Direct Tax Volume 2

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Direct Tax – Volume II for June 22 & Dec 22 exams CS Executive (New Syllabus)
Index
Page
Topics Topic Name
Numbers
8 Income From Other Sources 8.1 – 8.26
9 Clubbing 9.1 – 9.15
10 Set Off and Carry Forward of Losses 10.1 – 10.12
11 Deductions 11.1 – 11.21
PAN – Return Filing – Self assessment -

12 12.1 – 12.16
Refund
13 TDS – TCS – Advance Tax 13.1 – 13.37
14 Various Entities 14.1 – 14.19
15 Tax Incidence on Companies 15.1 – 15.17
Assessment – Appeals – Revision -

16 16.1 – 16.23
Penalties
Unique Academy For Commerce Mo No – 8007916622/33

9. Clubbing ` 9.1
Chapter 9
Clubbing of Income
Sections (Income Tax Act, Details

1961)
Section 60 Transfer of income
Section 61 revocable transfer of assets
Section 64(1)(ii) income to spouse from a concern in which such individual has substantial
interest
Section 64(1)(iv) income to spouse from the assets transferred
Section 64(1)(vi) Income from Assets transferred to Son's Wife
Section 64(1)(viii) Income for immediate or deferred benefit of son's wife
Section 64(1)(vii) income of spouse through a third person
Section 64(1a) Clubbing of income of Minor Child
Section 64(2) Income from the converted property

9. Clubbing ` 9.2
CLUBBING OF INCOME
Normally, a person is taxed in respect of income earned by him only.
However, in certain special cases income of other person is included (i.e.
clubbed) in the taxable income of the taxpayer and in such a case he will be
liable to pay tax in respect of his income (if any) as well as income of other
person too. The situation in which income of other person is included in
the income of the taxpayer is called as clubbing of income. e.g., Income
of minor child is clubbed with the income of his/her parent. Section 60 to 64
of the Income-tax Act, contains various provisions relating to clubbing of
income.
The special provisions contained in these sections are designed to
counteract the various attempts which an individual may make for avoiding
or reducing his liability to tax by transferring his assets or income to other
person(s) while, at the same time, retaining certain powers or interest over
the property or it’s income. These provisions are explained below.
TRANSFER OF INCOME [SECTION 60]
Where a person transfers to any other person, income (whether revocable

or not) from an asset without transferring that asset, the income shall be
included in the total income of the transferor. “Transfer” includes any
settlement, trust, covenant, agreement or arrangement. The transfer also
includes a lease for inadequate consideration and the income derived
by the lessee from the leased property is included in the income of the
lessor.
These are applicable if the following conditions are satisfied:
The ownership
of asset is not
transferredby
him. The income from
the asset is
transferredtoany
The taxpayer person under a
owns an asset. settlement, or
agreement.
Applicability
[Section 60]

9. Clubbing ` 9.3
Section 60 of the Act has no application where assets producing income are transferred
along with the income C.I.T. v. Ram Prasad Mehta (1975) 100 ITR 468 (Bombay).
Illustration 1: A owns Debentures worth Rs 1,000,000 of ABC Ltd., (annual) interest being Rs.
100,000. On April 1, 2021, he transfers interest income to B, his friend without transferring the
ownership of these debentures.
In this particular case during 2021-22, interest of Rs. 100,000 is received by B; it will be taxable
in the hands of A as per Section 60.
Illustration 2: Mr. X owns Debentures worth Rs 1,000,000 of ABC Ltd., (annual) interest being
Rs. 100,000. On April 1, 2021, he transfers interest income to Mr. Y, his friend without
transferring the ownership of these debentures. Although during 2021-22, interest of Rs.
100,000 is received by Mr. Y, it is taxable in the hands of Mr. X as per Section 60.
REVOCABLE TRANSFER OF ASSETS [SECTION 61]
‘Revocable transfer’ means the transferor of asset assumes a right to

re-acquire asset or income from such an asset, either whole or in
parts at any time in future, during the lifetime of transferee.
Where a person transfers any asset to any person with a right to revoke
the transfer, all income accruing to the transferee from the asset
shall be included in the total income of the transferor.
For this purpose, assets include movable or immovable property

whether situated in India or abroad. As per Section 63, a transfer shall
be deemed to be revocable if:
(i) it contains any provision for the re-transfer directly or indirectly of the
whole or any part of the income or assets to the transferor; or
(ii) it, in any way, gives the transferor a right to reassume power directly, or
indirectly over the whole or any part of the income or assets.
Examples of revocable transfers
Some of the examples of revocable transfers are as follows:
(i) If there is an express clause of revocation in the instrument of transfer; or
(ii) If there is a sale with a condition of re-purchase; or
(iii) If the transfer is to a trust and if the transfer can be revoked with the
consent of two or more beneficiaries;
Or

9. Clubbing ` 9.4
(iv) If the trustees are empowered in sole discretion to revoke the transfer;
or
(v) If the transferor has power to change beneficiary or trustees. “Transfer”

includes any settlement, trust, agreement orarrangement.
Note: Re-transfer to the transferor must be in the same capacity in
which he made the transfer or settlement. If a settlement is made by a
Hindu undivided family and there is a re-transfer to one member of
the family in his capacity as an individual and not in his capacity as a
member of the family this cannot be termed a re-transfer for this
purpose.
INCOME OF SPOUSE
The following incomes of the spouse of an individual shall be included in the total income of the
individual:
(a)Income to spouse from a concern in which such individual has substantial interest
[Section 64(1)(ii)]
All such income as arises directly or indirectly, to the spouse of an individual

by way of salary, commission, fees or any other remuneration, whether
in cash or kind from a concern in which such individual has a substantial
interest, shall be included in the income of the individual.
Exception: However, where the spouse possesses technical or

professional qualifications and the income is solely attributable to the
application of his/her technical or professional knowledge and experience,
the income shall not be included in the income of (other spouse) the
assessee.
Substantial Interest : An individual shall be deemed to have a substantial interest in a concern -

9. Clubbing ` 9.5
(i) In a case where the concern is a company, if its shares (not being shares

9. Clubbing ` 9.6
entitled to a fixed rate of dividend whether with or without a further right to

participate in profits) carrying not less than 20% of the voting power are, at
any time during the previous year, owned beneficially by such person or
partly by such person and partly by one or more of his relatives;
(ii) In any other case, if such person is entitled, or such person and one or more
of his relatives are entitled in the aggregate, at any time during the previous
year, to not less than 20% of the profits of such concern.
Illustration
X has a substantial interest in A Ltd. and Mrs. X is employed by A Ltd. without any technical or
professional qualification to justify the remuneration.
In this case, salary income of Mrs. X shall be taxable in the hands of X.

When both husband and wife have substantial interest
Where both husband and wife have a substantial interest in the concern
and both are in receipt of the remuneration in such concern, the
remuneration from such concern is to be included in the total income of
the husband or, as the case may be, the wife whose total income
excluding the income referred to in that clause i.e. 64(1)(ii) is greater;
(Circular No. 258, dated 14-6-79) and where any such income is once
included in the total income of either spouse, any such income arising in
any succeeding year shall not be included in the total income of the other
spouse unless the Assessing Officer is satisfied, after giving that spouse an
opportunity of being heard, that it is necessary so to do.
Illustration
Mr. P is employed as Public Relation Officer in a company where Mrs. P holds 21 per cent
equity shares. She has been holding the share before marriage with Mr. P., Mr. P gets a salary
of Rs. 1,500 per month.
The whole salary of Rs. 18,000 will be included in the income of Mrs. P provided Mr. P has no
technical or professional qualification.
It is immaterial that the remuneration so paid is genuine and not excessive and that Mrs. P had
substantial interest in the company even before her marriage.

9. Clubbing ` 9.7
(b) Income to spouse from the assets transferred [Section 64(1)(iv)]
Where any individual transfers directly or indirectly any asset (other than
a house property) to the spouse, the income from such asset shall be
included in the income of the transferor.
Exception: However, there are exceptions to this rule:
(i) The transferor has received adequate consideration in money or

money’s worth. If the consideration was inadequate, proportionate
income shall be included in the income of the transferor.
(ii) The transfer has been made in connection with an agreement to

live apart. This separation can be either judicial or voluntary under
circumstances in which a judicial separation can be granted.
(iii) The income from the assets transferred shall not be included in
the income of transferor after the death of spouse, either transferor
or transferee. (Kind of revocable transfer)
(iv) The income from assets transferred shall be included in the income of
the transferor, only if the relationship as spouse exists on the two
dates, i.e., the date of transfer and the date on which the income
accrues or arises to the transferee. If any asset has been
transferred before marriage, the income from such asset cannot
be included in the income of the transferor.
(v) Only the direct income (including capital gains) earned with the help
of the transferred assets shall be clubbed. Any indirect income to
the transferee from the transferred assets shall not be included in
the income of the transferor.
• Suppose, A transfers certain shares to his wife B. Dividends

received on such shares are taxable in the hands of A.
• If B sells the shares and makes some capital gains, such gains are
also taxable in A’s hands.
• Now from the dividend money, B purchases some more shares and
receives dividends on these new shares, such dividends are not
taxable to A.
• In the same way, if B receives certain bonus shares on the shares

transferred by her husband and later on she receives dividend on
such bonus shares, the dividend shall not be included in the income

9. Clubbing ` 9.8
of the transferor because the bonus shares were never transferred

by her husband.
(vi) If some pin-money is given to wife by her husband neither the savings
out of pin-money nor the income earned with the help of savings out of pin-
money can be included in the income of husband.
Illustration - X transfers 500 debentures of IFCI to his wife without adequate consideration.
Interest income on these debentures will be included in the income of X.
INCOME TO SPOUSE THROUGH A THIRD PERSON [SECTION 64(1)(vii)]
Where a person transfers some assets directly or indirectly to a person or

association of persons (trustee or body of trustees or juristic person)
without adequate consideration for the immediate or deferred benefit
of his or her spouse, all such income as arises directly or indirectly from
assets transferred shall be included in the income of the transferor.
Where a trust was created by assessee’s mother for the benefit of the
assessee, his wife and the trustees were authorized to carry on
business, the income from the business was held to be income of the
trust and the share of wife could not be added to the income of the
spouse because neither the trust was created by the assessee nor the
business done in the partnership. [K.T Doctor v. C.I.T (1980) 124 ITR
501 (Guj.)].
INCOME FROM ASSETS TRANSFERRED TO SON’S WIFE [SECTION 64(1)(vi)]
Income from assets transferred to son’s wife shall be

taxable in hand of taxpayer who has transferred the assets:
He/she has
The taxpayer
transferred
is an
an asset after
individual.
May 31, 1973.
The asset is
The asset is transferred
transferred without
to son’s wife. adequate
consideration.

9. Clubbing ` 9.9
TRANSFER FOR IMMEDIATE OR DEFERRED BENEFIT OF SON’S WIFE [SECTION

64(1)(viii)]
Any income arising, directly or indirectly, to any person or
association of persons from assets transferred directly or indirectly
otherwise than for adequate consideration to the person or
association of persons by such individual shall, to the extent to which
the income from such assets is for the immediate or deferred benefit of
his son’s wife be included in computing the total income of such
individual.
Assets transferred directly or indirectly by an individual to his spouse or son’s wife are
invested by the transferee
(i) in any business, such investment being not in the nature of

contribution of capital as a partner in a firm or, as the case may
be, for being admitted to the benefits of partnership in a firm, that
part of the income arising out of the business to the
transferee in any previous year, which bears the same
proportion to the income of the transferee from the business
as the value of the assets aforesaid as on the first day of the
previous year bears to the total investment in the business by
the transferee as on the said day;
(ii) in the nature of contribution of capital as a partner in a firm, that

part of the interest receivable by the transferee from the firm in
any previous year, which bears the same proportion to the interest
receivable by the transferee from the firm as the value of
investment aforesaid as on the first day of the previous year
bears to the total investment by way of capital contribution as a
partner in the firm as on the said day, shall be included in the total
income of the individual in that previous year.

9. Clubbing ` 9.10
CLUBBING OF INCOME OF MINOR CHILD [SECTION 64(1A)]
All income which arises or accrues to the minor child (not being a
minor child suffering from any disability of the nature specified in
Section 80U) shall be clubbed in the income of his parent.
However, any income which is derived by the minor from manual work
or from any activity involving application of his skill, talent or
specialized knowledge and experience will not be included in the
income of his parent.
Further, the income of the minor shall be included in the income of that
parent whose total income excluding income includible under this
sub section is greater, where the marriage of minor’s parents
subsists, otherwise the income of the minor will be includible in the
income of that parent who maintains the minor child in the relevant
previous year.
Once the income of the minor is included in the total income of any
one parent, clubbing of income of the minor with the same parent will
continue in subsequent years also, unless the Assessing Officer is
satisfied, after giving that parent an opportunity of being heard that it is
necessary so to do.
In case the income of an individual includes any income of his minor

child in terms of this section [i.e. Section 64(1A)], such individual
shall be entitled to exemption of the amount of such income or Rs.
V Imp 1,500 whichever is less.
If opted for Section 115BAC this exemption of Rs. 1500 will not be
provided
INCOME FROM THE CONVERTED PROPERTY [SECTION 64(2)]
Where an individual, being a member of Hindu undivided family, transfers

his self-acquired property to the family for the common benefit of the
family, or throwing it into the common stock of the family, or transfers it
directly or indirectly to the family otherwise than for adequate consideration,
such property is known as converted property
The income derived from the converted property or any part thereof, shall
be included in the income of the transferor.

9. Clubbing ` 9.11
Income from converted property to spouse after partition
Where the converted property has been the subject matter of total or
partial partition amongst the members of the family, the income derived
from such converted property as is received by the spouse of the

transferor on partition shall be included in the income of the
individual.
The income from the above mentioned items shall first be computed
under the appropriate heads in the hands of the transferee and after
that it shall be included in the total income of the transferor under
the head, “Income from other sources”.
However, the income from house property transferred to spouse

shall be computed under the head ‘Income from house property’ in
the hands of transferor and not in the hands of the transferee.
Explanation to the term ‘income’ used in Section 64 includes ‘loss’. This

amendment nullifies the decision in Dayalbhai Madhavji Vadera v. C.I.T.
(1966) 60 ITR 551 of the Gujarat High Court that the term ‘income’ used in
Sub-section (1) of Section 64 does not include a loss.

9. Clubbing ` 9.12
SUMMARY OF THE CLUBBING PROVISION

Nature of TransactionClubbed in Conditions/Exceptions Relevant Reference
the Hands of
Transfer of Income Transferor Irrespective of: 1. Income for the purpose of Section
without transfer of who transfers 64 includes losses. [P. Doriswamy
1. Whether such transfer
Assets (Section 60) the income Chetty 183 ITR 559 (SC)] [also see
is revocable or not.
Expl. (2) to Section 64]
2. Whether the transfer is
2. Section 60 does not apply if
effected before or after
corpus itself is transferred.
the commencement of IT [Grandhi Narayana Rao 173 ITR 593
Act. (AP)]
Revocable transfer of Transferor Clubbing not applicable if: Transfer held as revocable
Assets (Section 61) who transfers
1. Trust/transfer 1. If there is provision to re transfer
the Assets
irrevocable during the directly or indirectly whole/part of
lifetime of income/asset to transferor;
beneficiaries/transferee or
2. If there is a right to reassume power,
directly or indirectly, the transfer is held
revocable and actual exercise is not
necessary. [S. Raghbir Singh 57 ITR
408 (SC)]
3. Where no absolute right is given to
transferee and asset can revert to
transferor in prescribed circumstances,
transfer is held revocable.
[Jyotendrasinhji vs. S.
I. Tripathi 201 ITR 611 (SC)]
Salary, Commission, Spouse Clubbing not applicable if: 1. The relationship of husband and
Fees or remuneration whose total Spouse possesses wife must subsist at the time of
paid to spouse income technical or professional accrual of the income. [Philip John
from a concern in (excluding qualification and Plasket Thomas 49 ITR 97 (SC)]
which an individual income to be remuneration is solely 2. Income other than salary,
has a substantial* clubbed) is attributable to application commission, fees or remuneration is
interest. [Section 64 greater. of that knowledge/ not clubbed under this clause
(1)(ii)] qualification.
Income from the Individual Condition: The transfer Cross transfers are also covered
assets transferred to transferring should be without [C.M.Kothari 49 ITR 107 (SC)]
son’s wife [Section the adequate
64 (1)(vi)] Asset. consideration.

9. Clubbing ` 9.13
Nature of Clubbed in Conditions/Exceptions Relevant Reference

Transaction the Hands of
Income from Individual Clubbing not applicable if: The assets 1. Income earned out of
assets transferred transferring the Income arising from
are transferred;
directly or asset. transferred assets not
indirectly to the 1. With an agreement to live apart. liable for clubbed. [M.S.S.
spouse without 2. Before marriage. Rajan 252 ITR 126
adequate (Mad)]
3. Income earned when relation does
consideration
not exist. 2. Cash gifted to spouse
[Section 64 (1)(iv)]
4. By Karta of Huf gifting co-parcenary and he/she invests to
property to his wife. L. Hirday narain earn interest. [Mohini
vs. ITO 78 ITR 26 (SC) Thaper vs. CIT 83 ITR
5. Property acquired out of pin money. 208 (SC)]
R.B.N.J. Naidu vs. CIT 29 ITR 194 3. Capital gain on sale of
(Nag.) property which was
received without
consideration from
spouse [Sevential M.
Sheth vs. CIT 68 ITR 503
(SC)]
Transfer of assets Individual Condition: 1. Wife means legally

by an individual to transferring the
1. The transfer should be without wedded wife. [executors
a person or AOP Asset. of the will of T.V. Krishna
adequate consideration.
for the immediate Iyer 38 ITR 144 (Ker)]
or deferred benefit
of his: (vii) -
Spouse (viii)
- Son’s wife
[Section
64(1)(vii)&(vii)]
Income of a minor 1. If the Clubbing not applicable for: 1. Income out of
child [Child marriage – property transferred for
includes step subsists, in the no consideration to a
1. Income of a minor child suffering
child, adopted hands of the minor married daughter,
any disability specified u/s. 80u.
child and minor parent whose total shall not be clubbed in
married daughter] income is greater; 2. Income on account of manual work the parents’ hands.
[Section 64 (1A)] or; done by the minor child. [Section 27]
2. If the 3. Income on account of any activity 2. The parent in
marriage does not involving application of skills, talent or whose hands the minor’s
subsist, in the specialized knowledge and income is clubbed is
hands of the experience. entitled to an exemption
person who up to Rs. 1,500 per child.
[Section 10(32)]

9. Clubbing ` 9.14
maintains the
minor child.
3. Income once
included in the
total income
of either of
parents, it shall
continue to be
included in the
hands of same
parent in the
subsequent year
unless AO is
satisfied that it is
necessary to do
so
(after giving that
parent
opportunity of
being heard)
included in the
hands of same
parent in the
subsequent year
unless AO is
satisfied that it is
necessary to do
so
(after giving that
parent
opportunity of
being heard)
RECOVERY OF TAX
Dual Liability for Tax: The tax on the income of the other person which has been included
in the income of the assessee can either be recovered from the assessee or from the
other person. The liability of other person is limited to the portion of the tax levied on the
assessee which is attributable to the income so included. His liability arises after the
service of a notice of demand by the Assessing Officer in this behalf.
Where any such asset (the income from which has been included in that of the assessee) is
held jointly by more than one person, they shall be jointly and severally liable to pay the tax
which is attributable to the income from the assets so included.

9. Clubbing ` 9.15
Illustration 1 :
Mr Sharma invests Rs 10 lakh in a fixed deposit (FD) at a bank, in his wife’s name. Interest of
Rs. 1 lakhs arises on this income. Mrs Sharma invests the interest on periodic basis and
interest for an amount of Rs. 5,000 arises on the interest deposited by her in bank. Analyze the
clubbing provisions and find out the taxability of interest accrued.
Solution
Rs. 1 lakhs in the Now Interest income on FD will be clubbed with his (Mr. Sharma) income.
Interest of Rs. 5,000 aroused out of Investment made by Mrs. Sharma will be taxed as her own
income.
Illustration 2 :
Red holds 40% of shares in a Company. Mrs. Red (a CS) is employed in the company as a
Company Secretary and is getting salalry of Rs. 15,000 per month. Compute total income
and tax payable by Red and Mrs. Red for the Assessment Year 2022-23 assuming other
income of Red is Rs. 2,00,000 from a business.
Solution
In the present case, Mrs. Red’s salary income wil be taxable in her hands only as she is
earning the same through her professional qualification.
Computation of Total Income and Tax Liability for Assessment Year 2022-23
Particulars Red Mrs. Red
Income from Salary nil 1,80,000
Income from Business 2,00,000 nil
Gross Total Income (or Total Income) 2,00,000 1,80,000
Tax Liability (as total income does not exceed Rs. 2,50,000): Nil Nil
Illustration 3:
Mr. Amit is beneficially holding 21% equity shares of Essem Minerals Pvt. Ltd. Mrs. Amit is
employed as Manager (in accounts department) in Essem Minerals Pvt. Ltd. at a monthly
salary of Rs. 84,000. Mrs. Amit is not having any knowledge, experience or qualification in
the field of accountancy. Will the remuneration (i.e., salary) received by Mrs. Amit be
clubbed with the income of Mr. Amit?
Solution
In this situation, Mr. Amit is having substantial interest in essem Minerals Pvt. Ltd. and
remuneration of Mrs. Amit is not justifiable (i.e., she is employed without any technical or
professional knowledge or experience) and, hence, salary received by Mrs. Amit from

9. Clubbing ` 9.16
essem Minerals Pvt. Ltd. will be clubbed with the income of Mr. Amit and will be taxed in the
hands of Mr. Amit.
Illustration 4:
Mr. Kapoor gifted Rs. 8,40,000 to his wife. The said amount is invested by his wife in
debenture of a company. Will the income from the debenture purchased by Mrs. Kapoor
from gifted money be clubbed with the income of Mr. Kapoor?
Solution
Rs. 8,40,000 is transferred to spouse. Fund is transferred via gift (i.e., without adequate
consideration) and, hence, the provisions of section 64(1)(iv)will be attracted. The
provisions of clubbing will apply even if the form of asset is changed by the transferee-
spouse.
In this case asset transferred is money and, subsequently, the form of asset is changed
to debentures, hence, income from debentures acquired from money gifted by her
husband will be clubbed with the income of her husband. Thus, interest on debenture
received by Mrs. Kapoor will be clubbed with the income of Mr. Kapoor.

10. Set off – Carry Forward of Losses 10.1
Chapter 10
Set off and Set off &
Carry Forward of
-
Losses
Sections (Income Details
Tax Act, 1961)
Section 70 Set-Off of Losses from One Source Against Income from Another Source under the
Same Head of income
Section 71 Set-Off of Loss from One Head Against Income from Another Head
Section 72 loss in Non-Speculation Business
Section 73 loss in Speculation Business
Section 73a Carry Forward and Set Off of Losses by Specified Business
Section 74 Set-Off and Carry Forward of Capital Losses
Section 74(a) loss on Maintenance of race Horses
Section72a(1),(2),(3) Carry forward and set off of accumulated loss and unabsorbed depreciation in
case of amalgamation
Section 72a(4) ,(5) Carry forward and set off of accumulated losses and unabsorbed depreciation in
case of demerger
Section 72a(6) Carry forward and set off of accumulated losses and unabsorbed depreciation in
case of reorganization of business
Section 72aa Carry forward and set off of accumulated loss and unabsorbed depreciation
allowance in scheme of amalgamation in certain cases
Section 78 Carry-forward and set-off of losses in case of change in constitution of firm
Section 79 Carry-forward and set-off of losses of companies in which the public are not
substantially interested
Section 79(b) Carry forward and set of losses in case of eligible start-up
Section 80 Submission of return of loss
Sr. No. Heads Types of Set off in the year of Loss Carry forward and set off in Time Limit for Return filing
of Income business/ activity the subsequent previous years c/f and set off requirement before
for next - due date
(Section 80)
Intra head Inter head Intra head Inter head
(Sec 70) (sec 71)
1 Salary - Loss doesn’t arise

2 House - Allowed Allowed- Maximum Rs Allowed Not Allowed 8 A.Y's No
Property 2,00,000 aggregating
al heads.
Balance C/f
Normal i.e. non- Allowed from any Allowed except Salary Allowed from any Not Allowed 8 A.Y's Yes
speculation business (Normal, business (Normal,
business speculative, 35AD) speculative, 35AD)
Speculation Allowed - Only and Not Allowed Allowed - Only and Not Allowed 4 A.Y's Yes
Business only from speculation only from speculation
3 PGBP business business
35AD Allowed - Only and Not Allowed Allowed - Only and Not Allowed Indefinite period Yes
only from 35AD only from 35AD
business business

Sr No. Heads Types of Set off in the year of Loss Carry forward and set off in Time Limit for c/f Return filing
of Income business/ activity the subsequent previous years and set off for next - requirement
Intra head Inter head Intra head Inter head before due date
(Sec 70) (sec 71)
Short Term Allowed (From both Not Allowed Allowed (From both Not Allowed 8 A.Y's Yes
STCG and LTCG) STCG and LTCG)
4 Capital Gains
Long Term Allowed - Only and only Not Allowed Allowed - Only and Not Allowed 8 A.Y's Yes
from LTCG only from LTCG
Normal income Allowed - Against Allowed Loss not allowed to c/f NA

normal income and
activity of maintaining
horse races
Lottery, betting, Not Allowed and also No Loss can be set off against such Income. NA
5 IOS gambling, horse
races etc.
Activity of Allowed - Only and only Not Allowed Allowed - Only and Not Allowed 4 A.Y's Yes
owning and against activity of only against activity of
maintaining maintaining horse maintaining horse
Race Horses races races
- Allowed Allowed Allowed Allowed Indefinite period No

Unabsorbed except Salary except Salary
6
depreciation

Section 115BAC
AY 21-22
Sr. Nature of Exemption/Deduction Relating to New System of Tax u/s Existing system of
No. Head House Property 115BAC Tax
1. Set off of brought forward House Property losses Not allowed if related allowed
& brought forward depreciation to disallowed
from Current year House Property deduction &
income exemptions
2. Set off current year House Property loss from Not allowed allowed
other
heads
SET-OFF AND CARRY-FORWARD OF LOSSES
The Income-tax Act, 1961 contains specific provisions (Sections 70 to 80) for
the set-off and carry- forward of losses.
Few Pointers
• The loss suffered by a wholly owned subsidiary company cannot

be set-off by the parent company, since both are separate assessees.
• Similarly, where loss incurred by a wholly owned subsidiary

company is reimbursed by the holding company, the subsidiary
company does not use the right to carry forward and set-off the
loss. [C.I.T v. Handicraft Handloom Export Corporation (1982) 133 ITR
590 (Delhi)].
• Loss from an illegal speculation business cannot be set-off against

income from any lawful speculation. [C.I.T. v. K.J. Kotecha 107ITR 101
(SC)].
The assessee earns commission on speculative transactions, he is not entitled to set-off
speculative loss against such commission because there is no element of speculation in the
commission [C.I.T. v. Pangal VittalNayak & Co. Pvt. Ltd. (1969) 74 I.T.R. 754 (S.C.)]
1. Order of Set-off of losses
In case where profits are insufficient to absorb brought forward losses,
current depreciation and current business losses, the same should be
deducted in the following order:
(a) Current scientific research expenditure [under Section 35(1)].
(b) Current Depreciation [under Section 32(1)].
(c) Brought forward business losses [under Section 72(1)].
(d) unabsorbed family planning promotion capital expenditure [under

Section 36( 1)(ix)].
(e) unabsorbed Depreciation [under Section 32(2)].
(f) unabsorbed scientific research expenditure [under Section 35(4)]
Unique Academy - 8007916622 CA Saumil Manglani - 9921051593

2. The loss from an illegal speculation business or loss incurred in

speculation business in banned items can be neither set-off against
income from any lawful speculation business nor can it be carried
forward for being set-off in the subsequent year against income even
from an illegal speculation business because the law assumes that any
illegal business dies with all its losses in the same year [CIT v. Kurji
Jinabhai Kotecha (1977) 107 ITR 101 (SC)].
3. Sometimes there may be brought-forward speculation loss and

current year’s non-speculation business loss. Now the problem
arises which loss should be set-off first against the current year’s
speculative income. Accordingly, to the administrative
instructions the Assessing Officer may allow the assessee:
(i) either to first set-off the speculation loss carried forward;

or
(ii) to first set-off the current year’s losses from non-

speculation business and other sources
whichever is advantageous to the assessee..

4. Similarly, where a speculation business is carried on by sole
proprietor and after his death the business is continued by legal
heirs forming partnership, the firm is entitled to carry forward and
set-off such loss. [C.I.T. v. Madhukant M. Mehta (1981) 132 ITR 159
(Guj.)].
5. Only the person who has incurred the loss is entitled to carry
forward or set off the same. Consequently, the successor of a
business cannot carry forward or set off the losses of his predecessor
except in the following cases –

Exceptions
Share of loss of
Son succeding the partnership taken
business/ professoin over by one of its Certain cases covered
by inheritance due to partners can also be in point 6 below
father's death set-off by the
partner[Dwarkadass
Leeladhar v. CIT (1963)
47 ITR 619 (Ker.)]
Note - However, loss incurred by HUF → cannot be C/f & set-off after its
partition against income of firm formed by certain coparceners
[KeshrichandBhanabhai v. CIT(1951) 20ITR 201 (Bom.)].
Note – The unabsorbed depreciation can’t be carried forward by the
successor on inheritance
6. C/f and Set – Off of Business Loss and Unabsorbed Depreciation in

case of Amalgamation, Demerger etc.

Losses/ unabsorbed
depre. to be c/f by
successor entities -
In case of reorganisation -
72A(1) Amalgamation of
industrial undertaking/ In Demerger a. firm/proprietary concern
ship co./ a hotel with is succeeded by a company
another company/PSC’s 72A(4) and (5) - 72A(6)
or an amalgamation of a b. private company / unlisted
banking company (72AA) public company is
succeeded by a LLP 72(6A)
Unabsorbed
Unabsorbed depreciation &
depreciation & Losses can be C/f Unabsorbed
Losses can be C/f by the new entity depreciation &
by the new entity Losses can be C/f
by the new entity
Here the losses are Here the losses are

considered to be the fresh not considered to Here the losses are
losses for the new entity in be the fresh losses considered to be the fresh
the year of for the new entity losses for the new entity in
amalgamation.(Refer Note the year of
below) reorganizations.(Refer Note
below)
• Note – Suppose losses are incurred by Company “A” in PY 13-14 and
amalgamation took place in 17-18 with company “B”, then for those old losses
incurred by Company “A” it is considered as if the same are suffered in the year 17-
18 (i.e. 17 – 18 is considered as the first year of losses) and it can be further c/f by
Company “B” for next 7 years.
[ In simple words there is re-incarnation of Losses] [ पु नरुजनम ]
72A(1) Amalgamation of
✓ Industrial undertakings, Ship, Hotel
AY 21-22
✓ Banking company
✓ Public sector company merging with another Public sector company
✓ Erstwhile public sector company → with one or more company or companies
If the share purchase agreement entered into under strategic disinvestment
restricted immediate amalgamation
and the amalgamation is carried out within 5 years from the end of the previous year
in which the restriction ends
Provided that the accumulated loss and the unabsorbed depreciation of Erstwhile
public sector company
shall not be more than the accumulated loss and unabsorbed depreciation of the public sector
company as on the date on which the public sector company ceases to be a public
sector company as a result of strategic disinvestment.
“Strategic disinvestment" means sale of shareholding by the Central Government or any
State Government in a public sector company which results in reduction of its shareholding
to below 51% with transfer of control to the buyer.
In case of amalgamation
The accumulated loss shall not be set off or carried forward and the unabsorbed
depreciation shall not be allowed in the assessment of the amalgamated company
unless -
(a) the amalgamating company -
(i) has been engaged in the business, in which the accumulated loss occurred or
depreciation remains unabsorbed, for three or more years;
(ii ) has held continuously as on the date of the amalgamation at least 3/4th of
the book value of fixed assets held by it 2 years prior to the date of
amalgamation;
(b) the amalgamated company -
(i) holds continuously for a minimum period of 5 years from the date of
amalgamation at least 3/4th of the book value of fixed assets of the
amalgamating company acquired in a scheme of amalgamation;
(i) ) continues the business of the amalgamating company for a minimum

period of 5 years from the date of amalgamation;
(ii) fulfils such other conditions as may be prescribed to ensure the revival of the
business of the amalgamating company or to ensure that the amalgamation is
for genuine business purpose.
Consequences if the above conditions are not satisfied [Section 72A(3)]: Losses/
unabsorbed depreciation allowed will be deemed to be in the income of the amalgamated
company chargeable to tax for the year in which such conditions are not complied with.
Note: Loss sustained in a speculation business can’t be transferred to

amalgamated company

Treatment of C/f – Set Off of Losses of certain assesses –
a. In case of change in constitution of firm [Section 78] - Firm is not entitled to carry
forward and set off so much of the loss proportionate to the share of a retired or
deceased partner as exceeds his share of profits, if any, in the firm in respect of the
previous year.
Example - A firm consists of 3 partners A, B & C with equal Profit -sharing ratio. The firm suffered
loss for the year 16-17 amounting to Rs. 3,00,000. Further partner C retired on 31st March 17. Now
.
for PY 18 – 19, firm will not be able to c/f losses of Rs. 1 Lacs which belonged to the retired partner
C.
Thus, the carried forward losses for the year 18-19 will be only Rs. 2 lacs.
b. Carry-forward and set-off of losses of companies in which the “public

are not substantially interested” [Section 79]
The losses of such companies can be carried forward and set-off only if -:
“Minimum 51% shareholders having voting powers shall be the same as on

the last day of the PY in which the loss was incurred “&” on the last
day of the PY in which the loss is to be adjusted against the profit.”
Example –
• On 31st march 2017 (PY 16-17) → Company consists of 4 shareholders – A, B, C, D with 25% equity
holding each. Company suffered loss of Rs 10 Lacs during PY 16-17.
• Now in PY 17-18, Mr. C retired and Mr. D took over his share in the company and company earned a
profit of Rs. 25 Lacs. The s/h as on 31st March18 were A, B, C, D.
• Here as on the last day of PY 17-18 and PY 18-19, 3 shareholders are the same (i.e. Mr. A, B and C)
holding minimum 51% voting powers on both these dates.
• Therefore Co. will be able to set off the loss of Rs. 10 Lacs against the profits of Rs. 25 Lacs.
Note - However, the benefit of set-off will not be denied if the change in voting power is
due to
Death of a transfer of shares by way

Shareholde
r of gift to any relative of
the shareholder making
such gift.

It has further been provided by Finance Act, 2018 that benefit of carry forward and set
off of losses shall not be denied to a closely held company seeking insolvency
resolution, where a change in the shareholding takes place in a previous year pursuant
to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016, after
affording a reasonable opportunity of being heard to the jurisdictional Principal
Commissioner or Commissioner.(AY 19 -20)
c. Carry forward and set of “losses” in case of eligible start-up [Section 79(b)]
This section is applicable if following conditions are satisfied:
a) The assessee is a company in which public are not substantially interested.
b) It is an eligible start up referred u/s 80-IAC.
In case of such company the losses of such companies can be carried forward and set-off if –
“Minimum 51% shareholders having voting powers shall be the same as on the last day of
the PY in which the loss was incurred “&” on the last day of the PY in which the loss is to
be adjusted against the profit.”
Or.
Provided that even if the said condition is not satisfied in case of an eligible start up as referred to in
section 80-IAC, the loss incurred in any year prior to the previous year shall be allowed to be carried
forward and set off against the income of the previous year if all the shareholders of such company
who held shares carrying voting power on the last day of the year or years in which the loss was
incurred, continue to hold those shares on the last day of such previous year and such loss has been
incurred during the period of seven years beginning from the year in which such company is
incorporated.
Note – However, the benefit of set-off will not be denied if the change in voting power is
due to
Death of a transfer of shares by way

Shareholde
r of gift to any relative of
the shareholder making
such gift.
b. Change in shareholding takes place due to the Insolvency & Bankruptcy code.
c. If the assessee is a subsidiary of foreign company and the foreign holding company
is amalgamated / merged with another foreign company (and the persons holding
51% or more shares in the amalgamating/ demerged company become the
shareholders of the amalgamated/resulting foreign company).
d. Change in shareholding takes place due to resolution plan approved by NCLT

CASE LAW
Where assessment was reopened on ground that assesse had booked contrived (False) losses to
the extent of Rs. 16.51 lakhs through NMCE platform operated by ‘R (Agent)’. In view of the fact that
assesse had treated said sum as income and not loss, reason recorded by Assessing Officer for reopening
assessment was palpably incorrect and, thus, impugned re-assessment proceedings were to be quashed
[Assessment year 2011-12] [in favour of assesse]
Narendrakumar Mansukhbhai Patel v. ITO [2018] (Guarat)
Facts of the Case: The assesse was engaged in trading activities. For the relevant year, the
assessee had filed return of income which was accepted by the revenue authorities under section
143(1) without scrutiny. Subsequently, the Assessing Officer received information that one ‘R’, a
commodity trader was indulging in booking contrived losses by utilizing NMCE platform. He further
noted, that the assesee had booked such contrived losses to the extent of Rs. 16.51 lakhs through
NMCE platform operated by ’R’. He thus initiated reassessment proceedings.
According to the assessee, he had never claimed loss of Rs. 16.51 lakhs.
Judgement:
Held that since there was nothing on record showing that said sum of Rs. 16.51 lakhs was a loss
claimed by the assessee, reason recorded by the Assessing Officer for re-opening assessment was
incorrect and, thus, impugned re-assessment proceedings were to be quashed.
CASE LAW
In order to avail benefit of clause (a) of sub-section (4) of section 72A, maintenance of separate books of
account is not mandatory [Assessment year 2008-09] Principal CIT
v. Adani Retail Ltd. [2018] (Gujarat) Fact of the Case:
In case of the assessee, a demerged company, scheme of demerger was approved by the High Court, and
thereupon all assessed properties and liabilities of demerged company were to be transferred to resulting company. At
the time of demerger, question of carry-forward losses or unabsorbed depreciation of demerged company to be
available to resultant company came up for consideration. The Assessing Officer rejected the claim on the ground that
the assessee had not maintained separate accounts, a view which the Commissioner (Appeals) upheld. The tribunal
opined that no such requirement arose out of section 72A(4). According to the Tribunal, Section 72A(4) required that
explanation of the assessee, on how brought forward loss and unabsorbed depreciation directly relatable to units
transferred to resulting company were to be examined on merits and, if no defects were found in same, it was to be
accepted.
Judgement:
Held that on facts, the Tribunal rightly concluded that statutory provisions do not command that in order to avail benefit
of clause (a) of section 72(4) separate books of account must be maintained. Therefore, the impugned order passed by
the Tribunal requiring the Assessing Officer to examine explanation of the assessee on merits, did not require any
interference.

11. Deductions 11.1
“Happy Deductions”

11. Deductions 11.2
Introduction - Section 80B
a. The deductions are available only to the assessees where the gross total income is positive. If
however, the gross total income is nil or negative, the question of any deduction from the gross total
income does not arise.
b. “Gross total income” means the total income computed in accordance with the provisions of the Act
without making any deduction under Chapter VI-A. “Computed in accordance with the provisions of
the Act” implies—
i. that deductions under appropriate computation section have already been given effect to;
ii. that income of other persons, if includible under sections 60 to 64, has been included;
iii. the intra head and/or inter head losses have been adjusted; and
iv. that unabsorbed business losses, unabsorbed depreciation etc., have been set-off.
c. The income arising after deduction under section 80C to 80U is called Total Income.
d. An assessee cannot have a loss as a result of the deduction under Chapter VI-A and claim to carry
forward the same for the purpose of set-off against his income in the subsequent year.
Section 115BAC Impact
Individual and HUF opting for connectional tax regime under section 115BAC: the deduction
under Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or section 80JJAA;
not available to the individual and HUF opting to pay tax under connectional tax regime under section
115BAC of the income tax act, 1961.

11. Deductions 11.3
Section Eligible Eligible Payments Permissible

Assessee Deduction
1. Bonds of NABARD
2. 5-year time deposit Post Office
3.Deposit in Senior Citizens Savings Scheme
4.Minimum 5-year term deposit with bank
5.LIP - Self, Spouse, Children, any member of HUF
(Dependent, Independent, married, unmarried, major, minor)
[Parents – Bro and sis की ज़िन्दगी की ज़ िंता मत करना]
- For policies issued upto 31.3.2012 - Max 20% of minimum sum

assured.
- For policies issued on or after 1.4.2012 - Max 10% of minimum
sum assured.
- For disabled persons (80U & 80 DDB) policy issued on or after
1.4.2013 - Max 15% of minimum sum assured.
6.Contribution to PPF/SPF/RPF & approved superannuation fund
7. Deposited in Sukanya Samridhi Account
8.National Savings Certificate
9.Contribution in ULIP1971/ LIC Mutual Fund
10.Contribution to approved annuity plan of LIC Sums paid or
Individual - New Jeevan Dhara and New Jeevan Akshay deposited, subject to
80C
or HUF -Tata AIG a maximum of
11. notified units of mutual fund or UTI Rs. 1,50,000
12.Contribution to National Housing Bank (Tax Saving) Term 80 CCE
Deposit Scheme, 2008 Max
13.Subscription to any such deposit scheme of a public sector company ded.
which is engaged in providing long-term finance for construction, or 1.5
purchase of houses in India for residential purposes for example, public
lacs
deposit scheme of HUDCO, Housing Boards
14.Payment of tuition fees (excluding development fees, donation
for all
etc.) to any university, college, school or other educational 3 secs.
institutions within India for full-time education for maximum 2 in
children aggreg
15.Repayment of housing loan (Only Principal component) ate
including stamp duty, registration fee and other expenses related
to transfer.
Conditions -
a. income from such property should be chargeable to tax under
the head “Income from house property"
b. Payment to Government, financing institutions, banks, LIC etc.
16.Subscription to certain equity shares or debentures with a
lock-in period of three years
17.Premium paid in respect of a contract for deferred annuity
18. Investment in Tier II NPS Account by Central Govt. employee
AY 20-21
(Lock in 3 years)
80CCC Individual Pension fund of LIC or other insurer Amount paid or
deposited, subject to
80CCE
80CCD (1) Individual Contribution to Pension Scheme of Central Govt. [National Employee’s/
Pension Scheme & Atal Pension Yojana]. Individual's
Contribution
(This is also subject to 80CCE) For employees - Max 10%
of Salary (Basic +
Conditional DA)
Other than employee -
Max 20% of GTI

11. Deductions 11.4
Section Eligible Assessee Eligible Payments Permissible Deduction

80CCD(1B) Individual Additional deduction of upto Rs. 50,000 is
Contribution to Pension Scheme of Central available (In addition to 80CCD (1)
80CCD (2) Individual Govt. [National Pension Scheme & Atal Employer’s Contribution
Pension Yojana]. Dedn. of employer’s contribution u/s
80CCD (2) restricted to
Note - The limit 1.50 lakh u/s 80CCE does not 14% of Salary for CG employees AY 20-21
apply to dedn. u/s 80CCD (2) and 80CCD(1B) &
10% of salary for others
NPS Tier 1 Account NPS Tier 2 Account

• It is the basic account • It’s the additional account
• Lock in of up to 3 years • NPS tier 2 account basically serves like a
• After 3 years, a maximum of 25% of the fund regular bank savings account
value can be withdrawn • Tier 2 account functions like an investment
• Upon maturity (i.e. on retirement) 60% of the option and is not subject to the mandatory
fund value can be withdrawn. Rest of the 40% is withdrawal rules like a tier 1 account.
mandated to be utilized for annuity-related
fund options.
Few pointers (Amendment Ay 19-20) (Marked below)
Withdrawl AY 20-21
of amount
fomr NPS
Assessee is Assessee is
an other than
employee employee
closure of Partial
Purchased account/ Purchased closure of Partial
annuity in withdrawl withdrawl
opting out from NPS annuity in account/
the same the same opting out from NPS
of NPS (Sec (sec
year year of NPS (Sec (sec
10(12A) 10(12B)
10(12A) 10(12B)
No upto 25% No
Exemption No
withdrawl exempt Exemption
upto 60% provided upto 60%
amount exempt provided
exempt
taxable

11. Deductions 11.5
Section 80D (AY 19-20 → Amendment → Limit increased to Rs 50,000 & also age for “c” point
changed)
S. Nature of payment/ Expenditure on behalf of Deduction
No expenditure
A (i) Health insurance In case of Self, spouse and
premium (in other than individual dependent 25,000
cash) children
(ii) Contribution to Central In case of Family member
HUF
Government Health
Scheme (CGHS)
(iii) Preventive health 50,000
checkup (cash If any person from above is >= 60 + “R”
expenditure allowed)
B (i) Health insurance Parents
Parents
Parents (dependent/ Independent) 25,000
premium (in other than
cash)
(ii) Preventive health If any person from above is >= 60 + “R” 50,000
checkup (cash
expenditure allowed)
Maximum 5,000 allowed as deduction for aggregate of preventive health checkup expenditure
mentioned in A and B (Subject to overall limit of Rs. 25,000 or Rs. 50,000, as the case may be)
C Amount paid on account of For self/ spouse/ >= 60 yrs. 50,000
medical expenditure dependent
children/ parents
+
Resident No Health
Insurance
Note A + C – Maximum allowed Rs. 50, 000

B + C – Maximum allowed Rs 50,000
1. Deduction where premium for health insurance is paid in lump sum [Section 80D(4A)] (AY
19-20) Ne
(i) Appropriate fraction of lump sum premium allowable as deduction: In a case where mediclaim
premium is paid in lumpsum for more than one year by:
(a) an individual, to effect or keep in force an insurance on his health or health of his spouse,
dependent children or parents; or
(b) a HUF, to effect or keep in force an insurance on the health of any member of the family,
Then, the deduction allowable under this section for each of the relevant previous year would
be equal to the appropriate fraction of such lump sum payment.
(ii) Meaning of certain terms
Term Meaning
Appropriate fraction 1 ÷ Total number of relevant previous years
Relevant previous The previous year in which such lump sum amount
year is paid; and the subsequent previous year(s) during
which the insurance would be in force.

11. Deductions 11.6
Section Eligible Eligible Payments Permissible Deduction
Assessee
80DD Resident Maintenance + medical treatment of a dependant disabled - Normally Flat deduction of
Individual or 1. Amount incurred for the medical treatment (including nursing), Rs. 75,000.
HUF training and rehabilitation of a dependant disabled
And / or
2. Deposit in scheme of LIC or any other Insurer. - Severe disability (80% or
more), the flat deduction -
- Meaning of Dependant: Rs. 1,25,000.
For Individual - Spouse, children, parents, brothers, sisters
For HUF - Any member
- Such persons should not have claimed dedn. u/s 80U in

computing TI of that year.
80DDB Resident medical treatment of specified diseases or ailments (treatment from Upto Rs 40,000
(AY 19 – Individual or neurologist, immunologist, blood related, tumours etc.)
20) HUF For Senior citizen/ Very Sr.
- For himself or his dependant, being spouse, children, parents, Citizen - Maximum upto Rs.
brothers or sisters, which are wholly or mainly dependant 1,00,000
- For HUF - Any dependent member.
- The amount received from the insurance company or reimbursed by

the employer shall be reduced from deduction computed.
80E Individual 1.Interest on loan taken from any financial institution or approved Amount of interest paid (not
charitable institution. the principal sum)
2. Higher education (after Class XII) of self, his or her relative i.e.,
spouse or children of the individual or the student for whom the
individual is the legal guardian. In India
3. available for 8 A.Y. beginning with AY year in which payment of
interest begins.
80EE Individual Interest on loan borrowed from any financial institution (bank/housing Dedn. of upto Rs. 50,000.
finance company) for acquisition of residential house property.
Conditions:
(In case the property is self-occupied, the dedn. would be over and (1) Loan should be
above the dedn. of Rs. 2 lakhs u/s 24; In case the property is let-out, sanctioned during P.Y.2016-
entire interest can be claimed as dedn. u/s 24 while computing income 17
from house property. (2) Loan sanctioned ≤ 35
lakhs
However, dedn. u/s 80EE can be claimed during the pre-construction (3) Value of house ≤ 50 lakhs
period, when dedn. u/s 24 is not permissible. Such interest on which (4) The assessee should not
dedn. u/s 80EE has been claimed cannot be included in pre-construction own any residential house
interest for dedn. u/s 24 later on in instalments). on the date of sanction of
loan.
80EEA Individual Interest on loan borrowed from any financial institution (bank/housing Dedn. of upto Rs. 1,50,000.
AY 22-23
finance company) for acquisition of residential house property.
Conditions:
(In case the property is self-occupied, the dedn. would be over and (1) Loan should be
above the dedn. of Rs. 2 lakhs u/s 24; In case the property is let-out, sanctioned between 1.4 .2019
entire interest can be claimed as dedn. u/s 24 while computing income to 31.3.22 [AY 22-23]
from house property. (2) Value of house ≤ 45
lakhs
However, dedn. u/s 80EEA can be claimed during the pre-construction (3) The assessee should not
period, when dedn. u/s 24 is not permissible. Such interest on which own any residential house
dedn. u/s 80EEA has been claimed cannot be included in pre- on the date of sanction of
construction interest for dedn. u/s 24 later on in instalments). loan.

11. Deductions 11.7
80EEB Individual Dedn. of

AY 20-21 upto Rs.
1,50,000
80G Any Donations to certain funds, charitable institutions etc. (100/50 % without restriction, 100/50 % with restriction)
assessee
Calculation of Qualifying limit for Category III & IV donations:
Step 1: Compute adjusted total income, i.e., the GTI as reduced by the following:
1. Deductions under Chapter VI-A, except u/s 80G

2. STCG taxable u/s 111A
3. LTCG taxable u/s 112/112A
Step 2: Calculate 10% of adjusted total income.
Step 3: Calculate the actual donation, which is subject to qualifying limit [Total of Category III and IV donations]
Step 4: Lower of Step 2 or Step 3 is the maximum permissible dedn.
Step 5: The said dedn. is adjusted first against donations qualifying for 100% dedn. (i.e., Category III donations).
Thereafter, 50% of balance qualifies for dedn u/s 80G.
Note - No deduction shall be allowed for donation paid in cash in excess of Rs. 2,000 and donation in kind.
Supreme Court Ruling (Vijaipat Singhania v. CIT)
(Full amount disallowed)

11. Deductions 11.8
Donation qualifying for 100% deduction, without any qualifying limit

The Army Central Welfare Fund or Indian Naval Benevolent Fund or Air Force
The National Defense Fund set up by the Central
Central Welfare Fund established by the armed forces of the Union for the The National Sports Fund set up by the Central Government
Government
welfare of past and present members of such forces or their dependents.
Prime Minister’s National Relief Fund. The Africa (Public Contributions-India) Fund The National Cultural Fund set up by the Central Government
The Fund for Technology Development and Application set up by the Central
Prime Minister’s Armenia Earthquake Relief Fund The National Illness Assistance Fund
Government
Any Zila Saksharta Samiti for primary education
National Trust for welfare of persons with Autism, Cerebral Palsy, Mental
in villages and towns and for literacy and post- The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund
Retardation and Multiple Disabilities
literacy activities
The Swachh Bharat Kosh, set up by the Central Government, other than the
The National Children’s Fund sum spent by the assessee in pursuance of CSR u/s 135(5) of the Companies Any State Government Fund set up to provide medical relief to the poor
Act, 2013
The Clean Ganga Fund, set up by the Central Government, where such
The National Foundation for Communal
assessee is a resident, other than the sum spent in pursuance of CSR u/s The National Fund for Control of Drug Abuse constituted under section 7A of the
Harmony
135(5) of the Companies Act, 2013 Narcotic Drugs and Psychotropic Substances Act, 1985
National Blood Transfusion Council or any State Blood Transfusion Council
Approved University or educational institution of
whose sole objective is the control, supervision, regulation or The Prime Minister's Citizen Assistance and Relief in Emergency
national eminence
encouragement of operation and requirements of blood banks Situations Fund (PM CARES FUND)
Donation qualifying
for 50% deduction, Donation qualifying for 100% deduction, Donation qualifying for 50% deduction,
without any subject to qualifying limit subject to qualifying limit
qualifying limit
The Jawaharlal Nehru The Government or to any approved local authority, institution or association Any Institution or Fund established in India for charitable purposes fulfilling
Memorial Fund for promotion of family planning prescribed conditions
Sum paid by a company as donation to the Indian Olympic Association or any
Prime Minister’s other association/institution established in India, as may be notified by the The Government or any local authority for utilization for any charitable purpose other than the
Drought Relief Fund Government for the development of infrastructure for sports or games, or the purpose of promoting family planning
sponsorship of sports and games in India
An authority constituted in India by or under any other law enacted either for dealing with and
Indira Gandhi
satisfying the need for housing accommodation or for the purpose of planning, development or
Memorial Trust
improvement of cities, towns and villages, or both
Rajiv Gandhi Any Corporation established by the Central Government or any State Government for promoting
Foundation the interests of the members of a minority community
for renovation or repair of Notified temple, mosque, gurdwara, church or other place of historic,
archaeological or artistic importance or which is a place of public worship of renown throughout
any State or States

11. Deductions 11.9
For Claiming Deduction u/s 80G under Category 4th the institutions or funds need to satisfy certain conditions -
a. Institutions or funds should be approved by Principal Commissioner or Commissioner (PC/C)
b. The institutions/ funds need to apply for approval
AY 22-23
Scenario Time for making Pass Order – Grant approval Approval will
application Applicaton for effective from
Received →
Month End +
i Institution or Fund within 3 months from 3 Months For 5 Years From the AY
already approved the 1st April, 2021 from which
before approval was
earlier granted
Ii Institution or Fund is At least 6 months prior Call for such From AY
approved and the to expiry of the said documents or immediately
period of such period information to following the
approval is due to satisfy himself financial year in
expire about— which such
genuineness and application is
fulfilment of all made
iii Institution or fund has At least 6 months prior the conditions From the first of
6 Months
been provisionally to expiry of the period the AY for which
approved of the provisional Pass an order for such institution
approval 5 Years or fund was
or Or provisionally
within 6 months of if he is not so approved
commencement of its satisfied order in
activities, whichever is writing rejecting
earlier; application
iv Any other case At least 1 month prior 9 Months Granting approval From AY
to commencement of provisionally for a immediately
the previous year period of 3 years following the
relevant to the from the financial year in
assessment year from assessment year which such
which the said approval from which the application is
is sought registration is made
sought,
c. Prepare statement of donations received and can also provide a correction statement.
d. furnishes to the donor, a certificate specifying the amount of donation
s
Claim of the assessee for a deduction in respect of any donation made to an institution or fund in the return of income
for any assessment year filed by him, shall be allowed on the basis of information relating to said donation furnished
by the institution or fund to the prescribed income-tax authority.

11. Deductions 11.10
Section Eligible Assessee Eligible Payments Permissible Deduction

80GG Individuals not in Rent paid for residential accommodation. Least of the following is allowable
receipt of house Conditions as dedn.:
rent allowance (1) 25% of adjusted GTI
a. No dedn. if any residential accommodation is owned (2) Rent paid – 10% of adjusted
by assessee/spouse/minor child/HUF at the place where GTI
he ordinarily resides or performs the duties of his office (3) 5,000 p.m.
or employment or carries on his business or profession.
b. Thee assessee should not own any residential house

at any other place and claim benefit of SOP.
80GGA Any Assessee not Sum paid to approved research Association (Scientific, 100% of the sum paid
having PGBP social, statistical) Note - Any payment exceeding Rs.
income Note – Deduction will be allowed subject to verification by 2,000 must be paid in any mode
the department verification in accordance with the risk other than cash. [AY 21-22]
management strategy formulated by the Board from (Full Disallowance)
time to time.
80GGB Indian Company Any sum contributed by it to a registered political party Actual contribution
or an electoral trust. (otherwise than by way of cash)
80GGC Any person, Amount contributed to a registered political party or an Actual contribution
other than local electoral trust. (otherwise than by way of cash)
authority and an
artificial juridical
person funded by
the Govt.
(AY 19-20 – New requirement)

Section 80AC: Furnishing return of income on or before due date mandatory for claiming deduction under
Chapter VI-A under the heading “C. – Deductions in respect of certain incomes"
Section 80AC stipulates compulsory filing of return of income on or before the due date specified under
section 139(1), as a pre-condition for availing benefit of deductions under any provision of Chapter VI-A
under the heading “C. – Deductions in respect of certain incomes”.
Table showing the deductions contained in Chapter VI-A under the heading “C. – Deductions in respect of
certain income”
Section Deduction
80-IA Deductions in respect of profits and gains from undertakings or enterprises engaged
in infrastructure development/ operation/ maintenance, generation/ transmission/
distribution of power etc.
80-IAB Deduction in respect of profits and gains derived by an undertaking or enterprise

engaged in development of SEZ
80-IAC Deduction in respect of profits and gains derived by an eligible start-up from an eligible
business
80-IB Deduction in respect of profits and gains from certain industrial undertakings other
than infrastructure development undertakings
80-IBA Deduction in respect of profits and gains from housing projects – 100% of profits are
deducted. Project should be approved between 1.4.16 to 31.3.22
AY 22-23

80-IC Deduction in respect of profits and gains from certain undertakings or enterprises in
certain special category States [Himachal Pradesh and Uttaranchal]
80-IE Deduction in respect of profits and gains from manufacture or production of eligible
article or thing, substantial expansion to manufacture or produce any eligible article or
thing or carrying on of eligible business in North-Eastern States
80JJA Deduction in respect of profits and gains from business of collecting and processing
of bio-degradable waste
80JJAA Deduction in respect of employment of new employees – 100% Deduction for 5 years.
80LA Deduction in respect of certain income of Offshore Banking Units and International
Financial Services Centre
80P Deduction in respect of income of co-operative societies
80PA Deduction in respect of certain income of Producer Companies
80QQB Deduction in respect of royalty income, etc., of authors of certain books other than
text books
80RRB Deduction in respect of royalty on patents
The effect of this provision is that in case of failure to file return of income on or before the stipulated
due date, the undertakings would lose the benefit of deduction under these sections.
Few Income based deductions

Section Eligible Eligible Income Permissible
Assessee Deduction
80IAC Eligible start up Profits from start up 100% of the profit
and gains derived
Conditions
from such business
Eligible Start-up should not be formed by splitting up, or for 3 consecutive
assessment years
the reconstruction, of a business already in existence
option of the
and should not formed by the transfer to a new assessee out of 10
years beginning
business of machinery or plant previously used for any
from the year in
purpose. which the eligible
start-up is
However, any machinery or plant being previously used
incorporated
for any purpose is transferred to a new business and
the total value of the machinery or plant or part so
transferred does not exceed 20 % of the total value of
the machinery or plant used in the new business.
(i) “eligible business” means a business
carried out by an eligible start-up engaged
in innovation, development or
improvement of products or processes or
services or a scalable business model

with a high potential of employment
generation or wealth creation.
(ii) “eligible start-up” means a company or a
limited liability partnership (LLP)
engaged in eligible business which fulfils
the following conditions: –
a. It is incorporated on or after the 1st day of April,
2016 but upto 31st march 2022
b. The total turnover of its business does not
exceed 25 100 crore rupees in any 3 previous
years out of 10 previous years for which
deduction under section 80-IAC is first claimed.
c. it holds a certificate of eligible business from the AY 22-23
Inter-Ministerial Board of Certification.
The assessee needs to submit audit report at
least 1 month prior to the due date of return filing
80PA Producer Conditions 100% Deduction of
(AY 19-20) Companies Total turnover of less than 100 crore rupees. the profits derived
Benefit shall be available for the previous from eligible business
year relevant to an assessment year to a Producer
commencing on or after the 1st day of April, Company
2019, but before the 1st day of April, 2025.
In a case where the assessee is entitled also

to deduction under any other provision of
this Chapter, the deduction under this
section shall be allowed with reference to the
income, if any, as referred to in this section
included in the gross total income as
reduced by the deductions under such other
provision of this Chapter.
“eligible business” means –

(a) the marketing of agricultural produce grown
by the members
(b) the purchase of agricultural implements,
seeds, livestock or other articles intended for
agriculture for the purpose of supplying them
to the members
(c) the processing of the agricultural produce of
the members
“member” and “Producer Company” shall have the
meaning assigned to it in section 581A of the Companies
Act, 1956.

Other Income based deductions
Eligible Income/ Payments Permissible
Section Eligible Assessee
Deduction
New workmen hired
Deduction available only to business
New business (Business should not be formed by splitting up old business,
reconstruction of old business, business reorg. transfer from any other
person.)
Total emoluments (Including cash payments) upto 25,000 p.m.
3. There should be increase in number of employees as on the last date of
the year
4. Existing business - Emoluments paid in cash/crossed/bearer cheque not
to be considered for deduction.
5. New business - Emoluments paid in cash crossed/bearer cheque are to
be considered for deduction.
Any Assessee to
6. Ineligible employees - 30% of
80JJAA whom section
Additional
(AY 19-20) 44AB is
a. Receiving emoluments > Rs. 25,000 p.m. wages in 3 AY
applicable
b. Govt. employees
c. Employees engaged for less than 240 days in a year (150 in case of
manufacturing of apparel/ footwear or leather products)
d. Not participating in RPF
Exclusions from Emoluments

1. any contribution paid or payable by the employer to any pension fund
or provident fund etc.
2. Any lump-sum payment paid or payable to an employee at the time of

termination of his service or superannuation or voluntary retirement,
such as gratuity, severance pay, leave encashment, voluntary
retrenchment benefits, commutation of pension and the like.
The assessee needs to submit audit report at least 1 month prior to the due date of return filing AY 21-22
Note for 80JJAA (AY 19-20) – If an employee is employed during the previous year for less than 240
days or 150 days, as the case may be, but is employed for a period of 240 days or 150 days, as the
case may be, in the immediately succeeding year, he shall be deemed to have been employed in the
succeeding year. Accordingly, the employer would be entitled to deduction of 30% of additional
employee cost of such employees in the succeeding year.
Permissible
Section Eligible Assessee Eligible Income Deduction
80M Domestic Dividends from any other domestic company or a foreign Dividends
Company company or a business trust received upto the
amount of
AY 21-22 Note – Once the deduction is allowed from an income, it dividend
won’t be allowed in any other year. distributed by it
on or before the
Expression “due date” means the date 1 month
prior to the date for furnishing the return of
due date.
income under sub-section (1) of section 139.’.

80QQB Resident Case 1 -
Individua Lumpsum receipt
Work of literary, artistic or scientific nature or royalty or
l being
copyright fee received as lumpsum or otherwise. (But
an Royalty received
other than text books)
author - Expenses
or
If amount is to be received from abroad in foreign
Rs 3,00,000
currencies, it will be considered as income for calculation if
(whichever is
it is actually received in India within 6 months from the
less)
year end (prescribed by RBI)
Case 2 -
otherwise than
by way of lump
sum
Then in above
clause income to
be restricted to
15% of value of
books sold during
the relevant P.Y.
80RRB Resident Royalty on patents Whole of such
individua income or Rs.
l, being a 3,00,000,
patentee whichever less
80TTA Individual Interest on deposits in savings account with a bank/a maximum upto
or HUF co-operative society engaged in banking business or a Rs.10,000.
post office.
Note - Deduction under this section would,
however, not be available to a resident senior
citizen eligible for deduction under section 80TTB.
Restrictions: If the aforesaid income is derived from any
deposit in a savings account held by, or on behalf of, a firm,
an AOP/BOI, no deduction shall be allowed in respect of such
income in computing the total income of any partner of the
firm or any member of the AOP or any individual of the BOI.
80TTB Resident income by way of interest on deposits with Upto Rs. 50,000
(AY 19-20) Senior (a) a banking company to which Banking
Citizen Regulation Act, 1949 applies
(b) a co-operative society engaged in
carrying on the business of banking
(including a co- operative land mortgage
bank or a co-operative land development
bank)
(c) a Post Office.
Restrictions: If the aforesaid income is derived
from any deposit in a savings account held by, or
on behalf of, a firm, an AOP/BOI, no deduction
shall be allowed in respect of such income in
computing the total income of any partner of the
firm or any member of the AOP or any individual of
the BOI.
Note - Deduction u/s 80TTB is allowed on
interest on saving bank account, recurring deposit
account & Fixed Deposit as well.

80U Resident Individual A person with disability (Blindness, Low vision, Flat deduction of
leprosy-cured, Hearing impairment, locomotors Rs. 75,000, in
disability, mental retardation, mental illness) case of a person
with disability.
Flat deduction. of
Rs. 1,25,000, in
case of a person
with severe
disability (80% or
more disability).
Note - F&O Transaction carried out through recognized Stock Exchange is not Speculative Transaction
can be set off against Ordinary Business Income
Case Law
1
03.01.2017 CIT vs. Dr. Virendra Swaroop Educational Foundation Allahabad High Court
Commissioner of Income Tax cannot refuse to renew the approval u/s 80G (5) on account of the fact that for
the previous three years, the Assessee has shown surpluses.
Questions
Illustration 1:
X a resident individual incurs Rs. 30,000 expenditure on his own treatment of a specified disease and Rs. 15,000 on medical
treatment of his wife in a Government hospital. Rs. 2,000 is reimbursed by insurance company for his wife and Rs. 5,000 are
reimbursed by his employer for him. Compute the amount of deduction under section 80DDB?
Solution: The amount of deduction under section 80DDB shall be lower of 1 and 2 below less amount recovered from insurance
company and employer.
1. 30,000 + 15,000 = 45,000
2. 40,000
Rs. 40,000 less (2,000+5,000) = 33,000
Hence, Rs. 33, 000 is the amount of deduction under section 80 DDB.
Illustration 2:
1. If X, an individual incurs Rs. 1,80,000 expenditure on medical treatment of a specified disease for his mother (65 years) in a
hospital recognised by Chief Commissioner and Rs. 8,000 are reimbursed by insurance company, what will be the amount
of deduction available to him under section 80DDB?
(a) Rs. 92,000

(b) Rs. 72,000
(c) Rs. 1,80,000
(d) Any amount Ans - A
2. If X, an individual incurs Rs. 1,80,000 expenditure on medical treatment of a specified disease for his grand-
mother (85 years) in a hospital recognised by Chief Commissioner and Rs. 8,000 are reimbursed by insurance
company, what will be the amount of deduction available to him under section 80DDB?
(a) Rs. 60,000
(b) Rs. 1,80,000
(c) Rs. 92,000
(d) NIL Ans - d

Illustration 3
What is the upper limit of deduction (including interest) on loan, taken by an individual from any financial institution or any
approved charitable institution for the purpose of pursuing his/her higher education?
(a) Rs. 30,000
(b) Rs. 40,000
(c) Rs. 50,000
(d) Any Amount Ans - D
Illustration 4
Find out the amount of deduction under Section 80EE for the assessment year 2022-23 where an individual has applied for a loan
for acquisition of house property on March 15, 2016 for Rs. 50 lakh and the loan is sanctioned on May 10, 2016 for Rs. 30 lakh only.
He does not own any other residential house property and pays interest of Rs. 70,000 for previous year 21-22.
(a) 70,000
(b) 50,000
(c) NIL
(d) 40,000 Ans - C
Illustration 5
Section 80D provides deduction to an individual in respect of premium paid towards medical insurance of hisfamily. For the
purpose of Section 80 D Family means:
a) The spouse
b) The spouse and dependent children of the assessee.
c) The spouse and any children of the assessee.
d) The spouse, children and parents of the assessee.
Solution: (b) The spouse and dependent children of the assessee.
Illustration 6
Assessment year 2021-22, an individual taxpayer can claim deduction of up to under Section 80D of the Income Tax
Act, 1961, if he or his family members and his parents are 60 years or above:
a) Rs. 50,000
b) Rs. 60,000
c) Rs. 1,00,000
d) None of the above
Solution: (c) Rs. 1,00,000

Illustration 5
If Mr. ‘A’ had income against the following heads

Taxable salary income 40,000
Income from house property 75,000
Income from other sources 20,000
Interest on securities of DCM Ltd. (Gross) 8,000

1,43,000
He made following payments:

Contribution to P.F. (recognized) 2,000
Donation to the Prime Minister’s National Relief Fund 2,500
Donation to the Indira Gandhi Memorial Trust 4,000
Donation to an approved association for promoting family planning 4,000
Donation to approved charitable trust 10,000
Compute Mr. A’s taxable income for assessment year 2022-23.

Solution: His taxable income for assessment year 2022-23 will be computed as follows:
Net income from salary 40,000
Income from house property 75,000
Gross Total Income 1,43,000
Less: Deduction under Section 80C 2,000
Less: Deduction permissible: Donation under Section 80G 13,500
(as worked out below)
Taxable income 1,27,500
Income-tax on Rs.1,27,500 NIL
Net tax payable (including Health & Education cess @ 4%) NIL
Note: under Section 80G the various items of donations will be dealt with as under:
1. Prime Minister’s National Relief Fund deductible in full without any restrictions.
2. Donation to Indira Gandhi Memorial Trust is deductible to the extent of 50% of donation without any
restrictions.
3. Donation to approved family planning association is deductible in full so long as it is within the 10% limit
imposed by Section 80G(4).
4. Donation to an approved charitable trust is deductible to the tune of 50% so long as it is also within the
limit imposed by Section 80G(4).
Calculation of deduction under Section 80G:
Gross total income 1,43,000
Less: Deduction under Sections 80C to 80U (2,000)
Adjusted gross total income 1,41,000
(i) Donation on which qualifying limit is not applicable:
(A) Allowed @ 100%

Prime Minister’s National Relief Fund 2,500
(B) Allowed @ 50%

I. Indira Gandhi Memorial Trust (4000) 2,000
(ii) Donation to which qualifying limit is applicable:

(1) For promotion of family planning 4,000
(2) Charitable trust 10,000
14,000
Limited to 10% of Adjusted Gross Total Income:
i.e. Rs.14,100/- Since donation to family planning are lowest than maximum allowable.
9,000
Therefore, allowable amount is (4,000 + 5,000) Rs. 9,000/-
Total Deduction for Section 80G 13,500
Illustration 6
If Mr. ‘A’ had income against the following heads,

Professional income 6,40,000
Income from STCG (covered under section 111A) 5,000
Income from LTCG 12,000
Contribution to P.P.F. 70,000
Payment of Rent 84,000
Compute Mr. A’s taxable income for assessment year 2022-23.
Solution: His taxable income for assessment year 2022-23 will be computed as follows:
Professional income 6,40,000
Income from capital gains 17,000

Less: Deduction under Section 80C 70,000
Less: Deduction under Section 80GG 26,000

(as worked out below)
Taxable income 571,000
Working note:
Least of the following is deductible under section 80GG
– 84,000 – (10% of 5,80,000) = 26,000
– 25% of 5,80,000 = 1,45,000.
– Rs. 5,000 * 12 = 60,000

Deduction under Section 80GG is lower of three above Rs. 26,000.
Adjusted Total Income = 6,67,000-17,000-70,000= 5,80,000.
Note: if the assessee opted to pay tax under section 115BaC, deduction under section 80C / 80GG is not available.

Illustration 7
Mr. X receives royalty on books Rs. 1,00,000 at a rate of 18 percent and incurs Rs. 10, 000 as expenditure for earning
royalty. The books are covered under section 80QQB and royalty is received from abroad and Rs. 50,000 are remitted
to India till October 30, 2022. Determine deduction under section 80 QQB for the assessment year 2022-23.
Solution:
Eligible income (before deducting expenditure incurred) is lower of
1. Lump sum consideration Nil

2. Royalty not exceeding 15% (1,00,000/18) *15 83,334
3. Income brought to India in convertible foreign exchange 50,000
Eligible income Rs. 50,000
Expenditure incurred (Rs. 10,000)

Deduction under section 80 QQB Rs. 40,000 (subject to a maximum of Rs. 3, 00,000).
Illustration 8
Mr. Ram who is a person with disability submit the following information. Compute (a) the Taxable Income for
the assessment year 2022-23.
(i) Salary (per annum) 3,00,000

(ii) Rent received 48,000
(iii) Dividend from Co-operative Society 1,000
(iv) Interest on Savings Bank Deposits 18,000
(v) Interest on Government securities 1,000
(vi) Winning from Lotteries (gross) 5,000
(vii) NSC (VIII Issue) purchased during the year 10,000
(viii) Deposit under PPF Scheme 30,000

He earned a long-term capital gain of Rs. 15,000 on sale of gold during the year
Solution
(A) Computation of Total Income Rs.

Income from salary Basic Salary 3,00,000
Less: Deduction under section 16(ia) – Standard Deduction 50,000
2,50,000
Income from house property
Rent Received 48,000
Less: Statutory Deduction @ 30% 14,400 33,600

Capital Gains
Long-term capital gains 15,000
Income from other sources
Dividend from co-operative society 1,000

Interest on saving bank deposits 18,000
Interest on Government Securities 1,000
Winning from Lotteries 5,000 25,000

Less: Deduction under section 80C to 80U
(i) under section 80C Rs. (10,000 + 30,000) 40000
(ii) under section 80TTA 10,000
(iii) under section 80U 75,000 (1,25,000)

Total Income 1,98,600
Note: The solution has been made assuming the assessee has not opted to pay tax under section 115BAC of the income tax act,
1961
Illustration 9
Rahul who is a resident in India, is a person with disability. He provides the following particulars of his income
for the year ended 31.3.2022.
(a) Salary for working as a cable operator (per month) 18,000

(b) Interest on government securites (gross) 45,000
(c) Dividend from Indian Company 5,000
(d) Honorarium from school of orphanage for giving his service 49,000

He has donated Rs. 20,000 to the school for orphanage which is approved as a charitable institution and
contributed Rs. 2,000 to Prime Minister National Relief Fund. He has also paid Rs.3,000 by credit card as premium
of Mediclaim policy. His father is also a person with disability and is dependent on him for medical treatment and
rehabilitation. Rahul spends Rs. 8,000 during the year on him.
Compute the Total Income for the Assessment Year 2022-23, assuming he has deposited Rs. 20,000 in Public Provident fund
Account.
Solution Computation of Total Income for the Assessment Year 2022-23
Income from salary Rs. Rs.

Gross Salary 2,16,000
Less: Deduction (Standard) 50,000 1,66,000
Income from other sources
Interest on Government Securities 45,000
Dividend from Indian Company 5000
Honorarium 49,000 99,000
Less: Deductions:
(i) under section 80C 20,000
(ii) under section 80D 3,000
(iii) under section 80DD 75,000
(iv) under section 80U 75,000
(v) under section 80G
Prime Minister Relief Fund (100% of Rs. 2,000) 2,000
Orphanage School (50% of Rs. 9,200)
10% of 92,000 Rs. (2,65,000 - 1,73,000) 4,600 6,600 1,79,600
Total Income 85,400
Note: The solution has been made assuming the assessee has not opted to pay tax under section 115BAC of the income
tax act, 1961.
Illustration 10
Following are the particulars of income of Mr. Ram, who is 70 years old resident in India, for the Assessment year 2022-23:
Gross Total Income Rs. 8,10,040 which includes long-term capital gain of Rs. 2,55,000, Short-term capital gain of Rs.
88,000, interest income of Rs. 12,000 from savings bank deposits with banks. Mr. Ram invested in PPF Rs. 1,40,000 and also
paid a medical insurance premium Rs. 31,000. Compute the total income of Mr. Ram.
Solution Computation of Total Income for the Assessment Year 2022-23

Rs.

Less: Deductions:
under section 80C 1,40,000
undersection80D 31,000
undersection80TTA 10,000
Total income 6,29,040
Note: The solution has been made assuming the assessee has not opted to pay tax under section 115BAC of the income
tax act, 1961

12. PAN – Return Filing – Self assess - Refund 12.1
Chapter – 12
PAN - Return Filing - Self Assessment – Refund

Regulatory Framework
Sections (Income Tax Details
Act, 1961)
Section 139A Permanent account Number
Section 139AA Quoting of Aadhaar Number
Section 206AA exemption to Non-residents from requirement of furnishing PAN
Section 139(1) return of income
Section 139(3) return of loss
Section 139(4) Belated return
Section 139(4A) return of income of charitable trust and institutions
Section 139(4B) return of income of Political Party
Section 139(4C) Return of Income of Specified Association/Institutions
Section 139(5) revised return
Section 139(9) defective return
Section 140 Signing of return
Section 139B Scheme to facilitate submission of returns through tax return preparers
Section 234A interest for default in furnishing return of income
Section 234F Fees for delay in Furnishing return of income

AY 22-23
AY 22-23
Note: Loss from house property and unabsorbed depreciation can be carried forward for set off
even though return of loss has not been furnished on or before the due date u/s 139(1).
1. Few pointers
Amendment vide Finance Act, 2021

1. Individual and spouse governed by Portuguese Civil Code of 1860 and Tax Audit applicability:
✓ In case the provisions of tax audit are applicable, and
AY 22-23
✓ Married Couple is governed by the Portuguese Civil Code of 1860 (Applicable in Goa & Dadra &
Nagar Haveli & Daman & Diu) and Section 5A is applicable.
✓ In this all the income except Salary is equally apportioned between the couple.
✓ Thus, the due date of 31st October would now be applicable to both the said assessee as well as his
/ her spouse, if either one of them is required to get his / her books audited.
2. It is proposed to align the due date of filing Return of income under Section 139 to 30th November, for the
partners of the firm to whom the provisions of Section 92E are applicable (Involved in International
Transactions).
AY 22-23
If the couple being partners are covered in Section 5A then for the couple also the due date will be 30th
November.
✓ E-filing of Return
Filing of Income Tax Returns is a legal obligation of every person who total income for the
previous year exceeds the exemption limit provided under the Income Tax Act, 1961. The
Income Tax Department has introduced on line facility in addition to conventional method to
file return of income. The process of electronically filing of Income Tax return through
the mode of internet access is called e-filing of return. E-filing offers convenience of the
tax payers. The only obligation for the user of this facility is to have a PAN number.
✓ Other persons filing Return
A. Return of Income of charitable trust and institutions [Section 139(4A)] –
a. In case the total income exceeds the maximum amount not chargeable to tax.
b. If the total income (without giving effect to the provisions of Sections 11 and 12) exceeds
the amount not chargeable to tax.
B. Return of Income of Political Party [Section 139(4B)]
If the income without giving effect to the provisions of Section 13A) exceeds the maximum
amount not chargeable to tax duly signed by the Chief Executive Officer of the party
C. Return of Income of Specified Association/Institutions/ persons [Section
139(4C)]
(a) Research association

(b) news agency
(c) fund or institution or trust or institution or any university or other educational institution or
any hospital or other medical institution
(ea) Mutual Fund
(eb) securitisation trust
(ec) venture capital company or venture capital fund
(d) trade union
(e) body or authority or Board or Trust or Commission
(f) infrastructure debt fund or Mutual Fund
Income Tax Return Forms
ITR Applicability
Form No
1 A one page simplified ITR 1 (SAHAJ) can be filed by an individual who is resident
other than not ordinarily resident,
having income from salaries, one house property, income from other sources (interest etc.). and
having total income upto Rs. 50 lakh and agricultural income up to Rs.5 thousand
(Not for an individual who is either Director in a company or has invested in unlisted equity
shares or in cases where TDS has been deducted u/s 194N (TDS on Cash withdrawal or if
AY 22-23 income-tax is deferredred on ESOP
2 individuals and HUFs having not having income from business or profession shall be eligible to
file ITR 2.
3 Individuals and HUFs having income under the head “Profits and gains of business or profession”
have to file ITR 3.
4 For Individuals, HUFs and Firms (other than LLP) being a Resident having Total Income upto
Rs.50 lakhs and having income from Business and Profession which is computed under sections
44AD, 44ADA or 44AE (Not for an Individual who is either Director in a company or has invested
AY 22-23 in Unlisted Equity Shares or if income-tax is differed on ESOP).
5 ITR 5 can be used by persons other than individual, HUF, company and person filing Form ITR
7.
6 ITR 6 can be used by companies other than companies claiming exemption under section 11.
7 ITR 7 can be used by persons including companies required to furnish return under sections
139(4a) or 139(4B) or 139(4C) or 139(4d) or 139(4e) or 139(4F).
Note - All these ITR Forms are to be filed electronically. However, where return is furnished in
ITR Form-1 (SAHAJ) or ITR-4 (SUGAM), the following persons have an option to file return in
paper form:
• An Individual of the age of 80 years or more at any time during the previous year; or
• an Individual or HUF whose income does not exceed five lakh rupees & who has not
claimed any refund in the Return of Income.

2. Defective return u/s 139(9):
If return is not furnished with all accompanied documents mentioned in this section (like, tax
audit report, challans, etc.) then, AO shall intimate such defect and assessee shall rectify the
defect within 15 days of intimation or extended period otherwise, return deemed to be void ab-
initio.
However, if return is filed without payment of self-assessment tax u/s 140A then it does
not amount to defective return.
3. Scheme to facilitate submission of returns through tax return preparers [Section

139B] [W.E.F. 1-6-2006]
Certain persons may furnish their returns of income through a Tax return preparer authorized to
act as such under the scheme.
The following persons are not authorized to act as Tax return preparer:
– any officer of a scheduled bank in which the assessee maintains a current account or
has regular dealings. Also a person on whom 44AB is applicable can’t get
filed through TRP
– A legal practitioner; or
– A chartered accountant.
Educational qualification for Tax Return Preparers(TRP) notified vide Notification No.
4/2018, dated 19-01-2018 :
An individual, who holds a bachelor degree from a recognized Indian university or institution,
or has passed the intermediate level examination conducted by the Institute of Chartered
Accountants of India or the Institute of Company Secretaries of India or the Institute of Cost
Accountants of India, shall be eligible to act as TRP.
4. Fee and Interest

1. Interest for belated payment of Income-Tax [Section 220(2)]
An assessee is liable to pay interest @ 1% for every month or part thereof
comprised in the period intervening between the expiry of 30 days w.e.f.
serving of the notice of demand
Sub-section (2A) of Section 220, empowers the Board to reduce or waive

the amount of interest payable by an assessee under the above section on
the recommendation made by the Chief Commissioner or Commissioner
in this behalf. The Board’s order will be passed only upon satisfaction that :
(a) the payment of such interest has caused or would cause genuine hardship
to the assessee;

(b) the default in the payment of the amount on which interest has been paid
or was payable was due to circumstances beyond the control of the assessee;
and
(c) the assessee has co-operated in any enquiry relating to the assessment
or any proceeding for recovery of any amount due from him.
Provided that the order accepting or rejecting the application of the assessee,
either in full or in part, shall be passed within a period of twelve months from
the end of the month in which the application is received
2. INTEREST FOR DEFAULT IN FURNISHING RETURN OF INCOME [SECTION 234A]
Furnished after the due date or is not furnished
Pay simple interest at the rate of 1% per cent for every month or part of the month
on the total income as determined as per 143(1) or on the total income determined under regular
assessment reduced by an amount of –
(1) advance tax if paid

(2) any TDS/TCS;
(3) relief under Sections 89
(4) relief under Sections 90, 90A
(5) any deduction under Sections 91
(6) any tax credit under the provisions of Section 115JD (AMT Credit)
The interest calculation is upto the dates as below –
Circumstances Ending on the following dates
Where the return is furnished after the date of furnishing of the return
due date
Where no return is furnished the date of completion of assessment
Note - No interest under section 234A shall be charged on self-assessment tax paid by the assessee on or
before the due date of filing of return.
3. FEE FOR DEFAULT IN FURNISHING RETURN OF INCOME [SECTION 234F] - Substituted
Fee Circumstances
Rs. 5,000 if the return is furnished after the due date as given in 139(1)
Rs. 1,000 If the total income of the person does not exceed Rs. 5 lakhs
AY 22-23

234H (New Section)
If Aadhaar is not intimated to the IT Department then the maximum fees charges can be 1,000 rs.
Central Board of Direct Taxes (CBDT) has extended the last date for PAN-Aadhaar Linking from
September 30, 2021, to March 31, 2022
AY 22-23
• PAN is not required
CBDT relaxes PAN requirement for a non-resident eligible foreign investor making transaction only in a
capital asset listed on a recognised stock exchange located in any IFSC and consideration paid in
Foreign Currency
5. COLLECTION AND RECOVERY OF TAX
A. Assessee in Default
The amount specified in the notice of demand shall be paid within 30 days of the service of the
notice at the place and to the person mentioned in the notice. If the Assessing Officer has any
reason to believe that it will be detrimental to revenue if the full period of 30 days is allowed he may,
with the prior approval of the Joint Commissioner reduce the period as he thinks fit (Section 220).
B. The total amount of penalty shall not exceed the amount of tax in arrears..
6. PERSONS AUTHORISED TO VERIFY RETURN OF INCOME [SECTION 140]

Assessee Circumstance Authorized Persons
1 Individual (i) In circumstances not covered under (ii), (iii) &(iv) - the individual himself
. below
(ii) where he is absent from India - the individual himself; or
- any person duly authorized by him in
this behalf holding a valid power of
attorney from the individual (Such
power of attorney should be attached
to the return of income)
(iii) where he is mentally incapacitated from - his guardian; or
attending to his affairs - any other person competent to act
on his behalf
(iv) where, for any other reason, it is not possible for - any person duly authorized by him in
the individual to verify the return this behalf holding a valid power of
attorney from the individual (Such
power of attorney should be attached
to the return of income)
2 HUF (i) in circumstances not covered under (ii) and (iii) - the karta
. below
(ii) where the karta is absent from India
(iii) where the karta is mentally incapacitated from
attending to his affairs - any other adult member of the HUF
3 Company (i) in circumstances not covered under (ii) to (v) below - the managing director of the company
.
(ii)
(a) where for any unavoidable reason such managing - any director of the company or any
director is not able to verify the return; or other person, as may be prescribed for
where there is no managing director this purpose
(iii) where the company is not resident in India - a person who holds a valid power of
attorney from such company to do so (such
power of attorney should be attached to the
return).
(iv)
(a) Where the company is being wound up (whether - Liquidator
under the orders of a court or otherwise); or
where any person has been appointed as the receiver of
any assets of the company
(v) Where the management of the company has been - the principal officer of the Company
taken over by the Central Government or any State
Government under any law

(vi )Where an application for corporate insolvency resolution insolvency professional appointed by such
(AY 19-20) process has been admitted by the Adjudicating Authority Adjudicating Authority
under the Insolvency and
Bankruptcy Code, 2016.
4 Firm (i) in circumstances not covered under (ii) below - the managing partner of the firm
.
(ii)
(a) where for any unavoidable reason such managing - any partner of the firm, not being a
partner is not able to verify the return; or minor or any other person, as
where there is no managing partner. may be prescribed for this
purpose
5 LLP (i) in circumstances not covered under (ii) below - Designated partner
.
(ii)
(a) where for any unavoidable reason such designated - any partner of the LLP
partner is not able to verify the return; or
where there is no designated partner.
6 Local - - the principal officer
. authority
7 Political - - the chief executive officer of such

. party party (whether he is known as secretary or by
[referred any other designation)
to in
section
139(4B)]
8 Any other - - any member of the association or the
. association principal officer of such association
9 Any other - - that person or some other person

. person competent to act on his behalf.
7. Self -Assessment under section 140A

Tax Payable = Tax on Return to be Order of adjustment
Total Income – accompanied by of amount paid
Advances tax paid – proof of payment of Fee, Interest and tax
TDS/TCS – RELIEF – Tax payable + Interest
Relief u/s 89 U/S u/s 234A, 234B and
90,91,90A – 234C + Fee payable
115JJAA/115JD credit u/s
234F
8. REFUNDS (SECTION 237 TO SECTION 245)
A. Every claim for refund under this chapter shall be made in the prescribed Form (No.
30) within one year from the last day of the assessment year to which the claim is
related
B. Where refund arises on completion of assessment on account of excess
payments of advance tax or on self- assessment or it results on account of reduction
in appeal, revision or rectification of mistakes, no formal application for refund is
required.
C. WHO IS ENTITLED TO REFUND
Any one of the following persons can apply for the refund :
(i) Owner of the income who has made excess payment;
(ii) Where the income of a person is included in the hands of another, only the latter is
entitled to refund;
(iii) In case of death of the assessee, his legal representative;
(iv) In case of insolvency of the assessee - the receiver;
(v) In case of liquidation of a company - the liquidator of the company;
(vi) In case of minor or incapable assessee - the guardian of the minor or incapable;
(vii) In case of non-resident assessee - his agent provided he has been duly authorised by
the principal; and
(viii) In case of dissolved partnership firm - any partner provided he has been duly
authorised by all other ex-partners of the firm.
D. INTEREST ON REFUNDS
a. Where the refund is out of any tax collected at source or paid by way of advance
tax – 0.5 % for every month or part of a month from 1st day of April of the
assessment year to the date on which the refund is granted. But, if the amount
of refunds is less than ten per cent of the tax as determined on regular
assessment, no interest shall be payable
b. Refund is out of any tax paid under section 140A interest - 0.5% for every
month or part of a month from the date of furnishing of return of income or
payment of tax, whichever is later, to the date on which the refund is granted
[Amendment vide Finance Act, 2016 w.e.f. 1st June, 2016].

However, no interest shall be payable if the amount of refund is less than ten
percent of the tax as determined under Sub-section (1) of Section 143 or regular
assessment.
c. In any other case – 0.5% for every month or part of a month comprised in the
period or periods from the date or dates of payment of the tax or penalty to the
date on which the refund is granted
d. Where a refund arises out of appeal effect being delayed - an additional interest on
such refund amount calculated @ 3% per annum, for the period beginning from
the date following the date of expiry of the time allowed
e. New Section 244A(1B) - Refund becomes due to the deductor, such person
shall be entitled to receive, in addition to the refund, simple interest on such
refund at rate of 0.5% per month or part of month. Interest will be available from
the date on which claim for refund is made in the prescribed form to the date
on which refund is granted.
Where refund arises on account of giving effect to an appellate order under

section 250/254/262, interest will be available from the date of deposit of TDS to
the date on which refund is granted. However, interest shall not be allowed for
the period for which the delay (in the proceedings resulting in the refund) is
attributable to the deductor. [Amendment vide Finance Act, 2017 w.e.f. AY
2018-19]
New Section 241A: This section provides that for the returns furnished for
assessment year 2017-18 (or any subsequent year), where refund is due to the
assessee under section 143(1) and the assessing officer is of the opinion that the
grant of refund may adversely effect the recovery of revenue, he may , for the
reasons to be recorded in writing and with previous approval of the Principal
Commissioner or Commissioner, withhold the refund up to the date on which the
assessment is made. [Amendment vide Finance Act, 2017 w.e.f. AY 2018-19].
AAAPL1234CA — Association of persons (AOP)
9. PAN
A. The structure of the ten characters of PAN is as under :

a. The first 3 characters - alphabetic series running from AAA to ZZZ.
b. The fourth character of PAN represents the status of the PAN holder i.e.
✓ “P” stands for Individual
✓ “C” stands for Company;
✓ “H” stands for Hindu Undivided Family (HUF);
✓ “A” stands for Association of Persons (AOP);
✓ “B” stands for Body of Individuals (BOI)
✓ “G” stands for Government Agency
✓ ”J” stands for Artificial Juridical Person
✓ “L” stands for Local Authority
✓ “F” stands for Firm/ Limited Liability Partnership and
✓ “T” stands for Trust.
c. 5th character of PAN represents the first character of the PAN holder’s last name/surname in
case of an individual.
In case of non-individual PAN holders fifth character represents the first character of PAN holder’s
name.
d. Next 4 characters are sequential numbers running from 0001 to 9999.
e. 10th character is an alphabetic check digit.
B. Process to apply for PAN
✓ Income Tax Department has authorised UTI Infrastructure Technology and Services Limited
(UTIITSL) and National Securities Depository Limited (NSDL) to set-up and manage PAN Service
Centers.
✓ Thus, a person wishing to obtain PAN can apply for PAN by submitting the PAN application form
(Form 49A – (Indian Citizens) /49AA (Foreign Citizens) ) along with the related documents and
prescribed fees at the PAN application center of UTIITSL or NSDL.
An online application can also be made from the website of UTIITSL or NSDL.
139A - PAN APPLICABILITY and

time limit for making
application for PAN
Charitable/ Total
reigious Income > Person Any resident entity, In order to link the
trust amount carrying other than an financial transaction
required to which is not PGBP individual, which entered by such resident
file ROI. chargeable where, enters into a financial entity every managing
to tax Likely Sales, transaction of an director, director, partner,
turnover or amount aggregating trustee, author, founder,
receipt > minimum Rs. 2.5 lacs in karta, chief executive
a financial year. officer, principal officer or
Before PY Rs. 5,00,000 office bearer of such
ends entity will have to apply
By 31st for PAN.
May of AY
Before PY By 31st
ends May of AY
By 31st
May of AY

Instant PAN : CBDT has launched a new functionality on the e-filing portal which allots a PAN to the individual
assessee on the basis of his Aadhaar Number. This facility can be used by an assessee only if the following conditions
are fulfilled:
a. He has never been allotted a PAN
b. His mobile number is linked with his Aadhaar number
c. His complete date of birth is available on the Aadhaar card
d. He should not be a minor on the date of application for PAN
✓ Besides above cases, the Assessing Officer may also allot a permanent account number
to any other person by whom tax is payable.
✓ Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form
of a laminated card, by the Income Tax Department. PAN enables the department to link all
transactions of the “person” with the department. These transactions include tax payments,
TDS/TCS credits, returns of income/wealth/gift/, specified transactions, correspondence,
and so on. PAN, thus, acts as an identifier for the “person” with the tax department.
✓ Section 206AA: If PAN not furnished, TDS be at higher rate of 20%.

✓ Penalty for non-compliance u/s 139A or quoting false PAN - Rs. 10,000 (Section 272B)

PAN or General Index Register Number or Aadhar can be quoted
S. Nature of transaction Value of transaction
No.
1. Payment to a hotel or restaurant Payment in cash of an amount exceeding
against a bill or bills at any one Rs. 50,000.
time.
2. Payment in connection with travel Payment in cash of an amount exceeding
to any foreign country or Rs. 50,000.
payment for purchase of any
foreign currency at any one time.
3. Payment to a Mutual Fund for Amount exceeding Hint to remember →
purchase of its units Rs. 50,000. Everywhere “>” is used
4. Payment to a company or an Amount exceeding for amounts
institution for acquiring Rs. 50,000.
debentures or bonds issued by it.
5. Payment to the Reserve Bank of Amount exceeding
India for acquiring bonds issued Rs. 50,000.
by it. Amount >
6. Deposit with a banking company or Cash deposits exceeding Rs. 50,000 during 50,000 rs.
a co-operative bank any one day; (Generally)
7. Purchase of bank drafts or pay Payment in cash of an amount exceeding
orders or banker’s cheques Rs. 50,000 during any one day.
8. A time deposit with a Bank/Banking Amount exceeding 50,000.
Company/Banking Institution
9. Deposit in Post Office Savings exceeding Rs. 50,000

Bank.
10. Payment for one or more pre-paid Payment in cash or by way of a bank draft or
payment instruments, pay order or banker’s cheque of an amount
aggregating to more than Rs. 50,000 in a
financial year.
11 life insurance premium Amount aggregating to more than Rs. 50,000 in
a financial year.
12 Sale or purchase of a motor All such transactions
vehicle or vehicle, other than two
wheeled vehicles.
13 Opening an account with a banking All such transactions
company or a co-operative bank
14 Making an application for issue of All such transactions
a credit or debit card.
15. Opening of a demat account All such transactions
Application for installation of a All such transactions
telephone connection including
mobile phone.
16. A contract for sale or purchase of Amount exceeding Rs. 1 lakh per transaction
securities (other than shares)

17. Sale or purchase, by any person, of Amount exceeding Rs. 1 lakh per transaction.
shares of a company not listed in
a recognized stock exchange.
18. Sale or purchase of any Amount exceeding Rs. 10 lakh or valued by
immovable property. stamp valuation authority referred to in section
50C at an amount exceeding Rs. 10 lakhs
19. Sale or purchase, by any person, of goods or Amount exceeding Rs. 2 lakh per transaction:
services of any nature other than those specified
at Sl. No. 1 to 17 of this Table, if any.
Inter-changeability of PAN with the Aadhaar number
Every person who is required to furnish or intimate or quote his PAN may furnish or intimate or
quote his Aadhar Number in lieu of the PAN w.e.f. 1.9.2019 if he
- has not been allotted a PAN but possesses the Aadhar number
- has been allotted a PAN and has intimated his Aadhar number to prescribed authority in
accordance with the requirement contained in section 139AA(2) {Section for Quoting of
Aadhar}
234H (New Section)

If Aadhaar is not intimated to the IT Department then the maximum fees charges can be 1,000 rs.
AY 22-23
Central Board of Direct Taxes (CBDT) has extended the last date for PAN-Aadhaar Linking
from September 30, 2021, to March 31, 2022
• PAN is not required

CBDT relaxes PAN requirement for a non-resident eligible foreign investor making
transaction only in a capital asset listed on a recognised stock exchange located in any IFSC
and consideration paid in Foreign Currency.
Persons who are not required to quote Aadhar Number or Enrolment ID
(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India.

Note –
Quoting of Aadhaar Number mandatory in returns filed on or after 1.4.2019 [Circular No. 6/2019 dated
31.03.2019]
Consequences of failure to intimate Aadhar Number (Provision effective from1.9.19)

If a person fails to intimate the Aadhar Number then the permanent account Number (PAN) allotted
to such person shall be made inoperative after the date so notified in the prescribed manner.
Penalty for failure to comply with the provisions of section 139A [Section 272B]
Section Default Penalty

272B(1) Failure to comply with the provisions of section 139A Rs. 10,000
272B(2) Failure to quote PAN/Aadhaar number in any document required Rs. 10,000 for each
such default
Knowingly quoting or intimating a number which is false

272B(2A/2B) Failure to quote PAN/Aadhaar Number in documents referred to in section Rs. 10,000 for each
Inserted w.e.f. 139A(6A) or authenticate such number in accordance with the provisions such default
1.9.2019 contained therein
Note – It is necessary to give an opportunity to be heard to the person on whom the penalty under section 272B is
proposed to be imposed.
CASE LAWS
1. Provision Mandating Quoting of Aadhaar for IT Returns & PAN is valid Binoy Viswam v. Union of India
(2017)
In Binoy Viswam v. union of India, a two-judge bench of the Supreme Court upheld the constitutional validity of
the provisions of Section 139AA of the Income Tax Act which mandates quoting of Aadhaar for IT Returns & PAN.

13.1
Chapter - 13
TDS – TCS – Advance tax

13.2
Sec. Description Threshold Limit Payer Type Rate Time of Payments / Income exempted from TDS
of of dedn.
Payee TDS
192 Salary Basic exemption Any Individual Average payment Allowances, exempt under section 10, &
person rate exempt
perquisites - be
excluded.
192A Premature Rs. 49,999 Employe Individual 10% payment Applicable only if amount is withdrawn
withdrawal e before 5 years of contribution.
from PF Providen
(Recognized) t Fund
Officer
192 - Deferring TDS in respect of income pertaining to Employee Stock Option Plan (ESOP) of start ups: For the
purposes of deducting or paying tax under section 192, a person, being an eligible start-up referred to in section 80-IAC,
responsible for paying any income to the assessee being perquisite of the nature specified in Section 17(2)(vi) i.e. sweat
equity shares/ESOP ,in any previous year relevant to the assessment year, beginning on or after the 1st day of April, 2021,
shall deduct or pay, as the case may be, tax on such income within 14 days—
(i) after the expiry of forty-eight months from the end of the relevant assessment year; or
(ii) from the date of the sale of such specified security or sweat equity share by the assessee; or
(iii) from the date of the assessee ceasing to be the employee of the person,
whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security
or sweat equity share is allotted or transferred. [as amended by Finance act, 2020]
13.3
of of dedn.
Payee TDS
193 Interest on 8% Savings Any Any 10% Credit or Some exempted interest payments are –
Securities (Taxable) Bonds, person resident payment • Any security of CG/SG.
2003, / 7.75% , earlier. • On debentures issued by any co-operative
Savings (Taxable) society as notified by CG.
Bonds, 2018. – • 6½% Gold Bonds, 1977 or 7% Gold
Rs. 10,000 Bonds, 1980, where bonds are held by an
Interest on individual (other than a non-resident),
provided that total nominal value of the
debentures bonds did not exceed Rs. 10,000 at any
(whether listed or time during the period to which the
not) issued by a interest relates.
company in which • Payable to LIC/ GIC
the public are • Payable to any other insurer in respect
substantially of any securities owned by it or in which it
interested, paid or has full beneficial interest.
credited to a • Payable on any security issued by a
resident company, where such security is in
individual or HUF dematerialized form and is listed
- 5,000 & by a/c
payee cheque
Note – Section 193 - No tax is required to be deducted at source on interest payable on “Power Finance Corporation
Limited 54EC Capital Gains Bond” and “Indian Railway Finance Corporation Limited 54EC Capital Gains
Bond” – [Notification No. 27 & 28/2018, dated 18-06-2018]
The benefit of this exemption would, however, be admissible in the case of transfer of such bonds by endorsement
or delivery, only if the transferee informs PFCL/IRFCL by registered post within a period of 60 days of such
transfer.
13.4
of of deduction
Payee TDS
194 Dividend Rs. 5,000 in a F.Y., in The Resident 10% Before 1. LIC
(including case of dividend paid shareholder making any 2. GIC
dividends or credited to an Principal payment by 3. Any other Insurer
on individual Officer of any mode 4. A business Trust
preference (Payment from Special Purpose Vehicle to
shareholder by any a in respect
Business Trust)
shares) mode other than domestic of any
cash company dividend or
before
No threshold in making any
other cases distribution
or
payment
of
dividend.
13.5
Sec. Description Threshold Limit Payer Payee Rate Time of Payments / Income exempted from TDS
deduction
194A Interest Rs. 40,000 in a Any person, Any 10% Credit or Interest credited or paid to:
other than financial year, in & For Resident payment, - any banking company, or a cooperative society in
interest on case of interest paid Indi/HUF if in earlier. business of banking
securities by – preceding - any financial corporation established by or under a
• a banking year T. Over Central, State or Provincial Act.
company; > 1Crore/50 - LIC/ UTI
• a co- operative Lakhs - any company and cooperative society carrying on
society in
banking the business of insurance.
business; and Interest credited or paid –
• deposits with - by a firm to a partner
post office - by a co-operative society other than a co-
On time deposits operative bank to a member thereof or to such
In all the above income credited or paid by a co-operative society
cases, if payee is a to any other co-operative society
resident senior - By banking co-operative society on other than
citizen, tax deduction time deposits
limit is >Rs. 50,000. - By primary agriculture credit society or primary
credit society or a co-operative land mortgage
5,000 in a financial bank or a co-operative land development bank
year, in other cases. - By CG under Income Tax act
- Interest credited by the Motor Accidents Claims
Tribunal
- Interest paid by Motor Accidents Claims Tribunal
Co operative where aggregate during FY does not exceed
50,000
- by an infrastructure capital company or
Payer - co - op infrastructure capital fund or
Payer - Bank society - Other
than Bank infrastructure debt fund a public sector
company or scheduled bank in relation to aAY 22-23
zero coupon bond issued by them.
Receiver - Co - Summarizing Co – Op. Banks and Societies
Receiver - Any Reciver - Any
op Bank/Co-
other person perosn
op society
Note - Threshold will be checked by aggregating all the
bank accounts if Core Banking solutions have been
Time deposits adopted.
- TDS Other deposits
No TDS No TDS
Threshuld - Rs. No TDS
40,000 2. Cheque discounting charges does not attract 194A
ITO v. A.S. Babu Sah (2003) 86 ITD 283 (Mad.)
13.6
However, a cooperative society referred to in (e) or (f) is liable to deduct tax if –
(i) the total sales, gross receipts or turnover of the co-operative society exceeds Rs. 50 crore during the
financial year immediately preceding the financial year in which interest is credited or paid; and
(ii) the amount of interest or the aggregate amount of interest credited or paid, or is likely to be credited
or paid, during the financial year is more than Rs. 50,000 in case of payee being a senior citizen
and Rs. 40,000, in any other case.
Thus, such co-operative society is required to deduct tax under section 194A on interest credited or paid by it –
(a) to its member or to any other co-operative society; or

(b) in respect of deposits with a primary agricultural credit society or a primary credit society or a co-operative
land mortgage bank or a co-operative land development bank or
(c) in respect of deposits with a co-operative bank other than a co- operative society or bank engaged in
carrying on the business of banking
13.7
Sec. Description Threshold Payer Type of Rate Time of Payments / Income exempted from TDS
Payee deduction
194B Winnings from Rs. 10,000 Any Person Any 30% payment -
any lottery, Person
crossword
puzzle or card
game or other
game of any
sort
194BB Winnings Rs. 10,000 Book Maker Any 30% payment -

from horse or a person Person
race holding
license for
horse racing,
wagering
or betting
in any race
course.
194C Payments to Single sum Any person, Any 1% - Credit or (i) Any sum credited or paid to a contractor
Contractor credited or & For Resident if the payment, in transport business, who owns ten or
paid – Indi/HUF if in contract payee is an earlier. less goods carriages at any time during
Individual
30,000 preceding or or HUF the previous year if the contractor
Or The year T.Over (including furnishes a declaration to that effect
> 1Crore/50 supply of along with his PAN to the person paying
aggregate of 2% -
Lakhs Labour) or crediting such sum.
sums credited if
or paid during the payee is
the financial any other (ii) Any sum by an individual or HUF
year – 1,00,000 person. exclusively for personal purposes of such
individual or HUF.
194D Insurance Rs. 15,000 in a Any person Any 5% Credit or
Commission financial Resident payment
year , earlier.
194DA Any sum Upto 99,999 Any person Any 5% payment Sums which are exempt under section 10(10D)
under a Life (aggregate resident i.e. Insurance policies which are not taxable on
Insurance amount of maturity.
Policy payment to a (Note – Policy becomes taxable on maturity if
payee in a the premium paid exceeds 20%, 15%, 10% of
maturity amount and also Keyman Insurance
financial year)
policy is fully taxable)
13.8
Section Description Threshold Payer Type of Rate of Time of deduction Payments / Income
Limit Payee TDS exempted from TDS
194E Payment to non- - Any person non-resident 20% + Sur . Credit or payment, -
resident sportsmen sportsmen +Cess (If earlier.
or sports (including an applicable)
associations of athlete) or non-
income referred to citizen
in section 115BBA entertainer or
non-resident
sports
associations
194EE Payment of deposit Rs. 2,500 in a Any person Individual or 10% of payment Payment to the heirs of
under National financial year HUF the assessee
Saving Scheme
194G Commission on sale Rs. 15,000 in a Any person Any person 5% Credit or payment,
of lottery tickets financial year earlier.
194H Commission or Rs. 15,000 in a Any person, Any resident 5% Credit or payment, Commission or
brokerage financial year & For earlier. brokerage payable by
Indi/HUF if in BSNL or MTNL to their
preceding PCO franchisees.
year T.Over
> 1Crore/50
Lakhs
194-I Rent Rs. 2,40,000 in Any person, Any resident For P & M Credit or payment, Rent is paid / payable to a
- (Ownership of a financial & For or earlier.
Government agency.
the person giving year Indi/HUF if in equipment-
on rent is preceding 2% Sharing of proceeds
year T.Over
immaterial) between a Film distributor
> 1Crore/50 For land,
building, and exhibitor owing the
Lakhs
furniture cinema theatre
or fixtures
-10%
13.9
Section - Description Threshold Payer Type of Payee Rate of TDS Time of deduction Payments / Income
Limit exempted from TDS
194M - Payments to > Rs. 50,00,000 Individual or Any Resident 5% Credit or payment,
Contractors in a HUF those earlier.
Commission or financial year who are not
brokerage Fees for required to
professional deduct tax at
services source under
section 194C
or 194H or
194J
Secti Description Threshold - Payer Type of Payee Rate of TDS Time of Payments / Income
on Limit deductio exempted from TDS
n
194N Cash withdrawals > Rs. 1 crore - a banking Any person @2% of such sum. At the Paid to –
company or any In case the recipient has not filed ROI for time of a. Government
all the 3 immediately payment
bank or b. Bank/ Co-operative bank,
Preceding of such
banking Post office and their
P.Y.s, for sum
institution business correspondents
which time
- a co- limit u/s
operative 139(1) has expired, such sum shall c. any white label ATM
society be the amt or agg. of amts, in cash operator of a banking
engaged in >Rs. 20 lakh during the P.Y.
company (Ex.Tata Indicash,
carrying on the TDS
- @2% of the sum, where cash
Muthoot Finance etc.)
business of
banking or a withdrawal d. commission agent or
post office > Rs. 20 lakhs but ≤ Rs. 1 crore trader, operating under
- @5% of sum, where cash Agriculture Produce Market
withdrawal exceeds Rs. 1 crore
Committee (APMC)
13.10
Section Natur Threshold Limit for Payer Payee Rate of TDS Time of
e of deduction of tax at source deduction
paym
ent
194-O > Rs. 5 lakhs, being gross E-commerce operator, E-commerce 1% At the time of credit of
(w.e.f. 1.10.20 amount of sales or service who participant of gross such sum to the
20) or both in a financial year to facilitates sale of goods amount of account of the payee
an e- commerce or sale or or at the time of
participant, being provision of service or both payment, whichever is
> individual or HUF and services of an e- [In case of failure earlier.
such e- commerce commerce participant to furnish PAN,
participant has furnished through digital or Maximum
PAN or Aadhar number to electronic facility or TDS@5%]
the e-commerce operator platform
> No threshold in other
cases
Section Nature Threshold Limit for Payer Payee Rate of Special Point
of deduction of tax atsource TDS
payment
194P Pension Basic exemption limit ( Notified specified Specified Senior Citizen i.e., An Rates in Exemption from filing
3,00,000/` 5,00,000, bank individual, being a resident in force return of income
as the case may be) India, who is of the age of 75 years
Slab – The specified
(along ormore at any timeduring the PY;
[i.e., total income after Normal or senior citizen is
AY 22-23 with is having pension Income and no
giving effect to the deduction 115BAC exempted from
interest other income except
allowable under filing his return of
onbank interest income income for the
account) Chapter VI-A should exceed any account maintained by such assessment year
the basic exemption limit. individual in the same specified relevant to the
Further, in case the individual bank in which he is receiving his previous year in
is entitled to rebate under pension income;and which the tax has
section 87A from tax payable, has furnished a declaration to the been deducted
then the same should be given specified bank under this section
effect to]
13.11
Section Nature Threshold Limit Payer Payee Rate of TDS Time of deduction
of fordeduction of
payment tax atsource
194Q Purchse of > ` 50 lakhs in a Buyer, who is Any 0.1% of sum credit or payment, whichever is earlier.
goods previous year responsible for paying resident exceeding
9.80
w.e.f – Few Points -
1.7.21 (Person/Payee wise any sum to any ` 50 lakhs
• Tax is not required to be deducted under this section in
limit) resident for purchase respect of a transaction on which -
AY 22-23 of goods.
(a) tax is deductible under any of the provisions of this
Buyer means a Act; and
person whose total
(b) tax is collectible under the provisions of section
sales, gross receipts 206C, other than section 206C(1H).
or •In case of a transaction to which both section 206C(1H) and
turnover from section 194Q applies, tax is required to be deducted under
business exceeds ` section 194Q
10 crores during
the last FY
Notes –
(1) Section 206AA requires furnishing of PAN by the deductee to the deductor, failing which the deductor has to deduct tax at the higher
of the following rates, namely, -
(i) at the rate specified in the relevant provision of the Income-tax Act,1961; or
(ii) at the rate or rates in force; or
(iii) at the rate of 20% and in case of section 194-O and 194-Q, 5% AY 22-23
(2) Section 206AB requires tax to be deducted at source under the provisions ofthis Chapter on any sum or income or amount paid, or
payable or credited, by a person (deductee) to a specified person, at higher of the following rates –
(j) at twice the rate prescribed in the relevant provision of the Act;
(ii) at twice the rate or rates in force i.e., the rate mentioned in the FinanceAct; or
(iii) at 5%
However, section 206AB is not applicable in case of tax deductible at source under sections 192, 192A, 194B, 194BB or 194N.
Meaning of “specified person” – A person who has not filed the returns of income for both of the two assessment years relevant
9.79
9.81
to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit
of filing return of income under section 139(1) has expired, and the aggregate of tax deducted atsource and tax collected at source
in his case is ` 50,000 or more in each of these two previous years.
(3) In case the provisions of section 206AA are also applicable to the specified person, in addition to the provisions of this section, then,
tax is required to be deducted at higher of the two rates provided in section 206AA and section 206AB.
(4) If PAN is not Provided – Deduct TDS @ 5% / TCS @ 1%
13.12
Sec. Description Threshold Payer Payee Rate Time of deduction Payments / Income
194-IA Payment on Rs. 50 lakh Any Resident 1% Credit or payment, earlier. Payment for transfer of
transfer of (Consideration person, Individua agricultural land
certain for transfer) being a ;/HUF
immovable transferee
Property (Land or
Building)
194-IB Payment of rent Rs. 50, 000 Indi/HUF Any 5% At the time of credit of rent,
by certain for a month whose TO Resident for the last month of the
individual or HUF or part of a does not previous year
month increase 1 or the last month of tenancy,
cr./ 50 lacs if the
property is vacated during the
in year, as the case may be, to
preceding the account of
year the payee or at the time of
payment,
whichever is earlier
194-IC Payment - Any person Any 10% Credit or payment, earlier.
under Resident
specified
agreement u/s
45(5A) - JDA
194 - IA
Meaning of consideration for transfer of immovable property – 194- IA Consideration for transfer of immovable property include all
charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar
nature, which are incidental to transfer of the immovable property.
For 194-IA, Deductor doesn’t need to obtain TAN.
Section Description
Requirement to Furnish PAN - Else Max
206AA 30%
206AB TDS For Non Filers if IT Return
206CCA TCS For Non Filers if IT Return
206CC TCS - Twice the rate
13.13
Section Description Threshold Limit Payer Type of Rate of TDS Time of

Payee deduction
194J Fees for > Rs. 30,000 in a • Any person, Any Read from below table At the time
professional financial year, other than an individual or HUF; Reside of credit of
or technical for each nt such sum to
services/ category of • However, in case of fees for the account
Royalty/ Non- income. professional or technical services of the
compete fees/ (However, this payee or at
• Individual/HUF, whose total sales,
Director’s limit does not the time of
gross receipts or turnover from
remuneration apply in case of payment,
Business or profession exceeds
payment made whichever is
Rs. 1 crore in case of business
to director of a earlier.
or Rs. 50 lakhs in immediately
company).
preceding F.Y., is liable to
deduct tax u/s 194J,
except where fees for professional
services is credited or paid exclusively for
his personal purposes.
Note - It may be noted that individuals and HUFs are not required to deduct tax at source under section 194J on royalty and non-
compete fees.
In case of a payee, engaged only in the business of operation of call centre,the tax shall be deducted at
source @ 2%
13.14
Section Nature of Threshold Limit for Payer Paye Rate of Time of deduction
payment deduction of tax at e TDS
source
194K Income on > Rs. 5,000 in a Any person responsible Any 10% At the time of
units other financial year for paying any income in resid credit of such sum
than in the respect of units of ent to the account of
nature of a mutual fund/Administrat or the payee or at the
capital of the specified undertaking/ time of payment,
gains specified company whichever is earlier.
Sec. Description Threshold Payer Payee Rate Time of Payments / Income

Limit deduction exempted from TDS
194LA Compensation/ Rs. 2,50,000 Any person Any 10% payment Compensation on
enhanced in Resident acquisition of agricultural
compensation a financial land.
on acquisition year
of certain
immovable
property
13.15
Sec. Description Threshold Payer Payee Rate Time of deduction Payments / Income
194LB Special rate of tax - Any person non- 5% At the time of credit of such
on interest corporate sum to the account of the
received by non- non- payee or at the time of
residents from payment, whichever is earlier.
resident
notified or a
infrastructure
foreign
debt funds
company
194LC Concessional rate Indian non- 5% on gross At the time of credit of such
of tax on interest sum to the account of the 194LC is extended to
company corporate interest
on foreign payee or at the time of interest payable in respect
or non-
payment, whichever is earlier. of monies borrowed by an
currency business resident 4%long-term Indian company or business
borrowings by an trust or a bond or trust from a source outside
Indian company
foreign rupee India by way of issue of
or business trust
company denominated rupee denominated bond
outside India on bond issued issued before 1st July,
issue of long-term between 2023.
infrastructure 1.4.20 to
bonds including 30.6.20 listed
long-term in IFSC
infrastructure
bonds approved
by CG
194LD Interest on interest Governme FII OR 5% on gross At the time of credit of such
Government payable nt or QII interest sum to the account of the
securities or RDB during the Indian payee or at the time of
of an Indian payment, whichever is earlier
period company
company payable between
to a FII or a
1.6.2013 and
Qualified Foreign
30.6.2023
Investor (QFI)
13.16
Section Description Threshold Limit Payer Type of Payee Rate of Time of deduction Payments / Income exempted
TDS from TDS
194LBA Income from - Business Resident 10% At the time of
units of Trust credit of such sum
to the account of
9.82
business trust
the payee or at the
non-resident 5% + Sur + time of payment,
HEC whichever is
earlier.
10% in case
amount is
received/re
ceivable
from
Special
purpose
vehicle.
Section Description Thres Payer Type of Payee Rate of TDS Time of

hold deduction
Limit
196D Income of Foreign ✓ 20%
Institutional Investors
from securities
✓ 10% in case of income from specified
securities
✓ In case of DTAA and payee has given

Tax Residence Certificate–
20 %
or AY 22-23
Rate in DTAA
(Whichever is lower)
Few Pointers
Tax deducted at source (TDS) is an indirect mechanism of collecting tax which combines twin concepts of “pay
as you earn” and “collect as it is being earned.”
13.17
Payments of other sums to Non-Residents [Section 195]

Payment made by Indian company to U.S. Company for use of its data base is not subjected to TDS under Section 195
of the Income Tax Act. - WIPRO Ltd. v. I.T.O. (2005) 94 ITD 9 (Bang.)].
Rate of TDS under Section 195 : Rates prescribed under the Act has to be increased by surcharge and health
and education cess at the prescribed rate. If the payment is being made as per DTAA rates, then there is no
need to add surcharge and cess. The rates are as follows :
Particulars TDS rates
Income in respect of investment made by a NRI 20%
Income by the way of long term capital gains in Section 115E in case of a NRI 10%
Income by way of long-term capital gains 10%
Short Term Capital gains under section 111A 15%
Any other income by way of long-term capital gains 20%
Interest payable on money borrowed in foreign Currency 20%
Income by way of royalty payable by Government or an Indian concern 10%
Income by way of royalty, not being royalty of the nature referred to be payable by Government 10%
or an Indian concern
Income by way of fees for technical services payable by Government or an Indian concern 10%
Any other income 30%
Payment of dividend to a non-resident shareholder by domestic company 20%
Tax deducted at source (TDS) is an indirect mechanism of collecting tax which combines twin concepts of “pay as you earn” and
“collect as it is being earned.”
2. Few pointers
Section 194C
1. 194C - Definition of work
13.18
Work includes –
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadcasting or
telecasting;
(c) carriage of goods or passengers by any mode of transport other than by railways;
(d) catering;
(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material
purchased from such customer. or its associate, being a person related to the customer in such manner as defined u/s
40A(2)(b), (i.e., the customer would be in the place of assessee; and the associate would be the related person(s) mentioned in
that section) However, “work” shall not include manufacturing or supplying a product according to the requirement or
specification of a customer or associate of such customer, by using raw material purchased from a person, other than such
customer, as such a contract is a contract for ‘sale’. However, this will not be applicable to a contract which does not entail
manufacture or supply of an article or thing (e.g. a construction contract).
Section 194I
1. Payment made to C&F agent are regarded as payment made for carrying out work under Section
194C instead of treating it as rent - National Panasonic India (P) Ltd. v. CIT (TDS) (2005) 35 OT 16 Del.
2. Payment for advertisement for boarding site is dealt under Section 194C. - ITO v. Roshan Publicity
(P.) Ltd. (2005) 45 OT 105 Mum.
3. Landing and Parking fee received by Airport Authorities is treated as rent as was decided in the case
United Airlines v. CIT (2006) 152 Taxman 516 Del.
13.19
4. No requirement to deduct tax at source under section 194-I on remittance of Passenger Service Fees
by an Airline to an Airport Operator [Circular No. 21/2017, dated 12.06.2017]
On the issue of whether payment of passenger service fees (PSF) by an airline to an Airport Operator qualifies
as rent to attract TDS under section 194-I, the Bombay High Court relied on the Apex Court ruling in Japan
Airlines and Singapore Airlines case, wherein it was observed that the primary requirement for any payment to
qualify as rent is that the payment must be for the use of land and building and mere incidental use of the
same while providing other facilities and service would not make it a payment for use of land and building
only so as to attract section 194-I.
Sec 196 - No TDS in certain

cases - Payment to
entity established under any Mutual Fund

Government RBI law and whose income is specified
exempt 10(23D)
13.20
3. Tax shall not be deducted on payments related to:
Bank guarantee
commission; &
Cash
management
service charges;
credit card or
debit card
commission for Depository charges
transaction on maintenance of
between the DEMAT accounts;
merchant
establishment &
acquirer bank.
Tax shall not be

deducted on
payments related to
Charges for
Clearing charges ( warehousing
services for
commodities;
Underwriting
service charges;
4. Note – If PAN not furnished by the deductee – TDS will be deducted @ 20%
5. Due Dates to deposit TDS

Deducted between April to Feb 7th of Next month
Deductor is other than Govt.
Deducted in March Upto 30th April
Amount deposited without challan On same day of deduction
Deductor is Govt.
Deposited with challan 7th of Next month
Note - Tax deducted under sections 194-IA and 194-IB have to be remitted within 30 days from the
end of the month of deduction.
13.21
Higher rate of TDS for non-filers of income-tax return [Section 206AB] w.e.f 1 July 2021
AY 22-23
(1) Section 206AB requires tax to be deducted at source under the provisions ofthis Chapter on
any sum or income or amount paid, or payable or credited, bya person (deductee) to a specified
person, at higher of the following rates –
(i) at twice the rate prescribed in the relevant provisions of the Act;
(ii) at twice the rate or rates in force i.e., the rate mentioned in the FinanceAct; or
(iii) at 5%
However, section 206AB is not applicable in case of tax deductible at sourceunder sections 192, 192A,
194B, 194BB9 or 194N.
(2) In case the provisions of section 206AA are also applicable to the specified person, in addition
to the provisions of this section, then, tax is required to be deducted at higher of the two rates
provided in section 206AA and section 206AB.
(3) Meaning of “specified person” – A person who has
✓ not filed the retur-ns of income for both of the two assessment years relevant to
the two previous years immediately prior to the previous year in which tax is
required to be deducted, for which the time limit of filing return of income under
section 139(1) has expired
and
✓ The aggregate of tax deducted at source - TDS and tax collected at source - TCS
in his case is Rs. 50,000 or more in each of these two previous years
However, the specified person does not include a non-resident who does not have a permanent
establishment in India.
6. TAX DEDUCTION ACCOUNT NUMEBER (TAN)
TAN number is a 10 Digit Alphanumeric number and is used as an abbreviation for Tax Deduction
and Collection Account number. Every Assessee liable to deduct TDS is required to apply for a
TAN no. and shall quote this number in all TDS Returns, TDS Payments and any other
communication regarding TDS with the Income Tax Department.
As per Section 203A of the income tax act 1961, it is mandatory for all asseesee’s liable to
deduct TDS to quote this TAN Number in all communications regarding TDS with the income
tax department and failure to do so attracts a penalty of Rs. 10,000 u/s 272BB.
Structure of TAN: of the total 10 digit TAN number, first 4 digits of TAN are alphabets, the next
5 digits of TAN are numeric and last digit is a random alphabet.
First 3 alphabets of TAN represent the jurisdiction code, 4th alphabet is the initial of the name of
the TAN holder who can be a company, firm, individual, etc. For example, TAN allotted to Mr. Mahesh
of Delhi may appear as under: DELM12345I
7. Consequence in the event of default [Section 201]

13.22
Where any person does not deduct, or does not pay, or after so deducting
fails to pay, the whole or any part of the tax, as required by or under this Act,
then, such person, shall, without prejudice to any other consequences which he
may incur, be deemed to be an assessee in default in respect of such tax :
However, any person, including the principal officer of a company, who fails to deduct the whole or any part
of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum
credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax
if such resident.
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return
of income; and
(iii) has paid the tax due on the income declared by him in such return of income,
and the person furnishes a certificate to this effect from an accountant in form
26A
Note - No order shall be made deeming a person to be an assessee in default
for failure to deduct the whole or any part of the tax from a person resident
in India, at any time after the expiry of seven years from the end of the
financial year in which payment is made or credit is given.
8. Due Dates to deposit TDS
Deducted between April to Feb 7th of Next month

Deductor is other than Govt.
Deducted in March Upto 30th April
Deductor is Govt.
Note - Tax deducted under sections 194-IA and 194-IB have to be remitted within 30 days
from the end of the month of deduction.
9. Interest liability for TDS [Section 201(1A)]
• Failure to deduct tax - 1% for every month or part of month - date on

which tax was deductible to the date on which such tax was actually
deducted on TDS Amount
• Deducted but failed to deposit - 1½% for every month or part of month -
date on which tax was deducted to the date on which such tax is
13.23
actually paid on TDS Amount.
• Interest liability for assessee not deemed as assessee in default - on

account of payment of taxes by such resident payee, interest @1% p.m.
or part of month, shall be payable by the payer from the date on which
such tax was deductible to the date of furnishing of return of income
by such resident payee.
Prosecution - where the amount of tax which the responsible person has failed to deduct or pay exceeds
Rs. 1,00,000 he shall be punishable with rigorous imprisonment for a term not less than 6 months but
which may be extended to 7 years and with fine. In any other case, he shall be punished with a rigorous
imprisonment of a term of not less than 3 months but which may be extended to 3 years and with fine.
8. TDS Forms
Form No. Particulars

Form 24Q Statement for tax deducted at source from salaries
Form 26Q Statement for tax deducted at source on all payments except salaries
Form 27Q Statement for deduction of tax from interest, dividend, or any other sum
payable to non-Residents
Form 27EQ Statement of collection of tax at source
Form 26QB For section 194IA separate return is not required, challan cum return to be
filed on Form 26QB to be deposited within a period of 30 days (w.e.f.
01.06.2016) from the end of the month in which the deduction is made.
Note : ‘Nil’ TDS return is not mandatory
Issue of TDS Certificate
In case of employees receiving salary income, the certificate has to be issued in Form No.16. In all
other cases, the TDS certificate is to be issued in Form 16A
Due Date for Issue of Certificate

FORM 16 : 15th June of the Next Financial year in which tax is deducted.
FORM 16A : Within 15 days from due date for furnishing the statement of tax deducted under rule
31A
9. Rule 31A - Time limit for submission of quarterly statements – TDS – TCS – Form 16A
Quarter Form 27EQ(TCS) TDS Return Due Form 16A (TDS

Date for Form 24Q, return + 15 days)
Form 27 Q
& Form 26Q
April to June 15th July 31st July 15th August
13.24
July to Sept 15th Oct 31st Oct 15th November

Oct to Dec 15th Jan 31st Jan 15th February
Jan to March 15th May 31st May 15th June
10. Section 234E (Fee for TDS return) - A fee of Rs. 200 for every day would be levied under for late
furnishing of TDS statement from the due date of furnishing of TDS statement to the date of
furnishing of TDS/ statement. However, the total amount of fee shall not exceed the total
amount of tax deductible/collectible and such fee has to be paid before delivering the TDS
statement.
11. Certificate of TDS to be furnished under section 203 [Rule 31] –
To salaried employees – Form 16 - annually by 15th June
12. Refund of TDS

No claim of refund can be made after two years from the end of financial year in which tax was
deductible at source.
13. E – TDS Return
14. ELECTRONIC PAYMENT OF TAXES – Mandatory – All Corporate assessees & other
assesses on whom 44AB is applicable
13.25
TCS -206C
(1) (1C) (1F)
Alcohalic liquor for human Sale of Motor

consumption - 1%
Grant of license of - Parking lot,
Toll Plaza, Mining & Quarrying Vehicle > Rs. 10
Scrap - 1% Lacs
Minerals being coal or (Other than mining & quarrying
lignite or iron ore - 1% of mineral oil, petroleum &
Timber/ Wood - 2.5%
Natural Gas) TCS @ 1%
Tendu Leaves - 5%
on full
amount
Rate - 2%
No TCS if these No TCS if

goods are purchased Payee is
fro production
purpose
Public sector An Embassy, high Local
company engaged CG/ SG commission, Authority
in business of legatiion,
carrying passangers commission,
No TCS if Payee
is - (Form 27C to seller) consulate & trade
representation of a
foreign state & club
An Embassy, high
Public sector A buyer in the
company CG/ SG commission,
legatiion, retail sale of
commission, such goods TCS will not apply on sale of motor vehicles by
consulate & trade purchased by manufacturer to dealer / distributors but applicable
representation of a him for at retail level)
foreign state & personal
cliub. connsumption
For subsection 1 & 1F → Seller includes all persons but for individual + HUF, seller means whose Turn Over > 1 Crore/ Rs. 50 Lacs in the
preceding year.
13.26
1G (w.e.f
1.10.20)
Note - TCS
Authorised dealers who receives @ 10% if
Seller of an Overseas amount under the liberalised
Tour program remittance scheme of RBI for No PAN/
package Overseas remittance from a buyer
remitting amount out of India Aadhar is
furnished.
TCS @ 5% Remittance is a loan
Remittance other obtained from
( No upper limit than overseas tour financial institution
so TCS on whole package for pursuing any
amount) education
Yearly Remittance > Yearly Remittance >

Yearly Remittance
7 lacs 7 lacs
upto 7 Lacs
TCS @ 5% on over TCS @ 0.5% on over

No TCS
and above amount and above amount
(1G)
No TCS if
by authorised dealer if Payer is liable for CG/ SG, An

seller of package has TDS and has also Embassy, high Local Authority
already collected it deducted TDS commission etc.
13.27
(1H)
Seller of goods(seller means a person (1H)

turnover is more than 10 crore in the No TCS if
preceding year)
buyer is liable CG/ SG, An
buyer is
for TDS and has Embassy, high
imprting into Local Authority
TCS on sale consideration > Rs. 50 lacs India
also deducted commission
TDS etc.
Whether PAN/Aadhar is furnished by the buyer
Yes No (ICSI Supplementary June 21)

1. No adjustment of GST, sales return is to be
TCS @ 0.1% TCS can be maximum 1%
made
2. TCS on only over and above amount of 50 lacs
Due Dates to deposit TCS

Collector is other than Govt. Within a week from month end

Collector is Govt.
Section 206CC
Collectee shall furnish his PAN to the person responsible for collecting such tax at source else TCS will be collected at double the rate given or 5% (Higher)
13.28
Higher rate of TCS for non-filers of income-tax return and non- furnishers of PAN [Section 206CCA & 206CC]
AY 22-23
w.e.f 1 July 2021
(i) Section 206CCA requires tax to be collected at source received by a person(collectee) from a specified person, at higher of the
following rates –
(a) at twice the rate specified in the relevant provision of the Act;
(b) at 5%
(ii) In case the provisions of section 206CC are also applicable to the specified person, in addition to the provisions of section 206CCA, then, tax is
required to be collected at higher of the two rates provided in section 206CC and section 206CCA.
The provisions of section 206CC require tax collection at the higher of the following two rates, in case of failure by the person paying any
sumor amount on which tax is collectible at source to furnish PAN to the person responsible for collecting tax at source –
a. at twice the rate specified in the relevant provision of the Act
b. at 5% [1%, in case tax is required to be collected at source u/s 206C(1H)]
The provisions of section 206CC does not apply to a non-resident who does not have a permanent establishment in India.
It may be noted that whereas section 206CC is applicable to persons paying any sum or amount (on which tax is collectible at source) who have
not furnished PAN, section 206CCA is applicable to specified persons who have failed to file return of income [See definition of specified
person in (iii) below].
(iii) Meaning of “specified person” – A person who has not filed the returnsof income for both of the two assessment years relevant to the two
previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing return of income
under section 139(1) has expired, and the aggregate of tax deducted at source and tax collected at source in his case is ` 50,000 or more in
each of these two previous years.
However, the specified person does not include a non-resident who does not have a permanent establishment in India.
13.29
ADVANCE PAYMENT OF TAX
• Advance tax is payable if tax amount (after reducing TDS/TCS) less sec. 89 relief -
AMT Credit 115JD) during the year is ` 10,000 or more.
• However, an individual resident in India of the age of 60 years or more at any time
during the P.Y., who does not have any income chargeable under the head “Profits and
gains of business or profession” (PGBP), is not liable to pay advance tax.
Installments of advance tax and due dates [Section 211]
Other than 44AD or section 44ADA – Four installments
Due date of instalment Amount payable
On or before 15th June Not less than 15% of advance tax liability.
On or before 15th September Not less than 45% of advance tax liability (-) amount paid in
earlier installment.
On or before 15th December Not less than 75% of advance tax liability (-) amount paid in
earlier installment or installments.
On or before 15th March The whole amount of advance tax liability (-) amount paid in earlier
installment or installments.
For persons opting - 44AD (1) or 44ADA (1) to pay advance tax by 15th March
However, any amount paid by way of advance tax on or before 31st March shall also be treated as
advance tax paid during the F.Y. ending on that day.
Interest for defaults in payment of advance tax [Section 234B]

(1) Interest liability if advance tax of an amount less than 90% of assessed tax. (assessed tax
means the tax on total income determined u/s 143(1)/under regular assessment, as the case
may be, less TDS & TCS less sec. 89 relief - AMT Credit 115JD)
(2) 1% per month or part of the month from 1st April following the F.Y. upto the date of
determination of total income under section 143(1) and where regular assessment is made,
upto the date of such regular assessment.
(3) Amount of difference between the assessed tax and the advance tax paid.
13.30
Interest for deferment of advance tax [Section 234C]
(a) For other than 44AD AND 44ADA - Simple interest@1% per month for the period specified in
column (4) on the amount of shortfall, as per column (3) is leviable u/s 234C.
Specified date Specifie Shortfall in advance tax Period
d%
(1) (2) (3) (4)
15th June 15% 15% of tax due on returned income (-) 3 months
advance tax paid up to 15th June
15th September 45% 45% of tax due on returned income (-) advance 3 months
tax paid up to 15th September
15th December 75% 75% of tax due on returned income (-) advance 3 months
tax paid up to 15th December
15th March 100% 100% of tax due on returned income (-) 1 month
advance tax paid up to 15th March
Note – However, if the advance tax paid by the assessee on the current income, on or before
15th June or 15th September, is not less than 12% or, as the case may be, 36% of the tax due
on the returned income, then, the assessee shall not be liable to pay any interest on the
amount of the shortfall on those dates.
Tax due on returned Income = Tax chargeable on Total Income declared in Return – TDS –
TCS less sec. 89 relief- AMT Credit 115JD
(b) Computation of interest u/s 234C in - 44AD AND 44ADA case of an assessee who declares profits
and gains in accordance with the provisions of section 44AD (1) or section 44ADA (1):
Failed to pay on or before 15th March is less than the tax due on the returned income, then, the
assessee shall be liable to pay simple interest at the rate of 1% on the amount of the shortfall
from the tax due on the returned income.
13.31
(c) Non-applicability of interest u/s 234C where shortfall arises because of:
✓ The amount of capital gains;
✓ Income of nature referred to in section 2(24)(ix) i.e., winnings from lotteries,
crossword puzzles etc.;
✓ Income under the head “PGBP” in cases where the income accrues or arises
under the said head for the first time; or
✓ the amount of Dividend Income
AY 22-23
Dividend shall include 2(22) a, b, c, d but not (e)
However, the assessee still needs to pay the whole advance tax amount by 31 st March.
Note - An assessee who is liable to pay advance tax of less than 10,000 will not be saddled with interest under sections 234B and 234C for defaults
in payment of advance tax.
CASE LAWS
March 2, 2021 Engineering Analysis Centre of Excellence Private Limited Supreme Court
(Appellant) vs. CIT (Respondent)
Amount paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of
computer software through End User License Agreement EULAs distribution agreements, is not payment of royalty for the use of copyright in computer
software, and that the same does not give rise to any income taxable in India; as a result of which the persons are not liable to deduct any TDS under
section 195 of the Income Tax Act.
Fact of the Case: The appellant, Engineering Analysis Centre of Excellence Pvt. Ltd. (EAC), is a resident Indian end-user of shrink-wrapped (Commercial)
computer software, directly imported from the United States of America. The Assessing Officer by an order after applying Article 12(3) of the Double Taxation
Avoidance Agreement (DTAA), between India and USA, and upon applying section 9(1)(vi) of the Income Tax Act, 1961 (Act), found that what was in fact
transferred in the transaction between the parties was copyright which attracted the payment of royalty and thus, it was required that tax be deducted at
source
Order/ Judgment: The “license” that is granted vide the end user license agreement ‘EULA’, is a “license” which imposes restrictions or conditions for
the use of computer software. The EULAs do not grant any such right or interest to reproduce the computer software.
13.32
Further, what is “licensed” by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-
user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods.
Few Illustrations on Amendments
Illustration 1
Mr. Sharma, a resident Indian aged 77 years, gets pension of ` 52,000 per month from the UP State Government. The same is credited to his savings account in SBI, Lucknow
Branch. In addition, he gets interest@8% on fixed deposit of ` 20 lakh with the said bank. Out of the deposit of ` 20 lakh, ` 2 lakh represents five year term deposit made
by him on 1.4.2021. Interest on savings bank credited to his SBI savings account for theP.Y.2021-22 is ` 9,500.
(1) From the above facts, compute the total income and tax liability of Mr. Sharma for the A.Y. 2022-23, assuming that he has not opted for section 115BAC.
(2) What would be the amount of tax deductible at source by SBI, assuming that the same is a specified bank? Is Mr. Sharma required to file his return of income
for A.Y.2022-23, if tax deductible at source has been fully deducted? Examine.
(3) Would your answer to Q.2 be different if the fixed deposit of ` 20 lakh was with Canara Bank instead of SBI, other facts remaining the same?
SOLUTION
(1) Computation of total income of Mr. Sharma for A.Y.2022-23

Particulars ` `
I Salaries
Pension ( 52,000 x 12) 6,24,000
Less: Standard deduction u/s 16(ia) 50,000
5,74,000
II Income from Other Sources
Interest on fixed deposit (` 20 lakh x 8%) 1,60,000
Interest on savings account 9,500 1,69,500
Less: Deductions under Chapter VI-A
Under Section 80C
Five year term deposit (` 2 lakh, restricted 1,50,000
to ` 1.5 lakh)
Under section 80TTB
13.33
Interest on fixed deposit and savings account,

restricted to 50,000, since Mr. Sharma is a
resident Indian of the age of 77 years. 50,000 2,00,000
(1) SBI, being a specified bank, is required to deduct tax at source u/s 194P (after considering the tax, if any, deducted on pension u/s 192) and remit the same
to the Central Government. In such a case, Mr. Sharma would not be required to file his return of income u/s 139.
(2) If the fixed deposit of ` 20 lakh is with a bank other than SBI, which is the bank where his pension is credited, then, Mr. Sharma would not qualify as a
“specified senior citizen”, consequent to which SBI would not be liable to deduct tax under section 194P. In this case, Mr. Sharma would have to file his return
of income u/s139, since his total income (without giving effect to deduction under Chapter VI- A) exceeds the basic exemption limit.
It may be noted that in this case, TDS provisions u/s 192 would, in any case, be attracted in respect of pension income. Further, Canara Bank would, be liable to deduct
tax@10% under section 194-A on interest on fixed deposit, since thesame exceeds ` 50,000.
Illustration 2
Mr. Gupta, a resident Indian, is in retail business and his turnover for F.Y.2020-21 was ` 12 crores. He regularly purchases goods from another resident, Mr. Agarwal,
a wholesaler, and the aggregate payments during the F.Y.2021-22 was ` 95 lakh(` 20 lakh on 1.6.2021, ` 25 lakh on 12.8.2021, ` 22 lakh on 23.11.2021 and ` 28
lakh on 25.3.2022). Assume that the said amounts were credited to Mr. Agarwal’s
account in the books of Mr. Gupta on the same date. Mr. Agarwal’s turnover forF.Y.2020-21 was ` 15 crores.
(1) Based on the above facts, examine the TDS/TCS implications, if any, under theIncome-tax Act, 1961.
(2) Would your answer be different if Mr. Gupta’s turnover for F.Y.2020-21 was ` 8crores, all other facts remaining the same?
(3) Would your answer to (1) and (2) change, if PAN has not been furnished by thebuyer or seller, as required?
SOLUTION
(1) Since Mr. Gupta’s turnover for F.Y.2020-21 exceeds 10 crores, and payments made by him to Mr. Agarwal, a resident seller exceed ` 50 lakhs in the
P.Y.2021-22, he is liable to deduct tax@0.1% of ` 45 lakhs (being the sum exceeding ` 50 lakhs) in the following manner –
No tax is to be deducted u/s 194Q on the payments made on 1.6.2021 and 12.8.2021, since the aggregate payments till that date i.e. 45 lakhs, has not
exceeded the threshold of ` 50 lakhs.
Tax of ` 1,700 (i.e., 0.1% of ` 17 lakhs) has to be deducted u/s 194Q from the payment/ credit of ` 22 lakh on 23.11.2021 [` 22 lakh – ` 5 lakhs,
being the balance unexhausted threshold limit].
Tax of ` 2,800 (i.e., 0.1% of ` 28 lakhs) has to be deducted u/s 194Q fromthe payment/ credit of ` 28 lakhs on 25.3.2022.
Note – In this case, since both section 194Q and 206C(1H) applies, tax has tobe deducted u/s 194Q.
13.34
(2) If Mr. Gupta’s turnover for the F.Y.2020-21 was only ` 8 crores, TDS provisions under section 194Q would not be attracted. However, TCS provisions
under section 206C(1H) would be attracted in the hands of Mr. Agarwal, since his turnover exceeds ` 10 crores in the F.Y.2020-21 and his receipts from
Mr. Gupta exceed ` 50 lakhs.
No tax is to be collected u/s 206C(1H) on 1.6.2021 and 12.8.2021, since the aggregate receipts till that date i.e. 45 lakhs, has not exceeded the threshold
of ` 50 lakhs.
Tax of ` 1,700 (i.e., 0.1% of ` 17 lakhs) has to be collected u/s 206C(1H) on 23.11.2021 (` 22 lakh –` 5 lakhs, being the balance unexhausted threshold limit).
Tax of ` 2,800 (i.e., 0.1% of ` 28 lakhs) has to be collected u/s 206C(1H) on 25.3.2022.
(3) In case (1), if PAN is not furnished by Mr. Agarwal to Mr. Gupta, then, Mr. Gupta has to deduct tax@5%, instead of 0.1%. Accordingly, tax of
` 85,000 (i.e., 5% of ` 17 lakhs) and ` 1,40,000 (5% of ` 28 lakhs) has to be deducted by Mr. Gupta u/s 194Q on 23.11.2021 and 25.3.2022, respectively.
In case (2), if PAN is not furnished by Mr. Gupta to Mr. Agarwal, then, Mr. Agarwal has to collect tax@1% instead of 0.1%. Accordingly, tax of
` 17,000 (i.e., 1% of ` 17 lakhs) and ` 28,000 (1% of ` 28 lakhs) has to be collected by Mr. Agarwal u/s 206C(1H) on 23.11.2021 and 25.3.2022,
respectively.
ICSI Module Questions
Illustration 1 :
Calculate Advance Tax Payable by Mr. Arun from the following estimated incomes for the previous year 2021-22 :
• Business Income : Rs. 4,75,000;
• Rent from house property : Rs. 36,000 per month;
• Municipal taxes : Rs. 27,000;
• Winning from games : Rs. 70,000 (net of TDS);
• Life insurance premium paid for himself (sum assured : Rs. 5,00,000) : Rs. 30,000.
Solution:
Computation of Advance Tax payable by Mr. Arun - Previous Year 2021-22 (Assessment Year
2022-23)
Step 1 : Compute Estimated Total Income for the year :
Particulars Rs. Rs.

Income from house property :
13.35
Gross Annual Value [Rental Income (36,000 x 12)] 4,32,000
Less : Municipal taxes paid by owner (27,000)

Net Annual Value (NAV) 4,05,000
Less : Standard Deduction @ 30% of NAV (1,21,500) 2,83,500
Profits and gains of Business or Profession 4,75,000
Income from other sources :

Winning from games (gross) [70000 x 100(100% - 30%] 1,00,000
Gross Total Income (GTI) 8,58,500

Less : Deductions under Section 80C (30,000)
Step 2 : Computation Estimated of Tax Liability and Advance Tax Payable
Particulars Rs. Rs.

Tax on :
Winning from Games @ 30% [1,00,000 x 30%] 30,000

Balance Income @ Slab Rate [12,500 + 20% of (7,28,500 - 5,00,000)] 58,200
Tax Payable 88,200
Add : Surcharge, if any Nil

Add : Cess @ 4% 3,528
Tax Liability 91,728
Less : TDS (30,000)
Advance Tax Liability 61,728
Advance Tax (Rounded off) 61,730
Step 3 : Advance Tax Instalments - Advance tax is payable as follows :
Upto % (Rate) Cumulative (Rs.) Each Instalment

(Rs.)
13.36
15.06.2021 15 9,259 [61,730x15%] 9,259

15.09.2021 45 27,778 [61,730x45%] 18,519
15.12.2021 75 46,297 [61,730x75%] 18,519
15.03.2022 100 61,730 [61,730x100%] 15,433
Note: Assuming assessee has opted for section 115BAC of the Income Tax Act, 1961
Illustration 2 :
Red Ltd. (an Indian company) has estimated its income for previous year 2021-22. Calculate advance taxpayable by it from the following :
• Business Income : Rs. 10,80,000;

• Income from house property (after deduction under section 24) : Rs. 7,20,000;
• Long term capital gain (LTCG) on transfer of immovable property on 1st November, 2021 : Rs. 3,60,000;
• Interest on bank deposits (other than saving bank account) : Rs. 45,000.;
• TDS on business income and interest was Rs. 60,000;
• Deduction under section 80G is Rs.1,00,000.
Solution:
Computation of advance tax payable by Red Ltd. for Previous Year 2021-22 (Assessment Year 2022-23) :
Step 1 – Estimate Total Income
Particulars Rs.
Profits and gains of Business or Profession 10,80,000
Income from house property 7,20,000
LTCG 3,60,000
Income from other sources :
Interest on bank deposits 45,000
Gross Total Income (GTI) 22,05,000

Less : Deductions under Section 80G (1,00,000)
13.37
Step 2 : Computation of Estimated Tax Liability and Advance Tax Payable (It is presumed that Red Ltd is a regular company which is not satisfying the conditions
of 115BA, 115BAA and 115BAB and its turnover/ Gross receipts during P.Yr. 2019-20 exceeds Rs 400 Crores, hence rate of tax is taken as 30%)
Particulars Rs. Rs.

Tax on :
LTCG @ 20% (3,60,000 x 20%) 72,000
Balance Income @ 30% [(21,05,000 - 3,60,000) x 30%] 5,23,500 5,95,500
Add : Surcharge, if any Nil
Add : Cess @ 4% 23,820
Tax Liability 6,19,320
Less : TDS (60,000)
Advance Tax Liability 5,59,320
Advance Tax (rounded off) 5,59,320
Step 3 : Advance Tax Instalments - Advance Tax is payable as follows :

Note : Advance Tax is payable by all Assessee in four installments during the previous year, i.e., by 15th June (15%), 15th September (45%), 15th December
(75%) and 15th March (100%). However, in case of LTCG arising after one or more installments, advance tax on installments prior to date of LTCG can be paid
without including tax on LTCG and advance tax on installments after LTCG must be paid in the remaining installments on the amount of total tax liability
including that on LTCG.
Therefore, in this case, advance tax payable by 1st and 2nd installment would be based on Tax excluding Tax on LTCG and advance tax payable by 3rd and 4th
installment would be based on tax including tax on LTCG.
Tax excluding tax on LTCG : Rs. 5,23,500 + Cess @ 4% =Rs. 5,44,440 -TDS Rs. 60,000 = Rs.4,84,440
Upto Cumulative % Cumulative (Rs.) Each installment (Rs.)

15.06.2021 15 72,666 [4,84,440x15%] 72,666
15.09.2021 45 2,17,998 [4,84,440x45%] 1,45,332
15.12.2021 75 4,19,490 [5,59,320x75%] 2,01,492
15.03.2022 100 5,59,320 1,39,830
[5,59,320x100%]
14. Various Entities 14.1
Chapter – 14
Taxation of Various Entities

New Section 115BAC – Form 10-IE - Application for exercise/ withdrawal of
option
From ay 2021-22 (or FY 2020-21), there are two operative tax system –
One is the existing tax system where all the applicable deductions and exemptions are allowed and the tax
rates are as per the Slab rates of tax specified in the Finance Act, 2020.
The second one is section 115BAC which is a Optional tax System and under which many deductions and
exemptions have been disallowed but lower slab tax rates are provided in the section 115BaC as under:
(1) Notwithstanding anything contained in this act but subject to provisions of this Chapter, the income
-tax payable in respect of the total income of a person, being an individual or a Hindu undivided family , for
any previous year relevant to the assessment year beginning on or after the 1st day of april, 2021, shall, at the
option of such person, be computed at the rate of tax given in the following table, if the conditions contained in
sub -section (2) are satisfied, namely:—
TABLE
Sl. No. Total Income Rate of tax
(1) (2) (3)
1. up to rs. 2,50,000 Nil
2. From rs. 2,50,001 to rs. 5,00,000 5%
3. From rs. 5,00,001 to rs. 7,50,000 10%
4. From rs. 7,50,001 to rs. 10,00,000 5%
5. From rs. 10,00,001 to rs. 12,50,000 20%
6. From rs. 12,50,001 to rs. 15,00,000 25%
7. above rs. 15,00,000 30%
Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any
previous year, the option shall become invalid in respect of the assessment year relevant to that previous
year and other provisions of this act shall apply, as if the option had not been exercised for the
assessment year relevant to that previous year:
Provided further that where the option is exercised under clause (i) of sub-section (5), in the event of
failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent
assessment years also and other provisions of this act shall apply for those years accordingly.
(2) For the purposes of sub-section (1), the total income of the individual or Hindu undivided family shall be
computed,—
(i) without any exemption or deduction under the provisions of

• Leave travel concession as contained in clause (5) of section 10;
• House rent allowance as contained in clause (13A) of section 10;
• Some of the allowance as contained in clause (14) of section 10;
• Allowances to MPs/MLAs as contained in clause (17) of section 10;
• Allowance for income of minor as contained in clause (32) of section 10;
• Exemption for SEZ unit contained in section 10AA;
• Standard deduction, deduction for entertainment allowance and employment/professional tax as
contained in section 16;

• Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section

(2) of section 23. (Loss under the head income from house property for rented house shall not be
allowed to be set off under any other head and would be allowed to be carried forward as per
extant law);
• Additional deprecation under clause (iia) of sub-section (1) of section 32;
• Deductions under section 32AD(Investment allowance), 33AB (Tea, Coffee, Rubber
Development account), 33ABA (Site Restoration Fund)
• Various deduction for donation for or expenditure on scientific research contained in sub-clause
(ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
• Deduction under section 35AD or section 35CCC;
• Deduction from family pension under clause (iia) of section 57;
• Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E,
80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
However, deduction under sub-section (2) of section 80CCD (employer contribution on account
of employee in notified pension scheme) and section 80JJAA (for new employment) can be
claimed.
(ii) without set off of any loss,—
(a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is
attributable to any of the deductions referred to in clause (i);
(b) under the head “Income from house property” with any other head of income;
(iii) by claiming the depreciation, if any, under any provision of section 32, except additional depreciation and
(iv) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under
any other law for the time being in force.
Subsection 5 Nothing contained in this section shall apply unless option is exercised in the prescribed manner
by the person,—
Clause (i) having income from business or profession, on or before the due date u/s 139(1) for
furnishing the returns of income for any previous year relevant to the assessment year commencing on or
after the 1st day of april, 2021, and such option once exercised shall apply to subsequent
assessment years;
Clause (ii) having income other than the income referred to in clause (i), along with the return of
income to be furnished u/s 139(1) for a previous year relevant to the assessment year:
Provided that the option under clause (i), once exercised for any previous year can be withdrawn
only once for a previous year other than the year in which it was exercised and thereafter, the person
shall never be eligible to exercise option under this section, except where such person ceases to
have any income from business or profession in which case, option under clause (ii) shall be
available.
Comparison of Existing Tax System with new Optional Tax System for Individual & HuF
Existing System of Tax New System Of Tax U/S 115BAC
Exemption limit for three exemption limit are applicable Only one exemption limit of rs.2,50,000
incomes taxable at available irrespective of age/residential
1) 5,00,000 for super senior citizen
Slab rates status
(minimum 80 years & resident)
2) rs 3,00,000 for senior citizen
(minimum 60 years but less than 80
years & resident)
3) rs.2,50,000 for other individual
Slab rates 3 different slab rates One slab rate

0 – 2,50,000 : Nil 0 to 2,50,000 Nil

> 2,50,000 upto 5,00,000 : 5% > 2,50,000 to 5,00,000 : 5%
> 5,00,000 upto 10,00,000 : 20% > 5,00,000 to 7,50,000 : 10%
> 10,00,000 : 30% > 7,50,000 to10,00,000 : 15%
> 10,00,00 to12,50,000 : 20%
0 – 3,00,000 : Nil
> 12,50,00 to 15,00,000 : 25%
>3,00,000 upto 5,00,000 : 5%
> 15,00,000 30%
>5,00,000 upto 10,00,000 : 20%
> 10,00,000 : 30%
0 – 5,00,000 : Nil
> 5,00,000 upto 10,00,000 : 20%
> 10,00,000 : 30%
Special rates of available available
taxes e.g. section
115BB,112,112A
etc.
rebate u/s 87A available available
Chapter VI- A available Not available except 80CCD(2), 80JJAA
deductions
Surcharge Applicable (10%/15%/25%/37%) Applicable at same rates (10% / 15% /
25% / 37%)
Health & education 4% 4%
Cess
deductions and available Many deductions & exemptions not
exemptions available
Set off of C/F losses available Not allowed if related to deductions &
& depreciation, from exemptions not allowed u/s 115BAC
past p/y
Set off of current available allowed except losses of House Property
year losses
Intimation Not required as old tax system available assessee can opt for new tax system only
by default if intimation given in prescribed manner
Provisions of AMt applicable Not applicable
u/s 115JC
Many exemptions & deductions are not allowed under the new tax system. the exemptions and deduction not available
under the new system related to head of income are given under the respective chapters.

1. Taxation of Hindu Undivided Families
A Hindu Joint Family consists of two types of members:
1. Coparceners:
• The lineal male descendants of a person up to the 3rd generation of such
person are known as coparceners.
• The coparceners acquire, on birth, ownership in the ancestral properties of

such ascendant and have a right to claim partition of such property at any
time.
• However due to amendment of Hindu Succession Act, the daughter of a

coparcener shall by birth become a coparcener in her own right in the same
manner as the son. Hence, the daughter can also ask for partition.
2. Other members: Such members include wives of male members of the family and other
male members, Widow or widows of deceased male member or members.
Few pointers
1. The joint property of the HUF is managed through Karta. However, In the absence of
a male member in the family or when all male members are minors, a woman
member can be treated as manager of the family for income-tax purposes.
2. Any sum paid by an HUF to a member of the family out of its income is not deductible
in computing the income of the family.
However, such amount is exempt in the hands of such individual whether the family
had paid tax on its income or not [Section 10(2)].
3. If any remuneration is paid by HUF → to the karta or any other member for services
rendered by him in conducting family’s business, the remuneration is deductible if
remuneration is
(a) paid under a valid and bona fide agreement;
(b) in the interest of, and expedient for, the business of family; and
(c) genuine and not excessive.
4. Who is entitled to share on partition?
Though only coparceners can demand partition → but once the partition takes effect, the following
persons are entitled to a share:
(a) all coparceners;

(b) a son in the womb of his mother at the time of partition;
(c) mother, who gets an equal share if the partition takes place among her sons after the
death of her husband; and
(d) wife, who gets a share equal to that of a son at the time of a partition between father and sons.

2. Firm
Few Pointers –
• A joint Hindu family as such cannot be a partner in a firm. However, through its Karta
it may enter into a valid partnership with a third person or with a member of the undivided
family in his individual capacity. In such a case, the Karta occupies a dual position. On
the partnership he functions in his individual capacity; on the relations to other
members of the Hindu undivided family, in his representative capacity.
• An incorporated company being a legal person may form a partnership with an

individual or with another company. In considering the maximum number of partners
comprising a firm, the company will be considered as one person only.
• A partnership firm as such is not entitled to enter into a partnership with another
firm, H.U.F individual, or a company. However, its partners in their individual capacity
can enter into another partnership.
3. Tax exemptions for Charitable Trusts and Institutions
A. Charitable purpose: The term ‘charitable purpose’ as per Section 2(15) of the Act
includes
Charitable
Purpose
includes
✓ Reli ✓ Educ ✓ Yoga preservation ✓ any other

ef of ✓ Med
ation ✓ preservation of object of general
the ical
of monuments public utility not Promotion
poor relief environment or places or involving the of sports
(including objects of carrying on of and
watersheds, artistic or any activity for games
forests and profit.
wildlife)
historic
interest
The trust or institution should not be created or established for the benefit of any -
Particular religious community or caste (if the trust or institution is established for the benefit of the
member of a club or employees of a factory, it would not be a public charitable trust)

B. Business Income of Charitable Trust
Activity in the nature of trade, commerce or business, for a Cess or fee or any other consideration will
not be exempt, irrespective of the nature of use or application, or retention, of the income from
such activity, unless (Means exemption can be claimed if below 2 points are satisfied) –
Conditions
activity is aggregate receipts

undertaken in the from such activity
course of And are maximum 20%
advancement of any of the total receipts,
other object of of that previous year;
general public utility
C. Exempt Income i.e. Income not to be included in the Total Income - According to Section 11(1),
the following items are exempt –
Exempt income
Income derived from

Contributions for property held under trust
Corpus - Fully wholly for charitable or
exempt – religious purposes:
Condition –
Invest in 11(5)
AY 22-23
✓ 15% of the income (including ✓ out of the balance 85%, that

voluntary contributions but much amount will be exempt
excluding corpus amount) will be which will be applied for the
exempt by default. specified purposes in India.
Explanation - It might occur that the income applied to charitable or religious purposes in India is
less than 85% of the income derived because of –

Because of
Case A
Not receiving the income during that year Case B
(Suppose Income belongs to PY 17-18) for any other reason (Suppose
Income belongs to PY 17-18)
Not able to apply income in 17-18, Then -

Suppose Income Actually
received in PY 19-20 then - if assessee can apply the same by PY 18-
19 the income will be exempt originally for PY
The received income will be 17-18
exempt originally for PY 17-18 if
applied in the year of receipt i.e.
PY 19-20 or 1 year after that i.e.
PY 20-21
Suppose income is not applied during PY 18-19 then

the same will be taxable in PY 18-19
Suppose received income is not applied

as above then the same will be taxable
in PY 20-21 Explanation below
Note – The years taken in the above chart are just examples.
Explanation for last 2 blocks in wordings –

Where any income in (Case A) and (Case B) above is not applied to charitable or religious purposes in
India within the prescribed time, then such income shall be deemed to be the income of the person in
receipt thereof:
(A) In case of not receiving the income: Such income shall be deemed to be the income of the
previous year immediately following the previous year (PY 20-21) in which the income was
received (PY 19-20).
(B) In any other case: Such income shall be deemed to be the income of the previous year immediately
following the previous year (PY 18-19) in which the income was derived (PY 17-18)
Note- Any amount paid by one charitable trust to any other charitable with a specific
direction that they shall form part of the CORPUS of the trust or institution, shall not be treated as
application of income for charitable or religious purposes. (w.e.f. AY 2018-19)
Amendment –
(i) application for charitable or religious purposes from the corpus as referred to in clause (d) of
this sub-section, shall not be treated as application of income for charitable or religious purposes
AY 22-23 Provided that such amount shall be treated as application for charitable or religious
purposes in the previous year in which it is invested or deposited in 11(5)
and
(ii) application for charitable or religious purposes, from any loan or borrowing, shall not be treated as
application of income for charitable or religious purposes
Provided that the amount not so treated as application, or part thereof, shall be treated as
application for charitable or religious purposes in the previous year in which the loan or
borrowing, or part thereof, is repaid from the income of that year and to the extent of such
repayment.

D. Capital Gains [Section 11(1A)
i. Asset held wholly for religious purposes or charitable purposes

To claim exemption of Capital Gains the trust need to apply the net sale consideration for purchase of a
new asset.
Remember for below 2 cases in short
• Amount not taxable will be cost of old asset + Capital Gains utilized
• Amount taxable will be →Net Sale Consideration – (Cost of old asset + Capital Gains utilized)
= Balance (This balance amount if left will be taxable)
Case 1 - Where the whole of the net consideration received on transfer is utilized for acquiring the
new capital assets, so much of the capital gains shall be exempt.
Example: Given
Particulars Amount
Net sale Consideration Rs. 1,00,000
Cost of old asset Rs. 80,000
Capital Gains Rs. 20,000
Now New asset purchased for Rs.1,00,000

In this case full amount of Capital Gains Rs. 20,000 will be exempt
as amount utilized for new asset is cost of old asset (Rs. 80,000+
Capital Gains utilized Rs. 20,000)
Case 2 - Where only a part of the net consideration is utilized for acquiring the new capital
asset, so much of the capital gain as is equal to the amount by which the amount so utilized
exceeds the cost of the transferred asset will be taxable. Understand with the example -
Example: If a trust had a capital asset costing Rs.1,00,000 and sold the same for Rs. 1,50,000
and then bought a capital asset for Rs. 1,30,000, then the working will be as follows:
Particulars Rs.
Sale proceeds of old asset 1,50,000
Cost of the old asset (1,00,000)
Capital gain 50,000
Cost of the new asset 1,30,000
So, amount not taxable (cost of old asset + Capital Gains utilized) 1,30,000
Capital gain taxable is 20,000
Net Sale Consideration [Rs. 1,50,000]
minus
Cost of old asset [Rs. 1,00,000] + Capital Gains utilized [Rs. 30,000]

ii. Assets held partly for religious or charitable purposes (Asked in June 18)
In such case the appropriate fraction of the capital gain arising from the transfer shall be
deemed to have been applied to charitable or religious purposes to the extent specified here
under:
(i) where whole of the net consideration is utilized in acquiring the new capital asset
→ whole of the appropriate fraction of such capital gain shall be exempt.
Example - A trust has a capital asset costing Rs. 2,00,000 and 1/2 of its income is utilized for charitable purpose.
It is sold for Rs. 3,50,000. If the trust buys another capital asset for Rs. 3,50,000 then appropriate fraction of the
capital gain deemed to have been applied for charitable purpose. Here –
Particulars Rs.
Sale proceeds of Capital asset relevant for charitable purpose (Rs. 3.5 Lacs/2) 1,75,000
Cost of the asset sold relevant for charitable purpose (Rs. 2 Lacs/2) 1,00,000
Capital gain on transfer of capital asset relevant for charitable purpose (Rs. 1.5 75,000
Lacs/2)
Another asset purchased relevant for charitable purpose (Rs. 3.5 Lacs/2) 1,75,000
Appropriate fraction utilised (Relevant cost of old asset – Rs. 1 Lac + Relevant 1,75,000
Capital gains Rs. 75000)
In this case amount of relevant Capital Gains Rs. 75,000 will be exempt as amount utilized for new
asset is relevant cost of old asset (Rs. 1,00,000+ relevant Capital Gains utilized Rs. 75,000)
(ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to
the amount, if any, by which the appropriate fraction of the amount utilized for acquiring
the new asset exceeds the appropriate fraction of the cost of the transferred asset. (Let’s
understand with the help of example)
Example - (Asked in June 18)→ A trust has a capital asset costing Rs. 2,00,000 and 1/2 of its income is utilized
for charitable purpose. It is sold for Rs. 3,50,000. If the trust buys another capital asset for Rs. 2,90,000 then
appropriate fraction of the capital gain deemed to have been applied for charitable purpose. Here –
Solution –
Particulars Rs.
Sale proceeds of Capital asset relevant for charitable purpose (Rs. 3.5 Lacs/2) 1,75,000
Cost of the asset sold relevant for charitable purpose (Rs. 2 Lacs/2) 1,00,000
Capital gain on transfer of capital asset relevant for charitable purpose (Rs. 1.5 75,000
Lacs/2)
Another asset purchased relevant for charitable purpose (Rs. 2.9 Lacs/2) 1,45,000
Appropriate fraction utilised (Relevant cost of old asset – Rs. 1 Lac + Relevant 1,45,000
Capital gains Rs. 45,000)
So, amount not taxable (cost of old asset + Capital Gains utilized) 1,45,000
Capital gain taxable is 30,000
Relevant Net Sale Consideration [Rs. 1,75,000]
minus
Relevant Cost of old asset [Rs. 1,00,000] + Relevant Capital Gains utilized [Rs.
45,000]

E. Accumulations of Income [Section 11(2)] – 5 years wala funda

If 85 % of the income even if could not applied shall still not be included in the total income
if –
Following conditions are

fulfilled
Trust furnishes
statement to AO - money so accumulated
Income Tax return is
a. Explaining purpose is invested modes
filed as per 139(1)
of accumulating the specified 11(5)
amount
b. This accumulation
can be for Max.5 years
Explanation: Any amount donated out of income received by Charitable Trust shall not be
treated as application of income.
F. Forms and Modes of Investment [Section 11(5)] - investment in
Forms and Modes

of Investment
[Section 11(5)]
Post Deposit co-

saving Small Indira operativ co- Debentures UTI
Office Vikas with public
certific Savings e land operativ unconditionall
Schemes Saving Patra Bank, co- sector
ates develop e land y guaranteed
s Bank operative co. IDBI
ment mortgag by the CG or
bank, e bank by a SG
bank

According to section 11(6), If acquisition for an asset has been claimed as an application of
income then depreciation on same can’t be claimed.
G. Registration of Trusts [Section 12A]
The provisions of Sections 11 and 12 shall not apply (i.e. exemption shall not be provided) unless the
following conditions are fulfilled:
Conditions
Trust In case of
registered If TI > Basic modifications
under section exemption limit of objects
12AA + before exemption which do not
under section Assess to file
application for 11/12, then audit conform to
registration report is required the return of
given to to be furnished 1 conditions of Income as
Principal
month before
registration per sec.
due date of
Comm. or return filing → application 139(4A) within
Comm. to Principal due date
Comm. or
comm. within
30 Days
AY 18-19
Trusts are required to make an application to Principal Commissioner or Commissioner as
under -
AY 22-23 Section
12A(1)(ac) Situations Time Limit
Where a trust or institution
(i) is registered under section 12A Application shall be made within 3 months
or 12AA from 01.04.2021
Where a trust or institution is Application shall be made at least 6 months
registered under section 12AB and prior to the expiry date
(ii)
the period of the said registration
is due to expire
Where a trust or institution Application shall be made-
is provisionally registered under (a) at least 6 months prior to the expiry
section 12AB date of provisional registration, or
(iii)
(b) within 6 months of
commencement of its activities,
whichever is earlier.
Application shall be made at least 6
months prior to the commencement of
(iv) the assessment year –
Where registration of a trust or From which registration is to be made
institution has become inoperative operative
Application shall be made within a period
(v) Where the trust or institution of 30 days from the date of such
has modified the objectives modification
Application shall be made at least 1 month
prior to the commencement of the previous
(vi)
year relevant to the assessment year from
In any other case which the registration is sought
Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such
trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration
of such trust or institution for the said assessment year:
H. Procedure for Registration [Section 12AB]

AY 22-23
Following section 12AB shall be inserted after section 12AA by the Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021 :
Procedure for fresh registration.
12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause
(ac) of sub-section (1) of section 12A, shall -
Application
is made Procedure for fresh
Time limit to grant
under registration Remarks
registration
Section u/s 12AB
12A(1)(ac)
Registration will It appears that in this case no
be granted for a period of 5 documents will be called or Time limit to grant
(i)
years inquiry will be made for granting registration
[Section 12AB(1)(a)] the registration.
Registration may
be granted for a period of 5
years if PCIT or CIT is satisfied In this case, the PCIT or CIT shall
about the genuineness of have the powers to call for
activities and compliances documents or information from
under any other laws of the the trust or institution or to make
trust or institutions. inquiries before renewal of the Within 3 months from the end
(ii)/(iii)/ registration after 5 years. of the month in which
(iv)/(v)
application is made
Registration may be
cancelled after providing a Further, before cancelling the
reasonable opportunity of being registration, the trust or institution
heard to the trust or institution. shall be given an opportunity to
present its case.
[Section 12AB(1)(b)(ii)]
Provisional Registration
shall be granted for a period
of 3 years from the assessment It appears that in this case no
year from which the registration documents will be called or
(vi) is sought. inquiry will be made for granting Within 6 months from the end
the provisional registrati of the month in which
application is made
[Section 12AB(1)(c)]
Any registration granted u/s 12AB(1)(a) or u/s 12AB(1)(b) can be cancelled subsequently if the
Principal Commissioner or the Commissioner is satisfied that -
(a) the activities of the trust or institution are not genuine; or
(b) are not carried out as per the objects of the trust or institution; or
(c) the trust or institution has not complied with the requirement of any other law for the time being in force
as is material for the purpose of achieving its objects and the order or direction or decree, by whatever
name called, holding that such non-compliance has occurred has attained finality or has not been disputed,
after giving a reasonable opportunity of being heard to the trust or the institution.
Provided that the provisions of sections 11 and 12 shall apply to a trust or institution, where the
application is made under—
(a) sub-clause (i) of clause (ac) of sub-section (1), from the assessment year from which such trust
AY 22-23 or institution was earlier granted registration;
(b) sub-clause (iii) of clause (ac) of sub-section (1), from the first of the assessment year for which it
was provisionally registered

I. Denial of Exemption [Section 13] i.e. Income will not be eligible for exemption under
sections 11 and 12
Following
cases
Income from Income from

Property trust
held under a established Trust created Impermissible Deposits/
trust for for benefit of for benefit of Investments
private any particular any specified
religious religious person -
purposes community
or caste
However
exempion will Specified
be available if persons
trust created for are -
SC,ST, OBC,
Women,
Children
Where Any
Person made a Any concern in
Author/ substanti relative
Trustee/ substantial al which
contribution of authors,,
Manager of contributo founder
the trust (i.e. > Rs. r is HUF - trustees
50,000during s/ etc. have
> any authors
the year) member substantial
etc. interest
of HUF
Impermissible Investments
a. Loan without adequate interest/ security e. Excess payment for purchase of property
b. Allowing use of property without adequate rent f. Inadequate consideration for property sold
c. Excess payment for services g. Diversion of income or property exceeding ` 1,000
d. Inadequate remuneration for services rendered Investment in substantial interest concerns

J. Anonymous Donations received by Charitable Trusts/Institutions to be subject to tax

[Section 115BBC]
Anonymous donations in excess of specified limit would be subject to tax @ 30% under section
115BBC.
The exemption limit (specified limit) is the higher of the following –
5% of the total Rs 1 Lakh

donations received
The total tax payable –
Tax @ 30% Tax on balance

anonymous income at Slab Rate
donations on > the
exemption limit
Provisions of anonymous donations does not apply to –
Trust created Trust created wholly/

wholly for partly for religious/
religious charitable purposes
purposes
But in this case, if anonymous donation is made → specific direction →

donation is for any university or other educational institution or any
hospital or other medical institution run by such trust or
institution → then such anonymous donation shall be taxable

4. Political Parties - Section 13A
1. Political parties are assessed as ‘An association of persons’.
2. The income from voluntary contributions, House Property, Capital Gains, IOS are
exempt from subject to the following conditions:
AY 18-19
Conditions
Maintain For each Accounts Donation > Rs. 2000

books of Voluntary audited by has to be received
accounts contribution CA through banking File return
which is > Rs. channels only account u/s 139
20,000 , name payee (4B) by
& address of cheque/draft/ECS Due Date
contributor through a bank account
or through electoral
bonds
5. Electoral trust
Voluntary contributions received by an Electoral Trust (Section 13B)
Any voluntary contributions received by an electoral trust shall be exempt if electoral trust
distributes to any political party during the said previous year, minimum 95% of the
aggregate donations received + the surplus, if any brought forward from any earlier
previous year.
6. Co – Operative Society
a. Rate of Tax for Co - Operative Societies –

Income Rate of Tax
First Rs. 10,000 10%
Next Rs. 10,000 20%
Balance Income 30%
Note – HEC is also applicable @ 4% & if the TI > 1Cr. then Surcharge @ 12%
b. Deduction in respect of income of co-operative societies [Section 80P]
1.
Income Derived from Deduction
Specified Activities1 100% income exempt
Other than specified Assessee is a consumers co-operative up to Rs. 1 Lac
activities Society
In any other case up to Rs.
50,000

Meaning of specified activities –
carrying on the business of banking or

providing credit facilities to its members
cottage industry
Meaning of specified activities
marketing of the agricultural produce grown by

its members
purchase of agricultural implements, seeds,

livestock or other articles intended for agriculture or
for the purpose of supplying them to its members
processing without the aid of power, of the

agricultural produce of its members
supplying milk, oilseeds, fruits or co-operative credit societies

vegetables to another society supplying which provide financial
same commodities, Govt. or to the Local assistance to the society
Authority who actually carry on the
exemption is available fishing or other allied
collective disposal of the labour to only to those co- activities
its member or fishing and other operative societies
allied activities which restrict the voting members who contribute
rights to their labour force
the State Government
2. Following income of Co-operative society is also exempt –

1. Interest – Dividend from its investments with another Co- Operative society
2. Letting of godowns, warehouses, facilitating marketing of commodities
3. Interest on securities or income from House Property subject to the following conditions –
Conditions
Co - operative GTI should be

society must + upto Rs.
not be 20,000
Urban Co- Engaged in Manufacturing

Housing
operative transportation with the aid of
society
society business power

New Optional Section – Section 115BAD - Form 10-IF - Application for exercise/ withdrawal of
option
Till FY 2019-20 (ay 2020-21) there was only one regime of taxation for Cooperative society and were
required to apply the Slab rate( upto 10,000, next 10,000 & balance over 20,000) specified in the Annual
Finance Act on Total Income computed after allowing many deductions and exemptions. + surcharge @
12% if Total Income > 1 crore + 4% HEC
Finance act, 2020 has introduced a New Optional tax System for Cooperative society u/s 115Bad of
the Income Tax Act, 1961 wef A/Y 21-22 to provide for flat rate of Tax of 22% + 10% flat surcharge +
4%HEC to be applied on Total Income calculated without claiming specified deductions and exemptions.
Hence, from ay 2021-22 (or Fy 2020-21), there are two operative tax system –
One is the existing tax system where all the applicable deductions and exemptions are allowed and the tax
rates are as per the Slab rates of tax specified in the Finance Act, 2020.
The second one is section 115Bad which is a Optional tax System and under which many deductions and
exemptions have been disallowed but flat tax rate of 22% is provided in the section 115BAD itself.
Following section 115Bad shall be inserted by the Finance act, 2020, w.e.f. 1-4-2021 :
(1) Notwithstanding anything contained in this act but subject to the provisions of this Chapter, the
income- tax payable in respect of the total income of a person, being a co-operative society
resident in india, for any previous year relevant to the assessment year beginning on or after the
1st day of april, 2021, shall, at the option of such person, be computed at the rate of 22%, if the
conditions contained in sub-section (2) are satisfied:
Provided that where the person fails to satisfy the conditions contained in sub-section (2) in
computing its income in any previous year, the option shall become invalid in respect of the
assessment year relevant to that previous year and subsequent assessment years and other
provisions of the act shall apply, as if the option had not been exercised for the assessment year
relevant to that previous year and subsequent assessment years.
(2) For the purposes of sub-section (1), the total income of the co-operative society shall be computed,—
(i) without any deduction
• Exemption for SEZ unit contained in section 10AA;
• Additional deprecation under clause (iia) of sub-section (1) of section 32;
• Deductions under section 32AD(Investment allowance), 33AB (Tea, Coffee, Rubber
Development account), 33ABA (Site Restoration Fund)
• Various deduction for donation for or expenditure on scientific research contained in
sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section
(2AA) of section 35;
• Deduction under section 35AD or section 35CCC;
• Any deduction under chapter VIA (like section 80P, 80G, etc). However, deduction
section 80JJAA (for new employment) can be claimed.
(ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if
such loss or depreciation is attributable to any of the deductions referred to in clause (i); and
by claiming the depreciation, if any, u/s 32, other than u/s 32(1)(iia), determined in such
(ii)
manner as may be prescribed.
Sub-section 5 Nothing contained in this section shall apply unless option is exercised by the
person in such manner as may be prescribed on or before the due date specified under sub-
section (1) of section 139 for furnishing the return of income for any previous year relevant to the
assessment year commencing on or after the 1st day of april, 2021 and such option once
exercised shall apply to subsequent assessment years:
Provided that once the option has been exercised for any previous year, it cannot be subsequently
withdrawn for the same or any other previous year.
Illustration 1:
Delhi Co-operative Society derived the following incomes during the previous year (1.4.2021 to 31.3.2022 -
Assessment Year 2022-23).
(1) Marketing of agricultural produce of its members 10,000

(2) interest from members on delayed payment of the price of 1,000
goods purchased
(3) Processing (without aid of power) of agricultural produce of its 8,000
members
(4) Supplying milk to the Government (raised by its members) 15,000
(5) agency business 25,000
(6) dividends from other Co-operative Societies 15,000
(7) income from letting of godowns 20,000
(8) income from House Property 30,000
Compute the total income of the Delhi Co-operative Society. Option

1 : Assessee has not opted for Section 115BAD Option 2 :
Assessee has opted for Section 115BAD
Solution: Option 1 : Assessee has not opted for Section 115BAD
Computation of total income of Delhi Co-operative Society
letting of godowns 20,000 50,000
(2) income from Business:
Marketing of agricultural product 10,000
Processing of goods 8,000
Supplying milk 15,000
agency business 25,000 58,000
(3) income from other sources:
interest from members 1,000
dividends 15,000 16,000
Gross income 1,24,000
deductions under Section 80P:
(1) letting of godowns 20,000
(2) Marketing of agricultural produce 10,000
(3) Processing of goods 8,000
(4) Supplying milk 15,000
(5) agency business 25,000
(6) dividends 15,000 (93,000)
total income 31,000

Notes:
(1) interest from members rs. 1,000 is not deductible as it is not from the credit facilities provided to the
member and for this purpose society cannot be said to be a credit society [Rodier Mill Employees’ Co-
operative Stores Ltd. v. CIT (1982) 135 ITR 355].
(2) the gross total income of the society exceeds rs. 20,000 hence deduction regarding income from house
property is not available.
Solution: Option 2 : Assessee has opted for Section 115BAD
Computation of total income of Delhi Co-operative Society

letting of godowns 20,000 50,000
(2) income from Business:
Marketing of agricultural product 10,000
Processing of goods 8,000
Supplying milk 15,000
agency business 25,000 58,000
(3) income from other sources:
interest from members 1,000
dividends 15,000 16,000
Gross income 1,24,000
deductions under Section 80P: Na
total income 1,24,000
Notes:
1. interest from members rs. 1,000 is not deductible as it is not from the credit facilities provided to the member and
for this purpose society cannot be said to be a credit society [Rodier Mill employees’ Co- operative Stores ltd. v.
CIT (1982) 135 itr 355].
2. The gross total income of the society exceeds rs. 20,000 hence deduction regarding income from house
property is not available.
3. deduction under section 80P is not allowed u/s 115BAD

15. Tax incidence on companies 15.1
Chapter 15
Classification & Tax Incidence on Companies
Sections (Income Details
Tax Act, 1961)
Section 2(26) Indian Company
Section 2(26a) infrastructural capital company
Section 2(22a) domestic Company
Section 2(23a) Foreign Company
Section 6(3) residential Status of Company
Section 115Ba tax on income of certain manufacturing domestic Companies
Section 115Baa tax on income of certain domestic Companies
Section 115BaB tax on income of new manufacturing domestic companies
Section 115JB Minimum alternate tax
Section 115Jaa Mat Credit
Section 115BBd Taxability of Dividend income of an Indian company from a Specified foreign
company
Section 115BBG Carbon Credit

BACKGROUND & TYPES OF COMPANIES

Before we begin to examine and understand the taxability and tax incidence on companies, we
must understand the types of Companies that are in existence today post the Companies Act,
2013.
Indian Company
Section 2(26) of the Income Tax Act, 1961 defines the expression ‘Indian
Company’ as a company formed and registered under the Companies
Act, 2013 or any other relevant law
Provided that the registered or, as the case may be, principal office of
the company, corporation, institution, association or body in all
cases is in India.
Infrastructural capital company is defined under Section 2(26A). It

means a company which makes investments by way of acquiring shares
or providing long-term finance to any enterprise or undertaking wholly
engaged in the business referred to in an undertaking developing and
building a housing project referred to in Section 80-IB(10) or a project for
constructing a hotel of not less than three-star category as classified by
the Central Government or a project for constructing a hospital with at
least one-hundred beds for patients.
Domestic Company
Section 2(22A) of the Income Tax Act, 1961, defines domestic company as
an Indian company or any other company which, in respect of its income
liable to tax under the Income Tax Act, has made the prescribed
arrangements for the declaration and payment within India, of the
dividends (including dividends on preference shares) payable out of such
income.
From this definition, it is clear that all Indian companies are domestic

companies while all domestic companies need not necessarily be

Indian companies. In other words, a non-Indian company would be
considered as a domestic company if it makes the prescribed arrangements
for the declaration and payment of dividends in India.
Under Rule 27 of Income tax rules, the prescribed arrangements are as

follows:
(i) the share register of the company concerned, for all its shareholders, shall
be regularly maintained at its principal place of business within India in
respect of any assessment year from a date not later than the first day of April
of such year.
(ii) the general meeting for passing the accounts of the previous year
relevant to the assessment year declaring any dividends in respect thereof
shall be held only at a place within India
(iii) the dividends declared, if any, shall be payable only within India to all
shareholders.
Foreign Company
Section 2(23A) of the Income Tax Act defines foreign company as a
company, which, is not a domestic company.
Company in which public are substantially interested (A widely-held company)
Section 2(18) of the Income Tax, Act defines the expression “company in
which the public are substantially interested”.
A company is said to be one in which public are substantially interested in

the following cases, namely -
(i) A company owned by Govt./ RBI – If it is a company owned by the

Government or the Reserve Bank of India or in which not less than 40 per
cent of the shares, whether singly or taken together, are held by the
Government or the Reserve Bank of India or a corporation owned by the
Reserve Bank of India; or
(ii) Section 8 company – If it is a company which is registered under Section

8 of the Companies Act, 2013 ; or
(iii) A company having no share capital declared by CBDT – If it is a

company, having no share capital and if, having regard to its objects, the

nature and composition of its membership and other relevant

considerations, it is declared by an order of the Board (CBDT) to be a
company in which the public are substantially interested. However,
such a company shall be deemed to be one in which the public are
substantially interested only for the assessment year(s) as may be specified
in the declaration; or
(iv) Nidhi/ Mutual Benefit Society – If it is mutual benefit finance a company

which carries on, as its principal business, the business of acceptance of
deposits from its members and which is declared by the Central
Government under Section 406 of the Companies Act, 2013 to be a Nidhi or
Mutual Benefit Society; or
(v) A company owned by co-operative Society – If it is a company in which

shares carrying not less than 50 per cent of the voting power have been
allotted unconditionally to or acquired unconditionally by, and are
throughout the relevant previous year beneficially held by, one or more
cooperative societies; or
(vi) Listed company – If it is a company which is not a private company as

defined in Companies Act, and equity shares of the company (not being
shares entitled to a fixed rate of dividend whether with or without a further
right to participate in the profits, i.e. preference shares) were, as on the last
day of the relevant previous year, listed in a recognised stock
exchange in India;
(vii) Public company owned by Govt. and/ or public limited company – If it

is a company which is not a private company within the meaning of the
Companies Act, and the shares in the company (not being shares
entitled to a fixed rate of dividend whether with or without a further right to
participate in profits) carrying not less than 50 per cent (40 per cent in
case of an industrial company) of the voting power have been allotted
unconditionally to, or acquired unconditionally by, and were throughout the
relevant accounting year beneficially held by (a) the Government, or (b) a
corporation established by a Central or State or Provincial Act, or (c)
any company in which the public are substantially interested or a
wholly owned subsidiary company.
Note –
Industrial Company means an Indian company where business consists

mainly in the construction of “ships” or in the manufacture or

processing of goods or in mining or in the generation or distribution of
electricity or any other form of power.
It may be noted that, a public company under the Companies Act, need not
necessarily fall within the meaning of a company in which the public are
substantially interested under the Income-tax Act, 1961 because a public
company under the Companies Act, may be considered as one in which the
public are not substantially interested under the Income-tax Act, 1961 after
considering the nature and extent of shareholding
Illustration: State with the reason whether in the following cases Companies are widely held or
closely held:
(a) The shares of ABC Private Limited are held as follows:

i A corporation owned by RBI 15%
ii Central Govt. 18%
iii R.B.I. 10%
iv Mr. Raman 28%

v Mr. Bhuvan 27%
(b) 85% equity shares of Progressive Private Limited were held by the public and its affairs
during the relevant previous year were controlled by seven persons.
Solution:
(a) Shares held by Govt., RBI and Corporation owned by RBI = 18%+10%+15% = 43%.
As shares held by CG along with RBI are more than 40%, therefore, ABC Pvt. Ltd. is a
Govt. Participating company. Hence it is a company in which Public is substantially
interested i.e. widely held.
(b) As none of the criteria mentioned in Section 2(18) are met in case of Progressive
Pvt. Ltd. (such as Govt. Participating, Section 8 Company or Nidhi etc.) therefore, it
is a closely held company.
Closely held company
A Company in which the public is not substantially interested is known as a

closely held company.

TAX INCIDENCE UNDER INCOME TAX ACT, 1961
The incidence of Income tax depends upon the residential status of a

company in India during the relevant previous year. A Company may be either
resident or non-resident in India, i.e., company cannot be ordinary or not-
ordinary resident.
Net dividends received from foreign companies are includible in income and
not the gross dividends [CIT v. Shaw Wallace & Co. Ltd. (1981) 132 ITR 466].
Corporate Taxation Rates
Domestic Company Assessment Year 2021-22
- Where it has opted for Section 115BA [other than those opted 25%
under section 115BAA and section 115BAB]
[this regime shall be available only for the manufacturing
companies incorporated in India on or after 01-03-2016.
- Where it opted for Section 115BAA 22%
[This benefit shall be available when total income of the
Domestic company is computed without claiming specified
deductions, incentives, exemptions and additional depreciation
available under the income-tax act.]
- Where it opted for Section 115BAB 15%
[this regime shall be available only for the
manufacturing Domestic companies or generation of
electricity incorporated in india on or after 01-10-2019. Hence,
old companies will not be able to take the benefit of this section.]
- Where it has not opted for Section 115BAA and the total 25%
turnover or Gross receipts of the company in the previous year
2019-20 does not exceeds 400 crore rupees
- any other domestic company 30%
AY 22-23
Foreign Company 40%
Add - Health and education Cess @ 4% on tax & surcharge
Section 115BA (Old Section)
Manufacturing company set up and registered on or after 1.3.2016 and the company
doesn’t take benefits of SEZ, Additional Depreciation, 32AD, 33AB, 33ABA, scientific
research weightage deduction, 35AD Businesses, 35CCC and 35CCDchapter VI-A
deductions except 80JJAA then it may opt to chose to pay taxes @ 25%.
Optoin once exercised can’t be withdrawn but if the new section 115BAA is opted then
option under 115BA can be withdraw

Following sections 115BAA and 115BAB shall be inserted after section 115BA by
the Taxation Laws (Amendment) Ordinance, 2019, w.e.f. 1-4-2020:
AY 20-21
A. Tax on income of certain domestic companies - 115BAA.

Section 115BAA provides for concessional rate of tax@22% (plus surcharge@10% and
HEC@4%) for domestic companies, subject to certain conditions, like
✓ non- availability SEZ, Additional Depreciation, 32AD, 33AB, 33ABA, scientific research
weightage deduction, 35AD Businesses, 35CCC 35CCD, Chapter VI-A Deductions
(Except 80JJAA & 80M) etc.
✓ Cannot C/f losses of any earlier year
✓ The option has to be intimated by the due date of return filing u/s139(1)
✓ once the option has been exercised for any previous year, it cannot be subsequently
withdrawn for the same or any other previous year
B. Tax on income of certain new domestic manufacturing companies - 115BAB.
Section 115BAB provides for concessional rate of tax@15% (plus surcharge@10% plus
HEC@4%) to new manufacturing domestic companies set up and registered on or after
1.10.2019, and commences manufacturing on or before 31.3.2023, subject to certain
conditions, like
✓ Is not formed by splitting up, or the reconstruction, of a business already in existence
✓ It should not be formed by the transfer of machinery or plant previously used for any
purpose to a new business.
✓ However benefit will be available if total value of the machinery or plant transferred
does not exceed 20% of the total value of machinery or plant used in the business.
✓ For this purpose, any machinery or plant which was used outside India by any person
other than the assessee shall not be regarded as machinery or plant previously used
for any purpose if the following conditions are fulfilled:
o such machinery or plant was not at any time used in India;
o such machinery or plant is imported into India from any country outside India; and
o no deduction on account of depreciation has been allowed in respect of such
machinery or plant to any person earlier.
✓ Does not use any building previously used as a hotel or a convention centre, as the case
may be for which deduction u/s 80-ID has been claimed.
✓ Non- availability SEZ, Additional Depreciation, 32AD, 33AB, 33ABA, scientific research
weightage deduction, 35AD Businesses, 35CCC 35CCD, Chapter VI-A Deductions
(Except 80JJAA & 80M) etc.
✓ Cannot C/f losses of any earlier year
✓ The option has to be intimated by the due date of return filing u/s139(1)
✓ Once the option has been exercised for any previous year, it cannot be subsequently
withdrawn for the same or any other previous year

115BAB is not available on -

(i) development of computer software in any form or in any media;
(ii) mining;
(iii) conversion of marble blocks or similar items into slabs;
(iv) bottling of gas into cylinder;
(v) printing of books or production of cinematograph film
Note
✓ The option for section 115BAB has to be exercised in the very first year in which the
eligible company is set up, failing which it cannot exercise such option in the future
years. However, a company eligible to exercise option u/s 115BAA can defer exercise
of such option to a future year, if it is availing sizable profit-linked or investment-linked
deductions or additional depreciation in the P.Y.2019-20. However, once the company
exercises such option under section 115BAA or 115BAB, as the case may be, in a year,
it would continue to be governed by the special provisions u/s 115BAA or 115BAB, as
the case may be, thereafter and cannot opt for regular provisions in any subsequent
year.
✓ It may be noted that companies exercising option under section 115BAA or section
115BAB are not liable to minimum alternate tax under section 115JB.

Minimum Alternate Tax (For Companies) & Alternate Minimum Tax (For Other
than Companies)
It can be observed that the provisions of MAT are applicable to every company
whether public or private and whether Indian or foreign.
The books of accounts are to be maintained as per as per Schedule III
of the companies Act 2013. However Insurance, Banking& Electricity
companies can prepare accounts a per their respective acts.
However MAT shall not apply to :
(i) any income arising to a company from life insurance business.
(ii) Companies option for 115BAA/BAB
(iii) any shipping income arising to a company liable to tonnage taxation.
(iv) a foreign company resident of a country with which India has an Double
Taxation Avoidance Agreement (DTAA) and such company does not
have a permanent establishment in India.
(v) the foreign company is a resident of a country with which India does not have
an agreement (DTAA) and such company is not required to seek
registration under any law for the time being in force relating to
companies.
(vi) Further by Finance Act, 2018, MAT provisions shall not be applicable to a
foreign company, whose total income comprises of profits and gains arising
from business referred to in section 44BB (NR providing P&M on hire basis for
extracting Minera oil), 44BBA(NR Carrying out aircraft business), or 44BBB
(Foreign companies engaged in turnKey projects) and such income has been
offered to tax at the rates specified in those sections
Sr. No. Description MAT 115JB AMT 115JC
1 Applicable to Companies (Also to Other than Companies
the Foreign
Companies)
2 Calculated on Book Profits Adjusted Total Income (ATI)
3 Rate of Tax 15% + 4% Cess 18.5% + 4% Cess
+ Surcharge as + Surcharge as applicable

applicable
4 Rate of tax in IFSC 9% + 4% cess
(International Financial Services Centre
+ Surcharge as applicable
5 Provisions not applicable if No such limit ATI upto Rs 20 Lakhs
(Nwo threshold for LLP & Firms)
6 Applicability conditions No such conditions. If a person has claimed
Applicable to all deductions u/s -
companies.
a. Section 80IA to 80RRB (Other
than sec. 80P)
b. Sec. 10AA
c. Sec. 35AD
7 MAT/ AMT Credit to be Carried forward for - For 15 AY's
8 If Following Section 115BAC/115BAD Not Relevant AMT Doesn’t apply
For both MAT & AMT, assessee needs to submit audit report 1 month before due date of return filing.

Calculation of Adjusted Total Income
T.I as per normal provisions of the Act xxx

Add: Deductions under Chapter VI- A (Heading C-Deductions in respect of
Certain Incomes except Deduction u/s 80P) xxx
Adjusted Total Add: Deduction u/s 10AA (SEZ) xxx
Income Add: Deduction claimed u/s 35AD xxx
Less: Depre. Allowable as per sec. 32 assuming that deduction u/s 35AD
was not allowed (xxx)
Adjusted Total Income xxx
Note – The tax credit paid by a person on account of AMT shall be allowed to the extent of
the excess of the AMT paid over the regular income-tax.
It shall be allowed to be set off for an assessment year in which the regular income-tax
> AMT, to the extent of the excess of the regular income-tax over the AMT
Example for understanding the above Note
A B C D E F G H
Yr. Tax Tax Higher of Tax Payable as Difference of Carried Final tax Amount
Payable Payable A or B per A and B (in forward payable to credit
as per as per absolute amount this year to be C/f
Normal AMT/ terms) to be set off -
provisions MAT
of the IT provisions
Act
1 Rs 25 Lacs Rs. 17 Rs 25 Normal Rs. 7 Lacs Nil. Since Tax Rs 25 Nil
Lacs Lacs provisions of as per Lacs
Income Tax act - normal
subject to the provisions is
credit available > tax as per
AMT/ MAT
2 Rs. 10 Rs. 15 Rs. 15 Provisions of Rs. 5 Lacs Not available 15 Lacs Rs 5 Lacs
Lacs Lacs Lacs AMT/ MAT for this year (Rs 15
Lacs - Rs.
10 Lacs)
3 Rs, 12 Rs. 9 Lacs Rs. 12 Normal Rs. 3 Lacs Rs 5,00,000 Rs. 9 Rs. 2 Lacs
Lacs Lacs provisions of but Lacs (Rs (Rs. 5
Income Tax act - maximum 12 Lacs - Lacs - Rs.
subject to the credit that Rs 3 3 Lacs)
credit available can be used Lacs)
is upto Rs
3,00,000
4 Rs 20 Lacs Rs 15 Lacs Rs 20 Normal Rs. 5 Lacs Available Rs 18 Nil
Lacs provisions of only Rs. Lacs (Rs
Income Tax act - 2,00,000 20 Lacs -
subject to the Rs 2
credit available Lacs)

Taxability of Dividend income of an Indian company from a Specified foreign company [Section
115BBD]
• "Specified foreign company" means a foreign company in which the Indian company holds minimum
26% nominal value of the equity share capital of the company.
• Dividend declared, distributed or paid by a Specified foreign company → Received

by an Indian company → is taxable @ 15%.
• No deduction in respect of any expenditure or allowance shall be allowed to the assessee under
any provision of this Act in computing its income by way of such dividends.
Carbon Credit [Section 115BBG]
• Income from the transfer of carbon credit taxable at → rate of 10% (SC+ HEC) → on the gross
amount of such income.
• No expenditure or allowance in respect of such income shall be allowed.
EQUALISATION LEVY
“Equalization Levy” provides for an equalization levy of 6% on the amount of

consideration for specified services, received / receivable by a non- resident, not having
permanent establishment in India, from a resident in India, who carries out business /
profession, or from a non-resident who has a permanent establishment in India.
As amended by Finance Act, 2020, an equalization levy of 2% shall be charged on consideration received or
receivable ( on or after 01.04.2020 on the
consideration by an e-commerce operator from e-commerce supply made or provided by it:
a. to a person resident in india
b. to a non-resident in the specified circumstances
(i) Sale of advertisement, which targets a customer, who is resident in India or a customer who
accesses the advertisement though internet protocol address located in India; and
(ii) sale of data, collected from a person who is resident in India or from a person who uses
internet protocol address located in India
c. to a person who buys such goods or services or both using internet protocol address located in india.
Note - Where e-commerce operators means a non-resident who owns, operates or manages digital or electronic
facility or platform for online sale of goods or online provision of services or both
and e-commerce supply or services means-
(i) online sale of goods owned by the e-commerce operator
(ii) online provision of services provided by the e-commerce operator
(iii) online sale of goods or provision of services or both, facilitated by the e-commerce operator
(iv) any combination of activities listed in clause (i), (ii) or clause (iii)
Explanation.—For the purposes of this clause, "online sale of goods" and "online provision of services" shall
include one or more of the following online activities, namely:—
(a) acceptance of offer for sale; or
AY 22-23
(b) placing of purchase order; or
(c) acceptance of the purchase order; or
(d) payment of consideration; or
(e) supply of goods or provision of services, partly or wholly;]

The Equalisation levy shall not be charged in the following cases:
a. where the e-commerce operator making or providing or facilitating e-commerce supply or services has a
permanent establishment in India and such e-commerce supply or services is effectively connected with such
permanent establishment
b. where the equalisation levy is leviable @ 6% under consideration for specified services.
c. sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or
services made or provided or facilitated is less than 2 Crore rupees during the previous year
The equalisation levy, shall be paid by every e-commerce operator to the credit of the Central Government for the
quarter of the financial year ending with the date specified in column (2) of the Table below by the due date specified
in the corresponding entry in column (3) of the said Table:
S. No. Date of ending of the quarter of financial year Due date of the financial
year
1 30th June 7th July
2 30th September 7th October
3 31st december 7th January
4 31st March 31st March
Refer to the table below to understand the various parameters and aspects involved.
Sect Subject Provisions

ion
166 Person responsible every person being a resident in India, who carries out business / profession, or a
for deduction of non-resident who has a permanent establishment in India shall deduct equalization
equalization levy levy from the amount paid / payable to a non-resident in respect of the specified service
Rate 6% of the amount of consideration for a specified service, received / receivable by a non-
resident, not having permanent establishment in India, from a resident in India, who
carries out business / profession, or from a non-resident who has a permanent
establishment in India, rounded off to the nearest ten rupees
Threshold equalization Levy is deductible if the aggregate amount of consideration for a
specified service in a previous year > INR
100,000
Time-period The equalization Levy so deducted during any calendar month shall be paid by every
assessee to the credit of the Central Government by the 7th of following month
Consequence of Any assessee who fails to deduct, would anyway continue to be liable to pay to the credit
failure of the Central Government, the equalization Levy by 7th of the following month
167 furnishing the every assessee shall, within the time prescribed after the end of the FY, submit a
statement statement in the prescribed form # 1, on or by 30th June immediately following
the FY, setting forth all details for specified services pertaining to that FY
Revised Statement If the assessee notices omissions / errors / wrong details, he can furnish a revised
statement before the expiry of 2 years from the end of the FY in which the specified
service was provided
notice by the Where any assessee has failed to file the statement within the prescribed time, the A.O. is
Assessing Officer empowered to issue a notice calling for the statement and in which case the statement
(A.O.) has to be furnished within 30 days of date of serving of such notice
168 Processing o statement shall be processed, and the amount payable along with interest if any, shall
The
Statement bef computed towards the equalization Levy. The net amount payable by or refundable to
the assessee has to be worked out and an intimation must be served upon the assessee.
t
However, no intimation is to be sent after the expiry of one year, from the end of the FY
h
inewhich the statement is furnished

169 Rectification of mistake With a view to rectifying a mistake apparent on the record, the A.O.
may amend the intimation and such intimation must be amended
within one year from the end of the FY in which the intimation
sought to be amended was issued
170 Interest on delayed every assessee who fails to deposit to the credit of the Central
payments Government, the applicable equalization Levy, within 7th of the month
following the month in which it was deducted, the assessee shall be
liable to pay Interest @ 1% of such levy for every month / part of
the month of delay
171 Penalty If the assessee fails to deduct the equalization Levy, in addition to
the equalization Levy and Interest, penalty equal to the amount of
equalization Levy that he failed to deduct would be applicable
If the assessee fails to remit the equalization Levy so deducted to
the credit of the Government by 7th of the following month, a penalty
of INR 1000 per day would be leviable, subject to a maximum of
the equalization levy that he was to deduct
172 Penalty for delay in If the assessee fails to furnish the statement within 30th June of the
furnishing the statement following FY or within 30 days of the notice served by the A.O., a
penalty of INR 100 per day is leviable on the assessee
An assessee aggrieved by an order of the A.O., may appeal to the

Commissioner of Income Tax (Appeals)within 30 days of receipt of date of
order.
An assessee aggrieved by an order of the Commissioner, may appeal to

the Appellate Tribunal within 60 days of receipt of date of order.
Case Study
Def Ltd. is in the business of manufacture and sale of formal apparels and in order to expand its
footprints globally, has launched a massive online campaign. For the purpose of the online
advertisements, it utilized the services of GHI Ltd, based out of Singapore. During the PY, DEF
Ltd. paid a consideration of INR 20,00,000 to GHI Ltd. for such services.
entail the implications if:
a) GHI Ltd. has no permanent establishment in India
b) GHI Ltd. has a permanent establishment in India

Answer
a) In case GHI Ltd. has no permanent establishment in India, the consideration paid to GHI
Ltd. by DEF Ltd. would attract Equalization Levy to be deducted @ 6%. Hence, INR
120,000 has to be deducted by Def Ltd. and deposited to the credit of the Central

Government within 7th of the following month. non- deduction of equalization levy would
attract a disallowance u/s 40(a)(ib) of 100% of the amount paid, while computing
business income.
b) In case GHI Ltd. has a permanent establishment in India, Equalization Levy would not
be attracted. Therefore Def Ltd. need not deduct equalization Levy from the payment of
consideration to GHI Ltd. However, tax has to be deducted u/s 195 in respect of such
payments towards TDS. non-deduction of TDS would attract a disallowance u/s 40(a)(i)
of 100% of the amount paid, while computing business income.
TAX LIABILITY OF COMPANIES IN THE EVENT OF LIQUIDATION
The table / diagram below explain the various aspects that require careful reading and evaluation.
Section 178 Section 220 Section 139
Tax to be paid within Liquidator of the

Liquidator to notify 30 days of service of Company to file an
A.O. within 30 days of notice along with the annual return of it's
his appointment necessary and income in respect of
applicable interest, if the business being
any carried on for the
benefit of winding up
A.O. notifies the tax Cannot override the This return has to be
liability within 3 provisions of Sec. 530 filed by 31st Oct,
months from date of of the Companies Act, irrespective of date of
service of notice of 1956, for the payment winding up / closure of
liquidator's of Interest shall be books, and the
appointment outside scope of Liquidator must verify
preferential payments and sign the return
Key Points:
Section 178
– until the liquidator receives the intimation of tax liability, he is not
permitted to part with the assets of the Company
– If the A.O. fails to notify the tax liability within the 3 months’ time period,
then the demand of made by the A.O. after the expiry of the statutory period,
of 3 months falls outside the scope of preferential payment within the meaning
of Sec. 530 of the Act and hence, such tax liability then assumes the same
preference, i.e. ranks pari passu with the claims of ordinary creditors

– In case the liquidator fails to notify his appointment, or parts with any
assets of the Company in contravention with the provisions of the section, he
will be personally liable for the payment of tax which otherwise the company
was liable to pay
Liability of Directors & Shareholders
– Section 179 of the Income Tax Act fastens the directors of a private
company with a personal liability in the event of non-recovery of its tax dues.
This liability is “joint and several”
TAXATION ASPECTS RELATED TO CONVERSION OF COMPANY INTO LLP
✓ Not be regarded as “transfer”, and therefore, no capital gain. Exemption is limited to capital assets and
not any other assets like inventory
Mentioned conditions would be applicable to avail the exemption.

S. No. Condition Explanation
a. Assets and Liabilities All the assets and liabilities should transfer
b. Shareholders/Capital All the shareholders of the company immediately before the
Contribution/Profit Sharing conversion become the partners of the limited liability
Ratios on conversion partnership.
The capital contribution and profit sharing ratio of the
shareholders in the limited liability partnership are in the same
proportion as their shareholding in the company on the date of
conversion.
c. No other benefit to The shareholders of the company do not receive any
the shareholders consideration or benefit, directly or indirectly, in any form or
manner, other than by way of share in profit and capital
contribution in the limited liability partnership.
d. Profit sharing ratio • The aggregate of the profit sharing ratio of the
after shareholders of the company in the limited liability
conversion partnership
• shall not be less than 50% at any time
• during the period of 5 years
• from the date of conversion.
e. Turnover Limit The total sales, turnover or gross receipts in any the last 3 Years
does not exceed 60 lakh rupees.

ea Value of assets The total value of the assets as appearing in the books of account
. (Inserted by Finance in any of the last 3 Years of the company
Bill 2016)
does not exceed 5 crore rupees.
f. Accumulated profit No amount is paid, either directly or indirectly, to any partner
(reserves) out of balance of accumulated profit standing in the accounts of
the company on the date of conversion for a period of 3 years
from the date of conversion.
Note: MAT credit of the company is not allowed to be carried forward

TAXATION ASPECTS OF AMALGAMATIONS, MERGERS AND DEMERGERS
Section 2(1B) of the Income Tax Act, 1961, defines the term “amalgamation” as follows:
“Amalgamation in relation to Companies, means the merger of one or more companies with
another company or the merger of two or more companies to form one company, the companies
which so merge being referred to as the “amalgamating company” and the company with which
they merge or which is formed as a result of the merger, being referred to as the “amalgamated
company”, in such a manner that:
a) all the property of the amalgamating company(ies) before the amalgamation become
the property of the amalgamated company by virtue of the amalgamation
b) all the liabilities of the amalgamating company(ies) before the amalgamation become
the liabilities of the amalgamated company by virtue of the amalgamation
c) shareholders holding not less than 3/4ths in value of the shares in the amalgamating
company become shareholders of the amalgamated company by virtue of the
amalgamation
Few More Points
A. Business Losses & Unabsorbed Depreciation

It can be carried forward by the amalgamated company subject to the following conditions –
Conditions for amalgamating company
a) the amalgamating company s h o u l d h a v e i t s o w n a c c um u l a t e d l o s s o r u n a b s o r b e d
d e p r e c i a t i o n w h i c h it i s m i ni m um 3 y e ar s o l d.
b) the amalgamating company has held continuously as on date of the amalgamation >= 3/4ths of
the book value of fixed assets 2 years prior to the date of amalgamation
Conditions for amalgamated company
a) the amalgamated company holds continuously for minimum 5 years from the date of
amalgamation, minimum 3/4ths of the book value of fixed assets of the amalgamating
company so acquired;
b) the amalgamated company continues the business of the amalgamating company for
minimum 5 years from the date of amalgamation.
B. Capital Gains
• Any transfer of shares in an Indian company held by a foreign company to another foreign company
• No to be regarded as transfer
If
✓ if Minimum 25% of the shareholders of the amalgamating company continue to remain
shareholders of the amalgamated foreign company
✓ & such transfer does not attract tax in the country in which the amalgamating company
is situated.

C. Capital Expenditure on Scientific Research & Know-how

• The amalgamated company can carry forward
D. Expenditure on Amalgamation
Section 35DD provides that –
where an assessee being an Indian company,
• incurs any expenditure,

• a deduction of an amount equal to 1/5th of such expenditure for each of the five successive
previous years beginning with the PY in which such amalgamation / demerger takes place.
SELF TEST QUESTIONS

PRACTICAL QUESTIONS
Q.1. State whether the following companies can be said to be companies in which the public
are substantially interested:
(i) Vimal Industries (P) Ltd. The entire equity share capital was beneficially held by
public and its affairs were managed during the financial year by more than five
persons.
(i) Arun Industries Ltd. During the year more than 75 per cent of the equity share capital
of the company was beneficially held by the public in general. The shares of the
company were not listed in a recognized stock exchange in India.
(ii) Reliable Industries Ltd. The company is running a textile mill. 60 per cent of its equity
share capital was beneficially held during the year by D & Co. Ltd. which is a widely-
held company, i.e., a company in which the public were substantially interested. The
shares of Reliable Industries Ltd. were not listed in a recognized stock exchange in
India.
(iv) 30 per cent of the equity share capital of the ABC Ltd. was beneficially held during
the year by XYZ Co. Ltd. which is a widely-held company. i.e., a company in
which the public were substantially interested. The rest 70 per cent shares were
held by the public in general. The shares were listed in a recognized stock
exchange in India.
(v) M & Co. Ltd. The company carried on mining business. During the year the equity
share capital of the company was beneficially held as under:
30 per cent by Arun Industries Ltd. which is a Company in which the
public were substantially interested.
15 per cent by Varun Industries Ltd. which is a 100 per cent subsidiary of
Arun Industries Ltd.
55 per cent by the public in general. The shares of the company were not
listed in a recognized stock exchange in India.
Answers – (i) No (ii) No (iii) Yes (iv) Yes (v) Yes

16. Assessment – Appeals – Revisions - Penalties 16.1
Chapter 16
Assessment – Appeals – Revisions - Penalties

Assessment Procedures
Phase I Phase II Phase III Phase IV Phase V Phase VI Phase VII

Person require to Required to file Intimation u/s Inquiry made by AO Assessment by the For the purpose of Assessment special
file Return has to return of income u/s 143(1) shall be sent u/s 142, he may department: assessment cases - 147
obtain PAN u/s 139 and pay self which may be direct special audit Regular u/s 143 or department can
139A assessment tax u/s followed up with u/s 142 (2A), refer Best judgment u/s exercise various
140A scrutiny u/s 143(2) case to valuation 144 powers available
officer u/s 142A under the Act.

Phase III - Intimation (Section 143(1))
Processing of return u/s 143(1):
Return filed u/s 139 or 142(1) shall be processed u/s 143(1) as per following procedures:
1. Total income / loss computed making some adjustments but Before making adjustment
intimation shall given to the assessee & response received within 30 days shall be
considered.
2. Tax and interest on above income to be computed.
3. In computation of tax payable (or refund due) on account of processing of return under this
section, the fee payable under section 234F shall also be taken into account. (AY 2018-19)
4. Acknowledgement of return shall be deemed to be intimation in case of no change & no tax
payable or refundable.
5. Time limit for intimation under section 143(1) : 12 months 9 Months from the end of
financial year in which return of income is made.
AY 22-23
Phase IV - Notice of Scrutiny (Section 143(2), 142 (1))
Issue of notice u/s 143(2): Notice can be issued under this section only if the return is filed
No notice of scrutiny can be served after expiry of 6 months 3 months from the end of F.Y. in
which
AY 22-23
return is filed u/s 139 or 142(1).
Non-compliance with above notice shall attract: penalty u/s 272A(1)(d) of Rs.10,000 & best
judgment assessment u/s 144.
Notice u/s 142(1):
Notice issued by AO to any person if:

ROI not furnished u/s 139(1): to furnish ROI
ROI furnished u/s 139(1): to produce required books of accounts for 3 years prior to relevant
P.Y. or
to produce information or documents.
Notice can be served by the prescribed income tax authority apart from AO. AY 22-23
Consequence of non-compliance: (1) Best judgment assessment u/s 144, (2) Penalty u/s
271A(1)(d) of Rs. 10,000, (3) Prosecution u/s 276D: imprisonment of 1 year or fine every day till
default continues, (4) Issue of order u/s 132 for search and seizure

Phase V - Order of assessment
Scrutiny assessment order u/s 143(3): Regular scrutiny
AO, on the basis of material gathered & evidence produced by the assessee, shall make
assessment of total income or loss & determine sum payable or refundable.
E -Assessments: The Finance Act, 2018 has inserted a new sub-section (3A) in
Section 143 that the Central Govt. may make a scheme for the purpose of making
assessment so as to impart greater efficiency, transparency and accountability by:
(a) Eliminating the interface between the Assessing Officer and the assessee in the course of
proceeding to the extent technologically feasible.
(b) Optimizing utilization of the resources through economies of scale and functional
specialization.
(c) Introducing a team-based assessment with dynamic jurisdiction.

As part of e-governance initiative to facilitate conduct of assessment proceedings electronically,
Income-tax department has launched ‘e-Proceeding’ facility. under this initiative, CBDT has
made it mandatory for the tax officers to take recourse of electronic communications for all limited
and complete scrutiny. The CBDT had issued the instructions and notice formats for conducting
scrutiny assessments electronically. As per the instruction, except search related assessments,
all scrutiny assessments shall be conducted only through the ‘E-Proceeding’ functionality
available at e-filing website of Income-tax Department.
Best Judgment assessment u/s 144:
Except, in case of failure to comply notice u/s

142(1) no opportunity of being heard to be
given

AO may reject the books of account u/s 145(3):
If AO is not satisfied about the correctness or completeness of the accounts, or

Method of accounting u/s 145(1) or ICDS is not followed by the assessee then, he may reject the
accounts & proceed for best judgment assessment u/s 144.
Section 153 – Time Limits

Section reference Time limit
Regular assessment u/s 143/ Best Income was first assessable → End of AY + 12
judgment assessment u/s 144 months 9 months
Assessment/ Reassessment Year end + 12 months AY 22-23
u/s 147 (Income escaping
assessment)
An order of fresh assessment as a order received → year end + 12 Months
result of an order u/s 254 (ITAT’s
order) or 263 or 264 (Revision by
commissioner) setting aside or
cancelling an Assessment
An order giving effect otherwise Order received → Month end + 3 months [+ 6
than making a fresh assessment or months extn. If reasons beyond officer’s control]
reassessment
Assessment, reassessment or Order received → Month end + 12 months
recomputation to give effect to any
finding or direction contained in
the order of CIT, CIT(A), ITAT or any
court
Assessment is made on partner of Assessment order passed → Month end +
firm in consequence of assessment 12months
made on firm u/s 147
Reference made to TPO u/s 92CA In any of the above case, extend the time limit by 12
months
Assessment u/s 153A 12 months from the end of the financial year in which
the last of the authorizations for search u/s 132 or for
requisition u/s 132A was executed
Assessment u/s 153C 12 months from the end of the financial year in which
the last of the authorization for search u/s
132 or requisition u/s 132A was executed

Phase VI - Powers of Income tax authorities - Powers (Except Search)
Cross inquiry/Cross confirmation u/s 142(2):
AO can make necessary inquiry to obtain full information of income or loss.
Special audit u/s 142(2A):
AO is of opinion that on account of:
Nature and
complexity
of accounts
Specialized nature
of business Volume of
activity of the Interests of accounts
assessee
Multiplicity of Doubts about the

transactions in correctness of the
the accounts accounts
and having regard to the Interest of the revenue, may direct special audit with prior approval of
CCIT/CIT during the course of the proceedings. CA nominated by CCIT/CIT carry out such audit
within time allowed or extended by AO however, in no case aggregate time should exceeds
180 days & expenses of such audit to be borne by the govt.
Consequence of non - compliance: Same as u/s 142(1) except, Penalty which is u/s 271(1)(b) of
Rs. 10,000.
Opportunity of being heard to be given before passing order on the basis of material gathered u/s
142(2) or 142(2A).

Section 142B has been inserted with effect from 1st November, 2020 to empower the Central Government to notify
the scheme for faceless processes for eliminating physical interface.
AY 22-23
Faceless Scheme [Section 142B(1)]: The Central Government is empowered to make a scheme (faceless enquiry and
valuation scheme) by notification in the official gazette for the purpose of:
(a) Issue notice u/s 142(1) or
(b) Making enquiry to obtain full information in respect of income or loss of any person u/s 142(2) or
(c) directing the assessee to get his accounts audited by an accountant u/s 142(2A) or
(d) making a reference to the valuation officer to estimate the value of any asset, property or investment u/s
142A.
The objective of the scheme is to impart greater efficiency, transparency and accountability by
(a) eliminating the interface between the income-tax authority or Valuation Officer and the assessee or any
person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based issuance of notice or making of enquiries or issuance of directions or valuation
with dynamic jurisdiction.
FACELESS ASSESSMENT (Section 144B) AY 22-23
✓ Serving of Notice: The National Faceless Assessment Centre (NFAC) has to serve a notice on the
assessee under section 143(2)
✓ Filing of response to the notice by the Assessee: The assessee is required to file his response to the
notice within 15 days from the date of receipt of the notice to the NFAC.
✓ Case is allotted to an assessment unit in any Regional Faceless Assessment Centre (RFAC)
✓ Finalization of assessment by NFAC upon receipt of acceptance from eligible assessee or where no
objections are received from eligible assessee: Upon receipt of the acceptance from the eligible
assessee (International Transactions or NR Entity) or if no objections are received from the eligible
assessee within the 30 days period as specified under section 144C(2), the NFAC has to proceed to
finalise the assessment within the time allowed under section 144C(4), i.e., 1 month from the end of
month in which the acceptance is received or period of 30 days for filing objection expires.
Note – 144C is for Dispute Resolution Panel
NFAC/RFACs/AUs/VUs/Rus to be set up for the purpose of faceless assessment [Section 144B(3)]- For the purpose
of faceless assessment, the CBDT, may set up the following Centers and Units and specify their respective jurisdiction:
National Faceless To facilitate the conduct of faceless assessment proceedings

Assessment Center (NFAC)
Regional Faceless To facilitate the conduct of faceless assessment in the controlling region of a
Assessment Center (RFAC) Principal Chief Commissioner
Assessment Units (AUs) To facilitate the conduct of faceless assessment, Assessment Units, as deemed
necessary, may be set up to perform the function of making assessment, which
includes
• identification of points or issues material for the determination of any liability
(including refund) under the Act,
• seeking information or clarification on points or issues so identified,
• analysis of the material furnished by the assessee or any other person, and
• such other functions as may be required for the purposes of making faceless
assessment.

Verification Units (VUs) To facilitate the conduct of faceless assessment, Verification Units (VUs) as
deemed necessary, may be set up to perform the function of verification, which
includes
• enquiry, cross verification, examination of books of account, examination of
witnesses and recording of statements, and
• such other functions as may be required for the purposes of verification.
Technical Units (TUs) To facilitate the conduct of faceless assessment, Technical Units (TUs) as deemed
necessary, may be set up to perform the function of providing technical
assistance which includes any assistance or advice on legal, accounting,
forensic, information technology, valuation, transfer pricing, data analytics,
management or any other technical matter which may be required in a particular
case or a class of cases, under this section.
Review Units (RUs) To facilitate the conduct of faceless assessment, Review Units (RUs) as deemed
necessary, may be set up to perform the function of review of the draft
assessment order, which includes checking-
• whether the relevant and material evidence has been brought on record,
• whether the relevant points of fact and law have been duly incorporated in the
draft order,
• whether the issues on which addition or disallowance should be made have
been discussed in the draft order,
• whether the applicable judicial decisions have been considered and dealt with
in the draft order,
• for arithmetical correctness of variations proposed, if any, and
• such other functions as may be required for the purposes of review.

16.9
Phase VII - Income escaping assessment u/s 147
AY 22-23
In other words, Assessing Officer may assess any income in respect of any issue that has escaped assessment which comes to his notice subsequently in the
course of the proceeding, even if the steps prescribed in new section 148A were not followed in relation thereto.
Section 148A - Conducting inquiry, providing opportunity before issue of notice under section 148
AY 22-23
Assessing Officer has to follow the steps given hereunder, before issuing any notice under section 148-
(a) conduct any enquiry, if required, with the prior approval of specified authority
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such
time, as may be specified in the notice, being 7 days to 30 days or the extended time if requested
(c) consider the reply of assessee
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing
an order, with the prior approval of specified authority,
(i) Reply is received → Month end +1 month or
(ii) Reply is not received → Time provided to the assessee expires – Month end + 1 month

16.10
Meaning of Specified Authority for section 148 & 148A[Section 151]

AY 22-23
Non- applicability of section 148A – The provisions of this section shall not apply in a case where-
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after
01.04.2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other
valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after 01.04.2021,
belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents,
seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after 01.04.2021, pertains or pertain to, or any information
contained therein, relate to, the assessee.
In other words, in cases (a), (b) and (c) mentioned above, the Assessing Officer need not conduct enquiry and provide an opportunity of being heard as required under section 148A
before issuing notice under section 148.
Issue of Notice where income has escaped assessment – Section 148

AY 22-23
✓ Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer has to serve on the assessee a notice, requiring him to furnish
within such period, as maybe specified in such notice, a return of his income
✓ It is considered as if such return were a return required to be furnished under section 139.
✓ The Assessing Officer finds it is a fit case for issue of notice → Send Order of 148A + Notice u/s 148

16.11
✓ However, this doesnot apply in case search initiated under section 132 or books of account requisitioned under section 132A.
Conditions: Notice can be issued only when-
- there is information with the AO which
and
- the AO has obtained prior approval of the specified authority to issue such notice.
Scenario 1
(a) For the purposes of this section and section 148A, the ‘information’ with the Assessing Officer which suggests that the income chargeable to tax has escaped
assessment means,—
(i) any information flagged in accordance with the risk management strategy formulated by the Board from time to time;
(ii) any final objection raised by the Comptroller and Auditor General of India to
Scenario 2
(b) Cases where Assessing Officer shall be deemed to have information- The Assessing Officer shall be deemed to have information which suggests that the income
chargeable to tax has escaped assessment in the case of the assessee where-
(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after 01.04.2021, in the caseof the
assessee; or
(ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after 01.04.2021, in the case of the assessee; or
(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing,
seized or requisitioned under section 132 or section 132A in case of any other person on or after 01.04.2021, belongs to the assessee; or
(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or
requisitioned under section 132 or section 132A in case of any other person on or after 01.04.2021, pertains or pertain to, or any information contained therein, relate to,
the assessee,
In scenario 2 The AO will be deemed to gave information that the income has escaped for the last 3 AY apart from the current AY.

16.12
Time Limit for Notice (Section 149)

– Section 149(1) provides that no notice under section 148 shall be issued for the relevant assessment year –
AY 22-23
"Asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.
Note – The provision of section 149(1)shall not apply for search prior to 31.03.2021.
Notice under section 149(1) shall be issued subject to the approval of Specified Authority prescribed under section 151 [Section 149(2)].
Let us Recap
What is the meaning of “Relevant Assessment Year (RAY)”?
Explanation 1 to Section 148 Explanation 2 to Section 1482

I. Where the information with AO II. Where AO shall be deemed to have
suggest that income has escaped information suggesting that income has
assessment: escaped assessment
In such a case, the RAY is the The RAYs means the 3 A.Y.s immediately
assessment year: preceding the A.Y. relevant to the P.Y. in
- for which information is flagged which the search is initiated u/s 132 or
in the system in accordance survey is conducted u/s 133A or money,
with risk management strategy bullion, jewellery or other valuable article or
formulated by the CBDT or thing or books of account or documents are
seized or requisitioned in case of any other
- for which CAG has raised final person. (This applies in respect of search
objection,
initiated or books of account requisitioned on
as the case may be. or after 1.4.2021)

16.13
Let us understand with the help of the following examples, the contextual meaning of RAY and the time limit upto which a notice u/s 148 can be issued in cases mentioned in
Explanation 1 & 2 below to section 148.
Example 1: In a case, where information is flagged in the system which suggests income has escaped assessment:
Information flagged RAY Date of expiry of Can notice be issued on or
in the system for the 3 year time limit after 1.4.2021?
A.Y. 2016-17 2016-17 31.03.2020 No, notice cannot be
A.Y. 2017-18 2017-18 31.03.2021 issued, since 3 years have
elapsed from the end of the
RAY.
A.Y. 2018-19 2018-19 31.03.2022 Yes, notice can be issued,
A.Y. 2019-20 2019-20 31.03.2023 since 3 years have not
elapsed from the end of the
A.Y. 2020-21 2020-21 31.03.2024 RAY.
Example 2: In a case, where search is initiated u/s 132 during the P.Y. 2021-22, AO is deemed to have information suggesting income has escaped assessment for the 3 A.Y.’s
immediately preceding the A.Y. relevant to the P.Y. in which the search is initiated u/s 132. Accordingly, the RAY’s would be A.Y. 2021-22, A.Y. 2020-21 and A.Y. 2019-20. Thus,
notice can be issued for these A.Y.’s, since 3 years have not elapsed from the end of the RAY.

16.14

Appeals – Revisions – Penalties
Appeals
Return filed AO issue scrutiny Order passed Assessee/ Deductor/ Collector CIT (A) ITAT HC SC
u/s 139 notice u/s 143(2) u/. s 143(3) aggrieved by the order and
challenges it by appeal
Section 246A 253 260A 261
Time limit 30 days 60 days 120 days 90 days
Note - For appeal to CIT(A) – If the issue is regarding deduction of TDS for payment to NR then Assessee From the date of service of order
Will have to first deposit TDS and then within 30 days send an application to CIT(A)
PARTICULARS CIT (A)* ITAT (2nd Appeal) High Court Supreme

(Income Tax Appellate Tribunal Court
Appealable order Following orders passed by the AO can • Assessee aggrieved: Order of ITAT Order of High
be challenged: 1. Order of the CIT(A) [enhancing the (where an assessment Court
1. Assessment order assessment, or imposing penalty or order is very arbitrary
2. Order of levying Penalty confirming the order of AO] for any reason, the
3. treating a person as an assessee 2. Order of CIT (enhanced in the assessment assessee can directly
in default as per TDS & TCS u/s 263, or imposing penalty or cancelling or file a writ petition
Chapter denying the registration of Trust u/s 12AA or before the High Court.
4. Refund order against assessee order passed u/s 10(23C) denying the However, in all other
5. Intimation u/s 143(1) approval. cases the remedy
6. An order made u/s 163 treating 3. Order passed by the AO in pursuance of the available under the Act
the assessee as the agent of the direction of the DRP u/s 144C. against the assessment
NR 4. Penalty order u/s 270A (under/mis order shall be followed)
7. (Generally, orders of DRP are not reporting) passed by CIT(A), Principal CIT
appealable here) or CIT
8. Appeal can be made by • Department aggrieved:
Assessee only (First Appeal
1. Order passed by CIT(A)
Section 246A)
9. Apply in Form 35

Memorandum of cross After appeal is made to the ITAT, notice is sent

objection to the respondent.
Memorandum for cross objection may be
filed before ITAT by respondent (optional):
➢ 30 days from receipt of notice from ITAT.
➢ No filing fees.
➢ Shall be treated as separate appeal.
Power to condone ✓ ✓ ✓ ✓
delay in filing appeal
Nature of Power of CIT is co-terminus with the Since ITAT is the final fact-finding authority, Only substantial Only
authority power of AO. Therefore, what AO can do, hence it can cause further inquiry if it feels question of law substantial
CIT(A) can also do. (i.e. causing inquiry, necessary. question of
examination of records etc.) law
Application for Can be allowed, if there is reasonable Can be allowed at the discretion of ITAT - -
adjournment by cause
assessee
Time Limit for passing Year in which appeal Filed → Year-end + 1 Year in which appeal Filed → Year end + 4 N/A N/A
order year years
Grant of stay on Section 220(6): Allowed, but 1st stay up to 180 days and if ✓ ✓
demand - Where the assessee has presented an appeal is not disposed of till 1st stay and delay in
appeal u/s 246A disposal of appeal is not attributable to the
- the AO may, treat the assessee as not assessee, then further extension of stay can be
being in default in respect of the amount in granted by the ITAT, as it thinks fit on
dispute in the appeal, application of assessee. However, such period
of 1st stay and subsequent stay in aggregate
- even though the time for payment has
shall not exceed 365 days. subject to the
expired
condition that the assessee deposits not less
- as long as such appeal remains
than twenty per cent of the amount of tax,
indisposed of.
interest, fee, penalty, or any other sum payable
under the provisions of this act, or furnishes
security of equal amount in respect thereof
Rectification of ✓ ✓ ✓ ✓
mistake apparent from U/s 154 Suo moto within 4 years from the U/s 254 within 6 months from the end of the
records date of order month in which order was passed by the
ITAT. (Finance Act 16)

A. PROCEDURE FOR FILING OF APPEAL [SECTION 249(1)] to CIT (Appeals)

The rates of fees are as follows:
Sl No Assessed Fees
Income
1 Upto Rs. 1 Lac Rs. 250
2 > Rs. 1,00,000 but upto Rs. 2,00,000 Rs. 500
3 > Rs. 2,00,000 Rs. 1000
4 Any other case Rs. 250
Form No. 35 – Application in Duplicate
B. PROCEDURE FOR FILING OF APPEAL to ITAT

1. The filing fees in case of appeal to the Tribunal is prescribed under Section 253 as follows:
(i) Assessed income upto Rs 1 lakh - Rs. 500/-
(ii) > Rs 1 lakh upto Rs 2 lakhs – Rs 1,500/-
(iii) > Rs 2 lakhs – 1% of the assessed income or Rs 10,000, whichever is less.
2. Where the subject matter of an appeal is not with reference to the income assessed
the filing fee shall be Rs 500/-. For example, appeal against an order imposing
penalty for default in deducting tax at source or in filing certain returns will fall
under this category.
3. No such filing fee is payable where the appeal is preferred by the Commissioner or
where a memorandum of cross-objections is filed by assessee or by CIT.
4. An application of stay of demand shall be accompanied with a fee of Rs. 500/-
5. Any application filed by an assessee seeking rectification of any mistake apparent from
the record by the Appellate Tribunal shall be accompanied by a fee of Rs. 50.
Form No. 36 – Application in Triplicate
E-Appeal & E Penalties have been introduced through an amendment has been made vide Finance act, 2020
by inserting sub-section 250(6a) & Section 274(2A)] of the income tax act, 1961 to provide the following:
⚫ empowering Central Government to notify an e-appeal scheme for disposal of appeal so as to impart
greater efficiency, transparency and accountability.
⚫ eliminating the interface between the Commissioner (appeals) and the appellant in the course of
appellate proceedings to the extent technologically feasible.
⚫ Optimizing utilization of the resources through economies of scale and functional specialization.
⚫ introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by
one or more Commissioner (appeals).
⚫ Enhancement of Monetary limits for filing of appeals by the Department before Income
Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court-
Amendment to Circular 3 of 2018 - Measures for reducing litigation
Appeals/SLPs Monetary Limit (Rs.)
Income-tax matters
⚫ Before Appellate Tribunal 50,00,000
⚫ Before High Court 1,00.00.000
⚫ Before Supreme Court 2.00.00,000
Revision
S.NO. PARTICULARS SECTION 263 SECTION264

I INCOME Principal Chief Commissioner or Generally, Income of the assessee is
Chief Commissioner or Principal decreased here
Commissioner or Commissioner
may call for and examine the
AY 22-23 record
Income of the assessee is increased
here
II. SCOPE The order of the AO is erroneous and Revision of order passed by any subordinate
prejudicial to the interest of revenue. authority.
Order of CIT(A) can be revised here
Deemed Erroneous and Prejudicial if
the order of AO is:
1. Not as per HC or SC verdict
which is prejudicial to the
assessee; or
2. Without any inquiries or
verification which should have
been made; or
3. Not as per order, direction or
instruction by CBDT
4. Allowing any relief without
inquiry of claim.
RESTRICTION Commissioner shall not revise any order

where:
i. Appeal is pending before CIT(A) or ITAT; OR
ii. At the time of filing an application for revision,
right to appeal has not lapsed and assessee
has not waived such right
III. PROCEDURE Every application for revision accompanied by
fees of Rs. 500.
IV. TIME LIMIT No order can be revised after expiry of i. Suo moto: CIT cannot revise any order
2 years from the end of financial beyond 1 year from the date of the order
year in which the order sought to be sought;
revised was passed. ii. On Application of Assessee:
a. Application by assessee: Assessee
cannot file an application after expiry of
1 year from the date of service of the
order sought to be revised.
b. Time Limit to pass order:
Revision petition to be disposed of by
CIT within 1 year from the end of FY
in which revision petition filed by an
assessee.
Delay in filing application by assessee can be
condoned.
Order can be passed at any time for Order can be passed at any time for giving
giving effect to findings, direction effect to findings, direction contained in verdicts
contained in verdicts of ITAT, HC, SC. of ITAT, HC, SC.
V REMEDY Assessee aggrieved by the order of There is no right to appeal. A writ can be
CIT u/s. 263 may file an appeal filed to High Court.
against such order before ITAT
VI Revision of Revision u/s 263 is possible of order Revision u/s 264 is not possible of order u/
263/264 u/section 264 section 263
Penalties - Important Provisions
Section 270A: Penalty for under-reporting & mis-reporting of income w.e.f. 1/4/17
During the course of assessment or other proceeding AO/CIT(A)/Principal CIT/CIT may direct that,
Any person who has Shall be liable to pay, PENALTY on his UNDER-REPORTED
UNDERREPORTED his income income in addition to tax payable on such under-reported income
Penalty 50% of TAX PAYABLE on UNDERREPORTED

INCOME or
200% of TAX PAYABLE on UNDERREPORTED

INCOME resulted from MISREPORTING
1. Cases of mis-reporting: [Section 270A (9)]:

a. Mis representation/suppression of facts.
b. Failure to record investment in the books of account.
c. Claim of expenditure not substantiated by any evidence.
d. Recording of any false entry in the books of account
e. Failure to record any receipt in books of account having a bearing on total income.
f. Failure to report any international transaction or any transaction deemed to be an interactional
transaction or any specified domestic transaction
2. Cases of under-reporting (Section 270A (2)): A person can be considered to have under-reported his income in
the following situations, as specified
Sr. No. Cases A B

1 ROI filed Income assessed Greater Income
than determined in the ROI
processed u/s 143(1)(a)
2 ROI not filed or 1st time filed Income assessed Basic exemption limit
u/s148
3 Reassessment 2nd or more time Income reassessed Income reassessed in previous
reassessment
4 Loss case Income assessed/reassessed has
effect of:  reducing the loss or 
converting the loss into income.
Few other Penalties
Section Type of Default Quantum of Penalty Levied by

(Authority)
271A Failure to keep, maintain or Rs. 25,000 Assessing Officer
retain books of account or Commissioner
etc. as required under (Appeals)
Section 44AA

271AA Failure to keep and maintain A sum equal to 2% of Assessing Officer

information and document in respect of the value of each or Commissioner
international transaction or specified international (Appeals)
domestic transaction or fails to report transaction or
such transactions or maintains or specified domestic
furnishes an incorrect information or transaction.
document.
Failure to furnish docs. 92D (4) –

Documents relating to a group entities
Penalty – Rs. 5lacs

271AAC Penalty where income includes any income 10% of tax payable on ----
referred to in Section 68, Section 69, Section 69a, undisclosed income
Section 69B, Section 69C or Section 69d.
271AAD is found that in the books of account sum equal to the aggregate
maintained by any person there is— a false amount of such false or
entry or an omission of any entry to evade tax
omitted entry.
liability
271B Failure to get accounts audited under 0.5% cent of Total AO

Section 44AB or furnish audit report Sales, turnover or
along with return of . 1,50,000 (Lesser)
income
271BA Failure to furnish report Rs. 1,00,000 AO

Under Section 92E (TP)
271CA Failure to collect tax at source 100% of tax sought to Imposed by the
be collected Joint
Commissioner
271D/E Taking any loan or deposit or specified A sum equal to the Imposed by the
sum in contravention of Section 269SS. amount of loan or Joint
(accept >=20,000 deposit or specified
amount so taken or Commissioner
loan/immovable property)
accepted
269ST (Pay >=20,000
loan/immovable property)
271DA Penalty for receiving an amount A sum equal to the I m p o s e d by
of Rs. 2,00,000 or more amount of such the Joint
receipt. (100%)
otherwise commissioner
However, penalty shall
than an A/c payee cheque/ draft/ECS, in not be imposed, if
contravention of such person proves
that there were good
provisions of Section 269ST and sufficient reasons
(w.e.f. April 1, 2017) for the contravention.

271DB Failure to comply with the Penalty of Rs. 5,000 per day of Penalty imposable
provisions of section continuing default, if the person who by Joint
269SU [w.e.f. 1.11.2019] is required to provide facility for Commissioner.
accepting payment through the
prescribed electronic modes of No penalty
payment referred to in section imposable if the
269SU, fails to provide such facility person proves that
there were good
and sufficient
reasons for such
failure
271K research association, not less than ten thousand rupees but
university, college or other which may extend to one lakh rupees
institution referred to in clause
(ii) or clause (iii) or the
company referred to in clause
(iia) of sub-section (1) of
section 35, if it fails to deliver or
cause to be delivered a
statement
institution or fund, if it fails to
deliver or cause to be delivered
a statement within the time
prescribed under clause
(viii) of sub-section (5) of
section 80G, or furnish a
certificate prescribed under
clause (ix) of the said sub-
section
269SU
Every person, carrying on business, shall provide facility for accepting payment through
prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if
any, being provided by such person, if his total sales, turnover or gross receipts, as the case
may be, in business > 50 Crore rupees during the immediately preceding previous year.
Provision for E-Penalty [Section 274(2A)]

The Central Government may notify an e-scheme for the purposes of imposing penalty so as to impart greater
efficiency, transparency and accountability by,—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings
to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by
one or more income-tax authorities.
It also empower the Central Government, for the purpose of giving effect to the scheme made under the
sub- section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act
relating to jurisdiction and procedure of imposing penalty shall not apply or shall apply with such exceptions,
modifications and adaptations as may be specified in the notification. Such directions are to be issued on or
before 31st March, 2022. It is further provided that every notification issued shall be required to be laid
before each House of Parliament.

Rigorous Imprisonment
Section Nature of Default Minimum Period Maximum Period

276BB Failure to pay to the 3 months and fine 7 years and fine
Government,
tax collected u/s. 206C
276C (1) Willful attempt to evade tax If tax evaded If tax evaded
penalty or interest imposable exceeds exceeds
or under reports his Rs. 25, 00,000, then ` 25,00,000, 7 years &
for 6 months& fine; fine; otherwise 2 years
income under the Act.
otherwise 3 months
and fine. and fine.
276C (2) Willful attempt to evade the 3 months and fine 2 years and fine
payment of any tax, penalty
or interest
276D Willful failure to produce Any period upto 1 1 year and fine
books of account and year
documents u/s. 142(1) or and fine
willful failure to comply with a
direction to get the accounts
audited u/s. 142(2A)
Prosecution in Case of Willful Failure To File Return Of Income Under Section 139/148/153A Or In
Response To Notice Under Section 142(1)
If ROI filed before the expiry If ROI filed after the expiry of the relevant AY
of the relevant AY
In case of person other than
Company:
Tax on Income Assessed Less: TDS
No prosecution whatever may be /TCS xxx Less: Advance tax xxx In case of Company:
the amount of income tax Less: Self assessment tax paid Prosecution will be there
payable. before the end of the assessment even if no tax is payable.
year xxx Balance ` 10,000 or less
NO PROSECUTION
Enhancement of Monetary limits for filing of appeals by the Department before Income Tax
Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court - Amendment to
Circular 3 of 2018 - Measures for reducing litigation
Appeals/SLPs Monetary Limit (Rs.)

Income-tax matters
Before Appellate Tribunal 50,00,000
Before High Court 1,00.00.000
Before Supreme Court 2.00.00,000
The appeal can be filed if the tax amount in respect of the disputed issues exceeds the monetary limit
specified above.
However Board, by way of special order direct filing of appeal on merit in cases involved
in organised tax evasion activity.
Procedure for identification and processing of cases for prosecution under Direct Tax Laws
Section Offence Not to be prosecuted if Exceptions to prosecute

276B Non-payment of TDS If Non-payment of TDS Habitual defaulters
is upto Rs. 25 Lacs & Only with the previous
delay in deposit is less administrative
than 60 days from the approval of the
due date Collegium of two
276BB Failure to collect TCS Same as above CCIT/DGIT rank
276C(1) Willful attempt to evade amount sought to be officers.
tax evaded or tax on under-
reported income is upto
Rs. 25 Lakhs
276CC Failure to furnish amount of tax, which
returns of income would have been
evaded if the failure
had not been
discovered, is Rs. 25
Lakhs or below
Power of AO for granting immunity from Penalty & Prosecution
Particulars Immunity from Penalty

Section 270AA of Income Tax Act w.e.f. 1/4/17 (Finance Act, 2016)
Authority AO
Conditions for a) All conditions mentioned below to be satisfied:
application • Assessee pays (Tax + Interest) as per assessment order & within time
limit as per notice of demand
• Assessee does not prefer an appeal against such assessment or
reassessment order
• Application is to be made within 1 month from the end of month in which
assessment or reassessment order is received
b) Period of filing appeal to CIT(A) u/s 249(2) has been expired
c) Proceeding for penalty has not been initiated for case of
MISREPORTING OF INCOME
Time limit to AO shall pass order accepting or rejecting the application within 1 month
pass order from the end of the month in which application is received
Additional • No appeal/application for revision is admissible against the order of
Points assessment or reassessment in respect of which application for
immunity is accepted.

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Dil se… ❤️❤️

At Unique Academy For Commerce it is not just about teaching a subject,

Unique Academy For Commerce

8 Income From Other Sources 8.1 – 8.26

9 Clubbing 9.1 – 9.15

10 Set Off and Carry Forward of Losses 10.1 – 10.12

11 Deductions 11.1 – 11.21

PAN – Return Filing – Self assessment -

13 TDS – TCS – Advance Tax 13.1 – 13.37

14 Various Entities 14.1 – 14.19

15 Tax Incidence on Companies 15.1 – 15.17

Assessment – Appeals – Revision -

Unique Academy For Commerce Mo No – 8007916622/33

Sections (Income Tax Act, Details

Unique Academy For Commerce Mo No – 8007916622/33

Where a person transfers to any other person, income (whether revocable

Unique Academy For Commerce Mo No – 8007916622/33

‘Revocable transfer’ means the transferor of asset assumes a right to

For this purpose, assets include movable or immovable property

Examples of revocable transfers

Some of the examples of revocable transfers are as follows:

(i) If there is an express clause of revocation in the instrument of transfer; or

(ii) If there is a sale with a condition of re-purchase; or

Unique Academy For Commerce Mo No – 8007916622/33

(v) If the transferor has power to change beneficiary or trustees. “Transfer”

All such income as arises directly or indirectly, to the spouse of an individual

Exception: However, where the spouse possesses technical or

Substantial Interest : An individual shall be deemed to have a substantial interest in a concern -

Unique Academy For Commerce Mo No – 8007916622/33

Unique Academy For Commerce Mo No – 8007916622/33

entitled to a fixed rate of dividend whether with or without a further right to

In this case, salary income of Mrs. X shall be taxable in the hands of X.

Unique Academy For Commerce Mo No – 8007916622/33

(b) Income to spouse from the assets transferred [Section 64(1)(iv)]

Exception: However, there are exceptions to this rule:

(i) The transferor has received adequate consideration in money or

(ii) The transfer has been made in connection with an agreement to

• Suppose, A transfers certain shares to his wife B. Dividends

• In the same way, if B receives certain bonus shares on the shares

Unique Academy For Commerce Mo No – 8007916622/33

of the transferor because the bonus shares were never transferred

INCOME TO SPOUSE THROUGH A THIRD PERSON [SECTION 64(1)(vii)]

Where a person transfers some assets directly or indirectly to a person or

Income from assets transferred to son’s wife shall be

Unique Academy For Commerce Mo No – 8007916622/33

TRANSFER FOR IMMEDIATE OR DEFERRED BENEFIT OF SON’S WIFE [SECTION

(i) in any business, such investment being not in the nature of

(ii) in the nature of contribution of capital as a partner in a firm, that

Unique Academy For Commerce Mo No – 8007916622/33

CLUBBING OF INCOME OF MINOR CHILD [SECTION 64(1A)]

In case the income of an individual includes any income of his minor

V Imp 1,500 whichever is less.

Where an individual, being a member of Hindu undivided family, transfers

Unique Academy For Commerce Mo No – 8007916622/33

from such converted property as is received by the spouse of the

However, the income from house property transferred to spouse

Explanation to the term ‘income’ used in Section 64 includes ‘loss’. This

Unique Academy For Commerce Mo No – 8007916622/33

SUMMARY OF THE CLUBBING PROVISION

Unique Academy For Commerce Mo No – 8007916622/33