for CTR)

Where than income is more

than 1 crores but less than 7%
or equal to 10 crores

Total income is more than

12%
10 crores

CTR (115BAA and 115BAB) 10%

6. Foreign Company

Where than income is more

than 1 crores but less than 2%
or equal to 10 crores
Total income is more than
5%
10 crores

Rebate u/s. 87A

Rebate is applicable only for a individual resident in India

i. Rebate u/s. 87A - For an individual who is opting to pay tax under default regime

Rebate u/s. 87A is INR 25,000 if the total income does not exceed INR 7,00,000

ii. Rebate u/s. 87A - For an individual - Old regime

Rebate u/s. 87A is INR 12,500 if the total income does not exceed INR 5,00,000

Rebate is always calculated before health and education cess

Rebate is not applicable in respect of tax payable under section 112A - Long term capital gains on sale of

Marginal relief

Income is 50,05,000
Tax Step 1 Step 2 Step 3 Step 4
0-250000 0 0 5000 1,317,500
250000-500000 12,500 12,500
500000-1000000 100,000 100,000
1000000-5005000 1,201,500 1,200,000
Normal tax 1,314,000 1,312,500
Surcharge @ 10% 131,400
Tax + Surcharge 1,445,400
Cess @ 4% 57,816
Total tax 1,503,216
Rounded off to nearest 10s 1,503,220

Steps for calculating marginal relief

Step 1 - Compute income tax on total income and add surcharge as applicable
Step 2 - Compute income-tax on INR 50 lakhs
Step 3 - Total income - INR 50 lakhs
Step 4 - Add the amount computed in Step 2 and Step 3
Step 5 - Income tax liability will be lower of Step 1 and Step 4

Marginal relief = Income tax liability (before cess) in Step 4 - Income tax liability (before cess) in step 1
If the income is more than 1 crore, 2 crores or 5 crores as the case may be
The above steps will be modified accordingly
And the surcharge rate applicable for the earlier slab - needs to be considered for Step 2 above

Assessment year / previous years

PY (for normal persons) 01 April 2024 to 31 March 2025

From the date of
PY (in case of new business
commencement of
commenced during the year)
business till 31Mar2025
AY 01 April 2025 to 31 March 2026

General rule - income of PY will be assessed to tax only in the AY

However, certain exceptions to this rule

a) Shipping business of a non-resident

b) Person leaving India
c) AOP / BOI / Artificial juridical person formed for a particular event or purpose
d) Persons likely to transfer property to avoid tax
e) Discontinued business
n will be treated as Senior Citizen
en who is a resident
Even if he is turning 60 on 01 April 2025
115BAE of the Act]

March 2024]
ax Regime
ital gains on sale of shares, etc

Step 5
Comparing 13,17,500 and 14,45,400

Lower is INR 13.17.500

Tax liability before cess will be the above amount

e cess) in step 1
p 2 above
Clubbing of total income

Rules

1 Transfer of income without transfer of asset

i If any person transfers the income from any asset - without transferring the asset - such income wi
included in the total income of the transferor

ii It is immaterial whether the transfer is revocable or irrevocable

2 Income arising from revocable transfer of asset

i All income arising to any person by virtue of revocable transfer of an asset

shall be treated as income of the transferor

What is revocable?

Transfer is deemed to be revocable if:

a) The transfer contains any provision - for retransfer of the whole or part of the income / assets to the
b) It gives in anny way to the transferor, a right to reassume power, directly or indirectly over the who

3 Clubbing of income arising to spouse

A Income by way of remuneration from a concern in which the individual has substantial inter

Substantial interest - Having more than 20% of the voting power / 20% or more of share in pro

This 20% voting power - can be directly held by the individual or by his / her relatives
Relative - Husband, wife, brother or sister or any lineal ascendant or descendant of the individual

Exception Clubbing provisions will not be applicable in case the spouse to whom the re
has technical / professional qualification required for the job

Where both husband and wife have substantial interest in a concern and both of them are in receip
such income will be included in the hands of that spouse - whose total income excluding such inco

B Income arising to the spouse from an asset transferred without adequate consideration

i. If any asset is transferred to a spouse without adequate consideration - then income earned from
clubbed in the hands of the spouse
 This above transfer is not applicable for residential house property

ii. In case of residential house property - transferred without adequate consideration to a spouse
the transferor will still be deemed to be a owner of the property

iii. The income earned from the asset that is transferred will alone be clubbed in the hands of the s
All other income - which is earned by reinvesting the income earned from the transferred asset will

iv. If an asset is transferred without / for inadequate consideration - and this asset is invested in the
Such investment will be treated as capital contribution by the transferor

For e/g. Mrs. A is transferring INR 5 lakhs to Mr. A

Mr. A is starting a business with INR 12 lakhs
The profits of the business will be taxed in the hands of Mr. A and Mrs. A in the proportion of 7:5

iii. Even if the transfer of the asset is for the benefit of the spouse

3 Clubbing of income arising to son's wife

i. Income arising to son's wife from the assets transferred without adequate consideration by the fa
ii. Asset transferred invested in business - the income earned from the business will be clubbed in
iii. Even if the transfer of the asset is for the benefit of the son's wife - clubbing provisions will be ap

4 Clubbing of income arising to minor child

i. Any income earned by a minor child will be clubbed in the parents' income
ii. Which parent - Whichever parent has the higher income without considering the clubbed income
iii. If it is clubbed once in the hands of a parent - in all the subsequent years the income will be club
iv. In case of divorce / parents are separated - the income of minor child will be clubbed in the hand
v. One exception to clubbing of income of minor child - Where the income is earned by the child fro

5 Cross transfers

Mr. A - is transfering INR 5 lakhs to Mrs. B (who is a wife of Mr. B - who in turn is brother of Mr. A)
Mr. B - is transferring INR 4 lakhs to Mrs. A

In this case, income earned on INR 4 lakhs will be clubbed in the respective spouse's income

Illustration

Mr. V started a proprietory business on 01 April 2023 with a capital of INR 5 lakhs
He incurred a loss of INR 2 lakhs during FY 23-24
To overcome this position - His wife gifted INR 5 lakhs on 01 April 2024
This amount was immediately invested in his business
During FY 24-25 he earned a profit of INR 4 lakhs

Compute the income to be clubbed in the hands of MRs. V

Particulars Capital of Mr. V Capital of Mrs. V Total

As on 01 April 2024 300,000 500,000 800,000
Profit of FY 24-25 150,000 250,000 400,000
[400000x3/8] [400000x5/8]

Income during FY 24- 150,000 250,000

If she has gifted the amount on 2 April 2024 - then the clubbing provisions will not be applicable fo
It will be applicable for FY 25-26 only
The reason being - the capital contribution should be seen only on the First day of the FY
erring the asset - such income will be

part of the income / assets to the transferor

directly or indirectly over the whole or any part of the income or assets

ndividual has substantial interest

r / 20% or more of share in profits

y his / her relatives

or descendant of the individual

case the spouse to whom the remuneration is paid

quired for the job

rn and both of them are in receipt of salary

total income excluding such income is higher

ut adequate consideration

ration - then income earned from such asset will be

uate consideration to a spouse

be clubbed in the hands of the spouse

ed from the transferred asset will not be clubbed

- and this asset is invested in the business of the spouse

Mrs. A in the proportion of 7:5

adequate consideration by the father in law or mother in law

m the business will be clubbed in the hands of FIL / MIL in the proportion of the capital contribution
fe - clubbing provisions will be applicable

ts' income
considering the clubbed income
ent years the income will be clubbed in the same parents income
r child will be clubbed in the hands of the parent who is maintaining the child
income is earned by the child from any activity involving his skill, talent or specialised knowledge or experience

- who in turn is brother of Mr. A)

respective spouse's income

rovisions will not be applicable for FY 24-25

n the First day of the FY

edge or experience
Aggregate set off and carry forward of losses

1. Inter source set off

Genera
Inter source set off is applicable for all income / losses

However, there are certain exceptions

i Long term capital loss can be set off against only long term capital gain
ii Speculation business loss can be set off against only speculation business profit
iii Loss from the activity of owning and maintaining race horses
iv Loss from specified business - 35AD

2. Inter head set off of current year losses

i. Loss from any head other than capital gains - can be set off against income under any other head
ii. Loss from the head PGBP - Can be set off against any income except income under the head Salari
iii. Loss under the head capital gain - Cannot be set off against any other head
iv. Loss from IFHP
a) In case of default regime Cannot be set off against income under other heads
b) IN case of old regime Set off is allowable upto INR 2 lakhs
v. Speculation loss / loss from horse racing - cannot be set off against any income
vi. Specified business loss cannot be set off against any other head of income

3. Carry forward and set off of loss from house property

General rule - Carry forward of losses can be set off against only the head of income to which such loss is

i. If there is any unabsorbed losses

a) Old regime - Carry forward this unabsorbed loss to the future years and can be

b) New regime - Unabsorbed losses cannot be carried forward to the future years

ii. i.a) - Maximum period for carry forward and set off of losses is 8 AY immediately succeeding the AY

4. Carry forward and set off of loss from PBGP (other than speculation / specified)

i. Carry foward and set off of losses can be possible against any business
ii. Maximum period of carry forward and set off is 8 years
5. Carry forward and set off of loss in case of speculation business

i. Carry foward and set off of losses can be possible against income from speculation business only
ii. Maximum period of carry forward and set off is 4 years

6. Carry forward and set off of loss in case of horse racing

i. Carry foward and set off of losses can be possible against income from horse racing
ii. Maximum period of carry forward and set off is 4 years

7. Carry forward and set off of loss in case of specified business

i. Carry foward and set off of losses can be possible against income from specified business
ii. No Maximum period of carry forward and set off

8. Carry forward and set off of loss in case of unabsorbed depreciation

i. Carry foward and set off of losses can be possible against any income
ii. No Maximum period of carry forward and set off

Revenue 270
Expenses (other than tax depreciation) 300
Tax depreciation 50
Loss from business -80

PBGP loss -30

Unabsorbed depreciation -50

9. Carry forward and set off of loss in case of capital gains

i. Carry foward and set off of short term capital loss - Can be set off against both LTCG and STCG
ii. Carry foward and set off of long term capital loss - Can be set off against only LTCG and not STCG
iii. Cannot be set off against any other head
iv. Maximum period of carry forward and set off is 8 years

10. Submission of return of losses mandatory

In the following cases of loss, the return of income is required to be filed on or before the due date of filing
If not filed, carry forward and set off of losses not possible

i Business loss
ii Speculation business loss
iii Specified business loss
iv Loss from horse racing
v Capital loss - both short term and long term
siness profit

ncome under any other head

pt income under the head Salaries

ome under other heads

any income

of income to which such loss is relating to

s and can be set off against the income under the head IFHP

future years

mmediately succeeding the AY in which the loss was incurred

n / specified)
om speculation business only

om horse racing

om specified business

ainst both LTCG and STCG

inst only LTCG and not STCG

or before the due date of filing the return of income u/s. 139(1)
Provision for filing return of income and self assessment

1. Compulsory filing of ROI in certain cases (Section 139)

i. All companies and firms are required to compulsorily file ROI

ii. In case of other persons - if their total income is exceeding the basic exemption limit (INR 2.5 lakhs in ca
iii. A person who is not requried to file ROI in (ii) above - and he is a ROR, he will be required to file ROI if:
a) He holds any asset located outside India as beneficial owner
b) He is a beneficiary of any asset located outside
iv. Basic exemption limit (specified in [ii] above) without giving effect to Chapter VI-A deduction, section 54
v. Any person other than company or a firm - who is not requried to file return of income as per the conditio
a) He has deposited an amount or aggregate of amounts of more than INR 1 crores in bank in a current ac
b) He has incurred expenditure of amount / aggregate of amounts exceeding INR 2 lakhs on foreign travel
c) He has incurred expenditure of an amount / aggregate of amounts towards consumption of electricity ex
d) such other conditions as may be prescribed by the CBDT

i. If a persons total sales, turnover or gross receipts in business is more than INR 60 lakhs; or
ii. If his total gross receipts in profession is more than INR 10 lakhs during the PY
iii. If the aggregate of TDS and TCS is more than INR 25,000 in the PY
iv. If deposit in one or more savings bank account is more than INR 50 lakhs during the PY

2. Due dates for filing return of income

Sl.No Particulars Due date

1 Original return (Section 139(1))
AY 25-26 - It is 31 October
a) If the assessee is a
- Company
- A person other than a company whose accounts
31 October of the
are required to be audited under any law
assessment year
including IT Act
- A partner of a firm whose accounts are required
to be audited under the Act or under any law

b) in case of any assessee - whos is required to AY 25-26 - It is 30 Novemb

30 November of
furnish report referred to in seciton 92E
the assessment
(Transaction is undertaken with foreign
year
associates)

31 July of the
c) In all other cases
assessment year

2 Belated return (Section 139(4))

 31 December of
the Asssessment
year or before
Time limit for filing completion of
assessment
whichever is
earlier

3 Revised return (Section 139(5))

31 December of
the Asssessment
year or before
Time limit for filing completion of
assessment
whichever is
earlier

3. Consequences of not filing return of income

A. Interest u/s. 234A - Not filing return of income on or before the original due dates

Interest u/s. 234A will be 1% for a month or part of the month calculated on the total tax payable - assesse
It needs to be calculated from the due date of filing return of income till the date of filing the return of incom

April 30 2 months - Part of April one month and Part of May one month
May 29 Not 1 month

However, if the assessee has paid any self assessment tax - 234A interest exposure will stop till the date o

100,000
Due date - 31 october 2025
Filed the return of income 10 November 2025
If no payment is made
Interest u/s. 234A - 2000 2 months - October and No

However, if payment is made on 31 october 2025 - No interest u/s. 234A

Even though the ROI is filed belatedly

B. Fees for default in furnishing return of income

Fees
234F - Fees - If return is not filed before the due date
(in INR)
i. If the total income is less than INR 5 lakhs 1,000 Fixed
ii. If it is above INR 5 lakhs 5,000

4. Updated return under section 139(8A)

i. All the assessee have an option to furnish an updated return of income for any previous year
ii. The updated return of income shall be furnished on or before 24 months from the end of the relevant AY
For eg., AY 25-26 - It can be filed on or before 31 March 2028

iii. Non applicability of filing updated return

a. If the updated return is a loss return

b. If the updated return has the effect of decreasing the income tax liability determined basis original return
c. If the updated return results in additional refund due basis the original / belated / revised return

iv. If the original return is a loss return and the updated return is a profit / income return - then updated retu

v. Additionall tax payable on the updated return

S.No Particulars Additional tax

payable
1 Where the updated return is filed before the end 25% of aggregate
of 12 months from the end of the relevant of excessive tax
assessment year and interest Excessive tax and interest
payable

2 Where the updated return is filed after the end of 50% of aggregate
12 months from the end of the relevant of excessive tax
assessment year and before 24 months from the and interest
end of the relevant AY payable
 1. Deductions
2. TDS
3. Filing of return of income

imit (INR 2.5 lakhs in case of old regime and INR 3 lakhs in case of new regime)
e required to file ROI if:

A deduction, section 54/54B/54D/54EC/54F deductions

come as per the conditions prescribed above, is required to file - if he satisfies the folllowing conditions:
s in bank in a current account
2 lakhs on foreign travel
umption of electricity exceeding INR 1 lakhs

0 lakhs; or

25-26 - It is 31 October 2025

25-26 - It is 30 November 2025

al tax payable - assessed u/s. 143(1) or during regular assessment
filing the return of income

re will stop till the date of payment of self assessment tax

months - October and November 2025

 evious year
he end of the relevant AY

ned basis original return/ belated return / revised return

revised return

eturn - then updated return can be filed

cessive tax and interest payable = Tax payable as per Original ROI less tax payable as per updated return of income
conditions:
pdated return of income
Alternate minimum tax (AMT) - For all assessees other than Companies - Section 115JC

Minimum Alternate Tax (MAT) - For Companies- Section 115JB

Alternate minimum tax - is applicable only in case of old regime

Gross total income 3,000,000

Less: Deduction u/s. 10AA 2,400,000
Total income 600,000

Tax payable under normal rates - Individual

0-250000 0
250000-500000 12500
500000-600000 20000
Total tax on normal rates 32,500

Alternate minimum tax = 18.5% on Adjusted total income

Adjusted total income = Total income before giving effect to

i) Deductions claimed u/s 10AA
ii) Deduction claimed u/s. 35AD
iii. Deduction claimed under Heading C of Chapter VIA - 80JJAA, 80-IA

Adjusted total income 3,000,000

Alternate minimum tax @ 18.5% 555,000

AY 2025-26 - AMT - INR 5,55,000

While Normal tax is INR 32,500

Difference between AMT and Normal tax can be carried forward to future years and set off against the tax

AMT credit for AY 25-26 522,500

This INR 5,22,500 can be carried forward to future years and set off against the tax liability of future years

AY 26-27
Total income is INR 30,00,000
No deductions claimed under the Act
Still old regime

0-250000 0
250000-500000 12,500
500000-1000000 100,000
1000000-3000000 600,000
Total tax payable as per normal provisions 712,500

For utilising AMT 190,000

AMT can be utilised only till the amount of AMT payablle in the year of utilisation

Total tax payuable for AY 26-27 as per AMT 555,000

[Adjusted total income = INR 30lakhs]

Credit that can be adjusted during AY 26-27

[Min of credit that is available and the diff between normal tax and AMT in teh subsequent year]

a. Credit available 522,500

b. Difference between tax payable as per normal and AM 157,500

AMT credit that can be utilised in AY 26-27 157,500

Tax payable in AY 26-27 555,000

A. Maximum year of carry forward is 15 Years

B. AMT is not applicable in case of new regime u/s. 115BAC
C. AMT is not applicable if the total income is less than INR 20,00,000
- Section 115JC

rs and set off against the tax liability of future years

he tax liability of future years

 Max credit available = 5,22,500

subsequent year]

365,000 Balance credit can be carried forward to the next year